UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
N-CSR
CERTIFIED SHAREHOLDER REPORT
OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number
811-21403
Western
Asset Inflation-Linked Income Fund
(Exact name of registrant as
specified in charter)
620 Eighth Avenue, 47th Floor,
New York, NY 10018
(Address of principal executive
offices) (Zip code)
Marc A. De Oliveira
Franklin Templeton
100 First Stamford Place
Stamford, CT 06902
(Name and address of agent for
service)
Registrant’s telephone number,
including area code: 1-888-777-0102
Date of fiscal year end: November
30
Date of reporting period: November
30, 2024
| ITEM
1. | REPORT
TO STOCKHOLDERS. |
The Annual Report to Stockholders is filed herewith.
Annual Report
November 30, 2024
WESTERN ASSET
INFLATION-LINKED INCOME FUND (WIA)
Managed Distribution Policy: The Fund’s Board of Trustees (the “Board”) has authorized a managed distribution plan pursuant to which the Fund makes monthly distributions
to shareholders at a fixed rate of $0.0500 per common share, which rate may be adjusted
from time to time by the Fund’s Board (the “Plan”). The Plan is intended to provide shareholders with a constant, but not guaranteed, fixed minimum rate of distribution each month.
The Fund is managed with a goal of generating as much of the distribution as possible
from net ordinary income and short-term capital gains that is consistent with the Fund’s investment strategy and risk profile. To the extent that sufficient distributable income is not
available on a monthly basis, the Fund will distribute long-term capital gains and/or return
of capital in order to maintain its managed distribution rate. A return of capital may occur,
for example, when some or all of the money that was invested in the Fund is paid back
to shareholders. A return of capital distribution does not necessarily reflect the Fund’s investment performance and should not be confused with “yield” or “income”. Even though the Fund may realize current year capital gains, such gains may be offset, in whole
or in part, by the Fund’s capital loss carryovers from prior years.
The Board may amend the terms of the Plan or terminate the Plan at any time without
prior notice to the Fund’s shareholders, however, at this time there are no reasonably foreseeable circumstances that might cause the termination of the Plan. The amendment or termination
of the Plan could have an adverse effect on the market price of the Fund’s common shares. The Plan is subject to the periodic review by the Board to determine if an adjustment
should be made.
Shareholders should not draw any conclusions about the Fund’s investment performance from the amount of the current distribution or from the terms of the Fund’s Plan. The Fund will send a Form 1099-DIV to shareholders for the calendar year that will describe
how to
report the Fund’s distributions for federal income tax purposes.
Fund objectives
The Fund’s primary investment objective is to provide current income. Capital appreciation, when consistent with current income, is a secondary investment objective.
Under normal market conditions and at the time of purchase, the Fund will invest at
least 80% of its total managed assets in inflation-linked securities and at least 60% of
its total managed assets in U.S. Treasury Inflation Protected Securities (TIPS). The Fund may
also invest up to 40% of its total managed assets in non-U.S. dollar investments.
Western Asset Inflation-Linked Income Fund
Letter from the president
We are pleased to provide the annual report of Western Asset Inflation-Linked Income
Fund for the twelve-month reporting period ended November 30, 2024. Please read on for
a detailed look at prevailing economic and market conditions during the Fund’s reporting period and to learn how those conditions have affected Fund performance.
Special shareholder notice
Effective June 3, 2024, Chia-Liang (CL) Lian no longer serves as a member of the Fund’s portfolio management team.
Effective August 21, 2024, the named portfolio management team responsible for the
day-to-day oversight of the Fund became as follows: Michael Buchanan and Frederick Marki.
As always, we remain committed to providing you with excellent service and a full
spectrum of investment choices. We also remain committed to supplementing the support
you receive from your financial advisor. One way we accomplish this is through our
website, www.franklintempleton.com. Here you can gain immediate access to market and investment information, including:
•
Fund prices and performance,
•
Market insights and commentaries from our portfolio managers, and
•
A host of educational resources.
We look forward to helping you meet your financial goals.
Jane Trust, CFA
President and Chief Executive Officer
Western Asset Inflation-Linked Income Fund
Q. What is the Fund’s investment strategy?
A. The Fund’s primary investment objective is to provide current income. Capital appreciation, when consistent with current income, is a secondary investment objective.
Under normal market conditions and at the time of purchase, the Fund will invest at
least 80% of its total managed assetsi in inflation-linked securities and at least 60% of its total managed assets in TIPSii. The Fund may also invest up to 40% of its total managed assets in non-U.S. dollar investments, which gives the Fund flexibility to invest up to 40%
of its total managed assets in non-U.S. dollar inflation-linked securities (no more than
20% of its non-U.S. dollar exposure may be unhedged). The Fund may invest no more than 10% of
its total managed assets in investments rated below investment grade at the time of purchase
(or, if unrated, assets of comparable quality as determined by management). The Fund
may engage in currency strategies, using instruments such as currency forwards, futures
and options, to take long and short foreign currency positions subject to a limit of exposure
from such strategies to 40% of total managed assets. This capacity is in addition to the
capacity to have 20% unhedged exposure to non-U.S. dollar currencies through the purchase of
fixed income securities. The Fund may utilize commodity-related strategies for up to 10%
of its total managed assets. Exposure to commodities is expected to be achieved using a variety
of instruments, such as futures contracts, options and other derivatives, or through
investments in exchange-traded products that offer exposure to commodities. The Fund
does not expect to hold physical commodities.
Each of the foregoing policies is a non-fundamental policy that may be changed without
shareholder approval. The Fund also has the following non-fundamental policy, which,
to the extent required by applicable law, may only be changed after notice to shareholders:
under normal market conditions, the Fund will invest at least 80% of its total managed
assets in inflation-protected securities and non-inflation-protected securities and
instruments with the potential to enhance the Fund’s income. To the extent permitted by the foregoing policies, the Fund may invest in emerging markets debt securities.
Reverse repurchase agreements and other forms of leverage will not exceed 38% of the
Fund’s total managed assets. To the extent the Fund covers its commitments under these transactions, investment in these transactions will not be considered leverage for
purposes of the Fund’s policy on the amount of leverage it may incur. The Fund currently expects that the average effective duration of its portfolio will range between zero and fifteen
years, although this target duration may change from time to time. The Fund may enter into
credit default swap contracts, interest rate swap contracts and total return swap contracts
for investment purposes, to manage its credit risk or to add leverage. There can be no
assurance that the Fund will achieve its investment objectives.
The Fund seeks to offer an inflation hedge through investments in global inflation-linked
securities, and primarily in TIPS. The Fund also seeks to offer shareholders certain
additional advantages through the ability to invest in other fixed income asset classes,
which may result in higher total returns and higher distribution rates. These asset
classes
Western Asset Inflation-Linked Income Fund 2024 Annual Report
include select investments in high-yield and investment-grade credit, emerging markets
and structured products.
At Western Asset Management Company, LLC (Western Asset), the Fund’s investment adviser, we utilize a fixed income team approach, with decisions derived from interaction
among various investment management sector specialists. The sector teams are comprised
of Western Asset’s senior portfolio management personnel, research analysts and an in-house economist. Under this team approach, management of client fixed income portfolios will reflect a consensus of interdisciplinary views within the Western
Asset organization. The individuals responsible for development of investment strategy,
day-to-day portfolio management, oversight and coordination of the Fund are Michael C. Buchanan
and Frederick Marki.
Q. What were the overall market conditions during the Fund’s reporting period?
A. The overall U.S. fixed income market experienced periods of volatility but generated
a positive return over the twelve-months ended November 30, 2024. The market was driven
by several factors, including resilient economic growth, moderating inflation, shifting
U.S. Federal Reserve (Fed) monetary policy, and several geopolitical issues.
Short-term U.S. Treasury yields declined as the Fed lowered interest rates in September
2024 (the first reduction since 2020) and again in November 2024. The two-year Treasury
yield began the reporting period at 4.73% and ended the period at 4.13%. Its high
for the period was 5.04% on April 30, 2024, and its low of 3.49% occurred on September 24,
2024.
Long-term U.S. Treasury yields also declined in part due to easing inflation and loosening
Fed monetary policy. The ten-year Treasury yield began the reporting period at 4.37%
and ended at 4.18%. Its high for the period was 4.70% on April 25, 2024, and its low of
3.63% occurred on September 16, 2024.
Inflation moderated, although it remained higher than the Fed’s preferred 2% target during the reporting period. For the twelve months ended November 30, 2024, the seasonally
unadjusted rate of inflation, as measured by the Consumer Price Index for All Urban
Consumers (CPI-U)iii, was 2.7%. The CPI-U less food and energy was 3.3% over the same time frame. TIPS, as measured by the Bloomberg U.S. TIPS Indexiv, returned 6.26% during the reporting period.
Q. How did we respond to these changing market conditions?
A. A number of adjustments were made to the Fund’s portfolio during the reporting period. The Fund trimmed but maintained its overweight duration stance versus the benchmark,
mostly at the very long end of the yield curve which, in turn, reduced the Fund’s yield curve flattener positioning.
During the reporting period, TIPS exposure was trimmed to a smaller overweight position
versus the benchmark. The Fund also reduced its overweight exposure to investment-grade
corporate credit. The Fund generally maintained its modest overweight exposures to
structured products and emerging markets.
Western Asset Inflation-Linked Income Fund 2024 Annual Report
The Fund employed interest rate futures to manage its yield curve positioning and
interest rate risk. In aggregate, the use of these instruments detracted from performance.
Futures on commodities, which were used to manage the Fund’s commodity exposure, contributed to performance. Index credit default swaps were employed to achieve synthetic exposure
to corporate bonds, and in aggregate, contributed to performance. Finally, the Fund used
foreign exchange forwards and futures to hedge positions, as well as to take outright
positions in a variety of emerging and developed market currencies. These instruments
were net detractors from performance.
Leverage was used to enhance the Fund’s yield. The Fund ended the reporting period with leverage as a percentage of total assets of roughly 34% versus 39% when the period
began. The use of leverage contributed to performance during the reporting period.
For the twelve months ended November 30, 2024, Western Asset Inflation-Linked Income
Fund returned 5.97% based on its net asset value (NAV)v and 11.94% based on its New York Stock Exchange (NYSE) market price per share. The Fund’s unmanaged benchmarks, the Bloomberg U.S. Government Inflation-Linked 1-10 Year Indexvi and the Bloomberg U.S. Government Inflation-Linked All Maturities Indexvii, returned 6.17% and 6.30%, respectively, for the same period. The Bloomberg World Government Inflation-Linked All Maturities
Indexviii and the Fund’s Custom Benchmarkix returned 4.11% and 6.50%, respectively, over the same time frame.
The Fund has adopted a managed distribution policy. Pursuant to this policy, the Fund
intends to make regular monthly distributions to common shareholders at a fixed rate
per common share, which rate may be adjusted from time to time by the Fund’s Board. This policy has no impact on the Fund’s investment strategy and may reduce the Fund’s NAV. The Fund’s investment adviser believes the policy helps maintain the Fund’s competitiveness and may benefit the Fund’s market price and premium/discount to the Fund’s NAV.
During the twelve-month period, the Fund made distributions to shareholders totaling
$0.60 per share of which $0.14 will be treated as a return of capital for tax purposes.* The performance table shows the Fund’s twelve-month total return based on its NAV and market price as of November 30, 2024. Past performance is no guarantee of future results.
*
For the tax character of distributions paid during the fiscal year ended November
30, 2024, please refer to page 46 of this report.
Western Asset Inflation-Linked Income Fund 2024 Annual Report
Performance Snapshot as of November 30, 2024
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All figures represent past performance and are not a guarantee of future results.
** Total returns are based on changes in NAV or market price, respectively. Returns
reflect the deduction of all Fund expenses, including management fees, operating expenses, and
other Fund expenses. Returns do not reflect the deduction of brokerage commissions or taxes that
investors may pay on distributions or the sale of shares.
† Total return assumes the reinvestment of all distributions, including returns of capital, at NAV.
‡ Total return assumes the reinvestment of all distributions, including returns of capital, in additional shares in accordance with the Fund’s Dividend Reinvestment Plan.
One of the distinguishing features of closed-end funds compared to other investment
vehicles is the ability to trade at a premium or discount to NAV. Since the Fund is
listed on the NYSE, the share price may trade above (premium) or below (discount) its NAV. Whereas
the NAV is reflective of the Fund’s underlying investments, the share price is reflective of the overall supply and demand in the marketplace. Historically, the majority of closed-end
funds have traded at a discount to NAV. This Fund is no exception to this phenomenon.
We believe the Fund’s discount may be driven by a number of factors, including the overall closed-end fund market, current distribution rate and muted demand for inflation-linked
investment products. While there are actions that may temporarily reduce the discount
to NAV, which the Board regularly evaluates, we believe that if investor demand for inflation-linked investments increases, that development, among other factors, may help reduce the
Fund’s share price discount to NAV over time. Western Asset continues to believe the Fund offers investors the opportunity for long-term inflation protection while providing
a source of diversification for investors’ fixed income portfolios.
Q. What were the leading contributors to performance?
A. The largest contributor to the Fund’s performance during the reporting period was its exposure to spread sectors, mainly due to corporate credit exposures – but also to structured products – as credit spreads tightened over the course of the reporting period. The Fund’s interest rate positioning (duration and yield curve positioning combined) also contributed to returns as real yields fell. Finally, commodity exposures were additive
for performance.
Q. What were the leading detractors from performance?
A. The most significant detractor from the Fund’s performance was its emerging markets (EM) exposures, mainly due to EM currency positions, though local-currency and U.S.
dollar-denominated EM bond positions provided a partial offset. The Fund’s tactical Treasury
Western Asset Inflation-Linked Income Fund 2024 Annual Report
exposure was the other main detractor from performance as breakeven inflation rates
fluctuated but ended the reporting period higher.
Looking for additional information?
The Fund is traded under the symbol “WIA” and its closing market price is available in most newspapers under the NYSE listings. The daily NAV is available online under the symbol
“XWIAX” on most financial websites. Barron’s and The Wall Street Journal’s Monday edition both carry closed-end fund tables that provide additional information. In
addition, the Fund issues a quarterly press release that can be found on most major financial
websites as well as www.franklintempleton.com.
In a continuing effort to provide information concerning the Fund, shareholders may
call 1-888-777-0102 (toll free), Monday through Friday from 8:00 a.m. to 5:30 p.m. Eastern
time, for the Fund’s current NAV, market price and other information.
Thank you for your investment in the Western Asset Inflation-Linked Income Fund. As
always, we appreciate that you have chosen us to manage your assets and we remain
focused on achieving the Fund’s investment goals.
Western Asset Management Company, LLC
RISKS: The Fund is a diversified closed-end management investment company designed primarily as a long-term investment and not as a trading vehicle. The Fund is not
intended to be a complete investment program and, due to the uncertainty inherent in all investments,
there can be no assurance that the Fund will achieve its investment objectives. The Fund’s common shares are traded on the NYSE. Similar to stocks, the Fund’s share price will fluctuate with market conditions and, at the time of sale, may be worth more or less than the original investment.
Shares of closed-end funds often trade at a discount to their net asset value. Diversification
does not assure against market loss. Bonds are subject to a variety of risks, including
interest rate, credit and inflation risks. As interest rates rise, bond prices fall, reducing
the value of a fixed income investment’s price. The Fund is subject to the additional risks associated with inflation protected securities, including liquidity risk, prepayment risk, extension
risk and deflation risk. Investments in foreign companies, including emerging markets, involve
risks beyond those inherent solely in domestic investments. Leverage may cause a fund to
be more volatile than if the fund had not been leveraged, which may increase the risk of investment
loss. Derivatives, such as options, futures, forwards and swaps, can be illiquid, create
counterparty risk, may disproportionately increase losses, and may have a potentially large impact
on Fund performance. To the extent that the Fund invests in asset-backed, mortgage-backed
or mortgage-related securities, its exposure to prepayment and extension risks may be greater than if
it invested in other fixed income securities. International investments are subject to
currency fluctuations, as well as social, economic and political risks. These risks are magnified
in
Western Asset Inflation-Linked Income Fund 2024 Annual Report
emerging markets. Emerging market countries tend to have economic, political and legal
systems that are less developed and are less stable than those of more developed countries.
An investment in the Fund is subject to the following additional risks. Lower grade
securities, or equivalent unrated securities, which are commonly known as “junk bonds,” typically entail greater potential price volatility and may be less liquid than higher-rated securities.
The Fund may have to apply a greater degree of judgment in establishing a price for lower grade
securities for purposes of valuing fund shares. Changes in economic conditions or developments
regarding the individual issuer are more likely to cause price volatility and weaken the capacity
of such securities to make principal and interest payments than is the case for higher grade
securities. Lower grade securities are regarded as having predominantly speculative characteristics
with respect to the issuer’s capacity to pay interest and repay principal. These securities may also be more susceptible to real or perceived adverse economic and competitive industry conditions
than higher rated securities. Lower grade and unrated securities are generally issued by
less creditworthy issuers that may have a larger amount of outstanding debt relative to
their assets than issuers of higher grade securities. In the event of an issuer’s bankruptcy, claims of other creditors may have priority over the claims of lower grade security holders, leaving
few or no assets available to repay lower grade security holders. The Fund may incur expenses
to the extent necessary to seek recovery upon default or to negotiate new terms with a defaulting
issuer. Lower grade securities frequently have redemption features that permit an
issuer to repurchase the security from the Fund before it matures. If the issuer redeems lower
grade securities, the Fund may have to invest the proceeds in securities with lower yields
and may lose income. Lower grade and unrated securities involve the risk that the Fund’s investment adviser may not accurately evaluate the security’s comparative rating. Analysis of the creditworthiness of issuers of lower grade and unrated securities may be more complex than for issuers
of higher quality securities. To the extent that the Fund holds lower grade and/or unrated securities,
the Fund’s success in achieving its investment objectives may depend more heavily on the Fund’s investment adviser’s credit analysis than if the Fund held exclusively higher-quality and rated securities. If changes in the currency exchange rates do not occur as anticipated,
the Fund may lose money on currency transactions. The Fund’s ability to use currency transactions successfully depends on a number of factors, including the currency transactions being available
at prices that are not too costly, the availability of liquid markets and the ability of the
Fund to accurately predict the direction of changes in currency exchange rates. Currency exchange rates
may be volatile. Currency transactions are subject to counterparty risk, which is the risk
that the other party in the transaction will not fulfill its contractual obligation. The Fund may
gain exposure to the commodities markets by investing a portion of its assets in a wholly-owned subsidiary,
Western Asset Inflation-Linked Income Fund CFC (the Subsidiary), organized under the
laws of the Cayman Islands. The Fund and the Subsidiary are deemed “commodity pools” and the investment adviser is considered a “commodity pool operator” with respect to the Fund under the Commodity Exchange Act. The investment adviser, directly or through its affiliates,
is therefore subject to dual regulation by the Securities and Exchange Commission (the
SEC) and the Commodity Futures Trading Commission (the CFTC).
The regulatory requirements governing the use of commodity futures (which include
futures on broad-based securities indexes, interest rate futures and currency futures), options
on
Western Asset Inflation-Linked Income Fund 2024 Annual Report
commodity futures, certain swaps or certain other investments could change at any
time. Investments by the Fund in commodity-linked derivatives may subject the Fund to greater
volatility than investments in traditional securities. The value of commodity-linked
derivatives may be affected by changes in overall market movements, commodity index volatility,
prolonged or intense speculation by investors, changes in interest rates or factors affecting
a particular industry or commodity, such as drought, floods, other weather phenomena, livestock
disease, embargoes, tariffs and international economic, political and regulatory developments.
By investing in the Subsidiary, the Fund is indirectly exposed to the risks associated
with the Subsidiary’s investments. The investments held by the Subsidiary are generally similar to those that are permitted to be held by the Fund and are subject to the same risks that apply
to similar investments if held directly by the Fund. The Subsidiary is not registered as an investment
company and is not subject to all of the investor protections of the Investment Company
Act of 1940 (the 1940 Act).
Changes in the laws of the United States and/or the Cayman Islands could adversely
affect the Fund. For example, the Cayman Islands does not currently impose any income, corporate
or capital gains tax, estate duty, inheritance tax, gift tax or withholding tax on the
Subsidiary. If Cayman Islands law changes such that the Subsidiary must pay Cayman Islands taxes,
shareholders would likely suffer decreased investment returns. The Fund’s exposure to commodities markets, including through the Subsidiary, may be limited by its intention
to qualify as a regulated investment company for U.S. federal income tax purposes and may interfere
with its ability to qualify as such. The market values of securities or other assets will
fluctuate, sometimes sharply and unpredictably, due to changes in general market conditions,
overall economic trends or events, governmental actions or intervention, actions taken by
the U.S. Federal Reserve or foreign central banks, market disruptions caused by trade disputes
or other factors, political developments, armed conflicts, economic sanctions and countermeasures
in response to sanctions, major cybersecurity events, investor sentiment, the global
and domestic effects of a pandemic, and other factors that may or may not be related to the issuer
of the security or other asset. The Fund may also invest in money market funds, including
funds affiliated with the Fund’s investment adviser. For more information on Fund risks, see Summary of information regarding the Fund - Principal Risk Factors in this report.
This material is not intended as a recommendation or as investment advice of any kind, including in connection with rollovers, transfers, and distributions. Such material is not provided in a fiduciary capacity, may not be relied upon for or in
connection with the making of investment decisions, and does not constitute a solicitation of an offer to buy or sell securities. All content has been provided
for informational or educational purposes only and is not intended to be and should not
be construed as legal or tax advice and/or a legal opinion. Always consult a financial,
tax and/or legal professional regarding your specific situation.
Portfolio holdings and breakdowns are as of November 30, 2024 and are subject to change
and may not be representative of the portfolio managers’ current or future investments. Please refer to pages 12 through 23 for a list and percentage breakdown of the Fund’s holdings.
The mention of sector breakdowns is for informational purposes only and should not
be construed as a recommendation to purchase or sell any securities. The information provided regarding
such sectors is
Western Asset Inflation-Linked Income Fund 2024 Annual Report
not a sufficient basis upon which to make an investment decision. Investors seeking
financial advice regarding the appropriateness of investing in any securities or investment strategies
discussed should consult their financial professional. The Fund’s top five sector holdings (as a percentage of net assets) as of November 30, 2024, were: U.S. treasury inflation protected securities (120.7%),
corporate bonds & notes (13.5%), collateralized mortgage obligations (7.0%), non-U.S. treasury inflation
protected securities (3.5%) and sovereign bonds (2.7%). The Fund’s portfolio composition is subject to change at any time.
All investments are subject to risk including the possible loss of principal. Past
performance is no guarantee of future results. All index performance reflects no deduction for fees,
expenses or taxes. Please note that an investor cannot invest directly in an index.
The information provided is not intended to be a forecast of future events, a guarantee
of future results or investment advice. Views expressed may differ from those of the firm as
a whole.
i
Total managed assets equals the total assets of the Fund (including any assets attributable
to leverage) minus accrued liabilities (other than liabilities representing leverage).
ii
U.S. Treasury Inflation-Protected Securities (TIPS) are inflation-indexed securities
issued by the U.S. Treasury in five-year, ten-year and thirty-year maturities. The principal is adjusted to the Consumer
Price Index, the commonly used measure of inflation. The coupon rate is constant but generates a different amount
of interest when multiplied by the inflation-adjusted principal.
iii
The Consumer Price Index for All Urban Consumers (CPI-U) is a measure of the average
change in prices over time of goods and services purchased by households, which covers approximately 93% of the
total population and includes, in addition to wage earners and clerical worker households, groups such as professional,
managerial and technical workers, the self-employed, short-term workers, the unemployed and retirees and others
not in the labor force.
iv
The Bloomberg U.S. TIPS Index represents an unmanaged market index made up of U.S.
Treasury Inflation-Linked Index securities.
v
Net asset value (NAV) is calculated by subtracting total liabilities, including liabilities
associated with financial leverage (if any), from the closing value of all securities held by the Fund (plus
all other assets) and dividing the result (total net assets) by the total number of the common shares outstanding. The
NAV fluctuates with changes in the market prices of securities in which the Fund has invested. However, the price
at which an investor may buy or sell shares of the Fund is the Fund’s market price as determined by supply of and demand for the Fund’s shares.
vi
The Bloomberg U.S. Government Inflation-Linked 1-10 Year Index measures the performance
of the intermediate U.S. TIPS market.
vii
The Bloomberg U.S. Government Inflation-Linked All Maturities Index measures the performance
of the U.S. TIPS market. The index includes TIPS with one or more years remaining maturity with total
outstanding issue size of $500 million or more.
viii
The Bloomberg World Government Inflation-Linked All Maturities Index measures the
performance of the major government inflation-linked bond markets.
ix
The Custom Benchmark is comprised of 90% Bloomberg U.S. Government Inflation-Linked
All Maturities Index and 10% Bloomberg U.S. Credit Index. The Bloomberg U.S. Credit Index is an index composed
of corporate and noncorporate debt issues that are investment grade (rated Baa3/BBB- or higher).
Important data provider notices and terms available at www.franklintempletondatasources.com.
Western Asset Inflation-Linked Income Fund 2024 Annual Report
Fund at a glance† (unaudited)
Investment breakdown (%) as a percent of total investments
†
The bar graph above represents the composition of the Fund’s investments as of November 30, 2024, and November 30, 2023, and does not include derivatives, such as futures contracts, forward
foreign currency contracts and swap contracts. The Fund is actively managed. As a result, the composition of the Fund’s investments is subject to change at any time.
‡
Represents less than 0.1%.
Western Asset Inflation-Linked Income Fund 2024 Annual Report
Fund performance (unaudited)
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Average annual total returns1
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Twelve Months Ended 11/30/24
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Five Years Ended 11/30/24
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Cumulative total returns1
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11/30/14 through 11/30/24
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Average annual total returns2
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Twelve Months Ended 11/30/24
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Five Years Ended 11/30/24
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Cumulative total returns2
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11/30/14 through 11/30/24
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All figures represent past performance and are not a guarantee of future results.
Returns reflect the deduction of all Fund expenses, including management fees, operating expenses, and other Fund expenses. Returns do not reflect the deduction of brokerage
commissions or taxes that investors may pay on distributions or the sale of shares.
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Assumes the reinvestment of all distributions, including returns of capital, if any,
at net asset value.
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Assumes the reinvestment of all distributions, including returns of capital, if any,
in additional shares in
accordance with the Fund’s Dividend Reinvestment Plan.
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Western Asset Inflation-Linked Income Fund 2024 Annual Report
Value of $10,000 invested in
Western Asset Inflation-Linked Income Fund vs. Bloomberg U.S. Government Inflation-Linked
1-10 Year Index and Bloomberg U.S. Government Inflation-Linked All Maturities Index† — November 2014 - November 2024
All figures represent past performance and are not a guarantee of future results.
Returns reflect the deduction of all Fund expenses, including management fees, operating expenses, and other Fund expenses. Returns do not reflect the deduction of brokerage
commissions or taxes that investors may pay on distributions or the sale of shares.
†
Hypothetical illustration of $10,000 invested in Western Asset Inflation-Linked Income
Fund on November 30, 2014, assuming the reinvestment of all distributions, including returns of capital,
if any, at net asset value and also assuming the reinvestment of all distributions, including returns of capital,
if any, in additional shares in accordance with the Fund’s Dividend Reinvestment Plan through November 30, 2024. The hypothetical illustration also assumes a $10,000 investment in the Bloomberg U.S. Government Inflation-Linked
1-10 Year Index and the Bloomberg U.S. Government Inflation-Linked All Maturities Index (together,
the “Indices”). The Bloomberg U.S. Government Inflation-Linked 1-10 Year Index measures the performance
of the intermediate U.S. Treasury Inflation-Protected Securities (“TIPS”) market. The Bloomberg U.S. Government Inflation-Linked All Maturities Index measures the performance of the U.S. TIPS market. The index includes
TIPS with one or more years remaining maturity with total outstanding issue size of $500 million or more.
The Indices are unmanaged. Please note that an investor cannot invest directly in an index.
Western Asset Inflation-Linked Income Fund 2024 Annual Report
Consolidated schedule of investments
November 30, 2024
Western Asset Inflation-Linked Income Fund
(Percentages shown based on Fund net assets)
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U.S. Treasury Inflation Protected Securities — 120.7%
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U.S. Treasury Bonds, Inflation Indexed
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U.S. Treasury Bonds, Inflation Indexed
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U.S. Treasury Bonds, Inflation Indexed
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|
|
|
|
U.S. Treasury Bonds, Inflation Indexed
|
|
|
|
|
U.S. Treasury Bonds, Inflation Indexed
|
|
|
|
|
U.S. Treasury Bonds, Inflation Indexed
|
|
|
|
|
U.S. Treasury Bonds, Inflation Indexed
|
|
|
|
|
U.S. Treasury Bonds, Inflation Indexed
|
|
|
|
|
U.S. Treasury Bonds, Inflation Indexed
|
|
|
|
|
U.S. Treasury Bonds, Inflation Indexed
|
|
|
|
|
U.S. Treasury Bonds, Inflation Indexed
|
|
|
|
|
U.S. Treasury Bonds, Inflation Indexed
|
|
|
|
|
U.S. Treasury Notes, Inflation Indexed
|
|
|
|
|
U.S. Treasury Notes, Inflation Indexed
|
|
|
|
|
U.S. Treasury Notes, Inflation Indexed
|
|
|
|
|
U.S. Treasury Notes, Inflation Indexed
|
|
|
|
|
U.S. Treasury Notes, Inflation Indexed
|
|
|
|
|
U.S. Treasury Notes, Inflation Indexed
|
|
|
|
|
U.S. Treasury Notes, Inflation Indexed
|
|
|
|
|
U.S. Treasury Notes, Inflation Indexed
|
|
|
|
|
U.S. Treasury Notes, Inflation Indexed
|
|
|
|
|
U.S. Treasury Notes, Inflation Indexed
|
|
|
|
|
U.S. Treasury Notes, Inflation Indexed
|
|
|
|
|
U.S. Treasury Notes, Inflation Indexed
|
|
|
|
|
|
|
Total U.S. Treasury Inflation Protected Securities (Cost — $272,499,665)
|
|
Corporate Bonds & Notes — 13.5%
|
Communication Services — 0.0%††
|
Wireless Telecommunication Services — 0.0%††
|
T-Mobile USA Inc., Senior Notes
|
|
|
|
|
|
|
Consumer Discretionary — 0.7%
|
Hotels, Restaurants & Leisure — 0.7%
|
Sands China Ltd., Senior Notes
|
|
|
|
|
Sands China Ltd., Senior Notes
|
|
|
|
|
Sands China Ltd., Senior Notes
|
|
|
|
|
Sands China Ltd., Senior Notes
|
|
|
|
|
|
|
Total Consumer Discretionary
|
|
|
|
Energy Equipment & Services — 0.0%††
|
Halliburton Co., Senior Notes
|
|
|
|
|
See Notes to Consolidated Financial Statements.
Western Asset Inflation-Linked Income Fund 2024 Annual Report
Western Asset Inflation-Linked Income Fund
(Percentages shown based on Fund net assets)
|
|
|
|
|
|
|
|
|
Oil, Gas & Consumable Fuels — 6.1%
|
Apache Corp., Senior Notes
|
|
|
|
|
BP Capital Markets America Inc., Senior
Notes
|
|
|
|
|
Columbia Pipelines Holding Co. LLC, Senior
Notes
|
|
|
|
|
Energy Transfer LP, Senior Notes
|
|
|
|
|
Enterprise Products Operating LLC, Senior
Notes
|
|
|
|
|
EOG Resources Inc., Senior Notes
|
|
|
|
|
EOG Resources Inc., Senior Notes
|
|
|
|
|
|
|
|
|
|
|
Exxon Mobil Corp., Senior Notes
|
|
|
|
|
Exxon Mobil Corp., Senior Notes
|
|
|
|
|
Occidental Petroleum Corp., Senior Notes
|
|
|
|
|
Occidental Petroleum Corp., Senior Notes
|
|
|
|
|
Occidental Petroleum Corp., Senior Notes
|
|
|
|
|
|
|
|
|
|
|
Petrobras Global Finance BV, Senior Notes
|
|
|
|
|
QazaqGaz NC JSC, Senior Notes
|
|
|
|
|
Targa Resources Corp., Senior Notes
|
|
|
|
|
Williams Cos. Inc., Senior Notes
|
|
|
|
|
Total Oil, Gas & Consumable Fuels
|
|
|
|
|
|
|
|
|
|
|
JPMorgan Chase & Co., Senior Notes (3.109%
to 4/22/50 then SOFR + 2.440%)
|
|
|
|
|
Wells Fargo & Co., Senior Notes (5.013% to
4/4/50 then 3 mo. Term SOFR + 4.502%)
|
|
|
|
|
|
|
|
Financial Services — 0.4%
|
ILFC E-Capital Trust II, Ltd. GTD (3 mo. Term
SOFR + 2.062%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bausch Health Americas Inc., Senior Notes
|
|
|
|
|
Bausch Health Americas Inc., Senior Notes
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements.
Western Asset Inflation-Linked Income Fund 2024 Annual Report
Consolidated schedule of investments (cont’d)
November 30, 2024
Western Asset Inflation-Linked Income Fund
(Percentages shown based on Fund net assets)
|
|
|
|
|
|
|
|
|
|
|
Aerospace & Defense — 1.0%
|
General Dynamics Corp., Senior Notes
|
|
|
|
|
General Dynamics Corp., Senior Notes
|
|
|
|
|
|
|
|
|
|
Information Technology — 0.2%
|
Semiconductors & Semiconductor Equipment — 0.2%
|
Broadcom Inc., Senior Notes
|
|
|
|
|
|
|
|
|
|
|
Anglo American Capital PLC, Senior Notes
|
|
|
|
|
Antofagasta PLC, Senior Notes
|
|
|
|
|
Barrick North America Finance LLC, Senior
Notes
|
|
|
|
|
BHP Billiton Finance USA Ltd., Senior Notes
|
|
|
|
|
Glencore Finance Canada Ltd., Senior Notes
|
|
|
|
|
Glencore Funding LLC, Senior Notes
|
|
|
|
|
Glencore Funding LLC, Senior Notes
|
|
|
|
|
Southern Copper Corp., Senior Notes
|
|
|
|
|
Yamana Gold Inc., Senior Notes
|
|
|
|
|
|
|
|
|
|
Total Corporate Bonds & Notes (Cost — $31,748,150)
|
|
Collateralized Mortgage Obligations(f) — 7.0%
|
Alternative Loan Trust, 2007-12T1 A3
|
|
|
|
|
Angel Oak Mortgage Trust, 2023-1 A1
|
|
|
|
|
|
|
|
|
|
|
Benchmark Mortgage Trust, 2021-B29 XA, IO
|
|
|
|
|
BHMS, 2018-ATLS D (1 mo. Term SOFR +
2.547%)
|
|
|
|
|
BOCA Commercial Mortgage Trust, 2024-
BOCA A (1 mo. Term SOFR + 1.921%)
|
|
|
|
|
BX Commercial Mortgage Trust, 2022-LP2 G (1
mo. Term SOFR + 4.106%)
|
|
|
|
|
BX Trust, 2021-ARIA D (1 mo. Term SOFR +
2.010%)
|
|
|
|
|
|
|
|
|
|
|
BXMT Ltd., 2020-FL2 A (1 mo. Term SOFR +
1.014%)
|
|
|
|
|
CD Mortgage Trust, 2017-CD5 A4
|
|
|
|
|
Chase Mortgage Finance Trust, 2007-A1 2A3
|
|
|
|
|
See Notes to Consolidated Financial Statements.
Western Asset Inflation-Linked Income Fund 2024 Annual Report
Western Asset Inflation-Linked Income Fund
(Percentages shown based on Fund net assets)
|
|
|
|
|
|
|
Collateralized Mortgage Obligations(f) — continued
|
Citigroup Commercial Mortgage Trust,
2016-C3 A3
|
|
|
|
|
Citigroup Commercial Mortgage Trust, 2023-
SMRT A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal Home Loan Mortgage Corp. (FHLMC)
Multifamily Structured Pass-Through
Certificates, K115 X1, IO
|
|
|
|
|
Federal Home Loan Mortgage Corp. (FHLMC)
REMIC, 4057 UI, IO
|
|
|
|
|
Federal Home Loan Mortgage Corp. (FHLMC)
REMIC, 4085 IO, IO
|
|
|
|
|
Federal Home Loan Mortgage Corp. (FHLMC)
REMIC, Structured Agency Credit Risk Trust,
2022-DNA3 M1B (30 Day Average SOFR +
2.900%)
|
|
|
|
|
Federal Home Loan Mortgage Corp. (FHLMC)
REMIC, Structured Agency Credit Risk Trust,
2022-DNA4 M1B (30 Day Average SOFR +
3.350%)
|
|
|
|
|
Federal Home Loan Mortgage Corp. (FHLMC)
REMIC, Structured Agency Credit Risk Trust,
2024-DNA1 M2 (30 Day Average SOFR +
1.950%)
|
|
|
|
|
Federal Home Loan Mortgage Corp. (FHLMC)
REMIC, Structured Agency Credit Risk Trust,
2024-DNA2 A1 (30 Day Average SOFR +
1.250%)
|
|
|
|
|
Federal Home Loan Mortgage Corp. (FHLMC)
Seasoned Credit Risk Transfer Trust, 2019-1 M
|
|
|
|
|
Federal National Mortgage Association
(FNMA) — CAS, 2017-C07 1B1 (30 Day
Average SOFR + 4.114%)
|
|
|
|
|
Federal National Mortgage Association
(FNMA) — CAS, 2019-R03 1B1 (30 Day
Average SOFR + 4.214%)
|
|
|
|
|
Federal National Mortgage Association
(FNMA) — CAS, 2019-R05 1B1 (30 Day
Average SOFR + 4.214%)
|
|
|
|
|
See Notes to Consolidated Financial Statements.
Western Asset Inflation-Linked Income Fund 2024 Annual Report
Consolidated schedule of investments (cont’d)
November 30, 2024
Western Asset Inflation-Linked Income Fund
(Percentages shown based on Fund net assets)
|
|
|
|
|
|
|
Collateralized Mortgage Obligations(f) — continued
|
Federal National Mortgage Association
(FNMA) — CAS, 2020-R01 1B1 (30 Day
Average SOFR + 3.364%)
|
|
|
|
|
Federal National Mortgage Association
(FNMA) — CAS, 2021-R01 1B1 (30 Day
Average SOFR + 3.100%)
|
|
|
|
|
Federal National Mortgage Association
(FNMA) — CAS, 2022-R07 1M1 (30 Day
Average SOFR + 2.950%)
|
|
|
|
|
Federal National Mortgage Association
(FNMA) — CAS, 2024-R02 1M2 (30 Day
Average SOFR + 1.800%)
|
|
|
|
|
Government National Mortgage Association
(GNMA), 2011-142 IO, IO
|
|
|
|
|
Government National Mortgage Association
(GNMA), 2012-44 IO, IO
|
|
|
|
|
Government National Mortgage Association
(GNMA), 2012-112 IO, IO
|
|
|
|
|
Government National Mortgage Association
(GNMA), 2012-152 IO, IO
|
|
|
|
|
Government National Mortgage Association
(GNMA), 2014-47 IA, IO
|
|
|
|
|
Government National Mortgage Association
(GNMA), 2014-50 IO, IO
|
|
|
|
|
Government National Mortgage Association
(GNMA), 2014-169 IO, IO
|
|
|
|
|
Government National Mortgage Association
(GNMA), 2015-101 IO, IO
|
|
|
|
|
Government National Mortgage Association
(GNMA), 2015-183 IO, IO
|
|
|
|
|
GSR Mortgage Loan Trust, 2004-11 1A1
|
|
|
|
|
Hawaii Hotel Trust, 2019-MAUI F (1 mo. Term
SOFR + 3.047%)
|
|
|
|
|
Home RE Ltd., 2023-1 M2 (30 Day Average
SOFR + 6.000%)
|
|
|
|
|
MHC Commercial Mortgage Trust, 2021-MHC
A (1 mo. Term SOFR + 0.915%)
|
|
|
|
|
MRCD Mortgage Trust, 2019-PARK A
|
|
|
|
|
New Residential Mortgage Loan Trust,
2014-1A A
|
|
|
|
|
PRKCM Trust, 2021-AFC1 A1
|
|
|
|
|
See Notes to Consolidated Financial Statements.
Western Asset Inflation-Linked Income Fund 2024 Annual Report
Western Asset Inflation-Linked Income Fund
(Percentages shown based on Fund net assets)
|
|
|
|
|
|
|
Collateralized Mortgage Obligations(f) — continued
|
PRKCM Trust, 2023-AFC1 A1
|
|
|
|
|
|
|
|
|
|
|
SREIT Trust, 2021-PALM B (1 mo. Term SOFR +
0.924%)
|
|
|
|
|
Towd Point Mortgage Trust, 2020-2 A1A
|
|
|
|
|
Towd Point Mortgage Trust, 2020-2 M1B
|
|
|
|
|
Verus Securitization Trust, 2023-8 B1
|
|
|
|
|
|
|
Total Collateralized Mortgage Obligations (Cost — $16,366,201)
|
|
Non-U.S. Treasury Inflation Protected Securities — 3.5%
|
|
|
Brazil Notas do Tesouro Nacional Serie B,
Notes
|
|
|
|
|
Brazil Notas do Tesouro Nacional Serie B,
Notes
|
|
|
|
|
|
|
|
|
|
United Kingdom Inflation-Linked Gilt, Bonds
|
|
|
|
|
|
|
Uruguay Government International Bond,
Senior Notes
|
|
|
|
|
|
|
Total Non-U.S. Treasury Inflation Protected Securities (Cost — $10,043,023)
|
|
|
|
|
|
Brazil Letras do Tesouro Nacional
|
|
|
|
|
Brazil Notas do Tesouro Nacional Serie F,
Notes
|
|
|
|
|
|
|
|
|
|
Bonos de la Tesoreria de la Republica en
pesos, Bonds
|
|
|
|
|
|
|
|
|
|
|
|
|
Mexico Government International Bond,
Senior Notes
|
|
|
|
|
|
|
|
|
|
Nigeria Government International Bond,
Senior Notes
|
|
|
|
|
See Notes to Consolidated Financial Statements.
Western Asset Inflation-Linked Income Fund 2024 Annual Report
Consolidated schedule of investments (cont’d)
November 30, 2024
Western Asset Inflation-Linked Income Fund
(Percentages shown based on Fund net assets)
|
|
|
|
|
|
|
|
|
|
|
Inter-American Development Bank, Senior
Notes
|
|
|
|
|
|
|
Total Sovereign Bonds (Cost — $7,386,216)
|
|
Mortgage-Backed Securities — 0.1%
|
|
|
Federal Home Loan Mortgage Corp. (FHLMC)
|
|
|
|
|
|
|
Federal National Mortgage Association
(FNMA)
|
|
|
|
|
|
|
Total Mortgage-Backed Securities (Cost — $148,060)
|
|
Asset-Backed Securities — 0.0%††
|
Countrywide Home Equity Loan Trust, 2005-C
2A (1 mo. Term SOFR + 0.294%)
(Cost — $123,536)
|
|
|
|
|
Total Investments before Short-Term Investments (Cost — $338,314,851)
|
|
|
|
|
|
|
|
|
Short-Term Investments — 2.9%
|
Western Asset Premier Institutional
Government Reserves, Premium Shares
(Cost — $6,162,056)
|
|
|
|
|
Total Investments — 150.4% (Cost — $344,476,907)
|
|
Liabilities in Excess of Other Assets — (50.4)%
|
|
Total Net Assets — 100.0%
|
|
See Notes to Consolidated Financial Statements.
Western Asset Inflation-Linked Income Fund 2024 Annual Report
Western Asset Inflation-Linked Income Fund
|
|
Face amount denominated in U.S. dollars, unless otherwise noted.
|
|
|
Represents less than 0.1%.
|
|
|
All or a portion of this security is held by the counterparty as collateral for open
reverse repurchase agreements.
|
|
|
All or a portion of this security is held at the broker as collateral for open centrally
cleared swap contracts.
|
|
|
All or a portion of this security is held at the broker as collateral for open futures
contracts.
|
|
|
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 Trustees.
|
|
|
Variable rate security. Interest rate disclosed is as of the most recent information
available. Certain variable rate
securities are not based on a published reference rate and spread but are determined
by the issuer or agent and
are based on current market conditions. These securities do not indicate a reference
rate and spread in their
description above.
|
|
|
Collateralized mortgage obligations are secured by an underlying pool of mortgages
or mortgage pass-through
certificates that are structured to direct payments on underlying collateral to different
series or classes of the
obligations. The interest rate may change positively or inversely in relation to one
or more interest rates, financial
indices or other financial indicators and may be subject to an upper and/or lower
limit.
|
|
|
Security is exempt from registration under Regulation S of the Securities Act of 1933.
Regulation S applies to
securities offerings that are made outside of the United States and do not involve
direct selling efforts in the
United States. This security has been deemed liquid pursuant to guidelines approved
by the Board of Trustees.
|
|
|
Rate shown is one-day yield as of the end of the reporting period.
|
|
|
In this instance, as defined in the Investment Company Act of 1940, an “Affiliated Company” represents Fund
ownership of at least 5% of the outstanding voting securities of an issuer, or a company
which is under common
ownership or control with the Fund. At November 30, 2024, the total market value of
investments in Affiliated
Companies was $6,162,056 and the cost was $6,162,056 (Note 8).
|
Abbreviation(s) used in this schedule:
|
|
|
|
|
|
|
|
Connecticut Avenue Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate Mortgage Investment Conduit
|
|
|
|
Secured Overnight Financing Rate
|
|
|
|
|
See Notes to Consolidated Financial Statements.
Western Asset Inflation-Linked Income Fund 2024 Annual Report
Consolidated schedule of investments (cont’d)
November 30, 2024
Western Asset Inflation-Linked Income Fund
At November 30, 2024, the Fund had the following open reverse repurchase agreements:
|
|
|
|
|
Face Amount
of Reverse
Repurchase
Agreements
|
Asset Class
of Collateral*
|
|
Morgan Stanley &
Co. Inc.
|
|
|
|
|
U.S. Treasury Inflation Protected
Securities
Cash
|
|
Morgan Stanley &
Co. Inc.
|
|
|
|
|
U.S. Treasury Inflation Protected
Securities
Cash
|
|
|
|
|
|
|
|
|
|
|
|
Refer to the Consolidated Schedule of Investments for positions held at the counterparty
as collateral for reverse
repurchase agreements.
|
|
|
Including accrued interest.
|
At November 30, 2024, the Fund had the following open futures contracts:
|
|
|
|
|
|
Unrealized
Appreciation
(Depreciation)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury 5-Year Notes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury Long-Term Bonds
|
|
|
|
|
|
U.S. Treasury Ultra Long-Term
Bonds
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized depreciation on open futures contracts
|
|
At November 30, 2024, the Fund had the following open forward foreign currency contracts:
|
|
|
|
|
Unrealized
Appreciation
(Depreciation)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements.
Western Asset Inflation-Linked Income Fund 2024 Annual Report
Western Asset Inflation-Linked Income Fund
|
|
|
|
|
Unrealized
Appreciation
(Depreciation)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Morgan Stanley & Co. Inc.
|
|
|
Net unrealized depreciation on open forward foreign currency contracts
|
|
Abbreviation(s) used in this table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At November 30, 2024, the Fund had the following open swap contracts:
CENTRALLY CLEARED CREDIT DEFAULT SWAPS ON CREDIT INDICES — SELL PROTECTION1
|
|
|
|
|
Periodic
Payments
Received by
|
|
Upfront
Premiums
Paid
(Received)
|
|
Markit CDX.NA.HY.43 Index
|
|
|
|
|
|
|
Markit CDX.NA.IG.43 Index
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Periodic
Payments
Made by
|
Periodic
Payments
Received by
|
|
Upfront
Premiums
Paid
(Received)
|
|
|
|
|
|
Daily SOFR
Compound +
1.100%**
|
|
|
|
|
See Notes to Consolidated Financial Statements.
Western Asset Inflation-Linked Income Fund 2024 Annual Report
Consolidated schedule of investments (cont’d)
November 30, 2024
Western Asset Inflation-Linked Income Fund
|
|
If the Fund is a seller of protection and a credit event occurs, as defined under
the terms of that particular swap
agreement, the Fund will either (i) pay to the buyer of protection an amount equal
to the notional amount of the
swap and take delivery of the referenced obligation or underlying securities comprising
the referenced index or (ii)
pay a net settlement amount in the form of cash or securities equal to the notional
amount of the swap less the
recovery value of the referenced obligation or underlying securities comprising the
referenced index.
|
|
|
The maximum potential amount the Fund could be required to pay as a seller of credit
protection or receive as a
buyer of credit protection if a credit event occurs as defined under the terms of
that particular swap agreement.
|
|
|
The quoted market prices and resulting values for credit default swap agreements on
asset-backed securities and
credit indices serve as an indicator of the current status of the payment/performance
risk and represent the
likelihood of an expected loss (or profit) for the credit derivative had the notional
amount of the swap agreement
been closed/sold as of the period end. Decreasing market values (sell protection)
or increasing market values (buy
protection), when compared to the notional amount of the swap, represent a deterioration
of the referenced
entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under
the terms of the agreement.
|
|
|
Percentage shown is an annual percentage rate.
|
|
|
Periodic payments made/received by the Fund are based on the total return of the referenced
entity.
|
|
|
Custom emerging markets debt basket is comprised of 37 bonds in the Sovereign Frontier
sector.
|
|
|
One time payment made at termination date.
|
Reference rate(s) and their value(s) as of period end used in this table:
Abbreviation(s) used in this table:
|
|
|
|
Western Asset Management Emerging Markets Frontier Custom Basket
|
|
|
|
Secured Overnight Financing Rate
|
The following table provides information about the underlying components of the JPEIFNTR
total
return swap, as of year end.
|
|
|
|
|
Angolan Government International Bond, 9.125% due 11/26/49
|
|
|
|
Argentine Republic Government International Bond, 3.500%
due 7/9/41
|
|
|
|
Argentine Republic Government International Bond, 5.000%
due 1/9/38
|
|
|
|
Bahamas Government International Bond, 8.950% due
10/15/32
|
|
|
|
Benin Government International Bond, 7.960% due 2/13/38
|
|
|
|
Costa Rica Government International Bond, 6.550% due 4/3/34
|
|
|
|
Dominican Republic International Bond, 4.500% due 1/30/30
|
|
|
|
Ecuador Government International Bond, 5.500% due 7/31/35
|
|
|
|
See Notes to Consolidated Financial Statements.
Western Asset Inflation-Linked Income Fund 2024 Annual Report
Western Asset Inflation-Linked Income Fund
|
|
|
|
|
Egypt Government International Bond, 5.800% due 9/30/27
|
|
|
|
Egypt Government International Bond, 7.903% due 2/21/48
|
|
|
|
El Salvador Government International Bond, 7.125% due
1/20/50
|
|
|
|
Ethiopia International Bond, 6.625% due 12/11/24(a)
|
|
|
|
Ghana Government International Bond, 5.000% due 7/3/29
|
|
|
|
Ghana Government International Bond, 5.000% due 7/3/35
|
|
|
|
Guatemala Government Bond, 5.375% due 4/24/32
|
|
|
|
Ivory Coast Government International Bond, 7.625% due
1/30/33
|
|
|
|
Jordan Government International Bond, 7.500% due 1/13/29
|
|
|
|
Mozambique International Bond, 9.000% due 9/15/31
|
|
|
|
Nigeria Government International Bond, 7.375% due 9/28/33
|
|
|
|
Paraguay Government International Bond, 6.100% due 8/11/44
|
|
|
|
Petroleos de Venezuela SA, 5.375% due 4/12/27(a)
|
|
|
|
Republic of Kenya Government International Bond, 6.300% due
1/23/34
|
|
|
|
Republic of Uzbekistan International Bond, 3.900% due
10/19/31
|
|
|
|
Senegal Government International Bond, 6.250% due 5/23/33
|
|
|
|
Senegal Government International Bond, 6.750% due 3/13/48
|
|
|
|
Sri Lanka Government International Bond, 6.125% due 6/3/25(a)
|
|
|
|
Sri Lanka Government International Bond, 6.825% due
7/18/26(a)
|
|
|
|
Sri Lanka Government International Bond, 6.850% due
11/3/25(a)
|
|
|
|
Ukraine Government International Bond, 0.000% due 2/1/30
|
|
|
|
Ukraine Government International Bond, 0.000% due 2/1/34
|
|
|
|
Ukraine Government International Bond, 0.000% due 2/1/35
|
|
|
|
Ukraine Government International Bond, 0.000% due 2/1/36
|
|
|
|
Ukraine Government International Bond, 1.750% due 2/1/34
|
|
|
|
Ukraine Government International Bond, 1.750% due 2/1/35
|
|
|
|
Ukraine Government International Bond, 1.750% due 2/1/36
|
|
|
|
Zambia Government International Bond, 0.500% due 12/31/53
|
|
|
|
Zambia Government International Bond, 5.750% due 6/30/33
|
|
|
|
|
|
|
|
|
(a)
The coupon payment on this security is currently in default as of November 30, 2024.
See Notes to Consolidated Financial Statements.
Western Asset Inflation-Linked Income Fund 2024 Annual Report
Consolidated statement of assets and liabilities
November 30, 2024
|
|
|
Investments in unaffiliated securities, at value (Cost — $338,314,851)
|
|
Investments in affiliated securities, at value (Cost — $6,162,056)
|
|
Foreign currency, at value (Cost — $507,638)
|
|
Deposits with brokers for open reverse repurchase agreements
|
|
|
|
|
Deposits with brokers for open futures contracts
|
|
Unrealized appreciation on forward foreign currency contracts
|
|
Foreign currency collateral for open futures contracts, at value (Cost — $129,156)
|
|
OTC swaps, at value (premiums paid — $0)
|
|
Receivable from brokers — net variation margin on centrally cleared swap contracts
|
|
Deposits with brokers for centrally cleared swap contracts
|
|
Dividends receivable from affiliated investments
|
|
Security litigation proceeds receivable
|
|
|
|
|
|
|
|
|
|
|
Payable for open reverse repurchase agreements (Note 3)
|
|
|
|
|
Unrealized depreciation on forward foreign currency contracts
|
|
Payable to brokers — net variation margin on open futures contracts
|
|
Investment management fee payable
|
|
Administration fee payable
|
|
Payable for open OTC swap contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares, no par value, unlimited number of shares authorized, 23,322,256 shares
issued and outstanding
|
|
Total distributable earnings (loss)
|
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements.
Western Asset Inflation-Linked Income Fund 2024 Annual Report
Consolidated statement of operations
For the Year Ended November 30, 2024
|
|
|
|
|
|
Dividends from affiliated investments
|
|
Less: Foreign taxes withheld
|
|
|
|
|
|
|
|
Interest expense (Note 3)
|
|
Investment management fee (Note 2)
|
|
Administration fees (Note 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock exchange listing fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Fee waivers and/or expense reimbursements (Note 2)
|
|
|
|
|
|
|
|
Realized and Unrealized Gain (Loss) on Investments, Futures Contracts, Swap Contracts,
Forward
Foreign Currency Contracts and Foreign Currency Transactions (Notes 1, 3 and 4):
|
Net Realized Gain (Loss) From:
|
|
Investment transactions in unaffiliated securities
|
|
|
|
|
|
|
|
Forward foreign currency contracts
|
|
Foreign currency transactions
|
|
|
|
|
Change in Net Unrealized Appreciation (Depreciation) From:
|
|
Investments in unaffiliated securities
|
|
|
|
|
|
|
|
Forward foreign currency contracts
|
|
|
|
|
Change in Net Unrealized Appreciation (Depreciation)
|
|
Net Gain on Investments, Futures Contracts, Swap Contracts, Forward Foreign
Currency Contracts and Foreign Currency Transactions
|
|
Increase in Net Assets From Operations
|
|
See Notes to Consolidated Financial Statements.
Western Asset Inflation-Linked Income Fund 2024 Annual Report
Consolidated statements of changes in net assets
For the Years Ended November 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in net unrealized appreciation (depreciation)
|
|
|
Increase (Decrease) in Net Assets From Operations
|
|
|
Distributions to Shareholders From (Note 1):
|
|
|
Total distributable earnings
|
|
|
|
|
|
|
Decrease in Net Assets From Distributions to Shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements.
Western Asset Inflation-Linked Income Fund 2024 Annual Report
Consolidated statement of cash flows
For the Year Ended November 30, 2024
Increase (Decrease) in Cash:
|
|
Cash Flows from Operating Activities:
|
|
Net increase in net assets resulting from operations
|
|
Adjustments to reconcile net increase in net assets resulting from operations to net
cash
provided (used) by operating activities:
|
|
Purchases of portfolio securities
|
|
Sales of portfolio securities
|
|
Net purchases, sales and maturities of short-term investments
|
|
|
|
|
Net amortization of premium (accretion of discount)
|
|
Securities litigation proceeds
|
|
Increase in security litigation proceeds receivable
|
|
Decrease in interest receivable
|
|
Increase in receivable from brokers — net variation margin on centrally cleared swap
contracts
|
|
Decrease in prepaid expenses
|
|
Decrease in dividends receivable from affiliated investments
|
|
Decrease in investment management fee payable
|
|
Decrease in Trustees’ fees payable
|
|
Decrease in administration fee payable
|
|
Decrease in interest expense payable
|
|
Increase in accrued expenses
|
|
Decrease in payable to brokers — net variation margin on open futures contracts
|
|
Increase in payable for open OTC swap contracts
|
|
Net realized loss on investments
|
|
Change in net unrealized appreciation (depreciation) of investments, OTC swap contracts
and forward foreign currency contracts
|
|
Net Cash Provided in Operating Activities*
|
|
Cash Flows from Financing Activities:
|
|
Distributions paid on common stock
|
|
Decrease in payable for open reverse repurchase agreements
|
|
Net Cash Used by Financing Activities
|
|
Net Decrease in Cash and Restricted Cash
|
|
Cash and restricted cash at beginning of year
|
|
Cash and restricted cash at end of year
|
|
|
|
Included in operating expenses is $7,483,503 paid for interest on borrowings.
|
See Notes to Consolidated Financial Statements.
Western Asset Inflation-Linked Income Fund 2024 Annual Report
Consolidated statement of cash flows (cont’d)
For the Year Ended November 30, 2024
The following table provides a reconciliation of cash (including foreign currency)
and restricted cash reported within the Consolidated Statement of Assets and Liabilities that sums to the total
of such amounts shown on the
Consolidated Statement of Cash Flows.
|
|
|
|
|
|
|
|
|
Total cash and restricted cash shown in the Consolidated Statement of Cash
Flows
|
|
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 Consolidated Statement of Assets and Liabilities as Deposits with brokers.
See Notes to Consolidated Financial Statements.
Western Asset Inflation-Linked Income Fund 2024 Annual Report
Consolidated financial highlights
For a share of common stock outstanding throughout each year ended November 30:
|
|
|
|
|
|
|
|
Net asset value, beginning of year
|
|
|
|
|
|
Income (loss) from operations:
|
|
|
|
|
|
|
|
Net realized and unrealized gain (loss)
|
|
|
|
|
|
Total income (loss) from operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anti-dilutive impact of tender offer
|
|
|
|
|
|
Net asset value, end of year
|
|
|
|
|
|
Market price, end of year
|
|
|
|
|
|
Total return, based on NAV3,4
|
|
|
|
|
|
Total return, based on Market Price5
|
|
|
|
|
|
Net assets, end of year (millions)
|
|
|
|
|
|
Ratios to average net assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per share amounts have been calculated using the average shares method.
|
|
|
The tender offer was completed at a price of $13.99 for 5,830,564 shares and $81,569,590
for the year ended
November 30, 2021.
|
|
|
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.
|
|
|
The total return calculation assumes that distributions are reinvested at NAV. Past
performance is no guarantee of
future results.
|
|
|
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.
|
|
|
The investment adviser 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.
|
|
|
Reflects fee waivers and/or expense reimbursements.
|
See Notes to Consolidated Financial Statements.
Western Asset Inflation-Linked Income Fund 2024 Annual Report
Notes to consolidated financial statements
1. Organization and significant accounting policies
Western Asset Inflation-Linked Income Fund (the “Fund”) is registered under the Investment Company Act of 1940, as amended (“1940 Act”), as a diversified, closed-end management investment company. The Fund commenced operations on September 26, 2003.
The Fund’s primary investment objective is to provide current income for its shareholders. Capital appreciation, when consistent with current income, is a secondary investment
objective. Under normal market conditions and at the time of purchase, the Fund will
invest at least 80% of its total managed assets in inflation-linked securities and at least
60% of its total managed assets in U.S. Treasury Inflation Protected Securities (“TIPS”). The Fund may also invest up to 40% of its total managed assets in non-U.S. dollar investments.
The Fund can invest no more than 10% of its total managed assets in securities rated below
investment grade at the time of purchase (or, if unrated, assets of comparable quality
as determined by management). If a security is rated by multiple nationally recognized
statistical rating organizations (“NRSROs”) and receives different ratings, the Fund will treat the security as being rated in the highest rating category received from an
NRSRO.
The Fund may gain exposure to the commodities markets by investing a portion of its
assets in a wholly-owned subsidiary, Western Asset Inflation-Linked Income Fund CFC (the
“Subsidiary”), organized under the laws of the Cayman Islands. Among other investments, the Subsidiary may invest in commodity-linked instruments. The Fund may invest up
to 25% of its total assets in the Subsidiary; although 10% of total managed assets may be
utilized for commodity-related strategies. These financial statements are consolidated financial
statements of the Fund and the Subsidiary. All interfund transactions have been eliminated
in consolidation.
The Fund follows the accounting and reporting guidance in Financial Accounting Standards
Board (“FASB”) Accounting Standards Codification Topic 946, Financial Services – Investment Companies (“ASC 946”). The following are significant accounting policies consistently followed by the Fund and are in conformity with U.S. generally accepted
accounting principles (“GAAP”), including, but not limited to, ASC 946. 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
Western Asset Inflation-Linked Income Fund 2024 Annual Report
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 adviser to be unreliable, the market price may be determined by the
adviser 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 Trustees.
Pursuant to policies adopted by the Board of Trustees, the Fund’s adviser has been designated as the valuation designee and is responsible for the oversight of the daily
valuation process. The Fund’s adviser is assisted by the Global Fund Valuation Committee (the “Valuation Committee”). The Valuation Committee is responsible for making fair value determinations, evaluating the effectiveness of the Fund’s pricing policies, and reporting to the Fund’s adviser and the Board of Trustees. 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 Trustees, 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 Trustees
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
Western Asset Inflation-Linked Income Fund 2024 Annual Report
Notes to consolidated financial statements (cont’d)
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 — unadjusted 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.
The following is a summary of the inputs used in valuing the Fund’s assets and liabilities carried at fair value:
|
|
|
|
|
Other Significant
Observable Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
|
|
|
|
|
U.S. Treasury Inflation
Protected Securities
|
|
|
|
|
|
|
|
|
|
|
Collateralized Mortgage
Obligations
|
|
|
|
|
Non-U.S. Treasury Inflation
Protected Securities
|
|
|
|
|
|
|
|
|
|
|
Mortgage-Backed Securities
|
|
|
|
|
|
|
|
|
|
|
Total Long-Term Investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Western Asset Inflation-Linked Income Fund 2024 Annual Report
|
|
|
|
|
Other Significant
Observable Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Other Financial Instruments:
|
|
|
|
|
|
|
|
|
|
|
Forward Foreign Currency
Contracts††
|
|
|
|
|
Centrally Cleared Credit
Default Swaps on Credit
Indices — Sell Protection††
|
|
|
|
|
|
|
|
|
|
|
Total Other Financial
Instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Significant
Observable Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Other Financial Instruments:
|
|
|
|
|
|
|
|
|
|
|
Forward Foreign Currency
Contracts††
|
|
|
|
|
|
|
|
|
|
|
|
|
See Consolidated 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 Consolidated
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.
Western Asset Inflation-Linked Income Fund 2024 Annual Report
Notes to consolidated financial statements (cont’d)
(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.
Non-deliverable forward foreign currency exchange contracts are settled with the counterparty in cash without the delivery of foreign currency.
Forward foreign currency contracts involve elements of market risk in excess of the
amounts reflected on the Consolidated 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) Swap agreements. The Fund invests in swaps for the purpose of managing its exposure to interest rate, credit or market risk, or for other purposes, including
to increase the Fund’s return. The use of swaps involves risks that are different from those associated with other portfolio transactions. Swap agreements are privately negotiated in the
over-the-counter market and may be entered into as a bilateral contract (“OTC Swaps”) or centrally cleared (“Centrally Cleared Swaps”). Unlike Centrally Cleared Swaps, the Fund has credit exposure to the counterparties of OTC Swaps.
In a Centrally Cleared Swap, immediately following execution of the swap, the swap
agreement is submitted to a clearinghouse or central counterparty (the “CCP”) and the CCP becomes the ultimate counterparty of the swap agreement. The Fund is required to interface with the CCP through a broker, acting in an agency capacity. All payments
are settled with the CCP through the broker. Upon entering into a Centrally Cleared Swap,
the Fund is required to deposit initial margin with the broker in the form of cash or
securities.
Swap contracts are marked-to-market daily and changes in value are recorded as unrealized
appreciation (depreciation). The daily change in valuation of Centrally Cleared Swaps,
if any, is recorded as a net receivable or payable for variation margin on the Consolidated
Statement of Assets and Liabilities. Gains or losses are realized upon termination
of the swap agreement. Collateral, in the form of restricted cash or securities, may be required
to be held in segregated accounts with the Fund’s custodian in compliance with the terms of the swap contracts. Securities posted as collateral for swap contracts are identified
in the Consolidated Schedule of Investments and restricted cash, if any, is identified on
the Consolidated Statement of Assets and Liabilities. Risks may exceed amounts recorded
in the Consolidated Statement of Assets and Liabilities. These risks include changes
in the returns of the underlying instruments, failure of the counterparties to perform under
the contracts’ terms, and the possible lack of liquidity with respect to the swap agreements.
Western Asset Inflation-Linked Income Fund 2024 Annual Report
OTC Swap payments received or made at the beginning of the measurement period are
reflected as a premium or deposit, respectively, on the Consolidated Statement of
Assets and Liabilities. These upfront payments are amortized over the life of the swap and
are recognized as realized gain or loss in the Consolidated Statement of Operations. Net
periodic payments received or paid by the Fund are recognized as a realized gain or
loss in the Consolidated Statement of Operations.
The Fund’s maximum exposure in the event of a defined credit event on a credit default swap to sell protection is the notional amount. As of November 30, 2024, the total
notional value of all credit default swaps to sell protection was $28,057,000. This amount
would be offset by the value of the swap’s reference entity, upfront premiums received on the swap and any amounts received from the settlement of a credit default swap where the Fund
bought protection for the same referenced security/entity.
For average notional amounts of swaps held during the year ended November 30, 2024,
see Note 4.
The Fund enters into credit default swap (“CDS”) contracts for investment purposes, to manage its credit risk or to add leverage. CDS agreements involve one party making
a stream of payments to another party in exchange for the right to receive a specified
return in the event of a default by a third party, typically corporate or sovereign issuers,
on a specified obligation, or in the event of a write-down, principal shortfall, interest
shortfall or default of all or part of the referenced entities comprising a credit index. The Fund
may use a CDS to provide protection against defaults of the issuers (i.e., to reduce risk
where the Fund has exposure to an issuer) or to take an active long or short position with respect
to the likelihood of a particular issuer’s default. As a seller of protection, the Fund generally receives an upfront payment or a stream of payments throughout the term of the swap
provided that there is no credit event. If the Fund is a seller of protection and
a credit event occurs, as defined under the terms of that particular swap agreement, the maximum
potential amount of future payments (undiscounted) that the Fund could be required
to make under a CDS agreement would be an amount equal to the notional amount of the
agreement. These amounts of potential payments will be partially offset by any recovery
of values from the respective referenced obligations. As a seller of protection, the
Fund effectively adds leverage to its portfolio because, in addition to its total net assets,
the Fund is subject to investment exposure on the notional amount of the swap. As a buyer
of protection, the Fund generally receives an amount up to the notional value of the
swap if a credit event occurs.
Implied spreads are the theoretical prices a lender receives for credit default protection.
When spreads rise, market perceived credit risk rises and when spreads fall, market
perceived credit risk falls. The implied credit spread of a particular referenced
entity reflects the cost of buying/selling protection and may include upfront payments required to
enter into the agreement. Wider credit spreads and decreasing market values, when compared
to the notional amount of the swap, represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring
as defined under the terms of the agreement. Credit spreads utilized in determining the
period end market value of CDS agreements on corporate or sovereign issues are disclosed
in the
Western Asset Inflation-Linked Income Fund 2024 Annual Report
Notes to consolidated financial statements (cont’d)
Consolidated Schedule of Investments and serve as an indicator of the current status
of the payment/performance risk and represent the likelihood or risk of default for credit
derivatives. For CDS agreements on asset-backed securities and credit indices, the
quoted market prices and resulting values, particularly in relation to the notional amount
of the contract as well as the annual payment rate, serve as an indication of the current
status of the payment/performance risk.
The Fund’s maximum risk of loss from counterparty risk, as the protection buyer, is the fair value of the contract (this risk is mitigated by the posting of collateral by the
counterparty to the Fund to cover the Fund’s exposure to the counterparty). As the protection seller, the Fund’s maximum risk is the notional amount of the contract. CDS are considered to have credit risk-related contingent features since they require payment by the protection
seller to the protection buyer upon the occurrence of a defined credit event.
Entering into a CDS agreement involves, to varying degrees, elements of credit, market
and documentation risk in excess of the related amounts recognized on the Consolidated
Statement of Assets and Liabilities. Such risks involve the possibility that there
will be no liquid market for these agreements, that the counterparty to the agreement may default
on its obligation to perform or disagree as to the meaning of the contractual terms in
the agreement, and that there will be unfavorable changes in net interest rates.
The Fund enters into total return swaps for investment purposes. Total return swaps
are agreements to exchange the return generated by one instrument for the return generated
by another instrument. For example, the agreement to pay a predetermined or fixed interest
rate in exchange for a market-linked return based on a notional amount. To the extent
the total return of a referenced index or instrument exceeds the offsetting interest obligation,
the Fund will receive a payment from the counterparty. To the extent it is less, the
Fund will make a payment to the counterparty.
(e) Stripped securities. The Fund may invest in ‘‘Stripped Securities,’’ a term used collectively for components, or strips, of fixed income securities. Stripped Securities
can be principal only securities (“PO”), which are debt obligations that have been stripped of unmatured interest coupons, or interest only securities (“IO”), which are unmatured interest coupons that have been stripped from debt obligations. The market value of Stripped
Securities will fluctuate in response to changes in economic conditions, rates of
pre-payment, interest rates and the market’s perception of the securities. However, fluctuations in response to interest rates may be greater in Stripped Securities than for debt
obligations of comparable maturities that pay interest currently. The amount of fluctuation may
increase with a longer period of maturity.
The yield to maturity on IO’s is sensitive to the rate of principal repayments (including prepayments) on the related underlying debt obligation and principal payments may
have a material effect on yield to maturity. If the underlying debt obligation experiences
greater than anticipated prepayments of principal, the Fund may not fully recoup its initial
investment in IO’s.
Western Asset Inflation-Linked Income Fund 2024 Annual Report
(f) 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 Consolidated Statement of Assets and Liabilities. Securities
pledged as collateral are noted in the Consolidated Schedule of Investments. Interest
payments made on reverse repurchase agreements are recognized as a component of “Interest expense” on the Consolidated 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.
(g) Inflation-indexed bonds. Inflation-indexed bonds are fixed income securities whose principal value or interest rate is periodically adjusted according to the rate of
inflation. As the index measuring inflation changes, the principal value or interest rate of inflation-indexed bonds will be adjusted accordingly. Inflation adjustments to the principal amount
of inflation-indexed bonds are reflected as an increase or decrease to investment income
on the Consolidated Statement of Operations. Repayment of the original bond principal
upon maturity (as adjusted for inflation) is guaranteed in the case of U.S. Treasury inflation-indexed bonds. For bonds that do not provide a similar guarantee, the adjusted principal
value of the bond repaid at maturity may be less than the original principal.
(h) 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
Consolidated Statements of Changes in Net Assets and additional information on cash
receipts and cash payments is presented in the Consolidated Statement of Cash Flows.
(i) 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.
Western Asset Inflation-Linked Income Fund 2024 Annual Report
Notes to consolidated financial statements (cont’d)
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.
(j) 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.
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.
(k) 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.
(l) 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
Western Asset Inflation-Linked Income Fund 2024 Annual Report
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 investment adviser 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 investment adviser. 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 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 Consolidated 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 Consolidated Statement of Assets and Liabilities. Securities
pledged as collateral, if any, for the same purpose are noted in the Consolidated
Schedule of Investments.
As of November 30, 2024, the Fund held forward foreign currency contracts with credit
related contingent features which had a liability position of $201,687. If a contingent
Western Asset Inflation-Linked Income Fund 2024 Annual Report
Notes to consolidated financial statements (cont’d)
feature in the master agreements would have been triggered, the Fund would have been
required to pay this amount to its derivatives counterparties.
At November 30, 2024, the Fund held non-cash collateral from Morgan Stanley & Co.
Inc. in the amount of $123,047. This amount could be used to reduce the Fund’s exposure to the counterparty in the event of default.
(m) 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) is recorded on the accrual basis. Amortization of premiums and accretion
of discounts on debt securities are recorded to interest income over the lives of the
respective securities, except for premiums on certain callable debt securities, which are amortized
to the earliest call date. 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.
(n) Distributions to shareholders. Distributions from net investment income of the Fund, if any, are declared and paid on a monthly basis. Distributions of net realized gains,
if any, are declared at least annually. Pursuant to its Managed Distribution Policy, the Fund
intends to make regular monthly distributions to shareholders at a fixed rate per common share,
which rate may be adjusted from time to time by the Fund’s Board of Trustees. Under the Fund’s Managed Distribution Policy, if, for any monthly distribution, the value of the Fund’s net investment income and net realized capital gain is less than the amount of the
distribution, the difference will be distributed from the Fund’s net assets (and may constitute a “return of capital”). Shareholders will be informed of the tax characteristics of the distributions after the close of the 2024 fiscal year. The Board of Trustees may
modify, terminate or suspend the Managed Distribution Policy at any time, including when certain
events would make part of the return of capital taxable to shareholders. Any such
modification, termination or suspension could have an adverse effect on the market
price of the Fund’s shares. 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.
(o) 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.
(p) 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
Western Asset Inflation-Linked Income Fund 2024 Annual Report
requirements imposed by the Code. Therefore, no federal or state income tax provision
is required in the Fund’s financial statements.
However, due to the timing of when distributions are made by the Fund, the Fund may
be subject to an excise tax of 4% of the amount by which 98% of the Fund’s annual taxable income and 98.2% of net realized gains exceed the distributions from such taxable
income and realized gains for the calendar year.
Management has analyzed the Fund’s tax positions taken on income tax returns for all open tax years and has concluded that as of November 30, 2024, 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.
(q) 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. During
the current year, the Fund had no reclassifications.
2. Investment management agreement and other transactions with affiliates
The Fund has entered into an Investment Management Agreement with Western Asset Management Company, LLC (“Western Asset” or the “Investment Adviser”), which provides for payment of a monthly fee computed at the annual rate of 0.35% of the Fund’s average weekly assets. “Average weekly assets” means the average weekly value of the total assets of the Fund (including any assets attributable to leverage) minus accrued liabilities
(other than liabilities representing leverage). For purposes of calculating “average weekly assets,” liabilities associated with any instrument or transactions used by the Investment Adviser to leverage the Fund’s portfolio (whether or not such instruments or transactions are treated as derivative instruments or transactions) are not considered a liability.
During periods when the Fund is using leverage, the fee paid to the Investment Adviser
for advisory services will be higher than if the Fund did not use leverage because the
fee paid will be calculated on the basis of the Fund’s average weekly assets, which includes the assets attributable to leverage.
Western Asset Management Company Pte. Ltd. (“Western Asset Singapore”), Western Asset Management Company Limited (“Western Asset London”) and Western Asset Management Company Ltd (“Western Asset Japan” and together with Western Asset Singapore and Western Asset London, the “Non-U.S. Advisers”) are also the Fund’s investment advisers. Western Asset Singapore, Western Asset London and Western Asset
Japan provide certain advisory services to the Fund relating to currency transactions
and investment in non-U.S. denominated securities. Western Asset Singapore, Western Asset
London and Western Asset Japan do not receive any compensation from the Fund.
Western Asset Inflation-Linked Income Fund 2024 Annual Report
Notes to consolidated financial statements (cont’d)
Franklin Templeton Fund Adviser, LLC (“FTFA” or the “Administrator”), an affiliate of the Investment Adviser, provides certain administrative, accounting, shareholder servicing
and corporate secretarial and related functions pursuant to an Administrative Services
Agreement with the Fund. The Fund pays the Administrator a monthly fee at the annual
rate of 0.05% of the Fund’s average weekly assets.
The Investment Adviser 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 (the “affiliated money market fund waiver”).
During the year ended November 30, 2024, fees waived and/or expenses reimbursed amounted to $4,850, all of which was an affiliated money market fund waiver.
Western Asset, Western Asset Singapore, Western Asset London, Western Asset Japan
and FTFA are indirect, wholly-owned subsidiaries of Franklin Resources, Inc.
During the year ended November 30, 2024, the aggregate cost of purchases and proceeds
from sales of investments (excluding short-term investments) and U.S. Government &
Agency Obligations were as follows:
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U.S. Government &
Agency Obligations
|
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|
|
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|
|
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At November 30, 2024, the aggregate cost of investments and the aggregate gross unrealized appreciation and depreciation of investments for federal income tax purposes
were as follows:
|
|
Cost/Premiums
Paid (Received)
|
Gross
Unrealized
Appreciation
|
Gross
Unrealized
Depreciation
|
Net
Unrealized
Appreciation
(Depreciation)
|
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|
|
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|
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|
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|
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Forward foreign currency contracts
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Transactions in reverse repurchase agreements for the Fund during the year ended November 30, 2024, were as follows:
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Weighted Average
Interest Rate*
|
Maximum Amount
Outstanding
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* Averages based on the number of days that the Fund had reverse repurchase agreements
outstanding.
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Interest rates on reverse repurchase agreements ranged from 5.160% to 5.540% during
the year ended November 30, 2024. Interest expense incurred on reverse repurchase agreements totaled $6,912,279.
Western Asset Inflation-Linked Income Fund 2024 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 Consolidated Statement of Assets and Liabilities
at November 30, 2024.
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Forward foreign currency contracts
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Centrally cleared swap contracts4
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Forward foreign currency contracts
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Generally, the balance sheet location for asset derivatives is receivables/net unrealized
appreciation and for
liability derivatives is payables/net unrealized depreciation.
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Includes cumulative unrealized appreciation (depreciation) of futures contracts as
reported in the Consolidated
Schedule of Investments. Only net variation margin is reported within the receivables
and/or payables on the
Consolidated Statement of Assets and Liabilities.
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Values include premiums paid (received) on swap contracts which are shown separately
in the Consolidated
Statement of Assets and Liabilities.
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Includes cumulative unrealized appreciation (depreciation) of centrally cleared swap
contracts as reported in the
Consolidated Schedule of Investments. Only net variation margin is reported within
the receivables and/or
payables on the Consolidated Statement of Assets and Liabilities.
|
The following tables provide information about the effect of derivatives and hedging
activities on the Fund’s Consolidated Statement of Operations for the year ended November 30, 2024. 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 net unrealized appreciation (depreciation) resulting from the Fund’s derivatives and hedging activities during the period.
AMOUNT OF NET REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED
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Forward foreign
currency contracts
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Western Asset Inflation-Linked Income Fund 2024 Annual Report
Notes to consolidated financial statements (cont’d)
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES RECOGNIZED
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Forward foreign
currency contracts
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During the year ended November 30, 2024, the volume of derivative activity for the
Fund was as follows:
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Futures contracts (to buy)
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Futures contracts (to sell)
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Forward foreign currency contracts (to buy)
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Forward foreign currency contracts (to sell)
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Credit default swap contracts (sell protection)
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Total return swap contracts
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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 November 30, 2024.
|
|
Gross Assets
Subject to
Master
|
Gross
Liabilities
Subject to
Master
|
Net Assets
(Liabilities)
Subject to
Master
Agreements
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Morgan Stanley & Co. Inc.
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Absent an event of default or early termination, derivative assets and liabilities
are presented gross and not
offset in the Consolidated Statement of Assets and Liabilities.
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Gross amounts are not offset in the Consolidated Statement of Assets and Liabilities.
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In some instances, the actual collateral received and/or pledged may be more than
the amount shown here due
to overcollateralization.
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Net amount may also include forward foreign currency exchange contracts that are not
required to be
collateralized.
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Represents the net amount receivable (payable) from (to) the counterparty in the event
of default.
|
Western Asset Inflation-Linked Income Fund 2024 Annual Report
5. Tender offer
On November 24, 2020, the Fund announced that the Fund’s Board of Trustees had approved a cash tender offer for up to 20% of the Fund’s outstanding common shares (the “Shares”) at a price per Share equal to 99% of the Fund’s net asset value per Share as of the business day immediately following the expiration date of the tender offer. On November 25,
2020, the Fund commenced its tender offer. On December 28, 2020, the tender offer expired.
Pursuant to the terms of the tender offer, the Fund repurchased Shares tendered and
accepted in the tender offer in exchange for cash. On December 30, 2020, the Fund
announced the final results of the tender offer. A total of 20,871,974 Shares were
duly tendered and not withdrawn. Because the number of Shares tendered exceeded 5,830,564
Shares, the tender offer was oversubscribed. Therefore, in accordance with the terms
and conditions specified in the tender offer, the Fund purchased Shares from all tendering
shareholders on a pro rata basis, disregarding fractions. Payment for such shares
was made on December 31, 2020. The purchase price of properly tendered Shares was $13.99 per
Share, equal to 99% of the per Share net asset value of $14.13 as of the close of
the regular trading session on the New York Stock Exchange on December 29, 2020. Shares
that were not tendered remain outstanding.
6. Distributions subsequent to November 30, 2024
The following distributions have been declared by the Fund’s Board of Trustees and are payable subsequent to the period end of this report:
7. Share repurchase program
On March 2, 2016, the Fund announced that the Fund’s Board of Trustees (the “Board”) had authorized the Fund to repurchase in the open market up to approximately 10% of the
Fund’s outstanding common shares when the Fund’s shares are trading at a discount to net asset value. The Board has directed management of the Fund to repurchase the Fund’s common shares at such times and in such amounts as management reasonably believes
may enhance shareholder value. The Fund is under no obligation to purchase shares
at any specific discount levels or in any specific amounts. During the years ended November
30, 2024, and November 30, 2023, the Fund did not repurchase any shares.
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
Western Asset Inflation-Linked Income Fund 2024 Annual Report
Notes to consolidated financial statements (cont’d)
all or some portion of the year ended November 30, 2024. The following transactions
were effected in such company for the year ended November 30, 2024.
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Affiliate
Value at
November 30,
2023
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Western Asset
Premier
Institutional
Government
Reserves, Premium
Shares
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Net Increase
(Decrease) in
Unrealized
Appreciation
(Depreciation)
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Affiliate
Value at
November 30,
2024
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Western Asset Premier
Institutional
Government Reserves,
Premium Shares
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9. Income tax information and distributions to shareholders
The tax character of distributions paid during the fiscal years ended November 30,
was as follows:
As of November 30, 2024, the components of distributable earnings (loss) on a tax
basis were as follows:
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Other book/tax temporary differences(a)
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Unrealized appreciation (depreciation)(b)
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Total distributable earnings (loss) — net
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These capital losses have been deferred in the current year as either short-term or
long-term losses. The losses
will be deemed to occur on the first day of the next taxable year in the same character
as they were originally
deferred and will be available to offset future taxable capital gains.
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Other book/tax temporary differences are attributable to the tax deferral of losses
on straddles, the realization
for tax purposes of unrealized gains (losses) on certain futures and foreign currency
contracts.
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The difference between book-basis and tax-basis unrealized appreciation (depreciation)
is attributable to the tax
deferral of losses on wash sales and the difference between the book and tax cost
basis in underlying
investments.
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Western Asset Inflation-Linked Income Fund 2024 Annual Report
Report of independent registered public accounting firm
To the Board of Trustees and Shareholders of Western Asset Inflation-Linked Income Fund
Opinion on the Financial Statements
We have audited the accompanying consolidated statement of assets and liabilities,
including the consolidated schedule of investments, of Western Asset Inflation-Linked Income Fund
and its subsidiary (the “Fund”) as of November 30, 2024, the related consolidated statements of operations and cash
flows for the year ended November 30, 2024, the consolidated statement of changes in net
assets for each of the two years in the period ended November 30, 2024, including the related notes,
and the consolidated financial highlights for each of the five years in the period ended November 30, 2024
(collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Fund as of
November 30, 2024, the results of its operations and its cash flows for the year then ended, the changes
in its net assets for each of the two years in the period ended November 30, 2024 and the financial highlights
for each of the five years in the period ended November 30, 2024 in conformity with accounting principles
generally accepted in the United States of America.
These consolidated financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting
Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund
in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.
We conducted our audits of these consolidated financial statements in accordance with
the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of material misstatement,
whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement
of the consolidated financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating
the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the consolidated financial statements. Our procedures included confirmation
of securities owned as of November 30, 2024 by correspondence with the custodian and brokers. We
believe that our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Baltimore, Maryland
January 23, 2025
We have served as the auditor of one or more investment companies in the Franklin Templeton
Group of Funds since 1948.
Western Asset Inflation-Linked Income Fund 2024 Annual Report
Additional information (unaudited)
Information about Trustees and Officers
The business and affairs of Western Asset Inflation-Linked Income Fund (the “Fund”) are conducted by management under the supervision and subject to the direction of its
Board of Trustees. The business address of each Trustee is c/o Jane Trust, Franklin Templeton,
280 Park Avenue, 8th Floor, New York, New York 10017.
Information pertaining to the Trustees and officers of the Fund is set forth below. The Fund’s annual proxy statement includes additional information about Trustees and is available,
without charge, upon request by calling the Fund at 1-888-777-0102.
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Position(s) held with Fund
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Trustee and Member of Audit, Executive and Contracts,
Investment and Performance and Governance and Nominating
Committees and Chair of Audit Committee, Class II
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Term of office1 and length of time served2
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Principal occupation(s) during the past five years
|
Board Member of Excellent Education Development
(since 2012); Senior Vice President Emeritus (since 2016) and
formerly, Senior Vice President, Finance and Chief Financial
Officer (2009 to 2016) at University of Southern California; and
formerly, Board Member of Great Public Schools Now (2018
to 2022)
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Number of portfolios in fund complex overseen by Trustee
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|
Other Trusteeships held by Trustee during the past five years
|
|
|
|
|
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Position(s) held with Fund
|
Trustee and Member of Audit, Executive and Contracts,
Investment and Performance and Governance and Nominating
Committees, Class II
|
Term of office1 and length of time served2
|
|
Principal occupation(s) during the past five years
|
Director (since 2022) and formerly, Chief Financial Officer, Long
Light Capital, LLC, formerly known as Korsant Partners, LLC (a
family investment company) (since 1997)
|
Number of portfolios in fund complex overseen by Trustee
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|
Other Trusteeships held by Trustee during the past five years
|
Formerly, Director, Visual Kinematics, Inc. (2018 to 2022)
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Western Asset Inflation-Linked Income Fund
Independent Trustees† (cont’d)
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Position(s) held with Fund
|
Trustee and Member of Audit, Executive and Contracts,
Investment and Performance and Governance and Nominating
Committees, Class II
|
Term of office1 and length of time served2
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Principal occupation(s) during the past five years
|
President of Tubman Truth Corp. (since 2015); Vice President
(since 2017), Member of the Executive Board (since 2013) and
Member of the International Olympic Committee (since 1986);
and President Emeritus (since 2015) and formerly, President
(1987 to 2015) and Director (1990 to 2015) of LA84 (formerly
Amateur Athletic Foundation of Los Angeles)
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Number of portfolios in fund complex overseen by Trustee
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|
Other Trusteeships held by Trustee during the past five years
|
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Position(s) held with Fund
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Trustee and Member of Audit, Executive and Contracts,
Investment and Performance and Governance and Nominating
Committees and Chair of Investment and Performance
Committee, Class I
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Term of office1 and length of time served2
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Principal occupation(s) during the past five years
|
Investment Consulting Partner, Strategic Management Advisors,
LLC (investment consulting) (since 1990)
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Number of portfolios in fund complex overseen by Trustee
(including the Fund)3
|
|
Other Trusteeships held by Trustee during the past five years
|
Director and Trustee (since 1990) and Chairman (since 2017
and 2005 to 2012) of various series of MainStay Family of Funds
(66 funds); formerly, Chairman of the Independent Directors
Council (2012 to 2014); ICI Executive Committee (2011 to 2014);
and Investment Company Institute (ICI) Board of Governors (2006
to 2014)
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Position(s) held with Fund
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Trustee and Member of Audit, Executive and Contracts,
Investment and Performance and Governance and Nominating
Committees, Class I
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Term of office1 and length of time served2
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|
Principal occupation(s) during the past five years
|
Chief Investment Officer for William H. Gates III (since 1994)4
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Number of portfolios in fund complex overseen by Trustee
(including the Fund)3
|
|
Other Trusteeships held by Trustee during the past five years
|
Ecolab Inc. (since 2012); Fomento Economico Mexicano, SAB
(since 2011); and Republic Services, Inc. (since 2009)
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Western Asset Inflation-Linked Income Fund
Additional information (unaudited) (cont’d)
Information about Trustees and Officers
Independent Trustees† (cont’d)
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Position(s) held with Fund
|
Trustee and Member of Audit, Executive and Contracts,
Investment and Performance and Governance and Nominating
Committees, Class I
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Term of office1 and length of time served2
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|
Principal occupation(s) during the past five years
|
Director and Advisor (since 2017) and formerly, Executive Vice
President and Chief Operating Officer (2002 to 2016) of Lowe
Enterprises, Inc. (privately held real estate and hospitality firm);
and formerly, Partner, Arthur Andersen, LLP (1974 to 2002)
|
Number of portfolios in fund complex overseen by Trustee
(including the Fund)3
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|
Other Trusteeships held by Trustee during the past five years
|
Public Storage (since 2010); Occidental Petroleum Corporation
(since 2008); and formerly, California Resources Corporation
(2014 to 2021)
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Position(s) held with Fund
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Trustee and Chair of the Board and Member of Audit, Executive
and Contracts, Investment and Performance and Governance
and Nominating Committees and Chair of Executive and
Contracts Committee, Class III
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Term of office1 and length of time served2
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Since 1997 (Chair of the Board since 2020)
|
Principal occupation(s) during the past five years
|
Chairman of Excellent Education Development (since 2000);
formerly, Chairman of Great Public Schools Now (2015 to 2020);
Trustee of The Getty Trust (2005 to 2017); and Chairman of Walt
Disney Concert Hall, Inc. (1998 to 2006)
|
Number of portfolios in fund complex overseen by Trustee
(including the Fund)3
|
|
Other Trusteeships held by Trustee during the past five years
|
Trustee, University of Southern California (since 1994); and
formerly, Member of Board of United States Golf Association,
Executive Committee Member (2017 to 2021)
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Western Asset Inflation-Linked Income Fund
Independent Trustees† (cont’d)
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Position(s) held with Fund
|
Trustee and Member of Audit, Executive and Contracts,
Investment and Performance and Governance and Nominating
Committees and Chair of Governance and Nominating
Committee, Class III
|
Term of office1 and length of time served2
|
|
Principal occupation(s) during the past five years
|
Corporate Board Member and Advisor (since 2004); formerly,
Chief Operating Officer of Overture Services, Inc. (publicly traded
internet company that created search engine marketing) (2001
to 2004); President and Chief Operating Officer, PayMyBills
(internet innovator in bill presentment/payment space) (1999 to
2001); and Executive vice president for consumer and business
banking for three national financial institutions (1984 to 1997)
|
Number of portfolios in fund complex overseen by Trustee
(including the Fund)3
|
|
Other Trusteeships held by Trustee during the past five years
|
Director of Pacific Premier Bancorp Inc. and Pacific Premier Bank
(since 2019); Director of EXL (operations management and
analytics company) (since 2018); formerly, Director of LifeLock,
Inc. (identity theft protection company) (2015 to 2017); Director
of CoreLogic, Inc. (information, analytics and business services
company) (2012 to 2021); and Director of Pinnacle
Entertainment, Inc. (gaming and hospitality company) (2012 to
2018)
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Position(s) held with Fund
|
Trustee and Member of Audit, Executive and Contracts,
Investment and Performance and Governance and Nominating
Committees, and Coordinator of Alternative Investments,
Class III
|
Term of office1 and length of time served2
|
|
Principal occupation(s) during the past five years
|
Retired; formerly, President, ECMC Foundation (nonprofit
organization) (2014 to 2023); and Executive Vice President and
Chief Financial Officer for University of California system (2009
to 2014)
|
Number of portfolios in fund complex overseen by Trustee
(including the Fund)3
|
|
Other Trusteeships held by Trustee during the past five years
|
Director of Pacific Mutual Holding Company (since 2016);5 Ralph
M. Parson Foundation (since 2015); Edison International
(since 2011); formerly, Director of 23andMe, Inc. (genetics
and health care services company) (2021 to 2024); Member
of the Board of Trustees of California State University
system (2015 to 2022); and Kaiser Family Foundation (2012
to 2022)
|
Western Asset Inflation-Linked Income Fund
Additional information (unaudited) (cont’d)
Information about Trustees and Officers
|
|
|
|
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|
Position(s) held with Fund
|
Trustee and Member of Investment and Performance
Committee, Class I
|
Term of office1 and length of time served2
|
|
Principal occupation(s) during the past five years
|
Partner of Munger, Tolles & Olson LLP (a law partnership) (since
1968)
|
Number of portfolios in fund complex overseen by Trustee
|
|
Other Trusteeships held by Trustee during the past five years
|
Director of Berkshire Hathaway, Inc. (since 1997); formerly,
Director of Provivi, Inc. (2017 to 2024)
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|
Interested Trustee and Officer
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|
Position(s) held with Fund
|
Trustee and Member of Investment and Performance
Committee, President and Chief Executive Officer, Class II
|
Term of office1 and length of time served2
|
|
Principal occupation(s) during the past five years
|
Senior Vice President, Fund Board Management, Franklin
Templeton (since 2020); Officer and/or Trustee/Director of 114
funds associated with FTFA or its affiliates (since 2015);
President and Chief Executive Officer of FTFA (since 2015);
formerly, Senior Managing Director (2018 to 2020) and
Managing Director (2016 to 2018) of Legg Mason & Co., LLC
(“Legg Mason & Co.”); and Senior Vice President of FTFA (2015)
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Number of portfolios in fund complex overseen by Trustee
(including the Fund)3
|
Trustee/Director of Franklin Templeton funds consisting of 114
portfolios; Trustee of Putnam Family of Funds consisting of 105
portfolios
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Other Trusteeships held by Trustee during the past five years
|
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Franklin Templeton
280 Park Avenue, 8th Floor, New York, NY 10017
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Position(s) held with Fund
|
|
Term of office1 and length of time served2
|
|
Principal occupation(s) during the past five years
|
Vice President, Global Compliance of Franklin Templeton
(since 2020); Chief Compliance Officer of FTFA (since 2006);
Chief Compliance Officer of certain funds associated with Legg
Mason & Co. or its affiliates (since 2006); formerly, Director of
Global Compliance at Legg Mason (2006 to 2020); Managing
Director of Compliance of Legg Mason & Co. (2005 to 2020)
|
Western Asset Inflation-Linked Income Fund
Additional Officers (cont’d)
|
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|
Franklin Templeton
100 First Stamford Place, 6th Floor, Stamford, CT 06902
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|
Position(s) held with Fund
|
Secretary and Chief Legal Officer
|
Term of office1 and length of time served2
|
|
Principal occupation(s) during the past five years
|
Associate General Counsel of Franklin Templeton (since 2020);
Secretary and Chief Legal Officer of certain funds associated
with Legg Mason & Co. or its affiliates (since 2020); Assistant
Secretary of certain funds associated with Legg Mason & Co. or
its affiliates (2006 to 2023); formerly, Managing Director (2016
to 2020) and Associate General Counsel of Legg Mason & Co.
(2005 to 2020)
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Franklin Templeton
100 First Stamford Place, 6th Floor, Stamford, CT 06902
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Position(s) held with Fund
|
|
Term of office1 and length of time served2
|
|
Principal occupation(s) during the past five years
|
Senior Associate General Counsel of Franklin Templeton
(since 2020); Secretary of FTFA (since 2006); Secretary of LM
Asset Services, LLC (“LMAS”) (since 2002) and Legg Mason
Fund Asset Management, Inc. (“LMFAM”) (since 2013) (formerly
registered investment advisers); formerly, Managing Director
and Deputy General Counsel of Legg Mason & Co. (2005
to 2020) and Assistant Secretary of certain funds in the fund
complex (2006 to 2022)
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Franklin Templeton
280 Park Avenue, 8th Floor, New York, NY 10017
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Position(s) held with Fund
|
Treasurer and Principal Financial Officer
|
Term of office1 and length of time served2
|
|
Principal occupation(s) during the past five years
|
Vice President, Fund Administration and Reporting, Franklin
Templeton (since 2020); Treasurer (since 2010) and Principal
Financial Officer (since 2019) of certain funds associated with
Legg Mason & Co. or its affiliates; formerly, Managing
Director (2020), Director (2015 to 2020), and Vice President (2011
to 2015) of Legg Mason & Co.
|
Western Asset Inflation-Linked Income Fund
Additional information (unaudited) (cont’d)
Information about Trustees and Officers
Additional Officers (cont’d)
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|
Franklin Templeton
280 Park Avenue, 8th Floor, New York, NY 10017
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Position(s) held with Fund
|
|
Term of office1 and length of time served2
|
|
Principal occupation(s) during the past five years
|
U.S. Fund Board Team Manager, Franklin Templeton (since 2020);
Senior Vice President of certain funds associated with Legg
Mason & Co. or its affiliates (since 2007); Senior Vice President
of FTFA (since 2006); President and Chief Executive Officer of
LMAS and LMFAM (since 2015); formerly, Managing Director of
Legg Mason & Co. (2005 to 2020); and Senior Vice President of
LMFAM (2013 to 2015)
|
†
Trustees who are not “interested persons” of the Fund within the meaning of Section 2(a)(19) of the Investment Company Act of 1940, as amended (the “1940 Act”).
1
The Fund’s Board of Trustees is divided into three classes: Class I, Class II and Class III. The terms of office of the Class I, II and III Trustees expire at the Annual Meetings of Stockholders in
the year 2025, year 2026 and year 2027, respectively, or thereafter in each case when their respective successors
are duly elected and qualified. The Fund’s executive officers are chosen each year, to hold office until their successors are duly elected and qualified.
2
Indicates the earliest year in which the Trustee became a board member for a fund
in the Franklin Templeton fund complex or the officer took such office.
3
Each board member also serves as a member of the Boards of Western Asset Inflation-Linked
Opportunities & Income Fund, Western Asset Investment Grade Income Fund Inc. and Western Asset Premier
Bond Fund (each a closed-end investment company) and the portfolios of Western Asset Funds,
Inc., Legg Mason Partners Income Trust, Legg Mason Partners Institutional Trust, Legg Mason Partners
Money Market Trust, Legg Mason Partners Premium Money Market Trust, Legg Mason Partners Variable Income
Trust and Master Portfolio Trust (each an open-end investment company), which are all considered part
of the same fund complex as the Fund.
4
Mr. Larson is the chief investment officer for William H. Gates III and in that capacity
oversees the non-Microsoft investments of Mr. Gates and all of the investments of the Bill and Melinda
Gates Foundation Trust (such combined investments are referred to as the “Accounts”). Since 1997, Western Asset has provided discretionary investment advice with respect to one or more Accounts. Since December
31, 2021, at no time did the value of those investment portfolios exceed 1.0% of Western Asset’s total assets under management. No changes to these arrangements are currently contemplated.
5
Western Asset and its affiliates provide investment advisory services with respect
to registered investment companies sponsored by an affiliate of Pacific Mutual Holding Company (“Pacific Holdings”). Affiliates of Pacific Holdings receive compensation from FTFA or its affiliates for shareholder
or distribution services provided with respect to registered investment companies for which Western Asset or
its affiliates serve as investment adviser.
6
Mr. Olson is an “interested person” of the Fund, as defined in the 1940 Act, because his law firm has provided legal services to Western Asset.
7
Ms. Trust is an “interested person” of the Fund, as defined in the 1940 Act, because of her position with FTFA and/or certain of its affiliates.
Western Asset Inflation-Linked Income Fund
Annual principal executive officer and
principal financial officer certifications (unaudited)
The Fund’s Principal Executive Officer (“PEO”) has submitted to the NYSE the required annual certification and the Fund also has included the Certifications of the Fund’s PEO and Principal Financial Officer required by Section 302 of the Sarbanes-Oxley Act in the Fund’s Form N-CSR filed with the SEC for the period of this report.
Western Asset Inflation-Linked Income Fund
Other shareholder communications regarding accounting matters (unaudited)
The Fund’s Audit Committee has established guidelines and procedures regarding the receipt, retention and treatment of complaints regarding accounting, internal accounting
controls or auditing matters (collectively, “Accounting Matters”). Persons with complaints or concerns regarding Accounting Matters may submit their complaints to the Chief Compliance Officer (“CCO”). Persons who are uncomfortable submitting complaints to the CCO, including complaints involving the CCO, may submit complaints directly to the Fund’s Audit Committee Chair. Complaints may be submitted on an anonymous basis.
The CCO may be contacted at:
Franklin Resources Inc.
Compliance Department
280 Park Ave, 8th Floor
New York, NY 10017
Complaints may also be submitted by telephone at 1-800-742-5274. Complaints submitted
through this number will be received by the CCO.
Western Asset Inflation-Linked Income Fund
Summary of information regarding the Fund (unaudited)
Investment Objectives
The Fund’s primary investment objective is to provide current income. Capital appreciation, when consistent with current income, is a secondary investment objective.
Principal Investment Policies and Strategies
Under normal market conditions and at the time of purchase, the Fund will invest at
least 80% of its total managed assets1 in inflation-linked securities and at least 60% of its total managed assets in U.S. Treasury Inflation Protected Securities (“TIPS”).2 The Fund may also invest up to 40% of its total managed assets in non-U.S. dollar investments, which
gives the Fund flexibility to invest up to 40% of its total managed assets in non-U.S. dollar
inflation-linked securities (no more than 20% of its non-U.S. dollar exposure may
be unhedged). The Fund may invest no more than 10% of its total managed assets in investments rated below investment grade at the time of purchase (or, if unrated,
assets of comparable quality as determined by management).
The Fund may engage in currency strategies, using instruments such as currency forwards,
futures and options, to take long and short foreign currency positions subject to
a limit of exposure from such strategies to 40% of total managed assets. This capacity is in
addition to the capacity to have 20% unhedged exposure to non-U.S. dollar currencies through
the purchase of fixed income securities.
The Fund may gain exposure to the commodities markets by investing a portion of its
assets in a wholly-owned subsidiary, Western Asset Inflation-Linked Income Fund CFC (the
“Subsidiary”), organized under the laws of the Cayman Islands. Among other investments, the Subsidiary may invest in commodity-linked instruments. The Fund may invest up
to 25% of its total assets in the Subsidiary; although 10% of total managed assets may be
utilized for commodity-related strategies. Exposure to commodities is expected to be achieved
using a variety of instruments, such as futures contracts, options and other derivatives,
or through investments in exchange-traded products that offer exposure to commodities.
The Fund does not expect to hold physical commodities.
Each of the foregoing policies is a non-fundamental policy that may be changed without
shareholder approval. The Fund also has the following non-fundamental policy, which,
to the extent required by applicable law, may only be changed after notice to shareholders:
under normal market conditions, the Fund will invest at least 80% of its total managed
assets in inflation-protected securities and non-inflation-protected securities and
1
“Total managed assets” means the total assets of the Fund (including any assets attributable to leverage) minus accrued liabilities (other than liabilities representing leverage).
2
U.S. Treasury Inflation-Protected Securities (“TIPS”) are inflation-indexed securities issued by the U.S. Treasury in five-year, ten-year and thirty-year maturities. The principal is adjusted to the
Consumer Price Index, the commonly used measure of inflation. The coupon rate is constant, but generates a different
amount of interest when multiplied by the inflation-adjusted principal.
Western Asset Inflation-Linked Income Fund
Summary of information regarding the Fund (unaudited) (cont’d)
instruments with the potential to enhance the Fund’s income.
To the extent permitted by the foregoing policies, the Fund may invest in emerging
markets debt securities.
Reverse repurchase agreements and other forms of leverage will not exceed 38% of the
Fund’s total managed assets. To the extent the Fund covers its commitments under these transactions, investment in these transactions will not be considered leverage for
purposes of the Fund’s policy on the amount of leverage it may incur. The Fund currently expects that the average effective duration3 of its portfolio will range between zero and fifteen years, although this target duration may change from time to time. The Fund may enter into
credit default swap contracts, interest rate swap contracts and total return swap contracts
for investment purposes, to manage its credit risk or to add leverage. There can be no
assurance that the Fund will achieve its investment objectives.
The Fund seeks to offer an inflation hedge through investments in global inflation-linked
securities, and primarily in U.S. TIPS. The Fund also seeks to offer shareholders
certain additional advantages through the ability to invest in other fixed income asset classes,
which may result in higher total returns and higher distribution rates. These asset
classes include select investments in high-yield and investment grade credit, emerging markets
and structured products.
The Fund may invest up to 20% of its total managed assets in securities that are not
inflation-linked securities, such as corporate debt that is not inflation-linked,
that are investment grade in quality at the time of their purchase. The Fund may invest up
to 10% of its total managed assets in securities that are not inflation-linked securities, such
as corporate debt that is not inflation-linked, that are rated below investment grade
at the time of purchase (or, if unrated, assets of comparable quality as determined by management). If a security is rated by multiple nationally recognized statistical
rating organizations (“NRSROs”) and receives different ratings, the Fund will treat the security as being rated in the highest rating category received from an NRSRO. Investment grade
quality debt securities are debt securities rated within a rating agency’s four highest grades (Baa or BBB or higher by Moody’s Investors Service, Inc. (“Moody’s”), S&P Global Ratings (“S&P”) or Fitch Ratings, Inc. (“Fitch”) or a similar rating of another nationally recognized rating agency) or debt securities that are unrated but judged to be of comparable
quality by Western Asset.
The Fund may enter into short sales, use reverse repurchase agreements and dollar
rolls, and engage in other types of transactions, including derivative transactions (such
as
3
Effective duration is a duration calculation for bonds with embedded options. Effective
duration takes into account that expected cash flows will fluctuate as interest rates change. Please note,
duration measures the sensitivity of price (the value of principal) of a fixed-income investment to a change
in interest rates. Funds that employ leverage calculate effective duration based off of net assets.
Western Asset Inflation-Linked Income Fund
options, futures contracts and swaps, including credit default swaps), for risk management
purposes or as part of its investment strategies.
The Fund may borrow money in an amount up to 5% of its total assets as a temporary
measure for extraordinary or emergency purposes, including the payment of dividends
and the settlement of securities transactions that otherwise might require untimely dispositions
of Fund securities. Such borrowings are not considered leverage for purposes of the Fund’s policy on the amount of leverage it may incur.
The Fund is a diversified, closed-end management investment company designed primarily
as a long-term investment and not as a trading vehicle. The Fund is not intended to
be a complete investment program and, due to the uncertainty inherent in all investments,
there can be no assurance that the Fund will achieve its investment objectives. Your common
shares at any point in time may be worth less than you invested, even after taking
into account the reinvestment of Fund dividends and distributions.
Investment and Market Risk. An investment in the Fund is subject to investment risk, including the possible loss of the entire amount that you invest. Your investment
in the common shares represents an indirect investment in the fixed income securities and
other investments owned by the Fund, most of which could be purchased directly. The value
of the Fund’s portfolio securities may move up or down, sometimes rapidly and unpredictably. At any point in time, your common shares may be worth less than your original investment,
even after taking into account the reinvestment of Fund dividends and distributions.
Market Discount Risk. Shares of closed-end investment companies frequently trade at a discount from their net asset value. This risk is separate and distinct from the risk
that the Fund’s net asset value could decrease as a result of its investment activities. Whether investors will realize gains or losses upon the sale of the common share will depend
not upon the Fund’s net asset value but upon whether the market price of the common share at the time of sale is above or below the investor’s purchase price for the common share.
Because the market price of the common share will be determined by factors such as
relative supply of and demand for the common share in the market, general market and
economic conditions and other factors beyond the control of the Fund, the Fund cannot
predict whether the common share will trade at, above or below net asset value or
at, above or below the initial public offering price. The Fund’s common share is designed primarily for long term investors and you should not view the Fund as a vehicle for
trading purposes.
Risks Relating to U.S. TIPS. The value of inflation-protected securities such as U.S. TIPS generally fluctuates in response to changes in real interest rates, which are in turn
tied to the relationship between nominal interest rates and the rate of inflation. Therefore,
if
Western Asset Inflation-Linked Income Fund
Summary of information regarding the Fund (unaudited) (cont’d)
inflation were to rise at a faster rate than nominal interest rates, real interest
rates might decline, leading to an increase in value of U.S. TIPS. In contrast, if nominal interest
rates increased at a faster rate than inflation, real interest rates might rise, leading
to a decrease in value of U.S. TIPS.
Although the principal value of U.S. TIPS declines in periods of deflation, holders
at maturity receive no less than the par value of the bond. However, if the Fund purchases
U.S. TIPS in the secondary market whose principal values have been adjusted upward due
to inflation since issuance, the Fund may experience a loss if there is a subsequent
period of deflation. If inflation is lower than expected during the period the Fund holds U.S.
TIPS, the Fund may earn less on the securities than on conventional debt securities. Any increase
in principal value of U.S. TIPS caused by an increase in the CPI-U is taxable in the
year the increase occurs, even though the Fund will not receive cash representing the increase
at that time. As a result, the Fund could be required at times to liquidate other investments,
including when it is not advantageous to do so, in order to satisfy its distribution
requirements as a regulated investment company and to eliminate any fund-level income
tax liability under the Internal Revenue Code of 1986, as amended (the “Code”).
If real interest rates rise (i.e., if interest rates rise due to reasons other than
inflation), the value of the U.S. TIPS in the Fund’s portfolio will decline. In addition, because the principal amount of U.S. TIPS would be adjusted downward during a period of deflation, the Fund
will be subject to deflation risk with respect to its investments in these securities.
The daily adjustment of the principal value of U.S. TIPS is currently tied to the
non-seasonally adjusted CPI-U, which is calculated monthly by the U.S. Bureau of Labor Statistics. The CPI-U is a measurement of changes in the cost of living, made up of
components such as housing, food, transportation and energy. Its calculation includes
a three-month lag. There can be no assurance that such index will accurately measure
the real rate of inflation in the prices of goods and services. In addition, calculation
of the CPI-U includes a three-month lag for purposes of determining the principal value of U.S.
TIPS which, consequently, could have a negative impact on the value of U.S. TIPS under
certain market conditions.
Fixed Income Securities Risk. In addition to the risks described elsewhere in this section with respect to valuations and liquidity, fixed income securities, including high-yield
securities, are also subject to certain risks, including:
• Issuer Risk. The value of fixed income securities may decline for a number of reasons that directly relate to the issuer, such as management performance, financial leverage
and reduced demand for the issuer’s goods and services.
• Interest Rate Risk. The market price of the Fund’s investments will change in response to changes in interest rates and other factors. During periods of declining interest
rates, the
Western Asset Inflation-Linked Income Fund
market price of fixed income securities generally rises. Conversely, during periods
of rising interest rates, the market price of such securities generally declines. The
magnitude of these fluctuations in the market price of fixed income securities is
generally greater for securities with longer maturities. Fluctuations in the market price of the Fund’s securities will not affect interest income derived from securities already owned by
the Fund, but will be reflected in the Fund’s net asset value. The Fund may utilize certain strategies, including swaps, futures contracts, options on futures and options based
on U.S. Treasury securities, for the purpose of reducing the interest rate sensitivity
of the portfolio, although there is no assurance that it will do so or that such strategies
will be successful. Recently, there have been inflationary price movements. As such, fixed
income securities markets may experience heightened levels of interest rate volatility
and liquidity risk.
• Prepayment Risk. Many issuers have a right to prepay their securities. During periods of declining interest rates, the issuer of a security may exercise its option to prepay
principal earlier than scheduled, forcing the Fund to reinvest the proceeds from such
prepayment in lower yielding securities, which may result in a decline in the Fund’s income and distributions to shareholders. This is known as prepayment or “call” risk. Debt securities frequently have call features that allow the issuer to redeem the
security at dates prior to its stated maturity at a specified price (typically greater than
par) only if certain prescribed conditions are met. An issuer may choose to redeem a debt security
if, for example, the issuer can refinance the debt at a lower cost due to declining interest
rates or an improvement in the credit standing of the issuer.
• Reinvestment Risk. Reinvestment risk is the risk that income from the Fund’s portfolio will decline if and when the Fund invests the proceeds from matured, traded or called fixed
income securities at market interest rates that are below the portfolio’s current earnings rate. A decline in income could affect the Fund’s common share price, its distributions or its overall return.
• Extension Risk. When interest rates rise, repayments of fixed income securities, particularly asset- and mortgage- backed securities, may occur more slowly than anticipated, extending the effective duration of these fixed income securities at
below market interest rates and causing their market prices to decline more than they would
have declined due to the rise in interest rates alone. This may cause the Fund’s share price to be more volatile.
Credit Risk. If an issuer or guarantor of a security held by the Fund or a counterparty to a financial contract with the Fund defaults or its credit is downgraded, or is perceived
to be less creditworthy, or if the value of the assets underlying a security declines, the
value of your investment will typically decline. Changes in actual or perceived creditworthiness
may occur quickly. The Fund could be delayed or hindered in its enforcement of rights
against an
Western Asset Inflation-Linked Income Fund
Summary of information regarding the Fund (unaudited) (cont’d)
issuer, guarantor or counterparty. Subordinated securities (meaning securities that
rank below other securities with respect to claims on the issuer’s assets) are more likely to suffer a credit loss than non-subordinated securities of the same issuer and will be disproportionately affected by a default, downgrade or perceived decline in creditworthiness.
Lower and Unrated Securities Risk. The Fund may invest in below investment grade securities (commonly referred to as “high-yield” securities or “junk bonds”) at the time of investment. High yield debt securities are generally subject to greater credit risks
than higher-grade debt securities, including the risk of default on the payment of interest
or principal. High yield debt securities are considered speculative, typically have lower
liquidity and are more difficult to value than higher grade bonds. High yield debt
securities tend to be volatile and more susceptible to adverse events, credit downgrades and
negative sentiments and may be difficult to sell at a desired price, or at all, during periods
of uncertainty or market turmoil.
Leverage risk. The value of your investment may be more volatile if the fund uses leverage-through borrowing of money and, under certain circumstances, reverse repurchase agreements, short sales, futures contracts, credit default swaps, dollar roll transactions
and other investment techniques shareholder. The Fund’s leveraging strategy may not be successful. Leverage is a speculative technique that may expose the Fund to greater
risk and increased costs. Increases and decreases in the value of the Fund’s portfolio will be magnified when the Fund uses leverage. As a result, leverage will cause greater changes
in the Fund’s net asset value than if leverage were not used. The Fund will also have to pay interest with respect to its leverage, which may reduce the Fund’s return. This expense may be greater than the Fund’s return on the underlying investments. It is anticipated that interest with respect to leverage will be based on shorter-term interest rates that
would be periodically reset. There can be no assurance that the use of leverage will result
in a higher yield on the shares. When leverage is employed, the net asset value and market price
of the shares and the yield to shareholders will be more volatile. The use of leverage will
cause the Fund’s net asset value to fall more sharply in response to increases in interest rates than it would in the absence of the use of leverage. Leverage creates two major types
of risks for shareholders: the likelihood of greater volatility of net asset value and
market price of the shares because changes in the value of the Fund’s assets, including investments bought with the proceeds from the use of leverage, are borne entirely by the shareholders;
and the possibility either that net investment income will fall if the interest and
dividend rates on leverage rise or that net investment income will fluctuate because the interest
and dividend rates on leverage vary.
Because the fees received by Western Asset are based on the average weekly assets
of the Fund (including assets represented by leverage), Western Asset has a financial incentive
for
Western Asset Inflation-Linked Income Fund
the Fund to incur leverage, which may create a conflict of interest between Western
Asset and the shareholders. The fees paid to Franklin Templeton Fund Adviser, LLC are also
based on the average weekly assets of the Fund.
Foreign Securities and Emerging Markets Risk. A fund that invests in foreign (non-U.S.) securities may experience more rapid and extreme changes in value than a fund that
invests exclusively in securities of U.S. companies. The securities markets of many foreign
countries are relatively small, with a limited number of companies representing a
small number of industries. Investments in foreign securities (including those denominated
in U.S. dollars) are subject to economic and political developments in the countries and regions
where the issuers operate or are domiciled, or where the securities are traded, such
as changes in economic or monetary policies. Values may also be affected by restrictions
on receiving the investment proceeds from a foreign country. Less information may be
publicly available about foreign companies than about U.S. companies. Foreign companies are
generally not subject to the same accounting, auditing and financial reporting standards
as are U.S. companies. In addition, the Fund’s investments in foreign securities may be subject to the risk of nationalization or expropriation of assets, imposition of currency
exchange controls or restrictions on the repatriation of foreign currency, confiscatory taxation,
political or financial instability and adverse diplomatic developments. In addition,
there may be difficulty in obtaining or enforcing a court judgment abroad. Dividends or interest
on, or proceeds from the sale of, foreign securities may be subject to non-U.S. withholding
taxes, and special U.S. tax considerations may apply.
The risks of foreign investment are greater for investments in emerging markets. Emerging
market countries typically have economic and political systems that are less fully
developed, and that can be expected to be less stable, than those of more advanced
countries. Low trading volumes may result in a lack of liquidity and in price volatility.
Emerging market countries may have policies that restrict investment by foreigners,
that require governmental approval prior to investments by foreign persons, or that prevent
foreign investors from withdrawing their money at will. An investment in emerging
market securities should be considered speculative.
Foreign Currency Risk. The value of investments in securities denominated in foreign currencies increases or decreases as the rates of exchange between those currencies
and the U.S. dollar change. Currency conversion costs and currency fluctuations could
erase investment gains or add to investment losses. Currency exchange rates can be volatile,
and are affected by factors such as general economic conditions, the actions of the U.S.
and foreign governments or central banks, the imposition of currency controls and speculation.
The Fund may be unable or may choose not to hedge its foreign currency exposure.
Short Sales Risk. If the price of the security sold short increases between the time of the short sale and the time the Fund replaces the borrowed security, the Fund will realize
a loss,
Western Asset Inflation-Linked Income Fund
Summary of information regarding the Fund (unaudited) (cont’d)
which may be substantial. A fund that engages in a short sale or short position may
lose more money than the actual cost of the short sale or short position and its potential
losses may be unlimited if the fund does not own the security sold short or the reference
instrument and it is unable to close out of the short sale or short position.
Commodities Market Risk. The Fund may gain exposure to the commodities markets, including by investing a portion of its assets in a wholly-owned subsidiary, Western
Asset Inflation-Linked Income Fund CFC (the “Subsidiary”), organized under the laws of the Cayman Islands. The Fund and the Subsidiary are deemed “commodity pools” and the investment adviser is considered a “commodity pool operator” with respect to the Fund under the Commodity Exchange Act. The investment adviser, directly or through its
affiliates, is subject to dual regulation by the Securities and Exchange Commission
(the “SEC”) and the Commodity Futures Trading Commission (the “CFTC”).
Due to recent regulatory changes, additional regulatory requirements may be imposed,
and additional expenses may be incurred by the Fund. The regulatory requirements governing
the use of commodity futures (which include futures on broad-based securities indexes,
interest rate futures and currency futures), options on commodity futures, certain
swaps or certain other investments could change at any time. Investments by the Fund in commodity-linked derivatives may subject the Fund to greater volatility than investments in traditional
securities. The value of commodity-linked derivatives may be affected by changes in
overall market movements, commodity index volatility, prolonged or intense speculation by
investors, changes in interest rates or factors affecting a particular industry or
commodity, such as drought, floods, other weather phenomena, livestock disease, embargoes, tariffs
and international economic, political and regulatory developments. By investing in
the Subsidiary, the Fund is indirectly exposed to the risks associated with the Subsidiary’s investments. The investments held by the Subsidiary are generally similar to those
that are permitted to be held by the Fund and are subject to the same risks that apply to similar
investments if held directly by the Fund. The Subsidiary is not registered as an investment
company and is not subject to all of the investor protections of the Investment Company
Act of 1940 (the “1940 Act”). Changes in the laws of the United States and/or the Cayman Islands could adversely affect the Fund. For example, the Cayman Islands does not
currently impose any income, corporate or capital gains tax, estate duty, inheritance tax, gift
tax or withholding tax on the Subsidiary. If Cayman Islands law changes such that the Subsidiary
must pay Cayman Islands taxes, shareholders would likely suffer decreased investment
returns. The Fund’s exposure to commodities markets, including through the Subsidiary, may be limited by its intention to qualify as a regulated investment company for U.S.
federal income tax purposes, and may interfere with its ability to qualify as such.
Mortgage-backed and Asset-backed Securities Risk. When market interest rates increase, the market values of mortgage-backed securities decline. At the same time, mortgage
Western Asset Inflation-Linked Income Fund
refinancings and prepayments slow, which lengthens the effective duration of these
securities. As a result, the negative effect of the interest rate increase on the
market value of mortgage-backed securities is usually more pronounced than it is for other types
of fixed income securities, potentially increasing the volatility of the fund. Conversely,
when market interest rates decline, while the value of mortgage-backed securities may increase,
the rate of prepayment of the underlying mortgages also tends to increase, which shortens the
effective duration of these securities. Mortgage-backed securities are also subject
to the risk that underlying borrowers will be unable to meet their obligations and the value
of property that secures the mortgage may decline in value and be insufficient, upon
foreclosure, to repay the associated loan. Investments in asset-backed securities
are subject to similar risks. The ability of an issuer of asset-backed securities to enforce
its security interest in the underlying assets may be limited, and therefore certain asset-backed
securities present a heightened level of risk.
Counterparty Risk. The Fund may enter into transactions with counterparties that become unable or unwilling to fulfill their contractual obligations. There can be no assurance
that any such counterparty will not default on its obligations to the Fund. In the event
of a counterparty default, the Fund may be hindered or delayed in exercising rights against
a counterparty and may experience significant losses. To the extent that the Fund enters
into multiple transactions with a single or small set of counterparties, the Fund will
be subject to increased counterparty risk.
Derivatives Risk. Using derivatives can increase Fund losses and reduce opportunities for gains when market prices, interest rates, currencies, or the derivatives themselves
behave in a way not anticipated by the Fund. Using derivatives also can have a leveraging
effect and increase Fund volatility. Certain derivatives have the potential for unlimited
loss, regardless of the size of the initial investment. Derivatives may not be available
at the time or price desired, may be difficult to sell, unwind or value, and the counterparty
may default on its obligations to the Fund. Derivatives are generally subject to the risks applicable
to the assets, rates, indices or other indicators underlying the derivative. The value of
a derivative may fluctuate more than the underlying assets, rates, indices or other indicators
to which it relates. Use of derivatives may have different tax consequences for the Fund than
an investment in the underlying security, and those differences may affect the amount,
timing and character of income distributed to shareholders. The U.S. government and foreign
governments have adopted and implemented regulations governing derivatives markets,
including mandatory clearing of certain derivatives, margin and reporting requirements.
The ultimate impact of the regulations remains unclear. Additional regulation of derivatives
may make derivatives more costly, limit their availability or utility, otherwise adversely
affect their performance or disrupt markets.
Western Asset Inflation-Linked Income Fund
Summary of information regarding the Fund (unaudited) (cont’d)
Effective August 19, 2022, the Fund began operating under Rule 18f-4 under the 1940
Act which, among other things, governs the use of derivative investments and certain financing
transactions (e.g. reverse repurchase agreements) by registered investment companies.
Among other things, Rule 18f-4 requires funds that invest in derivative instruments
beyond a specified limited amount to apply a value at risk (VaR) based limit to their use
of certain derivative instruments and financing transactions and to adopt and implement a derivatives
risk management program. A fund that uses derivative instruments in a limited amount
is not subject to the full requirements of Rule 18f-4. Compliance with Rule 18f-4 by
the Fund could, among other things, make derivatives more costly, limit their availability
or utility, or otherwise adversely affect their performance. Rule 18f-4 may limit the Fund’s ability to use derivatives as part of its investment strategy.
Credit default swap contracts involve heightened risks and may result in losses to
the Fund. Credit default swaps may be illiquid and difficult to value. When the Fund sells credit
protection via a credit default swap, credit risk increases since the Fund has exposure
to both the issuer whose credit is the subject of the swap and the counterparty to the
swap.
Reverse Repurchase Agreements Risk. The Fund’s use of reverse repurchase agreements is a form of leverage and therefore involves many of the same risks involved in the Fund’s use of leverage described above, as the proceeds from reverse repurchase agreements generally will be invested in additional securities. There is a risk that the market
value of the securities sold by the Fund in the reverse repurchase agreement may decline below
the price at which the Fund remains obligated to repurchase such securities. In addition,
there is a risk that the market value of the securities retained by the Fund may decline.
If the buyer of securities under a reverse repurchase agreement were to file for bankruptcy
or experiences insolvency, the Fund may be adversely affected. Also, in entering into
reverse repurchase agreements, the Fund would bear the risk of loss to the extent that the
proceeds of the reverse repurchase agreement are less than the value of the underlying securities.
In addition, due to the interest costs associated with reverse repurchase agreements
transactions, the Fund’s NAV will decline, and, in some cases, the Fund may be worse off than if it had not used such instruments.
Valuation Risk. The sales price the Fund could receive for any particular portfolio investment may differ from the Fund’s valuation of the investment, particularly for securities that trade in thin or volatile markets or that are valued using a fair value methodology. These
differences will increase significantly and affect Fund investments more broadly during
periods of market volatility. The Fund’s ability to value its investments may be impacted by technological issues and/or errors by pricing services or other third party service
providers. The valuation of the Fund’s investments involves subjective judgment, which may prove to be incorrect.
Western Asset Inflation-Linked Income Fund
Inflation/Deflation Risk. Inflation risk is the risk that the Fund’s assets or income from the Fund’s investments will be worth less in the future as inflation decreases the value of money. As inflation increases, the real value of the Fund’s portfolio could decline. Inflation risk is expected to be greater with respect to the Fund’s investments in securities or instruments other than U.S. TIPS. Common shares and distributions on the common shares
can decline. In addition, during any periods of rising inflation, the dividend rates
or borrowing costs associated with the Fund’s use of leverage would likely increase, which would tend to further reduce returns to shareholders Deflation risk is the risk that
prices throughout the economy decline over time--the opposite of inflation. Deflation may
have an adverse effect on the creditworthiness of issuers and may make issuer defaults more
likely, which may result in a decline in the value of the Fund’s portfolio. Because the principal amounts of U.S. TIPS would be adjusted downward during a period of deflation, the
Fund will be subject to deflation risk with respect to its investments in such securities.
Management Risk. The Fund is subject to management risk because it is an actively managed investment portfolio. Western Asset will apply investment techniques and risk
analyses in making investment decisions for the Fund, but there can be no guarantee
that these will produce the desired results.
Anti-Takeover Provisions Risk. The Charter and Bylaws of the Fund include provisions that are designed to limit the ability of other entities or persons to acquire control
of the Fund for short-term objectives, including by converting the Fund to open-end status or
changing the composition of the Board, that may be detrimental to the Fund’s ability to achieve its primary investment objective of seeking high current income. The Bylaws also contain
a provision providing that the Board of Directors has adopted a resolution to opt in
the Fund to the provisions of the Maryland Control Share Acquisition Act (“MCSAA”). There can be no assurance, however, that such provisions will be sufficient to deter professional
arbitrageurs that seek to cause the Fund to take actions that may not be consistent
with its investment objective or aligned with the interests of long-term shareholders, such
as liquidating debt investments prior to maturity, triggering taxable events for shareholders
and decreasing the size of the Fund. Such provisions may limit the ability of shareholders
to sell their shares at a premium over prevailing market prices by discouraging an investor
from seeking to obtain control of the Fund. There can be no assurance, however, that
such provisions will be sufficient to deter professional investors that seek to cause the
Fund to take actions that may not be aligned with the interests of long-term shareholders
in order to allow the professional investor to arbitrage the Fund’s market price.
Market Events Risk. The market values of securities or other assets will fluctuate, sometimes sharply and unpredictably, due to factors such as economic events, governmental actions or intervention, actions taken by the U.S. Federal Reserve or
foreign central banks, market disruptions caused by trade disputes or other factors, political
Western Asset Inflation-Linked Income Fund
Summary of information regarding the Fund (unaudited) (cont’d)
developments, armed conflicts, economic sanctions and countermeasures in response
to sanctions, major cybersecurity events, the global and domestic effects of widespread
or local health, weather or climate events, and other factors that may or may not be
related to the issuer of the security or other asset. Economies and financial markets throughout
the world are increasingly interconnected. Economic, financial or political events, trading
and tariff arrangements, public health events, terrorism, wars, natural disasters and
other circumstances in one country or region could have profound impacts on global economies
or markets. As a result, whether or not the fund invests in securities of issuers located
in or with significant exposure to the countries or markets directly affected, the value
and liquidity of the fund’s investments may be negatively affected. Following Russia’s invasion of Ukraine, Russian stocks lost all, or nearly all, of their market value. Other securities
or markets could be similarly affected by past or future geopolitical or other events
or conditions. Furthermore, events involving limited liquidity, defaults, non-performance
or other adverse developments that affect one industry, such as the financial services
industry, or concerns or rumors about any events of these kinds, have in the past and may in
the future lead to market-wide liquidity problems, may spread to other industries, and
could negatively affect the value and liquidity of the fund’s investments.
The long-term impact of the COVID-19 pandemic and its subsequent variants on economies,
markets, industries and individual issuers is not known. Some sectors of the economy
and individual issuers have experienced or may experience particularly large losses. Periods
of extreme volatility in the financial markets, reduced liquidity of many instruments,
increased government debt, inflation, and disruptions to supply chains, consumer demand and
employee availability, may continue for some time. The U.S. government and the Federal
Reserve, as well as certain foreign governments and central banks, took extraordinary
actions to support local and global economies and the financial markets in response
to the COVID-19 pandemic. This and other government intervention into the economy and financial
markets may not work as intended, and have resulted in a large expansion of government
deficits and debt, the long term consequences of which are not known. In addition,
the COVID-19 pandemic, and measures taken to mitigate its effects, could result in disruptions
to the services provided to the fund by its service providers.
Raising the ceiling on U.S. government debt has become increasingly politicized. Any
failure to increase the total amount that the U.S. government is authorized to borrow could
lead to a default on U.S. government obligations, with unpredictable consequences for economies
and markets in the U.S. and elsewhere. Recently, inflation and interest rates have
increased and may rise further. These circumstances could adversely affect the value and liquidity
of the fund’s investments, impair the fund’s ability to satisfy redemption requests, and negatively impact the fund’s performance.
Western Asset Inflation-Linked Income Fund
The United States and other countries are periodically involved in disputes over trade
and other matters, which may result in tariffs, investment restrictions and adverse impacts
on affected companies and securities. For example, the United States has imposed tariffs
and other trade barriers on Chinese exports, has restricted sales of certain categories
of goods to China, and has established barriers to investments in China. Trade disputes may
adversely affect the economies of the United States and its trading partners, as well
as companies directly or indirectly affected and financial markets generally. The United
States government has prohibited U.S. persons from investing in Chinese companies designated
as related to the Chinese military. These and possible future restrictions could limit the fund’s opportunities for investment and require the sale of securities at a loss or make
them illiquid. Moreover, the Chinese government is involved in a longstanding dispute with
Taiwan that has included threats of invasion. If the political climate between the
United States and China does not improve or continues to deteriorate, if China were
to attempt unification of Taiwan by force, or if other geopolitical conflicts develop
or get worse, economies, markets and individual securities may be severely affected both
regionally and globally, and the value of the fund’s assets may go down.
Liquidity Risk. Liquidity risk exists when particular investments are difficult to sell. Securities may become “illiquid securities” after purchase by the Fund, particularly during periods of market turmoil. When the Fund holds illiquid investments, the portfolio
may be harder to value, especially in changing markets, and if the Fund is forced to sell
these investments in order to segregate assets or for other cash needs, the Fund may suffer
a loss.
Managed Distribution Risk. Under a managed distribution policy, the Fund would intend to make monthly distributions to shareholders at a fixed rate per share of common shares
or a fixed percentage of net asset value that may include periodic distributions of long-term
capital gains. Under a managed distribution policy, if, for any monthly distribution,
ordinary income (that is, net investment income and any net short-term capital gain) and net
realized capital gains were less than the amount of the distribution, the difference would
be distributed from the Fund’s previously accumulated earnings and profits or cash generated from the sale of Fund assets. If, for any fiscal year, the total distributions exceeded
ordinary income and net realized capital gains (the “Excess”), the Excess would decrease the Fund’s total assets and, as a result, would have the likely effect of increasing the Fund’s expense ratio. There is a risk that the Fund would not eventually realize capital gains in
an amount corresponding to a distribution of the Excess. In addition, in order to make such
distributions, the Fund may have to sell a portion of its investment portfolio at
a time when independent investment judgment might not dictate such action. If the Fund were to
issue senior securities and not be in compliance with the asset coverage requirements of
the 1940 Act, the Fund would be required to suspend the managed distribution policy. Pursuant
Western Asset Inflation-Linked Income Fund
Summary of information regarding the Fund (unaudited) (cont’d)
to the requirements of the 1940 Act and other applicable laws, a notice will accompany
each monthly distribution disclosing the sources of the distribution.
Operational risk. Your ability to transact with the Fund or the valuation of your investment may be negatively impacted because of the operational risks arising from factors such
as processing errors and human errors, inadequate or failed internal or external processes,
failures in systems and technology (including those due to cybersecurity incidents),
changes in personnel, and errors caused by third party service providers or trading counterparties.
It is not possible to identify all of the operational risks that may affect the Fund
or to develop processes and controls that eliminate or mitigate the occurrence of such failures.
The Fund and its shareholders could be negatively impacted as a result.
Cybersecurity risk. Like other funds and business enterprises, the Fund, the Fund’s investment advisers and their service providers are subject to the risk of cyber incidents
occurring from time to time. Cybersecurity incidents, whether intentionally caused
by third parties or otherwise, may allow an unauthorized party to gain access to Fund assets,
Fund or customer data (including private shareholder information) or proprietary information,
cause the Fund, the manager, the subadviser and/or their service providers (including,
but not limited to, Fund accountants, custodians, sub-custodians, transfer agents and
financial intermediaries) to suffer data breaches, data corruption or loss of operational functionality,
or prevent Fund investors from purchasing, redeeming or exchanging shares, receiving
distributions or receiving timely information regarding the Fund or their investment
in the Fund. The Fund and the Fund’s investment advisers have limited ability to prevent or mitigate cybersecurity incidents affecting third party service providers, and such
third party service providers may have limited indemnification obligations to the Fund and/or the Fund’s investment advisers. Cybersecurity incidents may result in financial losses to the
Fund and its shareholders, and substantial costs may be incurred in order to prevent or mitigate
any future cybersecurity incidents. Issuers of securities in which the Fund invests are
also subject to cybersecurity risks, and the value of these securities could decline if
the issuers experience cybersecurity incidents.
New ways to carry out cyber attacks continue to develop. There is a chance that some
risks have not been identified or prepared for, or that an attack may not be detected, which
puts limitations on the Fund’s ability to plan for or respond to a cyber attack.
For a complete list of the Fund’s fundamental investment restrictions and more detailed descriptions of the Fund’s investment policies, strategies and risks, see the Fund’s prospectus and statement of additional information, dated September 25, 2003, as amended or superseded by subsequent disclosures. The Fund’s fundamental investment restrictions may not be changed without the approval of the holders of a majority
of the outstanding voting securities, as defined in the 1940 Act.
Western Asset Inflation-Linked Income Fund
Dividend reinvestment plan (unaudited)
The Fund and Computershare Inc. (“Agent”), as the Transfer Agent and Registrar of WIA, offer a convenient way to add shares of WIA to your account. WIA offers to all common
shareholders a Dividend Reinvestment Plan (“Plan”). Under the Plan, cash distributions (e.g., dividends and capital gains) on the common shares are automatically invested in shares
of WIA unless the shareholder elects otherwise by contacting the Agent at the address
set forth below.
As a participant in the Dividend Reinvestment Plan, you will automatically receive
your dividend or net capital gains distribution in newly issued shares of WIA, if the market
price of the shares on the date of the distribution is at or above the net asset value (NAV)
of the shares, minus estimated brokerage commissions that would be incurred upon the purchase
of common shares on the open market. The number of shares to be issued to you will
be determined by dividing the amount of the cash distribution to which you are entitled
(net of any applicable withholding taxes) by the greater of the NAV per share on such date
or 95% of the market price of a share on such date. If the market price of a share on such
distribution date is below the NAV, less estimated brokerage commissions that would
be incurred upon the purchase of common shares on the open market, the Agent will, as
agent for the participants, buy shares of WIA through a broker on the open market. All common
shares acquired on your behalf through the Plan will be automatically credited to
an account maintained on the books of the Agent.
Additional information regarding the plan
WIA will pay all costs applicable to the Plan, except for brokerage commissions for
open market purchases by the Agent under the Plan, which will be charged to participants.
All shares acquired through the Plan receive voting rights and are eligible for any share
split, share dividend, or other rights accruing to shareholders that the Board of Trustees
may declare.
You may terminate participation in the Plan at any time by giving notice to the Agent.
Such termination will be effective prior to the record date next succeeding the receipt
of such instructions or by a later date of termination specified in such instructions. Upon
termination, a participant will receive a certificate for the full shares credited
to his or her account or may request the sale of all or part of such shares. Fractional shares credited
to a terminating account will be paid for in cash at the current market price at the time
of termination.
Dividends and other distributions invested in additional shares under the Plan are
subject to income tax just as if they had been received in cash. After year end, dividends paid
on the accumulated shares will be included in the Form 1099-DIV information return to the
Internal Revenue Service and only one Form 1099-DIV will be sent to participants each year.
Inquiries regarding the Plan, as well as notices of termination, should be directed
to Computershare Inc., P.O. Box 43006 Providence, RI 02940-3078. Investor Relations telephone number 1-888-888-0151.
Western Asset Inflation-Linked Income Fund
Important tax information (unaudited)
By mid-February, tax information related to a shareholder’s proportionate share of distributions paid during the preceding calendar year will be received, if applicable.
Please also refer to www.franklintempleton.com for per share tax information related to any
distributions paid during the preceding calendar year. Shareholders are advised to
consult with their tax advisors for further information on the treatment of these amounts
on their tax returns.
The following tax information for the Fund is required to be furnished to shareholders
with respect to income earned and distributions paid during its fiscal year.
The Fund hereby reports the following amounts, or if subsequently determined to be
different, the maximum allowable amounts, for the fiscal year ended November 30, 2024:
|
|
|
|
Exempt-Interest Dividends Distributed
|
|
|
Qualified Net Interest Income (QII)
|
|
|
Section 163(j) Interest Earned
|
|
|
Interest Earned from Federal Obligations
|
|
|
Note (1) - The law varies in each state as to whether and what percentage of dividend
income attributable to Federal obligations is exempt from state income tax. Shareholders
are advised to consult with their tax advisors to determine if any portion of the
dividends received is exempt from state income taxes.
Western Asset Inflation-Linked Income Fund
Western Asset
Inflation-Linked Income Fund
Trustees
William E.B. Siart
Chair
Jane Trust
President and Chief Executive Officer
Christopher Berarducci
Treasurer and Principal Financial
Officer
Ted P. Becker
Chief Compliance Officer
Marc A. De Oliveira
Secretary and Chief Legal Officer
Thomas C. Mandia
Senior Vice President
Jeanne M. Kelly
Senior Vice President
Western Asset Inflation-Linked Income Fund
620 Eighth Avenue
47th Floor
New York, NY 10018
Western Asset Management Company, LLC
Western Asset Management Company Limited
Western Asset Management Company Pte. Ltd.
Western Asset Management Company Ltd
Franklin Templeton Fund Adviser, LLC
The Bank of New York Mellon
Computershare Inc.
P.O. Box 43006
Providence, RI 02940-3078
Independent registered public accounting firm
PricewaterhouseCoopers LLP
Baltimore, MD 21202
Ropes & Gray LLP
1211 Avenue of the Americas
New York, NY 10036
New York Stock Exchange Symbol
Franklin Templeton Funds Privacy and Security Notice
Your Privacy and the Security of Your Personal Information is Very Important to Us
This Privacy and Security Notice (the “Privacy Notice”) addresses the Funds’ privacy and data protection practices with respect to nonpublic personal information the Fund receives.
The Legg Mason Funds include the Western Asset Money Market Funds (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;
and
•
Online account access user IDs, passwords, security challenge question responses.
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, 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
•
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
NOT PART OF THE ANNUAL REPORT
Franklin Templeton 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 Funds at 1-877-721-1926 for the
Western Asset Money Market Funds or 1-888-777-0102 for the Legg Mason-sponsored closed-end funds. For additional information related to certain state privacy rights, please
visit https://www.franklintempleton.com/help/privacy-policy.
NOT PART OF THE ANNUAL REPORT
Western Asset Inflation-Linked Income Fund
Western Asset Inflation-Linked Income Fund
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, its common shares.
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 Inflation-Linked Income Fund 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.
P.O. Box 43006
Providence, RI 02940-3078
The registrant has adopted a code of ethics that applies to the
registrant’s principal executive officer, principal financial officer, principal accounting officer or controller.
| ITEM 3. | | AUDIT COMMITTEE FINANCIAL EXPERT. |
The Audit Committee of the Registrant’s Board of Trustees
is comprised solely of Trustees who are “independent” (as such term has been defined by the Securities and Exchange Commission
(“SEC”) in regulations implementing Section 407 of the Sarbanes-Oxley Act of 2002 (the “Regulations”)).
In addition, the Board of Trustees of the Registrant has determined that Mr. Robert Abeles, Jr. qualifies
as an “audit committee financial expert” (as such term has been defined in the Regulations) based on its review of his pertinent
experience, knowledge and education.
(Under applicable securities laws, a person who is determined
to be an audit committee financial expert will not be deemed an “expert” for any purpose, including without limitation for
the purposes of Section 11 of the Securities Act of 1933, as amended, as a result of being designated or identified as an audit
committee financial expert. The designation or identification of a person as an audit committee financial expert does not impose
on such person any duties, obligations, or liabilities that are greater than the duties, obligations, and liabilities imposed on such
person as a member of the audit committee and Board of Trustees in the absence of such designation or identification. The designation
or identification of a person as an audit committee financial expert does not affect the duties, obligations or liability of any other
member of the audit committee or Board of Trustees.)
| Item
4. | Principal
Accountant Fees and Services. |
(a) Audit Fees. The aggregate fees billed in the previous
fiscal years ending November 30, 2023 and November 30, 2024 (the “Reporting Periods”) for professional services rendered
by the Registrant’s principal accountant (the “Auditor”) for the audit of the Registrant’s annual financial statements,
or services that are normally provided by the Auditor in connection with the statutory and regulatory filings or engagements for the
Reporting Periods, were $60,000 in November 30, 2023 and $63,600 in November 30, 2024.
(b) Audit-Related Fees. The aggregate fees billed in the
Reporting Period for assurance and related services by the Auditor that are reasonably related to the performance of the Registrant’s
financial statements were $0 in November 30, 2023 and $0 in November 30, 2024.
(c) Tax Fees. The aggregate fees billed in the Reporting
Periods for professional services rendered by the Auditor for tax compliance, tax advice and tax planning (“Tax Services”)
were $11,000 in November 30, 2023 and $11,000 in November 30, 2024. These services consisted of (i) review or preparation of U.S.
federal, state, local and excise tax returns; (ii) U.S. federal, state and local tax planning, advice and assistance regarding statutory,
regulatory or administrative developments, and (iii) tax advice regarding tax qualification matters and/or treatment of various
financial instruments held or proposed to be acquired or held.
There were no fees billed for tax services by the Auditors to
service affiliates during the Reporting Periods that required pre-approval by the Audit Committee.
(d) All Other Fees. The aggregate fees for other fees billed
in the Reporting Periods for products and services provided by the Auditor, other than the services reported in paragraphs (a) through
(c) of this Item for the Western Asset Inflation-Linked Income Fund were $0 in November 30, 2023 and $0 in November 30, 2024.
All Other Fees. There were no other non-audit services rendered
by the Auditor to Legg Mason Partners Fund Advisors, LLC (“LMPFA”), and any entity controlling, controlled by or under common
control with LMPFA that provided ongoing services to Western Asset Inflation-Linked Income Fund requiring pre-approval by the Audit Committee
in the Reporting Period.
(e) Audit Committee’s pre—approval policies and
procedures described in paragraph (c) (7) of Rule 2-01 of Regulation S-X.
(1) The Charter for the Audit Committee (the “Committee”)
of the Board of each registered investment company (the “Fund”) advised by LMPFA or one of their affiliates (each, an “Adviser”)
requires that the Committee shall approve (a) all audit and permissible non-audit services to be provided to the Fund and (b) all
permissible non-audit services to be provided by the Fund’s independent auditors to the Adviser and any Covered Service Providers
if the engagement relates directly to the operations and financial reporting of the Fund. The Committee may implement policies
and procedures by which such services are approved other than by the full Committee.
The Committee shall not approve non-audit services that the Committee
believes may impair the independence of the auditors. As of the date of the approval of this Audit Committee Charter, permissible
non-audit services include any professional services (including tax services), that are not prohibited services as described below, provided
to the Fund by the independent auditors, other than those provided to the Fund in connection with an audit or a review of the financial
statements of the Fund. Permissible non-audit services may not include: (i) bookkeeping or other services related to the accounting
records or financial statements of the Fund; (ii) financial information systems design and implementation; (iii) appraisal
or valuation services, fairness opinions or contribution-in-kind reports; (iv) actuarial services; (v) internal audit outsourcing
services; (vi) management functions or human resources; (vii) broker or dealer, investment adviser or investment banking services;
(viii) legal services and expert services unrelated to the audit; and (ix) any other service the Public Company Accounting
Oversight Board determines, by regulation, is impermissible.
Pre-approval by the Committee of any permissible non-audit services
is not required so long as: (i) the aggregate amount of all such permissible non-audit services provided to the Fund, the Adviser
and any service providers controlling, controlled by or under common control with the Adviser that provide ongoing services to the Fund
(“Covered Service Providers”) constitutes not more than 5% of the total amount of revenues paid to the independent auditors
during the fiscal year in which the permissible non-audit services are provided to (a) the Fund, (b) the Adviser and (c) any
entity controlling, controlled by or under common control with the Adviser that provides ongoing services to the Fund during the fiscal
year in which the services are provided that would have to be approved by the Committee; (ii) the permissible non-audit services
were not recognized by the Fund at the time of the engagement to be non-audit services; and (iii) such services are promptly brought
to the attention of the Committee and approved by the Committee (or its delegate(s)) prior to the completion of the audit.
(2) None of the services described in paragraphs (b) through (d)
of this Item were performed in reliance on paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Not applicable.
(g) Non-audit fees billed by the Auditor for services rendered
to Western Asset Inflation-Linked Income Fund, LMPFA and any entity controlling, controlled by, or under common control with LMPFA that
provides ongoing services to Western Asset Inflation-Linked Income Fund during the reporting period were $342,635 in November 30, 2023
and $334,889 in November 30, 2024.
(h) Yes. Western Asset Inflation-Linked Income Fund’s
Audit Committee has considered whether the provision of non-audit services that were rendered to Service Affiliates, which were not pre-approved
(not requiring pre-approval), is compatible with maintaining the Accountant’s independence. All services provided by the
Auditor to the Western Asset Inflation-Linked Income Fund or to Service Affiliates, which were required to be pre-approved, were pre-approved
as required.
(i) Not applicable.
(j) Not applicable.
| ITEM 5. | | AUDIT COMMITTEE OF LISTED REGISTRANTS. |
a) Registrant has
a separately - designated standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Exchange Act.
The Audit Committee consists of the following Board members:
| |
Robert
Abeles, Jr. |
| |
Jane
Dasher |
| |
Anita
DeFrantz |
| |
Susan Kerley
Michael Larson |
| |
Avedick
B. Poladian |
| |
William
E.B. Siart |
| |
Jaynie
Miller Studenmund |
| |
Peter
Taylor |
| |
|
b) Not applicable.
| ITEM 6. | SCHEDULE OF INVESTMENTS. |
Included herein under Item 1.
| ITEM
7. | FINANCIAL
STATEMENTS AND FINANCIAL HIGLIGHTS FOR OPEN-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable.
| ITEM
8. | CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS FOR OPEN-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable.
| ITEM
9. | PROXY
DISCLOSURES FOR OPEN-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable.
| ITEM
10. | REMUNERATION
PAID TO DIRECTORS, OFFICERS, AND OTHERS OF OPEN-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable.
| ITEM
11. | STATEMENT
REGARDING BASIS FOR APPROVAL OF INVESTMENT ADVISORY CONTRACT. |
The information is disclosed as part of the Financial Statements
included in Item 1 of this Form N-CSR, as applicable.
| ITEM
12. | DISCLOSURE
OF PROXY VOTING POLOCIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES |
Western Asset Management Company, LLC
Proxy Voting Policies and Procedures
NOTE
The policy below relating to proxy voting and
corporate actions is a global policy for Western Asset Management Company, LLC (“Western Asset” or the “Firm”) and
all Western Asset affiliates, including Western Asset Management Company Limited ("Western Asset Limited"), Western Asset Management
Company Ltd (“Western Asset Japan”) and Western Asset Management Company Pte. Ltd. (“Western Asset Singapore”), as
applicable. As compliance with the policy is monitored by Western Asset, the policy has been adopted from the US Compliance Manual and
all defined terms are those defined in the US Compliance Manual rather than the compliance manual of any other Western Asset affiliate.
BACKGROUND
An investment adviser is required to adopt and
implement policies and procedures that we believe are reasonably designed to ensure that proxies are voted in the best interest of clients,
in accordance with fiduciary duties and Rule 206(4)-6 under the Investment Advisers Act of 1940 (“Advisers Act”). The authority
to vote the proxies of our clients is established through investment management agreements or comparable documents. In addition to SEC
requirements governing advisers, long-standing fiduciary standards and responsibilities have been established for ERISA accounts. Unless
a manager of ERISA assets has been expressly precluded from voting proxies, the Department of Labor has determined that the responsibility
for these votes lies with the investment manager.
POLICY
As a fixed income only manager, the occasion to
vote proxies is very rare, for instance, when fixed income securities are converted into equity by their terms or in connection with
a bankruptcy or corporate workout. However, the Firm has adopted and implemented policies and procedures that we believe are reasonably
designed to ensure that proxies are voted in the best interest of clients, in accordance with our fiduciary duties and Rule 206(4)-6
under the Advisers Act. In addition to SEC requirements governing advisers, our proxy voting policies reflect the long-standing fiduciary
standards and responsibilities for ERISA accounts. Unless a manager of ERISA assets has been expressly precluded from voting proxies,
the Department of Labor has determined that the responsibility for these votes lies with the investment manager.
While the guidelines included in the procedures
are intended to provide a benchmark for voting standards, each vote is ultimately cast on a case-by-case basis, taking into consideration
the Firm’s contractual obligations to our clients and all other relevant facts and circumstances at the time of the vote (such
that these guidelines may be overridden to the extent the Firm deems appropriate).
In exercising its voting authority, Western Asset
will not consult or enter into agreements with officers, directors or employees of Franklin Resources (Franklin Resources includes Franklin
Resources, Inc. and organizations operating as Franklin Resources) or any of its affiliates (other than Western Asset affiliated companies)
regarding the voting of any securities owned by its clients.
PROCEDURES
Responsibility and Oversight
The Legal & Compliance Group is responsible
for administering and overseeing the proxy voting process. The gathering of proxies is coordinated through the Corporate Actions team
of the Investment Operations Group (“Corporate Actions”). Research analysts and portfolio managers are responsible for determining
appropriate voting positions on each proxy utilizing any applicable guidelines contained in these procedures.
Client Authority
The Investment Management Agreement for each client
is reviewed at account start-up for proxy voting instructions. If an agreement is silent on proxy voting, but contains an overall delegation
of discretionary authority or if the account represents assets of an ERISA plan, Western Asset will assume responsibility for proxy voting.
The Portfolio Compliance Group maintains a matrix of proxy voting authority.
Proxy Gathering
Registered owners of record, client custodians,
client banks and trustees (“Proxy Recipients”) that receive proxy materials on behalf of clients should forward them to Corporate
Actions. Proxy Recipients for new clients (or, if Western Asset becomes aware that the applicable Proxy Recipient for an existing client
has changed, the Proxy Recipient for the existing client) are notified at start-up of appropriate routing to Corporate Actions of proxy
materials received and reminded of their responsibility to forward all proxy materials on a timely basis. If Western Asset personnel
other than Corporate Actions receive proxy materials, they should promptly forward the materials to Corporate Actions.
Proxy Voting
Once proxy materials are received by Corporate
Actions, they are forwarded to the Portfolio Compliance Group for coordination and the following actions:
Proxies are reviewed to determine accounts
impacted.
Impacted accounts are checked to confirm
Western Asset voting authority.
Where appropriate, the Regulatory Affairs
Group reviews the issues presented to determine any material conflicts of interest. (See Conflicts of Interest section of these procedures
for further information on determining material conflicts of interest.)
If a material conflict of interest exists,
(i) to the extent reasonably practicable and permitted by applicable law, the client is promptly notified, the conflict is disclosed
and Western Asset obtains the client’s proxy voting instructions, and (ii) to the extent that it is not reasonably practicable
or permitted by applicable law to notify the client and obtain such instructions (e.g., the client is a mutual fund or other commingled
vehicle or is an ERISA plan client), Western Asset seeks voting instructions from an independent third party.
The Portfolio Compliance Group provides
proxy material to the appropriate research analyst or portfolio manager to obtain their recommended vote. Research analysts and portfolio
managers determine votes on a case-by-case basis taking into account the voting guidelines contained in these procedures. For avoidance
of doubt, depending on the best interest of each individual client, Western Asset may vote the same proxy differently for different clients.
The analyst’s or portfolio manager’s basis for their decision is documented and maintained by the Portfolio Compliance Group.
Portfolio Compliance Group votes the proxy
pursuant to the instructions received in (d) or (e) and returns the voted proxy as indicated in the proxy materials.
Timing
Western Asset’s Legal and Compliance Department
personnel act in such a manner to ensure that, absent special circumstances, the proxy gathering and proxy voting steps noted above can
be completed before the applicable deadline for returning proxy votes.
Recordkeeping
Western Asset maintains records of proxies voted
pursuant to Rule 204-2 of the Advisers Act and ERISA DOL Bulletin 94-2. These records include:
| • | A
copy of Western Asset’s proxy voting policies and procedures. |
Copies of proxy statements received with
respect to securities in client accounts.
A copy of any document created by Western
Asset that was material to making a decision how to vote proxies.
Each written client request for proxy
voting records and Western Asset’s written response to both verbal and written client requests.
A proxy log including:
| 2. | Exchange
ticker symbol of the issuer’s shares to be voted; |
| 3. | Committee
on Uniform Securities Identification Procedures (“CUSIP”) number for the shares
to be voted; |
| 4. | A
brief identification of the matter voted on; |
| 5. | Whether
the matter was proposed by the issuer or by a shareholder of the issuer; |
| 6. | Whether
a vote was cast on the matter; |
| 7. | A
record of how the vote was cast; |
| 8. | Whether
the vote was cast for or against the recommendation of the issuer’s management team; |
| 9. | Funds
are required to categorize their votes so that investors can focus on the topics they find
important. Categories include, for example, votes related to director elections, extraordinary
transactions, say-on-pay, shareholder rights and defenses, and the environment or climate,
among others; and |
| 10. | Funds
are required to disclose the number of shares voted or instructed to be cast, as well as
the number of shares loaned but not recalled and, therefore, not voted by the fund. |
Records are maintained in an easily accessible
place for a period of not less than five (5) years with the first two (2) years in Western Asset’s offices.
Disclosure
Western Asset’s proxy policies and procedures
are described in the Firm’s Form ADV Part 2A. Clients are provided with a copy of these policies and procedures upon request. In
addition, clients may receive reports on how their proxies have been voted, upon request.
Conflicts of Interest
All proxies that potentially present conflicts
of interest are reviewed by the Regulatory Affairs Group for a materiality assessment. Issues to be reviewed include, but are not limited
to:
- Whether Western Asset (or, to the extent required to be considered by
applicable law, its affiliates) manages assets for the company or an employee group of the company or otherwise has an interest in the
company;
- Whether Western Asset or an officer or director of Western Asset or the
applicable portfolio manager or analyst responsible for recommending the proxy vote (together, “Voting Persons”) is a close
relative of or has a personal or business relationship with an executive, director or person who is a candidate for director of the company
or is a participant in a proxy contest; and
- Whether there is any other business or personal relationship where a Voting
Person has a personal interest in the outcome of the matter before shareholders.
Voting Guidelines
Western Asset’s substantive voting decisions
are based on the particular facts and circumstances of each proxy vote and are evaluated by the designated research analyst or portfolio
manager. The examples outlined below are meant as guidelines to aid in the decision making process.
Situations can arise in which more than one Western
Asset client invests in instruments of the same issuer or in which a single client may invest in instruments of the same issuer but in
multiple accounts or strategies. Multiple clients or the same client in multiple accounts or strategies may have different investment
objectives, investment styles, or investment professionals involved in making decisions. While there may be differences, votes are always
cast in the best interests of the client and the investment objectives agreed with Western Asset. As a result, there may be circumstances
where Western Asset casts different votes on behalf of different clients or on behalf of the same client with multiple accounts or strategies.
Guidelines are grouped according to the types of proposals generally
presented to shareholders. Part I deals with proposals which have been approved and are recommended by a company’s board of directors;
Part II deals with proposals submitted by shareholders for inclusion in proxy statements; Part III addresses issues relating to voting
shares of investment companies; and Part IV addresses unique considerations pertaining to foreign issuers.
| I. | Board
Approved Proposals |
The vast majority of matters presented to shareholders
for a vote involve proposals made by a company itself that have been approved and recommended by its board of directors. In view of the
enhanced corporate governance practices currently being implemented in public companies, Western Asset generally votes in support of
decisions reached by independent boards of directors. More specific guidelines related to certain board-approved proposals are as follows:
- Matters relating to the Board of Directors
Western Asset votes proxies for the election of the company’s
nominees for directors and for board-approved proposals on other matters relating to the board of directors with the following exceptions:
| a. | Votes
are withheld for the entire board of directors if the board does not have a majority of independent
directors or the board does not have nominating, audit and compensation committees composed
solely of independent directors. |
| b. | Votes
are withheld for any nominee for director who is considered an independent director by the
company and who has received compensation from the company other than for service as a director. |
| c. | Votes
are withheld for any nominee for director who attends less than 75% of board and committee
meetings without valid reasons for absences. |
| d. | Votes
are cast on a case-by-case basis in contested elections of directors. |
- Matters relating to Executive Compensation
Western Asset generally favors compensation programs that relate
executive compensation to a company’s long-term performance. Votes are cast on a case-by-case basis on board-approved proposals
relating to executive compensation, except as follows:
| a. | Except
where the firm is otherwise withholding votes for the entire board of directors, Western
Asset votes for stock option plans that will result in a minimal annual dilution. |
| b. | Western
Asset votes against stock option plans or proposals that permit replacing or repricing of
underwater options. |
| c. | Western
Asset votes against stock option plans that permit issuance of options with an exercise price
below the stock’s current market price. |
| d. | Except
where the firm is otherwise withholding votes for the entire board of directors, Western
Asset votes for employee stock purchase plans that limit the discount for shares purchased
under the plan to no more than 15% of their market value, have an offering period of 27 months
or less and result in dilution of 10% or less. |
- Matters relating to Capitalization
The Management of a company’s capital structure involves
a number of important issues, including cash flows, financing needs and market conditions that are unique to the circumstances of each
company. As a result, Western Asset votes on a case-by-case basis on board-approved proposals involving changes to a company’s
capitalization except where Western Asset is otherwise withholding votes for the entire board of directors.
| a. | Western
Asset votes for proposals relating to the authorization of additional common stock. |
| b. | Western
Asset votes for proposals to effect stock splits (excluding reverse stock splits). |
| c. | Western
Asset votes for proposals authorizing share repurchase programs. |
- Matters relating to Acquisitions, Mergers, Reorganizations and Other Transactions
Western Asset votes these issues on a case-by-case
basis on board-approved transactions.
- Matters relating to Anti-Takeover Measures
Western Asset votes against board-approved proposals
to adopt anti-takeover measures except as follows:
| a. | Western
Asset votes on a case-by-case basis on proposals to ratify or approve shareholder rights
plans. |
| b. | Western
Asset votes on a case-by-case basis on proposals to adopt fair price provisions. |
- Other Business Matters
Western Asset votes for board-approved proposals approving such
routine business matters such as changing the company’s name, ratifying the appointment of auditors and procedural matters relating
to the shareholder meeting.
| a. | Western
Asset votes on a case-by-case basis on proposals to amend a company’s charter or bylaws. |
| b. | Western
Asset votes against authorization to transact other unidentified, substantive business at
the meeting. |
- Reporting of Financially Material Information
Western Asset generally believes issuers should disclose information
that is material to their business. What qualifies as “material” can vary, so votes are cast on a case-by-case basis but
consistent with the overarching principle.
SEC regulations permit shareholders to submit
proposals for inclusion in a company’s proxy statement. These proposals generally seek to change some aspect of a company’s
corporate governance structure or to change some aspect of its business operations. Western Asset votes in accordance with the recommendation
of the company’s board of directors on all shareholder proposals, except as follows:
- Western Asset votes for shareholder proposals to require shareholder
approval of shareholder rights plans.
- Western Asset votes for shareholder proposals that are consistent
with Western Asset’s proxy voting guidelines for board-approved proposals.
- Western Asset votes on a case-by-case basis on other shareholder
proposals where the firm is otherwise withholding votes for the entire board of directors.
Environmental or social issues that are the subject
of a proxy vote will be considered on a case-by-case basis. Constructive proposals that seek to advance the health of the issuer and
the prospect for risk-adjusted returns to Western Assets clients are viewed more favorably than proposals that advance a single issue
or limit the ability of management to meet its operating objectives.
| III. | Voting
Shares of Investment Companies |
Western Asset may utilize shares of open or closed-end
investment companies to implement its investment strategies. Shareholder votes for investment companies that fall within the categories
listed in Parts I and II above are voted in accordance with those guidelines.
- Western Asset votes on a case-by-case basis on proposals relating
to changes in the investment objectives of an investment company taking into account the original intent of the fund and the role the
fund plays in the clients’ portfolios.
- Western Asset votes on a case-by-case basis all proposals that would
result in increases in expenses (e.g., proposals to adopt 12b-1 plans, alter investment advisory arrangements or approve fund mergers)
taking into account comparable expenses for similar funds and the services to be provided.
| IV. | Voting
Shares of Foreign Issuers |
In the event Western Asset is required to vote
on securities held in non-U.S. issuers – i.e. issuers that are incorporated under the laws of a foreign jurisdiction and that are
not listed on a U.S. securities exchange or the NASDAQ stock market, the following guidelines are used, which are premised on the existence
of a sound corporate governance and disclosure framework. These guidelines, however, may not be appropriate under some circumstances
for foreign issuers and therefore apply only where applicable.
- Western Asset votes for shareholder proposals calling for a majority
of the directors to be independent of management.
- Western Asset votes for shareholder proposals seeking to increase
the independence of board nominating, audit and compensation committees.
- Western Asset votes for shareholder proposals that implement corporate
governance standards similar to those established under U.S. federal law and the listing requirements of U.S. stock exchanges, and that
do not otherwise violate the laws of the jurisdiction under which the company is incorporated.
- Western Asset votes on a case-by-case basis on proposals relating
to (1) the issuance of common stock in excess of 20% of a company’s outstanding common stock where shareholders do not have preemptive
rights, or (2) the issuance of common stock in excess of 100% of a company’s outstanding common stock where shareholders have preemptive
rights.
| V. | Environmental,
Social and Governance (“ESG”) Matters |
Western Asset incorporates ESG considerations,
among other relevant risks, as part of the overall process where appropriate. The Firm seeks to identify and consider material risks
to the investment thesis, including material risks presented by ESG factors. While Western Asset is primarily a fixed income manager,
opportunities to vote proxies are considered on the investment merits of the instruments and strategies involved.
As a general proposition, Western Asset votes
to encourage disclosure of information material to their business. This principle extends to ESG matters. What qualifies as “material”
can vary, so votes are cast on a case-by-case basis but consistent with the overarching principle. Western Asset recognizes that objective
standards and criteria may not be available or universally agreed and that there may be different views and subjective analysis regarding
factors and their significance.
Targeted environmental or social issues that are
the subject of a proxy vote will be considered on a case-by-case basis. Constructive proposals that seek to advance the health of the
issuer and the prospect for risk-adjusted returns to Western Assets clients are viewed more favorably than proposals that advance a single
issue or limit the ability of management to meet its operating objectives.
Retirement Accounts
For accounts subject to ERISA, as well as other
retirement accounts, Western Asset is presumed to have the responsibility to vote proxies for the client. The Department of Labor has
issued a bulletin that states that investment managers have the responsibility to vote proxies on behalf of Retirement Accounts unless
the authority to vote proxies has been specifically reserved to another named fiduciary. Furthermore, unless Western Asset is expressly
precluded from voting the proxies, the Department of Labor has determined that the responsibility remains with the investment manager.
In order to comply with the Department of Labor’s
position, Western Asset will be presumed to have the obligation to vote proxies for its retirement accounts unless Western Asset has
obtained a specific written instruction indicating that: (a) the right to vote proxies has been reserved to a named fiduciary of the
client, and (b) Western Asset is precluded from voting proxies on behalf of the client. If Western Asset does not receive such an instruction,
Western Asset will be responsible for voting proxies in the best interests of the retirement account client and in accordance with any
proxy voting guidelines provided by the client.
ITEM 13. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
(a)(1): As of the date of filing this report:
| NAME AND |
|
PRINCIPAL OCCUPATION(S) DURING |
| ADDRESS |
|
PAST 5 YEARS |
| |
|
|
Michael C. Buchanan
Western Asset
385 East Colorado Blvd.
Pasadena, CA
91101 |
|
Co-portfolio manager of the fund; Deputy Chief Investment Officer of
Western Asset since 2014; portfolio manager at Western Asset 2005-2014.
|
| |
|
|
Frederick Marki
Western Asset
385 East Colorado Blvd.
Pasadena, CA |
|
Co-portfolio manager of the fund since 2016; portfolio manager at Western Asset
for more than five years |
(a)(2): DATA TO BE PROVIDED BY FINANCIAL CONTROL
The following tables set forth certain additional information with respect
to the fund’s portfolio managers for the fund. Unless noted otherwise, all information is provided as of November 30, 2024.
Other Accounts Managed by Portfolio Managers
The table below identifies
the number of accounts (other than the fund) for which the fund’s portfolio managers have day-to-day management responsibilities
and the total assets in such accounts, within each of the following categories: registered investment companies, other pooled investment
vehicles, and other accounts. For each category, the number of accounts and total assets in the accounts where fees are based on performance
is also indicated.
| Name
of PM |
Type
of Account |
Number
of Accounts Managed |
Total
Assets Managed |
Number
of Accounts Managed for which Advisory Fee is Performance-
Based |
Assets
Managed for which Advisory Fee is Performance-
Based |
| Frederick
R. Marki‡ |
Other
Registered Investment Companies |
19 |
$17.80
billion |
None |
None |
| Other
Pooled Vehicles |
21 |
$8.74
billion |
None |
None |
| Other
Accounts |
146 |
$49.63
billion |
1 |
$24
million |
| Michael
Buchanan‡ |
Other
Registered Investment Companies |
72 |
$89.82
billion |
None |
None |
| Other
Pooled Vehicles |
249 |
$56.52
billion |
20 |
$2.43
billion |
| Other
Accounts |
499 |
$156.83
billion |
17 |
$9.79
billion |
‡ The numbers above reflect the overall number
of portfolios managed by employees of Western Asset Management Company (“Western Asset”). Western Asset’s investment
discipline emphasizes a team approach that combines the efforts of groups of specialists working in different market sectors. He is responsible
for overseeing implementation of Western Asset’s overall investment ideas and coordinating the work of the various sector teams.
This structure ensures that client portfolios benefit from a consensus that draws on the expertise of all team members.
(a)(3): As of November 30, 2024:
Investment Professional Compensation
Conflicts of Interest
The Subadviser has adopted compliance policies and procedures
to address a wide range of potential conflicts of interest that could directly impact client portfolios. For example, potential conflicts
of interest may arise in connection with the management of multiple portfolios (including portfolios managed in a personal capacity).
These could include potential conflicts of interest related to the knowledge and timing of a portfolio’s trades, investment opportunities
and broker selection. Portfolio managers are privy to the size, timing, and possible market impact of a portfolio’s trades.
It is possible that an investment opportunity
may be suitable for both a portfolio and other accounts managed by a portfolio manager, but may not be available in sufficient quantities
for both the portfolio and the other accounts to participate fully. Similarly, there may be limited opportunity to sell an investment
held by a portfolio and another account. A conflict may arise where the portfolio manager may have an incentive to treat an account preferentially
as compared to a portfolio because the account pays a performance-based fee or the portfolio manager, the Subadviser or an affiliate
has an interest in the account. The Subadviser has adopted procedures for allocation of portfolio transactions and investment opportunities
across multiple client accounts on a fair and equitable basis over time. Eligible accounts that can participate in a trade generally
share the same price on a pro-rata allocation basis, taking into account differences based on factors such as cash availability, investment
restrictions and guidelines, and portfolio composition versus strategy.
With respect to securities transactions, the Subadviser
determines which broker or dealer to use to execute each order, consistent with their duty to seek best execution of the transaction.
However, with respect to certain other accounts (such as pooled investment vehicles that are not registered investment companies and
other accounts managed for organizations and individuals), the Subadviser may be limited by the client with respect to the selection
of brokers or dealers or may be instructed to direct trades through a particular broker or dealer. In these cases, trades for a portfolio
in a particular security may be placed separately from, rather than aggregated with, such other accounts. Having separate transactions
with respect to a security may temporarily affect the market price of the security or the execution of the transaction, or both, to the
possible detriment of a portfolio or the other account(s) involved. Additionally, the management of multiple portfolios and/or other
accounts may result in a portfolio manager devoting unequal time and attention to the management of each portfolio and/or other account.
The Subadviser’s team approach to portfolio management and block trading approach seeks to limit this potential risk.
The Subadviser also maintains a gift and entertainment
policy to address the potential for a business contact to give gifts or host entertainment events that may influence the business judgment
of an employee. Employees are permitted to retain gifts of only a nominal value and are required to make reimbursement for entertainment
events above a certain value. All gifts (except those of a de minimis value) and entertainment events that are given or sponsored by
a business contact are required to be reported in a gift and entertainment log which is reviewed on a regular basis for possible issues.
Employees of the Subadviser have access to transactions
and holdings information regarding client accounts and the Subadviser’s overall trading activities. This information represents
a potential conflict of interest because employees may take advantage of this information as they trade in their personal accounts. Accordingly,
the Subadviser maintains a Code of Ethics that is compliant with Rule 17j-1 under the 1940 Act and Rule 204A-1 under the Advisers Act
to address personal trading. In addition, the Code of Ethics seeks to establish broader principles of good conduct and fiduciary responsibility
in all aspects of the Subadviser’s business. The Code of Ethics is administered by the Legal and Compliance Department and monitored
through the Subadviser’s compliance monitoring program.
The Subadviser may also face other potential conflicts
of interest with respect to managing client assets, and the description above is not a complete description of every conflict of interest
that could be deemed to exist. The Subadviser also maintains a compliance monitoring program and engages independent auditors to conduct
a SOC1/ISAE 3402 audit on an annual basis. These steps help to ensure that potential conflicts of interest have been addressed.
Investment Professional Compensation
With respect to the compensation of the Fund’s
investment professionals, the Subadviser’s compensation system assigns each employee a total compensation range, which is derived
from annual market surveys that benchmark each role with its job function and peer universe. This method is designed to reward employees
with total compensation reflective of the external market value of their skills, experience and ability to produce desired results. Standard
compensation includes competitive base salaries, generous employee benefits and a retirement plan.
In addition, the Subadviser’s employees
are eligible for bonuses. These are structured to closely align the interests of employees with those of the Subadviser, and are determined
by the professional’s job function and pre-tax performance as measured by a formal review process. All bonuses are completely discretionary.
The principal factor considered is an investment professional’s investment performance versus appropriate peer groups and benchmarks
(e.g., a securities index and with respect to the Fund, the benchmark set forth in the Fund’s Prospectus to which the Fund’s
average annual total returns are compared or, if none, the benchmark set forth in the Fund’s annual report). Performance is reviewed
on a 1, 3 and 5 year basis for compensation—with 3 and 5 years having a larger emphasis. The Subadviser may also measure an investment
professional’s pre-tax investment performance against other benchmarks, as it determines appropriate. Because investment professionals
are generally responsible for multiple accounts (including the Fund) with similar investment strategies, they are generally compensated
on the performance of the aggregate group of similar accounts, rather than a specific account. Other factors that may be considered when
making bonus decisions include client service, business development, length of service to the Subadviser, management or supervisory responsibilities,
contributions to developing business strategy and overall contributions to the Subadviser’s business.
Finally, in order to attract and retain top talent,
all investment professionals are eligible for additional incentives in recognition of outstanding performance. These are determined based
upon the factors described above and include long-term incentives that vest over a set period of time past the award date.
(a)(4): Investment Professional Securities Ownership
The table below identifies the dollar range of securities
beneficially owned by each portfolio managers as of November 30, 2024.
| Portfolio Manager(s) |
|
Dollar Range of
Portfolio
Securities
Beneficially
Owned |
|
| Michael C. Buchanan |
|
A |
|
| Frederick Marki |
|
A |
|
Dollar Range ownership is as follows:
A: none
B: $1 - $10,000
C: 10,001 - $50,000
D: $50,001 - $100,000
E: $100,001 - $500,000
F: $500,001 - $1 million
G: over $1 million
| ITEM
14. | PURCHASES
OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS |
Not applicable.
| ITEM
15. | SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS. |
Not applicable.
| ITEM
16. | 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 period covered by this report
that have materially affected, or are likely to materially affect the registrant’s
internal control over financial reporting. |
| ITEM
17. | DISCLOSURE
OF SECURITIES LENDING ACTIVITIES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable.
| ITEM
18. | RECOVERY
OF ERRONEOUSLY AWARDED COMPENSATION. |
(a) (1) Code of Ethics attached hereto.
Exhibit 99.CODE
ETH
(a) (2) Certifications pursuant to section 302 of the Sarbanes-Oxley Act of 2002 attached hereto.
Exhibit 99.CERT
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 attached hereto.
Exhibit 99.906CERT
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,
there unto duly authorized.
Western Asset Inflation-Linked Income Fund
| By: |
/s/ Jane Trust |
|
| |
Jane Trust |
|
| |
President |
|
| |
|
|
| Date: |
January 24, 2025 |
|
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/ Jane Trust |
|
| |
Jane Trust |
|
| |
President |
|
| |
|
|
| Date: |
January 24, 2025 |
|
| |
|
|
| By: |
/s/ Christopher Berarducci |
|
|
Christopher Berarducci |
|
|
Principal Financial Officer |
|
| |
|
|
| Date: |
January 24, 2025 |
|
Code of Ethics for Principal Executives & Senior Financial
Officers
| |
|
| Procedures |
Revised [September 27, 2024] |
| |
|
FRANKLIN TEMPLETON AFFILIATED
FUNDS
CODE OF ETHICS FOR PRINCIPAL
EXECUTIVES AND
SENIOR FINANCIAL OFFICERS
| I. | Covered Officers
and Purpose of the Code |
This code of ethics (the “Code”)
applies to the Principal Executive Officers, Principal Financial Officer and Principal Accounting Officer (the “Covered Officers”)
of each investment company advised by a Franklin Resources subsidiary and that is registered with the United States Securities &
Exchange Commission (“SEC”) (collectively, “FT Funds”) for the purpose of promoting:
| • | Honest
and ethical conduct, including the ethical resolution of actual or apparent conflicts of
interest between personal and professional relationships; |
| • | Full,
fair, accurate, timely and understandable disclosure in reports and documents that a registrant
files with, or submits to, the SEC and in other public communications made by or on behalf
of the FT Funds; |
| • | Compliance
with applicable laws and governmental rules and regulations; |
| • | The
prompt internal reporting of violations of the Code to an appropriate person or persons identified
in the Code; and |
| • | Accountability
for adherence to the Code. |
Each Covered Officer will be
expected to adhere to a high standard of business ethics and must be sensitive to situations that may give rise to actual as well as
apparent conflicts of interest.
* Rule 38a-1 under the Investment Company Act of 1940 (“1940
Act”) and Rule 206(4)-7 under the Investment Advisers Act of 1940 (“Advisers Act”) (together the “Compliance
Rule”) require registered investment companies and registered investment advisers to, among other things, adopt and implement written
policies and procedures reasonably designed to prevent violations of the federal securities laws (“Compliance Rule Policies and
Procedures”).
| II. | Other Policies
and Procedures |
This Code
shall be the sole code of ethics adopted by the Funds for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable
to registered investment companies thereunder.
Franklin
Resources, Inc. has separately adopted the Code of Ethics and Business Conduct (“Business Conduct”), which is applicable
to all officers, directors and employees of Franklin Resources, Inc., including Covered Officers. It summarizes the values, principles
and business practices that guide the employee’s business conduct and also provides a set of basic principles to guide officers,
directors and employees regarding the minimum ethical requirements expected of them. It supplements the values, principles and business
conduct identified in the Code and other existing employee policies.
Additionally,
the Franklin Templeton Funds have separately adopted the FTI Personal Investments and Insider Trading Policy governing personal
securities trading and other related matters. The Code for Insider Trading provides for separate requirements that apply to the Covered
Officers and others, and therefore is not part of this Code.
Insofar as other
policies or procedures of Franklin Resources, Inc., the Funds, the Funds’ adviser, principal underwriter, or other service providers
govern or purport to govern the behavior or activities of the Covered Officers who are subject to this Code, they are superseded by this
Code to the extent that they overlap or conflict with the provisions of this Code. Please review these other documents or consult with
the Legal Department if have questions regarding the applicability of these policies to you.
| III. | Covered
Officers Should Handle Ethically Actual and Apparent Conflicts of Interest |
Overview.
A “conflict of interest” occurs when a Covered Officer’s private interest interferes with the interests of, or
his or her service to, the FT Funds. For example, a conflict of interest would arise if a Covered Officer, or a member of his family,
receives improper personal benefits as a result of a position with the FT Funds.
Certain conflicts
of interest arise out of the relationships between Covered Officers and the FT Funds and already are subject to conflict of interest
provisions in the Investment Company Act of 1940 (“Investment Company Act”) and the Investment Advisers Act of 1940 (“Investment
Advisers Act”). For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale
of securities or other property) with the FT Funds because of their status as “affiliated persons” of the FT Funds. The FT
Funds’ and the investment advisers’ compliance programs and procedures are designed to prevent, or identify and correct,
violations of these provisions. This Code does not, and is not intended to, repeat or replace these programs and procedures, and such
conflicts fall outside of the parameters of this Code.
Although
typically not presenting an opportunity for improper personal benefit, conflicts arise from, or as a result of, the contractual relationship
between the FT Funds, the investment advisers and the fund administrator of which the Covered Officers are also officers or employees.
As a result, this Code recognizes that the Covered Officers will, in the normal course of their duties (whether formally for the FT Funds,
for the adviser, the administrator, or for all three), be involved in establishing policies and implementing decisions that will have
different effects on the
adviser, administrator and the FT
Funds. The participation of the Covered Officers in such activities is inherent in the contractual relationship between the FT Funds,
the adviser, and the administrator and is consistent with the performance by the Covered Officers of their duties as officers of the
FT Funds. Thus, if performed in conformity with the provisions of the Investment Company Act and the Investment Advisers Act, such activities
will be deemed to have been handled ethically. In addition, it is recognized by the FT Funds’ Boards of Directors (“Boards”)
that the Covered Officers may also be officers or employees of one or more other investment companies covered by this or other codes.
Other conflicts
of interest are covered by the Code, even if such conflicts of interest are not subject to provisions in the Investment Company Act and
the Investment Advisers Act. The following list provides examples of conflicts of interest under the Code, but Covered Officers should
keep in mind that these examples are not exhaustive. The overarching principle is that the personal interest of a Covered Officer should
not be placed improperly before the interest of the FT Funds.
Each Covered Officer must:
| • | Not
use his or her personal influence or personal relationships improperly to influence investment
decisions or financial reporting by the FT Funds whereby the Covered Officer would benefit
personally to the detriment of the FT Funds; |
| • | Not
cause the FT Funds to take action, or fail to take action, for the individual personal benefit
of the Covered Officer rather than the benefit of the FT Funds; |
| • | Not
retaliate against any other Covered Officer or any employee of the FT Funds or their affiliated
persons for reports of potential violations that are made in good faith; |
| • | Report
at least annually the following affiliations or other relationships:1 |
| • | all
directorships for public companies and all companies that are required to file reports with
the SEC; |
| • | any
direct or indirect business relationship with any independent directors of the FT Funds; |
| • | any
direct or indirect business relationship with any independent public accounting firm (which
are not related to the routine issues related to the firm’s service as the Covered
Persons accountant); and |
| • | any
direct or indirect interest in any transaction with any FT Fund that will benefit the officer
(not including benefits derived from the advisory, sub-advisory, distribution or service
agreements with affiliates of Franklin Resources). |
These reports will be reviewed by the
Legal Department for compliance with the Code.
There
are some conflict of interest situations that should always be approved in writing by Franklin Resources General Counsel or Deputy General
Counsel, if material. Examples of these include2:
| • | Service
as a director on the board of any public or private Company. |
| | | |
| • | The
receipt of any gifts in excess of $100 from any person, from any corporation or association. |
1 Reporting of these affiliations or other
relationships shall be made by completing the annual Directors and Officers Questionnaire and returning the questionnaire to Franklin
Resources Inc, General Counsel or Deputy General Counsel.
2 Any activity or relationship that would present
a conflict for a Covered Officer may also present a conflict for the Covered Officer if a member of the Covered Officer’s immediate family engages in such an activity or has such a relationship. The Covered Person should also obtain written approval by
FT’s General Counsel in such situations.
| • | The
receipt of any entertainment from any Company with which the FT Funds has current or prospective
business dealings unless such entertainment is business related, reasonable in cost, appropriate
as to time and place, and not so frequent as to raise any question of impropriety. Notwithstanding
the foregoing, the Covered Officers must obtain prior approval from the Franklin Resources
General Counsel for any entertainment with a value in excess of $1000. |
| | | |
| • | Any
ownership interest in, or any consulting or employment relationship with, any of the FT Fund’s
service providers, other than an investment adviser, principal underwriter, administrator
or any affiliated person thereof. |
| | | |
| • | A
direct or indirect financial interest in commissions, transaction charges or spreads paid
by the FT Funds for effecting portfolio transactions or for selling or redeeming shares other
than an interest arising from the Covered Officer’s employment, such as compensation
or equity ownership. |
| | | |
| • | Franklin
Resources General Counsel or Deputy General Counsel, or the Chief Compliance Officer, will
provide a report to the FT Funds Audit Committee of any approvals granted at the next regularly
scheduled meeting. |
| IV. | Disclosure
and Compliance |
| | |
| • | Each
Covered Officer should familiarize himself with the disclosure requirements generally applicable
to the FT Funds; |
| | | |
| • | Each
Covered Officer should not knowingly misrepresent, or cause others to misrepresent, facts
about the FT Funds to others, whether within or outside the FT Funds, including to the FT
Funds’ directors and auditors, and to governmental regulators and self-regulatory
organizations; |
| | | |
| • | Each
Covered Officer should, to the extent appropriate within his or her area of responsibility,
consult with other officers and employees of the FT Funds, the FT Fund’s adviser and
the administrator with the goal of promoting full, fair, accurate, timely and understandable
disclosure in the reports and documents the FT Funds file with, or submit to, the SEC and
in other public communications made by the FT Funds; and |
| | | |
| • | It
is the responsibility of each Covered Officer to promote compliance with the standards and
restrictions imposed by applicable laws, rules and regulations. |
| V. | Reporting
and Accountability |
Each Covered Officer must:
| • | Upon
becoming a covered officer affirm in writing to the Board that he or she has received, read,
and understands the Code (see Exhibit A); |
| | | |
| • | Annually
thereafter affirm to the Board that he has complied with the requirements of the Code; and |
| | | |
| • | Notify
Franklin Resources’ General Counsel or Deputy General Counsel promptly if he or she
knows of any violation of this Code. Failure to do so is itself is a violation of this Code. |
Franklin Resources’
General Counsel and Deputy General Counsel are responsible for applying this Code to specific situations in which questions are presented
under it and have the authority to interpret this Code in any particular situation.3 However, the Independent Directors of
the respective FT Funds will consider any approvals or waivers4 sought by any Chief Executive Officers of the Funds.
The FT Funds will follow these procedures in investigating and
enforcing this Code:
| • | Franklin
Resources General Counsel or Deputy General Counsel will take all appropriate action to investigate
any potential violations reported to the Legal Department; |
| | | |
| • | If,
after such investigation, the General Counsel or Deputy General Counsel believes that no
violation has occurred, The General Counsel is not required to take any further action; |
| | | |
| • | Any
matter that the General Counsel or Deputy General Counsel believes is a violation will be
reported to the Independent Directors of the appropriate FT Fund; |
| | | |
| • | If
the Independent Directors concur that a violation has occurred, it will inform and make a
recommendation to the Board of the appropriate FT Fund or Funds, which will consider appropriate
action, which may include review of, and appropriate modifications to, applicable policies
and procedures; notification to appropriate personnel of the investment adviser or its board;
or a recommendation to dismiss the Covered Officer; |
| | | |
| • | The
Independent Directors will be responsible for granting waivers, as appropriate; and |
| | | |
| • | Any
changes to or waivers of this Code will, to the extent required, are disclosed as provided
by SEC rules.5 |
| VI. | Other
Policies and Procedures |
This Code
shall be the sole code of ethics adopted by the FT Funds for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms
applicable to registered investment companies thereunder. Insofar as other policies or procedures of the FT Funds, the FT Funds’
advisers, principal underwriter, or other service providers govern or purport to govern the behavior or activities of the Covered Officers
who are subject to this Code, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this
Code. The FTI Personal Investments and Insider Trading Policy, adopted by the FT Funds, FT investment advisers and FT Fund’s principal
underwriter pursuant to Rule 17j-1 under the Investment Company Act, the Code of Ethics and Business Conduct and more detailed policies
and procedures set forth in FT’s Employee Handbook are separate requirements applying to the Covered Officers and others, and are
not part of this Code.
Any amendments
to this Code must be approved or ratified by a majority vote of the FT Funds’ Board including a majority of independent directors.
3 Franklin Resources
General Counsel and Deputy General Counsel are authorized to consult, as appropriate, with members of the Audit Committee, counsel to
the FT Funds and counsel to the Independent Directors, and are encouraged to do so.
4 Item 2 of Form N-CSR
defines “waiver” as “the approval by the registrant of a material departure from a provision of the code of
ethics” and “implicit waiver,” which must also be disclosed, as “the registrant’s failure to take
action within a reasonable period of time regarding a material departure from a provision of the code of ethics that has been made
known to an executive officer” of the registrant. See Part X.
5 See Part X.
All reports
and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly.
Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the FT Funds’ Board
and their counsel.
The Code
is intended solely for the internal use by the FT Funds and does not constitute an admission, by or on behalf of any FT Funds, as to
any fact, circumstance, or legal conclusion.
| X. | Disclosure
on Form N-CSR |
Item 2 of
Form N-CSR requires a registered management investment company to disclose annually whether, as of the end of the period covered by the
report, it has adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar functions, regardless of whether these officers are employed
by the registrant or a third party. If the registrant has not adopted such a code of ethics, it must explain why it has not done so.
The registrant
must also: (1) file with the SEC a copy of the code as an exhibit to its annual report; (2) post the text of the code on its Internet
website and disclose, in its most recent report on Form N-CSR, its Internet address and the fact that it has posted the code on its Internet
website; or (3) undertake in its most recent report on Form N-CSR to provide to any person without charge, upon request, a copy of the
code and explain the manner in which such request may be made. Disclosure is also required of amendments to, or waivers (including implicit
waivers) from, a provision of the code in the registrant’s annual report on Form N-CSR or on its website. If the registrant intends
to satisfy the requirement to disclose amendments and waivers by posting such information on its website, it will be required to disclose
its Internet address and this intention.
The Legal Department shall be responsible
for ensuring that:
| • | a
copy of the Code is filed with the SEC as an exhibit to each Fund’s annual report;
and |
| | | |
| • | any
amendments to, or waivers (including implicit waivers) from, a provision of the Code is disclosed
in the registrant’s annual report on Form N-CSR. |
In the event
that the foregoing disclosure is omitted or is determined to be incorrect, the Legal Department shall promptly file such information
with the SEC as an amendment to Form N-CSR.
In such an event, the Fund Chief
Compliance Officer shall review the Code and propose such changes to the Code as are necessary or appropriate to prevent reoccurrences.
Exhibit A
ACKNOWLEDGMENT FORM
Franklin Templeton Funds Code
of Ethics
For Principal Executives
and Senior Financial Officers
Instructions:
| 1. | Complete
all sections of this form. |
| 2. | Print
the completed form, sign, and date. |
| 3. | Submit
completed form to FT’s General Counsel c/o Code of Ethics Administration within 10
days of becoming a Covered Officer and by February 15th of each subsequent year. |
| |
E-mail: | Code
of Ethics Inquiries & Requests (internal address);
lpreclear@franklintempleton.com
(external address) |
| Covered Officer’s
Name: |
|
| Title: |
|
| Department: |
|
| Location: |
|
| Certification
for Year Ending: |
|
To: Franklin Resources General
Counsel, Legal Department
I acknowledge receiving, reading and understanding
the Franklin Templeton Fund’s Code of Ethics for Principal Executive Officers and Senior Financial Officers (the “Code”).
I will comply fully with all provisions of the Code to the extent they apply to me during the period of my employment. I further understand
and acknowledge that any violation of the Code may subject me to disciplinary action, including termination of employment.
CERTIFICATIONS PURSUANT TO SECTION 302
EX-99.CERT
CERTIFICATIONS
I, Jane Trust, certify that:
| 1. | I
have reviewed this report on Form N-CSR Western Asset Inflation-Linked Income Fund; |
| 2. | Based
on my knowledge, this report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the period covered
by this report; |
| 3. | Based
on my knowledge, the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition, results of operations,
changes in net assets, and cash flows (if the financial statements are required to include
a statement of cash flows) of the registrant as of, and for, the periods presented in this
report; |
| 4. | The
registrant’s other certifying officers and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company
Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under
the Investment Company Act of 1940) for the registrant and have: |
| a) | Designed
such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being prepared; |
| b) | Designed
such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated
the effectiveness of the registrant’s disclosure controls and procedures and presented
in this report our conclusions about the effectiveness of the disclosure controls and procedures,
as of a date within 90 days prior to the filing date of this report based on such evaluation;
and |
| d) | Disclosed
in this report any change in the registrant’s internal control over financial reporting
that occurred during the period covered by this report that has materially affected, or is
reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and |
| 5. | The
registrant’s other certifying officers and I have disclosed to the registrant’s
auditors and the audit committee of the registrant’s board of directors (or persons
performing the equivalent functions): |
| a) | All
significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant’s
ability to record, process, summarize, and report financial information; and |
| b) | Any
fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant’s internal control over financial reporting. |
| Date: |
January 24, 2025 |
|
/s/ Jane Trust |
| |
|
|
Jane Trust |
| |
|
|
President |
CERTIFICATIONS
I, Christopher Berarducci, certify that:
| 1. | I
have reviewed this report on Form N-CSR of Western Asset Inflation-Linked Income Fund; |
| 2. | Based
on my knowledge, this report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the period covered
by this report; |
| 3. | Based
on my knowledge, the financial information included in this report, and the financial statements
on which the financial information is based, fairly present in all material respects the
financial condition, results of operations, changes in net assets, and cash flows (if the
financial statements are required to include a statement of cash flows) of the registrant
as of, and for, the periods presented in this report; |
| 4. | The
registrant’s other certifying officers and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company
Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under
the Investment Company Act of 1940) for the registrant and have: |
| a) | Designed
such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being prepared; |
| b) | Designed
such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles; |
c) Evaluated the effectiveness of the registrant’s
disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and
| d) | Disclosed
in this report any change in the registrant’s internal control over financial reporting
that occurred during the period covered by this report that has materially affected, or is
reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and |
| 5. | The
registrant’s other certifying officers and I have disclosed to the registrant’s
auditors and the audit committee of the registrant’s board of directors (or persons
performing the equivalent functions): |
a) All significant
deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely
to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and
b) Any fraud, whether
or not material, that involves management or other employees who have a significant role in the registrant’s internal control over
financial reporting.
| Date: |
January 24, 2025 |
|
/s/ Christopher Berarducci |
| |
|
|
Christopher Berarducci |
| |
|
|
Principal Financial Officer |
CERTIFICATIONS PURSUANT TO SECTION 906
EX-99.906CERT
CERTIFICATION
Jane Trust, President, and Christopher Berarducci, Principal
Financial Officer of Western Asset Inflation-Linked Income Fund (the “Registrant”), each certify to the best of their knowledge
that:
1.
The Registrant’s periodic report on Form N-CSR for the period ended November 30, 2024 (the “Form N-CSR”) fully
complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
2.
The information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations
of the Registrant.
| President |
|
Principal Financial Officer |
| Western Asset Inflation-Linked Income Fund |
|
Western Asset Inflation-Linked Income Fund |
| |
|
|
| /s/ Jane Trust |
|
/s/ Christopher Berarducci |
| Jane Trust |
|
Christopher Berarducci |
| Date: January 24, 2025 |
|
Date: January 24, 2025 |
| |
|
|
This certification is being furnished to the Securities and Exchange Commission
solely pursuant to 18 U.S.C. § 1350 and is not being filed as part of the Form N-CSR with the Commission.
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