Form N-CSRS WESTERN ASSET INFLATION- For: May 31

 

 

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, 47^th 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: (888) 777-0102

Date of fiscal year end: November 30

Date of reporting period: May 31, 2021

 

 

 

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ITEM 1.

REPORT TO STOCKHOLDERS.

The Semi-Annual Report to Stockholders is filed herewith.

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Semi-Annual Report		May 31, 2021

WESTERN ASSET

INFLATION-LINKED

INCOME FUND (WIA)

 

 

 

 

 

 

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

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What’s inside
Letter from the president			III
Performance review			IV
Fund at a glance			1
Consolidated schedule of investments			2
Consolidated statement of assets and liabilities			13
Consolidated statement of operations			14
Consolidated statements of changes in net assets			15
Consolidated statement of cash flows			16
Consolidated financial highlights			18
Notes to consolidated financial statements			20
Additional shareholder information			37
Dividend reinvestment plan			38

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.

 

 

II		Western Asset Inflation-Linked Income Fund

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Letter from the president

 

 

Dear Shareholder,

We are pleased to provide the semi-annual report of Western Asset Inflation-Linked Income Fund for the six-month reporting period ended May 31, 2021. Please read on for Fund performance information during the Fund’s reporting period.

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.lmcef.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,

 

Jane Trust, CFA

President

June 30, 2021

 

Western Asset Inflation-Linked Income Fund		III

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Performance review

 

For the six months ended May 31, 2021, Western Asset Inflation-Linked Income Fund returned 5.93% based on its net asset value (“NAV”)ⁱ and 10.94% based on its New York Stock Exchange (“NYSE”) market price per share. The Fund’s unmanaged benchmarks, the Bloomberg Barclays U.S. Government Inflation-Linked 1-10 Year Indexⁱⁱ and the Bloomberg Barclays U.S. Government Inflation-Linked All Maturities Indexⁱⁱⁱ, returned 3.52% and 2.00%, respectively, for the same period. The Bloomberg Barclays World Government Inflation-Linked All Maturities Index^iv and the Fund’s Custom Benchmark^v returned 2.90% and 1.57%, respectively, over the same time frame.

During this six-month period, the Fund made distributions to shareholders totaling $0.58 per share. As of May 31, 2021, the Fund estimates that 100% of the distributions were sourced from net realized gains.* The performance table shows the Fund’s six-month total return based on its NAV and market price as of May 31, 2021. Past performance is no guarantee of future results.

 

Performance Snapshot as of May 31, 2021 (unaudited)
Price Per Share		6-Month Total Return**
$ 14.47 (NAV)		5.93%†
$ 13.99 (Market Price)		10.94%‡

All figures represent past performance and are not a guarantee of future results. Performance figures for periods shorter than one year represent cumulative figures and are not annualized.

** 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, if any, at NAV.

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

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.lmcef.com (click on the name of the Fund).

 

*

These estimates are not for tax purposes. The Fund will issue a Form 1099 with final composition of the distributions for tax purposes after year end. A return of capital is not taxable and results in a reduction in the tax basis of a shareholder’s investment. For more information about a distribution’s composition, please refer to the Fund’s distribution press release or, if applicable, the Section 19 notice located in the press release section of our website www.lmcef.com (click on the name of the Fund).

 

IV		Western Asset Inflation-Linked Income Fund

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Performance review (cont’d)

 

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 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.

Sincerely,

 

Jane Trust, CFA

President

June 30, 2021

RISKS: 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 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

 

Western Asset Inflation-Linked Income Fund		V

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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”).

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”).

 

VI		Western Asset Inflation-Linked Income Fund

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Performance review (cont’d)

 

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.

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.

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.

 

 

i

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.

 

ii	The Bloomberg Barclays U.S. Government Inflation-Linked 1-10 Year Index measures the performance of the intermediate U.S. Treasury Inflation-Protected Securities (“TIPS”) market.

 

iii	The Bloomberg Barclays 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.

 

iv	The Bloomberg Barclays World Government Inflation-Linked All Maturities Index measures the performance of the major government inflation-linked bond markets.

 

v

The Custom Benchmark is comprised of 90% Bloomberg Barclays U.S. Government Inflation-Linked All Maturities Index and 10% Bloomberg Barclays U.S. Credit Index. The Bloomberg Barclays U.S. Credit Index is an index composed of corporate and non-corporate debt issues that are investment grade (rated Baa3/BBB- or higher).

 

Western Asset Inflation-Linked Income Fund		VII

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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 May 31, 2021 and November 30, 2020 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.

 

Western Asset Inflation-Linked Income Fund 2021 Semi-Annual Report					1

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Consolidated schedule of investments (unaudited)

May 31, 2021

 

Western Asset Inflation-Linked Income Fund

 

Security		Rate				Maturity Date				Face Amount†				Value
U.S. Treasury Inflation Protected Securities — 113.9%
U.S. Treasury Bonds, Inflation Indexed			2.000	%			1/15/26				33,363,500			$	39,744,671	(a)
U.S. Treasury Bonds, Inflation Indexed			2.375	%			1/15/27				5,253,800				6,514,243
U.S. Treasury Bonds, Inflation Indexed			1.750	%			1/15/28				12,643,500				15,423,004	(a)
U.S. Treasury Bonds, Inflation Indexed			2.500	%			1/15/29				12,448,134				16,147,567
U.S. Treasury Bonds, Inflation Indexed			3.875	%			4/15/29				41,086,620				58,202,002	(a)
U.S. Treasury Bonds, Inflation Indexed			2.125	%			2/15/40				5,514,705				8,121,275	(b)
U.S. Treasury Bonds, Inflation Indexed			2.125	%			2/15/41				3,459,256				5,139,920	(c)
U.S. Treasury Bonds, Inflation Indexed			0.750	%			2/15/42				10,198,401				12,170,598
U.S. Treasury Bonds, Inflation Indexed			1.375	%			2/15/44				25,003,440				33,677,643	(a)
U.S. Treasury Bonds, Inflation Indexed			0.125	%			2/15/51				2,401,017				2,518,971
U.S. Treasury Notes, Inflation Indexed			0.625	%			7/15/21				5,876,150				5,944,510
U.S. Treasury Notes, Inflation Indexed			0.125	%			1/15/22				23,405,800				23,979,664
U.S. Treasury Notes, Inflation Indexed			0.125	%			4/15/22				37,031,100				38,128,051	(a)
U.S. Treasury Notes, Inflation Indexed			0.125	%			7/15/22				32,250,960				33,609,714	(a)
U.S. Treasury Notes, Inflation Indexed			0.125	%			1/15/23				11,475,400				12,045,771
U.S. Treasury Notes, Inflation Indexed			0.625	%			4/15/23				29,325,175				31,218,527
U.S. Treasury Notes, Inflation Indexed			0.625	%			1/15/26				35,437,902				39,826,999	(a)
U.S. Treasury Notes, Inflation Indexed			0.125	%			1/15/31				1,729,784				1,900,036
Total U.S. Treasury Inflation Protected Securities (Cost — $351,833,011)															384,313,166
Corporate Bonds & Notes — 12.0%
Communication Services — 0.0%††
Wireless Telecommunication Services — 0.0%††
T-Mobile USA Inc., Senior Secured Notes			3.750	%			4/15/27				40,000				44,039
Energy — 5.7%
Energy Equipment & Services — 0.0%††
Halliburton Co., Senior Notes			3.800	%			11/15/25				13,000				14,415
Oil, Gas & Consumable Fuels — 5.7%
Apache Corp., Senior Notes			4.250	%			1/15/44				440,000				414,968
BP Capital Markets America Inc., Senior Notes			3.633	%			4/6/30				300,000				333,116
Chevron USA Inc., Senior Notes			3.900	%			11/15/24				200,000				221,319
Chevron USA Inc., Senior Notes			4.950	%			8/15/47				1,590,000				2,065,761
Enterprise Products Operating LLC, Senior Notes			3.125	%			7/31/29				1,170,000				1,245,897
EOG Resources Inc., Senior Notes			4.375	%			4/15/30				40,000				46,616
EOG Resources Inc., Senior Notes			4.950	%			4/15/50				120,000				153,077
Exxon Mobil Corp., Senior Notes			4.327	%			3/19/50				3,500,000				4,151,741
Exxon Mobil Corp., Senior Notes			3.452	%			4/15/51				330,000				342,798

 

See Notes to Consolidated Financial Statements.

 

2				Western Asset Inflation-Linked Income Fund 2021 Semi-Annual Report

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Western Asset Inflation-Linked Income Fund

 

Security		Rate				Maturity Date				Face Amount†				Value
Oil, Gas & Consumable Fuels — continued
Gazprom PJSC Via Gaz Capital SA, Senior Notes			5.150	%			2/11/26				1,430,000			$	1,602,924	(d)
KazTransGas JSC, Senior Notes			4.375	%			9/26/27				1,600,000				1,787,064	(d)
MEG Energy Corp., Secured Notes			6.500	%			1/15/25				8,000				8,288	(d)
Occidental Petroleum Corp., Senior Notes			5.550	%			3/15/26				110,000				117,563
Occidental Petroleum Corp., Senior Notes			3.000	%			2/15/27				810,000				767,354
Occidental Petroleum Corp., Senior Notes			6.200	%			3/15/40				1,330,000				1,405,012
Petrobras Global Finance BV, Senior Notes			5.999	%			1/27/28				1,470,000				1,679,181
Range Resources Corp., Senior Notes			5.000	%			3/15/23				673,000				693,190
Williams Cos. Inc., Senior Notes			5.750	%			6/24/44				1,340,000				1,688,158
YPF SA, Senior Notes			8.500	%			7/28/25				800,000				596,000	(e)
Total Oil, Gas & Consumable Fuels															19,320,027
Total Energy															19,334,442
Financials — 1.3%
Banks — 1.1%
JPMorgan Chase & Co., Senior Notes (3.109% to 4/22/50 then SOFR + 2.440%)			3.109	%			4/22/51				430,000				424,870	(f)
Wells Fargo & Co., Senior Notes (5.013% to 4/4/50 then SOFR + 4.502%)			5.013	%			4/4/51				2,440,000				3,226,091	(f)
Total Banks															3,650,961
Diversified Financial Services — 0.2%
ILFC E-Capital Trust II, Ltd. GTD ((Highest of 3 mo. USD LIBOR, 10 year Treasury Constant Maturity Rate and 30 year Treasury Constant Maturity Rate) + 1.800%)			4.250	%			12/21/65				1,010,000				876,690	(d)(f)
Total Financials															4,527,651
Health Care — 1.2%
Pharmaceuticals — 1.2%
Bausch Health Americas Inc., Senior Notes			9.250	%			4/1/26				1,390,000				1,502,938	(d)
Bausch Health Americas Inc., Senior Notes			8.500	%			1/31/27				970,000				1,040,325	(d)
Bausch Health Cos. Inc., Senior Notes			9.000	%			12/15/25				1,280,000				1,372,352	(d)
Total Health Care															3,915,615
Industrials — 1.1%
Aerospace & Defense — 0.9%
General Dynamics Corp., Senior Notes			4.250	%			4/1/40				10,000				11,875
General Dynamics Corp., Senior Notes			4.250	%			4/1/50				2,560,000				3,129,645
Total Aerospace & Defense															3,141,520
Industrial Conglomerates — 0.2%
General Electric Co., Senior Notes			3.450	%			5/1/27				50,000				55,094

 

See Notes to Consolidated Financial Statements.

 

Western Asset Inflation-Linked Income Fund 2021 Semi-Annual Report					3

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Consolidated schedule of investments (unaudited) (cont’d)

May 31, 2021

 

Western Asset Inflation-Linked Income Fund

 

Security		Rate				Maturity Date				Face Amount†				Value
Industrial Conglomerates — continued
General Electric Co., Senior Notes			3.625	%			5/1/30				110,000			$	120,929
General Electric Co., Senior Notes			4.250	%			5/1/40				110,000				124,538
General Electric Co., Senior Notes			4.350	%			5/1/50				130,000				148,362
Total Industrial Conglomerates															448,923
Total Industrials															3,590,443
Information Technology — 0.1%
Semiconductors & Semiconductor Equipment — 0.1%
Broadcom Inc., Senior Notes			4.700	%			4/15/25				370,000				417,284
Materials — 2.6%
Metals & Mining — 2.6%
Anglo American Capital PLC, Senior Notes			4.000	%			9/11/27				800,000				890,210	(d)
Antofagasta PLC, Senior Notes			2.375	%			10/14/30				550,000				528,245	(d)
Barrick Gold Corp., Senior Notes			5.250	%			4/1/42				170,000				216,665
Barrick North America Finance LLC, Senior Notes			5.750	%			5/1/43				530,000				714,329
BHP Billiton Finance USA Ltd., Senior Notes			5.000	%			9/30/43				810,000				1,076,294
Glencore Finance Canada Ltd., Senior Notes			5.550	%			10/25/42				1,170,000				1,447,491	(d)
Glencore Funding LLC, Senior Notes			4.125	%			3/12/24				370,000				400,800	(d)
Glencore Funding LLC, Senior Notes			4.000	%			3/27/27				200,000				222,051	(d)
Glencore Funding LLC, Senior Notes			3.875	%			10/27/27				800,000				883,191	(d)
Southern Copper Corp., Senior Notes			5.250	%			11/8/42				1,370,000				1,662,495
Yamana Gold Inc., Senior Notes			4.625	%			12/15/27				670,000				741,200
Total Materials															8,782,971
Total Corporate Bonds & Notes (Cost — $37,315,827)															40,612,445
Collateralized Mortgage Obligations (g) —7.6%
Alternative Loan Trust, 2007-12T1 A3			6.000	%			6/25/37				1,307,719				937,249
BANK, 2021-BN32 XA, IO			0.785	%			4/15/54				2,629,294				159,721	(f)
Bear Stearns ARM Trust, 2004-9 24A1			3.240	%			11/25/34				15,650				15,349	(f)
BHMS, 2018-ATLS D (1 mo. USD LIBOR + 2.250%)			2.351	%			7/15/35				2,520,000				2,516,534	(d)(f)
BXMT Ltd., 2020-FL2 A (1 mo. USD LIBOR + 0.900%)			1.001	%			2/15/38				660,000				660,165	(d)(f)
Chase Mortgage Finance Trust, 2007-A1 2A3			2.791	%			2/25/37				2,808				2,819	(f)
CSMC Trust, 2014-11R 9A2 (1 mo. USD LIBOR + 0.140%)			0.246	%			10/27/36				2,188,858				1,911,503	(d)(f)
CSMC Trust, 2019-NQM1 A1, Step bond			2.656	%			10/25/59				680,237				693,747	(d)
Federal Home Loan Mortgage Corp. (FHLMC) Multifamily Structured Pass-Through Certificates, K721 X1, IO			0.297	%			8/25/22				140,431,855				423,837	(f)

 

See Notes to Consolidated Financial Statements.

 

4				Western Asset Inflation-Linked Income Fund 2021 Semi-Annual Report

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Western Asset Inflation-Linked Income Fund

 

Security		Rate				Maturity Date				Face Amount†				Value
Collateralized Mortgage Obligations (g) — continued
Federal Home Loan Mortgage Corp. (FHLMC) REMIC, 4057 UI, IO			3.000	%			5/15/27				455,301			$	22,307
Federal Home Loan Mortgage Corp. (FHLMC) REMIC, 4085 IO, IO			3.000	%			6/15/27				1,276,534				66,712
Federal Home Loan Mortgage Corp. (FHLMC) Structured Agency Credit Risk Debt Notes, 2017-DNA2 M2 (1 mo. USD LIBOR + 3.450%)			3.542	%			10/25/29				1,300,000				1,356,669	(f)
Federal Home Loan Mortgage Corp. (FHLMC) Structured Agency Credit Risk Debt Notes, 2020-DNA1 B1 (1 mo. USD LIBOR + 2.300%)			2.392	%			1/25/50				440,000				439,701	(d)(f)
Federal Home Loan Mortgage Corp. (FHLMC) Structured Agency Credit Risk Debt Notes, 2020-DNA2 M2 (1 mo. USD LIBOR + 1.850%)			1.942	%			2/25/50				650,000				655,831	(d)(f)
Federal National Mortgage Association (FNMA) — CAS, 2014-C04 1M2 (1 mo. USD LIBOR + 4.900%)			4.992	%			11/25/24				499,675				516,975	(d)(f)
Federal National Mortgage Association (FNMA) — CAS, 2017-C03 1B1 (1 mo. USD LIBOR + 4.850%)			4.942	%			10/25/29				590,000				632,113	(d)(f)
Federal National Mortgage Association (FNMA) — CAS, 2017-C03 1M2 (1 mo. USD LIBOR + 3.000%)			3.092	%			10/25/29				1,171,657				1,204,568	(d)(f)
Federal National Mortgage Association (FNMA) — CAS, 2017-C07 1B1 (1 mo. USD LIBOR + 4.000%)			4.092	%			5/25/30				440,000				457,117	(d)(f)
Government National Mortgage Association (GNMA), 2011-142 IO, IO			0.000	%			9/16/46				1,894,047				1,690	(f)
Government National Mortgage Association (GNMA), 2012-44 IO, IO			0.087	%			3/16/49				657,897				1,836	(f)
Government National Mortgage Association (GNMA), 2012-112 IO, IO			0.184	%			2/16/53				1,164,158				8,534	(f)
Government National Mortgage Association (GNMA), 2012-152 IO, IO			0.565	%			1/16/54				2,581,868				54,633	(f)
Government National Mortgage Association (GNMA), 2013-145 XI, IO			0.001	%			9/16/44				203,770				761
Government National Mortgage Association (GNMA), 2014-47 IA, IO			0.131	%			2/16/48				251,818				3,391	(f)
Government National Mortgage Association (GNMA), 2014-50 IO, IO			0.677	%			9/16/55				972,460				35,737	(f)
Government National Mortgage Association (GNMA), 2014-169 IO, IO			0.690	%			10/16/56				9,085,192				296,803	(f)

 

See Notes to Consolidated Financial Statements.

 

Western Asset Inflation-Linked Income Fund 2021 Semi-Annual Report					5

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Consolidated schedule of investments (unaudited) (cont’d)

May 31, 2021

 

Western Asset Inflation-Linked Income Fund

 

Security		Rate				Maturity Date				Face Amount†				Value
Collateralized Mortgage Obligations (g) — continued
Government National Mortgage Association (GNMA), 2015-101 IO, IO			0.452	%			3/16/52				7,796,925			$	189,647	(f)
Government National Mortgage Association (GNMA), 2015-183 IO, IO			0.717	%			9/16/57				10,915,738				450,878	(f)
GSR Mortgage Loan Trust, 2004-11 1A1			3.404	%			9/25/34				45,160				46,783	(f)
JPMorgan Chase Commercial Mortgage Securities Trust, 2020-NNN FFL (1 mo. USD LIBOR + 2.500%)			2.601	%			1/16/37				1,963,500				1,958,856	(d)(f)
JPMorgan Chase Commercial Mortgage Securities Trust, 2020-NNN GFL (1 mo. USD LIBOR + 3.000%)			3.101	%			1/16/37				1,963,500				1,873,775	(d)(f)
JPMorgan Chase Commercial Mortgage Securities Trust, 2020-NNN GFX			4.688	%			1/16/37				2,270,000				2,198,645	(d)(f)
Merrill Lynch Mortgage Investors Trust, 2004-A1 2A1			2.310	%			2/25/34				4,224				4,346	(f)
MRCD Mortgage Trust, 2019-PARK A			2.718	%			12/15/36				850,000				890,637	(d)
Natixis Commercial Mortgage Securities Trust, 2019-TRUE A (1 mo. USD LIBOR + 2.011%, 3.511% floor)			3.511	%			4/18/24				2,050,000				2,028,594	(d)(f)
New Residential Mortgage Loan Trust, 2014-1A A			3.750	%			1/25/54				477,210				507,650	(d)(f)
Nomura Resecuritization Trust, 2015-4R 2A2 (1 mo. USD LIBOR + 0.306%)			0.246	%			10/26/36				2,803,514				2,533,822	(d)(f)
RAMP Trust, 2004-SL4 A5			7.500	%			7/25/32				39,711				24,769
Washington Mutual MSC Mortgage Pass- Through Certificates Trust, 2004-RA1 2A			7.000	%			3/25/34				5,441				5,808
Total Collateralized Mortgage Obligations (Cost — $27,752,204)															25,790,512
Non-U.S. Treasury Inflation Protected Securities — 4.9%
Brazil — 1.8%
Brazil Notas do Tesouro Nacional Serie B, Notes			6.000	%			8/15/50				25,128,497	BRL			6,090,998
Canada — 1.0%
Canada Government Real Return Bond			1.500	%			12/1/44				1,799,339	CAD			1,912,433
Canada Government Real Return Bond			0.500	%			12/1/50				1,568,215	CAD			1,401,054
Total Canada															3,313,487
Mexico — 1.1%
Mexican Udibonos			2.000	%			6/9/22				71,174,313	MXN			3,589,650
Russia — 1.0%
Russian Federal Inflation Linked Bond — OFZ			2.500	%			2/2/28				253,468,168	RUB			3,434,040
Total Non-U.S. Treasury Inflation Protected Securities (Cost — $17,766,869)											16,428,175

 

See Notes to Consolidated Financial Statements.

 

6				Western Asset Inflation-Linked Income Fund 2021 Semi-Annual Report

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Western Asset Inflation-Linked Income Fund

 

Security		Rate				Maturity Date				Face Amount†				Value
Sovereign Bonds — 4.2%
Brazil — 0.2%
Brazil Notas do Tesouro Nacional Serie F, Notes			10.000	%			1/1/23				2,920,000	BRL		$	585,919
Brazil Notas do Tesouro Nacional Serie F, Notes			10.000	%			1/1/27				965,000	BRL			196,579
Total Brazil															782,498
Chile — 1.0%
Bonos de la Tesoreria de la Republica en pesos, Bonds			5.000	%			3/1/35				2,330,000,000	CLP			3,368,590
Indonesia — 1.3%
Indonesia Government International Bond, Senior Notes			4.750	%			7/18/47				400,000				465,409	(d)
Indonesia Government International Bond, Senior Notes			4.350	%			1/11/48				290,000				321,350
Indonesia Treasury Bond			7.000	%			5/15/27				49,188,000,000	IDR			3,644,771
Total Indonesia															4,431,530
Mexico — 0.9%
Mexican Bonos, Bonds			8.000	%			11/7/47				21,750,000	MXN			1,140,832
Mexico Government International Bond, Senior Notes			4.500	%			4/22/29				1,480,000				1,675,131
Total Mexico															2,815,963
Nigeria — 0.1%
Nigeria Government International Bond, Senior Notes			6.500	%			11/28/27				200,000				213,738	(d)
Russia — 0.4%
Russian Federal Bond — OFZ			7.050	%			1/19/28				97,680,000	RUB			1,356,074
United Arab Emirates — 0.3%
Abu Dhabi Government International Bond, Senior Notes			3.875	%			4/16/50				960,000				1,080,691	(d)
Total Sovereign Bonds (Cost — $14,497,801)															14,049,084
Asset-Backed Securities — 1.6%
Ameriquest Mortgage Securities Inc., Asset- Backed Pass-Through Certificates, 2005-R7 M2 (1 mo. USD LIBOR + 0.750%)			0.842	%			9/25/35				418,528				418,852	(f)
Countrywide Home Equity Loan Trust, 2005-C 2A (1 mo. USD LIBOR + 0.180%)			0.281	%			7/15/35				334,926				327,503	(f)
Countrywide Home Equity Loan Trust, 2006-I 2A (1 mo. USD LIBOR + 0.140%)			0.241	%			1/15/37				553,866				535,822	(f)
First Franklin Mortgage Loan Trust, 2006- FF15 A5 (1 mo. USD LIBOR + 0.160%)			0.252	%			11/25/36				837,495				827,695	(f)

 

See Notes to Consolidated Financial Statements.

 

Western Asset Inflation-Linked Income Fund 2021 Semi-Annual Report					7

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Consolidated schedule of investments (unaudited) (cont’d)

May 31, 2021

 

Western Asset Inflation-Linked Income Fund

 

Security		Rate				Maturity Date				Face Amount†				Value
Asset-Backed Securities — continued
Legacy Mortgage Asset Trust, 2019-GS1 A1, Step bond			4.000	%			1/25/59				762,110			$	764,704	(d)
Morgan Stanley ABS Capital I Inc. Trust, 2004-HE7 M1 (1 mo. USD LIBOR + 0.900%)			0.992	%			8/25/34				694,605				690,416	(f)
Saxon Asset Securities Trust, 2006-3 A4 (1 mo. USD LIBOR + 0.240%)			0.332	%			10/25/46				1,110,000				994,214	(f)
Towd Point Mortgage Trust, 2015-2 1B3			3.450	%			11/25/60				950,000				980,380	(d)(f)
Total Asset-Backed Securities (Cost — $5,477,794)															5,539,586
Mortgage-Backed Securities — 0.3%
FNMA — 0.3%
Federal National Mortgage Association (FNMA)			2.680	%			1/1/35- 2/1/35				300,000				321,004
Federal National Mortgage Association (FNMA)			2.790	%			1/1/35				467,097				506,515	(f)
Total Mortgage-Backed Securities (Cost — $771,057)															827,519
Total Investments before Short-Term Investments (Cost — $455,414,563)															487,560,487
										Shares
Short-Term Investments — 2.0%
Dreyfus Government Cash Management, Institutional Shares (Cost — $6,743,689)			0.030	%							6,743,689				6,743,689
Total Investments — 146.5% (Cost — $462,158,252)															494,304,176
Liabilities in Excess of Other Assets — (46.5)%															(156,810,142	)
Total Net Assets — 100.0%														$	337,494,034

 

See Notes to Consolidated Financial Statements.

 

8				Western Asset Inflation-Linked Income Fund 2021 Semi-Annual Report

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Western Asset Inflation-Linked Income Fund

 

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

 

††	Represents less than 0.1%.

 

(a)	All or a portion of this security is held by the counterparty as collateral for open reverse repurchase agreements.

 

(b)	All or a portion of this security is held at the broker as collateral for open swap contracts.

 

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

 

(d)

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.

 

(e)

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.

 

(f)

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.

 

(g)

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.

 

Abbreviation(s) used in this schedule:
ARM		— Adjustable Rate Mortgage
BRL		— Brazilian Real
CAD		— Canadian Dollar
CAS		— Connecticut Avenue Securities
CLP		— Chilean Peso
GTD		— Guaranteed
IDR		— Indonesian Rupiah
IO		— Interest Only
JSC		— Joint Stock Company
LIBOR		— London Interbank Offered Rate
MXN		— Mexican Peso
OFZ		— Obligatsyi Federal’novo Zaima (Russian Federal Loan Obligation)
PJSC		— Private Joint Stock Company
REMIC		— Real Estate Mortgage Investment Conduit
RUB		— Russian Ruble
SOFR		— Secured Overnight Financing Rate
USD		— United States Dollar

 

See Notes to Consolidated Financial Statements.

 

Western Asset Inflation-Linked Income Fund 2021 Semi-Annual Report					9

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Consolidated schedule of investments (unaudited) (cont’d)

May 31, 2021

 

Western Asset Inflation-Linked Income Fund

 

At May 31, 2021, the Fund had the following open reverse repurchase agreements:

 

Counterparty

Rate

Effective Date

Maturity Date

Face Amount of Reverse Repurchase Agreements

Asset Class of Collateral*

Collateral Value**

Morgan Stanley & Co. Inc.

0.200

%

12/11/2020

6/11/2021

$

160,737,500

U.S. Treasury Inflation Protected Securities

$

164,887,897

 

*	Refer to the Consolidated Schedule of Investments for positions held at the counterparty as collateral for reverse repurchase agreements.

 

**	Including accrued interest.

At May 31, 2021, the Fund had the following open futures contracts:

 

 

		Number of Contracts				Expiration Date				Notional Amount				Market Value				Unrealized Appreciation (Depreciation)
Contracts to Buy:
90-Day Eurodollar			322				12/23			$	79,673,951			$	79,727,200			$	53,249
Brent Crude			124				12/21				7,582,665				8,295,600				712,935
Copper			98				7/21				10,309,845				11,459,875				1,150,030
Euro			53				6/21				7,907,401				8,085,481				178,080
Gold 100 Ounce			66				8/21				12,332,925				12,574,980				242,055
Japanese Yen			35				6/21				4,034,321				3,985,406				(48,915)
Mexican Peso			97				6/21				2,271,324				2,431,305				159,981
U.S. Treasury 10-Year Notes			629				9/21				83,038,920				82,988,688				(50,232)
U.S. Treasury Ultra Long- Term Bonds			12				9/21				2,212,427				2,223,000				10,573
WTI Crude			101				12/21				6,099,789				6,454,910				355,121
																			2,762,877
Contracts to Sell:
British Pound			33				6/21				2,875,352				2,927,925				(52,573)
U.S. Treasury 5-Year Notes			112				9/21				13,873,806				13,871,375				2,431
U.S. Treasury Long-Term Bonds			179				9/21				27,826,592				28,019,094				(192,502)
WTI Crude			93				7/21				5,977,133				6,167,760				(190,627)
																			(433,271)
Net unrealized appreciation on open futures contracts																		$	2,329,606

At May 31, 2021, the Fund had the following open forward foreign currency contracts:

 

Currency Purchased

Currency Sold

Counterparty

Settlement Date

Unrealized Appreciation (Depreciation)

USD

47,704

EUR

40,000

BNP Paribas SA

7/19/21

$

(1,123)

USD

2,289,812

EUR

1,920,000

BNP Paribas SA

7/19/21

(53,890)

USD

2,542,318

EUR

2,128,609

BNP Paribas SA

7/19/21

(56,028)

 

See Notes to Consolidated Financial Statements.

 

10				Western Asset Inflation-Linked Income Fund 2021 Semi-Annual Report

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Western Asset Inflation-Linked Income Fund

 

Currency Purchased						Currency Sold						Counterparty		Settlement Date				Unrealized Appreciation (Depreciation)
AUD			145,262			USD			111,189			Citibank N.A.			7/19/21			$	820
BRL			6,560,000			USD			1,171,178			Citibank N.A.			7/19/21				81,359
INR			236,697,367			USD			3,182,486			Citibank N.A.			7/19/21				58,202
RUB			367,490,000			USD			4,700,623			Citibank N.A.			7/19/21				282,451
USD			3,233,463			CAD			4,047,196			Citibank N.A.			7/19/21				(116,491)
USD			2,414,624			EUR			2,030,000			Citibank N.A.			7/19/21				(63,352)
USD			1,320,949			MXN			26,950,000			Citibank N.A.			7/19/21				(24,311)
USD			1,932,255			MXN			39,271,722			Citibank N.A.			7/19/21				(28,067)
USD			2,520,337			MXN			51,400,000			Citibank N.A.			7/19/21				(45,390)
GBP			1,928,058			USD			2,649,334			Goldman Sachs Group Inc.			7/19/21				87,011
RUB			123,590,000			USD			1,577,610			Goldman Sachs Group Inc.			7/19/21				98,240
RUB			185,605,641			USD			2,367,753			Goldman Sachs Group Inc.			7/19/21				149,014
IDR			5,269,305,390			USD			358,920			JPMorgan Chase & Co.			7/19/21				8,365
BRL			3,596,828			USD			630,755			Morgan Stanley & Co. Inc.			7/19/21				56,007
BRL			4,800,000			USD			841,749			Morgan Stanley & Co. Inc.			7/19/21				74,742
BRL			9,600,000			USD			1,683,498			Morgan Stanley & Co. Inc.			7/19/21				149,483
COP			21,134,053,192			USD			5,783,180			Morgan Stanley & Co. Inc.			7/19/21				(100,335)
MYR			11,377,459			USD			2,749,507			Morgan Stanley & Co. Inc.			7/19/21				(2,917)
USD			4,212,259			CLP			3,021,201,024			Morgan Stanley & Co. Inc.			7/19/21				44,048
USD			909,690			JPY			99,967,625			Morgan Stanley & Co. Inc.			7/19/21				(835)
Total																		$	597,003

 

Abbreviation(s) used in this table:
AUD		—		Australian Dollar
BRL		—		Brazilian Real
CAD		—		Canadian Dollar
CLP		—		Chilean Peso
COP		—		Colombian Peso
EUR		—		Euro
GBP		—		British Pound
IDR		—		Indonesian Rupiah
INR		—		Indian Rupee
JPY		—		Japanese Yen
MXN		—		Mexican Peso
MYR		—		Malaysian Ringgit
RUB		—		Russian Ruble
USD		—		United States Dollar

 

See Notes to Consolidated Financial Statements.

 

Western Asset Inflation-Linked Income Fund 2021 Semi-Annual Report					11

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Consolidated schedule of investments (unaudited) (cont’d)

May 31, 2021

 

Western Asset Inflation-Linked Income Fund

 

At May 31, 2021, the Fund had the following open swap contracts:

 

CENTRALLY CLEARED INTEREST RATE SWAPS
		Notional Amount				Termination Date				Payments Made by the Fund†				Payments Received by the Fund†				Upfront Premiums Paid (Received)				Unrealized Appreciation (Depreciation)
		$	21,580,000				3/22/23				2.570%*				CPURNSA*				—			$	313,172
			7,110,000				4/7/25				0.802%*				CPURNSA*			$	45,882				611,741
			21,580,000				3/22/26				CPURNSA*				2.504%*				—				(325,301)
Total		$	50,270,000															$	45,882			$	599,612

 

CENTRALLY CLEARED CREDIT DEFAULT SWAPS ON CREDIT INDICES — SELL PROTECTION1
Reference Entity		Notional Amount2				Termination Date				Periodic Payments Received by the Fund†		Market Value3				Upfront Premiums Paid (Received)				Unrealized Appreciation
Markit CDX.NA.HY.36 Index		$	9,464,000				6/20/26			5.000% quarterly		$	919,305			$	822,190			$	97,115
Markit CDX.NA.IG.36 Index			73,036,000				6/20/26			1.000% quarterly			1,785,000				1,576,913				208,087
Total		$	82,500,000									$	2,704,305			$	2,399,103			$	305,202

 

1

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.

2	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.

3

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.

*	One time payment made at termination date.

 

Abbreviation(s) used in this table:
CPURNSA		— U.S. CPI Urban Consumers NSA Index

 

See Notes to Consolidated Financial Statements.

 

12				Western Asset Inflation-Linked Income Fund 2021 Semi-Annual Report

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Consolidated statement of assets and liabilities (unaudited)

May 31, 2021

 

Assets:
Investments, at value (Cost — $462,158,252)		$	494,304,176
Foreign currency, at value (Cost — $602,417)			622,918
Cash			162,520
Receivable for securities sold			2,474,854
Deposits with brokers for open futures contracts			2,016,593
Interest receivable			1,915,571
Deposits with brokers for centrally cleared swap contracts			1,444,868
Unrealized appreciation on forward foreign currency contracts			1,089,742
Foreign currency collateral for open futures contracts, at value (Cost — $129,614)			147,829
Receivable from broker — net variation margin on open futures contracts			67,467
Receivable from broker — net variation margin on centrally cleared swap contracts			34,251
Prepaid expenses			7,985
Total Assets			504,288,774
Liabilities:
Payable for open reverse repurchase agreements (Note 3)			160,737,500
Payable for securities purchased			2,474,293
Deposits from brokers for open reverse repurchase agreements			2,215,000
Unrealized depreciation on forward foreign currency contracts			492,739
Deposits from brokers for OTC derivatives			400,000
Interest expense payable			153,594
Investment management fee payable			147,000
Administration fee payable			21,000
Trustees’ fees payable			3,535
Accrued expenses			150,079
Total Liabilities			166,794,740
Total Net Assets		$	337,494,034
Net Assets:
Common shares, no par value, unlimited number of shares authorized, 23,322,256 shares issued and outstanding		$	299,282,514
Total distributable earnings (loss)			38,211,520
Total Net Assets		$	337,494,034
Shares Outstanding			23,322,256
Net Asset Value			$14.47

 

See Notes to Consolidated Financial Statements.

 

Western Asset Inflation-Linked Income Fund 2021 Semi-Annual Report					13

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Consolidated statement of operations (unaudited)

For the Six Months Ended May 31, 2021

 

Investment Income:
Interest				$	9,056,504
Less: Foreign taxes withheld					(27,510	)
Total Investment Income					9,028,994
Expenses:
Investment management fee (Note 2)					885,003
Interest expense (Note 3)					168,319
Administration fees (Note 2)					126,429
Legal fees					99,310
Fund accounting fees					39,752
Transfer agent fees					38,832
Audit and tax fees					24,819
Custody fees					13,467
Commodity pool reports					13,459
Trustees’ fees					11,576
Shareholder reports					7,556
Stock exchange listing fees					7,153
Insurance					2,713
Miscellaneous expenses					4,560
Total Expenses					1,442,948
Net Investment Income					7,586,046
Realized and Unrealized Gain (Loss) on Investments, Futures Contracts, Written Options, Swap Contracts, Forward Foreign Currency Contracts and Foreign Currency Transactions (Notes 1, 3 and 4):
Net Realized Gain From:
Investment transactions					17,969,623
Futures contracts					6,734,771
Written options					1,796,992
Swap contracts					2,713,687
Forward foreign currency contracts					171,787
Foreign currency transactions					134,521
Net Realized Gain					29,521,381
Change in Net Unrealized Appreciation (Depreciation) From:
Investments					(16,760,372	)
Futures contracts					1,238,860
Written options					463,103
Swap contracts					(1,797,039	)
Forward foreign currency contracts					159,114
Foreign currencies					(49,766	)
Change in Net Unrealized Appreciation (Depreciation)					(16,746,100	)
Net Gain on Investments, Futures Contracts, Written Options, Swap Contracts, Forward Foreign Currency Contracts and Foreign Currency Transactions					12,775,281
Increase in Net Assets From Operations				$	20,361,327

 

See Notes to Consolidated Financial Statements.

 

14				Western Asset Inflation-Linked Income Fund 2021 Semi-Annual Report

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Consolidated statements of changes in net assets

 

For the Six Months Ended May 31, 2021 (unaudited) and the Year Ended November 30, 2020		2021				2020
Operations:
Net investment income		$	7,586,046			$	8,586,526
Net realized gain (loss)			29,521,381				(7,601,892)
Change in net unrealized appreciation (depreciation)			(16,746,100)				39,818,800
Increase in Net Assets From Operations			20,361,327				40,803,434
Distributions to Shareholders From (Note 1):
Total distributable earnings			(16,101,102)				(11,194,683)
Decrease in Net Assets From Distributions to Shareholders			(16,101,102)				(11,194,683)
Fund Share Transactions:
Cost of shares repurchased through tender offer (5,830,564 and 0 shares repurchased, respectively) (Note 5)			(81,569,590)				—
Decrease in Net Assets From Fund Share Transactions			(81,569,590)				—
Increase (Decrease) in Net Assets			(77,309,365)				29,608,751
Net Assets:
Beginning of period			414,803,399				385,194,648
End of period		$	337,494,034			$	414,803,399

 

See Notes to Consolidated Financial Statements.

 

Western Asset Inflation-Linked Income Fund 2021 Semi-Annual Report					15

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Consolidated statement of cash flows (unaudited)

For the Six Months Ended May 31, 2021

 

Increase (Decrease) in Cash:
Cash Flows from Operating Activities:
Net increase in net assets resulting from operations		$	20,361,327
Adjustments to reconcile net increase in net assets resulting from operations to net cash provided (used) by operating activities:
Purchases of portfolio securities			(87,523,563)
Sales of portfolio securities			212,069,434
Net purchases, sales and maturities of short-term investments			(9,451,847)
Net inflation adjustment			(6,156,298)
Net amortization of premium (accretion of discount)			2,394,318
Increase in receivable for securities sold			(2,474,854)
Decrease in interest receivable			520,964
Decrease in receivable from broker — net variation margin on centrally cleared swap contracts			93,352
Increase in prepaid expenses			(2,635)
Increase in receivable from broker — net variation margin on open futures contracts			(67,467)
Decrease in deposits from brokers for reverse repurchase agreements			(4,238,000)
Increase in deposits from brokers for OTC derivatives			220,000
Increase in payable for securities purchased			2,196,414
Decrease in investment management fee payable			(24,680)
Decrease in Trustees’ fees payable			(168)
Decrease in administration fee payable			(3,526)
Decrease in interest expense payable			(57,123)
Decrease in accrued expenses			(80,773)
Decrease in premiums received from written options			(1,126,085)
Decrease in payable to broker — net variation margin on futures contracts			(95,877)
Net realized gain on investments			(17,969,623)
Change in net unrealized appreciation (depreciation) of investments, written options and forward foreign currency contracts			16,138,155
Net Cash Provided in Operating Activities*			124,721,445
Cash Flows from Financing Activities:
Distributions paid on common stock			(16,101,102)
Decrease in payable for reverse repurchase agreements			(33,212,500)
Payment for shares repurchased through tender offer			(81,569,590)
Net Cash Used by Financing Activities			(130,883,192)
Net Decrease in Cash and Restricted Cash			(6,161,747)
Cash and restricted cash at beginning of period			10,556,475
Cash and restricted cash at end of period		$	4,394,728

 

*	Included in operating expenses is cash of $225,442 paid for interest on borrowings.

 

See Notes to Consolidated Financial Statements.

 

16				Western Asset Inflation-Linked Income Fund 2021 Semi-Annual Report

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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.

 

		May 31, 2021
Cash		$	785,438
Restricted cash			3,609,290
Total cash and restricted cash shown in the Consolidated Statement of Cash Flows		$	4,394,728

 

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 2021 Semi-Annual Report					17

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Consolidated financial highlights

 

For a share of common stock outstanding throughout each year ended November 30, unless otherwise noted:
		20211,2				20201				20191				20181				20171				20161,3				20151,4
Net asset value, beginning of period			$14.23				$13.21				$12.35				$13.09				$12.66				$12.47				$13.21
Income (loss) from operations:
Net investment income			0.31				0.29				0.32				0.33				0.34				0.27				0.07
Net realized and unrealized gain (loss)			0.48				1.11				0.95				(0.66)				0.48				0.27				(0.46)
Total income (loss) from operations			0.79				1.40				1.27				(0.33)				0.82				0.54				(0.39)
Less distributions from:
Net investment income			(0.58)	5			(0.38)				(0.41)				(0.41)				(0.40)				(0.23)				(0.09)
Net realized gains			—				—				—				—				—				—				(0.00)	6
Return of capital			—				—				—				—				—				(0.12)				(0.26)
Total distributions			(0.58)				(0.38)				(0.41)				(0.41)				(0.40)				(0.35)				(0.35)
Anti-dilutive impact of tender offer			0.03	7			—				—				—				—				—				—
Payment by servicing agent			—				—				—				—				0.01				—				—
Net asset value, end of period			$14.47				$14.23				$13.21				$12.35				$13.09				$12.66				$12.47
Market price, end of period			$13.99				$13.17				$11.96				$10.69				$11.62				$11.23				$10.57
Total return, based on NAV8,9			5.93	%			10.88	%			10.43	%			(2.49)	%			6.77	%10			4.28	%			(3.00)	%
Total return, based on Market Price11			10.94	%			13.70	%			16.03	%			(4.61)	%			7.15	%			9.61	%			(5.95)	%
Net assets, end of period (millions)			$337				$415				$385				$360				$382				$369				$363
Ratios to average net assets:
Gross expenses			0.84	%12			1.31	%			1.93	%			1.83	%			1.44	%			1.33	%12			1.10	%
Net expenses			0.84	12			1.31				1.93				1.62	13			1.44				1.33	12			1.10
Net investment income			4.43	12			2.20				2.46				2.60				2.63				2.33	12			0.50
Portfolio turnover rate			18	%			47	%			38	%			45	%			59	%			88	%			59	%

 

See Notes to Consolidated Financial Statements.

 

18				Western Asset Inflation-Linked Income Fund 2021 Semi-Annual Report

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1	Per share amounts have been calculated using the average shares method.

 

2	For the six months ended May 31, 2021 (unaudited).

 

3	For the period January 1, 2016 through November 30, 2016.

 

4	For the year ended December 31.

 

5	The actual source of the Fund’s current fiscal year distributions may be from net investment income, realized capital gains, return of capital or a combination thereof. Shareholders will be informed of the tax characteristics of the distributions after the close of the fiscal year.

 

6	Amount represents less than $0.005 per share.

 

7	The tender offer was completed at a price of $13.99 for 5,830,564 shares and $81,569,590 for the six months ended May 31, 2021.

 

8

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. Total returns for periods of less than one year are not annualized.

 

9	The total return calculation assumes that distributions are reinvested at NAV. Past performance is no guarantee of future results. Total returns for periods of less than one year are not annualized.

 

10	The total return includes payment by the servicing agent. Without this payment, the total return would have been 6.69% for the year ended November 30, 2017.

 

11	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. Total returns for periods of less than one year are not annualized.

 

12	Annualized.

 

13	Reflects fee waivers.

 

See Notes to Consolidated Financial Statements.

 

Western Asset Inflation-Linked Income Fund 2021 Semi-Annual Report					19

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Notes to consolidated financial statements (unaudited)

 

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

 

20				Western Asset Inflation-Linked Income Fund 2021 Semi-Annual Report

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services are unable to supply prices for a portfolio investment, or if the prices supplied are deemed by the manager to be unreliable, the market price may be determined by the manager 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.

The Board of Trustees is responsible for the valuation process and has delegated the supervision of the daily valuation process to the Global Fund Valuation Committee (formerly known as Legg Mason North Atlantic Fund Valuation Committee prior to March 1, 2021) (the “Valuation Committee”). The Valuation Committee, pursuant to the policies adopted by the Board of Trustees, is responsible for making fair value determinations, evaluating the effectiveness of the Fund’s pricing policies, and reporting to 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 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.

 

Western Asset Inflation-Linked Income Fund 2021 Semi-Annual Report				21

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Notes to consolidated financial statements (unaudited) (cont’d)

 

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 — 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:

 

ASSETS
Description		Quoted Prices (Level 1)				Other Significant Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				Total
Long-Term Investments†:
U.S. Treasury Inflation Protected Securities			—			$	384,313,166				—			$	384,313,166
Corporate Bonds & Notes			—				40,612,445				—				40,612,445
Collateralized Mortgage Obligations			—				25,790,512				—				25,790,512
Non-U.S. Treasury Inflation Protected Securities			—				16,428,175				—				16,428,175
Sovereign Bonds			—				14,049,084				—				14,049,084
Asset-Backed Securities			—				5,539,586				—				5,539,586
Mortgage-Backed Securities			—				827,519				—				827,519
Total Long-Term Investments			—				487,560,487				—				487,560,487
Short-Term Investments†		$	6,743,689				—				—				6,743,689
Total Investments		$	6,743,689			$	487,560,487				—			$	494,304,176
Other Financial Instruments:
Futures Contracts††		$	2,864,455				—				—			$	2,864,455
Forward Foreign Currency Contracts††			—			$	1,089,742				—				1,089,742
Centrally Cleared Interest Rate Swaps††			—				924,913				—				924,913
Centrally Cleared Credit Default Swaps on Credit Indices — Sell Protection††			—				305,202				—				305,202
Total Other Financial Instruments		$	2,864,455			$	2,319,857				—			$	5,184,312
Total		$	9,608,144			$	489,880,344				—			$	499,488,488

 

22				Western Asset Inflation-Linked Income Fund 2021 Semi-Annual Report

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LIABILITIES
										Significant
						Other Significant				Unobservable
		Quoted Prices				Observable Inputs				Inputs
Description		(Level 1)				(Level 2)				(Level 3)				Total
Other Financial Instruments:
Futures Contracts††		$	534,849				—				—			$	534,849
Forward Foreign Currency Contracts††			—			$	492,739				—				492,739
Centrally Cleared Interest Rate Swaps††			—				325,301				—				325,301
Total		$	534,849			$	818,040				—			$	1,352,889

 

†	See Consolidated Schedule of Investments for additional detailed categorizations.

††	Reflects the unrealized appreciation (depreciation) of the instruments.

(b) Written options. When the Fund writes an option, an amount equal to the premium received by the Fund is recorded as a liability, the value of which is marked-to-market daily to reflect the current market value of the option written. If the option expires, the premium received is recorded as a realized gain. When a written call option is exercised, the difference between the premium received plus the option exercise price and the Fund’s basis in the underlying security (in the case of a covered written call option), or the cost to purchase the underlying security (in the case of an uncovered written call option), including brokerage commission, is recognized as a realized gain or loss. When a written put option is exercised, the amount of the premium received is subtracted from the cost of the security purchased by the Fund from the exercise of the written put option to form the Fund’s basis in the underlying security purchased. The writer or buyer of an option traded on an exchange can liquidate the position before the exercise of the option by entering into a closing transaction. The cost of a closing transaction is deducted from the original premium received resulting in a realized gain or loss to the Fund.

The risk in writing a covered call option is that the Fund may forego the opportunity of profit if the market price of the underlying security increases and the option is exercised. The risk in writing a put option is that the Fund may incur a loss if the market price of the underlying security decreases and the option is exercised. The risk in writing an uncovered call option is that the Fund is exposed to the risk of loss if the market price of the underlying security increases. 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.

(c) 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,

 

Western Asset Inflation-Linked Income Fund 2021 Semi-Annual Report				23

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Notes to consolidated financial statements (unaudited) (cont’d)

 

but is recorded as a net variation margin payable or receivable. The daily changes in contract value are recorded as unrealized gains or losses 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.

(d) 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.

(e) 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. 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

 

24				Western Asset Inflation-Linked Income Fund 2021 Semi-Annual Report

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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.

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 May 31, 2021, the total notional value of all credit default swaps to sell protection was $82,500,000. 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 six months ended May 31, 2021, see Note 4.

Credit default swaps

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 credit default swap 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

 

Western Asset Inflation-Linked Income Fund 2021 Semi-Annual Report				25

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Notes to consolidated financial statements (unaudited) (cont’d)

 

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 credit default swap agreements on corporate or sovereign issues are disclosed in the 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 credit default swap 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. Credit default swaps 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.

Interest rate swaps

The Fund enters into interest rate swap contracts to manage its exposure to interest rate risk. Interest rate swaps are agreements between two parties to exchange cash flows based on a notional principal amount. The Fund may elect to pay a fixed rate and receive a floating rate, receive a fixed rate and pay a floating rate, or pay and receive a floating rate, on a notional principal amount. Interest rate swaps are marked-to-market daily based upon quotations from market makers and the change, if any, is recorded as an unrealized gain or loss in the Consolidated Statement of Operations. When a swap contract is terminated early, the Fund records a realized gain or loss equal to the difference between the original cost and the settlement amount of the closing transaction.

The risks of interest rate swaps include changes in market conditions that will affect the value of the contract or changes in the present value of the future cash flow streams and the possible inability of the counterparty to fulfill its obligations under the agreement. The Fund’s maximum risk of loss from counterparty credit risk is the discounted net value of the cash flows to be received from the counterparty over the contract’s remaining life, to the extent that amount is positive. This risk is mitigated by the posting of collateral by the counterparty to the Fund to cover the Fund’s exposure to the counterparty.

(f) 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

 

26				Western Asset Inflation-Linked Income Fund 2021 Semi-Annual Report

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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.

(g) 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.

(h) 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.

(i) 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 Statement of Changes in Net Assets and additional information on cash receipts and cash payments is presented in the Consolidated Statement of Cash Flows.

 

Western Asset Inflation-Linked Income Fund 2021 Semi-Annual Report					27

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Notes to consolidated financial statements (unaudited) (cont’d)

 

(j) 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.

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.

(k) 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.

 

28				Western Asset Inflation-Linked Income Fund 2021 Semi-Annual Report

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(l) 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 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.

(m) 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 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.

 

Western Asset Inflation-Linked Income Fund 2021 Semi-Annual Report				29

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Notes to consolidated financial statements (unaudited) (cont’d)

 

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 May 31, 2021, the Fund held forward foreign currency contracts with credit related contingent features which had a liability position of $492,739. If a contingent feature in the master agreements would have been triggered, the Fund would have been required to pay this amount to its derivatives counterparties.

At May 31, 2021, the Fund held cash collateral from Citibank N.A. in the amount of $400,000 and the Fund held non-cash collateral from Goldman Sachs Group Inc. and Morgan Stanley & Co. Inc. in the amounts of $217,757 and $158,715, respectively. These amounts could be used to reduce the Fund’s exposure to the counterparty in the event of default.

(n) 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), adjusted for amortization of premium and accretion of discount, is recorded on the accrual basis. 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.

(o) 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. The actual source of the Fund’s monthly distributions may be from net investment income, realized capital gains, return of capital or a combination thereof. 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 2021 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

 

30				Western Asset Inflation-Linked Income Fund 2021 Semi-Annual Report

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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.

(p) 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.

(q) 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 requirements imposed by the Code. Therefore, no federal or state income tax provision is required in the Fund’s financial statements.

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, 2020, 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.

(r) 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.

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 “covered” as described in the prospectus) 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) are also the Fund’s investment advisers. Western Asset Singapore, Western Asset London and Western Asset Japan provide certain advisory

 

Western Asset Inflation-Linked Income Fund 2021 Semi-Annual Report					31

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Notes to consolidated financial statements (unaudited) (cont’d)

 

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.

Legg Mason Partners Fund Advisor, LLC (“LMPFA” 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.

Western Asset, Western Asset Singapore, Western Asset London, Western Asset Japan and LMFPA are indirect, wholly-owned subsidiaries of Franklin Resources, Inc.

3. Investments

During the six months ended May 31, 2021, the aggregate cost of purchases and proceeds from sales of investments (excluding short-term investments) and U.S. Government & Agency Obligations were as follows:

 

		Investments				U.S. Government & Agency Obligations
Purchases		$	7,117,964			$	80,405,599
Sales			39,692,953				172,376,481

At May 31, 2021, the aggregate cost of investments and the aggregate gross unrealized appreciation and depreciation of investments for federal income tax purposes were substantially as follows:

 

		Cost/Premiums Paid (Received)				Gross Unrealized Appreciation				Gross Unrealized Depreciation				Net Unrealized Appreciation
Securities		$	462,158,252			$	38,504,383			$	(6,358,459)			$	32,145,924
Futures contracts			—				2,864,455				(534,849)				2,329,606
Forward foreign currency contracts			—				1,089,742				(492,739)				597,003
Swap contracts			2,444,985				1,230,115				(325,301)				904,814

Transactions in reverse repurchase agreements for the Fund during the six months ended May 31, 2021 were as follows:

 

Average Daily		Weighted Average		Maximum Amount
Balance*		Interest Rate*		Outstanding
$162,562,363		0.205%		$193,950,000

 

*	Averages based on the number of days that the Fund had reverse repurchase agreements outstanding.

Interest rates on reverse repurchase agreements ranged from 0.200% to 0.240% during the six months ended May 31, 2021. Interest expense incurred on reverse repurchase agreements totaled $166,524.

 

32				Western Asset Inflation-Linked Income Fund 2021 Semi-Annual Report

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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 May 31, 2021.

 

ASSET DERIVATIVES1
		Interest Rate Risk				Foreign Exchange Risk				Credit Risk				Commodity Risk				Total
Futures contracts2		$	66,253			$	338,061				—			$	2,460,141			$	2,864,455
Forward foreign currency contracts			—				1,089,742				—				—				1,089,742
Centrally cleared swap contracts3			924,913				—			$	305,202				—				1,230,115
Total		$	991,166			$	1,427,803			$	305,202			$	2,460,141			$	5,184,312
		LIABILITY DERIVATIVES1
						Interest Rate Risk				Foreign Exchange Risk				Commodity Risk				Total
Futures contracts2						$	242,734			$	101,488			$	190,627			$	534,849
Forward foreign currency contracts							—				492,739				—				492,739
Centrally cleared swap contracts3							325,301				—				—				325,301
Total						$	568,035			$	594,227			$	190,627			$	1,352,889

 

1	Generally, the balance sheet location for asset derivatives is receivables/net unrealized appreciation and for liability derivatives is payables/net unrealized depreciation.

 

2	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.

 

3	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 six months ended May 31, 2021. 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 unrealized appreciation (depreciation) resulting from the Fund’s derivatives and hedging activities during the period.

 

AMOUNT OF REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED
		Interest Rate Risk				Foreign Exchange Risk				Credit Risk				Commodity Risk				Total
Futures contracts		$	718,657			$	(105,964)				—			$	6,122,078			$	6,734,771
Written options			1,796,992				—				—				—				1,796,992
Swap contracts			(237,728)				—			$	2,951,415				—				2,713,687
Forward foreign currency contracts			—				171,787				—				—				171,787
Total		$	2,277,921			$	65,823			$	2,951,415			$	6,122,078			$	11,417,237

 

Western Asset Inflation-Linked Income Fund 2021 Semi-Annual Report					33

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Notes to consolidated financial statements (unaudited) (cont’d)

 

CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES RECOGNIZED
		Interest Rate Risk				Foreign Exchange Risk				Credit Risk				Commodity Risk				Total
Futures contracts		$	(385,746)			$	(141,822)				—			$	1,766,428			$	1,238,860
Written options			463,103				—				—				—				463,103
Swap contracts			292,998				—			$	(2,090,037)				—				(1,797,039)
Forward foreign currency contracts			—				159,114				—				—				159,114
Total		$	370,355			$	17,292			$	(2,090,037)			$	1,766,428			$	64,038

During the six months ended May 31, 2021, the volume of derivative activity for the Fund was as follows:

 

		Average Market Value
Written options†		$	303,237
Futures contracts (to buy)			190,486,529
Futures contracts (to sell)			55,454,612
Forward foreign currency contracts (to buy)			36,021,178
Forward foreign currency contracts (to sell)			34,130,136
		Average Notional Balance
Interest rate swap contracts		$	44,106,000
Credit default swap contracts (to sell protection)			89,445,857

 

†	At May 31, 2021, there were no open positions held in this derivative.

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 May 31, 2021.

 

Counterparty		Gross Assets Subject to Master Agreements1				Gross Liabilities Subject to Master Agreements1				Net Assets (Liabilities) Subject to Master Agreements				Collateral Pledged (Received)2,3				Net Amount4,5
BNP Paribas SA			—			$	(111,041)			$	(111,041)				—			$	(111,041)
Citibank N.A.		$	422,832				(277,611)				145,221			$	(400,000)				(254,779)
Goldman Sachs Group Inc.			334,265				—				334,265				(217,757)				116,508
JPMorgan Chase & Co.			8,365				—				8,365				—				8,365
Morgan Stanley & Co. Inc.			324,280				(104,087)				220,193				(158,715)				61,478
Total		$	1,089,742			$	(492,739)			$	597,003			$	(776,472)			$	(179,469)

 

1	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.

 

34				Western Asset Inflation-Linked Income Fund 2021 Semi-Annual Report

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2	Gross amounts are not offset in the Consolidated Statement of Assets and Liabilities.

 

3	In some instances, the actual collateral received and/or pledged may be more than the amount shown here due to overcollateralization.

 

4	Net amount may also include forward foreign currency exchange contracts that are not required to be collateralized.

 

5	Represents the net amount receivable (payable) from (to) the counterparty in the event of default.

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 May 31, 2021

The following distributions have been declared by the Fund’s Board of Trustees and are payable subsequent to the period end of this report:

 

Record Date		Payable Date				Amount
6/23/2021			6/30/2021			$	0.0340
7/23/2021			7/30/2021			$	0.0340
8/24/2021			8/31/2021			$	0.1480
9/23/2021			9/30/2021			$	0.0340
10/22/2021			10/29/2021			$	0.0340
11/22/2021			11/30/2021			$	0.0340

7. Stock 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 stock when the Fund’s shares are trading at a discount to net asset value. The Board has directed management of the Fund to repurchase shares of common stock at such times and in such amounts as management reasonably believes may enhance stockholder value. The Fund is under no obligation to purchase shares at any specific discount levels or in any specific amounts. During the six months ended May 31, 2021, the Fund did not repurchase any shares.

 

Western Asset Inflation-Linked Income Fund 2021 Semi-Annual Report				35

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Notes to consolidated financial statements (unaudited) (cont’d)

 

8. Recent accounting pronouncement

In March 2020, the Financial Accounting Standards Board issued Accounting Standards Update No. 2020-04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting (the “ASU”). The amendments in the ASU provide optional temporary financial reporting relief from the effect of certain types of contract modifications due to the planned discontinuation of the London Interbank Offered Rate and other interbank-offered based reference rates as of the end of 2021. The ASU is effective for certain reference rate-related contract modifications that occur during the period March 12, 2020 through December 31, 2022. Management has reviewed the requirements and believes the adoption of this ASU will not have a material impact on the financial statements.

9. Other matters

The outbreak of the respiratory illness COVID-19 (commonly referred to as “coronavirus”) has continued to rapidly spread around the world, causing considerable uncertainty for the global economy and financial markets. The ultimate economic fallout from the pandemic, and the long-term impact on economies, markets, industries and individual issuers, are not known. The COVID-19 pandemic could adversely affect the value and liquidity of the Fund’s investments and negatively impact the Fund’s performance. In addition, the outbreak of COVID-19, and measures taken to mitigate its effects, could result in disruptions to the services provided to the Fund by its service providers.

*  *  *

The Fund’s investments, payment obligations, and financing terms may be based on floating rates, such as the London Interbank Offered Rate, or “LIBOR,” which is the offered rate for short-term Eurodollar deposits between major international banks. On March 5, 2021, the ICE Benchmark Administration, the administrator of LIBOR, stated that it will cease the publication of (i) the overnight and one-, three-, six- and twelve-month USD LIBOR settings immediately following the LIBOR publication on Friday, June 30, 2023 and (ii) all other LIBOR settings, including the one-week and two-month USD LIBOR settings, immediately following the LIBOR publication on Friday, December 31, 2021. There remains uncertainty regarding the nature of any replacement rate and the impact of the transition from LIBOR on the Fund’s transactions and the financial markets generally. As such, the potential effect of a transition away from LIBOR on the Fund or the Fund’s investments cannot yet be determined.

 

36				Western Asset Inflation-Linked Income Fund 2021 Semi-Annual Report

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Additional shareholder information (unaudited)

 

Results of annual meeting of shareholders

The Annual Meeting of Shareholders of Western Asset Inflation-Linked Income Fund was held on May 14, 2021, for the purpose of considering and voting upon the proposal presented at the Meeting. The following table provides information concerning the matters voted upon at the Meeting:

Election of Trustees

 

Nominees		Votes FOR		Votes WITHHELD
William E.B. Siart		15,206,968		6,187,485
Jaynie Miller Studenmund		15,218,102		6,176,351
Peter J. Taylor		15,212,368		6,182,085

At May 31, 2021, in addition to William E.B. Siart, Jaynie Miller Studenmund and Peter J. Taylor, the Trustees of the Fund were Robert Abeles, Jr., Jane F. Dasher, Anita L. DeFrantz, Susan B. Kerley, Michael Larson, Ronald L. Olson, Avedick B. Poladian, and Jane E. Trust.

 

Western Asset Inflation-Linked Income Fund				37

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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 stock split, stock 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., 462 South 4th Street, Suite 1600 Louisville, KY 40202. Investor Relations telephone number 1-888-888-0151.

 

 

38				Western Asset Inflation-Linked Income Fund

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Western Asset

Inflation-Linked Income Fund

 

Trustees

Robert Abeles, Jr.

Jane F. Dasher

Anita L. DeFrantz

Susan B. Kerley

Michael Larson

Ronald L. Olson

Avedick B. Poladian

William E.B. Siart

Chairman

Jaynie M. Studenmund

Peter J. Taylor

Jane Trust

Officers

Jane Trust

President and Chief Executive Officer

Christopher Berarducci

Treasurer and Principal Financial Officer

Ted P. Becker

Chief Compliance Officer

Jenna Bailey

Identity Theft Prevention Officer

Marc A. De Oliveira

Secretary and Chief Legal Officer

Thomas C. Mandia

Assistant Secretary

Jeanne M. Kelly

Senior Vice President

Western Asset Inflation- Linked Income Fund

620 Eighth Avenue

47th Floor

New York, NY 10018

Investment advisers

Western Asset Management Company, LLC

Western Asset Management Company Limited

Western Asset Management Company Pte. Ltd.

Western Asset Management Company Ltd

Administrator

Legg Mason Partners Fund Advisor, LLC

Custodian

The Bank of New York Mellon

Transfer agent

Computershare Inc.

462 South 4th Street, Suite 1600

Louisville, KY 40202

Independent registered public accounting firm

PricewaterhouseCoopers LLP

Baltimore, MD 21202

Legal counsel

Ropes & Gray LLP

1211 Avenue of the Americas

New York, NY 10036

New York Stock

Exchange Symbol

WIA

 

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Legg Mason Funds Privacy and Security Notice

 

Your Privacy and the Security of Your Personal Information is Very Important to the Funds

This Privacy and Security Notice (the “Privacy Notice”) addresses the Funds’ privacy and data protection practices with respect to nonpublic personal information the Funds receive. The Legg Mason Funds include any funds sold by the Funds’ distributor, Legg Mason Investor Services, 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;

 

•

Online account access user IDs, passwords, security challenge question responses; and

 

•

Information received from consumer reporting agencies regarding credit history and creditworthiness (such as the amount of an individual’s total debt, payment history, etc.).

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, or with other financial institutions or affiliates for joint 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 solely for the Funds;

 

•

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 grantor trust.

 

NOT PART OF THE SEMI-ANNUAL REPORT

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Legg Mason 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 Funds’ website at www.lmcef.com, or contact the Fund at 1-888-777-0102.

Revised April 2018

Legg Mason California Consumer Privacy Act Policy

Although much of the personal information we collect is “nonpublic personal information” subject to federal law, residents of California may, in certain circumstances, have additional rights under the California Consumer Privacy Act (“CCPA”). For example, if you are a broker,

 

NOT PART OF THE SEMI-ANNUAL REPORT

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Legg Mason Funds Privacy and Security Notice (cont’d)

 

dealer, agent, fiduciary, or representative acting by or on behalf of, or for, the account of any other person(s) or household, or a financial advisor, or if you have otherwise provided personal information to us separate from the relationship we have with personal investors, the provisions of this Privacy Policy apply to your personal information (as defined by the CCPA).

 

•

In addition to the provisions of the Legg Mason Funds Security and Privacy Notice, you may have the right to know the categories and specific pieces of personal information we have collected about you.

 

•

You also have the right to request the deletion of the personal information collected or maintained by the Funds.

If you wish to exercise any of the rights you have in respect of your personal information, you should advise the Funds by contacting them as set forth below. The rights noted above are subject to our other legal and regulatory obligations and any exemptions under the CCPA. You may designate an authorized agent to make a rights request on your behalf, subject to the identification process described below. We do not discriminate based on requests for information related to our use of your personal information, and you have the right not to receive discriminatory treatment related to the exercise of your privacy rights.

We may request information from you in order to verify your identity or authority in making such a request. If you have appointed an authorized agent to make a request on your behalf, or you are an authorized agent making such a request (such as a power of attorney or other written permission), this process may include providing a password/passcode, a copy of government issued identification, affidavit or other applicable documentation, i.e. written permission. We may require you to verify your identity directly even when using an authorized agent, unless a power of attorney has been provided. We reserve the right to deny a request submitted by an agent if suitable and appropriate proof is not provided.

For the 12-month period prior to the date of this Privacy Policy, the Legg Mason Funds have not sold any of your personal information; nor do we have any plans to do so in the future.

Contact Information

Address: Data Privacy Officer, 100 International Dr., Baltimore, MD 21202

Email: [email protected]

Phone: 1-800-396-4748

Revised October 2020

 

 

NOT PART OF THE SEMI-ANNUAL REPORT

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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, shares of its stock.

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.lmcef.com and (3) on the SEC’s website at www.sec.gov.

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.

462 South 4th Street, Suite 1600

Louisville, KY 40202

 

WASX013850 7/21 SR21-4183

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ITEM 2.

CODE OF ETHICS.

Not applicable.

 

ITEM 3.

AUDIT COMMITTEE FINANCIAL EXPERT.

Not applicable.

 

ITEM 4.

PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Not applicable.

 

ITEM 5.

AUDIT COMMITTEE OF LISTED REGISTRANTS.

Not applicable.

 

ITEM 6.

SCHEDULE OF INVESTMENTS.

Included herein under Item 1.

 

ITEM 7.

DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

Not applicable.

 

ITEM 8.

PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

Not applicable.

 

ITEM 9.

PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.

Not applicable.

 

ITEM 10.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

Not applicable.

 

ITEM 11.

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 second fiscal quarter of the period covered by this report that have materially affected, or are likely to materially affect the registrant’s internal control over financial reporting.

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ITEM 12.

DISCLOSURE OF SECURITIES LENDING ACTIVITIES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

Not applicable

 

ITEM 13.

EXHIBITS.

(a) (1) Not applicable.

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

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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:		July 26, 2021

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:		July 26, 2021
By:		/s/ Christopher Berarducci
		Christopher Berarducci
		Principal Financial Officer
Date:		July 26, 2021

CERTIFICATIONS PURSUANT TO SECTION 302

EX-99.CERT

CERTIFICATIONS

I, Jane Trust, 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 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 second fiscal quarter of 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:    July 26, 2021						/s/ Jane Trust
						Jane Trust
						President

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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 second fiscal quarter of 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:    July 26, 2021						/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 May 31, 2021 (the “Form N-CSR”) fully complies with the requirements of section 15(d) 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: July 26, 2021				Date: July 26, 2021

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.