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 811-06110

Western Asset Funds, Inc.

(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: 1-877-721-1926

Date of fiscal year end: December 31

Date of reporting period: December 31, 2021

ITEM 1. REPORT TO STOCKHOLDERS.

The Annual Report to Stockholders is filed herewith.

Annual Report December 31, 2021

WESTERN ASSET

INFLATION INDEXED PLUS BOND FUND

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

What’s inside
Letter from the president	II
Fund overview	1
Fund at a glance	7
Fund expenses	8
Fund performance	10
Schedule of investments	12
Statement of assets and liabilities	16
Statement of operations	18
Statements of changes in net assets	19
Financial highlights	20
Notes to financial statements	27
Report of independent registered public accounting firm	42
Statement regarding liquidity risk management program	43
Additional information	45
Important tax information	52

Fund objective

The Fund seeks to maximize total return, consistent with preservation of capital.

Letter from the president

Dear Shareholder,

We are pleased to provide the annual report of Western Asset Inflation Indexed Plus Bond Fund for the twelve-month reporting period ended December 31, 2021. Please read on for a detailed look at prevailing economic and market conditions during the Fund’s reporting period and to learn how those conditions have affected Fund performance.

As always, we remain committed to providing you with excellent service and a full spectrum of investment choices. We also remain committed to supplementing the support you receive from your financial advisor. One way we accomplish this is through our website, www.franklintempleton.com. Here you can gain immediate access to market and investment information, including:

• Fund prices and performance,

• Market insights and commentaries from our portfolio managers, and

• A host of educational resources.

We look forward to helping you meet your financial goals.

Sincerely,

Jane Trust, CFA

President and Chief Executive Officer

January 31, 2022

II Western Asset Inflation Indexed Plus Bond Fund

Fund overview

Q. What is the Fund’s investment strategy?

A. The Fund’s investment objective is to maximize total return, consistent with preservation of capital. Under normal market conditions, the Fund invests at least 80% of its net assets in inflation-indexed fixed income securities and at least 70% of its net assets in U.S. Treasury Inflation Protected Securities (“TIPS”)i. Fundamental investment techniques are used to select issues. Although the Fund may invest in securities of any maturity, the Fund will normally maintain a dollar-weighted average effective duration, as estimated by the Fund’s subadvisers, within three years of that of its benchmark, the Bloomberg U.S. Treasury: U.S. TIPSⁱⁱ (formerly known as Bloomberg U.S. Treasury Inflation-Linked Bond Index). The Fund is expected to maintain a dollar-weighted average credit quality of at least A/A.

The Fund may sell protection in connection with credit default swaps relating to corporate debt securities. It is currently expected that the notional amount of the credit default swaps will not exceed 40% of the Fund’s net assets, although such exposure may exceed 40% from time to time.

In addition, under normal market conditions, at the time of purchase:

• no more than 20% of the Fund’s net assets may be invested in non-U.S. dollar denominated inflation-indexed securities

• no more than 10% of the Fund’s net assets may be invested in un-hedged non-U.S. dollar denominated securities

• no more than 20% of the Fund’s net assets may be invested in a combination of securities rated below investment grade, emerging market securities and loan participations and assignments

• no more than 10% of the Fund’s net assets may be invested in securities rated below investment grade

• no more than 10% of the Fund’s net assets may be invested in emerging market securities

• no more than 10% of the Fund’s net assets may be invested in loan participations and assignments

The Fund may also enter into various exchange-traded and over-the-counter derivative transactions for both hedging and non-hedging purposes, including for purposes of enhancing returns. These derivative transactions include, but are not limited to, futures, options, swaps, foreign currency futures and forwards.

In particular, the Fund may use interest rate swaps, credit default swaps (including buying and selling credit default swaps on individual securities and/or baskets of securities), options (including options on credit default swaps) and futures contracts to a significant

Western Asset Inflation Indexed Plus Bond Fund 2021 Annual Report 1

Fund overview (cont’d)

extent, although the amounts invested in these instruments may change from time to time. Other instruments may also be used to a significant extent from time to time.

At Western Asset Management Company, LLC (“Western Asset”), the Fund’s subadviser, we utilize a fixed income team approach, with decisions derived from interaction among various investment management sector specialists. The sector teams are comprised of Western Asset’s senior portfolio management personnel, research analysts and an in-house economist. Under this team approach, management of client fixed income portfolios will reflect a consensus of interdisciplinary views within the Western Asset organization.

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

A. Fixed income markets experienced periods of volatility and, overall, declined over the twelve-month reporting period ended December 31, 2021. Volatility was driven by a number of factors, including the repercussions from the COVID-19 pandemic, rebounding global growth, sharply rising inflation, fluctuating interest rates, and expectations for less accommodative central bank monetary policy. Most spread sectors (non-Treasuries) outperformed similar duration Treasuries, as many investors looked to generate incremental yield in the relatively low interest rate environment.

Short-term U.S. Treasury yields moved sharply higher as the Federal Reserve Board (the “Fed”) telegraphed that it was poised to begin raising interest rates in 2022. The yield for the two-year Treasury note began the reporting period at 0.13% and ended the reporting period at 0.73%. The low of 0.09% occurred on February 5, 2021 and the high of 0.76% took place on December 27, 2021. Long-term U.S. Treasury yields also moved higher, as positive economic data and rising inflation triggered expectations that the Fed would remove its monetary policy accommodation sooner than previously anticipated. The yield for the ten-year Treasury began the reporting period at 0.93% (equaling the low for the period) and ended the reporting period at 1.52%. The high of 1.74% took place on March 19 and March 31, 2021.

Inflation moved sharply higher during the reporting period. For the twelve months ended December 31, 2021, the seasonally unadjusted rate of inflation, as measured by the Consumer Price Index for All Urban Consumers (“CPI-U”)iii, was 7.0%. The CPI-U less food and energy was 5.5% over the same time frame. TIPS, as measured by the Bloomberg U.S. Treasury: U.S. TIPS, returned 5.96% during the reporting period.

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

A. A number of adjustments were made to the Fund during the reporting period. We increased the Fund’s non-U.S. dollar inflation-linked bond exposure, as well as its allocation to medium-term maturity TIPS. Conversely, we pared its allocation to non-agency mortgage-backed securities and emerging markets.

The Fund used U.S. Treasury and Eurobond futures to manage its duration and yield curve exposure. Overall, the use of these instruments contributed to performance.

2 Western Asset Inflation Indexed Plus Bond Fund 2021 Annual Report

Performance review

For the twelve months ended December 31, 2021, Class I shares of Western Asset Inflation Indexed Plus Bond Fund returned 4.74%. The Fund’s unmanaged benchmark, the Bloomberg U.S. Treasury: U.S. TIPS, returned 5.96% for the same period. The Lipper Inflation Protected Bond Funds Category Avearge^iv returned 5.40% over the same time frame.

Performance Snapshot as of December 31, 2021 (unaudited)
(excluding sales charges)	6 months			12 months
Western Asset Inflation Indexed Plus Bond Fund:
Class A		3.23	%		4.50	%
Class C		2.77	%		3.75	%
Class C1		3.46	%1		4.46	%1
Class FI		3.16	%		4.56	%
Class R		3.04	%		4.16	%
Class I		3.22	%		4.74	%
Class IS		3.43	%		4.99	%
Bloomberg U.S. Treasury: U.S. TIPS		4.16	%		5.96	%
Lipper Inflation Protected Bond Funds Category Average		3.27	%		5.40	%

The performance shown represents past performance. Past performance is no guarantee of future results and current performance may be higher or lower than the performance shown above. Principal value, investment returns and yields will fluctuate and investors’ shares, when redeemed, may be worth more or less than their original cost. To obtain performance data current to the most recent month-end, please visit our website at www.franklintempleton.com.

All share class returns assume the reinvestment of all distributions at net asset value and the deduction of all Fund expenses. Returns have not been adjusted to include sales charges that may apply or the deduction of taxes that a shareholder would pay on Fund distributions. If sales charges were reflected, the performance quoted would be lower. Performance figures for periods shorter than one year represent cumulative figures and are not annualized.

Fund performance figures reflect fee waivers and/or expense reimbursements, without which the performance would have been lower.

The 30-Day SEC Yields for the period ended December 31, 2021 for Class A, Class C, Class C1, Class FI, Class R, Class I and Class IS shares were 5.07%, 4.52%, 4.59%, 5.27%, 5.18%, 5.54% and 5.64%, respectively. Absent fee waivers and/or expense reimbursements, the 30-Day SEC Yield for Class A, Class C, Class C1, Class FI, Class I and Class IS shares would have been 5.05%, 4.50%, 3.98%, 5.24%, 5.52% and 5.62%, respectively. The 30-Day SEC Yield, calculated pursuant to the standard SEC formula, is based on the Fund’s investments over an annualized trailing 30-day period, and not on the distributions paid by the Fund, which may differ. The 30-Day SEC Yield includes adjustments for inflation to both U.S. and foreign portfolio securities that are linked to inflation indices. Please note, inflation adjustments to U.S. securities often occur at different intervals than

¹ Performance includes a payment by an affiliate to reimburse for an error. Absent this payment, performance for the six months ended December 31, 2021 would have been 2.83% and performance for the twelve months ended December 31, 2021 would have been 3.82%.

Western Asset Inflation Indexed Plus Bond Fund 2021 Annual Report 3

Fund overview (cont’d)

foreign securities. These adjustments can cause the SEC Yield to change substantially from month-to-month. Increases in the inflation rate may result in the Fund reporting an exceptionally high yield which may not be repeated.

Total Annual Operating Expenses (unaudited)

As of the Fund’s current prospectus dated May 1, 2021, the gross total annual fund operating expense ratios for Class A, Class C, Class C1, Class FI, Class R, Class I and Class IS shares were 0.65%, 1.43%, 2.24%, 0.73%, 1.06%, 0.35% and 0.27%, respectively.

Actual expenses may be higher. For example, expenses may be higher than those shown if average net assets decrease. Net assets are more likely to decrease and Fund expense ratios are more likely to increase when markets are volatile.

As a result of expense limitation arrangements, the ratio of total annual fund operating expenses, other than interest, brokerage commissions, taxes, extraordinary expenses, deferred organizational expenses and acquired fund fees and expenses, to average net assets will not exceed 0.90% for Class A shares, 1.65% for Class C shares, 1.40% for Class C1 shares, 0.85% for Class FI shares and 1.15% for Class R shares. In addition, the ratio of total annual fund operating expenses for Class IS shares will not exceed the ratio of total annual fund operating expenses for Class I shares. These expense limitation arrangements cannot be terminated prior to December 31, 2023 without the Board of Directors’ consent. In addition, the manager has agreed to waive the Fund’s management fee to an extent sufficient to offset the net management fee payable in connection with any investment in an affiliated money market fund. This management fee waiver is not subject to the recapture provision discussed below.

The manager is permitted to recapture amounts waived and/or reimbursed to a class within two years after the fiscal year in which the manger earned the fee or incurred the expense if the class’ total annual fund operating expenses have fallen to a level below the expense limitation (“expense cap”) in effect at the time the fees were earned or the expenses incurred. In no case will the manager recapture any amount that would result, on any particular business day of the Fund, in the class’ total annual fund operating expenses exceeding the expense cap or any other lower limit then in effect.

Q. What were the leading contributors to performance?

A. The largest contributor to the Fund’s relative performance during the reporting period was its long TIPS exposure hedged with U.S. Treasury futures in the early months of 2021. TIPS outperformed nominal Treasuries as inflation expectations rose. An allocation to investment-grade corporate bonds was a small positive for performance as their spreads modestly narrowed in 2021.

Q. What were the leading detractors from performance?

A. The Fund posted a strong absolute return, but it lagged the benchmark over the reporting period. The largest detractor from the Fund’s relative performance was its yield curve positioning, driven by an underweight to the five-year to ten-year portion of the real yield curve.

4 Western Asset Inflation Indexed Plus Bond Fund 2021 Annual Report

An allocation to emerging markets was also a headwind for returns, as their spreads widened during the reporting period. Finally, the Fund’s non-U.S. dollar exposure was a small detractor from performance.

Thank you for your investment in Western Asset Inflation Indexed Plus Bond Fund. As always, we appreciate that you have chosen us to manage your assets and we remain focused on achieving the Fund’s investment goals.

Sincerely,

Western Asset Management Company, LLC

January 20, 2022

RISKS: Fixed income securities involve interest rate, credit, inflation and reinvestment risks. As interest rates rise, the value of fixed income securities falls, thereby reducing the value of the Fund’s share price. Derivatives, such as options, futures and swaps, can be illiquid, may disproportionately increase losses, and have a potentially large impact on Fund performance. The use of leverage may increase volatility and possibility of loss. Risks of high-yield securities (commonly known as “junk” bonds) include greater price volatility, illiquidity and possibility of default. The Fund may be subject to interest rate, income and deflation risks. Changes in inflation will cause the Fund’s income to fluctuate, sometimes substantially. Periods of deflation may adversely affect the Fund’s net asset value. International investments are subject to special risks, including currency fluctuations and social, economic and political uncertainties, which could increase volatility. These risks are magnified in emerging markets. Emerging market countries tend to have economic, political and legal systems that are less developed and are less stable than those of more developed countries. Asset-backed, mortgage-backed or mortgage related securities are subject to prepayment and extension risks. Please see the Fund’s prospectus for a more complete discussion of these and other risks and the Fund’s investment strategies.

Portfolio holdings and breakdowns are as of December 31, 2021 and are subject to change and may not be representative of the portfolio managers’ current or future investments. Please refer to pages 12 through 15 for a list and percentage breakdown of the Fund’s holdings.

The mention of sector breakdowns is for informational purposes only and should not be construed as a recommendation to purchase or sell any securities. The information provided regarding such sectors is not a sufficient basis upon which to make an investment decision. Investors seeking financial advice regarding the appropriateness of investing in any securities or investment strategies discussed should consult their financial professional. Portfolio holdings are subject to change at any time and may not be representative of the portfolio managers’ current or future investments. The Fund’s top five sector holdings (as a percentage of net assets) as of December 31, 2021 were: U.S. treasury inflation protected securities (87.8%), corporate bonds & notes (4.8%), non-U.S. treasury inflation protected securities (2.8%), sovereign bonds (1.6%) and collateralized mortgage obligations (0.9%). The Fund’s portfolio composition is subject to change at any time.

All investments are subject to risk including the possible loss of principal. Past performance is no guarantee of future results. All index performance reflects no deduction for fees, expenses or taxes. Please note that an investor cannot invest directly in an index.

Western Asset Inflation Indexed Plus Bond Fund 2021 Annual Report 5

Fund overview (cont’d)

The information provided is not intended to be a forecast of future events, a guarantee of future results or investment advice. Views expressed may differ from those of the firm as a whole.

ⁱ U.S. Treasury Inflation-Protected Securities (“TIPS”) are inflation-indexed securities issued by the U.S. Treasury in five-year, ten-year and thirty-year maturities. The principal is adjusted to the Consumer Price Index, the commonly used measure of inflation. The coupon rate is constant, but generates a different amount of interest when multiplied by the inflation-adjusted principal.

ⁱⁱ The Bloomberg U.S. Treasury: U.S. TIPS (formerly known as Bloomberg U.S. Treasury Inflation-Linked Bond Index) represents an unmanaged market index made up of U.S. Treasury Inflation-Linked Index securities.

ⁱⁱⁱ The Consumer Price Index for All Urban Consumers (“CPI-U”) is a measure of the average change in prices over time of goods and services purchased by households, which covers approximately 87% of the total population and includes, in addition to wage earners and clerical worker households, groups such as professional, managerial and technical workers, the self-employed, short-term workers, the unemployed and retirees and others not in the labor force.

^iv Lipper, Inc., a wholly-owned subsidiary of Refinitiv, provides independent insight on global collective investments. Returns are based on the period ended December 31, 2021, including the reinvestment of all distributions, including returns of capital, if any, calculated among the 202 funds for the six-month period and among the 201 funds for the twelve-month period in the Fund’s Lipper category, excluding sales charges, if any.

6 Western Asset Inflation Indexed Plus Bond Fund 2021 Annual Report

Fund at a glance^†(unaudited)

Investment breakdown (%) as a percent of total investments

† The bar graph above represents the Fund’s portfolio as of December 31, 2021 and December 31, 2020, and does not include derivatives, such as futures contracts and forward foreign currency contracts. The Fund’s portfolio is actively managed. As a result, the composition of its portfolio holdings and sectors is subject to change at any time.

‡ Represents less than 0.1%.

Western Asset Inflation Indexed Plus Bond Fund 2021 Annual Report 7

Fund expenses (unaudited)

Example

As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, including front-end and back-end sales charges (loads) on purchase payments; and (2) ongoing costs, including management fees; service and/or distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

This example is based on an investment of $1,000 invested on July 1, 2021 and held for the six months ended December 31, 2021.

Actual expenses

The table below titled “Based on Actual Total Return” provides information about actual account values and actual expenses. You may use the information provided in this table, together with the amount you invested, to estimate the expenses that you paid over the period. To estimate the expenses you paid on your account, divide your ending account value by $1,000 (for example, an $8,600 ending account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled “Expenses Paid During the Period”.

Hypothetical example for comparison purposes

The table below titled “Based on Hypothetical Total Return” provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio and an assumed rate of return of 5.00% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use the information provided in this table to compare the ongoing costs of investing in the Fund and other funds. To do so, compare the 5.00% hypothetical example relating to the Fund with the 5.00% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table below are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as front-end or back-end sales charges (loads). Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.

Based on actual total return1													Based on hypothetical total return1
	Actual Total Return Without Sales Charge2			Beginning Account Value		Ending Account Value		Annualized Expense Ratio			Expenses Paid During the Period3			Hypothetical Annualized Total Return			Beginning Account Value		Ending Account Value		Annualized Expense Ratio			Expenses Paid During the Period3
Class A		3.23	%	$	1,000.00	$	1,032.30		0.80	%	$	4.10	Class A		5.00	%	$	1,000.00	$	1,021.17		0.80	%	$	4.08
Class C		2.77			1,000.00		1,027.70		1.51			7.72	Class C		5.00			1,000.00		1,017.59		1.51			7.68
Class C1		3.46	4		1,000.00		1,034.60		1.40			7.18	Class C1		5.00			1,000.00		1,018.15		1.40			7.12
Class FI		3.16			1,000.00		1,031.60		0.78			3.99	Class FI		5.00			1,000.00		1,021.27		0.78			3.97
Class R		3.04			1,000.00		1,030.40		1.10			5.63	Class R		5.00			1,000.00		1,019.66		1.10			5.60
Class I		3.22			1,000.00		1,032.20		0.50			2.56	Class I		5.00			1,000.00		1,022.68		0.50			2.55
Class IS		3.43			1,000.00		1,034.30		0.36			1.85	Class IS		5.00			1,000.00		1,023.39		0.36			1.84

8 Western Asset Inflation Indexed Plus Bond Fund 2021 Annual Report

¹ For the six months ended December 31, 2021.

² Assumes the reinvestment of all distributions, including returns of capital, if any, at net asset value and does not reflect the deduction of the applicable sales charge with respect to Class A shares or the applicable contingent deferred sales charge (“CDSC”) with respect to Class C shares. Total return is not annualized, as it may not be representative of the total return for the year. 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.

³ Expenses (net of compensating balance arrangements, fee waivers and/or expense reimbursements) are equal to each class’ respective annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year (184), then divided by 365.

⁴ Total return includes a payment by an affiliate and without the payment, total return would have been lower.

Western Asset Inflation Indexed Plus Bond Fund 2021 Annual Report 9

Fund performance (unaudited)

Average annual total returns
Without sales charges1	Class A			Class C			Class C1			Class FI			Class R			Class I			Class IS
Twelve Months Ended 12/31/21		4.50	%		3.75	%		4.46	%2		4.56	%		4.16	%		4.74	%		4.99	%
Five Years Ended 12/31/21		4.76			4.05			4.34			4.77			4.40			5.09			5.20
Ten Years Ended 12/31/21		N/A			N/A			N/A			2.23			N/A			2.58			2.70
Inception* through 12/31/21		2.06			1.33			1.33			—			1.69			—			—
With sales charges3	Class A			Class C			Class C1			Class FI			Class R			Class I			Class IS
Twelve Months Ended 12/31/21		0.02	%		2.83	%		4.46	%2		4.56	%		4.16	%		4.74	%		4.99	%
Five Years Ended 12/31/21		3.85			4.05			4.34			4.77			4.40			5.09			5.20
Ten Years Ended 12/31/21		N/A			N/A			N/A			2.23			N/A			2.58			2.70
Inception* through 12/31/21		1.60			1.33			1.33			—			1.69			—			—

Cumulative total returns
Without sales charges1
Class A (Inception date of 4/30/12 through 12/31/21)	21.78	%
Class C (Inception date of 4/30/12 through 12/31/21)	13.63
Class C1 (Inception date of 10/5/12 through 12/31/21)	12.96
Class FI (12/31/11 through 12/31/21)	24.72
Class R (Inception date of 4/30/12 through 12/31/21)	17.55
Class I (12/31/11 through 12/31/21)	28.97
Class IS (12/31/11 through 12/31/21)	30.51

All figures represent past performance and are not a guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 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.

¹ Assumes the reinvestment of all distributions, including returns of capital, if any, at net asset value and does not reflect the deduction of the applicable sales charge with respect to Class A shares or the applicable contingent deferred sales charge (“CDSC”) with respect to Class C shares.

² Total return includes a payment by an affiliate and without the payment, total return would have been lower.

³ Assumes the reinvestment of all distributions, including returns of capital, if any, at net asset value. In addition, Class A shares reflect the deduction of the maximum initial sales charge of 4.25%. Class C shares reflect the deduction of a 1.00% CDSC, which applies if shares are redeemed within one year from purchase payment.

* Inception dates for Class A, C, C1, FI, R, I and IS shares are April 30, 2012, April 30, 2012, October 5, 2012, June 28, 2007, April 30, 2012, March 1, 2001 and December 18, 2008, respectively.

10 Western Asset Inflation Indexed Plus Bond Fund 2021 Annual Report

Historical performance

Value of $1,000,000 invested in

Class I Shares of Western Asset Inflation Indexed Plus Bond Fund vs. Bloomberg U.S. Treasury: U.S. TIPS†* — December 2011 - December 2021

All figures represent past performance and are not a guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 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.

† Hypothetical illustration of $1,000,000 invested in Class I shares of Western Asset Inflation Indexed Plus Bond Fund on December 31, 2011, assuming the reinvestment of all distributions, including returns of capital, if any, at net asset value through December 31, 2021. The hypothetical illustration also assumes a $1,000,000 investment in the Bloomberg U.S. Treasury: U.S. TIPS. The Bloomberg U.S. Treasury: U.S. TIPS (the “Index”) represents an unmanaged market index made up of U.S. Treasury Inflation-Linked Index securities. The Index is unmanaged and not subject to the same management and trading expenses as a mutual fund. Please note that an investor cannot invest directly in an index. The performance of the Fund’s other classes may be greater or less than Class I shares’ performance indicated on this chart, depending on whether greater or lesser sales charges and fees were incurred by shareholders investing in the other classes.

* Formerly known as Bloomberg U.S. Treasury Inflation-Linked Bond Index.

Western Asset Inflation Indexed Plus Bond Fund 2021 Annual Report 11

Schedule of investments

December 31, 2021

Western Asset Inflation Indexed Plus Bond Fund

(Percentages shown based on Fund net assets)

Security	Rate			Maturity Date		Face Amount†		Value
U.S. Treasury Inflation Protected Securities — 87.8%
U.S. Treasury Bonds, Inflation Indexed		2.375	%		1/15/27		3,017,366	$	3,645,766
U.S. Treasury Bonds, Inflation Indexed		2.500	%		1/15/29		4,019,371		5,141,228
U.S. Treasury Bonds, Inflation Indexed		3.875	%		4/15/29		5,501,710		7,667,001
U.S. Treasury Bonds, Inflation Indexed		2.125	%		2/15/40		959,760		1,470,728
U.S. Treasury Bonds, Inflation Indexed		0.750	%		2/15/42		7,099,548		8,984,571
U.S. Treasury Bonds, Inflation Indexed		1.375	%		2/15/44		7,951,426		11,364,358
U.S. Treasury Bonds, Inflation Indexed		0.250	%		2/15/50		537,910		652,308
U.S. Treasury Notes, Inflation Indexed		0.125	%		1/15/23		1,006,555		1,039,613
U.S. Treasury Notes, Inflation Indexed		0.625	%		4/15/23		8,485,022		8,870,981
U.S. Treasury Notes, Inflation Indexed		0.375	%		7/15/23		4,754,080		4,999,171
U.S. Treasury Notes, Inflation Indexed		0.625	%		1/15/24		4,291,148		4,567,352
U.S. Treasury Notes, Inflation Indexed		0.500	%		4/15/24		7,018,688		7,483,025
U.S. Treasury Notes, Inflation Indexed		0.125	%		4/15/25		1,027,968		1,099,924
U.S. Treasury Notes, Inflation Indexed		0.625	%		1/15/26		10,278,473		11,292,356
U.S. Treasury Notes, Inflation Indexed		0.125	%		4/15/26		6,433,548		6,945,601
U.S. Treasury Notes, Inflation Indexed		0.125	%		10/15/26		3,239,008		3,523,866
U.S. Treasury Notes, Inflation Indexed		0.750	%		7/15/28		1,432,444		1,641,381
U.S. Treasury Notes, Inflation Indexed		0.875	%		1/15/29		2,683,706		3,105,369
U.S. Treasury Notes, Inflation Indexed		0.250	%		7/15/29		1,730,080		1,939,841
U.S. Treasury Notes, Inflation Indexed		0.125	%		1/15/30		1,773,816		1,970,218
U.S. Treasury Notes, Inflation Indexed		0.125	%		7/15/31		1,031,970		1,161,011
Total U.S. Treasury Inflation Protected Securities (Cost — $93,723,889)									98,565,669
Corporate Bonds & Notes — 4.8%
Energy — 2.5%
Energy Equipment & Services — 0.0%††
Halliburton Co., Senior Notes		3.800	%		11/15/25		11,000		11,836
Oil, Gas & Consumable Fuels — 2.5%
Apache Corp., Senior Notes		2.625	%		1/15/23		78,000		78,064
Apache Corp., Senior Notes		4.750	%		4/15/43		150,000		165,001
BP Capital Markets America Inc., Senior Notes		3.588	%		4/14/27		410,000		443,060
Devon Energy Corp., Senior Notes		5.850	%		12/15/25		490,000		560,758
Energy Transfer LP, Senior Notes		2.900	%		5/15/25		30,000		31,016
Enterprise Products Operating LLC, Senior Notes		3.125	%		7/31/29		300,000		318,891
Enterprise Products Operating LLC, Senior Notes		2.800	%		1/31/30		120,000		125,252
Exxon Mobil Corp., Senior Notes		3.043	%		3/1/26		90,000		95,301
Kinder Morgan Inc., Senior Notes		4.300	%		6/1/25		170,000		183,853
Occidental Petroleum Corp., Senior Notes		5.550	%		3/15/26		110,000		122,582
Occidental Petroleum Corp., Senior Notes		3.000	%		2/15/27		130,000		132,087
Occidental Petroleum Corp., Senior Notes		3.500	%		8/15/29		240,000		246,967

See Notes to Financial Statements.

12 Western Asset Inflation Indexed Plus Bond Fund 2021 Annual Report

Western Asset Inflation Indexed Plus Bond Fund

(Percentages shown based on Fund net assets)

Security	Rate			Maturity Date		Face Amount†			Value
Oil, Gas & Consumable Fuels — continued
Transcontinental Gas Pipe Line Co. LLC, Senior Notes		7.850	%		2/1/26		170,000		$	207,694
Western Midstream Operating LP, Senior Notes		4.350	%		2/1/25		120,000			125,551
Total Oil, Gas & Consumable Fuels										2,836,077
Total Energy										2,847,913
Materials — 2.3%
Metals & Mining — 2.1%
Anglo American Capital PLC, Senior Notes		4.000	%		9/11/27		280,000			301,284	(a)
Antofagasta PLC, Senior Notes		2.375	%		10/14/30		340,000			323,488	(a)
ArcelorMittal SA, Senior Notes		7.000	%		10/15/39		140,000			193,074
Glencore Funding LLC, Senior Notes		4.125	%		3/12/24		130,000			136,764	(a)
Glencore Funding LLC, Senior Notes		4.000	%		3/27/27		140,000			151,147	(a)
Glencore Funding LLC, Senior Notes		3.875	%		10/27/27		100,000			107,713	(a)
Southern Copper Corp., Senior Notes		5.250	%		11/8/42		440,000			554,574
Teck Resources Ltd., Senior Notes		3.750	%		2/1/23		120,000			121,792
Vale Overseas Ltd., Senior Notes		6.250	%		8/10/26		140,000			162,258
Yamana Gold Inc., Senior Notes		4.625	%		12/15/27		230,000			248,726
Total Metals & Mining										2,300,820
Paper & Forest Products — 0.2%
Inversiones CMPC SA, Senior Notes		4.375	%		4/4/27		240,000			264,840	(b)
Total Materials										2,565,660
Total Corporate Bonds & Notes (Cost — $4,979,794)										5,413,573
Non-U.S. Treasury Inflation Protected Securities — 2.8%
Brazil — 0.6%
Brazil Notas do Tesouro Nacional Serie B, Notes		6.000	%		8/15/30		3,662,808	BRL		697,823
Canada — 2.2%
Canadian Government Real Return Bond		4.250	%		12/1/26		1,638,110	CAD		1,635,041
Canadian Government Real Return Bond		1.500	%		12/1/44		423,140	CAD		460,592
Canadian Government Real Return Bond		0.500	%		12/1/50		376,367	CAD		353,513
Total Canada										2,449,146
Total Non-U.S. Treasury Inflation Protected Securities (Cost — $3,400,014)										3,146,969
Sovereign Bonds — 1.6%
Indonesia — 0.5%
Indonesia Government International Bond, Senior Notes		3.500	%		1/11/28		210,000			227,006
Indonesia Government International Bond, Senior Notes		4.750	%		2/11/29		270,000			314,712
Total Indonesia										541,718

See Notes to Financial Statements.

Western Asset Inflation Indexed Plus Bond Fund 2021 Annual Report 13

Schedule of investments (cont’d)

December 31, 2021

Western Asset Inflation Indexed Plus Bond Fund

(Percentages shown based on Fund net assets)

Security	Rate			Maturity Date		Face Amount†		Value
Kuwait — 0.3%
Kuwait International Government Bond, Senior Notes		3.500	%		3/20/27		350,000	$	381,834	(b)
Panama — 0.2%
Panama Government International Bond, Senior Notes		3.160	%		1/23/30		200,000		207,502
Peru — 0.3%
Peruvian Government International Bond, Senior Notes		2.783	%		1/23/31		340,000		339,153
United Arab Emirates — 0.3%
Abu Dhabi Government International Bond, Senior Notes		2.500	%		9/30/29		340,000		353,495	(a)
Total Sovereign Bonds (Cost — $1,764,866)									1,823,702
Collateralized Mortgage Obligations (c) — 0.9%
CSMC Trust, 2019-AFC1 A3, Step bond		2.877	%		7/25/49		318,913		320,942	(a)
Federal Home Loan Mortgage Corp. (FHLMC) REMIC, Structured Agency Credit Risk Debt Notes, 2021-DNA6 M2 (30 Day Average SOFR + 1.500%)		1.550	%		10/25/41		190,000		190,088	(a)(d)
Federal Home Loan Mortgage Corp. (FHLMC) Structured Agency Credit Risk Debt Notes, 2015- DNA2 M3 (1 mo. USD LIBOR + 3.900%)		4.003	%		12/25/27		105,185		105,744	(d)
Federal National Mortgage Association (FNMA) — CAS, 2021-R01 1M2 (30 Day Average SOFR + 1.550%)		1.600	%		10/25/41		130,000		130,275	(a)(d)
Residential Mortgage Loan Trust, 2020-2 A1		1.654	%		5/25/60		236,342		237,198	(a)(d)
Total Collateralized Mortgage Obligations (Cost — $986,397)									984,247
Asset-Backed Securities — 0.0%††
Bear Stearns Asset Backed Securities Trust, 2003- ABF1 A (1 mo. USD LIBOR + 0.740%) (Cost — $4,376)		0.842	%		1/25/34		4,482		4,324	(d)
Total Investments before Short-Term Investments (Cost — $104,859,336)									109,938,484
						Shares
Short-Term Investments — 0.5%
Western Asset Premier Institutional Government Reserves, Premium Shares (Cost — $527,330)		0.010	%				527,330		527,330	(e)
Total Investments — 98.4% (Cost — $105,386,666)									110,465,814
Other Assets in Excess of Liabilities — 1.6%									1,761,172
Total Net Assets — 100.0%								$	112,226,986

See Notes to Financial Statements.

14 Western Asset Inflation Indexed Plus Bond Fund 2021 Annual Report

Western Asset Inflation Indexed Plus Bond Fund

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

†† Represents less than 0.1%.

^(a) 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 Directors.

^(b) 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 Directors.

^(c) 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.

^(d) 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.

^(e) In this instance, as defined in the Investment Company Act of 1940, an “Affiliated Company” represents Fund ownership of at least 5% of the outstanding voting securities of an issuer, or a company which is under common ownership or control with the Fund. At December 31, 2021, the total market value of investments in Affiliated Companies was $527,330 and the cost was $527,330 (Note 8).

Abbreviation(s) used in this schedule:
BRL	— Brazilian Real
CAD	— Canadian Dollar
CAS	— Connecticut Avenue Securities
LIBOR	— London Interbank Offered Rate
REMIC	— Real Estate Mortgage Investment Conduit
SOFR	— Secured Overnight Financing Rate
USD	— United States Dollar

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

Currency Purchased		Currency Sold		Counterparty	Settlement Date		Unrealized Appreciation
USD	11,579	EUR	10,000	BNP Paribas SA		1/18/22	$	190
USD	23,157	EUR	20,000	BNP Paribas SA		1/18/22		379
USD	46,367	EUR	40,000	Citibank N.A.		1/18/22		811
USD	1,686,521	CAD	2,095,900	JPMorgan Chase & Co.		1/18/22		29,645
Total							$	31,025

Abbreviation(s) used in this table:
CAD	— Canadian Dollar
EUR	— Euro
USD	— United States Dollar

See Notes to Financial Statements.

Western Asset Inflation Indexed Plus Bond Fund 2021 Annual Report 15

Statement of assets and liabilities

December 31, 2021

Assets:
Investments in unaffiliated securities, at value (Cost — $104,859,336)	$	109,938,484
Investments in affiliated securities, at value (Cost — $527,330)		527,330
Foreign currency, at value (Cost — $372,843)		355,368
Cash		1,000,000
Interest receivable		379,212
Receivable for Fund shares sold		85,589
Unrealized appreciation on forward foreign currency contracts		31,025
Dividends receivable from affiliated investments		9
Other receivables		197
Prepaid expenses		47,156
Total Assets		112,364,370
Liabilities:
Payable for Fund shares repurchased		60,210
Fund accounting fees payable		30,289
Investment management fee payable		17,240
Transfer agent fees payable		11,189
Service and/or distribution fees payable		3,517
Directors’ fees payable		444
Accrued expenses		14,495
Total Liabilities		137,384
Total Net Assets	$	112,226,986
Net Assets:
Par value (Note 7)	$	9,695
Paid-in capital in excess of par value		111,549,943
Total distributable earnings (loss)		667,348
Total Net Assets	$	112,226,986

See Notes to Financial Statements.

16 Western Asset Inflation Indexed Plus Bond Fund 2021 Annual Report

Net Assets:
Class A	$10,798,050
Class C	$1,480,751
Class C1	$30,534
Class FI	$816,431
Class R	$102,208
Class I	$34,614,522
Class IS	$64,384,490
Shares Outstanding:
Class A	944,253
Class C	133,525
Class C1	2,673
Class FI	71,950
Class R	9,065
Class I	2,996,194
Class IS	5,537,242
Net Asset Value:
Class A (and redemption price)	$11.44
Class C*	$11.09
Class C1 (and redemption price)	$11.42
Class FI (and redemption price)	$11.35
Class R (and redemption price)	$11.28
Class I (and redemption price)	$11.55
Class IS (and redemption price)	$11.63
Maximum Public Offering Price Per Share:
Class A (based on maximum initial sales charge of 4.25%)	$11.95

* Redemption price per share is NAV of Class C shares reduced by a 1.00% CDSC if shares are redeemed within one year from purchase payment (Note 2).

See Notes to Financial Statements.

Western Asset Inflation Indexed Plus Bond Fund 2021 Annual Report 17

Statement of operations

For the Year Ended December 31, 2021

Investment Income:
Interest	$	15,477,435
Dividends from affiliated investments		636
Less: Foreign taxes withheld		(6,264)
Total Investment Income		15,471,807
Expenses:
Investment management fee (Note 2)		663,304
Registration fees		122,143
Fund accounting fees		73,228
Transfer agent fees (Note 5)		66,304
Audit and tax fees		49,509
Service and/or distribution fees (Notes 2 and 5)		36,029
Legal fees		17,874
Directors’ fees		6,001
Insurance		5,811
Custody fees		3,818
Commitment fees (Note 9)		3,578
Shareholder reports		3,425
Interest expense		1,126
Miscellaneous expenses		12,549
Total Expenses		1,064,699
Less: Fee waivers and/or expense reimbursements (Notes 2 and 5)		(2,711)
Net Expenses		1,061,988
Net Investment Income		14,409,819
Realized and Unrealized Gain (Loss) on Investments, Futures Contracts, Forward Foreign Currency Contracts and Foreign Currency Transactions (Notes 1, 3, 4 and 10):
Net Realized Gain (Loss) From:
Investment transactions in unaffiliated securities		54,614,829
Futures contracts		2,283,429
Forward foreign currency contracts		(189,095)
Foreign currency transactions		12,387
Net Realized Gain		56,721,550
Change in Net Unrealized Appreciation (Depreciation) From:
Investments in unaffiliated securities		(54,342,952)
Futures contracts		(393,788)
Forward foreign currency contracts		164,173
Foreign currencies		(35,916)
Change in Net Unrealized Appreciation (Depreciation)		(54,608,483)
Net Gain on Investments, Futures Contracts, Forward Foreign Currency Contracts and Foreign Currency Transactions		2,113,067
Increase in Net Assets From Operations	$	16,522,886

See Notes to Financial Statements.

18 Western Asset Inflation Indexed Plus Bond Fund 2021 Annual Report

Statements of changes in net assets

For the Years Ended December 31,	2021		2020
Operations:
Net investment income	$	14,409,819	$	6,968,928
Net realized gain (loss)		56,721,550		(1,620,594)
Change in net unrealized appreciation (depreciation)		(54,608,483)		39,224,108
Increase in Net Assets From Operations		16,522,886		44,572,442
Distributions to Shareholders From (Notes 1 and 6):
Total distributable earnings		(20,534,351)		(6,975,051)
Decrease in Net Assets From Distributions to Shareholders		(20,534,351)		(6,975,051)
Fund Share Transactions (Note 7):
Net proceeds from sale of shares		84,772,622		139,979,855
Reinvestment of distributions		20,268,911		6,667,958
Cost of shares repurchased		(113,619,276)		(137,512,117)
Shares redeemed in-kind (Note 10)		(384,296,171)		—
Increase (Decrease) in Net Assets From Fund Share Transactions		(392,873,914)		9,135,696
Increase (Decrease) in Net Assets		(396,885,379)		46,733,087
Net Assets:
Beginning of year		509,112,365		462,379,278
End of year	$	112,226,986	$	509,112,365

See Notes to Financial Statements.

Western Asset Inflation Indexed Plus Bond Fund 2021 Annual Report 19

Financial highlights

For a share of capital stock outstanding throughout each year ended December 31:
Class A Shares1	2021			2020			2019			2018			2017
Net asset value, beginning of year		$12.29			$11.34			$10.56			$11.11			$10.93
Income (loss) from operations:
Net investment income		0.47			0.13			0.19			0.27			0.19
Net realized and unrealized gain (loss)		0.06			0.95			0.80			(0.56)			0.18
Total income (loss) from operations		0.53			1.08			0.99			(0.29)			0.37
Less distributions from:
Net investment income		(0.59)			(0.13)			(0.21)			(0.26)			(0.19)
Net realized gains		(0.79)			—			—			—			—
Total distributions		(1.38)			(0.13)			(0.21)			(0.26)			(0.19)
Net asset value, end of year		$11.44			$12.29			$11.34			$10.56			$11.11
Total return2		4.50	%		9.58	%		9.37	%		(2.60)	%		3.44	%
Net assets, end of year (000s)		$10,798			$8,749			$10,140			$16,984			$21,848
Ratios to average net assets:
Gross expenses		0.75	%		0.65	%		0.71	%		0.70	%		0.71	%
Net expenses3,4		0.75			0.65			0.71			0.70			0.71
Net investment income		3.83			1.11			1.75			2.45			1.73
Portfolio turnover rate		80	%5		23	%		60	%		85	%		43	%

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

² Performance figures, exclusive of sales charges, 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.

³ As a result of an expense limitation arrangement, the ratio of total annual fund operating expenses, other than interest, brokerage commissions, taxes, extraordinary expenses, deferred organizational expenses and acquired fund fees and expenses, to average net assets of Class A shares did not exceed 0.90%. This expense limitation arrangement cannot be terminated prior to December 31, 2023 without the Board of Directors’ consent. In addition, the manager has agreed to waive the Fund’s management fee to an extent sufficient to offset the net management fee payable in connection with any investment in an affiliated money market fund.

⁴ Reflects fee waivers and/or expense reimbursements.

⁵ Excludes securities delivered as a result of a redemption in-kind.

See Notes to Financial Statements.

20 Western Asset Inflation Indexed Plus Bond Fund 2021 Annual Report

For a share of capital stock outstanding throughout each year ended December 31:
Class C Shares1	2021			2020			2019			2018			2017
Net asset value, beginning of year		$11.96			$11.05			$10.30			$10.83			$10.66
Income (loss) from operations:
Net investment income		0.38			0.06			0.12			0.17			0.12
Net realized and unrealized gain (loss)		0.05			0.90			0.77			(0.52)			0.19
Total income (loss) from operations		0.43			0.96			0.89			(0.35)			0.31
Less distributions from:
Net investment income		(0.51)			(0.05)			(0.14)			(0.18)			(0.14)
Net realized gains		(0.79)			—			—			—			—
Total distributions		(1.30)			(0.05)			(0.14)			(0.18)			(0.14)
Net asset value, end of year		$11.09			$11.96			$11.05			$10.30			$10.83
Total return2		3.75	%		8.73	%		8.63	%		(3.28)	%		2.89	%
Net assets, end of year (000s)		$1,481			$1,002			$867			$857			$1,790
Ratios to average net assets:
Gross expenses		1.45	%		1.43	%		1.38	%		1.36	%		1.32	%
Net expenses3		1.45	4		1.43	4		1.38	4		1.36			1.32
Net investment income		3.23			0.48			1.12			1.60			1.14
Portfolio turnover rate		80	%5		23	%		60	%		85	%		43	%

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

² Performance figures, exclusive of CDSC, 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.

³ As a result of an expense limitation arrangement, the ratio of total annual fund operating expenses, other than interest, brokerage commissions, taxes, extraordinary expenses, deferred organizational expenses and acquired fund fees and expenses, to average net assets of Class C shares did not exceed 1.65%. This expense limitation arrangement cannot be terminated prior to December 31, 2023 without the Board of Directors’ consent. In addition, the manager has agreed to waive the Fund’s management fee to an extent sufficient to offset the net management fee payable in connection with any investment in an affiliated money market fund.

⁴ Reflects fee waivers and/or expense reimbursements.

⁵ Excludes securities delivered as a result of a redemption in-kind.

See Notes to Financial Statements.

Western Asset Inflation Indexed Plus Bond Fund 2021 Annual Report 21

Financial highlights (cont’d)

For a share of capital stock outstanding throughout each year ended December 31:
Class C1 Shares1	2021			2020			2019			2018			2017
Net asset value, beginning of year		$12.20			$11.24			$10.41			$10.95			$10.76
Income (loss) from operations:
Net investment income		0.39			0.04			0.04			0.21			0.14
Net realized and unrealized gain (loss)		0.13			0.93			0.89			(0.54)			0.19
Total income (loss) from operations		0.52			0.97			0.93			(0.33)			0.33
Less distributions from:
Net investment income		(0.51)			(0.01)			(0.10)			(0.21)			(0.14)
Net realized gains		(0.79)			—			—			—			—
Total distributions		(1.30)			(0.01)			(0.10)			(0.21)			(0.14)
Net asset value, end of year		$11.42			$12.20			$11.24			$10.41			$10.95
Total return2		4.46	%3		8.66	%		8.95	%		(3.03)	%		3.11	%
Net assets, end of year (000s)		$31			$28			$91			$702			$1,003
Ratios to average net assets:
Gross expenses		1.94	%		2.24	%		1.21	%		1.17	%		1.14	%
Net expenses4		1.40	5		1.40	5		1.21	5		1.17			1.14
Net investment income		3.24			0.33			0.35			1.94			1.32
Portfolio turnover rate		80	%6		23	%		60	%		85	%		43	%

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

² 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.

³ The total return includes a payment by an affiliate to reimburse for an error. Absent this payment, total return would have been 3.82% for the year ended December 31, 2021.

⁴ As a result of an expense limitation arrangement, the ratio of total annual fund operating expenses, other than interest, brokerage commissions, taxes, extraordinary expenses, deferred organizational expenses and acquired fund fees and expenses, to average net assets of Class C1 shares did not exceed 1.40%. This expense limitation arrangement cannot be terminated prior to December 31, 2023 without the Board of Directors’ consent. In addition, the manager has agreed to waive the Fund’s management fee to an extent sufficient to offset the net management fee payable in connection with any investment in an affiliated money market fund.

⁵ Reflects fee waivers and/or expense reimbursements.

⁶ Excludes securities delivered as a result of a redemption in-kind.

See Notes to Financial Statements.

22 Western Asset Inflation Indexed Plus Bond Fund 2021 Annual Report

For a share of capital stock outstanding throughout each year ended December 31:
Class FI Shares1	2021			2020			2019			2018			2017
Net asset value, beginning of year		$12.20			$11.27			$10.49			$11.03			$10.85
Income (loss) from operations:
Net investment income		0.47			0.13			0.22			0.23			0.22
Net realized and unrealized gain (loss)		0.07			0.93			0.77			(0.51)			0.15
Total income (loss) from operations		0.54			1.06			0.99			(0.28)			0.37
Less distributions from:
Net investment income		(0.60)			(0.13)			(0.21)			(0.26)			(0.19)
Net realized gains		(0.79)			—			—			—			—
Total distributions		(1.39)			(0.13)			(0.21)			(0.26)			(0.19)
Net asset value, end of year		$11.35			$12.20			$11.27			$10.49			$11.03
Total return2		4.56	%		9.42	%		9.48	%		(2.58)	%		3.45	%
Net assets, end of year (000s)		$816			$754			$483			$804			$1,889
Ratios to average net assets:
Gross expenses		0.70	%		0.73	%		0.64	%		0.68	%		0.67	%
Net expenses3		0.69	4		0.73	4		0.64	4		0.68			0.67
Net investment income		3.89			1.07			2.03			2.16			1.97
Portfolio turnover rate		80	%5		23	%		60	%		85	%		43	%

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

² 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.

³ As a result of an expense limitation arrangement, the ratio of total annual fund operating expenses, other than interest, brokerage commissions, taxes, extraordinary expenses, deferred organizational expenses and acquired fund fees and expenses, to average net assets of Class FI shares did not exceed 0.85%. This expense limitation arrangement cannot be terminated prior to December 31, 2023 without the Board of Directors’ consent. In addition, the manager has agreed to waive the Fund’s management fee to an extent sufficient to offset the net management fee payable in connection with any investment in an affiliated money market fund.

⁴ Reflects fee waivers and/or expense reimbursements.

⁵ Excludes securities delivered as a result of a redemption in-kind.

See Notes to Financial Statements.

Western Asset Inflation Indexed Plus Bond Fund 2021 Annual Report 23

Financial highlights (cont’d)

For a share of capital stock outstanding throughout each year ended December 31:
Class R Shares1	2021			2020			2019			2018			2017
Net asset value, beginning of year		$12.13			$11.20			$10.43			$10.97			$10.79
Income (loss) from operations:
Net investment income		0.42			0.10			0.16			0.23			0.16
Net realized and unrealized gain (loss)		0.07			0.91			0.78			(0.55)			0.18
Total income (loss) from operations		0.49			1.01			0.94			(0.32)			0.34
Less distributions from:
Net investment income		(0.55)			(0.08)			(0.17)			(0.22)			(0.16)
Net realized gains		(0.79)			—			—			—			—
Total distributions		(1.34)			(0.08)			(0.17)			(0.22)			(0.16)
Net asset value, end of year		$11.28			$12.13			$11.20			$10.43			$10.97
Total return2		4.16	%		9.06	%		8.99	%		(2.93)	%		3.18	%
Net assets, end of year (000s)		$102			$216			$458			$607			$1,022
Ratios to average net assets:
Gross expenses		1.13	%		1.06	%		1.05	%		1.06	%		1.01	%
Net expenses3		1.13	4		1.06	4		1.05	4		1.06			1.01
Net investment income		3.45			0.88			1.49			2.11			1.47
Portfolio turnover rate		80	%5		23	%		60	%		85	%		43	%

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

² 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.

³ As a result of an expense limitation arrangement, the ratio of total annual fund operating expenses, other than interest, brokerage commissions, taxes, extraordinary expenses, deferred organizational expenses and acquired fund fees and expenses, to average net assets of Class R shares did not exceed 1.15%. This expense limitation arrangement cannot be terminated prior to December 31, 2023 without the Board of Directors’ consent. In addition, the manager has agreed to waive the Fund’s management fee to an extent sufficient to offset the net management fee payable in connection with any investment in an affiliated money market fund.

⁴ Reflects fee waivers and/or expense reimbursements.

⁵ Excludes securities delivered as a result of a redemption in-kind.

See Notes to Financial Statements.

24 Western Asset Inflation Indexed Plus Bond Fund 2021 Annual Report

For a share of capital stock outstanding throughout each year ended December 31:
Class I Shares1	2021			2020			2019			2018			2017
Net asset value, beginning of year		$12.40			$11.45			$10.66			$11.21			$11.02
Income (loss) from operations:
Net investment income		0.54			0.18			0.24			0.30			0.23
Net realized and unrealized gain (loss)		0.03			0.94			0.80			(0.55)			0.19
Total income (loss) from operations		0.57			1.12			1.04			(0.25)			0.42
Less distributions from:
Net investment income		(0.63)			(0.17)			(0.25)			(0.30)			(0.23)
Net realized gains		(0.79)			—			—			—			—
Total distributions		(1.42)			(0.17)			(0.25)			(0.30)			(0.23)
Net asset value, end of year		$11.55			$12.40			$11.45			$10.66			$11.21
Total return2		4.74	%		9.84	%		9.79	%		(2.25)	%		3.82	%
Net assets, end of year (000s)		$34,615			$84,063			$51,902			$59,639			$90,372
Ratios to average net assets:
Gross expenses		0.39	%		0.35	%		0.36	%		0.38	%		0.39	%
Net expenses3		0.39	4		0.35	4		0.36	4		0.38			0.39
Net investment income		4.34			1.51			2.17			2.77			2.08
Portfolio turnover rate		80	%5		23	%		60	%		85	%		43	%

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

² 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.

³ The manager has agreed to waive the Fund’s management fee to an extent sufficient to offset the net management fee payable in connection with any investment in an affiliated money market fund.

⁴ Reflects fee waivers and/or expense reimbursements.

⁵ Excludes securities delivered as a result of a redemption in-kind.

See Notes to Financial Statements.

Western Asset Inflation Indexed Plus Bond Fund 2021 Annual Report 25

Financial highlights (cont’d)

For a share of capital stock outstanding throughout each year ended December 31:
Class IS Shares1	2021			2020			2019			2018			2017
Net asset value, beginning of year	$	12.46		$	11.51		$	10.71		$	11.27		$	11.08
Income (loss) from operations:
Net investment income		0.54			0.18			0.26			0.32			0.25
Net realized and unrealized gain (loss)		0.06			0.95			0.80			(0.57)			0.18
Total income (loss) from operations		0.60			1.13			1.06			(0.25)			0.43
Less distributions from:
Net investment income		(0.64)			(0.18)			(0.26)			(0.31)			(0.24)
Net realized gains		(0.79)			—			—			—			—
Total distributions		(1.43)			(0.18)			(0.26)			(0.31)			(0.24)
Net asset value, end of year	$	11.63		$	12.46		$	11.51		$	10.71		$	11.27
Total return2		4.99	%		9.87	%		9.93	%		(2.23)	%		3.93	%
Net assets, end of year (000s)	$	64,384		$	414,300		$	398,438		$	349,242		$	324,746
Ratios to average net assets:
Gross expenses		0.28	%		0.27	%		0.27	%		0.28	%		0.27	%
Net expenses3		0.28	4		0.27	4		0.27	4		0.28			0.27
Net investment income		4.37			1.49			2.31			2.87			2.19
Portfolio turnover rate		80	%5		23	%		60	%		85	%		43	%

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

² 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.

³ As a result of an expense limitation arrangement, the ratio of total annual fund operating expenses for Class IS did not exceed the ratio of total annual fund operating expenses for Class I shares. This expense limitation arrangement cannot be terminated prior to December 31, 2023 without the Board of Directors’ consent. In addition, the manager has agreed to waive the Fund’s management fee to an extent sufficient to offset the net management fee payable in connection with any investment in an affiliated money market fund.

⁴ Reflects fee waivers and/or expense reimbursements.

⁵ Excludes securities delivered as a result of a redemption in-kind.

See Notes to Financial Statements.

26 Western Asset Inflation Indexed Plus Bond Fund 2021 Annual Report

Notes to financial statements

1. Organization and significant accounting policies

Western Asset Inflation Indexed Plus Bond Fund (the “Fund”) is a separate diversified investment series of Western Asset Funds, Inc. (the “Corporation”). The Corporation, a Maryland Statutory Corporation, is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company.

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 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 Directors.

The Board of Directors is responsible for the valuation process and has delegated the supervision of the daily valuation process to the Global Fund Valuation Committee (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 Directors, is responsible for making fair value determinations, evaluating the effectiveness of the Fund’s pricing policies, and reporting to the Board of Directors. When determining the reliability of third party pricing information for investments owned by the

Western Asset Inflation Indexed Plus Bond Fund 2021 Annual Report 27

Notes to financial statements (cont’d)

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 Directors, 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 Directors 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.

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.

28 Western Asset Inflation Indexed Plus Bond Fund 2021 Annual Report

The following is a summary of the inputs used in valuing the Fund’s assets 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		—	$	98,565,669		—	$	98,565,669
Corporate Bonds & Notes		—		5,413,573		—		5,413,573
Non-U.S. Treasury Inflation Protected Securities		—		3,146,969		—		3,146,969
Sovereign Bonds		—		1,823,702		—		1,823,702
Collateralized Mortgage Obligations		—		984,247		—		984,247
Asset-Backed Securities		—		4,324		—		4,324
Total Long-Term Investments		—		109,938,484		—		109,938,484
Short-Term Investments†	$	527,330		—		—		527,330
Total Investments	$	527,330	$	109,938,484		—	$	110,465,814
Other Financial Instruments:
Forward Foreign Currency Contracts††		—	$	31,025		—	$	31,025
Total	$	527,330	$	109,969,509		—	$	110,496,839

† See Schedule of Investments for additional detailed categorizations.

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

(b) Futures contracts. The Fund uses futures contracts generally to gain exposure to, or hedge against, changes in interest rates or gain exposure to, or hedge against, changes in certain asset classes. A futures contract represents a commitment for the future purchase or sale of an asset at a specified price on a specified date.

Upon entering into a futures contract, the Fund is required to deposit cash or cash equivalents with a broker in an amount equal to a certain percentage of the contract amount. This is known as the ‘‘initial margin’’ and subsequent payments (‘‘variation margin’’) are made or received by the Fund each day, depending on the daily fluctuation in the value of the contract. For certain futures, including foreign denominated futures, variation margin is not settled daily, but is recorded as a net variation margin payable or receivable. The daily changes in contract value are recorded as unrealized appreciation or depreciation in the 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.

(c) Forward foreign currency contracts. The Fund enters into a forward foreign currency contract to hedge exposure of bond positions or in an attempt to increase the Fund’s return.

Western Asset Inflation Indexed Plus Bond Fund 2021 Annual Report 29

Notes to financial statements (cont’d)

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 Statement of Assets and Liabilities. The Fund bears the risk of an unfavorable change in the foreign exchange rate underlying the forward foreign currency contract. Risks may also arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of their contracts.

(d) 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 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.

(e) 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.

30 Western Asset Inflation Indexed Plus Bond Fund 2021 Annual Report

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.

(f) Credit and market risk. 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.

(g) Foreign investment risks. The Fund’s investments in foreign securities may involve risks not present in domestic investments. Since securities may be denominated in foreign currencies, may require settlement in foreign currencies or may pay interest or dividends in foreign currencies, changes in the relationship of these foreign currencies to the U.S. dollar can significantly affect the value of the investments and earnings of the Fund. Foreign investments may also subject the Fund to foreign government exchange restrictions, expropriation, taxation or other political, social or economic developments, all of which affect the market and/or credit risk of the investments.

(h) 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 subadviser 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 subadviser. 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

Western Asset Inflation Indexed Plus Bond Fund 2021 Annual Report 31

Notes to financial statements (cont’d)

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 Statement of Assets and Liabilities across transactions between the Fund and the applicable counterparty. The enforceability of the right to offset may vary by jurisdiction.

Collateral requirements differ by type of derivative. Collateral or margin requirements are set by the broker or exchange clearinghouse for exchange traded derivatives while collateral terms are contract specific for OTC traded derivatives. Cash collateral that has been pledged to cover obligations of the Fund under derivative contracts, if any, will be reported separately in the Statement of Assets and Liabilities. Securities pledged as collateral, if any, for the same purpose are noted in the Schedule of Investments.

As of December 31, 2021, the Fund did not have any open OTC derivative transactions with credit related contingent features in a net liability position.

(i) 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. 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.

(j) Distributions to shareholders. Distributions from net investment income of the Fund, if any, are declared and paid on a quarterly basis. Distributions of net realized gains, if any, are declared at least annually. 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.

(k) Share class accounting. Investment income, common expenses and realized/ unrealized gains (losses) on investments are allocated to the various classes of the Fund on

32 Western Asset Inflation Indexed Plus Bond Fund 2021 Annual Report

the basis of daily net assets of each class. Fees relating to a specific class are charged directly to that share class.

(l) 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.

(m) 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 December 31, 2021, 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.

(n) Reclassification. GAAP requires that certain components of net assets be reclassified to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset value per share. During the current year, the following reclassifications have been made:

	Total Distributable Earnings (Loss)		Paid-in Capital
(a)	$	(36,037,812)	$	36,037,812

^(a) Reclassifications are due to book/tax differences in the treatment of an in-kind distribution of securities.

2. Investment management agreement and other transactions with affiliates

Legg Mason Partners Fund Advisor, LLC (“LMPFA”) is the Fund’s investment manager. Western Asset Management Company, LLC (“Western Asset”), Western Asset Management Company Limited in London (“Western Asset London”), Western Asset Management Company Pte. Ltd. in Singapore (“Western Asset Singapore”) and Western Asset Management Company Ltd in Japan (“Western Asset Japan”) are the Fund’s subadvisers. LMPFA, Western Asset, Western Asset London, Western Asset Singapore and Western Asset Japan are indirect, wholly-owned subsidiaries of Franklin Resources, Inc. (“Franklin Resources”).

LMPFA provides the Fund with management and administrative services for which the Fund pays a fee, calculated daily and paid monthly, at an annual rate of 0.20% of the Fund’s average daily net assets. For their services, LMPFA pays Western Asset, Western Asset London, Western Asset Singapore and Western Asset Japan monthly all of the management fee that it receives from the Fund.

Western Asset Inflation Indexed Plus Bond Fund 2021 Annual Report 33

Notes to financial statements (cont’d)

As a result of expense limitation arrangements between the Fund and LMPFA, the ratio of total annual fund operating expenses, other than interest, brokerage commissions, taxes, extraordinary expenses, deferred organizational expenses and acquired fund fees and expenses, to average net assets of Class A, Class C, Class C1, Class FI and Class R shares did not exceed 0.90%, 1.65%, 1.40%, 0.85% and 1.15%, respectively. In addition, the ratio of total annual fund operating expenses for Class IS shares did not exceed the ratio of total annual fund operating expenses for Class I shares. These expense limitation arrangements cannot be terminated prior to December 31, 2023 without the Board of Directors’ consent. In addition, the manager has agreed to waive the Fund’s management fee to an extent sufficient to offset the net management fee payable in connection with any investment in an affiliated money market fund (the “affiliated money market fund waiver”). The affiliated money market fund waiver is not subject to the recapture provision discussed below.

During the year ended December 31, 2021, fees waived and/or expenses reimbursed amounted to $2,711, which included an affiliated money market fund waiver of $1,210.

LMPFA is permitted to recapture amounts waived and/or reimbursed to a class within two years after the fiscal year in which LMPFA earned the fee or incurred the expense if the class’ total annual fund operating expenses have fallen to a level below the expense limitation (“expense cap”) in effect at the time the fees were earned or the expenses incurred. In no case will LMPFA recapture any amount that would result, on any particular business day of the Fund, in the class’ total annual fund operating expenses exceeding the expense cap or any other lower limit then in effect.

Pursuant to these arrangements, at December 31, 2021, the Fund had remaining fee waivers and/or expense reimbursements subject to recapture by LMPFA and respective dates of expiration as follows:

	Class A		Class C		Class C1	Class FI		Class R		Class I		Class IS
Expires December 31, 2022		—		—	$397		—		—		—		—
Expires December 31, 2023	$	128	$	18	161	$	10	$	1	$	417	$	767
Total fee waivers/ expense reimbursements subject to recapture	$	128	$	18	$558	$	10	$	1	$	417	$	767

For the year ended December 31, 2021, LMPFA did not recapture any fees.

Franklin Distributors, LLC (known as Legg Mason Investor Services, LLC prior to July 7, 2021) (“Franklin Distributors”) serves as the Fund’s sole and exclusive distributor. Franklin Distributors is an indirect, wholly-owned broker-dealer subsidiary of Franklin Resources.

There is a maximum initial sales charge of 4.25% for Class A shares. There is a contingent deferred sales charge (“CDSC”) of 1.00% on Class C shares, which applies if redemption occurs within 12 months from purchase payment. In certain cases, Class A shares have a 1.00% CDSC, which applies if redemption occurs within 18 months from purchase payment. This CDSC only applies to those purchases of Class A shares, which, when combined with current holdings of other shares of Legg Mason funds, equal or exceed $1,000,000 in the aggregate. These purchases do not incur an initial sales charge.

34 Western Asset Inflation Indexed Plus Bond Fund 2021 Annual Report

For the year ended December 31, 2021, sales charges retained by and CDSCs paid to Franklin Distributors and its affiliates, if any, were as follows:

	Class A		Class C
Sales charges	$	3,148		—
CDSCs		—	$	764

All officers and one Director of the Corporation are employees of Franklin Resources or its affiliates and do not receive compensation from the Corporation.

3. Investments

During the year ended December 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	$	4,105,206		$	252,416,565
Sales		10,716,726	*		266,935,145	*

* Excludes value of securities delivered as a result of redemptions in-kind totaling $376,605,287 (Note 10).

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

	Cost		Gross Unrealized Appreciation		Gross Unrealized Depreciation		Net Unrealized Appreciation
Securities	$	105,386,666	$	5,545,962	$	(466,814)	$	5,079,148
Forward foreign currency contracts		—		31,025		—		31,025

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 Statement of Assets and Liabilities at December 31, 2021.

ASSET DERIVATIVES1
	Foreign Exchange Risk
Forward foreign currency contracts	$	31,025

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

Western Asset Inflation Indexed Plus Bond Fund 2021 Annual Report 35

Notes to financial statements (cont’d)

The following tables provide information about the effect of derivatives and hedging activities on the Fund’s Statement of Operations for the year ended December 31, 2021. The 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		Total
Futures contracts	$	2,283,429		—	$	2,283,429
Forward foreign currency contracts		—	$	(189,095)		(189,095)
Total	$	2,283,429	$	(189,095)	$	2,094,334
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES RECOGNIZED
	Interest Rate Risk		Foreign Exchange Risk		Total
Futures contracts	$	(393,788)		—	$	(393,788)
Forward foreign currency contracts		—	$	164,173		164,173
Total	$	(393,788)	$	164,173	$	(229,615)

During the year ended December 31, 2021, the volume of derivative activity for the Fund was as follows:

	Average Market Value
Futures contracts (to buy)†	$	9,755,082
Futures contracts (to sell)†		12,615,406
Forward foreign currency contracts (to buy)†		402,263
Forward foreign currency contracts (to sell)		1,848,636

† At December 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 December 31, 2021.

Counterparty	Gross Assets Subject to Master Agreements1		Gross Liabilities Subject to Master Agreements		Net Assets (Liabilities) Subject to Master Agreements		Collateral Pledged (Received)		Net Amount2
BNP Paribas SA	$	569		—	$	569		—	$	569
Citibank N.A.		811		—		811		—		811
JPMorgan Chase & Co.		29,645		—		29,645		—		29,645
Total	$	31,025		—	$	31,025		—	$	31,025

¹ Absent an event of default or early termination, derivative assets and liabilities are presented gross and not offset in the Statement of Assets and Liabilities.

² Represents the net amount receivable (payable) from (to) the counterparty in the event of default.

36 Western Asset Inflation Indexed Plus Bond Fund 2021 Annual Report

5. Class specific expenses, waivers and/or expense reimbursements

The Fund has adopted a Rule 12b-1 shareholder services and distribution plan and under that plan the Fund pays service and/or distribution fees with respect to its Class A, Class C, Class C1, Class FI and Class R shares calculated at the annual rate of 0.25%, 1.00%, 0.75%, 0.25% and 0.50% of the average daily net assets of each class, respectively. Service and/or distribution fees are accrued daily and paid monthly.

For the year ended December 31, 2021, class specific expenses were as follows:

	Service and/or Distribution Fees		Transfer Agent Fees
Class A	$	20,664	$	12,134
Class C		12,223		1,151
Class C1		222		252
Class FI		1,926		738
Class R		994		576
Class I		—		49,073
Class IS		—		2,380
Total	$	36,029	$	66,304

For the year ended December 31, 2021, waivers and/or expense reimbursements by class were as follows:

	Waivers/Expense Reimbursements
Class A	$	153
Class C		21
Class C1		161
Class FI		12
Class R		2
Class I		632
Class IS		1,730
Total	$	2,711

6. Distributions to shareholders by class

	Year Ended December 31, 2021		Year Ended December 31, 2020
Net Investment Income:
Class A	$	415,887	$	92,836
Class C		54,017		4,549
Class C1		1,251		77
Class FI		38,365		5,015
Class R		9,725		2,823
Class I		2,615,254		1,039,210
Class IS		10,365,541		5,830,541
Total	$	13,500,040	$	6,975,051

Western Asset Inflation Indexed Plus Bond Fund 2021 Annual Report 37

Notes to financial statements (cont’d)

	Year Ended December 31, 2021		Year Ended December 31, 2020
Net Realized Gains:
Class A	$	684,849		—
Class C		98,979		—
Class C1		1,941		—
Class FI		51,668		—
Class R		6,578		—
Class I		2,192,270		—
Class IS		3,998,026		—
Total	$	7,034,311		—

7. Capital shares

At December 31, 2021, the Corporation had 42.7 billion shares of capital stock authorized with a par value of $0.001 per share. Transactions in shares of each class were as follows:

	Year Ended December 31, 2021				Year Ended December 31, 2020
	Shares		Amount		Shares		Amount
Class A
Shares sold		442,916	$	5,405,550		273,932	$	3,220,522
Shares issued on reinvestment		84,011		970,361		6,010		71,892
Shares repurchased		(294,832)		(3,590,901)		(461,881)		(5,307,815)
Net increase (decrease)		232,095	$	2,785,010		(181,939)	$	(2,015,401)
Class C
Shares sold		60,321	$	716,777		44,903	$	526,278
Shares issued on reinvestment		12,326		138,123		367		4,312
Shares repurchased		(22,936)		(270,315)		(39,891)		(456,683)
Net increase		49,711	$	584,585		5,379	$	73,907
Class C1
Shares sold		294	$	3,757		256	$	3,005
Shares issued on reinvestment		278		3,192		7		77
Shares repurchased		(192)		(2,349)		(6,055)		(69,680)
Net increase (decrease)		380	$	4,600		(5,792)	$	(66,598)
Class FI
Shares sold		7,813	$	92,891		25,311	$	307,714
Shares issued on reinvestment		7,817		90,032		424		5,015
Shares repurchased		(5,505)		(65,115)		(6,773)		(77,340)
Net increase		10,125	$	117,808		18,962	$	235,389
Class R
Shares sold		18,201	$	220,245		26,868	$	316,951
Shares issued on reinvestment		898		10,466		43		507
Shares repurchased		(27,818)		(335,827)		(49,986)		(587,030)
Net decrease		(8,719)	$	(105,116)		(23,075)	$	(269,572)

38 Western Asset Inflation Indexed Plus Bond Fund 2021 Annual Report

	Year Ended December 31, 2021				Year Ended December 31, 2020
	Shares		Amount		Shares		Amount
Class I
Shares sold		1,942,877	$	23,989,975		4,259,433	$	50,747,739
Shares issued on reinvestment		404,007		4,777,977		85,746		1,035,620
Shares repurchased		(6,131,392)		(76,440,714)		(2,099,107)		(24,725,735)
Net increase (decrease)		(3,784,508)	$	(47,672,762)		2,246,072	$	27,057,624
Class IS
Shares sold		4,392,632	$	54,343,427		7,092,714	$	84,857,646
Shares issued on reinvestment		1,183,343		14,278,760		458,780		5,550,535
Shares repurchased		(2,657,939)		(32,914,055)		(8,939,597)		(106,287,834)
Shares redeemed in-kind		(30,621,209)		(384,296,171)		—		—
Net decrease		(27,703,173)	$	(348,588,039)		(1,388,103)	$	(15,879,653)

8. Transactions with affiliated company

As defined by the 1940 Act, an affiliated company is one in which the Fund owns 5% or more of the outstanding voting securities, or a company which is under common ownership or control with the Fund. The following company was considered an affiliated company for all or some portion of the year ended December 31, 2021. The following transactions were effected in such company for the year ended December 31, 2021.

	Affiliate Value at December 31, 2020		Purchased				Sold
			Cost		Shares		Cost		Shares
Western Asset Premier Institutional Government Reserves, Premium Shares	$	10,591,499	$	132,575,660		132,575,660	$	142,639,829		142,639,829

(cont’d)	Realized Gain (Loss)	Dividend Income		Net Increase (Decrease) in Unrealized Appreciation (Depreciation)	Affiliate Value at December 31, 2021
Western Asset Premier Institutional Government Reserves, Premium Shares	—	$	636	—	$	527,330

9. Redemption facility

Effective February 5, 2021, the Fund’s redemption facility (the “Redemption Facility”) was terminated and the Fund and certain other participating funds within the Trust, together with other U.S. registered and foreign investment funds (collectively, the “Borrowers”) managed by LMPFA or Franklin Resources, became borrowers in a joint syndicated senior unsecured credit facility totaling $2.675 billion (the “Global Credit Facility”). The Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency

Western Asset Inflation Indexed Plus Bond Fund 2021 Annual Report 39

Notes to financial statements (cont’d)

purposes, including the ability to meet future unanticipated or unusually large redemption requests. Unless renewed, the Global Credit Facility will terminate on February 3, 2023.

Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all the Borrowers, including an annual commitment fee of 0.15% based upon the unused portion of the Global Credit Facility; there is no upfront fee. Under the Redemption Facility, the Fund had access to the aggregate amount of $485 million prior to February 5, 2021 and the following terms were in effect: the annual commitment fee to maintain the Redemption Facility was 0.15% incurred on the unused portion of the facility and there was an annual upfront fee of 0.06%. The aggregate commitment fees under the Global Credit Facility and Redemption Facility are reflected in the Statement of Operations. The Fund did not utilize the Global Credit Facility nor the Redemption Facility during the year ended December 31, 2021.

10. Redemptions in-kind

The Fund may make payment for Fund shares redeemed wholly or in part by distributing portfolio securities to shareholders. For the year ended December 31, 2021, the Fund had redemptions in-kind with total proceeds in the amount of $384,296,171. The net realized gain on these redemptions in-kind amounted to $36,185,101, which was not realized for tax purposes.

11. Income tax information and distributions to shareholders

The tax character of distributions paid during the fiscal years ended December 31, was as follows:

	2021		2020
Distributions paid from:
Ordinary income	$	20,534,351	$	6,975,051

As of December 31, 2021, the components of distributable earnings (loss) on a tax basis were as follows:

Undistributed ordinary income — net	$	786,311
Other book/tax temporary differences(a)		(5,211,473)
Unrealized appreciation (depreciation)		5,092,510
Total distributable earnings (loss) — net	$	667,348

^(a) Other book/tax temporary differences are attributable to the tax deferral of losses on straddles, the realization for tax purposes of unrealized gains (losses) on certain foreign currency contracts and book/tax differences in the timing of the deductibility of various expenses.

12. Recent accounting pronouncement

In March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2020-04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting. In January 2021, the FASB issued ASU No. 2021-01, with further amendments to Topic 848. The amendments in the

40 Western Asset Inflation Indexed Plus Bond Fund 2021 Annual Report

ASUs provide optional temporary accounting recognition and financial reporting relief from the effect of certain types of contract modifications due to the planned discontinuation of the LIBOR and other interbank-offered based reference rates as of the end of 2021 and 2023. The ASUs are 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 these ASUs will not have a material impact on the financial statements.

13. 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, impair the Fund’s ability to satisfy redemption requests, 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 the overnight and one-, three-, six- and twelve-month USD LIBOR settings immediately following the LIBOR publication on Friday, June 30, 2023. All other LIBOR settings, including the one-week and two-month USD LIBOR settings, have ceased publication as of January 1, 2022. 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.

Western Asset Inflation Indexed Plus Bond Fund 2021 Annual Report 41

Report of independent registered public accounting firm

To the Board of Directors of Western Asset Funds, Inc. and Shareholders of Western Asset Inflation Indexed Plus Bond Fund

Opinion on the Financial Statements

We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Western Asset Inflation Indexed Plus Bond Fund (one of the funds constituting Western Asset Funds, Inc., referred to hereafter as the “Fund”) as of December 31, 2021, the related statement of operations for the year ended December 31, 2021, the statement of changes in net assets for each of the two years in the period ended December 31, 2021, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2021 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2021, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2021 and the financial highlights for each of the five years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2021 by correspondence with the custodian and brokers. We believe that our audits provide a reasonable basis for our opinion.

/s/PricewaterhouseCoopers LLP

Baltimore, Maryland

February 17, 2022

We have served as the auditor of one or more investment companies in the Franklin Templeton Group of Funds since 1948.

42 Western Asset Inflation Indexed Plus Bond Fund 2021 Annual Report

Statement regarding liquidity risk management program (unaudited)

Each Fund has adopted and implemented a written Liquidity Risk Management Program (the “LRMP”) as required by Rule 22e-4 under the Investment Company Act of 1940 (the “Liquidity Rule”). The LRMP is designed to assess and manage each Fund’s liquidity risk, which is defined as the risk that the Fund could not meet requests to redeem shares issued by the Fund without significant dilution of remaining investors’ interests in the Fund. In accordance with the Liquidity Rule, the LRMP includes policies and procedures that provide for: (1) assessment, management, and review (no less frequently than annually) of each Fund’s liquidity risk; (2) classification of each Fund’s portfolio holdings into one of four liquidity categories (Highly Liquid, Moderately Liquid, Less Liquid, and Illiquid); (3) for Funds that do not primarily hold assets that are Highly Liquid, establishing and maintaining a minimum percentage of the Fund’s net assets in Highly Liquid investments (called a “Highly Liquid Investment Minimum” or “HLIM”); and (4) prohibiting the Fund’s acquisition of Illiquid investments that would result in the Fund holding more than 15% of its net assets in Illiquid assets. The LRMP also requires reporting to the Securities and Exchange Commission (“SEC”) (on a non-public basis) and to the Board if the Fund’s holdings of Illiquid assets exceed 15% of the Fund’s net assets. Funds with HLIMs must have procedures for addressing HLIM shortfalls, including reporting to the Board and, with respect to HLIM shortfalls lasting more than seven consecutive calendar days, reporting to the SEC (on a non-public basis).

The Director of Liquidity Risk within the Investment Risk Management Group (the “IRMG”) is the appointed Administrator of the LRMP. The IRMG maintains the Investment Liquidity Committee (the “ILC”) to provide oversight and administration of policies and procedures governing liquidity risk management for Franklin Templeton and Legg Mason products and portfolios. The ILC includes representatives from Franklin Templeton’s Risk, Trading, Global Compliance, Legal, Investment Compliance, Investment Operations, Valuation Committee, Product Management and Global Product Strategy.

In assessing and managing each Fund’s liquidity risk, the ILC considers, as relevant, a variety of factors, including the Fund’s investment strategy and the liquidity of its portfolio investments during both normal and reasonably foreseeable stressed conditions; its short and long-term cash flow projections; and its cash holdings and access to other funding sources including the Funds’ interfund lending facility and line of credit. Classification of the Fund’s portfolio holdings in the four liquidity categories is based on the number of days it is reasonably expected to take to convert the investment to cash (for Highly Liquid and Moderately Liquid holdings) or sell or dispose of the investment (for Less Liquid and Illiquid investments), in current market conditions without significantly changing the investment’s market value.

Each Fund primarily holds liquid assets that are defined under the Liquidity Rule as “Highly Liquid Investments,” and therefore is not required to establish an HLIM. Highly Liquid

Western Asset Inflation Indexed Plus Bond Fund 43

Statement regarding liquidity risk management program (unaudited) (cont’d)

Investments are defined as cash and any investment reasonably expected to be convertible to cash in current market conditions in three business days or less without the conversion to cash significantly changing the market value of the investment.

At meetings of the Funds’ Board of Trustees/Directors held in November 2021, the Program Administrator provided a written report to the Board addressing the adequacy and effectiveness of the program for the year ended December 31, 2020. The Program Administrator report concluded that (i.) the LRMP, as adopted and implemented, remains reasonably designed to assess and manage each Fund’s liquidity risk; (ii.) the LRMP, including the Highly Liquid Investment Minimum (“HLIM”) where applicable, was implemented and operated effectively to achieve the goal of assessing and managing each Fund’s liquidity risk; and (iii.) each Fund was able to meet requests for redemption without significant dilution of remaining investors’ interests in the Fund.

44 Western Asset Inflation Indexed Plus Bond Fund

Additional information (unaudited)

Information about Directors and Officers

The business and affairs of Western Asset Inflation Indexed Plus Bond Fund (the “Fund”) are conducted by management under the supervision and subject to the direction of its Board of Directors. The business address of each Director is c/o Jane Trust, Legg Mason, 100 International Drive, 11th Floor, Baltimore, Maryland 21202.

Information pertaining to the Directors and officers of the Board is set forth below. The Statement of Additional Information includes additional information about Directors and is available, without charge, upon request by calling the Fund at 1-877-6LM-FUND/656-3863.

Independent Directors†
Robert Abeles, Jr.
Year of birth	1945
Position(s) with Fund	Director
Term of office1 and length of time served2	Since 2013
Principal occupation(s) during the past five years	Board Member, Great Public Schools Now (since 2018); Senior Vice President Emeritus (since 2016) and formerly, Senior Vice President, Finance and Chief Financial Officer (2009 to 2016) at University of Southern California; Board Member, Excellent Education Development (since 2012)
Number of funds in fund complex overseen by Director3	51
Other Directorships held by Director during the past five years	None
Jane F. Dasher
Year of birth	1949
Position(s) with Fund	Director
Term of office1 and length of time served2	Since 1999
Principal occupation(s) during the past five years	Chief Financial Officer, Long Light Capital, LLC, formerly known as Korsant Partners, LLC (a family investment company) (since 1997)
Number of funds in fund complex overseen by Director3	51
Other Directorships held by Director during the past five years	Director, Visual Kinematics, Inc. (since 2018)
Anita L. DeFrantz
Year of birth	1952
Position(s) with Fund	Director
Term of office1 and length of time served2	Since 1998
Principal occupation(s) during the past five years	President of Tubman Truth Corp. (since 2015); President Emeritus (since 2015) and formerly, President (1987 to 2015) and Director (1990 to 2015) of LA84 (formerly Amateur Athletic Foundation of Los Angeles); Member (since 1986), Member of the Executive Board (since 2013) and Vice President (since 2017) of the International Olympic Committee
Number of funds in fund complex overseen by Director3	51
Other Directorships held by Director during the past five years	None

Western Asset Inflation Indexed Plus Bond Fund 45

Additional information (unaudited) (cont’d)

Information about Directors and Officers

Independent Directors† (cont’d)
Susan B. Kerley
Year of birth	1951
Position(s) with Fund	Director
Term of office1 and length of time served2	Since 1992
Principal occupation(s) during the past five years	Investment Consulting Partner, Strategic Management Advisors, LLC (investment consulting) (since 1990)
Number of funds in fund complex overseen by Director3	51
Other Directorships held by Director during the past five years	Director and Trustee (since 1990) and Chairman (since 2017 and 2005 to 2012) of various series of MainStay Family of Funds (66 funds); formerly, Investment Company Institute (ICI) Board of Governors (2006 to 2014); ICI Executive Committee (2011 to 2014); Chairman of the Independent Directors Council (2012 to 2014)
Michael Larson
Year of birth	1959
Position(s) with Fund	Director
Term of office1 and length of time served2	Since 2004
Principal occupation(s) during the past five years	Chief Investment Officer for William H. Gates III (since 1994)4
Number of funds in fund complex overseen by Director3	51
Other Directorships held by Director during the past five years	Republic Services, Inc. (since 2009); Fomento Economico Mexicano, SAB (since 2011); Ecolab Inc. (since 2012); formerly, AutoNation, Inc. (2010 to 2018)
Avedick B. Poladian
Year of birth	1951
Position(s) with Fund	Director
Term of office1 and length of time served2	Since 2007
Principal occupation(s) during the past five years	Director and Advisor (since 2017) and former Executive Vice President and Chief Operating Officer (2002 to 2016) of Lowe Enterprises, Inc. (privately held real estate and hospitality firm); formerly, Partner, Arthur Andersen, LLP (1974 to 2002)
Number of funds in fund complex overseen by Director3	51
Other Directorships held by Director during the past five years	Occidental Petroleum Corporation (since 2008); California Resources Corporation (2014 to 2021); and Public Storage (since 2010)

46 Western Asset Inflation Indexed Plus Bond Fund

Independent Directors† (cont’d)
William E.B. Siart
Year of birth	1946
Position(s) with Fund	Director and Chairman of the Board
Term of office1 and length of time served2	Since 1997
Principal occupation(s) during the past five years	Chairman of Excellent Education Development (since 2000); formerly, Chairman of Great Public Schools Now (2015 to 2020); Trustee of The Getty Trust (since 2005 to 2017); Chairman of Walt Disney Concert Hall, Inc. (1998 to 2006)
Number of funds in fund complex overseen by Director3	51
Other Directorships held by Director during the past five years	Member of Board of United States Golf Association, Executive Committee Member (since 2017); Trustee, University of Southern California (since 1994)
Jaynie Miller Studenmund
Year of birth	1954
Position(s) with Fund	Director
Term of office1 and length of time served2	Since 2004
Principal occupation(s) during the past five years	Corporate Board Member and Advisor (since 2004); formerly, Chief Operating Officer of Overture Services, Inc. (publicly traded internet company that created search engine marketing) (2001 to 2004); President and Chief Operating Officer, PayMyBills (internet innovator in bill presentment/payment space) (1999 to 2001); Executive vice president for consumer and business banking for three national financial institutions (1984 to 1997)
Number of funds in fund complex overseen by Director3	51
Other Directorships held by Director during the past five years	Director of Pacific Premier Bancorp Inc. and Pacific Premier Bank (since 2019); Director of EXL (operations management and analytics company) (since 2018); Director of CoreLogic, Inc. (information, analytics and business services company) (since 2012); formerly, Director of Pinnacle Entertainment, Inc. (gaming and hospitality company) (2012 to 2018); Director of LifeLock, Inc. (identity theft protection company) (2015 to 2017); Director of Orbitz Worldwide, Inc. (online travel company) (2007 to 2014)
Peter J. Taylor
Year of birth	1958
Position(s) with Fund	Director
Term of office1 and length of time served2	Since 2019
Principal occupation(s) during the past five years	President, ECMC Foundation (nonprofit organization) (since 2014); formerly, Executive Vice President and Chief Financial Officer for University of California system (2009 to 2014)
Number of funds in fund complex overseen by Director3	51
Other Directorships held by Director during the past five years	Director of Pacific Mutual Holding Company5 (since 2016); Member of the Board of Trustees of California State University system (since 2015); Ralph M. Parson Foundation (since 2015), Kaiser Family Foundation (since 2012), and Edison International (since 2011)

Western Asset Inflation Indexed Plus Bond Fund 47

Additional information (unaudited) (cont’d)

Information about Directors and Officers

Interested Director
Ronald L. Olson6
Year of birth	1941
Position(s) with Fund	Director
Term of office1 and length of time served2	Since 2005
Principal occupation(s) during the past five years	Partner of Munger, Tolles & Olson LLP (law partnership) (since 1968)
Number of funds in fund complex overseen by Director3	51
Other Directorships held by Director during the past five years	Berkshire Hathaway, Inc. (since 1997)
Interested Director and Officer
Jane Trust, CFA7
Year of birth	1962
Position(s) with Fund	Director, President and Chief Executive Officer
Term of office1 and length of time served2	Since 2015
Principal occupation(s) during the past five years	Senior Vice President, Fund Board Management, Franklin Templeton (since 2020); Officer and/or Trustee/Director of 131 funds associated with LMPFA or its affiliates (since 2015); President and Chief Executive Officer of LMPFA (since 2015); formerly, Senior Managing Director (2018 to 2020) and Managing Director (2016 to 2018) of Legg Mason & Co., LLC (“Legg Mason & Co.”); Senior Vice President of LMPFA (2015)
Number of funds in fund complex overseen by Director3	129
Other Directorships held by Director during the past five years	None
Additional Officers
Ted P. Becker
Franklin Templeton 620 Eighth Avenue, 47th Floor, New York, NY 10018
Year of birth	1951
Position(s) with Fund	Chief Compliance Officer
Term of office1 and length of time served2	Since 2007
Principal occupation(s) during the past five years	Vice President, Global Compliance of Franklin Templeton (since 2020); Chief Compliance Officer of LMPFA (since 2006); Chief Compliance Officer of certain funds associated with Legg Mason & Co. or its affiliates (since 2006); formerly, Director of Global Compliance at Legg Mason, Inc. (2006 to 2020); Managing Director of Compliance of Legg Mason & Co. (2005 to 2020)

48 Western Asset Inflation Indexed Plus Bond Fund

Additional Officers (cont’d)
Susan Kerr
Franklin Templeton 620 Eighth Avenue, 47th Floor, New York, NY 10018
Year of birth	1949
Position(s) with Fund	Chief Anti-Money Laundering Compliance Officer
Term of office1 and length of time served2	Since 2013
Principal occupation(s) during the past five years	Senior Compliance Analyst, Franklin Templeton (since 2020); Chief Anti-Money Laundering Compliance Officer of certain funds associated with Legg Mason & Co. or its affiliates (since 2013) and Anti-Money Laundering Compliance Officer (since 2012), Senior Compliance Officer (since 2011) and Assistant Vice President (since 2010) of Franklin Distributors, LLC; formerly, Assistant Vice President of Legg Mason & Co. (2010 to 2020)
Jenna Bailey
Franklin Templeton 100 First Stamford Place, 5th Floor, Stamford, CT 06902
Year of birth	1978
Position(s) with Fund	Identity Theft Prevention Officer
Term of office1 and length of time served2	Since 2015
Principal occupation(s) during the past five years	Senior Compliance Analyst of Franklin Templeton (since 2020); Identity Theft Prevention Officer of certain funds associated with Legg Mason & Co. or its affiliates (since 2015); formerly, Compliance Officer of Legg Mason & Co. (2013 to 2020); Assistant Vice President of Legg Mason & Co. (2011 to 2020)
Marc A. De Oliveira
Franklin Templeton 100 First Stamford Place, 6th Floor, Stamford, CT 06902
Year of birth	1971
Position(s) with Fund	Secretary and Chief Legal Officer
Term of office1 and length of time served2	Since 2020
Principal occupation(s) during the past five years	Associate General Counsel of Franklin Templeton (since 2020); Assistant Secretary of certain funds associated with Legg Mason & Co. or its affiliates (since 2006); formerly, Managing Director (2016 to 2020) and Associate General Counsel of Legg Mason & Co. (2005 to 2020)

Western Asset Inflation Indexed Plus Bond Fund 49

Additional information (unaudited) (cont’d)

Information about Directors and Officers

Additional Officers (cont’d)
Thomas C. Mandia
Franklin Templeton 100 First Stamford Place, 6th Floor, Stamford, CT 06902
Year of birth	1962
Position(s) with Fund	Senior Vice President
Term of office1 and length of time served2	Since 2020
Principal occupation(s) during the past five years	Senior Associate General Counsel of Franklin Templeton (since 2020); Secretary of LMPFA (since 2006); Assistant Secretary of certain funds associated with Legg Mason & Co. or its affiliates (since 2006); Secretary of LM Asset Services, LLC (“LMAS”) (since 2002) and Legg Mason Fund Asset Management, Inc. (“LMFAM”) (since 2013) (formerly registered investment advisers); formerly, Managing Director and Deputy General Counsel of Legg Mason & Co. (2005 to 2020)
Christopher Berarducci
Franklin Templeton 620 Eighth Avenue, 47th Floor, New York, NY 10018
Year of birth	1974
Position(s) with Fund	Treasurer and Principal Financial Officer
Term of office1 and length of time served2	Since 2019
Principal occupation(s) during the past five years	Vice President, Fund Administration and Reporting, Franklin Templeton (since 2020); Treasurer (since 2010) and Principal Financial Officer (since 2019) of certain funds associated with Legg Mason & Co. or its affiliates; formerly, Managing Director (2020), Director (2015 to 2020), and Vice President (2011 to 2015) of Legg Mason & Co.
Jeanne M. Kelly
Franklin Templeton 620 Eighth Avenue, 47th Floor, New York, NY 10018
Year of birth	1951
Position(s) with Fund	Senior Vice President
Term of office1 and length of time served2	Since 2007
Principal occupation(s) during the past five years	U.S. Fund Board Team Manager, Franklin Templeton (since 2020); Senior Vice President of certain funds associated with Legg Mason & Co. or its affiliates (since 2007); Senior Vice President of LMPFA (since 2006); President and Chief Executive Officer of LMAS and LMFAM (since 2015); formerly, Managing Director of Legg Mason & Co. (2005 to 2020); Senior Vice President of LMFAM (2013 to 2015)

† Directors who are not “interested persons” of the Fund within the meaning of Section 2(a)(19) of the Investment Company Act of 1940, as amended (the “1940 Act”).

¹ Each Director and officer serves until his or her respective successor has been duly elected and qualified or until his or her earlier death, resignation, retirement or removal.

² Indicates the earliest year in which the Director became a board member for a fund in the Legg Mason fund complex or the officer took such office.

50 Western Asset Inflation Indexed Plus Bond Fund

³ Each board member also serves as a Director of Western Asset Investment Grade Income Fund Inc. and a Trustee of Western Asset Premier Bond Fund (closed-end investment companies), which are considered part of the same fund complex. Additionally, each board member serves as a Trustee of Western Asset Inflation-Linked Income Fund and Western Asset Inflation-Linked Opportunities & Income Fund, closed-end investment companies that are part of the same fund complex.

⁴ Mr. Larson is the chief investment officer for William H. Gates III and in that capacity oversees the investments of Mr. Gates and the investments of the Bill and Melinda Gates Foundation Trust (such combined investments are referred to as the “Accounts”). Since 1997, Western Asset has provided discretionary investment advice with respect to one or more Accounts.

⁵ Western Asset and its affiliates provide investment advisory services with respect to registered investment companies sponsored by an affiliate of Pacific Mutual Holding Company (“Pacific Holdings”). Affiliates of Pacific Holdings receive compensation from LMPFA or its affiliates for shareholder or distribution services provided with respect to registered investment companies for which Western Asset or its affiliates serve as investment adviser.

⁶ Mr. Olson is an “interested person” of the Fund, as defined in the 1940 Act, because his law firm has provided legal services to Western Asset.

⁷ Ms. Trust is an “interested person” of the Fund, as defined in the 1940 Act, because of her position with LMPFA and/or certain of its affiliates.

Western Asset Inflation Indexed Plus Bond Fund 51

Important tax information (unaudited)

By mid-February, tax information related to a shareholder’s proportionate share of distributions paid during the preceding calendar year will be received, if applicable. Please also refer to www.franklintempleton.com for per share tax information related to any distributions paid during the preceding calendar year. Shareholders are advised to consult with their tax advisors for further information on the treatment of these amounts on their tax returns.

The following tax information for the Fund is required to be furnished to shareholders with respect to income earned and distributions paid during its fiscal year.

The Fund hereby reports the following amounts, or if subsequently determined to be different, the maximum allowable amounts, for the fiscal year ended December 31, 2021:

	Pursuant to:		Amount Reported
Qualified Net Interest Income (QII)	§871(k)(1)(C)	$	14,673,220
Short-Term Capital Gain Dividends Distributed	§871(k)(2)(C)	$	7,034,311
Section 163(j) Interest Earned	§163(j)	$	16,591,158
Interest Earned from Federal Obligations	Note (1)	$	15,585,739

Note (1) - The law varies in each state as to whether and what percentage of dividend income attributable to Federal obligations is exempt from state income tax. Shareholders are advised to consult with their tax advisors to determine if any portion of the dividends received is exempt from state income taxes.

52 Western Asset Inflation Indexed Plus Bond Fund

Western Asset

Inflation Indexed Plus Bond Fund

Directors

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

† Effective July 7, 2021, Legg Mason Investor Services, LLC was renamed Franklin Distributors, LLC.

# Effective February 22, 2022, Franklin Templeton Investor Services, LLC replaced BNY Mellon Investment Servicing (US) Inc. as Transfer Agent.

Investment manager

Legg Mason Partners Fund Advisor, LLC

Subadvisers

Western Asset Management Company, LLC

Western Asset Management Company Limited

Western Asset Management Company Ltd

Western Asset Management Company Pte. Ltd.

Distributor

Franklin Distributors, LLC†

Custodian

The Bank of New York Mellon

Transfer agent#

Franklin Templeton Investor

Services, LLC

3344 Quality Drive

Rancho Cordova, CA 95670-7313

Independent registered public accounting firm

PricewaterhouseCoopers LLP Baltimore, MD

Western Asset Inflation Indexed Plus Bond Fund

The Fund is a separate investment series of Western Asset Funds, Inc.

Western Asset Inflation Indexed Plus Bond Fund

Legg Mason Funds

620 Eighth Avenue, 47th Floor

New York, NY 10018

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 1-877-6LM-FUND/656-3863.

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 the Fund at 1-877-6LM-FUND/656-3863, (2) at www.franklintempleton.com and (3) on the SEC’s website at www.sec.gov.

This report is submitted for the general information of the shareholders of Western Asset Inflation Indexed Plus Bond Fund. This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by a current prospectus.

Investors should consider the Fund’s investment objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other important information about the Fund. Please read the prospectus carefully before investing.

www.franklintempleton.com

© 2022 Franklin Distributors, LLC, Member FINRA/SIPC. All rights reserved.

Legg Mason Funds Privacy and Security Notice

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

This Privacy and Security Notice (the “Privacy Notice”) addresses the Legg Mason 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, Franklin Distributors, LLC, as well as Legg Mason-sponsored closed-end funds. The provisions of this Privacy Notice apply to your information both while you are a shareholder and after you are no longer invested with the Funds.

The Type of Nonpublic Personal Information the Funds Collect About You

The Funds collect and maintain nonpublic personal information about you in connection with your shareholder account. Such information may include, but is not limited to:

• Personal information included on applications or other forms;

• Account balances, transactions, and mutual fund holdings and positions;

• Bank account information, legal documents, and identity verification documentation;

• 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 ANNUAL REPORT

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 Contact Us section of the Funds’ website at www.franklintempleton.com, or contact the Fund at 1-877-6LM-FUND/656-3863.

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 ANNUAL REPORT

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: DataProtectionOfficer@franklintempleton.com

Phone: 1-800-396-4748

Revised October 2020

NOT PART OF THE ANNUAL REPORT

www.franklintempleton.com

© 2022 Franklin Distributors, LLC, Member FINRA/SIPC. All rights reserved.

WASX013142 2/22 SR22-4345

ITEM 2. CODE OF ETHICS.

The registrant has adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller.

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.

The Board of Directors of the registrant has determined that Mr. Robert Abeles, Jr., possesses the technical attributes identified in Instruction 2(b) of Item 3 to Form N-CSR to qualify as “audit committee financial expert,” and have designated Mr. Abeles as the Audit Committee’s financial expert. Mr. Abeles is an “independent” Director pursuant to paragraph (a) (2) of Item 3 to Form N-CSR.

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES

(a) Audit Fees. The aggregate fees billed in the last two fiscal years ending December 31, 2020 and December 31, 2021 (the “Reporting Periods”) for professional services rendered by the Registrant’s principal accountant (the “Auditor”) for the audit of the Registrant’s annual financial statements, or services that are normally provided by the Auditor in connection with the statutory and regulatory filings or engagements for the Reporting Periods, were $205,236 in December 31, 2020 and in $205,236 in December 31, 2021.

(b) Audit-Related Fees. The aggregate fees billed in the Reporting Period for assurance and related services by the Auditor that are reasonably related to the performance of the Registrant’s financial statements were $0 in December 31, 2020 and $0 in December 31, 2021.

(c) Tax Fees. The aggregate fees billed in the Reporting Periods for professional services rendered by the Auditor for tax compliance, tax advice and tax planning (“Tax Services”) were $0 in December 31, 2020 and $30,000 in December 31, 2021. These services consisted of (i) review or preparation of U.S. federal, state, local and excise tax returns; (ii) U.S. federal, state and local tax planning, advice and assistance regarding statutory, regulatory or administrative developments, and (iii) tax advice regarding tax qualification matters and/or treatment of various financial instruments held or proposed to be acquired or held.

There were no fees billed for tax services by the Auditors to service affiliates during the Reporting Periods that required pre-approval by the Audit Committee.

(d) All Other Fees. The aggregate other fees billed in the Reporting Periods for products and services provided by the Auditor were $0 in December 31, 2020 and $0 in December 31, 2021, other than the services reported in paragraphs (a) through (c) for the Item for the Western Asset Funds, Inc.

All Other Fees. There were no other non-audit services rendered by the Auditor to Legg Mason Partners Fund Advisors, LLC (“LMPFA”), and any entity controlling, controlled by or under common control with LMPFA that provided ongoing services to Western Asset Funds, Inc. requiring pre-approval by the Audit Committee in the Reporting Period.

(e) Audit Committee’s pre–approval policies and procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X.

(1) The Charter for the Audit Committee (the “Committee”) of the Board of each registered investment company (the “Fund”) advised by LMPFA or one of their affiliates (each, an “Adviser”) requires that the Committee shall approve (a) all audit and permissible non-audit services to be provided to the Fund and (b) all permissible non-audit services to be provided by

the Fund’s independent auditors to the Adviser and any Covered Service Providers if the engagement relates directly to the operations and financial reporting of the Fund. The Committee may implement policies and procedures by which such services are approved other than by the full Committee.

The Committee shall not approve non-audit services that the Committee believes may impair the independence of the auditors. As of the date of the approval of this Audit Committee Charter, permissible non-audit services include any professional services (including tax services), that are not prohibited services as described below, provided to the Fund by the independent auditors, other than those provided to the Fund in connection with an audit or a review of the financial statements of the Fund. Permissible non-audit services may not include: (i) bookkeeping or other services related to the accounting records or financial statements of the Fund; (ii) financial information systems design and implementation; (iii) appraisal or valuation services, fairness opinions or contribution-in-kind reports; (iv) actuarial services; (v) internal audit outsourcing services; (vi) management functions or human resources; (vii) broker or dealer, investment adviser or investment banking services; (viii) legal services and expert services unrelated to the audit; and (ix) any other service the Public Company Accounting Oversight Board determines, by regulation, is impermissible.

Pre-approval by the Committee of any permissible non-audit services is not required so long as: (i) the aggregate amount of all such permissible non-audit services provided to the Fund, the Adviser and any service providers controlling, controlled by or under common control with the Adviser that provide ongoing services to the Fund (“Covered Service Providers”) constitutes not more than 5% of the total amount of revenues paid to the independent auditors during the fiscal year in which the permissible non-audit services are provided to (a) the Fund, (b) the Adviser and (c) any entity controlling, controlled by or under common control with the Adviser that provides ongoing services to the Fund during the fiscal year in which the services are provided that would have to be approved by the Committee; (ii) the permissible non-audit services were not recognized by the Fund at the time of the engagement to be non-audit services; and (iii) such services are promptly brought to the attention of the Committee and approved by the Committee (or its delegate(s)) prior to the completion of the audit.

(2) For the Western Asset Funds, Inc., the percentage of fees that were approved by the audit committee, with respect to: Audit-Related Fees were 100% and 100% for December 31, 2020 and December 31, 2021; Tax Fees were 100% and 100% for December 31, 2020 and December 31, 2021; and Other Fees were 100% and 100% for December 31, 2020 and December 31, 2021.

(f) N/A

(g) Non-audit fees billed by the Auditor for services rendered to Western Asset Funds, Inc., LMPFA and any entity controlling, controlled by, or under common control with LMPFA that provides ongoing services to Western Asset Funds, Inc. during the reporting period were $773,011 in December 31, 2020 and $343,489 in December 31, 2021.

(h) Yes. Western Asset Funds, Inc.’s Audit Committee has considered whether the provision of non-audit services that were rendered to Service Affiliates, which were not pre-approved (not requiring pre-approval), is compatible with maintaining the Accountant’s independence. All services provided by the Auditor to the Western Asset Funds, Inc. or to Service Affiliates, which were required to be pre-approved, were pre-approved as required.

ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.

a) The independent board members are acting as the registrant’s audit committee as specified in Section 3(a)(58)(B) of the Exchange Act. The Audit Committee consists of the following Board members:

Robert Abeles, Jr     

Jane F. Dasher

Anita L. DeFrantz

Susan B. Kerley

Michael Larson

Avedick B. Poladian

William E.B. Siart

JaynieM. Studenmund

Peter J. Taylor

b) 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.

ITEM 12. DISCLOSURE OF SECURITIES LENDING ACTIVITIES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

Not applicable.

ITEM 13. EXHIBITS.

(a) (1) Code of Ethics attached hereto.

Exhibit  99.CODE ETH

(a) (2)  Certifications pursuant to section 302 of the Sarbanes-Oxley Act of 2002 attached hereto.

Exhibit 99.CERT

(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 attached hereto.

Exhibit 99.906CERT

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this Report to be signed on its behalf by the undersigned, there unto duly authorized.

Western Asset Funds, Inc.
By:	/s/ Jane Trust
	Jane Trust
	Chief Executive Officer

Date: February 23, 2022

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
	Chief Executive Officer

Date: February 23, 2022

By:	/s/ Christopher Berarducci
	Christopher Berarducci
	Principal Financial Officer

Date: February 23, 2022