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 811-23598

 

 

Western Asset Diversified 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)

 

 

George P. Hoyt

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: December 31

Date of reporting period: December 31, 2023

 

 

 


ITEM 1.

REPORT TO STOCKHOLDERS.

The Annual Report to Stockholders is filed herewith.


LOGO

 

Annual Report   December 31, 2023

WESTERN ASSET

DIVERSIFIED INCOME

FUND (WDI)

 

 

 

 

LOGO

 

INVESTMENT PRODUCTS: NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE


What’s inside      
Letter from the chairman     III  
Fund overview     1  
Fund at a glance     7  
Fund performance     8  
Schedule of investments     10  
Statement of assets and liabilities     38  
Statement of operations     39  
Statements of changes in net assets     40  
Statement of cash flows     41  
Financial highlights     43  
Notes to financial statements     45  
Report of independent registered public accounting firm     69  
Additional information     70  
Annual chief executive officer and principal financial officer certifications     76  
Other shareholder communications regarding accounting matters     77  
Summary of information regarding the Fund     78  
Dividend reinvestment plan     94  
Important tax information     97  

 

Fund objectives

The Fund’s primary investment objective is to seek high current income. As a secondary investment objective, the Fund will seek capital appreciation.

The Fund seeks to achieve its investment objectives by investing, under normal market conditions, across fixed income sectors and securities in seeking to deliver a well-diversified portfolio. It is anticipated that the Fund will dissolve on or about June 24, 2033, unless an Eligible Tender Offer is conducted and certain other conditions are satisfied, as described in this report.

 

 

 II 

   Western Asset Diversified Income Fund


Letter from the chairman

 

LOGO

 

Dear Shareholder,

We are pleased to provide the annual report of Western Asset Diversified Income Fund for the twelve-month reporting period ended December 31, 2023. 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.

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.

Sincerely,

 

LOGO

Jane Trust, CFA

Chairman, President and Chief Executive Officer

January 31, 2024

 

Western Asset Diversified Income Fund  

 

 III 


Fund overview

 

Q. What is the Fund’s investment strategy?

A. The Fund’s primary investment objective is to seek high current income. As a secondary investment objective, the Fund will seek capital appreciation. Under normal circumstances, the Fund will invest across fixed income sectors and securities to deliver a well-diversified portfolio. Western Asset Management Company, LLC (“Western Asset”) will seek to dynamically rotate investments into sectors and securities that it believes to be undervalued from a fundamental perspective with an attractive return profile and away from investments that it believes to be overvalued. The Fund may invest in investment-grade and high-yield corporate debt securities, senior loans, agency and non-agency residential mortgage-backed securities (“MBS”) and commercial mortgage-backed securities (“CMBS”), government (i.e., sovereign) debt (including U.S. government obligations), floating rate securities, bank loans, collateralized loan obligations (“CLOs”), asset-backed securities (whose underlying asset classes include, but are not limited to, equipment leases, solar and student loans), private debt and mortgage whole loans.

The Fund may invest up to 15% of its Managed Assets in securities issued by CLOs, including up to 5% of its Managed Assets in equity securities issued by CLOs (i.e., subordinated, or residual tranches of CLO securities). “Managed Assets” means the net assets of the Fund plus the principal amount of any borrowings or preferred shares that may be outstanding, reverse repurchase agreements, dollar rolls or similar transactions. Although the Fund does not specifically target covenant lite loans, the Fund may invest in covenant lite loans if market conditions result in loans having fewer covenants. With respect to all of the securities in which the Fund may invest, the Fund may invest in securities rated below investment grade (that is, securities rated below the Baa/BBB categories, or, if unrated, determined to be of comparable credit quality by Western Asset). These below investment grade securities that comprise the Fund’s portfolio are commonly referred to as either “high yield” securities or “junk bonds.” The Fund may invest up to 25% of its Managed Assets in securities, including structured instruments such as MBS and CMBS, rated CCC or below (or, if unrated, determined to be of comparable credit quality by Western Asset) at the time of investment. For this purpose, 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 invest in foreign securities denominated either in U.S. dollars or foreign currencies. Under normal market circumstances, the Fund will invest at least 70% of its Managed Assets in U.S. securities and at least 80% of its Managed Assets in U.S. dollar-denominated investments. Investments in non-U.S. securities may include emerging market corporate, government and quasi-sovereign debt. The Fund may invest in securities of any maturity.

At Western Asset, the Fund’s subadviser, 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

 

Western Asset Diversified Income Fund 2023 Annual Report  

 

 1 


Fund overview (cont’d)

 

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 S. Kenneth Leech, Michael C. Buchanan, Greg E. Handler, Christopher F. Kilpatrick and Annabel Rudebeck.

Q. What were the overall market conditions during the Funds’ reporting period?

A. The fixed income market experienced periods of elevated volatility, but ultimately generated solid results in 2023. The market moved higher over the first quarter of the reporting period amid shifting expectations for Federal Reserve Board (the “Fed”) rate hikes. Turmoil in the regional banking industry also triggered a flight to quality assets. Those market gains were then erased during the second and third quarters of 2023, as persistent inflation led to expectations of a “higher for longer” interest rate environment. The market ended the year on a positive note, as the Fed indicated it would likely pivot from raising rates to cutting rates in 2024. Moderating inflation and hopes that the central bank could orchestrate a “soft landing” for the economy also supported the market.

Short-term U.S. Treasury yields declined as inflation fell and the Fed indicated the likely end of its rate hike cycle. The yield for the two-year Treasury note began the reporting period at 4.41% and ended the period at 4.23%. The low of 3.75% was on May 4, 2023, and the peak of 5.19% occurred on October 17 and 18, 2023. The yield for the ten-year Treasury note began and ended the reporting period at 3.88%. The low of 3.30% was on April 5 and 6, 2023, and the peak of 4.98% occurred on October 19, 2023.

All told, the Bloomberg U.S. Aggregate Indexi returned 5.53% for the twelve months ended December 31, 2023. For comparison purposes, riskier fixed income securities, including high yield bonds and emerging market debt, produced stronger results. Over the fiscal year, the Bloomberg U.S. Corporate High Yield 2% Issuer Cap Indexii and the JPMorgan Emerging Markets Bond Index Globaliii returned 13.44% and 10.45%, respectively.

 

Q. How did we respond to these changing market conditions?

A. During the reporting period, the team calibrated portfolio positioning to take advantage of U.S. Treasury volatility engendered by ongoing market uncertainty around the Fed policy and the U.S. growth and inflation outlook. Given the volatile macro backdrop, the team reduced exposure to potentially vulnerable credits within the high yield and bank loans allocations and deployed those proceeds into investment-grade-rated industrial credits and credit risk transfer notes in the non-agency residential mortgage allocation. The team continues to view high yield corporate credit as a principal driver of returns, as yields are attractive in the high single-digits. Market fundamentals remain buoyant and technicals are supportive, as higher yields have attracted institutional and fund buyers while issuance has been moderate. The team also remains constructive on bank loans and CLOs. The loan market delivered double-digit returns in 2023 and continues to benefit from strong technical demand due to CLOs issuance. We favor defensive sectors that have strong competitive positions, less cyclical industry dynamics and decent asset coverage. These include health

 

 

 2 

   Western Asset Diversified Income Fund 2023 Annual Report


care, property & casualty brokerage and environmental waste management companies. In the CLOs space, we view investment-grade rated tranches at current levels as very attractive and retain our view that this sector will continue to perform well in either bullish or bearish bank loan spread environments given strong structural protections. Turning to emerging markets (“EM”), the team reduced the Fund’s EM corporate credit exposure in favor of EM local debt, the latter of which offers more compelling relative value as EM central banks begin their easing cycles. Nevertheless, the Fund’s overall EM exposure remains modest given uncertainty around growth risks in the U.S., Europe and China. The remaining allocations in the Fund were primarily in CMBS (ex-office space), which continue to offer diversification benefits and additional carry (yield) for the portfolio.

The Fund’s portfolio duration ranged from 3.5 years to 5.2 years and closed the year at 4.8 years. The team utilized U.S. Treasury futures, options and interest rate swaps, Eurodollar futures and options and interest rate swaps, and futures on non-U.S. rates to manage its duration and yield curve exposure. These derivatives, in aggregate, modestly contributed to performance. Index credit default swaps, which were used to manage the Fund’s exposure to credit index spread levels, slightly contributed to results. The use of currency forwards and options on currencies, to both take outright positions in and to hedge the Fund’s non-U.S. dollar currency exposure, modestly detracted from performance.

Performance review

For the twelve months ended December 31, 2023, Western Asset Diversified Income Fund returned 17.32% based on its net asset value (“NAV”)iv and 24.97% based on its New York Stock Exchange (“NYSE”) market price per share. The Fund’s unmanaged benchmark, the Bloomberg U.S. Corporate High Yield — 2% Issuer Cap Index (USD), returned 13.44% for the same period.

The Fund has a practice of seeking to maintain a relatively stable level of distributions to shareholders. This practice has no impact on the Fund’s investment strategy and may reduce the Fund’s NAV. The Fund’s manager believes the practice 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 $1.61 per share.* The performance table shows the Fund’s twelve-month total return based on its NAV and market price as of December 31, 2023. Past performance is no guarantee of future results.

 

Performance Snapshot as of December 31, 2023  
Price Per Share   12-Month
Total Return**
 
$15.54 (NAV)     17.32 %† 
$ 14.10 (Market Price)     24.97 %‡ 

 

*

For the tax character of distributions paid during the fiscal year ended December 31, 2023, please refer to page 67 of this report.

 

Western Asset Diversified Income Fund 2023 Annual Report  

 

 3 


Fund overview (cont’d)

 

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 at NAV.

‡ Total return assumes the reinvestment of all distributions in additional shares in accordance with the Fund’s Dividend Reinvestment Plan.

Q. What were the leading contributors to performance?

A. The Fund was well positioned to capitalize on the final rally of the year with corporate credit, structured credit and bank loans positively impacting portfolio performance. Duration also contributed strongly to returns with EM also providing a modest positive contribution to return.

Q. What were the leading detractors from performance?

A. Select holdings of CMBS and EM U.S. dollar-denominated corporates were mild detractors from performance during the reporting period.

Looking for additional information?

The Fund is traded under the symbol “WDI” and its closing market price is available in most newspapers under the NYSE listings. The daily NAV is available online under the symbol “XWDIX” 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 Diversified 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.

Sincerely,

Western Asset Management Company, LLC

January 19, 2024

RISKS: The Fund is a diversified limited term 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

 

 

 4 

   Western Asset Diversified Income Fund 2023 Annual Report


Fund’s common shares are traded on the New York Stock Exchange. 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. The Fund’s investments are subject to a number of risks, such as credit risk, inflation risk and interest rate risk. As interest rates rise, the value of fixed income securities falls. The Fund may invest in lower-rated high yield bonds (commonly known as “junk bonds”), which are subject to greater liquidity risk and credit risk (risk of default) than higher-rated obligations. Asset-backed, mortgage-backed or mortgage-related securities are subject to prepayment and extension risks. The Fund may invest in securities backed by subprime mortgages which involve a higher degree of risk and chance of loss. International investments are subject to special risks, including currency fluctuations and social, economic and political uncertainties, which could increase volatility. These risks are magnified in 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. The Fund may make significant investments in derivative instruments. Derivative instruments can be illiquid, may disproportionately increase losses, and have a potentially large impact on Fund performance. Leverage may result in greater volatility of NAV and the market price of common shares and increases a shareholder’s risk of loss. 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 manager and subadvisers. For more information on Fund risks, see Summary of information regarding the Fund -Principal Risk Factors in this report.

Portfolio holdings and breakdowns are as of December 31, 2023 and are subject to change and may not be representative of the portfolio managers’ current or future investments. Please refer to pages 10 through 37 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 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. Portfolio holdings are subject to change at any time and may not be representative of the portfolio managers’ current or future investments. The Fund’s top five sector holdings (as a percentage of net assets) as of December 31, 2023 were: collateralized mortgage obligations (26.4%), asset-backed securities (22.4%), consumer discretionary (21.8%), industrials (14.0%) and energy (13.6%). 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.

 

Western Asset Diversified Income Fund 2023 Annual Report  

 

 5 


Fund overview (cont’d)

 

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

The Bloomberg U.S. Aggregate Index is a broad-based bond index comprised of government, corporate, mortgage- and asset-backed issues, rated investment grade or higher, and having at least one year to maturity.

 

ii

The Bloomberg U.S. Corporate High Yield—2% Issuer Cap Index is an index of the 2% Issuer Cap component of the Bloomberg U.S. Corporate High Yield Index, which covers the U.S. dollar-denominated, non-investment grade, fixed- rate, taxable corporate bond market.

 

iii

The JPMorgan Emerging Markets Bond Index Global tracks total returns for U.S. dollar-denominated debt instruments issued by emerging market sovereign and quasi-sovereign entities: Brady bonds, loans, Eurobonds and local market instruments.

 

iv

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.

 

 

 6 

   Western Asset Diversified Income Fund 2023 Annual Report


Fund at a glance (unaudited)

 

Investment breakdown (%) as a percent of total investments

 

 

LOGO

 

The bar graph above represents the composition of the Fund’s investments as of December 31, 2023 and December 31, 2022 and does not include derivatives, such as written options, 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 Diversified Income Fund 2023 Annual Report  

 

 7 


Fund performance (unaudited)

 

Net Asset Value       
Average annual total returns1        
Twelve Months Ended 12/31/23      17.32
Commencement date of 6/25/21 through 12/31/23      -1.10  
Cumulative total returns1        
Commencement date of 6/25/21 through 12/31/23      -2.75
  
Market Price       
Average annual total returns2        
Twelve Months Ended 12/31/23      24.97
Commencement date of 6/25/21 through 12/31/23      -3.96  
  
Cumulative total returns2        
Commencement date of 6/25/21 through 12/31/23      -9.69

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.

 

1 

Assumes the reinvestment of all distributions, including returns of capital, if any, at net asset value.

 

2 

Assumes the reinvestment of all distributions, including returns of capital, if any, in additional shares in accordance with the Fund’s Dividend Reinvestment Plan.

 

 

 8 

   Western Asset Diversified Income Fund 2023 Annual Report


 

 

Historical performance

 

Value of $10,000 invested in

 

Western Asset Diversified Income Fund vs. Bloomberg U.S. Corporate High Yield — 2% Issuer Cap Index† —June 25, 2021—December 31, 2023

 

LOGO

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 Diversified Income Fund on June 25, 2021 (commencement of operations), 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 December 31, 2023. The hypothetical illustration also assumes a $10,000 investment in the Bloomberg U.S. Corporate High Yield — 2% Issuer Cap Index. The Bloomberg U.S. Corporate High Yield — 2% Issuer Cap Index (the “Index”) is an index of the 2% Issuer Cap component of the Bloomberg U.S. Corporate High Yield Index, which covers the U.S. dollar denominated, non-investment grade, fixed-rate, taxable corporate bond market. The Index is unmanaged. Please note that an investor cannot invest directly in an index.

 

Western Asset Diversified Income Fund 2023 Annual Report  

 

 9 


Schedule of investments

December 31, 2023

 

Western Asset Diversified Income Fund

 

(Percentages shown based on Fund net assets)

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  
Corporate Bonds & Notes — 64.3%                                
Communication Services — 7.3%                                

Diversified Telecommunication Services — 1.1%

                               

Altice Financing SA, Senior Secured Notes

    5.750     8/15/29       3,000,000     $ 2,666,230  (a)(b) 

Altice France Holding SA, Senior Secured Notes

    10.500     5/15/27       9,000,000       5,837,752  (a) 

Total Diversified Telecommunication Services

 

            8,503,982  

Entertainment — 1.3%

                               

Allen Media LLC/Allen Media Co-Issuer Inc., Senior Notes

    10.500     2/15/28       9,160,000       4,907,790  (a) 

AMC Entertainment Holdings Inc., Senior Secured Notes

    7.500     2/15/29       4,780,000       3,324,447  (a)(b) 

Banijay Entertainment SASU, Senior Secured Notes

    8.125     5/1/29       2,000,000       2,061,030  (a)(b) 

Total Entertainment

                            10,293,267  

Media — 3.1%

                               

Charter Communications Operating LLC/Charter Communications Operating Capital Corp., Senior Secured Notes

    6.834     10/23/55       10,000,000       10,002,293  (b) 

DirecTV Financing LLC/DirecTV Financing Co-Obligor Inc., Senior Secured Notes

    5.875     8/15/27       7,605,000       7,151,718  (a)(b) 

DISH DBS Corp., Senior Notes

    5.875     11/15/24       3,000,000       2,815,643  (b) 

DISH DBS Corp., Senior Secured Notes

    5.250     12/1/26       4,500,000       3,863,813  (a)(b) 

DISH Network Corp., Senior Secured Notes

    11.750     11/15/27       1,000,000       1,044,672  (a)(b) 

Total Media

                            24,878,139  

Wireless Telecommunication Services — 1.8%

                               

CSC Holdings LLC, Senior Notes

    5.250     6/1/24       2,500,000       2,449,103  (b) 

CSC Holdings LLC, Senior Notes

    7.500     4/1/28       8,280,000       6,202,093  (a)(b) 

CSC Holdings LLC, Senior Notes

    6.500     2/1/29       3,000,000       2,650,185  (a)(b) 

CSC Holdings LLC, Senior Notes

    4.500     11/15/31       4,750,000       3,597,178  (a)(b) 

Total Wireless Telecommunication Services

                            14,898,559  

Total Communication Services

                            58,573,947  
Consumer Discretionary — 17.8%                                

Automobile Components — 1.3%

                               

Carbon Revolution Ltd., Senior Secured Notes

    8.500     5/15/27       3,000,000       3,018,750  (a) 

 

See Notes to Financial Statements.

 

 

 10 

   Western Asset Diversified Income Fund 2023 Annual Report


Western Asset Diversified Income Fund

 

(Percentages shown based on Fund net assets)

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  

Automobile Components — continued

                               

Clarios Global LP/Clarios US Finance Co., Senior Notes

    8.500     5/15/27       5,000,000     $ 5,026,805  (a) 

JB Poindexter & Co. Inc., Senior Notes

    8.750     12/15/31       2,250,000       2,297,812  (a)(b) 

Total Automobile Components

                            10,343,367  

Automobiles — 2.7%

                               

Ford Motor Co., Senior Notes

    8.900     1/15/32       4,800,000       5,595,929  

Ford Motor Co., Senior Notes

    6.100     8/19/32       1,000,000       1,008,529  (b) 

Mclaren Finance PLC, Senior Secured Notes

    7.500     8/1/26       7,300,000       6,328,633  (a)(b) 

PM General Purchaser LLC, Senior Secured Notes

    9.500     10/1/28       8,600,000       8,730,415  (a)(b) 

Total Automobiles

                            21,663,506  

Broadline Retail — 1.0%

                               

QVC Inc., Senior Secured Notes

    4.450     2/15/25       950,000       892,815  (b) 

QVC Inc., Senior Secured Notes

    4.375     9/1/28       9,670,000       6,993,017  (b) 

Total Broadline Retail

                            7,885,832  

Distributors — 0.8%

                               

Accelerate360 Holdings LLC, Secured Notes

    8.000     3/1/28       4,259,550       4,433,361  (a) 

American News Co. LLC, Secured Notes (8.500% Cash or 10.000% PIK)

    8.500     9/1/26       2,063,814       2,298,573  (a)(b)(c) 

Total Distributors

                            6,731,934  

Diversified Consumer Services — 0.6%

                               

StoneMor Inc., Senior Secured Notes

    8.500     5/15/29       2,670,000       2,098,527  (a)(b) 

WW International Inc., Senior Secured Notes

    4.500     4/15/29       3,500,000       2,298,254  (a) 

Total Diversified Consumer Services

                            4,396,781  

Hotels, Restaurants & Leisure — 7.6%

                               

888 Acquisitions Ltd., Senior Secured Notes

    7.558     7/15/27       2,000,000  EUR      2,123,845  (a) 

Carnival Corp., Senior Notes

    10.500     6/1/30       5,000,000       5,472,650  (a)(b) 

Carnival Holdings Bermuda Ltd., Senior Notes

    10.375     5/1/28       6,500,000       7,079,761  (a)(b) 

Full House Resorts Inc., Senior Secured Notes

    8.250     2/15/28       8,000,000       7,527,360  (a)(b) 

Melco Resorts Finance Ltd., Senior Notes

    4.875     6/6/25       800,000       776,656  (a)(b) 

NCL Corp. Ltd., Senior Secured Notes

    8.125     1/15/29       4,000,000       4,181,328  (a)(b) 

Pinnacle Bidco PLC, Senior Secured Notes 

    10.000     10/11/28       2,500,000  GBP      3,321,037  (a) 

 

See Notes to Financial Statements.

 

Western Asset Diversified Income Fund 2023 Annual Report  

 

 11 


Schedule of investments (cont’d)

December 31, 2023

 

Western Asset Diversified Income Fund

 

(Percentages shown based on Fund net assets)

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  

Hotels, Restaurants & Leisure — continued

                               

Royal Caribbean Cruises Ltd., Senior Notes

    11.625     8/15/27       5,000,000     $ 5,444,370  (a)(b) 

Saga PLC, Senior Notes

    5.500     7/15/26       2,190,000  GBP      2,261,102  (d) 

Sands China Ltd., Senior Notes

    3.100     3/8/29       3,000,000       2,618,223  (e) 

Sizzling Platter LLC/Sizzling Platter Finance Corp., Senior Secured Notes

    8.500     11/28/25       7,000,000       6,990,052  (a)(b) 

Wheel Bidco Ltd., Senior Secured Notes

    6.750     7/15/26       5,180,000  GBP      5,673,029  (a) 

Wynn Macau Ltd., Senior Notes

    5.500     1/15/26       5,000,000       4,884,396  (a) 

Wynn Macau Ltd., Senior Notes

    5.500     10/1/27       3,000,000       2,836,551  (a) 

Total Hotels, Restaurants & Leisure

                            61,190,360  

Household Durables — 1.2%

                               

Newell Brands Inc., Senior Notes

    5.200     4/1/26       3,500,000       3,454,153 (b) 

Newell Brands Inc., Senior Notes

    6.500     4/1/46       6,500,000       5,413,152  (b) 

Victoria PLC, Senior Secured Notes

    3.625     8/24/26       1,240,000  EUR      1,102,415  (d) 

Total Household Durables

                            9,969,720  

Specialty Retail — 2.6%

                               

Bath & Body Works Inc., Senior Notes

    6.750     7/1/36       3,250,000       3,274,996  

Bath & Body Works Inc., Senior Notes

    7.600     7/15/37       4,275,000       4,366,015  (b) 

Doman Building Materials Group Ltd., Senior Notes

    5.250     5/15/26       1,950,000  CAD      1,360,357  (a) 

Foot Locker Inc., Senior Notes

    4.000     10/1/29       6,500,000       5,386,907  (a)(b) 

Michaels Cos. Inc., Senior Secured Notes

    5.250     5/1/28       5,965,000       4,720,282  (a)(b) 

Upbound Group Inc., Senior Notes

    6.375     2/15/29       2,000,000       1,879,130  (a)(b) 

Total Specialty Retail

                            20,987,687  

Total Consumer Discretionary

                            143,169,187  
Consumer Staples — 0.9%                                

Food Products — 0.5%

                               

TKC Holdings Inc., Senior Secured Notes

    6.875     5/15/28       4,050,000       3,750,624  (a)(b) 

Tobacco — 0.4%

                               

Vector Group Ltd., Senior Secured Notes

    5.750     2/1/29       3,500,000       3,208,039  (a)(b) 

Total Consumer Staples

                            6,958,663  
Energy — 11.3%                                

Energy Equipment & Services — 1.1%

                               

Nabors Industries Ltd., Senior Notes

    7.250     1/15/26       1,000,000       962,220  (a)(b) 

 

See Notes to Financial Statements.

 

 

 12 

   Western Asset Diversified Income Fund 2023 Annual Report


Western Asset Diversified Income Fund

 

(Percentages shown based on Fund net assets)

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  

Energy Equipment & Services — continued

                               

Shelf Drilling Holdings Ltd., Senior Secured Notes

    9.625     4/15/29       5,500,000     $ 5,386,196  (a)(b) 

Sunnova Energy Corp., Senior Notes

    5.875     9/1/26       3,500,000       2,982,490  (a)(b) 

Total Energy Equipment & Services

                            9,330,906  

Oil, Gas & Consumable Fuels — 10.2%

                               

Berry Petroleum Co. LLC, Senior Notes

    7.000     2/15/26       4,022,000       3,895,347  (a)(b) 

Blue Racer Midstream LLC/Blue Racer Finance Corp., Senior Notes

    7.625     12/15/25       2,000,000       2,028,106  (a)(b) 

Blue Racer Midstream LLC/Blue Racer Finance Corp., Senior Notes

    6.625     7/15/26       362,000       360,152  (a)(b) 

Crescent Energy Finance LLC, Senior Notes

    7.250     5/1/26       4,670,000       4,703,579  (a)(b) 

Crescent Energy Finance LLC, Senior Notes

    9.250     2/15/28       3,710,000       3,852,223  (a)(b) 

Energy Transfer LP, Junior Subordinated Notes (3 mo. USD LIBOR + 4.028%)

    9.669     1/16/24       7,298,000       7,017,497  (f)(g) 

Energy Transfer LP, Junior Subordinated Notes (7.125% to 5/15/30 then 5 year Treasury Constant Maturity Rate + 5.306%)

    7.125     5/15/30       6,842,000       6,321,861  (b)(f)(g) 

Energy Transfer LP, Senior Notes

    8.000     4/1/29       600,000       624,735  (a)(b) 

EQM Midstream Partners LP, Senior Notes

    6.500     7/15/48       3,000,000       3,078,426  (b) 

Hilcorp Energy I LP/Hilcorp Finance Co., Senior Notes

    6.250     4/15/32       7,000,000       6,743,771  (a)(b) 

Northern Oil and Gas Inc., Senior Notes

    8.125     3/1/28       1,000,000       1,013,540  (a)(b) 

Occidental Petroleum Corp., Senior Notes

    7.500     11/1/96       8,610,000       9,015,144  

Permian Resources Operating LLC, Senior Notes

    9.875     7/15/31       2,000,000       2,224,760  (a)(b) 

Plains All American Pipeline LP, Junior Subordinated Notes (3 mo. Term SOFR + 4.372%)

    9.751     1/29/24       7,000,000       6,798,750  (f)(g) 

Rockies Express Pipeline LLC, Senior Notes

    7.500     7/15/38       10,000,000       10,110,900  (a)(b) 

Rockies Express Pipeline LLC, Senior Notes

    6.875     4/15/40       1,000,000       979,867  (a)(b) 

SilverBow Resources Inc., Secured Notes (3 mo. Term SOFR + 7.750%) 

    13.135     12/15/28       5,000,000       4,950,000  (a)(g)(h)(i) 

 

See Notes to Financial Statements.

 

Western Asset Diversified Income Fund 2023 Annual Report  

 

 13 


Schedule of investments (cont’d)

December 31, 2023

 

Western Asset Diversified Income Fund

 

(Percentages shown based on Fund net assets)

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  

Oil, Gas & Consumable Fuels — continued

                               

Venture Global LNG Inc., Senior Secured Notes

    8.375     6/1/31       5,000,000     $ 5,004,936  (a)(b) 

YPF SA, Senior Notes

    8.500     7/28/25       3,300,000       3,189,019  

Total Oil, Gas & Consumable Fuels

                            81,912,613  

Total Energy

                            91,243,519  
Financials — 8.1%                                

Banks — 0.7%

                               

Comerica Bank, Senior Notes

    2.500     7/23/24       4,000,000       3,918,850  (b) 

Wells Fargo & Co., Junior Subordinated Notes

    5.900     6/15/24       2,000,000       1,983,915  (b)(f)(g) 

Total Banks

                            5,902,765  

Capital Markets — 1.1%

                               

B3 SA - Brasil Bolsa Balcao, Senior Notes

    4.125     9/20/31       2,200,000       1,925,232  (a)(e) 

Credit Suisse AG, Senior Notes

    3.625     9/9/24       680,000       670,691  (b) 

Credit Suisse AG, Senior Notes

    7.950     1/9/25       2,000,000       2,045,530  (b) 

StoneX Group Inc., Senior Secured Notes

    8.625     6/15/25       4,000,000       4,058,960  (a)(b) 

Total Capital Markets

                            8,700,413  

Consumer Finance — 1.1%

                               

Navient Corp., Senior Notes

    5.500     3/15/29       10,000,000       9,232,673  (b) 

Financial Services — 3.3%

                               

Burford Capital Global Finance LLC, Senior Notes

    6.250     4/15/28       4,000,000       3,843,914  (a)(b) 

Global Aircraft Leasing Co. Ltd., Senior Notes (6.500% Cash or 7.250% PIK)

    6.500     9/15/24       7,909,094       7,443,762  (a)(c) 

GTCR W-2 Merger Sub LLC, Senior Secured Notes

    7.500     1/15/31       3,650,000       3,859,409  (a)(b) 

LD Holdings Group LLC, Senior Notes

    6.500     11/1/25       5,000,000       4,640,450  (a)(b) 

Rocket Mortgage LLC/Rocket Mortgage Co-Issuer Inc., Senior Notes

    4.000     10/15/33       1,000,000       850,683  (a)(b) 

VistaJet Malta Finance PLC/Vista Management Holding Inc., Senior Notes

    7.875     5/1/27       6,500,000       5,598,167  (a)(b) 

VistaJet Malta Finance PLC/Vista Management Holding Inc., Senior Notes

    9.500     6/1/28       310,000       262,737  (a)(b) 

Total Financial Services 

                            26,499,122  

 

See Notes to Financial Statements.

 

 

 14 

   Western Asset Diversified Income Fund 2023 Annual Report


Western Asset Diversified Income Fund

 

(Percentages shown based on Fund net assets)

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  

Insurance — 1.1%

                               

Highlands Holdings Bond Issuer Ltd./ Highlands Holdings Bond Co-Issuer Inc., Senior Secured Notes (7.625% Cash or 8.375% PIK)

    7.625     10/15/25       8,645,427     $ 8,794,733  (a)(b)(c) 

Mortgage Real Estate Investment Trusts (REITs) — 0.8%

                               

Ladder Capital Finance Holdings LLLP/ Ladder Capital Finance Corp., Senior Notes

    4.750     6/15/29       7,000,000       6,321,349  (a)(b) 

Total Financials

                            65,451,055  
Health Care — 4.0%                                

Health Care Providers & Services — 2.6%

                               

Akumin Inc., Senior Secured Notes

    7.500     8/1/28       7,395,000       5,613,360 *(a)(b)(j) 

CHS/Community Health Systems Inc., Secured Notes

    6.125     4/1/30       14,000,000       9,082,080  (a) 

CHS/Community Health Systems Inc., Senior Secured Notes

    4.750     2/15/31       3,000,000       2,362,500  (a)(b) 

LifePoint Health Inc., Senior Secured Notes

    9.875     8/15/30       3,000,000       3,035,522  (a)(b) 

U.S. Renal Care Inc., Senior Secured Notes

    10.625     6/28/28       1,883,000       1,445,202  (a) 

Total Health Care Providers & Services

                            21,538,664  

Health Care Technology — 0.2%

                               

AthenaHealth Group Inc., Senior Notes

    6.500     2/15/30       1,670,000       1,517,216  (a)(b) 

Pharmaceuticals — 1.2%

                               

Bausch Health Cos. Inc., Senior Notes

    7.000     1/15/28       5,000,000       2,185,275  (a) 

Bausch Health Cos. Inc., Senior Notes

    6.250     2/15/29       7,616,000       3,379,000  (a) 

Teva Pharmaceutical Finance Co. LLC, Senior Notes

    6.150     2/1/36       2,000,000       1,916,894  (b) 

Teva Pharmaceutical Finance Netherlands III BV, Senior Notes

    4.100     10/1/46       3,000,000       2,034,880  

Total Pharmaceuticals

                            9,516,049  

Total Health Care

                            32,571,929  
Industrials — 10.5%                                

Aerospace & Defense — 1.2%

                               

Triumph Group Inc., Senior Secured Notes

    9.000     3/15/28       9,000,000       9,581,355  (a) 

Commercial Services & Supplies — 2.3%

                               

CoreCivic Inc., Senior Notes

    8.250     4/15/26       5,096,000       5,189,269  (b) 

GEO Group Inc., Secured Notes 

    10.500     6/30/28       3,750,000       3,809,569  

 

See Notes to Financial Statements.

 

Western Asset Diversified Income Fund 2023 Annual Report  

 

 15 


Schedule of investments (cont’d)

December 31, 2023

 

Western Asset Diversified Income Fund

 

(Percentages shown based on Fund net assets)

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  

Commercial Services & Supplies — continued

                               

GEO Group Inc., Secured Notes

    9.500     12/31/28       6,048,000     $ 5,843,884  (a)(b) 

PECF USS Intermediate Holding III Corp., Senior Notes

    8.000     11/15/29       7,621,000       3,894,216  (a) 

Total Commercial Services & Supplies

                            18,736,938  

Construction & Engineering — 0.8%

                               

Tutor Perini Corp., Senior Notes

    6.875     5/1/25       6,895,000       6,736,776  (a)(b) 

Ground Transportation — 0.7%

                               

Carriage Purchaser Inc., Senior Notes

    7.875     10/15/29       6,000,000       4,917,356  (a)(b) 

RXO Inc., Senior Notes

    7.500     11/15/27       1,000,000       1,032,830  (a)(b) 

Total Ground Transportation

                            5,950,186  

Machinery — 2.1%

                               

Chart Industries Inc., Senior Secured Notes

    7.500     1/1/30       3,000,000       3,139,491  (a) 

Park-Ohio Industries Inc., Senior Notes

    6.625     4/15/27       6,400,000       5,927,232  (b) 

Titan International Inc., Senior Secured Notes

    7.000     4/30/28       7,500,000       7,510,620  (b) 

Total Machinery

                            16,577,343  

Passenger Airlines — 2.4%

                               

American Airlines Group Inc. Pass- Through Trust

    4.000     7/15/25       5,857,791       5,616,318  

American Airlines Inc., Senior Secured Notes

    8.500     5/15/29       3,500,000       3,698,184  (a)(b) 

RJET 2023-1 A

    8.000     6/15/30       4,875,000       4,884,925  (h)(i) 

Spirit Loyalty Cayman Ltd./Spirit IP Cayman Ltd., Senior Secured Notes

    8.000     9/20/25       310,000       223,305  (a)(b) 

Spirit Loyalty Cayman Ltd./Spirit IP Cayman Ltd., Senior Secured Notes

    8.000     9/20/25       6,490,000       4,674,994  (a)(b) 

Total Passenger Airlines

                            19,097,726  

Professional Services — 0.5%

                               

RR Donnelley & Sons Co., Secured Notes

    9.750     7/31/28       4,000,000       3,978,760  (a)(b) 

Transportation Infrastructure — 0.5%

                               

Gatwick Airport Finance PLC, Senior Secured Notes

    4.375     4/7/26       3,000,000 GBP      3,675,772  (d) 

Total Industrials 

                            84,334,856  

 

See Notes to Financial Statements.

 

 

 16 

   Western Asset Diversified Income Fund 2023 Annual Report


Western Asset Diversified Income Fund

 

(Percentages shown based on Fund net assets)

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  
Information Technology — 2.4%                                

Communications Equipment — 0.6%

                               

CommScope Technologies LLC, Senior Notes

    5.000     3/15/27       7,589,000     $ 3,166,017  (a) 

Viasat Inc., Senior Notes

    7.500     5/30/31       1,875,000       1,474,219  (a)(b) 

Total Communications Equipment

                            4,640,236  

Software — 0.6%

                               

Central Parent Inc./CDK Global Inc., Senior Secured Notes

    7.250     6/15/29       2,000,000       2,041,187  (a)(b) 

NCR Voyix Corp., Senior Notes

    5.125     4/15/29       3,000,000       2,855,164  (a)(b) 

Total Software

                            4,896,351  

Technology Hardware, Storage & Peripherals — 1.2%

                               

CA Magnum Holdings, Senior Secured Notes

    5.375     10/31/26       1,500,000       1,398,750  (a)(b) 

Vericast Corp., Secured Notes

    12.500     12/15/27       590,000       670,821  (a)(b) 

Vericast Corp., Senior Secured Notes

    11.000     9/15/26       7,020,000       7,467,525  (a)(b) 

Total Technology Hardware, Storage & Peripherals

                            9,537,096  

Total Information Technology

                            19,073,683  
Materials — 0.8%                                

Metals & Mining — 0.8%

                               

First Quantum Minerals Ltd., Senior Notes

    7.500     4/1/25       3,000,000       2,863,216  (a) 

First Quantum Minerals Ltd., Senior Notes

    6.875     3/1/26       2,600,000       2,330,758  (a) 

First Quantum Minerals Ltd., Senior Notes

    6.875     10/15/27       1,400,000       1,191,750  (a) 

Total Materials

                            6,385,724  
Real Estate — 0.7%                                

Diversified REITs — 0.1%

                               

MPT Operating Partnership LP/MPT Finance Corp., Senior Notes

    4.625     8/1/29       1,000,000       720,091  (b) 

Hotel & Resort REITs — 0.5%

                               

Service Properties Trust, Senior Secured Notes

    8.625     11/15/31       3,500,000       3,668,921  (a)(b) 

Real Estate Management & Development — 0.1%

                               

China Aoyuan Group Ltd., Senior Secured Notes

    6.350     2/8/24       3,200,000       72,000 *(d)(j) 

 

See Notes to Financial Statements.

 

Western Asset Diversified Income Fund 2023 Annual Report  

 

 17 


Schedule of investments (cont’d)

December 31, 2023

 

Western Asset Diversified Income Fund

 

(Percentages shown based on Fund net assets)

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  

Real Estate Management & Development — continued

                               

Country Garden Holdings Co. Ltd., Senior Secured Notes

    8.000     1/27/24       3,500,000     $ 275,625 *(d)(j) 

Cushman & Wakefield US Borrower LLC, Senior Secured Notes

    8.875     9/1/31       850,000       901,446  (a)(b) 

Total Real Estate Management & Development

 

            1,249,071  

Total Real Estate

                            5,638,083  
Utilities — 0.5%                                

Electric Utilities — 0.0%††

                               

NSG Holdings LLC/NSG Holdings Inc., Senior Secured Notes

    7.750     12/15/25       436,494       434,480  (a) 

Independent Power and Renewable Electricity Producers — 0.5%

                               

TransAlta Corp., Senior Notes

    6.500     3/15/40       4,000,000       3,983,826 (b) 

Total Utilities

                            4,418,306  

Total Corporate Bonds & Notes (Cost — $523,714,280)

 

    517,818,952  
Collateralized Mortgage Obligations (k) — 26.4%                                

BANK, 2021-BN35 H

    1.660     6/15/64       9,451,000       3,032,139  (a)(g) 

BANK, 2021-BN35 K

    1.660     6/15/64       21,846,154       5,078,289  (a)(g) 

Benchmark Mortgage Trust, 2021-B27 F

    2.250     7/15/54       5,000,000       2,123,954  (a)(g) 

Benchmark Mortgage Trust, 2021-B27 G

    2.250     7/15/54       5,000,000       1,863,623  (a)(g) 

BSREP Commercial Mortgage Trust, 2021-DC HRR (1 mo. Term SOFR + 5.614%)

    10.976     8/15/38       17,687,987       8,977,799  (a)(g) 

BX Commercial Mortgage Trust, 2019- IMC G (1 mo. Term SOFR + 3.646%)

    9.008     4/15/34       4,000,000       3,919,874  (a)(g) 

Citigroup Commercial Mortgage Trust, 2015-GC29 D

    3.110     4/10/48       3,439,000       2,796,374  (a)(b) 

Citigroup Commercial Mortgage Trust, 2015-P1 D

    3.225     9/15/48       2,000,000       1,509,880  (a) 

CSMC Trust, 2021-ADV G (1 mo. Term SOFR + 6.364%)

    11.726     7/15/38       8,350,000       4,377,212  (a)(g) 

CSMC Trust, 2021-RPL2 B1

    3.616     1/25/60       6,233,900       3,850,654  (a)(g) 

Federal Home Loan Mortgage Corp. (FHLMC) Multifamily Structured Pass- Through Certificates, 2021-MN2 B1 (30 Day Average SOFR + 5.500%)

    10.837     7/25/41       2,500,000       1,987,854  (a)(g) 

Federal Home Loan Mortgage Corp. (FHLMC) REMIC, Structured Agency Credit Risk Debt Notes, 2020-DNA1 B2 (30 Day Average SOFR + 5.364%) 

    10.702     1/25/50       2,225,000       2,351,912  (a)(b)(g) 

 

See Notes to Financial Statements.

 

 

 18 

   Western Asset Diversified Income Fund 2023 Annual Report


Western Asset Diversified Income Fund

 

(Percentages shown based on Fund net assets)

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  
Collateralized Mortgage Obligations (k) — continued                                

Federal Home Loan Mortgage Corp. (FHLMC) REMIC, Structured Agency Credit Risk Debt Notes, 2020-DNA2 B2 (30 Day Average SOFR + 4.914%)

    10.252     2/25/50       7,250,000     $ 7,530,627  (a)(g) 

Federal Home Loan Mortgage Corp. (FHLMC) REMIC, Structured Agency Credit Risk Debt Notes, 2020-DNA6 B2 (30 Day Average SOFR + 5.650%)

    10.987     12/25/50       5,000,000       5,411,457  (a)(b)(g) 

Federal Home Loan Mortgage Corp. (FHLMC) REMIC, Structured Agency Credit Risk Debt Notes, 2021-DNA1 B2 (30 Day Average SOFR + 4.750%)

    10.087     1/25/51       9,482,500       9,710,820  (a)(g) 

Federal Home Loan Mortgage Corp. (FHLMC) REMIC, Structured Agency Credit Risk Debt Notes, 2021-DNA3 B2 (30 Day Average SOFR + 6.250%)

    11.587     10/25/33       5,000,000       5,668,755  (a)(b)(g) 

Federal Home Loan Mortgage Corp. (FHLMC) REMIC, Structured Agency Credit Risk Debt Notes, 2021-DNA5 B1 (30 Day Average SOFR + 3.050%)

    8.387     1/25/34       2,470,000       2,497,730  (a)(b)(g) 

Federal Home Loan Mortgage Corp. (FHLMC) REMIC, Structured Agency Credit Risk Debt Notes, 2021-DNA5 B2 (30 Day Average SOFR + 5.500%)

    10.837     1/25/34       6,700,000       7,136,836  (a)(g) 

Federal Home Loan Mortgage Corp. (FHLMC) REMIC, Structured Agency Credit Risk Debt Notes, 2021-DNA6 B2 (30 Day Average SOFR + 7.500%)

    12.837     10/25/41       6,590,000       6,941,727  (a)(g) 

Federal Home Loan Mortgage Corp. (FHLMC) Seasoned Credit Risk Transfer Trust, 2018-3 BX

    1.425     8/25/57       9,461,983       3,407,524  (a)(g) 

Federal Home Loan Mortgage Corp. (FHLMC) Structured Agency Credit Risk Debt Notes, 2018-HRP1 B2 (30 Day Average SOFR + 11.864%)

    17.202     5/25/43       4,731,240       5,566,372  (a)(b)(g) 

Federal Home Loan Mortgage Corp. (FHLMC) Structured Agency Credit Risk Debt Notes, 2021-DNA2 B2 (30 Day Average SOFR + 6.000%)

    11.337     8/25/33       6,000,000       6,728,891  (a)(g) 

Federal National Mortgage Association (FNMA) — CAS, 2016-C04 1B (30 Day Average SOFR + 10.364%)

    15.702     1/25/29       2,223,898       2,556,455  (a)(b)(g) 

 

See Notes to Financial Statements.

 

Western Asset Diversified Income Fund 2023 Annual Report  

 

 19 


Schedule of investments (cont’d)

December 31, 2023

 

Western Asset Diversified Income Fund

 

(Percentages shown based on Fund net assets)

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  
Collateralized Mortgage Obligations (k) — continued                                

Federal National Mortgage Association (FNMA) — CAS, 2019-R07 1B1 (30 Day Average SOFR + 3.514%)

    8.852     10/25/39       4,940,000     $ 5,025,842  (a)(b)(g) 

FREMF Mortgage Trust, 2021-F117 CS (30 Day Average SOFR + 6.400%)

    11.731     7/25/31       5,032,355       5,008,191  (a)(g) 

Great Wolf Trust, 2019-WOLF E (1 mo. Term SOFR + 2.846%)

    8.408     12/15/36       3,943,000       3,897,049  (a)(b)(g) 

GS Mortgage Securities Corp. Trust, 2018-HULA G (1 mo. Term SOFR + 3.703%)

    9.073     7/15/25       1,829,545       1,746,770  (a)(g) 

GS Mortgage Securities Corp. Trust, 2018-LUAU G (1 mo. Term SOFR + 4.747%)

    10.109     11/15/32       5,000,000       4,836,023  (a)(b)(g) 

GS Mortgage Securities Trust, 2015- GC30 D

    3.384     5/10/50       2,840,000       1,980,672  

GS Mortgage Securities Trust, 2021- ARDN H (1 mo. Term SOFR + 6.048%)

    11.409     11/15/26       5,000,000       4,647,335  (a)(b)(g) 

JPMorgan Chase Commercial Mortgage Securities Trust, 2018-WPT GFX

    5.364     7/5/33       4,000,000       2,153,921  (a)(g) 

JPMorgan Chase Commercial Mortgage Securities Trust, 2020-NNN GFX

    4.688     1/16/37       1,580,000       695,873  (a)(g) 

JPMorgan Chase Commercial Mortgage Securities Trust, 2021-NYMZ M (1 mo. Term SOFR + 7.364%)

    12.726     6/15/26       10,000,000       7,743,070  (a)(g) 

KIND Trust, 2021-KIND F (1 mo. Term SOFR + 4.064%)

    9.426     8/15/38       7,446,184       6,762,247  (a)(b)(g) 

Med Trust, 2021-MDLN F (1 mo. Term SOFR + 4.114%)

    9.476     11/15/38       6,558,524       6,384,168  (a)(b)(g) 

MIRA Trust, 2023-MILE HRR

    9.300     6/10/38       13,750,000       13,914,522  (a) 

Morgan Stanley Capital I Trust, 2021-L6 F

    2.250     6/15/54       7,195,000       3,667,608  (a)(g) 

Multifamily CAS Trust, 2019-1 CE (30 Day Average SOFR + 8.864%)

    14.202     10/25/49       2,000,000       1,921,626  (a)(g) 

Multifamily CAS Trust, 2020-1 CE (30 Day Average SOFR + 7.614%)

    12.952     3/25/50       2,500,000       2,457,407  (a)(g) 

Natixis Commercial Mortgage Securities Trust, 2022-JERI G (1 mo. Term SOFR + 7.458%)

    12.820     1/15/39       2,500,000       1,989,941  (a)(g) 

Natixis Commercial Mortgage Securities Trust, 2022-RRI E (1 mo. Term SOFR + 5.193%)

    10.555     3/15/35       3,992,157       3,966,786  (a)(b)(g) 

 

See Notes to Financial Statements.

 

 

 20 

   Western Asset Diversified Income Fund 2023 Annual Report


Western Asset Diversified Income Fund

 

(Percentages shown based on Fund net assets)

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  
Collateralized Mortgage Obligations (k) — continued

 

               

New Residential Mortgage Loan Trust, 2017-2A B5

    5.261     3/25/57       2,819,937     $ 2,219,883  (a)(g) 

New Residential Mortgage Loan Trust, 2020-2A B5D

    6.422     10/25/46       4,504,802       4,230,227  (a)(b)(g) 

River Haus, 2021 A-2

    6.950     8/15/24       8,500,000       8,499,714  (h)(i)(l) 

Seasoned Credit Risk Transfer Trust, 2022-1 M

    4.500     11/25/61       5,000,000       4,069,192  (a)(b)(g) 

Soho Trust, 2021-SOHO D

    2.697     8/10/38       7,000,000       3,848,039  (a)(g) 

UBS Commercial Mortgage Trust, 2018- NYCH F (1 mo. Term SOFR + 3.868%)

    9.230     2/15/32       6,000,000       5,826,274  (a)(b)(g) 

Total Collateralized Mortgage Obligations (Cost — $240,677,499)

 

    212,519,138  
                   Face
Amount†/
Units
        
Asset-Backed Securities — 22.4%                                

AGL CLO Ltd., 2021-11A E (3 mo. Term SOFR + 6.622%)

    12.015     4/15/34       2,650,000       2,634,556  (a)(b)(g) 

AGL CLO Ltd., 2020-6A ER (3 mo. Term SOFR + 6.762%)

    12.177     7/20/34       6,990,000       6,998,707  (a)(b)(g) 

Anchorage Capital CLO Ltd., 2014-3RA E (3 mo. Term SOFR + 5.762%)

    11.152     1/28/31       3,625,000       3,386,300  (a)(b)(g) 

Apidos CLO Ltd., 2023-46A SUB

    0.000     10/24/36       3,500,000       2,886,656  (a)(g) 

Ares CLO Ltd., 2015-2A ER (3 mo. Term SOFR + 7.112%)

    12.514     4/17/33       1,500,000       1,394,177  (a)(b)(g) 

Barings CLO Ltd., 2020-4A E (3 mo. Term SOFR + 5.942%)

    11.357     1/20/32       1,090,000       1,034,406  (a)(b)(g) 

BlueMountain CLO Ltd., 2020-29A ER (3 mo. Term SOFR + 7.122%)

    12.500     7/25/34       7,000,000       6,646,432  (a)(b)(g) 

BlueMountain Fuji US CLO Ltd., 2017-2A D (3 mo. Term SOFR + 6.412%)

    11.827     10/20/30       5,350,000       4,669,118  (a)(b)(g) 

CARLYLE US CLO Ltd., 2020-1A ER (3 mo. Term SOFR + 8.142%)

    13.557     7/20/34       5,000,000       4,496,617  (a)(b)(g) 

College Avenue Student Loans LLC, 2021-B R

    0.000     6/25/52       17,241       6,187,768  (a) 

Credit Suisse European Mortgage Capital Ltd., 2019-1OTF A (3 mo. USD LIBOR + 2.900%)

    8.552     8/9/24       1,968,800       1,931,207  (a)(g) 

Credit Suisse European Mortgage Capital Ltd., 2020-1OTF A (3 mo. USD LIBOR + 2.900%)

    7.390     8/9/24       1,081,809       1,054,926  (a) 

 

See Notes to Financial Statements.

 

Western Asset Diversified Income Fund 2023 Annual Report  

 

 21 


Schedule of investments (cont’d)

December 31, 2023

 

Western Asset Diversified Income Fund

 

(Percentages shown based on Fund net assets)

 

Security   Rate     Maturity
Date
    Face
Amount†/
Units
    Value  
Asset-Backed Securities — continued                                

Dryden CLO Ltd., 2021-95A SUB

    0.000     8/20/34       6,870,000     $ 4,351,165  (a)(g) 

Elmwood CLO Ltd., 2019-2A SUB

    0.000     4/20/34       4,600,000       3,635,358  (a)(g) 

Fortress Credit BSL Ltd., 2021-4A E (3 mo. Term SOFR + 7.392%)

    12.785     10/15/34       5,000,000       4,408,970  (a)(b)(g) 

Goldentree Loan Management US CLO Ltd., 2020-8A FR (3 mo. Term SOFR + 8.312%)

    13.727     10/20/34       7,000,000       6,113,162  (a)(b)(g) 

Greenwood Park CLO Ltd., 2018-1A E (3 mo. Term SOFR + 5.212%)

    10.605     4/15/31       1,570,000       1,362,678  (a)(b)(g) 

Greywolf CLO Ltd., 2015-1A DR (3 mo. Term SOFR + 6.112%)

    11.490     1/27/31       6,250,000       5,720,781  (a)(b)(g) 

Greywolf CLO Ltd., 2018-1A D (3 mo. Term SOFR + 6.010%)

    11.390     4/26/31       3,800,000       3,567,803  (a)(b)(g) 

Hayfin US Ltd., 2021-14A E (3 mo. Term SOFR + 7.442%)

    12.857     7/20/34       7,000,000       6,932,019  (a)(b)(g) 

LCM Ltd., 33A E (3 mo. Term SOFR + 6.612%)

    12.027     7/20/34       3,000,000       2,475,251  (a)(b)(g) 

Lunar Structured Aircraft Portfolio Notes, 2021-1 C

    5.682     10/15/46       5,515,648       4,645,555  (a) 

MACH Cayman Ltd., 2019-1 B

    4.335     10/15/39       868,376       623,868  (a) 

Magnetite Ltd., 2020-26A ER (3 mo. Term SOFR + 6.212%)

    11.590     7/25/34       6,750,000       6,604,208  (a)(b)(g) 

MAPS Trust, 2021-1A C

    5.437     6/15/46       3,320,592       2,162,311  (a) 

Marathon CLO Ltd., 2019-1A C (3 mo. Term SOFR + 4.332%)

    9.725     4/15/32       4,625,000       4,345,576  (a)(b)(g) 

National Collegiate Class A-3L Commutation Trust, 2007-4VI O (1 mo. USD LIBOR + 0.850%)

    6.307     3/29/38       27,730,208       4,687,986  (a)(g) 

Ocean Trails CLO, 2020-10A ER (3 mo. Term SOFR + 7.832%)

    13.225     10/15/34       3,750,000       3,428,552  (a)(b)(g) 

Palmer Square CLO Ltd., 2023-4A E (3 mo. Term SOFR + 6.750%)

    12.163     10/20/33       4,200,000       4,193,977  (a)(g) 

Palmer Square Loan Funding Ltd., 2022-3A C (3 mo. Term SOFR + 5.400%)

    10.794     4/15/31       2,950,000       2,974,369  (a)(b)(g) 

Park Avenue Institutional Advisers CLO Ltd., 2019-1A D (3 mo. Term SOFR + 7.112%)

    12.491     5/15/32       6,950,000       6,086,717  (a)(b)(g) 

Rad CLO Ltd., 2018-1A E (3 mo. Term SOFR + 5.882%)

    11.275     7/15/31       1,500,000       1,425,117  (a)(b)(g) 

 

See Notes to Financial Statements.

 

 

 22 

   Western Asset Diversified Income Fund 2023 Annual Report


Western Asset Diversified Income Fund

 

(Percentages shown based on Fund net assets)

 

Security   Rate     Maturity
Date
    Face
Amount†/
Units
    Value  
Asset-Backed Securities — continued                                

Riserva CLO Ltd., 2016-3A ERR (3 mo. Term SOFR + 6.762%)

    12.157     1/18/34       2,450,000     $ 2,281,385  (a)(b)(g) 

Riserva CLO Ltd., 2016-3A FRR (3 mo. Term SOFR + 8.772%)

    14.167     1/18/34       2,500,000       2,171,885  (a)(b)(g) 

RR Ltd., 2021-18A D (3 mo. Term SOFR + 6.512%)

    11.905     10/15/34       7,190,000       7,084,965  (a)(b)(g) 

Saratoga Investment Corp. CLO Ltd., 2013-1A (3 mo. Term SOFR + 10.262%)

    15.579     4/20/33       4,000,000       3,384,415  (a) 

SMB Private Education Loan Trust, 2015-C R

    0.000     9/18/46       7,570       1,878,044  (a) 

Sound Point CLO Ltd., 2020-1A ER (3 mo. Term SOFR + 7.122%)

    12.537     7/20/34       4,200,000       3,656,134  (a)(b)(g) 

Sunnova Hellios II Issuer LLC, 2018-1A B

    7.710     7/20/48       4,004,122       3,590,817  (a) 

Symphony CLO Ltd., 2016-18A ER (3 mo. Term SOFR + 7.332%)

    12.744     7/23/33       3,000,000       2,621,891  (a)(g) 

Symphony CLO Ltd., 2019-21A ER (3 mo. Term SOFR + 6.862%)

    12.255     7/15/32       2,800,000       2,621,791  (a)(b)(g) 

Symphony CLO Ltd., 2021-28A SUB

    0.000     10/23/50       6,045,000       3,972,505  (a)(g) 

TCI-Symphony CLO Ltd., 2016-1A ER2 (3 mo. Term SOFR + 7.012%)

    12.405     10/13/32       3,500,000       3,159,091  (a)(g) 

Voya CLO Ltd., 2018-2A E (3 mo. Term SOFR + 5.512%)

    10.905     7/15/31       6,750,000       5,928,476  (a)(b)(g) 

Voya CLO Ltd., 2021-1A E (3 mo. Term SOFR + 6.612%)

    12.005     7/15/34       2,250,000       2,202,321  (a)(b)(g) 

Whitebox CLO Ltd., 2020-2A ER (3 mo. Term SOFR + 7.362%)

    12.760     10/24/34       2,175,000       2,186,178  (a)(b)(g) 

Wind River CLO Ltd., 2021-4A E3 (3 mo. Term SOFR + 8.512%)

    13.927     1/20/35       3,000,000       2,852,712  (a)(b)(g) 

Wind River CLO Ltd., 2021-4A F (3 mo. Term SOFR + 6.522%)

    11.937     1/20/35       2,450,000       1,756,667  (a)(g) 

Zais CLO Ltd., 2021-17A E (3 mo. Term SOFR + 8.512%)

    13.927     10/20/33       6,000,000       5,606,406  (a)(b)(g) 

Total Asset-Backed Securities (Cost — $201,537,731)

 

    180,021,976  

 

See Notes to Financial Statements.

 

Western Asset Diversified Income Fund 2023 Annual Report  

 

 23 


Schedule of investments (cont’d)

December 31, 2023

 

Western Asset Diversified Income Fund

 

(Percentages shown based on Fund net assets)

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  
Senior Loans — 14.9%                                
Communication Services — 1.4%                                

Entertainment — 0.8%

                               

Allen Media LLC, Term Loan B (3 mo. Term SOFR + 5.650%)

    10.998     2/10/27       7,310,209     $ 6,518,257  (g)(m)(n) 

Media — 0.6%

                               

CB Poly US Holdings Inc., Initial Term Loan (3 mo. Term SOFR + 5.500%)

    10.848     5/18/29       4,937,500       4,902,543  (g)(m)(n) 

Total Communication Services

                            11,420,800  
Consumer Discretionary — 3.9%                                

Automobile Components — 1.2%

                               

Autokiniton US Holdings Inc., Closing Date Term Loan B (1 mo. Term SOFR + 4.614%)

    9.970     4/6/28       3,900,000       3,919,851  (g)(m)(n) 

First Brands Group LLC, 2021 First Lien Term Loan (3 mo. Term SOFR + 5.000%)

    10.881     3/30/27       5,844,750       5,808,220  (g)(m)(n) 

Total Automobile Components

                            9,728,071  

Diversified Consumer Services — 0.3%

                               

Adtalem Global Education Inc., Term Loan B (1 mo. Term SOFR + 4.114%)

    9.470     8/12/28       1,729,616       1,736,102  (g)(m)(n) 

WW International Inc., Initial Term Loan (1 mo. Term SOFR + 3.614%)

          4/13/28       330,000       235,262  (o) 

Total Diversified Consumer Services

                            1,971,364  

Hotels, Restaurants & Leisure — 0.1%

                               

Equinox Holdings Inc., Term Loan B2 (3 mo. USD LIBOR + 9.000%)

    14.610     3/8/24       1,158,000       1,135,275  (g)(m)(n) 

Specialty Retail — 2.3%

                               

Empire Today LLC, Closing Date Term Loan (1 mo. Term SOFR + 5.114%)

    10.470     4/3/28       2,437,500       1,918,666  (g)(m)(n) 

Franchise Group Inc., First Lien Initial Term Loan (3 mo. Term SOFR + 5.012%)

    10.437     3/10/26       5,955,440       4,826,884  (g)(m)(n) 

Michaels Cos. Inc., Term Loan B (3 mo. Term SOFR + 4.512%)

    9.860     4/15/28       3,253,045       2,713,040  (g)(m)(n) 

Rising Tide Holdings Inc., 2023 Term Loan (3 mo. Term SOFR + 6.250%)

    11.616     3/11/24       2,273,911       1,944,194  (g)(m)(n) 

Spencer Spirit IH LLC, Initial Term Loan (1 mo. Term SOFR + 6.100%)

    11.441     6/19/26       7,465,662       7,454,463  (g)(m)(n) 

Total Specialty Retail

                            18,857,247  

Total Consumer Discretionary

                            31,691,957  

 

See Notes to Financial Statements.

 

 

 24 

   Western Asset Diversified Income Fund 2023 Annual Report


Western Asset Diversified Income Fund

 

(Percentages shown based on Fund net assets)

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  
Consumer Staples — 0.4%                                

Beverages — 0.2%

                               

Triton Water Holdings Inc., First Lien Initial Term Loan (3 mo. Term SOFR + 3.512%)

    8.860     3/31/28       1,488,551     $ 1,477,387  (g)(m)(n) 

Household Products — 0.2%

                               

Knight Health Holdings LLC, Term Loan B (1 mo. Term SOFR + 5.364%)

    10.720     12/23/28       4,899,949       1,408,735  (g)(m)(n) 

Total Consumer Staples

                            2,886,122  
Financials — 2.9%                                

Financial Services — 1.5%

                               

Deerfield Dakota Holding LLC, 2021 Replacement Term Loan (3 mo. Term SOFR + 7.012%)

    12.360     4/7/28       2,000,000       1,922,500  (g)(m)(n) 

Greystone Select Holdings LLC, Term Loan B (3 mo. Term SOFR + 5.262%)

    10.658     6/16/28       3,391,975       3,375,015  (g)(m)(n) 

GTCR W Merger Sub LLC, Term Loan B

          9/20/30       3,000,000       3,016,875  (o) 

Nexus Buyer LLC, Initial Term Loan (1 mo. USD LIBOR + 3.850%)

    9.206     11/9/26       3,958,763       3,926,836  (g)(m)(n) 

Total Financial Services

                            12,241,226  

Insurance — 1.4%

                               

Asurion LLC, New Term Loan B4 (1 mo. Term SOFR + 5.364%)

    10.720     1/20/29       5,000,000       4,730,850  (g)(m)(n) 

Asurion LLC, Second Lien Term Loan B3 (1 mo. Term SOFR + 5.364%)

    10.720     1/31/28       5,000,000       4,779,150  (g)(m)(n) 

Sedgwick Claims Management Services Inc., 2023 Term Loan (1 mo. Term SOFR + 3.750%)

    9.106     2/24/28       1,578,075       1,584,868  (g)(m)(n) 

Total Insurance

                            11,094,868  

Total Financials

                            23,336,094  
Health Care — 0.1%                                

Health Care Providers & Services — 0.1%

                               

EyeCare Partners LLC, Second Lien Initial Term Loan (3 mo. Term SOFR + 7.012%)

    12.395     11/15/29       2,590,000       731,675  (g)(m)(n) 
Industrials — 3.5%                                

Air Freight & Logistics — 0.8%

                               

WWEX Uni Topco Holdings LLC, Second Lien Initial Term Loan (3 mo. Term SOFR + 7.262%)

    12.610     7/26/29       7,000,000       6,020,000  (g)(m)(n) 

 

See Notes to Financial Statements.

 

Western Asset Diversified Income Fund 2023 Annual Report  

 

 25 


Schedule of investments (cont’d)

December 31, 2023

 

Western Asset Diversified Income Fund

 

(Percentages shown based on Fund net assets)

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  

Building Products — 0.6%

                               

ACProducts Holdings Inc., Initial Term Loan (3 mo. Term SOFR + 4.512%)

    9.860     5/17/28       4,974,490     $ 4,378,919  (g)(m)(n) 

Commercial Services & Supplies — 1.3%

                               

DS Parent Inc., Term Loan B

          12/16/30       5,000,000       4,787,500  (o) 

GEO Group Inc., Term Loan 1 (1 mo. Term SOFR + 7.125%)

    12.481     3/23/27       2,255,510       2,309,079  (g)(m)(n) 

Neptune Bidco Us Inc., Term Loan A (3 mo. Term SOFR + 4.850%)

    10.257     10/11/28       3,980,000       3,644,546  (g)(m)(n) 

Total Commercial Services & Supplies

                            10,741,125  

Professional Services — 0.8%

                               

RR Donnelley & Sons Co., 2023 Replacement Term Loan (1 mo. Term SOFR + 7.350%)

    12.706     3/17/28       6,609,050       6,624,746  (g)(m)(n) 

Total Industrials

                            27,764,790  
Information Technology — 2.1%                                

IT Services — 1.0%

                               

Nielsen Consumer Inc., Fifth Amendment Incremental Term Loan (1 mo. Term SOFR + 6.250%)

    11.606     3/6/28       4,975,000       4,878,609  (g)(m)(n) 

Redstone Holdco 2 LP, First Lien Initial Term Loan (1 mo. Term SOFR + 4.864%)

    10.220     4/27/28       4,280,726       3,262,384  (g)(m)(n) 

Total IT Services

                            8,140,993  

Software — 1.1%

                               

Cloudera Inc., Second Lien Term Loan (1 mo. Term SOFR + 6.100%)

    11.456     10/8/29       2,120,000       2,042,260  (g)(m)(n) 

DCert Buyer Inc., Second Lien Initial Term Loan (1 mo. Term SOFR + 7.000%)

    12.356     2/19/29       500,000       457,500  (g)(m)(n) 

Magenta Buyer LLC, First Lien Initial Term Loan (3 mo. Term SOFR + 5.262%)

    10.645     7/27/28       3,169,575       2,268,227  (g)(m)(n) 

Planview Parent Inc., First Lien Closing Date Term Loan (3 mo. Term SOFR + 4.262%)

    9.610     12/17/27       4,163,275       4,136,984  (g)(m)(n) 

Total Software

                            8,904,971  

Total Information Technology

                            17,045,964  
Materials — 0.6%                                

Chemicals — 0.6%

                               

Plastics Management LLC, First Lien Initial Term Loan (3 mo. Term SOFR + 5.100%)

    10.448     8/3/27       4,893,331       4,763,566  (g)(h)(i)(m)(n) 

Total Senior Loans (Cost — $129,403,532)

 

            119,640,968  

 

See Notes to Financial Statements.

 

 

 26 

   Western Asset Diversified Income Fund 2023 Annual Report


Western Asset Diversified Income Fund

 

(Percentages shown based on Fund net assets)

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  
Sovereign Bonds — 5.6%                                

Angola — 0.4%

                               

Angolan Government International Bond, Senior Notes

    8.750     4/14/32       3,500,000     $ 3,087,777  (a)(e) 

Angolan Government International Bond, Senior Notes

    9.125     11/26/49       620,000       507,625 (d) 

Total Angola

                            3,595,402  

Argentina — 1.4%

                               

Ciudad Autonoma De Buenos Aires, Senior Notes

    7.500     6/1/27       5,100,000       5,051,932  (a) 

Ciudad Autonoma De Buenos Aires, Senior Notes

    7.500     6/1/27       2,000,000       1,981,150  (d) 

Provincia de Cordoba, Senior Notes

    6.875     12/10/25       4,333,420       3,944,223  (a) 

Total Argentina

                            10,977,305  

Bahamas — 0.1%

                               

Bahamas Government International Bond, Senior Notes

    8.950     10/15/32       600,000       565,894  (d) 

Dominican Republic — 0.4%

                             

Dominican Republic International Bond, Senior Notes

    4.500     1/30/30       430,000       397,234  (d) 

Dominican Republic International Bond, Senior Notes

    4.875     9/23/32       2,750,000       2,511,025  (d)(e) 

Total Dominican Republic

                            2,908,259  

Ecuador — 0.2%

                               

Ecuador Government International Bond, Senior Notes

    0.000     7/31/30       5,593,000       1,609,248  (a)(e) 

Egypt — 0.1%

                               

Egypt Government International Bond, Senior Notes

    5.800     9/30/27       890,000       688,605  (d) 

Egypt Government International Bond, Senior Notes

    7.053     1/15/32       700,000       481,568  (d) 

Total Egypt

                            1,170,173  

El Salvador — 0.0%††

                               

El Salvador Government International Bond, Senior Notes

    6.375     1/18/27       180,000       159,699  (d) 

Ghana — 0.0%††

                               

Ghana Government International Bond, Senior Notes

    10.750     10/14/30       590,000       373,544  (d) 

Ivory Coast — 0.1%

                               

Ivory Coast Government International Bond, Senior Notes

    6.125     6/15/33       670,000       618,182  (d) 

 

See Notes to Financial Statements.

 

Western Asset Diversified Income Fund 2023 Annual Report  

 

 27 


Schedule of investments (cont’d)

December 31, 2023

 

Western Asset Diversified Income Fund

 

(Percentages shown based on Fund net assets)

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  

Jamaica — 0.1%

                               

Jamaica Government International Bond, Senior Notes

    9.625     11/3/30       82,000,000 JMD    $ 541,179  

Kenya — 0.4%

                               

Republic of Kenya Government International Bond, Senior Notes

    6.300     1/23/34       3,200,000       2,575,630  (a)(e) 

Republic of Kenya Government International Bond, Senior Notes

    6.300     1/23/34       550,000       442,686  (d) 

Total Kenya

                            3,018,316  

Mexico — 1.0%

                               

Mexican Bonos, Bonds

    5.750     3/5/26       40,930,000 MXN      2,228,440  

Mexican Bonos, Senior Notes

    8.500     5/31/29       98,350,000 MXN      5,671,183  

Total Mexico

                            7,899,623  

Nigeria — 0.1%

                               

Nigeria Government International Bond, Senior Notes

    7.143     2/23/30       940,000       849,346  (d) 

Senegal — 0.0%††

                               

Senegal Government International Bond, Senior Notes

    6.250     5/23/33       550,000       492,921  (d) 

Sri Lanka — 0.0%††

                               

Sri Lanka Government International Bond, Senior Notes

    6.200     5/11/27       570,000       289,448 *(d)(j) 

Supranational — 0.7%

                               

International Finance Corp., Senior Notes

    6.140     6/3/24       225,000,000 UYU      5,725,156  

Turkey — 0.4%

                               

Turkiye Ihracat Kredi Bankasi AS, Senior Notes

    5.750     7/6/26       3,200,000       3,118,896  (a)(e) 

Ukraine — 0.1%

                               

Ukraine Government International Bond, Senior Notes

    7.375     9/25/34       2,280,000       541,614 *(d) 

Uruguay — 0.0%††

                               

Uruguay Government International Bond, Senior Notes

    3.875     7/2/40       17,547,636 UYU      474,811  

Uzbekistan — 0.1%

                               

Republic of Uzbekistan International Bond, Senior Notes

    3.900     10/19/31       590,000       497,037  (d) 

Total Sovereign Bonds (Cost — $46,366,880)

 

            45,426,053  

 

See Notes to Financial Statements.

 

 

 28 

   Western Asset Diversified Income Fund 2023 Annual Report


Western Asset Diversified Income Fund

 

(Percentages shown based on Fund net assets)

 

Security   Rate            Shares     Value  
Convertible Preferred Stocks — 2.3%                                
Energy — 2.3%                                

Oil, Gas & Consumable Fuels — 2.3%

                               

Equitrans Midstream Corp. (9.750% to 3/31/24 then 3 mo. USD LIBOR + 8.150%)

    9.750             416,711     $ 9,271,820  (g)(h) 

MPLX LP

    9.538             251,254       8,856,703  (h)(i) 

Total Convertible Preferred Stocks (Cost — $18,052,486)

 

    18,128,523  
            Maturity
Date
    Face
Amount†
        
Convertible Bonds & Notes — 0.8%                                
Communication Services — 0.5%                                

Media — 0.5%

                               

DISH Network Corp., Senior Notes

    0.000     12/15/25       4,500,000       2,812,500  

DISH Network Corp., Senior Notes

    3.375     8/15/26       2,000,000       1,070,000  

Total Communication Services

                            3,882,500  
Financials — 0.3%                                

Mortgage Real Estate Investment Trusts (REITs) — 0.3%

                               

Two Harbors Investment Corp., Senior Notes

    6.250     1/15/26       3,010,000       2,784,250 (b) 

Total Convertible Bonds & Notes (Cost — $7,167,044)

 

    6,666,750  
                   Shares         
Common Stocks — 0.1%                                
Consumer Discretionary — 0.1%                                

Specialty Retail — 0.1%

                               

West Marine

                    146,250       475,312  (h)(i) 

West Marine 1A Common Units

                    16,250       52,813  (h)(i) 

Total Common Stocks (Cost — $0)

                            528,125  
     Expiration
Date
    Contracts     Notional
Amount†
        
Purchased Options — 0.1%                                
Exchange-Traded Purchased Options — 0.0%††                                

U.S. Treasury 5-Year Notes Futures, Put @ $105.000

    1/26/24       512       512,000       8,000  

U.S. Treasury 10-Year Notes Futures, Put @ $111.000

    1/26/24       251       251,000       62,750  

Total Exchange-Traded Purchased Options (Cost — $144,070)

 

    70,750  

 

See Notes to Financial Statements.

 

Western Asset Diversified Income Fund 2023 Annual Report  

 

 29 


Schedule of investments (cont’d)

December 31, 2023

 

Western Asset Diversified Income Fund

 

(Percentages shown based on Fund net assets)

 

Security   Counterparty     Expiration
Date
    Contracts     Notional
Amount†
     Value  
OTC Purchased Options — 0.1%                                         

U.S. Dollar/Canadian

    BNP Paribas                                   

Dollar, Call @ 1.372CAD

    SA       3/21/24       5,560,000       5,560,000      $ 8,251  

U.S. Dollar/Euro, Call @ $1.055

   
JPMorgan
Chase & Co.
 
 
    2/2/24       4,865,022       4,865,022        1,158  

U.S. Dollar/Euro, Call @ $1.060

   
JPMorgan
Chase & Co.
 
 
    2/6/24       3,015,847       3,015,847        1,358  

U.S. Dollar/Euro, Call @ $1.062

   
BNP Paribas
SA
 
 
    2/22/24       5,650,000       5,650,000        5,405  

U.S. Dollar/Mexican Peso, Put @ 17.973MXN

    Citibank N.A.       1/11/24       6,460,000       6,460,000        370,702  

Total OTC Purchased Options (Cost — $242,045)

 

             386,874  

Total Purchased Options (Cost — $386,115)

 

             457,624  

Total Investments before Short-Term Investments (Cost — $1,167,305,567)