PAI Western Asset Investment Grade Income Fund Inc

 

 

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 811-02351

 

 

Western Asset Investment Grade Income Fund 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: 1-888-777-0102

Date of fiscal year end: December 31

Date of reporting period: December 31, 2023

 

 

 

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ITEM 1.

REPORT TO STOCKHOLDERS.

The Annual Report to Stockholders is filed herewith.

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Annual Report		December 31, 2023

WESTERN ASSET

INVESTMENT GRADE

INCOME FUND INC. (PAI)

 

 

 

 

 

 

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

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What’s inside
Letter from the president			III
Fund overview			1
Fund at a glance			6
Fund performance			7
Schedule of investments			9
Statement of assets and liabilities			30
Statement of operations			31
Statements of changes in net assets			32
Financial highlights			33
Notes to financial statements			34
Report of independent registered public accounting firm			45
Additional information			46
Annual chief executive officer and principal financial officer certifications			53
Other shareholder communications regarding accounting matters			54
Summary of information regarding the Fund			55
Dividend reinvestment plan			72
Important tax information			74

 

Fund objectives

The Fund’s primary investment objective is to seek a high level of current income, consistent with prudent investment risk, through investment in a diversified portfolio of debt securities. To a lesser extent, the Fund may also invest in privately placed debt securities and in certain equity securities. Capital appreciation is a secondary investment objective.

 

II		Western Asset Investment Grade Income Fund Inc.

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Letter from the president

 

Dear Shareholder,

We are pleased to provide the annual report of Western Asset Investment Grade Income Fund Inc. for the twelve-month reporting period ended December 31, 2023. Please read on for a detailed look at prevailing economic and market conditions during the Fund’s reporting period and to learn how those conditions have affected Fund performance.

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

 

•

Fund prices and performance,

 

•

Market insights and commentaries from our portfolio managers, and

 

•

A host of educational resources.

We look forward to helping you meet your financial goals.

Sincerely,

 

Jane Trust, CFA

President and Chief Executive Officer

January 31, 2024

 

Western Asset Investment Grade Income Fund Inc.		III

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Fund overview

 

Q. What is the Fund’s investment strategy?

A. The Fund’s primary investment objective is to seek a high level of current income, consistent with prudent investment risk, through investment in a diversified portfolio of debt securities. To a lesser extent, the Fund may also invest in privately placed debt securities and in certain equity securities. Capital appreciation is a secondary investment objective.

The Fund invests at least 80% of its net assets in fixed income securities that are rated in the Baa or BBB categories or above at the time of purchase by one or more Nationally Recognized Statistical Rating Organizations (“NRSROs”) or unrated securities of comparable quality at the time of purchase (as determined by the investment adviser). If a security is rated by multiple NRSROs and receives different ratings, the Fund will treat the security as being rated in the highest rating category received from an NRSRO. In addition, the Fund may invest up to 20% in other fixed income securities, and not more than 25% in securities restricted as to resale. The Fund’s 80% investment policy may be changed by the Board of Directors without shareholder approval upon 60 days’ prior notice to shareholders. In addition, convertible bonds and preferred securities may be treated as “fixed income” securities for purposes of the policy and so, if appropriately rated, would qualify for the 80% test.

At Western Asset Management Company, LLC (“Western Asset”), the Fund’s investment adviser, we utilize a fixed income team approach, with decisions derived from interaction among various investment management sector specialists. The sector teams are comprised of Western Asset’s senior portfolio management personnel, research analysts and an in-house economist. Under this team approach, management of client fixed income portfolios will reflect a consensus of interdisciplinary views within the Western Asset organization. The individuals responsible for development of investment strategy, day-to-day portfolio management, oversight and coordination of the Fund are S. Kenneth Leech, Ryan K. Brist, Michael C. Buchanan, Dan Alexander, Kurt D. Halvorson and Blanton Y. Keh.

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

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

Short-term U.S. Treasury yields declined as inflation fell and the Fed indicated the likely end of its rate hike cycle. The yield for the two-year Treasury note began the reporting period at 4.41% and ended the period at 4.23%. The low of 3.75% was on May 4, 2023, and the peak

 

Western Asset Investment Grade Income Fund Inc. 2023 Annual Report					1

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Fund overview (cont’d)

 

of 5.19% occurred on October 17 and 18, 2023. The yield for the ten-year Treasury note began and ended the reporting period at 3.88%. The low of 3.30% was on April 5 and 6, 2023, and the peak of 4.98% occurred on October 19, 2023.

All told, the overall credit market, as represented by the Bloomberg U.S. Credit Indexⁱ, returned 8.18% during the twelve-month reporting period ended December 31, 2023. Over the same period, the overall bond market, as measured by the Bloomberg U.S. Aggregate Index^ii, returned 5.53%.

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

A. A number of adjustments were made to the Fund’s portfolio during the reporting period. We tactically managed the Fund’s duration, increasing duration as yields rose in the beginning of the year and trimming back as they declined. We ended the reporting period only slightly lower than where we started. Elsewhere, we increased the Fund’s allocation to investment-grade bonds, mainly in industrials, energy, consumer non-cyclicals¹ and financials (banking) sectors. Conversely, we reduced the Fund’s allocation to below-investment-grade securities and emerging markets (both sovereigns and corporates).

Performance review

For the twelve months ended December 31, 2023, Western Asset Investment Grade Income Fund Inc. returned 9.05% based on both its net asset value (“NAV”)ⁱⁱⁱ and its New York Stock Exchange (“NYSE”) market price per share. The Fund’s unmanaged benchmarks, the Bloomberg U.S. Corporate High Yield Index^iv and the Bloomberg U.S. Credit Index, returned 13.44% and 8.18%, respectively, for the same period.

The Fund has a practice of seeking to maintain a relatively stable level of distributions to shareholders. This practice has no impact on the Fund’s investment strategy and may reduce the Fund’s NAV. The Fund’s manager believes the practice helps maintain the Fund’s competitiveness and may benefit the Fund’s market price and premium/discount to the Fund’s NAV.

During the twelve-month period, the Fund made distributions to shareholders totaling $0.56 per share.* The performance table shows the Fund’s twelve-month total return based on its NAV and market price as of December 31, 2023. Past performance is no guarantee of future results.

 

Performance Snapshot as of December 31, 2023
Price Per Share		12-Month Total Return**
$13.11 (NAV)			9.05	%†
$12.04 (Market Price)			9.05	%‡

 

1	Non-cyclicals consists of the following industries: consumer products, food/beverage, health care, pharmaceuticals, supermarkets and tobacco.

 

*	For the tax character of distributions paid during the fiscal year ended December 31, 2023, please refer to page 43 of this report.

 

2				Western Asset Investment Grade Income Fund Inc. 2023 Annual Report

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All figures represent past performance and are not a guarantee of future results.

** Total returns are based on changes in NAV or market price, respectively. Returns reflect the deduction of all Fund expenses, including management fees, operating expenses, and other Fund expenses. Returns do not reflect the deduction of brokerage commissions or taxes that investors may pay on distributions or the sale of shares.

† Total return assumes the reinvestment of all distributions at NAV. Total return information is based on month-end net asset values. Certain adjustments were made to the net assets of the Fund at December 31, 2023, for financial reporting purposes. Accordingly, adjusted total returns have been disclosed in the Financial Highlights and differ from those reported here.

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

Q. What were the leading contributors to performance?

A. The largest contributor to the Fund’s relative performance during the reporting period was its credit selection. Selection within the communication services and energy sectors alone combined for over 50 basis points of outperformance, and several other sectors also had strong contribution from an issue selection perspective. The Fund’s overweight to Kinder Morgan via El Paso corporation bonds, as well as Western Midstream Operating, led the energy sector’s issue selection outperformance. In the communication services sector, the Fund’s overweight to Warner Bros. Discovery and Charter were key contributors. The sector overweights to energy and basic industry also supported the Fund’s performance. In addition, its allocation to lower quality was beneficial, with securities rated BBB and below meaningfully beating the index average.

Q. What were the leading detractors from performance?

A. The largest detractors from the Fund’s relative performance during the reporting period were its overweight to the banking industry and underweight to the information technology sector. Despite the multiple banking crises during the year, the Fund’s performance from an allocation to that sector ended nearly flat. Looking at issue selection, within the banking industry, an overweight to Credit Suisse was a major headwind for returns. Within basic industry, it was the Fund’s slight underweights across a number of issuers that detracted from returns. Finally, an overweight to duration only marginally detracted from returns despite bond yields spiking drastically during the year, thanks to our active duration and yield curve management.

Looking for additional information?

The Fund is traded under the symbol “PAI” and its closing market price is available in most newspapers under the NYSE listings. The daily NAV is available online under the symbol “XPAIX” on most financial websites. Barron’s and The Wall Street Journal’s Monday edition both carry closed-end fund tables that provide additional information. In addition, the Fund issues a quarterly press release that can be found on most major financial websites as well as www.franklintempleton.com.

 

Western Asset Investment Grade Income Fund Inc. 2023 Annual Report					3

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Fund overview (cont’d)

 

In a continuing effort to provide information concerning the Fund, shareholders may call 1-888-777-0102 (toll free), Monday through Friday from 8:00 a.m. to 5:30 p.m. Eastern Time, for the Fund’s current NAV, market price and other information.

Thank you for your investment in the Western Asset Investment Grade Income Fund Inc. 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 17, 2024

RISKS: The Fund is a diversified closed-end management investment company designed primarily as a long-term investment and not as a trading vehicle. The Fund is not intended to be a complete investment program and, due to the uncertainty inherent in all investments, there can be no assurance that the Fund will achieve its investment objectives. The Fund’s common stock is traded on the NYSE. Similar to stocks, the Fund’s share price will fluctuate with market conditions and, at the time of sale, may be worth more or less than the original investment. Shares of closed-end funds often trade at a discount to their net asset value. Diversification does not assure against market loss. The Fund’s investments are subject to a number of risks, including interest rate, credit and inflation risks. As interest rates rise, bond prices fall, reducing the value of a fixed income investment’s price. The Fund may invest in high yield bonds (commonly known as “junk” bonds), which are rated below investment grade and carry more risk than higher-rated securities. To the extent that the Fund invests in asset-backed, mortgage-backed or mortgage-related securities, its exposure to prepayment and extension risks may be greater than investments in other fixed income securities. Leverage may result in greater volatility of NAV and the market price of the shares of the Fund’s common stock and increases a shareholder’s risk of loss. The Fund may invest, to a limited extent, in foreign securities, including emerging or developing markets. Investing in foreign securities is subject to certain risks not associated with domestic investing, such as currency fluctuations and social, political, and economic uncertainties which could result in significant volatility. These risks are magnified in emerging or developing markets. Emerging market or developing countries tend to have economic, political, and legal systems that are less developed and are less stable than those of more developed countries. The Fund may make significant investments in derivative instruments. Derivative instruments can be illiquid, may disproportionately increase losses, and have a potentially large impact on Fund performance. The market values of securities or other assets will fluctuate, sometimes sharply and unpredictably, due to changes in general market conditions, overall economic trends or events, governmental actions or intervention, actions taken by the U.S. Federal Reserve or foreign central banks, market disruptions caused by trade disputes or other factors, political developments, armed conflicts, economic sanctions and countermeasures in response to sanctions, major cybersecurity events, investor sentiment, the global and domestic effects of a pandemic, and other factors that may or may not be related to the issuer of the security or other asset. The Fund may also invest in money market funds,

 

4				Western Asset Investment Grade Income Fund Inc. 2023 Annual Report

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including funds affiliated with the Fund’s investment advisers. For more information on Fund risks, see Summary of information regarding the Fund — Principal Risk Factors in this report.

This material is not intended as a recommendation or as investment advice of any kind, including in connection with rollovers, transfers, and distributions. Such material is not provided in a fiduciary capacity, may not be relied upon for or in connection with the making of investment decisions, and does not constitute a solicitation of an offer to buy or sell securities. All content has been provided for informational or educational purposes only and is not intended to be and should not be construed as legal or tax advice and/or a legal opinion. Always consult a financial, tax and/or legal professional regarding your specific situation.

Portfolio holdings and breakdowns are as of December 31, 2023 and are subject to change and may not be representative of the portfolio managers’ current or future investments. Please refer to pages 9 through 29 for a list and percentage breakdown of the Fund’s holdings.

The mention of sector breakdowns is for informational purposes only and should not be construed as a recommendation to purchase or sell any securities. The information provided regarding such sectors is not a sufficient basis upon which to make an investment decision. Investors seeking financial advice regarding the appropriateness of investing in any securities or investment strategies discussed should consult their financial professional. Portfolio holdings are subject to change at any time and may not be representative of the portfolio managers’ current or future investments. The Fund’s top five sector holdings (as a percentage of net assets) as of December 31, 2023 were: financials (32.7%), energy (14.2%), communication services (9.4%), health care (8.0%) and materials (6.1%). The Fund’s portfolio composition is subject to change at any time.

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

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

 

i	The Bloomberg U.S. Credit Index is an index composed of corporate and non-corporate debt issues that are investment grade (rated Baa3/BBB or higher).

 

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

 

iii

Net asset value (“NAV”) is calculated by subtracting total liabilities and outstanding preferred stock (if any) from the closing value of all securities held by the Fund (plus all other assets) and dividing the result (total net assets) by the total number of the shares of common stock outstanding. The NAV fluctuates with changes in the market prices of securities in which the Fund has invested. However, the price at which an investor may buy or sell shares of the Fund is the Fund’s market price as determined by supply of and demand for the Fund’s shares.

 

iv

The Bloomberg U.S. Corporate High Yield Index covers the universe of fixed-rate, non-investment grade debt, including corporate and non-corporate sectors. Pay-in-kind (“PIK”) bonds, Eurobonds and debt issues from countries designated as emerging markets are excluded, but Canadian and global bonds (SEC registered) of issuers in non-emerging market countries are included. Original issue zero coupon bonds, step-up coupon structures and 144A securities are also included.

 

Western Asset Investment Grade Income Fund Inc. 2023 Annual Report					5

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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, 2023 and December 31, 2022, and does not include derivatives, such as futures contracts. The Fund’s portfolio is actively managed. As a result, the composition of the Fund’s investments is subject to change at any time.

‡	Represents less than 0.1%.

 

6				Western Asset Investment Grade Income Fund Inc. 2023 Annual Report

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Fund performance (unaudited)

 

Net Asset Value
Average annual total returns1
Twelve Months Ended 12/31/23			9.05	%2
Five Years Ended 12/31/23			2.86
Ten Years Ended 12/31/23			3.50
Cumulative total returns1
12/31/13 through 12/31/23			41.12	%

 

Market Price
Average annual total returns3
Twelve Months Ended 12/31/23			9.05	%
Five Years Ended 12/31/23			2.45
Ten Years Ended 12/31/23			3.77
Cumulative total returns3
12/31/13 through 12/31/23			44.79	%

All figures represent past performance and are not a guarantee of future results. Returns reflect the deduction of all Fund expenses, including management fees, operating expenses, and other Fund expenses. Returns do not reflect the deduction of brokerage commissions or taxes that investors may pay on distributions or the sale of shares.

 

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

 

2

Total return information is based on month-end net asset values. Certain adjustments were made to the net assets of the Fund at December 31, 2023, for financial reporting purposes. Accordingly, adjusted total returns have been disclosed in the Financial Highlights and differ from those reported here.

 

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

 

Western Asset Investment Grade Income Fund Inc. 2023 Annual Report					7

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Fund performance (unaudited) (cont’d)

 

Historical performance

Value of $10,000 invested in

Western Asset Investment Grade Income Fund Inc. vs. Bloomberg U.S. Corporate High Yield Index and Bloomberg U.S. Credit Index† — December 2013 - December 2023

 

All figures represent past performance and are not a guarantee of future results. Returns reflect the deduction of all Fund expenses, including management fees, operating expenses, and other Fund expenses. Returns do not reflect the deduction of brokerage commissions or taxes that investors may pay on distributions or the sale of shares.

 

†

Hypothetical illustration of $10,000 invested in Western Asset Investment Grade Income Fund Inc. on December 31, 2013, assuming the reinvestment of all distributions, including returns of capital, if any, at net asset value and also assuming the reinvestment of all distributions, including returns of capital, if any, in additional shares in accordance with the Fund’s Dividend Reinvestment Plan through December 31, 2023. The hypothetical illustration also assumes a $10,000 investment in the Bloomberg U.S. Corporate High Yield Index and the Bloomberg U.S. Credit Index (together, the “Indices”). The Bloomberg U.S. Corporate High Yield Index covers the universe of fixed-rate, non-investment grade debt, including corporate and non-corporate sectors. Pay-in-kind (“PIK”) bonds, Eurobonds and debt issues from countries designated as emerging markets are excluded, but Canadian and global bonds (SEC registered) of issuers in non-emerging market countries are included. Original issue zero coupon bonds, step-up coupon structures and 144A securities are also included. The Bloomberg U.S. Credit Index is an index composed of corporate and non-corporate debt issues that are investment grade. The Indices are unmanaged. Please note that an investor cannot invest directly in an index.

 

8				Western Asset Investment Grade Income Fund Inc. 2023 Annual Report

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Schedule of investments

December 31, 2023

 

Western Asset Investment Grade Income Fund Inc.

(Percentages shown based on Fund net assets)

 

Security		Rate				Maturity Date				Face Amount				Value
Corporate Bonds & Notes — 92.4%
Communication Services — 9.0%
Diversified Telecommunication Services — 2.0%
AT&T Inc., Senior Notes			4.300	%			2/15/30			$	80,000			$	78,404
AT&T Inc., Senior Notes			4.500	%			5/15/35				360,000				341,279
AT&T Inc., Senior Notes			6.350	%			3/15/40				50,000				51,827
AT&T Inc., Senior Notes			4.900	%			6/15/42				150,000				136,829
AT&T Inc., Senior Notes			4.800	%			6/15/44				210,000				192,073
AT&T Inc., Senior Notes			4.550	%			3/9/49				310,000				271,353
AT&T Inc., Senior Notes			3.300	%			2/1/52				120,000				85,702
AT&T Inc., Senior Notes			3.500	%			9/15/53				130,000				94,449
AT&T Inc., Senior Notes			3.800	%			12/1/57				130,000				96,746
AT&T Inc., Senior Notes			3.500	%			2/1/61				70,000				48,798
British Telecommunications PLC, Senior Notes			9.625	%			12/15/30				70,000				86,683
Telefonica Emisiones SA, Senior Notes			7.045	%			6/20/36				60,000				67,938
Telefonica Europe BV, Senior Notes			8.250	%			9/15/30				230,000				269,431
Verizon Communications Inc., Senior Notes			5.500	%			3/16/47				630,000				657,595
Total Diversified Telecommunication Services															2,479,107
Entertainment — 1.9%
Walt Disney Co., Senior Notes			6.550	%			3/15/33				545,000				629,945
Walt Disney Co., Senior Notes			7.750	%			12/1/45				130,000				174,299
Warnermedia Holdings Inc., Senior Notes			5.141	%			3/15/52				1,820,000				1,563,281
Total Entertainment															2,367,525
Media — 3.7%
CCO Holdings LLC/CCO Holdings Capital Corp., Senior Notes			4.500	%			5/1/32				580,000				497,518
Charter Communications Operating LLC/Charter Communications Operating Capital Corp., Senior Secured Notes			6.384	%			10/23/35				110,000				111,778
Charter Communications Operating LLC/Charter Communications Operating Capital Corp., Senior Secured Notes			3.500	%			3/1/42				80,000				55,719
Charter Communications Operating LLC/Charter Communications Operating Capital Corp., Senior Secured Notes			6.484	%			10/23/45				260,000				255,725
Charter Communications Operating LLC/Charter Communications Operating Capital Corp., Senior Secured Notes			5.375	%			5/1/47				350,000				297,969
Charter Communications Operating LLC/Charter Communications Operating Capital Corp., Senior Secured Notes			5.750	%			4/1/48				70,000				62,217

 

See Notes to Financial Statements.

 

Western Asset Investment Grade Income Fund Inc. 2023 Annual Report					9

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Schedule of investments (cont’d)

December 31, 2023

 

Western Asset Investment Grade Income Fund Inc.

(Percentages shown based on Fund net assets)

 

Security		Rate				Maturity Date				Face Amount				Value
Media — continued
Charter Communications Operating LLC/Charter Communications Operating Capital Corp., Senior Secured Notes			5.250	%			4/1/53			$	160,000			$	134,215
Charter Communications Operating LLC/Charter Communications Operating Capital Corp., Senior Secured Notes			3.950	%			6/30/62				80,000				50,420
Charter Communications Operating LLC/Charter Communications Operating Capital Corp., Senior Secured Notes			5.500	%			4/1/63				210,000				175,498
Comcast Corp., Senior Notes			6.450	%			3/15/37				220,000				250,348
Comcast Corp., Senior Notes			6.950	%			8/15/37				160,000				189,047
Comcast Corp., Senior Notes			6.400	%			5/15/38				950,000				1,058,093
DISH DBS Corp., Senior Secured Notes			5.750	%			12/1/28				160,000				127,916	(a)
Fox Corp., Senior Notes			5.476	%			1/25/39				510,000				496,407
Time Warner Cable Enterprises LLC, Senior Secured Notes			8.375	%			7/15/33				410,000				475,252
Time Warner Cable LLC, Senior Secured Notes			6.550	%			5/1/37				180,000				177,573
Time Warner Cable LLC, Senior Secured Notes			7.300	%			7/1/38				200,000				206,503
Time Warner Cable LLC, Senior Secured Notes			6.750	%			6/15/39				10,000				9,931
Time Warner Cable LLC, Senior Secured Notes			5.500	%			9/1/41				50,000				43,321
Total Media															4,675,450
Wireless Telecommunication Services — 1.4%
America Movil SAB de CV, Senior Notes			6.125	%			3/30/40				850,000				929,376
Sprint LLC, Senior Notes			7.125	%			6/15/24				150,000				150,752
T-Mobile USA Inc., Senior Notes			4.375	%			4/15/40				60,000				54,183
T-Mobile USA Inc., Senior Notes			4.500	%			4/15/50				210,000				185,742
T-Mobile USA Inc., Senior Notes			3.400	%			10/15/52				230,000				167,713
Vodafone Group PLC, Senior Notes			5.250	%			5/30/48				210,000				204,900
Vodafone Group PLC, Senior Notes			4.250	%			9/17/50				10,000				8,309
Total Wireless Telecommunication Services															1,700,975
Total Communication Services															11,223,057
Consumer Discretionary — 5.5%
Automobile Components — 0.3%
ZF North America Capital Inc., Senior Notes			4.750	%			4/29/25				400,000				395,718	(a)
Automobiles — 1.2%
Ford Motor Co., Senior Notes			3.250	%			2/12/32				290,000				241,315
Ford Motor Credit Co. LLC, Senior Notes			2.700	%			8/10/26				400,000				370,654
General Motors Co., Senior Notes			6.125	%			10/1/25				190,000				192,609
General Motors Co., Senior Notes			6.600	%			4/1/36				170,000				182,179

 

See Notes to Financial Statements.

 

10				Western Asset Investment Grade Income Fund Inc. 2023 Annual Report

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Western Asset Investment Grade Income Fund Inc.

(Percentages shown based on Fund net assets)

 

Security		Rate				Maturity Date				Face Amount				Value
Automobiles — continued
General Motors Co., Senior Notes			6.750	%			4/1/46			$	270,000			$	290,934
Nissan Motor Co. Ltd., Senior Notes			4.810	%			9/17/30				200,000				187,102	(a)
Total Automobiles															1,464,793
Broadline Retail — 0.6%
Amazon.com Inc., Senior Notes			3.950	%			4/13/52				330,000				289,065
MercadoLibre Inc., Senior Notes			2.375	%			1/14/26				470,000				439,243
Total Broadline Retail															728,308
Diversified Consumer Services — 0.2%
California Institute of Technology, Senior Notes			3.650	%			9/1/2119				110,000				78,528
Washington University, Senior Notes			3.524	%			4/15/54				90,000				71,732
Washington University, Senior Notes			4.349	%			4/15/2122				110,000				93,329
Total Diversified Consumer Services															243,589
Hotels, Restaurants & Leisure — 2.2%
Genting New York LLC/GENNY Capital Inc., Senior Notes			3.300	%			2/15/26				550,000				501,258	(a)
Marriott International Inc., Senior Notes			3.600	%			4/15/24				200,000				199,029
McDonald’s Corp., Senior Notes			4.700	%			12/9/35				150,000				148,288
McDonald’s Corp., Senior Notes			4.875	%			12/9/45				230,000				226,168
McDonald’s Corp., Senior Notes			4.450	%			9/1/48				10,000				9,293
Melco Resorts Finance Ltd., Senior Notes			5.375	%			12/4/29				380,000				336,216	(a)
Sands China Ltd., Senior Notes			5.375	%			8/8/25				450,000				444,059
Sands China Ltd., Senior Notes			5.650	%			8/8/28				200,000				198,455
Sands China Ltd., Senior Notes			4.625	%			6/18/30				200,000				182,246
Sands China Ltd., Senior Notes			3.500	%			8/8/31				330,000				276,822
Wynn Macau Ltd., Senior Notes			5.500	%			10/1/27				240,000				226,924	(a)
Total Hotels, Restaurants & Leisure															2,748,758
Household Durables — 0.4%
Lennar Corp., Senior Notes			5.000	%			6/15/27				190,000				190,739
MDC Holdings Inc., Senior Notes			2.500	%			1/15/31				100,000				82,260
MDC Holdings Inc., Senior Notes			6.000	%			1/15/43				200,000				186,355
Total Household Durables															459,354
Specialty Retail — 0.6%
Home Depot Inc., Senior Notes			3.625	%			4/15/52				270,000				219,014
Lithia Motors Inc., Senior Notes			4.625	%			12/15/27				110,000				105,797	(a)
Lithia Motors Inc., Senior Notes			3.875	%			6/1/29				190,000				171,796	(a)
Lowe’s Cos. Inc., Senior Notes			3.750	%			4/1/32				80,000				74,909
Lowe’s Cos. Inc., Senior Notes			4.250	%			4/1/52				280,000				237,362
Total Specialty Retail															808,878
Total Consumer Discretionary															6,849,398

 

See Notes to Financial Statements.

 

Western Asset Investment Grade Income Fund Inc. 2023 Annual Report					11

---

Schedule of investments (cont’d)

December 31, 2023

 

Western Asset Investment Grade Income Fund Inc.

(Percentages shown based on Fund net assets)

 

Security		Rate				Maturity Date				Face Amount				Value
Consumer Staples — 3.9%
Beverages — 1.5%
Anheuser-Busch Cos. LLC/Anheuser-Busch InBev Worldwide Inc., Senior Notes			4.900	%			2/1/46			$	840,000			$	824,055
Anheuser-Busch InBev Worldwide Inc., Senior Notes			4.600	%			4/15/48				70,000				66,331
Coca-Cola Co., Senior Notes			4.125	%			3/25/40				180,000				167,153
Coca-Cola Co., Senior Notes			4.200	%			3/25/50				110,000				103,068
Pernod Ricard SA, Senior Notes			5.500	%			1/15/42				670,000				699,764	(a)
Total Beverages															1,860,371
Food Products — 0.3%
J M Smucker Co., Senior Notes			6.200	%			11/15/33				230,000				250,981
Kraft Heinz Foods Co., Senior Notes			5.000	%			6/4/42				110,000				106,100
Total Food Products															357,081
Tobacco — 2.1%
Altria Group Inc., Senior Notes			3.800	%			2/14/24				190,000				189,412
Altria Group Inc., Senior Notes			4.400	%			2/14/26				410,000				406,411
Altria Group Inc., Senior Notes			4.800	%			2/14/29				870,000				868,021
Imperial Brands Finance PLC, Senior Notes			6.125	%			7/27/27				330,000				339,077	(a)
Philip Morris International Inc., Senior Notes			4.500	%			3/20/42				100,000				89,756
Reynolds American Inc., Senior Notes			8.125	%			5/1/40				270,000				310,202
Reynolds American Inc., Senior Notes			7.000	%			8/4/41				320,000				331,992
Reynolds American Inc., Senior Notes			5.850	%			8/15/45				90,000				84,409
Total Tobacco															2,619,280
Total Consumer Staples															4,836,732
Energy — 14.2%
Energy Equipment & Services — 0.2%
Halliburton Co., Senior Notes			5.000	%			11/15/45				200,000				194,468
Oil, Gas & Consumable Fuels — 14.0%
Apache Corp., Senior Notes			6.000	%			1/15/37				106,000				104,440
Apache Corp., Senior Notes			5.100	%			9/1/40				20,000				17,168
Apache Corp., Senior Notes			5.250	%			2/1/42				90,000				75,457
Cameron LNG LLC, Senior Secured Notes			3.302	%			1/15/35				20,000				17,051	(a)
Cameron LNG LLC, Senior Secured Notes			3.701	%			1/15/39				40,000				33,950	(a)
Cheniere Energy Partners LP, Senior Notes			3.250	%			1/31/32				220,000				187,716
Chesapeake Energy Corp., Senior Notes			6.750	%			4/15/29				170,000				171,763	(a)
Columbia Pipelines Operating Co. LLC, Senior Notes			6.036	%			11/15/33				290,000				303,853	(a)
Columbia Pipelines Operating Co. LLC, Senior Notes			6.544	%			11/15/53				240,000				264,663	(a)

 

See Notes to Financial Statements.

 

12				Western Asset Investment Grade Income Fund Inc. 2023 Annual Report

---

 

 

Western Asset Investment Grade Income Fund Inc.

(Percentages shown based on Fund net assets)

 

Security		Rate				Maturity Date				Face Amount				Value
Oil, Gas & Consumable Fuels — continued
ConocoPhillips, Senior Notes			6.500	%			2/1/39			$	810,000			$	937,726
Continental Resources Inc., Senior Notes			2.268	%			11/15/26				80,000				73,642	(a)
Continental Resources Inc., Senior Notes			4.375	%			1/15/28				140,000				135,663
Continental Resources Inc., Senior Notes			2.875	%			4/1/32				120,000				97,450	(a)
Continental Resources Inc., Senior Notes			4.900	%			6/1/44				90,000				72,895
Devon Energy Corp., Senior Notes			5.850	%			12/15/25				350,000				354,037
Devon Energy Corp., Senior Notes			5.600	%			7/15/41				320,000				309,886
Diamondback Energy Inc., Senior Notes			6.250	%			3/15/53				230,000				245,662
Ecopetrol SA, Senior Notes			5.375	%			6/26/26				540,000				529,835
Ecopetrol SA, Senior Notes			5.875	%			11/2/51				260,000				197,011
Energy Transfer LP, Junior Subordinated Notes (6.750% to 5/15/25 then 5 year Treasury Constant Maturity Rate + 5.134%)			6.750	%			5/15/25				210,000				201,094	(b)(c)
Energy Transfer LP, Junior Subordinated Notes (7.125% to 5/15/30 then 5 year Treasury Constant Maturity Rate + 5.306%)			7.125	%			5/15/30				560,000				517,428	(b)(c)
Energy Transfer LP, Senior Notes			5.250	%			4/15/29				30,000				30,248
Energy Transfer LP, Senior Notes			8.250	%			11/15/29				160,000				182,367
Energy Transfer LP, Senior Notes			6.625	%			10/15/36				20,000				21,576
Energy Transfer LP, Senior Notes			5.800	%			6/15/38				40,000				40,268
Enterprise Products Operating LLC, Senior Notes			6.125	%			10/15/39				320,000				349,872
Enterprise Products Operating LLC, Senior Notes			3.300	%			2/15/53				150,000				111,279
Enterprise Products Operating LLC, Senior Notes			3.950	%			1/31/60				100,000				81,175
Enterprise Products Operating LLC, Senior Notes (5.375% to 2/15/28 then 3 mo. Term SOFR + 2.832%)			5.375	%			2/15/78				430,000				386,458	(c)
EOG Resources Inc., Senior Notes			4.375	%			4/15/30				240,000				239,196
Exxon Mobil Corp., Senior Notes			4.227	%			3/19/40				140,000				130,038
KazMunayGas National Co. JSC, Senior Notes			3.500	%			4/14/33				200,000				166,713	(a)
Kinder Morgan Inc., Senior Notes			7.800	%			8/1/31				2,000,000				2,289,399
MPLX LP, Senior Notes			4.800	%			2/15/29				60,000				59,624
MPLX LP, Senior Notes			4.500	%			4/15/38				380,000				338,781
Occidental Petroleum Corp., Senior Notes			7.500	%			5/1/31				465,000				522,028
Occidental Petroleum Corp., Senior Notes			7.875	%			9/15/31				190,000				216,382
ONEOK Inc., Senior Notes			6.050	%			9/1/33				460,000				487,589
ONEOK Inc., Senior Notes			6.625	%			9/1/53				460,000				515,384
Parsley Energy LLC/Parsley Finance Corp., Senior Notes			4.125	%			2/15/28				200,000				193,006	(a)
Petrobras Global Finance BV, Senior Notes			7.375	%			1/17/27				190,000				200,230
Petrobras Global Finance BV, Senior Notes			6.900	%			3/19/49				280,000				278,102

 

See Notes to Financial Statements.

 

Western Asset Investment Grade Income Fund Inc. 2023 Annual Report					13

---

Schedule of investments (cont’d)

December 31, 2023

 

Western Asset Investment Grade Income Fund Inc.

(Percentages shown based on Fund net assets)

 

Security		Rate				Maturity Date				Face Amount				Value
Oil, Gas & Consumable Fuels — continued
Petrobras Global Finance BV, Senior Notes			5.500	%			6/10/51			$	100,000			$	84,397
Petrobras Global Finance BV, Senior Notes			6.850	%			6/5/2115				300,000				282,824
Phillips 66, Senior Notes			5.875	%			5/1/42				160,000				172,873
QatarEnergy, Senior Notes			3.300	%			7/12/51				490,000				358,989	(a)
Reliance Industries Ltd., Senior Notes			3.625	%			1/12/52				300,000				220,463	(a)
Shell International Finance BV, Senior Notes			6.375	%			12/15/38				250,000				287,800
Targa Resources Corp., Senior Notes			4.950	%			4/15/52				160,000				140,668
Targa Resources Partners LP/Targa Resources Partners Finance Corp., Senior Notes			6.875	%			1/15/29				490,000				506,493
Transcontinental Gas Pipe Line Co. LLC, Senior Notes			7.850	%			2/1/26				470,000				492,425
Transcontinental Gas Pipe Line Co. LLC, Senior Notes			7.250	%			12/1/26				230,000				242,088
Transcontinental Gas Pipe Line Co. LLC, Senior Notes			3.250	%			5/15/30				130,000				117,897
Transcontinental Gas Pipe Line Co. LLC, Senior Notes			5.400	%			8/15/41				310,000				307,810
Transcontinental Gas Pipe Line Co. LLC, Senior Notes			3.950	%			5/15/50				30,000				24,290
Western Midstream Operating LP, Senior Notes			4.650	%			7/1/26				660,000				649,314
Western Midstream Operating LP, Senior Notes			4.750	%			8/15/28				680,000				664,402
Western Midstream Operating LP, Senior Notes			4.050	%			2/1/30				90,000				84,270
Western Midstream Operating LP, Senior Notes			5.450	%			4/1/44				80,000				72,540
Western Midstream Operating LP, Senior Notes			5.250	%			2/1/50				270,000				242,416
Williams Cos. Inc., Senior Notes			7.500	%			1/15/31				47,000				53,248
Williams Cos. Inc., Senior Notes			7.750	%			6/15/31				37,000				41,520
Williams Cos. Inc., Senior Notes			8.750	%			3/15/32				610,000				740,412
Williams Cos. Inc., Senior Notes			3.500	%			10/15/51				50,000				36,551
Total Oil, Gas & Consumable Fuels															17,511,795
Total Energy															17,706,263
Financials — 32.6%
Banks — 18.7%
Banco Mercantil del Norte SA, Junior Subordinated Notes (7.500% to 6/27/29 then 10 year Treasury Constant Maturity Rate + 5.470%)			7.500	%			6/27/29				200,000				188,953	(a)(b)(c)
Banco Mercantil del Norte SA, Junior Subordinated Notes (8.375% to 10/14/30 then 10 year Treasury Constant Maturity Rate + 7.760%)			8.375	%			10/14/30				250,000				246,860	(a)(b)(c)
Banco Santander SA, Senior Notes			5.294	%			8/18/27				400,000				401,494

 

See Notes to Financial Statements.

 

14				Western Asset Investment Grade Income Fund Inc. 2023 Annual Report

---

 

 

Western Asset Investment Grade Income Fund Inc.

(Percentages shown based on Fund net assets)

 

Security		Rate				Maturity Date				Face Amount				Value
Banks — continued
Banco Santander SA, Senior Notes			3.490	%			5/28/30			$	200,000			$	179,961
Bank of America Corp., Senior Notes			5.875	%			2/7/42				320,000				345,349
Bank of America Corp., Senior Notes (4.083% to 3/20/50 then 3 mo. Term SOFR + 3.412%)			4.083	%			3/20/51				160,000				134,739	(c)
Bank of America Corp., Subordinated Notes			6.110	%			1/29/37				320,000				341,506
Bank of America Corp., Subordinated Notes			7.750	%			5/14/38				900,000				1,096,128
Bank of Nova Scotia, Subordinated Notes (4.588% to 5/4/32 then 5 year Treasury Constant Maturity Rate + 2.050%)			4.588	%			5/4/37				390,000				349,186	(c)
Barclays PLC, Junior Subordinated Notes (6.125% to 6/15/26 then 5 year Treasury Constant Maturity Rate + 5.867%)			6.125	%			12/15/25				1,060,000				1,015,172	(b)(c)
Barclays PLC, Subordinated Notes (5.088% to 6/20/29 then 3 mo. USD LIBOR + 3.054%)			5.088	%			6/20/30				640,000				620,314	(c)
BNP Paribas SA, Junior Subordinated Notes (8.500% to 8/14/28 then 5 year Treasury Constant Maturity Rate + 4.354%)			8.500	%			8/14/28				940,000				986,741	(a)(b)(c)
BNP Paribas SA, Senior Notes (5.198% to 1/10/29 then 3 mo. Term SOFR + 2.829%)			5.198	%			1/10/30				280,000				280,556	(a)(c)
BPCE SA, Senior Notes (6.714% to 10/19/28 then SOFR + 2.270%)			6.714	%			10/19/29				350,000				368,911	(a)(c)
BPCE SA, Subordinated Notes			5.150	%			7/21/24				410,000				406,567	(a)
BPCE SA, Subordinated Notes (3.582% to 10/19/41 then SOFR + 1.952%)			3.582	%			10/19/42				270,000				190,713	(a)(c)
Citigroup Inc., Senior Notes			8.125	%			7/15/39				251,000				323,511
Citigroup Inc., Senior Notes			5.875	%			1/30/42				240,000				254,927
Citigroup Inc., Senior Notes (3.785% to 3/17/32 then SOFR + 1.939%)			3.785	%			3/17/33				420,000				377,895	(c)
Citigroup Inc., Subordinated Notes			5.500	%			9/13/25				750,000				753,828
Citigroup Inc., Subordinated Notes			6.125	%			8/25/36				404,000				431,262
Citigroup Inc., Subordinated Notes			6.675	%			9/13/43				370,000				415,742
Citigroup Inc., Subordinated Notes (6.174% to 5/25/33 then SOFR + 2.661%)			6.174	%			5/25/34				250,000				258,790	(c)
Commonwealth Bank of Australia, Subordinated Notes			3.743	%			9/12/39				220,000				173,590	(a)
Cooperatieve Rabobank UA, Senior Notes			5.750	%			12/1/43				450,000				464,081
Cooperatieve Rabobank UA, Senior Notes			5.250	%			8/4/45				340,000				338,590
Cooperatieve Rabobank UA, Senior Notes (3.758% to 4/6/32 then 1 year Treasury Constant Maturity Rate + 1.420%)			3.758	%			4/6/33				350,000				314,403	(a)(c)

 

See Notes to Financial Statements.

 

Western Asset Investment Grade Income Fund Inc. 2023 Annual Report					15

---

Schedule of investments (cont’d)

December 31, 2023

 

Western Asset Investment Grade Income Fund Inc.

(Percentages shown based on Fund net assets)

 

Security		Rate				Maturity Date				Face Amount				Value
Banks — continued
Credit Agricole SA, Junior Subordinated Notes (8.125% to 12/23/25 then USD 5 year ICE Swap Rate + 6.185%)			8.125	%			12/23/25			$	1,040,000			$	1,063,153	(a)(b)(c)
Credit Agricole SA, Senior Notes (6.316% to 10/3/28 then SOFR + 1.860%)			6.316	%			10/3/29				290,000				304,027	(a)(c)
Danske Bank A/S, Senior Notes			5.375	%			1/12/24				230,000				229,952	(a)
HSBC Holdings PLC, Junior Subordinated Notes (4.600% to 6/17/31 then 5 year Treasury Constant Maturity Rate + 3.649%)			4.600	%			12/17/30				320,000				267,684	(b)(c)
HSBC Holdings PLC, Junior Subordinated Notes (6.500% to 3/23/28 then USD 5 year ICE Swap Rate + 3.606%)			6.500	%			3/23/28				300,000				290,112	(b)(c)
HSBC Holdings PLC, Senior Notes			4.950	%			3/31/30				200,000				198,486
HSBC Holdings PLC, Senior Notes (6.254% to 3/9/33 then SOFR + 2.390%)			6.254	%			3/9/34				840,000				893,245	(c)
HSBC Holdings PLC, Subordinated Notes			7.625	%			5/17/32				70,000				78,179
HSBC Holdings PLC, Subordinated Notes (4.762% to 3/29/32 then SOFR + 2.530%)			4.762	%			3/29/33				400,000				372,846	(c)
Intesa Sanpaolo SpA, Senior Notes			7.000	%			11/21/25				200,000				205,036	(a)
Intesa Sanpaolo SpA, Senior Notes			4.700	%			9/23/49				200,000				151,642	(a)
Intesa Sanpaolo SpA, Senior Notes (7.778% to 6/20/53 then 1 year Treasury Constant Maturity Rate + 3.900%)			7.778	%			6/20/54				220,000				227,109	(a)(c)
Intesa Sanpaolo SpA, Subordinated Notes (4.198% to 6/1/31 then 1 year Treasury Constant Maturity Rate + 2.600%)			4.198	%			6/1/32				200,000				165,118	(a)(c)
Intesa Sanpaolo SpA, Subordinated Notes (4.950% to 6/1/41 then 1 year Treasury Constant Maturity Rate + 2.750%)			4.950	%			6/1/42				200,000				142,570	(a)(c)
JPMorgan Chase & Co., Junior Subordinated Notes (3 mo. Term SOFR + 3.562%)			8.939	%			2/1/24				260,000				262,925	(b)(c)
JPMorgan Chase & Co., Senior Notes (3.897% to 1/23/48 then 3 mo. Term SOFR + 1.482%)			3.897	%			1/23/49				50,000				41,512	(c)
JPMorgan Chase & Co., Subordinated Notes			5.625	%			8/16/43				440,000				461,655
JPMorgan Chase & Co., Subordinated Notes			4.950	%			6/1/45				490,000				469,059
Lloyds Banking Group PLC, Junior Subordinated Notes (7.500% to 6/27/24 then USD 5 year ICE Swap Rate + 4.760%)			7.500	%			6/27/24				360,000				356,889	(b)(c)
Lloyds Banking Group PLC, Junior Subordinated Notes (7.500% to 9/27/25 then USD 5 year ICE Swap Rate + 4.496%)			7.500	%			9/27/25				370,000				363,263	(b)(c)

 

See Notes to Financial Statements.

 

16				Western Asset Investment Grade Income Fund Inc. 2023 Annual Report

---

 

 

Western Asset Investment Grade Income Fund Inc.

(Percentages shown based on Fund net assets)

 

Security		Rate				Maturity Date				Face Amount				Value
Banks — continued
Lloyds Banking Group PLC, Junior Subordinated Notes (8.000% to 3/27/30 then 5 year Treasury Constant Maturity Rate + 3.913%)			8.000	%			9/27/29			$	270,000			$	271,215	(b)(c)
Mitsubishi UFJ Financial Group Inc., Senior Notes (4.315% to 4/19/32 then 1 year Treasury Constant Maturity Rate + 1.550%)			4.315	%			4/19/33				330,000				314,525	(c)
NatWest Group PLC, Subordinated Notes (3.754% to 11/1/24 then 5 year Treasury Constant Maturity Rate + 2.100%)			3.754	%			11/1/29				230,000				224,405	(c)
Santander UK Group Holdings PLC, Subordinated Notes			4.750	%			9/15/25				210,000				205,705	(a)
Standard Chartered PLC, Subordinated Notes			5.700	%			3/26/44				410,000				404,852	(a)
Truist Financial Corp., Senior Notes (5.867% to 6/8/33 then SOFR + 2.361%)			5.867	%			6/8/34				250,000				255,198	(c)
Truist Financial Corp., Senior Notes (7.161% to 10/30/28 then SOFR + 2.446%)			7.161	%			10/30/29				230,000				248,574	(c)
UniCredit SpA, Subordinated Notes (7.296% to 4/2/29 then USD 5 year ICE Swap Rate + 4.914%)			7.296	%			4/2/34				1,040,000				1,070,541	(a)(c)
US Bancorp, Senior Notes (5.836% to 6/10/33 then SOFR + 2.260%)			5.836	%			6/12/34				300,000				309,590	(c)
Wells Fargo & Co., Senior Notes (4.611% to 4/25/52 then SOFR + 2.130%)			4.611	%			4/25/53				380,000				342,071	(c)
Wells Fargo & Co., Senior Notes (5.013% to 4/4/50 then 3 mo. Term SOFR + 4.502%)			5.013	%			4/4/51				230,000				219,006	(c)
Wells Fargo & Co., Senior Notes (5.557% to 7/25/33 then SOFR + 1.990%)			5.557	%			7/25/34				570,000				580,619	(c)
Wells Fargo & Co., Subordinated Notes			5.375	%			11/2/43				430,000				419,348
Wells Fargo & Co., Subordinated Notes			4.750	%			12/7/46				580,000				511,782
Westpac Banking Corp., Subordinated Notes			4.421	%			7/24/39				110,000				96,201
Total Banks															23,277,863
Capital Markets — 7.6%
Charles Schwab Corp., Junior Subordinated Notes (4.000% to 12/1/30 then 10 year Treasury Constant Maturity Rate + 3.079%)			4.000	%			12/1/30				320,000				253,139	(b)(c)
Charles Schwab Corp., Senior Notes (5.853% to 5/19/33 then SOFR + 2.500%)			5.853	%			5/19/34				260,000				268,524	(c)
Charles Schwab Corp., Senior Notes (6.136% to 8/24/33 then SOFR + 2.010%)			6.136	%			8/24/34				600,000				632,676	(c)
CI Financial Corp., Senior Notes			3.200	%			12/17/30				330,000				260,941
CI Financial Corp., Senior Notes			4.100	%			6/15/51				160,000				94,093

 

See Notes to Financial Statements.

 

Western Asset Investment Grade Income Fund Inc. 2023 Annual Report					17

---

Schedule of investments (cont’d)

December 31, 2023

 

Western Asset Investment Grade Income Fund Inc.

(Percentages shown based on Fund net assets)

 

Security		Rate				Maturity Date				Face Amount				Value
Capital Markets — continued
CME Group Inc., Senior Notes			5.300	%			9/15/43			$	440,000			$	467,938
Credit Suisse AG AT1 Claim			—				—				1,700,000				204,000	*(d)
Credit Suisse USA Inc., Senior Notes			7.125	%			7/15/32				40,000				45,533
Goldman Sachs Group Inc., Junior Subordinated Notes (7.500% to 2/10/29 then 5 year Treasury Constant Maturity Rate + 3.156%)			7.500	%			2/10/29				100,000				104,739	(b)(c)
Goldman Sachs Group Inc., Senior Notes			5.700	%			11/1/24				380,000				381,135
Goldman Sachs Group Inc., Senior Notes			6.250	%			2/1/41				570,000				636,303
Goldman Sachs Group Inc., Senior Notes (3.615% to 3/15/27 then SOFR + 1.846%)			3.615	%			3/15/28				740,000				710,005	(c)
Goldman Sachs Group Inc., Subordinated Notes			6.750	%			10/1/37				640,000				705,093
Goldman Sachs Group Inc., Subordinated Notes			5.150	%			5/22/45				500,000				483,911
Intercontinental Exchange Inc., Senior Notes			4.950	%			6/15/52				250,000				250,562
Intercontinental Exchange Inc., Senior Notes			5.200	%			6/15/62				260,000				266,821
KKR Group Finance Co. III LLC, Senior Notes			5.125	%			6/1/44				820,000				752,162	(a)
KKR Group Finance Co. VI LLC, Senior Notes			3.750	%			7/1/29				70,000				65,732	(a)
KKR Group Finance Co. X LLC, Senior Notes			3.250	%			12/15/51				90,000				62,193	(a)
Morgan Stanley, Senior Notes			6.375	%			7/24/42				90,000				104,057
Morgan Stanley, Senior Notes (4.889% to 7/20/32 then SOFR + 2.076%)			4.889	%			7/20/33				280,000				273,161	(c)
Morgan Stanley, Subordinated Notes (5.297% to 4/20/32 then SOFR + 2.620%)			5.297	%			4/20/37				130,000				126,566	(c)
Morgan Stanley, Subordinated Notes (5.948% to 1/19/33 then 5 year Treasury Constant Maturity Rate + 2.430%)			5.948	%			1/19/38				100,000				101,173	(c)
Raymond James Financial Inc., Senior Notes			4.650	%			4/1/30				70,000				70,597
Raymond James Financial Inc., Senior Notes			4.950	%			7/15/46				90,000				84,166
UBS Group AG, Junior Subordinated Notes (7.000% to 1/31/24 then USD 5 year ICE Swap Rate + 4.344%)			7.000	%			1/31/24				580,000				580,184	(a)(b)(c)
UBS Group AG, Junior Subordinated Notes (9.250% to 11/13/33 then 5 year Treasury Constant Maturity Rate + 4.758%)			9.250	%			11/13/33				290,000				322,122	(a)(b)(c)
UBS Group AG, Senior Notes (4.194% to 4/1/30 then SOFR + 3.730%)			4.194	%			4/1/31				250,000				232,998	(a)(c)
UBS Group AG, Senior Notes (6.301% to 9/22/33 then 1 year Treasury Constant Maturity Rate + 2.000%)			6.301	%			9/22/34				230,000				243,652	(a)(c)

 

See Notes to Financial Statements.

 

18				Western Asset Investment Grade Income Fund Inc. 2023 Annual Report

---

 

 

Western Asset Investment Grade Income Fund Inc.

(Percentages shown based on Fund net assets)

 

Security		Rate				Maturity Date				Face Amount				Value
Capital Markets — continued
UBS Group AG, Senior Notes (6.537% to 8/12/32 then SOFR + 3.920%)			6.537	%			8/12/33			$	380,000			$	405,755	(a)(c)
UBS Group AG, Senior Notes (9.016% to 11/15/32 then SOFR + 5.020%)			9.016	%			11/15/33				250,000				307,505	(a)(c)
Total Capital Markets															9,497,436
Consumer Finance — 0.1%
Capital One Financial Corp., Senior Notes (5.817% to 2/1/33 then SOFR + 2.600%)			5.817	%			2/1/34				150,000				149,359	(c)
Financial Services — 2.2%
AerCap Ireland Capital DAC/AerCap Global Aviation Trust, Senior Notes			4.875	%			1/16/24				330,000				329,798
AerCap Ireland Capital DAC/AerCap Global Aviation Trust, Senior Notes			3.000	%			10/29/28				430,000				392,796
AerCap Ireland Capital DAC/AerCap Global Aviation Trust, Senior Notes			3.850	%			10/29/41				540,000				435,547
Carlyle Finance LLC, Senior Notes			5.650	%			9/15/48				110,000				102,860	(a)
Carlyle Finance Subsidiary LLC, Senior Notes			3.500	%			9/19/29				150,000				140,426	(a)
Carlyle Holdings II Finance LLC, Senior Notes			5.625	%			3/30/43				220,000				214,865	(a)
Everest Reinsurance Holdings Inc., Senior Notes			3.500	%			10/15/50				140,000				103,220
ILFC E-Capital Trust I, Ltd. GTD ((Highest of 3 mo. USD LIBOR, 10 year Treasury Constant Maturity Rate and 30 year Treasury Constant Maturity Rate) + 1.812%)			7.186	%			12/21/65				470,000				349,858	(a)(c)
ILFC E-Capital Trust II, Ltd. GTD ((Highest of 3 mo. USD LIBOR, 10 year Treasury Constant Maturity Rate and 30 year Treasury Constant Maturity Rate) + 2.062%)			7.436	%			12/21/65				270,000				210,307	(a)(c)
Park Aerospace Holdings Ltd., Senior Notes			5.500	%			2/15/24				220,000				219,610	(a)
Rocket Mortgage LLC/Rocket Mortgage Co-Issuer Inc., Senior Notes			2.875	%			10/15/26				160,000				147,735	(a)
Rocket Mortgage LLC/Rocket Mortgage Co-Issuer Inc., Senior Notes			4.000	%			10/15/33				140,000				119,096	(a)
Total Financial Services															2,766,118
Insurance — 3.6%
Allianz SE, Junior Subordinated Notes (3.500% to 4/30/26 then 5 year Treasury Constant Maturity Rate + 2.973%)			3.500	%			11/17/25				200,000				177,832	(a)(b)(c)
Allstate Corp., Junior Subordinated Notes (6.500% to 5/15/37 then 3 mo. USD LIBOR + 2.120%)			6.500	%			5/15/57				480,000				478,187	(c)

 

See Notes to Financial Statements.

 

Western Asset Investment Grade Income Fund Inc. 2023 Annual Report					19

---

Schedule of investments (cont’d)

December 31, 2023

 

Western Asset Investment Grade Income Fund Inc.

(Percentages shown based on Fund net assets)

 

Security		Rate				Maturity Date				Face Amount				Value
Insurance — continued
American International Group Inc., Junior Subordinated Notes			6.250	%			3/15/37			$	80,000			$	72,325
American International Group Inc., Senior Notes			4.750	%			4/1/48				70,000				66,099
Americo Life Inc., Senior Notes			3.450	%			4/15/31				80,000				62,758	(a)
AXA SA, Subordinated Notes			8.600	%			12/15/30				200,000				241,117
Fidelity & Guaranty Life Holdings Inc., Senior Notes			5.500	%			5/1/25				230,000				227,341	(a)
Liberty Mutual Insurance Co., Subordinated Notes			7.875	%			10/15/26				490,000				512,354	(a)
Massachusetts Mutual Life Insurance Co., Subordinated Notes			4.900	%			4/1/77				260,000				222,141	(a)
MetLife Inc., Junior Subordinated Notes			6.400	%			12/15/36				1,150,000				1,189,209
New York Life Insurance Co., Subordinated Notes			4.450	%			5/15/69				90,000				77,298	(a)
Nippon Life Insurance Co., Subordinated Notes (2.750% to 1/21/31 then 5 year Treasury Constant Maturity Rate + 2.653%)			2.750	%			1/21/51				200,000				166,047	(a)(c)
Northwestern Mutual Life Insurance Co., Subordinated Notes			3.625	%			9/30/59				110,000				81,709	(a)
Prudential Financial Inc., Junior Subordinated Notes (6.750% to 3/1/33 then 5 year Treasury Constant Maturity Rate + 2.848%)			6.750	%			3/1/53				170,000				177,550	(c)
RenaissanceRe Holdings Ltd., Senior Notes			5.750	%			6/5/33				190,000				191,745
Teachers Insurance & Annuity Association of America, Subordinated Notes			6.850	%			12/16/39				400,000				462,435	(a)
Total Insurance															4,406,147
Mortgage Real Estate Investment Trusts (REITs) — 0.4%
Blackstone Holdings Finance Co. LLC, Senior Notes			6.200	%			4/22/33				450,000				480,871	(a)
Total Financials															40,577,794
Health Care — 8.0%
Biotechnology — 1.6%
AbbVie Inc., Senior Notes			4.050	%			11/21/39				740,000				668,582
Amgen Inc., Senior Notes			5.250	%			3/2/33				740,000				758,941
Amgen Inc., Senior Notes			5.650	%			3/2/53				300,000				315,854
Amgen Inc., Senior Notes			5.750	%			3/2/63				110,000				115,544
Gilead Sciences Inc., Senior Notes			5.650	%			12/1/41				60,000				64,127
Gilead Sciences Inc., Senior Notes			4.750	%			3/1/46				50,000				47,693
Total Biotechnology															1,970,741

 

See Notes to Financial Statements.

 

20				Western Asset Investment Grade Income Fund Inc. 2023 Annual Report

---

 

 

Western Asset Investment Grade Income Fund Inc.

(Percentages shown based on Fund net assets)

 

Security		Rate				Maturity Date				Face Amount				Value
Health Care Equipment & Supplies — 0.4%
Abbott Laboratories, Senior Notes			4.900	%			11/30/46			$	90,000			$	92,113
Becton Dickinson & Co., Senior Notes			4.669	%			6/6/47				410,000				383,534
Total Health Care Equipment & Supplies															475,647
Health Care Providers & Services — 4.6%
Centene Corp., Senior Notes			4.250	%			12/15/27				100,000				96,431
Centene Corp., Senior Notes			4.625	%			12/15/29				360,000				345,594
Centene Corp., Senior Notes			3.375	%			2/15/30				500,000				449,243
Cigna Group, Senior Notes			4.125	%			11/15/25				340,000				335,829
Cigna Group, Senior Notes			4.800	%			8/15/38				340,000				329,059
CVS Health Corp., Senior Notes			4.100	%			3/25/25				530,000				524,749
CVS Health Corp., Senior Notes			4.300	%			3/25/28				540,000				531,180
CVS Health Corp., Senior Notes			4.780	%			3/25/38				570,000				540,368
CVS Health Corp., Senior Notes			5.125	%			7/20/45				340,000				322,083
CVS Health Corp., Senior Notes			5.050	%			3/25/48				560,000				524,258
Dartmouth-Hitchcock Health, Secured Bonds			4.178	%			8/1/48				100,000				79,561
Elevance Health Inc., Senior Notes			5.350	%			10/15/25				320,000				322,347
HCA Inc., Senior Notes			4.125	%			6/15/29				210,000				200,923
HCA Inc., Senior Notes			5.125	%			6/15/39				110,000				104,975
HCA Inc., Senior Notes			5.500	%			6/15/47				220,000				212,170
HCA Inc., Senior Notes			5.250	%			6/15/49				350,000				325,803
Humana Inc., Senior Notes			8.150	%			6/15/38				80,000				98,142
Humana Inc., Senior Notes			4.800	%			3/15/47				150,000				140,048
Inova Health System Foundation, Senior Notes			4.068	%			5/15/52				90,000				77,781
Kaiser Foundation Hospitals, Senior Notes			3.002	%			6/1/51				80,000				57,052
Orlando Health Obligated Group, Senior Notes			4.089	%			10/1/48				170,000				143,458
Total Health Care Providers & Services															5,761,054
Pharmaceuticals — 1.4%
Bausch Health Cos. Inc., Senior Notes			5.000	%			1/30/28				80,000				36,368	(a)
Bristol-Myers Squibb Co., Senior Notes			6.250	%			11/15/53				140,000				160,353
Pfizer Investment Enterprises Pte Ltd., Senior Notes			4.750	%			5/19/33				390,000				391,019
Pfizer Investment Enterprises Pte Ltd., Senior Notes			5.110	%			5/19/43				400,000				398,820
Pfizer Investment Enterprises Pte Ltd., Senior Notes			5.300	%			5/19/53				290,000				296,276
Pfizer Investment Enterprises Pte Ltd., Senior Notes			5.340	%			5/19/63				60,000				60,626
Teva Pharmaceutical Finance Netherlands III BV, Senior Notes			7.125	%			1/31/25				200,000				201,899

 

See Notes to Financial Statements.

 

Western Asset Investment Grade Income Fund Inc. 2023 Annual Report					21

---

Schedule of investments (cont’d)

December 31, 2023

 

Western Asset Investment Grade Income Fund Inc.

(Percentages shown based on Fund net assets)

 

Security		Rate				Maturity Date				Face Amount				Value
Pharmaceuticals — continued
Teva Pharmaceutical Finance Netherlands III BV, Senior Notes			8.125	%			9/15/31			$	200,000			$	218,366
Zoetis Inc., Senior Notes			4.700	%			2/1/43				30,000				28,731
Total Pharmaceuticals															1,792,458
Total Health Care															9,999,900
Industrials — 5.7%
Aerospace & Defense — 1.9%
Avolon Holdings Funding Ltd., Senior Notes			3.950	%			7/1/24				140,000				138,168	(a)
Avolon Holdings Funding Ltd., Senior Notes			4.250	%			4/15/26				530,000				512,270	(a)
Boeing Co., Senior Notes			3.250	%			2/1/28				370,000				351,268
Boeing Co., Senior Notes			5.705	%			5/1/40				210,000				217,343
Boeing Co., Senior Notes			5.805	%			5/1/50				140,000				145,075
HEICO Corp., Senior Notes			5.350	%			8/1/33				240,000				245,859
Huntington Ingalls Industries Inc., Senior Notes			3.483	%			12/1/27				200,000				189,221
L3Harris Technologies Inc., Senior Notes			5.400	%			7/31/33				190,000				197,639
L3Harris Technologies Inc., Senior Notes			4.854	%			4/27/35				260,000				256,852
Lockheed Martin Corp., Senior Notes			4.500	%			5/15/36				40,000				39,620
RTX Corp., Senior Notes			4.625	%			11/16/48				110,000				100,548
Total Aerospace & Defense															2,393,863
Building Products — 0.0%††
Carrier Global Corp., Senior Notes			3.577	%			4/5/50				100,000				78,319
Commercial Services & Supplies — 0.4%
Waste Connections Inc., Senior Notes			4.250	%			12/1/28				480,000				478,200
Construction & Engineering — 0.7%
Vinci SA, Senior Notes			3.750	%			4/10/29				890,000				857,556	(a)
Ground Transportation — 0.2%
Union Pacific Corp., Senior Notes			4.375	%			11/15/65				320,000				264,009
Industrial Conglomerates — 0.4%
General Electric Co., Senior Notes			6.875	%			1/10/39				94,000				114,187
Honeywell International Inc., Senior Notes			5.000	%			2/15/33				350,000				366,322
Total Industrial Conglomerates															480,509
Machinery — 0.2%
Caterpillar Inc., Senior Notes			4.750	%			5/15/64				220,000				213,111
Passenger Airlines — 1.0%
American Airlines Inc./AAdvantage Loyalty IP Ltd., Senior Secured Notes			5.500	%			4/20/26				91,667				91,073	(a)
American Airlines Inc./AAdvantage Loyalty IP Ltd., Senior Secured Notes			5.750	%			4/20/29				110,000				107,350	(a)
Delta Air Lines Inc., Senior Secured Notes			7.000	%			5/1/25				260,000				264,764	(a)

 

See Notes to Financial Statements.

 

22				Western Asset Investment Grade Income Fund Inc. 2023 Annual Report

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Western Asset Investment Grade Income Fund Inc.

(Percentages shown based on Fund net assets)

 

Security		Rate				Maturity Date				Face Amount				Value
Passenger Airlines — continued
Delta Air Lines Inc./SkyMiles IP Ltd., Senior Secured Notes			4.500	%			10/20/25			$	254,000			$	250,240	(a)
Delta Air Lines Inc./SkyMiles IP Ltd., Senior Secured Notes			4.750	%			10/20/28				180,000				177,130	(a)
Southwest Airlines Co., Senior Notes			5.125	%			6/15/27				190,000				190,973
United Airlines Pass-Through Trust			4.875	%			1/15/26				127,680				123,773
Total Passenger Airlines															1,205,303
Trading Companies & Distributors — 0.9%
Air Lease Corp., Senior Notes			5.850	%			12/15/27				320,000				328,540
Aircastle Ltd., Senior Notes			5.250	%			8/11/25				630,000				621,384	(a)
Aviation Capital Group LLC, Senior Notes			5.500	%			12/15/24				180,000				179,125	(a)
Total Trading Companies & Distributors															1,129,049
Total Industrials															7,099,919
Information Technology — 3.7%
Electronic Equipment, Instruments & Components — 0.3%
TD SYNNEX Corp., Senior Notes			1.250	%			8/9/24				380,000				370,474
IT Services — 0.2%
International Business Machines Corp., Senior Notes			3.500	%			5/15/29				110,000				104,954
Kyndryl Holdings Inc., Senior Notes			4.100	%			10/15/41				300,000				225,552
Total IT Services															330,506
Semiconductors & Semiconductor Equipment — 1.6%
Broadcom Inc., Senior Notes			4.150	%			11/15/30				113,000				107,996
Broadcom Inc., Senior Notes			4.300	%			11/15/32				370,000				355,157
Broadcom Inc., Senior Notes			3.187	%			11/15/36				14,000				11,353	(a)
Broadcom Inc., Senior Notes			4.926	%			5/15/37				152,000				147,195	(a)
Foundry JV Holdco LLC, Senior Secured Notes			5.875	%			1/25/34				300,000				308,484	(a)
Intel Corp., Senior Notes			4.900	%			7/29/45				130,000				131,055
Intel Corp., Senior Notes			4.750	%			3/25/50				10,000				9,459
Intel Corp., Senior Notes			4.950	%			3/25/60				60,000				59,189
Intel Corp., Senior Notes			3.200	%			8/12/61				120,000				82,802
Micron Technology Inc., Senior Notes			3.366	%			11/1/41				30,000				22,428
NVIDIA Corp., Senior Notes			3.500	%			4/1/50				190,000				158,698
NVIDIA Corp., Senior Notes			3.700	%			4/1/60				80,000				67,092
Texas Instruments Inc., Senior Notes			4.600	%			2/15/28				250,000				254,166
Texas Instruments Inc., Senior Notes			3.875	%			3/15/39				270,000				249,406
Total Semiconductors & Semiconductor Equipment															1,964,480
Software — 1.2%
Microsoft Corp., Senior Notes			4.250	%			2/6/47				970,000				937,488

 

See Notes to Financial Statements.

 

Western Asset Investment Grade Income Fund Inc. 2023 Annual Report					23

---

Schedule of investments (cont’d)

December 31, 2023

 

Western Asset Investment Grade Income Fund Inc.

(Percentages shown based on Fund net assets)

 

Security		Rate				Maturity Date				Face Amount				Value
Software — continued
Oracle Corp., Senior Notes			3.950	%			3/25/51			$	310,000			$	243,213
Oracle Corp., Senior Notes			4.100	%			3/25/61				380,000				290,172
Total Software															1,470,873
Technology Hardware, Storage & Peripherals — 0.4%
Apple Inc., Senior Notes			3.850	%			8/4/46				340,000				295,892
Dell International LLC/EMC Corp., Senior Notes			8.100	%			7/15/36				120,000				147,735
Dell International LLC/EMC Corp., Senior Notes			8.350	%			7/15/46				30,000				39,456
Total Technology Hardware, Storage & Peripherals															483,083
Total Information Technology															4,619,416
Materials — 6.1%
Chemicals — 1.3%
Celanese US Holdings LLC, Senior Notes			5.900	%			7/5/24				310,000				310,096
Dow Chemical Co., Senior Notes			7.375	%			11/1/29				800,000				904,481
Ecolab Inc., Senior Notes			4.800	%			3/24/30				80,000				82,121
OCP SA, Senior Notes			3.750	%			6/23/31				200,000				172,460	(a)
Sociedad Quimica y Minera de Chile SA, Senior Notes			3.500	%			9/10/51				240,000				165,913	(a)
Total Chemicals															1,635,071
Metals & Mining — 4.4%
Anglo American Capital PLC, Senior Notes			4.000	%			9/11/27				500,000				480,769	(a)
ArcelorMittal SA, Senior Notes			4.550	%			3/11/26				470,000				463,077
ArcelorMittal SA, Senior Notes			6.550	%			11/29/27				160,000				168,129
Barrick North America Finance LLC, Senior Notes			5.700	%			5/30/41				50,000				52,846
Barrick PD Australia Finance Pty Ltd., Senior Notes			5.950	%			10/15/39				180,000				193,053
First Quantum Minerals Ltd., Senior Notes			7.500	%			4/1/25				200,000				190,881	(a)
Freeport-McMoRan Inc., Senior Notes			5.450	%			3/15/43				210,000				204,640
Glencore Finance Canada Ltd., Senior Notes			6.900	%			11/15/37				430,000				475,214	(a)
Glencore Finance Canada Ltd., Senior Notes			5.550	%			10/25/42				150,000				145,784	(a)
Glencore Funding LLC, Senior Notes			4.125	%			3/12/24				530,000				528,137	(a)
Glencore Funding LLC, Senior Notes			4.000	%			3/27/27				360,000				349,844	(a)
Glencore Funding LLC, Senior Notes			3.875	%			10/27/27				170,000				164,425	(a)
Glencore Funding LLC, Senior Notes			3.375	%			9/23/51				70,000				49,406	(a)
Southern Copper Corp., Senior Notes			5.250	%			11/8/42				470,000				455,645
Vale Overseas Ltd., Senior Notes			6.875	%			11/21/36				1,148,000				1,253,821
Yamana Gold Inc., Senior Notes			4.625	%			12/15/27				350,000				338,537
Yamana Gold Inc., Senior Notes			2.630	%			8/15/31				30,000				25,307
Total Metals & Mining															5,539,515

 

See Notes to Financial Statements.

 

24				Western Asset Investment Grade Income Fund Inc. 2023 Annual Report

---

 

 

Western Asset Investment Grade Income Fund Inc.

(Percentages shown based on Fund net assets)

 

Security		Rate				Maturity Date				Face Amount				Value
Paper & Forest Products — 0.4%
Georgia-Pacific LLC, Senior Notes			7.375	%			12/1/25			$	250,000			$	260,124
Suzano Austria GmbH, Senior Notes			3.125	%			1/15/32				230,000				191,054
Total Paper & Forest Products															451,178
Total Materials															7,625,764
Real Estate — 0.6%
Health Care REITs — 0.3%
Diversified Healthcare Trust, Senior Notes			4.750	%			5/1/24				130,000				129,649
Welltower OP LLC, Senior Notes			4.125	%			3/15/29				320,000				309,322
Total Health Care REITs															438,971
Residential REITs — 0.1%
Invitation Homes Operating Partnership LP, Senior Notes			4.150	%			4/15/32				80,000				73,582
Retail REITs — 0.2%
WEA Finance LLC/Westfield UK & Europe Finance PLC, Senior Notes			3.750	%			9/17/24				200,000				196,467	(a)
Specialized REITs — 0.0%††
Extra Space Storage LP, Senior Notes			3.900	%			4/1/29				60,000				56,798
Total Real Estate															765,818
Utilities — 3.1%
Electric Utilities — 3.1%
CenterPoint Energy Houston Electric LLC, Senior
Secured Bonds			4.500	%			4/1/44				210,000				193,100
Comision Federal de Electricidad, Senior Notes			3.348	%			2/9/31				200,000				167,259	(a)
Edison International, Junior Subordinated Notes (5.375% to 3/15/26 then 5 year Treasury Constant Maturity Rate + 4.698%)			5.375	%			3/15/26				270,000				256,041	(b)(c)
Enel Finance International NV, Senior Notes			6.800	%			10/14/25				330,000				338,480	(a)
Exelon Corp., Senior Notes			4.050	%			4/15/30				120,000				114,560
FirstEnergy Corp., Senior Notes			4.150	%			7/15/27				310,000				298,353
FirstEnergy Corp., Senior Notes			7.375	%			11/15/31				830,000				980,170
MidAmerican Energy Co., First Mortgage Bonds			3.650	%			4/15/29				150,000				143,472
Ohio Edison Co., Senior Notes			5.500	%			1/15/33				90,000				91,344	(a)
Pacific Gas and Electric Co., First Mortgage Bonds			3.300	%			8/1/40				20,000				14,671
Pacific Gas and Electric Co., First Mortgage Bonds			4.950	%			7/1/50				240,000				205,526
Pacific Gas and Electric Co., First Mortgage Bonds			6.750	%			1/15/53				140,000				152,667
PG&E Wildfire Recovery Funding LLC, Senior Secured Notes			5.081	%			6/1/41				120,000				119,408

 

See Notes to Financial Statements.

 

Western Asset Investment Grade Income Fund Inc. 2023 Annual Report					25

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Schedule of investments (cont’d)

December 31, 2023

 

Western Asset Investment Grade Income Fund Inc.

(Percentages shown based on Fund net assets)

 

Security		Rate				Maturity Date				Face Amount				Value
Electric Utilities — continued
PG&E Wildfire Recovery Funding LLC, Senior Secured Notes			5.212	%			12/1/47			$	30,000			$	30,120
Southern California Edison Co., First Mortgage Bonds			4.125	%			3/1/48				310,000				260,994
Virginia Electric & Power Co., Senior Notes			8.875	%			11/15/38				390,000				532,533
Total Utilities															3,898,698
Total Corporate Bonds & Notes (Cost — $117,593,060)															115,202,759
Sovereign Bonds — 3.1%
Argentina — 0.6%
Argentine Republic Government International Bond, Senior Notes			1.000	%			7/9/29				35,342				14,207
Argentine Republic Government International Bond, Senior Notes, Step bond (0.750% to 7/9/27 then 1.750%)			0.750	%			7/9/30				127,826				51,579
Argentine Republic Government International Bond, Senior Notes, Step bond (3.625% to 7/9/24 then 4.125%)			3.625	%			7/9/35				412,972				142,709
Provincia de Buenos Aires, Senior Notes, Step bond (6.375% to 9/1/24 then 6.625%)			6.375	%			9/1/37				1,353,938				521,897	(a)
Total Argentina															730,392
Canada — 0.7%
Province of Quebec Canada, Senior Notes			7.970	%			7/22/36				650,000				827,276
Chile — 0.1%
Chile Government International Bond, Senior Notes			2.550	%			7/27/33				200,000				165,965
Colombia — 0.7%
Colombia Government International Bond, Senior Notes			4.500	%			3/15/29				870,000				817,382
Indonesia — 0.2%
Indonesia Government International Bond, Senior Notes			4.350	%			1/11/48				240,000				224,231
Kenya — 0.3%
Republic of Kenya Government International Bond, Senior Notes			8.000	%			5/22/32				460,000				417,588	(a)
Mexico — 0.5%
Mexico Government International Bond, Senior Notes			3.500	%			2/12/34				230,000				195,160

 

See Notes to Financial Statements.

 

26				Western Asset Investment Grade Income Fund Inc. 2023 Annual Report

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Western Asset Investment Grade Income Fund Inc.

(Percentages shown based on Fund net assets)

 

Security		Rate				Maturity Date				Face Amount				Value
Mexico — continued
Mexico Government International Bond, Senior Notes			4.280	%			8/14/41			$	200,000			$	165,581
Mexico Government International Bond, Senior Notes			4.350	%			1/15/47				360,000				290,909
Total Mexico															651,650
Total Sovereign Bonds (Cost — $4,275,009)															3,834,484
Municipal Bonds — 1.1%
California — 0.7%
Los Angeles County, CA Public Works Financing Authority Revenue, Multiple Capital Projects I, Series 2010 B, Taxable Build America Bonds			7.618	%			8/1/40				650,000				804,630
Regents of the University of California Medical Center Pooled Revenue, Series Q			4.563	%			5/15/53				110,000				102,946
Total California															907,576
Florida — 0.1%
Sumter Landing, FL, Community Development District Recreational Revenue, Taxable Community Development District			4.172	%			10/1/47				170,000				153,096
Illinois — 0.3%
Illinois State, GO, Taxable, Build America Bonds, Series 2010-3			6.725	%			4/1/35				286,154				301,710
Total Municipal Bonds (Cost — $1,477,534)															1,362,382
U.S. Government & Agency Obligations — 0.5%
U.S. Government Obligations — 0.5%
U.S. Treasury Bonds			4.125	%			8/15/53				500,000				505,547
U.S. Treasury Bonds			4.750	%			11/15/53				50,000				56,082
U.S. Treasury Notes			5.000	%			8/31/25				40,000				40,374
Total U.S. Government & Agency Obligations (Cost — $572,346)															602,003
Convertible Bonds & Notes — 0.4%
Communication Services — 0.4%
Media — 0.4%
DISH Network Corp., Senior Notes (Cost — $464,147)			2.375	%			3/15/24				470,000				467,063

 

See Notes to Financial Statements.

 

Western Asset Investment Grade Income Fund Inc. 2023 Annual Report					27

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Schedule of investments (cont’d)

December 31, 2023

 

Western Asset Investment Grade Income Fund Inc.

(Percentages shown based on Fund net assets)

 

Security		Rate								Shares				Value
Preferred Stocks — 0.1%
Financials — 0.1%
Insurance — 0.1%
Delphi Financial Group Inc. (3 mo. Term SOFR + 3.452%) (Cost — $143,068)			8.831	%							5,725			$	135,940	(c)
Total Investments before Short-Term Investments (Cost — $124,525,164)															121,604,631
Short-Term Investments — 1.0%
Western Asset Premier Institutional Government Reserves, Premium Shares (Cost — $1,282,190)			5.295	%							1,282,190				1,282,190	(e)(f)
Total Investments — 98.6% (Cost — $125,807,354)															122,886,821
Other Assets in Excess of Liabilities — 1.4%															1,796,989
Total Net Assets — 100.0%														$	124,683,810

 

††	Represents less than 0.1%.

 

*	Non-income producing security.

 

(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 has no maturity date. The date shown represents the next call date.

 

(c)

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.

 

(d)	Security is fair valued in accordance with procedures approved by the Board of Directors (Note 1).

 

(e)	Rate shown is one-day yield as of the end of the reporting period.

 

(f)

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, 2023, the total market value of investments in Affiliated Companies was $1,282,190 and the cost was $1,282,190 (Note 7).

 

Abbreviation(s) used in this schedule:
GO		— General Obligation
GTD		— Guaranteed
ICE		— Intercontinental Exchange
JSC		— Joint Stock Company
LIBOR		— London Interbank Offered Rate
SOFR		— Secured Overnight Financing Rate
USD		— United States Dollar

 

See Notes to Financial Statements.

 

28				Western Asset Investment Grade Income Fund Inc. 2023 Annual Report

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Western Asset Investment Grade Income Fund Inc.

 

At December 31, 2023, the Fund had the following open futures contracts:

 

		Number of Contracts				Expiration Date				Notional Amount				Market Value				Unrealized Appreciation (Depreciation)
Contracts to Buy:
U.S. Treasury 2-Year Notes			47				3/24			$	9,579,769			$	9,677,961			$	98,192
U.S. Treasury 5-Year Notes			53				3/24				5,634,778				5,764,992				130,214
U.S. Treasury Ultra Long-Term Bonds			23				3/24				2,796,427				3,072,656				276,229
																			504,635
Contracts to Sell:
U.S. Treasury Long-Term Bonds			59				3/24				6,803,795				7,371,312				(567,517)
U.S. Treasury Ultra 10-Year Notes			22				3/24				2,478,275				2,596,344				(118,069)
																			(685,586)
Net unrealized depreciation on open futures contracts																		$	(180,951)

 

See Notes to Financial Statements.

 

Western Asset Investment Grade Income Fund Inc. 2023 Annual Report					29

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Statement of assets and liabilities

December 31, 2023

 

Assets:
Investments in unaffiliated securities, at value (Cost — $124,525,164)		$	121,604,631
Investments in affiliated securities, at value (Cost — $1,282,190)			1,282,190
Interest receivable			1,694,522
Deposits with brokers for open futures contracts			180,644
Receivable from investment manager			48,856
Receivable from brokers — net variation margin on open futures contracts			11,336
Dividends receivable from affiliated investments			4,108
Other assets			13,944
Prepaid expenses			535
Total Assets			124,840,766
Liabilities:
Investment management fee payable			54,960
Audit and tax fees payable			43,384
Fund accounting fees payable			27,775
Transfer agent fees payable			20,806
Directors’ fees payable			800
Accrued expenses			9,231
Total Liabilities			156,956
Total Net Assets		$	124,683,810
Net Assets:
Par value ($0.01 par value; 9,510,962 shares issued and outstanding; 20,000,000 shares authorized)		$	95,110
Paid-in capital in excess of par value			132,042,402
Total distributable earnings (loss)			(7,453,702)
Total Net Assets		$	124,683,810
Shares Outstanding			9,510,962
Net Asset Value			$13.11

 

See Notes to Financial Statements.

 

30				Western Asset Investment Grade Income Fund Inc. 2023 Annual Report

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Statement of operations

For the Year Ended December 31, 2023

 

Investment Income:
Interest		$	6,744,386
Dividends from affiliated investments			36,298
Dividends from unaffiliated investments			12,039
Less: Foreign taxes withheld			(9,822)
Total Investment Income			6,782,901
Expenses:
Investment management fee (Note 2)			659,688
Fund accounting fees			66,665
Franchise taxes			49,200
Transfer agent fees			45,513
Audit and tax fees			43,384
Legal fees			32,582
Directors’ fees			27,048
Shareholder reports			26,123
Stock exchange listing fees			12,470
Interest expense			3,947
Insurance			806
Custody fees			302
Miscellaneous expenses			11,677
Total Expenses			979,405
Less: Fee waivers and/or expense reimbursements (Note 2)			(24,597)
Net Expenses			954,808
Net Investment Income			5,828,093
Realized and Unrealized Gain (Loss) on Investments and Futures Contracts (Notes 1, 3 and 4):
Net Realized Gain (Loss) From:
Investment transactions in unaffiliated securities			(2,922,084)
Futures contracts			192,515
Net Realized Loss			(2,729,569)
Change in Net Unrealized Appreciation (Depreciation) From:
Investments in unaffiliated securities			7,721,225
Futures contracts			(233,685)
Change in Net Unrealized Appreciation (Depreciation)			7,487,540
Net Gain on Investments and Futures Contracts			4,757,971
Increase in Net Assets From Operations		$	10,586,064

 

See Notes to Financial Statements.

 

Western Asset Investment Grade Income Fund Inc. 2023 Annual Report					31

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Statements of changes in net assets

For the Years Ended December 31,		2023				2022
Operations:
Net investment income		$	5,828,093			$	5,600,962
Net realized gain (loss)			(2,729,569)				433,260
Change in net unrealized appreciation (depreciation)			7,487,540				(30,522,553)
Increase (Decrease) in Net Assets From Operations			10,586,064				(24,488,331)
Distributions to Shareholders From (Note 1):
Total distributable earnings			(5,345,161)				(5,307,116)
Decrease in Net Assets From Distributions to Shareholders			(5,345,161)				(5,307,116)
Increase (Decrease) in Net Assets			5,240,903				(29,795,447)
Net Assets:
Beginning of year			119,442,907				149,238,354
End of year		$	124,683,810			$	119,442,907

 

See Notes to Financial Statements.

 

32				Western Asset Investment Grade Income Fund Inc. 2023 Annual Report

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Financial highlights

 

For a share of common stock outstanding throughout each year ended December 31:
		20231				20221				20211				20201				20191
Net asset value, beginning of year			$12.56				$15.69				$16.23				$15.48				$14.00
Income (loss) from operations:
Net investment income			0.61				0.59				0.58				0.58				0.62
Net realized and unrealized gain (loss)			0.50				(3.16)				(0.56)				0.78				1.55
Total income (loss) from operations			1.11				(2.57)				0.02				1.36				2.17
Less distributions from:
Net investment income			(0.56)				(0.56)				(0.56)				(0.61)				(0.69)
Total distributions			(0.56)				(0.56)				(0.56)				(0.61)				(0.69)
Net asset value, end of year			$13.11				$12.56				$15.69				$16.23				$15.48
Market price, end of year			$12.04				$11.58				$15.63				$15.90				$15.52
Total return, based on NAV2,3			9.14	%			(16.51)	%			0.14	%			9.11	%			15.77	%
Total return, based on Market Price4			9.05	%			(22.56)	%			1.88	%			6.62	%			23.05	%
Net assets, end of year (millions)			$125				$119				$149				$154				$147
Ratios to average net assets:
Gross expenses			0.82	%			0.77	%			0.73	%			0.81	%			0.85	%
Net expenses5,6			0.80				0.75				0.71				0.79				0.83
Net investment income			4.86				4.39				3.66				3.80				4.12
Portfolio turnover rate			14	%			17	%			18	%			41	%			66	%

 

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 calculation assumes that distributions are reinvested at NAV. Past performance is no guarantee of future results.

 

4	The total return calculation assumes that distributions are reinvested in accordance with the Fund’s dividend reinvestment plan. Past performance is no guarantee of future results.

 

5	Reflects fee waivers and/or expense reimbursements.

 

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

 

See Notes to Financial Statements.

 

Western Asset Investment Grade Income Fund Inc. 2023 Annual Report					33

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Notes to financial statements

 

1. Organization and significant accounting policies

Western Asset Investment Grade Income Fund Inc. (the “Fund”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as a diversified, closed-end management investment company. The Fund’s primary investment objective is to seek a high level of current income, consistent with prudent investment risk, through investment in a diversified portfolio of debt securities. To a lesser extent, the Fund may also invest in privately placed debt securities and in certain equity securities. Capital appreciation is a secondary investment objective.

The Fund follows the accounting and reporting guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946, Financial Services – Investment Companies (“ASC 946”). The following are significant accounting policies consistently followed by the Fund and are in conformity with U.S. generally accepted accounting principles (“GAAP”), including, but not limited to, ASC 946. Estimates and assumptions are required to be made regarding assets, liabilities and changes in net assets resulting from operations when financial statements are prepared. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ. Subsequent events have been evaluated through the date the financial statements were issued.

(a) Investment valuation. The valuations for fixed income securities (which may include, but are not limited to, corporate, government, municipal, mortgage-backed, collateralized mortgage obligations and asset-backed securities) and certain derivative instruments are typically the prices supplied by independent third party pricing services, which may use market prices or broker/dealer quotations or a variety of valuation techniques and methodologies. The independent third party pricing services typically use inputs that are observable such as issuer details, interest rates, yield curves, prepayment speeds, credit risks/spreads, default rates and quoted prices for similar securities. Investments in open-end funds are valued at the closing net asset value per share of each fund on the day of valuation. Futures contracts are valued daily at the settlement price established by the board of trade or exchange on which they are traded. Equity securities for which market quotations are available are valued at the last reported sales price or official closing price on the primary market or exchange on which they trade. When the Fund holds securities or other assets that are denominated in a foreign currency, the Fund will normally use the currency exchange rates as of 4:00 p.m. (Eastern Time). If independent third party pricing services are unable to supply prices for a portfolio investment, or if the prices supplied are deemed by the adviser to be unreliable, the market price may be determined by the adviser using quotations from one or more broker/dealers or at the transaction price if the security has recently been purchased and no value has yet been obtained from a pricing service or pricing broker. When reliable prices are not readily available, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded, but before the Fund calculates its net asset

 

34				Western Asset Investment Grade Income Fund Inc. 2023 Annual Report

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value, the Fund values these securities as determined in accordance with procedures approved by the Fund’s Board of Directors.

Pursuant to policies adopted by the Board of Directors, the Fund’s adviser has been designated as the valuation designee and is responsible for the oversight of the daily valuation process. The Fund’s adviser is assisted by the Global Fund Valuation Committee (the “Valuation Committee”). The Valuation Committee is responsible for making fair value determinations, evaluating the effectiveness of the Fund’s pricing policies, and reporting to the Fund’s adviser and the Board of Directors. When determining the reliability of third party pricing information for investments owned by the Fund, the Valuation Committee, among other things, conducts due diligence reviews of pricing vendors, monitors the daily change in prices and reviews transactions among market participants.

The Valuation Committee will consider pricing methodologies it deems relevant and appropriate when making fair value determinations. Examples of possible methodologies include, but are not limited to, multiple of earnings; discount from market of a similar freely traded security; discounted cash-flow analysis; book value or a multiple thereof; risk premium/yield analysis; yield to maturity; and/or fundamental investment analysis. The Valuation Committee will also consider factors it deems relevant and appropriate in light of the facts and circumstances. Examples of possible factors include, but are not limited to, the type of security; the issuer’s financial statements; the purchase price of the security; the discount from market value of unrestricted securities of the same class at the time of purchase; analysts’ research and observations from financial institutions; information regarding any transactions or offers with respect to the security; the existence of merger proposals or tender offers affecting the security; the price and extent of public trading in similar securities of the issuer or comparable companies; and the existence of a shelf registration for restricted securities.

For each portfolio security that has been fair valued pursuant to the policies adopted by the Board of 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.

 

Western Asset Investment Grade Income Fund Inc. 2023 Annual Report					35

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Notes to financial statements (cont’d)

 

GAAP establishes a disclosure hierarchy that categorizes the inputs to valuation techniques used to value assets and liabilities at measurement date. These inputs are summarized in the three broad levels listed below:

 

•

Level 1 — unadjusted quoted prices in active markets for identical investments

 

•

Level 2 — other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)

 

•

Level 3 — significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)

The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.

The following is a summary of the inputs used in valuing the Fund’s assets and liabilities carried at fair value:

 

ASSETS
Description		Quoted Prices (Level 1)				Other Significant Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				Total
Long-Term Investments†:
Corporate Bonds & Notes			—			$	115,202,759				—			$	115,202,759
Sovereign Bonds			—				3,834,484				—				3,834,484
Municipal Bonds			—				1,362,382				—				1,362,382
U.S. Government & Agency Obligations			—				602,003				—				602,003
Convertible Bonds & Notes			—				467,063				—				467,063
Preferred Stocks			—				135,940				—				135,940
Total Long-Term Investments			—				121,604,631				—				121,604,631
Short-Term Investments†		$	1,282,190				—				—				1,282,190
Total Investments		$	1,282,190			$	121,604,631				—			$	122,886,821
Other Financial Instruments:
Futures Contracts††		$	504,635				—				—			$	504,635
Total		$	1,786,825			$	121,604,631				—			$	123,391,456
LIABILITIES
Description		Quoted Prices (Level 1)				Other Significant Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				Total
Other Financial Instruments:
Futures Contracts††		$	685,586				—				—			$	685,586

 

†	See Schedule of Investments for additional detailed categorizations.

 

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

 

36				Western Asset Investment Grade Income Fund Inc. 2023 Annual Report

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

Upon entering into a futures contract, the Fund is required to deposit cash or securities with a broker in an amount equal to a certain percentage of the contract amount. This is known as the ‘‘initial margin’’ and subsequent payments (‘‘variation margin’’) are made or received by the Fund each day, depending on the daily fluctuation in the value of the contract. For certain futures, including foreign denominated futures, variation margin is not settled daily, but is recorded as a net variation margin payable or receivable. The daily changes in contract value are recorded as unrealized appreciation or depreciation in the 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) Credit and market risk. The Fund invests in high-yield and emerging market instruments that are subject to certain credit and market risks. The yields of high-yield and emerging market debt obligations reflect, among other things, perceived credit and market risks. The Fund’s investments in securities rated below investment grade typically involve risks not associated with higher rated securities including, among others, greater risk related to timely and ultimate payment of interest and principal, greater market price volatility and less liquid secondary market trading. The consequences of political, social, economic or diplomatic changes may have disruptive effects on the market prices of investments held by the Fund. The Fund’s investments in non-U.S. dollar denominated securities may also result in foreign currency losses caused by devaluations and exchange rate fluctuations.

Investments in securities that are collateralized by real estate mortgages are subject to certain credit and liquidity risks. When market conditions result in an increase in default rates of the underlying mortgages and the foreclosure values of underlying real estate properties are materially below the outstanding amount of these underlying mortgages, collection of the full amount of accrued interest and principal on these investments may be doubtful. Such market conditions may significantly impair the value and liquidity of these investments and may result in a lack of correlation between their credit ratings and values.

(d) 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,

 

Western Asset Investment Grade Income Fund Inc. 2023 Annual Report					37

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Notes to financial statements (cont’d)

 

expropriation, taxation or other political, social or economic developments, all of which affect the market and/or credit risk of the investments.

(e) Counterparty risk and credit-risk-related contingent features of derivative instruments. The Fund may invest in certain securities or engage in other transactions where the Fund is exposed to counterparty credit risk in addition to broader market risks. The Fund may invest in securities of issuers, which may also be considered counterparties as trading partners in other transactions. This may increase the risk of loss in the event of default or bankruptcy by the counterparty or if the counterparty otherwise fails to meet its contractual obligations. The Fund’s investment adviser attempts to mitigate counterparty risk by (i) periodically assessing the creditworthiness of its trading partners, (ii) monitoring and/or limiting the amount of its net exposure to each individual counterparty based on its assessment and (iii) requiring collateral from the counterparty for certain transactions.

Market events and changes in overall economic conditions may impact the assessment of such counterparty risk by the investment adviser. In addition, declines in the values of underlying collateral received may expose the Fund to increased risk of loss.

With exchange traded and centrally cleared derivatives, there is less counterparty risk to the Fund since the exchange or clearinghouse, as counterparty to such instruments, guarantees against a possible default. The clearinghouse stands between the buyer and the seller of the contract; therefore, the credit risk is limited to failure of the clearinghouse. While offset rights may exist under applicable law, the Fund does not have a contractual right of offset against a clearing broker or clearinghouse in the event of a default of the clearing broker or clearinghouse.

The Fund has entered into master agreements, such as an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement, with certain of its derivative counterparties that govern over-the-counter (“OTC”) derivatives and provide for general obligations, representations, agreements, collateral posting terms, netting provisions in the event of default or termination and credit related contingent features. The credit related contingent features include, but are not limited to, a percentage decrease in the Fund’s net assets or net asset value per share over a specified period of time. If these credit related contingent features were triggered, the derivatives counterparty could terminate the positions and demand payment or require additional collateral.

Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. However, absent an event of default by the counterparty or a termination of the agreement, the terms of the ISDA Master Agreements do not result in an offset of reported amounts of financial assets and financial liabilities in the 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.

 

38				Western Asset Investment Grade Income Fund Inc. 2023 Annual Report

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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, 2023, the Fund did not have any open OTC derivative transactions with credit related contingent features in a net liability position.

(f) Security transactions and investment income. Security transactions are accounted for on a trade date basis. Interest income (including interest income from payment-in-kind securities) is recorded on the accrual basis. Amortization of premiums and accretion of discounts on debt securities are recorded to interest income over the lives of the respective securities, except for premiums on certain callable debt securities, which are amortized to the earliest call date. Paydown gains and losses on mortgage- and asset-backed securities are recorded as adjustments to interest income. Dividend income is recorded on the ex-dividend date for dividends received in cash and/or securities. 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.

(g) Distributions to shareholders. Distributions from net investment income of the Fund, if any, are declared quarterly and paid on a monthly 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.

(h) 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.

(i) 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, 2023, no provision for income tax is required in the Fund’s financial statements. The Fund’s federal and state income and federal

 

Western Asset Investment Grade Income Fund Inc. 2023 Annual Report					39

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Notes to financial statements (cont’d)

 

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.

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

2. Investment management agreement and other transactions with affiliates

The Fund has entered into an Investment Advisory Agreement with Western Asset Management Company, LLC (“Adviser”), pursuant to which the Adviser provides investment advice and administrative services to the Fund. In return for its services, the Fund pays the Adviser a monthly fee at an annual rate of 0.70% of the average monthly net assets of the Fund up to $60,000,000 and 0.40% of such net assets in excess of $60,000,000. If expenses (including the Adviser’s fee but excluding interest, taxes, brokerage fees, the expenses of any offering by the Fund of its securities, and extraordinary expenses beyond the control of the Fund) borne by the Fund in any fiscal year exceed 1.5% of average net assets of the Fund up to $30,000,000 and 1% of average net assets of the Fund over $30,000,000, the Adviser has contractually agreed to reimburse the Fund for any excess. The Adviser or its affiliates has also agreed to waive $24,000 annually in Fund operating expenses. This waiver is ongoing and will not be terminated without Board approval.

The Adviser has agreed to waive the Fund’s management fee to an extent sufficient to offset the net management fee payable in connection with any investment in an affiliated money market fund (the “affiliated money market fund waiver”).

During the year ended December 31, 2023, fees waived and/or expenses reimbursed amounted to $24,597, which included an affiliated money market fund waiver of $597.

Western Asset Management Company Limited (“Western London”), as subadviser to the Fund, provides the Fund with investment research, advice, management and supervision and a continuous investment program for the Fund’s portfolio of non-dollar securities consistent with the Fund’s investment objectives and policies. As compensation, the Adviser pays Western London a fee based on the pro rata assets of the Fund managed by Western London during the month.

Under the terms of an administrative services agreement among the Fund, the Adviser, and Franklin Templeton Fund Adviser, LLC (“FTFA”) (formerly known as Legg Mason Partners Fund Advisor, LLC (“LMPFA”) prior to November 30, 2023), the Adviser (not the Fund) pays FTFA a monthly fee of $3,000 (an annual rate of $36,000).

 

40				Western Asset Investment Grade Income Fund Inc. 2023 Annual Report

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The Adviser, FTFA and Western London are indirect, wholly-owned subsidiaries of Franklin Resources, Inc. (“Franklin Resources”).

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

3. Investments

During the year ended December 31, 2023, 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		$	14,141,238			$	2,860,526
Sales			15,524,689				2,533,314

At December 31, 2023, 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 Depreciation
Securities		$	125,818,469			$	3,502,085			$	(6,433,733)			$	(2,931,648)
Futures contracts			—				504,635				(685,586)				(180,951)

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, 2023.

 

ASSET DERIVATIVES1
		Interest Rate Risk
Futures contracts2		$	504,635
LIABILITY DERIVATIVES1
		Interest Rate Risk
Futures contracts2		$	685,586

 

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

 

2	Includes cumulative unrealized appreciation (depreciation) of futures contracts as reported in the Schedule of Investments. Only net variation margin is reported within the receivables and/or payables on the Statement of Assets and Liabilities.

 

Western Asset Investment Grade Income Fund Inc. 2023 Annual Report					41

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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, 2023. The first table provides additional detail about the amounts and sources of gains (losses) realized on derivatives during the period. The second table provides additional information about the change in net unrealized appreciation (depreciation) resulting from the Fund’s derivatives and hedging activities during the period.

 

AMOUNT OF NET REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED
		Interest Rate Risk
Futures contracts		$	192,515
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES RECOGNIZED
		Interest Rate Risk
Futures contracts		$	(233,685)

During the year ended December 31, 2023, the volume of derivative activity for the Fund was as follows:

 

		Average Market Value
Futures contracts (to buy)		$	20,677,186
Futures contracts (to sell)			9,884,644

5. Distributions subsequent to December 31, 2023

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

 

Record Date		Payable Date				Amount
1/24/2024			2/1/2024			$	0.0485
2/22/2024			3/1/2024			$	0.0485
3/21/2024			4/1/2024			$	0.0490
4/23/2024			5/1/2024			$	0.0490
5/23/2024			6/3/2024			$	0.0490

6. Stock repurchase program

On November 20, 2015, the Fund announced that the Fund’s Board of Directors (the “Board”) had authorized the Fund to repurchase in the open market up to approximately 10% of the Fund’s outstanding common stock when the Fund’s shares are trading at a discount to net asset value. The Board has directed management of the Fund to repurchase shares of common stock at such times and in such amounts as management reasonably believes may enhance shareholder value. The Fund is under no obligation to purchase shares at any specific discount levels or in any specific amounts. During the years ended December 31, 2023 and December 31, 2022, the Fund did not repurchase any shares.

 

42				Western Asset Investment Grade Income Fund Inc. 2023 Annual Report

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7. 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, 2023. The following transactions were effected in such company for the year ended December 31, 2023.

 

		Affiliate Value at December 31, 2022
						Purchased								Sold
						Cost				Shares				Proceeds				Shares
Western Asset Premier Institutional Government Reserves, Premium Shares		$	44,839			$	16,821,371				16,821,371			$	15,584,020				15,584,020

 

(cont’d)		Realized Gain (Loss)				Dividend Income				Net Increase (Decrease) in Unrealized Appreciation (Depreciation)				Affiliate Value at December 31, 2023
Western Asset Premier Institutional Government Reserves, Premium Shares			—			$	36,298				—			$	1,282,190

8. Income tax information and distributions to shareholders

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

 

		2023				2022
Distributions paid from:
Ordinary income		$	5,345,161			$	5,307,116

As of December 31, 2023, the components of distributable earnings (loss) on a tax basis were as follows:

 

Undistributed ordinary income — net		$	1,106,936
Deferred capital losses*			(5,550,081)
Other book/tax temporary differences(a)			102,042
Unrealized appreciation (depreciation)(b)			(3,112,599)
Total distributable earnings (loss) — net		$	(7,453,702)

 

Western Asset Investment Grade Income Fund Inc. 2023 Annual Report					43

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Notes to financial statements (cont’d)

 

*	These capital losses have been deferred in the current year as either short-term or long-term losses. The losses will be deemed to occur on the first day of the next taxable year in the same character as they were originally deferred and will be available to offset future taxable capital gains.

 

(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 futures contracts and book/tax differences in the timing of the deductibility of various expenses.

 

(b)	The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable to the tax deferral of losses on wash sales.

9. 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 and December 2022, the FASB issued ASU No. 2021-01 and ASU No. 2022-06, with further amendments to Topic 848. The amendments in the 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 London Interbank Offered Rate (LIBOR) and other interbank-offered based reference rates as of the end of 2021 for certain LIBOR settings and 2023 for the remainder. The ASUs are effective for certain reference rate-related contract modifications that occur during the period March 12, 2020 through December 31, 2024. Management has reviewed the requirements and believes the adoption of these ASUs will not have a material impact on the financial statements.

 

44				Western Asset Investment Grade Income Fund Inc. 2023 Annual Report

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Report of independent registered public accounting firm

 

To the Board of Directors and Shareholders of Western Asset Investment Grade Income Fund Inc.

Opinion on the Financial Statements

We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Western Asset Investment Grade Income Fund Inc. (the “Fund”) as of December 31, 2023, the related statement of operations for the year ended December 31, 2023, the statement of changes in net assets for each of the two years in the period ended December 31, 2023, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2023 (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, 2023, 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, 2023 and the financial highlights for each of the five years in the period ended December 31, 2023 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, 2023 by correspondence with the custodian and brokers; when replies were not received, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

/s/PricewaterhouseCoopers LLP

Baltimore, Maryland

February 23, 2024

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

 

Western Asset Investment Grade Income Fund Inc. 2023 Annual Report					45

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Additional information (unaudited)

Information about Directors and Officers

 

The business and affairs of Western Asset Investment Grade Income Fund Inc. (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, Franklin Templeton, 280 Park Avenue, 8th Floor, New York, New York 10017.

Information pertaining to the Directors and officers of the Fund is set forth below. The Fund’s annual proxy statement includes additional information about Directors and is available, without charge, upon request by calling the Fund at 1-888-777-0102.

 

Independent Directors†
Robert Abeles, Jr.
Year of birth		1945
Position(s) with Fund		Director and Member of Audit, Executive and Contracts, Investment and Performance and Governance and Nominating Committees and Chair of Audit Committee
Term of office and length of time served1		Since 2013
Principal occupation(s) during the past five years		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 of Excellent Education Development (since 2012); and formerly, Board Member of Great Public Schools Now (2018 to 2022)
Number of funds in fund complex overseen by Director2		50
Other board memberships held by Director during the past five years		None
Jane F. Dasher
Year of birth		1949
Position(s) with Fund		Director and Member of Audit, Executive and Contracts, Investment and Performance and Governance and Nominating Committees
Term of office and length of time served1		Since 1999
Principal occupation(s) during the past five years		Director (since 2022) and formerly Chief Financial Officer, Long Light Capital, LLC, formerly known as Korsant Partners, LLC (a family investment company) (since 1997)
Number of funds in fund complex overseen by Director2		50
Other board membership held by Director during the past five years		Formerly, Director, Visual Kinematics, Inc. (2018 to 2022)

 

46				Western Asset Investment Grade Income Fund Inc.

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Independent Directors† (cont’d)
Anita L. DeFrantz
Year of birth		1952
Position(s) with Fund		Director and Member of Audit, Executive and Contracts, Investment and Performance and Governance and Nominating Committees and Chair of Governance and Nominating Committee
Term of office and length of time served1		Since 1998
Principal occupation(s) during the past five years		President of Tubman Truth Corp. (since 2015); President Emeritus (since 2015); Member (since 1986), Member of the Executive Board (since 2013) and Vice President (since 2017) of the International Olympic Committee; and formerly, President (1987 to 2015) and Director (1990 to 2015) of LA84 (formerly Amateur Athletic Foundation of Los Angeles)
Number of funds in fund complex overseen by Director2		50
Other board memberships held by Director during the past five years		None
Susan B. Kerley
Year of birth		1951
Position(s) with Fund		Director and Member of Audit, Executive and Contracts, Investment and Performance and Governance and Nominating Committees and Chair of Investment and Performance Committee
Term of office and length of time served1		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 Director2		50
Other board memberships 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); and Chairman of the Independent Directors Council (2012 to 2014)
Michael Larson
Year of birth		1959
Position(s) with Fund		Director and Member of Audit, Executive and Contracts, Investment and Performance and Governance and Nominating Committees
Term of office and length of time served1		Since 2004
Principal occupation(s) during the past five years		Chief Investment Officer for William H. Gates III (since 1994)3
Number of funds in fund complex overseen by Director2		50
Other board memberships held by Director during the past five years		Ecolab Inc. (since 2012); Fomento Economico Mexicano, SAB (since 2011); and Republic Services, Inc. (since 2009)

 

Western Asset Investment Grade Income Fund Inc.					47

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Additional information (unaudited) (cont’d)

Information about Directors and Officers

 

Independent Directors† (cont’d)
Avedick B. Poladian
Year of birth		1951
Position(s) with Fund		Director and Member of Audit, Executive and Contracts, Investment and Performance and Governance and Nominating Committees
Term of office and length of time served1		Since 2007
Principal occupation(s) during the past five years		Director and Advisor (since 2017) and formerly, Executive Vice President and Chief Operating Officer (2002 to 2016) of Lowe Enterprises, Inc. (privately held real estate and hospitality firm); and formerly, Partner, Arthur Andersen, LLP (1974 to 2002)
Number of funds in fund complex overseen by Director2		50
Other board memberships held by Director during the past five years		Public Storage (since 2010); Occidental Petroleum Corporation (since 2008); and formerly, California Resources Corporation (2014 to 2021)
William E.B. Siart
Year of birth		1946
Position(s) with Fund		Director and Chairman of the Board and Member of Audit, Executive and Contracts, Investment and Performance and Governance and Nominating Committees and Chair of Executive and Contracts Committee
Term of office and length of time served1		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 (2005 to 2017); and Chairman of Walt Disney Concert Hall, Inc. (1998 to 2006)
Number of funds in fund complex overseen by Director2		50
Other board memberships held by Director during the past five years		Trustee, University of Southern California (since 1994); and formerly, Member of Board of United States Golf Association, Executive Committee Member (2017 to 2021)

 

48				Western Asset Investment Grade Income Fund Inc.

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Independent Directors† (cont’d)
Jaynie Miller Studenmund
Year of birth		1954
Position(s) with Fund		Director and Member of Audit, Executive and Contracts, Investment and Performance and Governance and Nominating Committees
Term of office and length of time served1		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); and Executive vice president for consumer and business banking for three national financial institutions (1984 to 1997)
Number of funds in fund complex overseen by Director2		50
Other board memberships 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) (2012 to 2021); formerly, Director of Pinnacle Entertainment, Inc. (gaming and hospitality company) (2012 to 2018); and Director of LifeLock, Inc. (identity theft protection company) (2015 to 2017)
Peter J. Taylor
Year of birth		1958
Position(s) with Fund		Director and Member of Audit, Executive and Contracts, Investment and Performance and Governance and Nominating Committees, and Coordinator of Alternative Investments
Term of office and length of time served1		Since 2019
Principal occupation(s) during the past five years		Retired; formerly, President, ECMC Foundation (nonprofit organization) (2014 to 2023); and Executive Vice President and Chief Financial Officer for University of California system (2009 to 2014)
Number of funds in fund complex overseen by Director2		50
Other board memberships held by Director during the past five years		Director of 23andMe, Inc. (genetics and health care services company) (since 2021); Director of Pacific Mutual Holding Company4 (since 2016); Ralph M. Parson Foundation (since 2015); Edison International (since 2011); and formerly, Member of the Board of Trustees of California State University System (2015 to 2022) and Kaiser Family Foundation (2012 to 2022)

 

Western Asset Investment Grade Income Fund Inc.					49

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Additional information (unaudited) (cont’d)

Information about Directors and Officers

 

Interested Director
Ronald L. Olson5
Year of birth		1941
Position(s) with Fund		Director and Member of Investment and Performance Committee
Term of office and length of time served1		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 Director2		50
Other board memberships held by Director during the past five years		Director of Provivi, Inc. (since 2017); and Director of Berkshire Hathaway, Inc. (since 1997)
Interested Director and Officer
Jane Trust, CFA6
Year of birth		1962
Position(s) with Fund		Director and Member of Investment and Performance Committee, President and Chief Executive Officer
Term of office and length of time served1		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 123 funds associated with FTFA or its affiliates (since 2015); President and Chief Executive Officer of FTFA (since 2015); formerly, Senior Managing Director (2018 to 2020) and Managing Director (2016 to 2018) of Legg Mason & Co., LLC (“Legg Mason & Co.”); and Senior Vice President of FTFA (2015)
Number of funds in fund complex overseen by Director2		123
Other board memberships held by Director during the past five years		None
Additional Officers
Ted P. Becker
Franklin Templeton 280 Park Avenue, 8th Floor, New York, NY 10017
Year of birth		1951
Position(s) with Fund		Chief Compliance Officer
Term of office1 and length of time served7		Since 2007
Principal occupation(s) during the past five years		Vice President, Global Compliance of Franklin Templeton (since 2020); Chief Compliance Officer of FTFA (since 2006); Chief Compliance Officer of certain funds associated with Legg Mason & Co. or its affiliates (since 2006); formerly, Director of Global Compliance at Legg Mason (2006 to 2020); Managing Director of Compliance of Legg Mason & Co. (2005 to 2020)

 

50				Western Asset Investment Grade Income Fund Inc.

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Additional Officers (cont’d)
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 served7		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)
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 served7		Since 2022
Principal occupation(s) during the past five years		Senior Associate General Counsel of Franklin Templeton (since 2020); Secretary of FTFA (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) and Assistant Secretary of certain funds in the fund complex (2020 to 2022)
Christopher Berarducci Franklin Templeton 280 Park Avenue, 8th Floor, New York, NY 10017
Year of birth		1974
Position(s) with Fund		Treasurer and Principal Financial Officer
Term of office1 and length of time served7		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.

 

Western Asset Investment Grade Income Fund Inc.					51

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Additional information (unaudited) (cont’d)

Information about Directors and Officers

 

Additional Officers (cont’d)
Jeanne M. Kelly
Franklin Templeton 280 Park Avenue, 8th Floor, New York, NY 10017
Year of birth		1951
Position(s) with Fund		Senior Vice President
Term of office1 and length of time served7		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 FTFA (since 2006); President and Chief Executive Officer of LMAS and LMFAM (since 2015); formerly, Managing Director of Legg Mason & Co. (2005 to 2020); and Senior Vice President of LMFAM (2013 to 2015)

 

FTFA, referenced above, was formerly known as LMPFA prior to November 30, 2023.

 

†	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 of the Directors of the Fund holds office until his or her successor shall have been duly elected and shall qualify, subject to prior death, resignation, retirement, disqualification or removal from office and applicable law and the rules of the New York Stock Exchange. Each officer holds office until his or her respective successor is chosen and qualified, or in each case until he or she sooner dies, resigns, is removed with or without cause or becomes disqualified.

 

2

Each board member also serves as a member of the Boards of Western Asset Inflation-Linked Opportunities & Income Fund, Western Asset Inflation-Linked Income Fund and Western Asset Premier Bond Fund (each a closed-end investment company) and the portfolios of Western Asset Funds, Inc., Legg Mason Partners Income Trust, Legg Mason Partners Institutional Trust, Legg Mason Partners Money Market Trust, Legg Mason Partners Premium Money Market Trust, Legg Mason Partners Variable Income Trust and Master Portfolio Trust (each an open-end investment company), which are all considered part of the same fund complex as the Fund.

 

3

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

 

4

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

 

5	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.

 

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

 

7	Indicates the earliest year in which the officer took such office. Each officer of the Fund is an “interested person” (as defined above) of the Fund.

 

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Annual chief executive officer and principal financial officer certifications (unaudited)

 

The Fund’s Chief Executive Officer (“CEO”) has submitted to the NYSE the required annual certification and the Fund also has included the Certifications of the Fund’s CEO and Principal Financial Officer required by Section 302 of the Sarbanes-Oxley Act in the Fund’s Form N-CSR filed with the SEC for the period of this report.

 

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Other shareholder communications regarding accounting matters (unaudited)

 

The Fund’s Audit Committee has established guidelines and procedures regarding the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters (collectively, “Accounting Matters”). Persons with complaints or concerns regarding Accounting Matters may submit their complaints to the Chief Compliance Officer (“CCO”). Persons who are uncomfortable submitting complaints to the CCO, including complaints involving the CCO, may submit complaints directly to the Fund’s Audit Committee Chair. Complaints may be submitted on an anonymous basis.

The CCO may be contacted at:

Franklin Resources Inc.

Compliance Department

280 Park Ave, 8th Floor

New York, NY 10017

Complaints may also be submitted by telephone at 1-800-742-5274. Complaints submitted through this number will be received by the CCO.

 

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Summary of information regarding the Fund (unaudited)

 

Investment Objectives

The Fund’s primary investment objective is to seek a high level of current income, consistent with prudent investment risk, through investment in a diversified portfolio of debt securities. To a lesser extent, the Fund may also invest in privately placed debt securities and in certain equity securities. Capital appreciation is a secondary investment objective.

Principal Investment Policies and Strategies

The Fund invests at least 80% of its net assets in fixed income securities that are rated in the Baa or BBB categories or above at the time of purchase by one or more Nationally Recognized Statistical Rating Organizations (“NRSROs”) or unrated securities of comparable quality at the time of purchase (as determined by the Adviser). If a security is rated by multiple NRSROs and receives different ratings, the Fund will treat the security as being rated in the highest rating category received from an NRSRO. In addition, the Fund may invest up to 20% in other fixed income securities, and not more than 25% in securities restricted as to resale. In addition, convertible bonds and preferred securities may be treated as “fixed income” securities for purposes of the policy and so, if appropriately rated, would qualify for the 80% test. The Fund’s 80% investment policy may be changed by the Board of Directors without shareholder approval upon 60 days’ prior notice to shareholders.

At least 75% of the Fund’s total assets will be invested in the following types of interest-bearing debt securities:

 

(1)	marketable and privately placed straight debt securities which are rated at the time of purchase within the four highest grades assigned by Moody’s Investors Service, Inc. (“Moody’s”) (Aaa, Aa, A or Baa) or S&P Global Ratings (“S&P”) (AAA, AA, A or BBB);

 

(2)	marketable securities of, or guaranteed by, the U.S. Government, its agencies or instrumentalities;

 

(3)

marketable securities (payable in U.S. dollars) of, or guaranteed by, the Government of Canada or a Province of Canada or any instrumentality or political subdivision thereof, acquired under circumstances that would not subject the Fund to payment of U.S. Interest Equalization Tax, such securities not to exceed 25% of the Fund’s total assets;

 

(4)

obligations of, or guaranteed by, U.S. banks or U.S. bank holding companies (i.e., companies whose primary assets are U.S. banks), which obligations, although not rated as a matter of policy by either Moody’s or S&P, are considered by management to have investment quality comparable to securities which may be purchased under item (1) above, provided that investments will not be made in obligations of First Interstate Bancorp, First Interstate Bank of California or any of their subsidiaries; and

 

(5)	commercial paper.

 

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Summary of information regarding the Fund (unaudited) (cont’d)

 

The foregoing requirement for 75% of total assets (the “75% policy”) is a fundamental policy of the Fund which may only be changed with the approval of the holders of the Fund’s voting securities as discussed below. In investing up to 75% of the Fund’s total assets in the debt securities (as described above) which are not rated, the Adviser selects securities which, in the opinion of the Adviser, are of a quality comparable to one of the four highest grades of debt securities which are rated.

Up to 25% of the Fund’s total assets may consist of:

 

(1)

interest-bearing debt securities not included in items (1) through (5) above, which include straight debt securities rated below the four highest grades assigned by Moody’s or S&P (although the Adviser does not currently intend to invest in debt securities rated less than B by Moody’s or S&P), which securities lack desirable investment characteristics with assurance of interest and principal payments over any long period of time being small.

 

(2)	securities which may be convertible into or exchangeable for, or carry warrants to purchase, common stock or other equity interests; and

 

(3)	preferred stocks.

Trust preferred interests and capital securities are considered debt securities and not preferred stock for purposes of the foregoing policy and the 75% policy. The Fund will not invest for the purpose of exercising control or management.

The Fund may invest in securities of other investment companies to the extent permitted under the Investment Company Act of 1940, as amended (the “1940 Act”).

Subject to certain restrictions, the Fund may leverage its portfolio borrowing from banks or other lending institutions in negotiated transactions and issuing publicly or privately and from time to time, bonds, debentures or notes, in series or otherwise, with such interest rates and other terms and provisions, including conversion rights if deemed advisable, as the Board of Directors of the Fund may from time to time determine, provided that immediately after any such borrowing or issuance the aggregate amount of such indebtedness outstanding would not exceed 20% of the value of the Fund’s total assets. Subject to such limitations as may be specified in applicable margin regulations of the Board of Governors of the Federal Reserve System, amounts so borrowed and securities so issued by the Fund could be secured by a pledge or mortgage, provided that as a result not more than 40% of the value of the Fund’s total assets would be subject in the aggregate to such pledges and mortgages. Borrowings may be for long or short term, and, subject to compliance with applicable legal requirements, including applicable provisions of the 1940 Act, may be evidenced by documented discount notes or other short-term notes of the Fund generically referred to as “commercial paper.”

 

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Subject to certain requirements of the Securities and Exchange Commission (the “SEC”), the Fund may lend its portfolio securities to any broker, dealer or financial institution.

The Fund may invest in asset-backed securities. The Fund may also invest in mortgage-backed securities (“MBS”) such as mortgage pass-through securities, collateralized mortgage obligations and multi-class pass-through securities. The Fund may also invest in debt securities which are secured with collateral consisting of mortgage loans or MBS, and in other types of MBS. The Fund may also invest in mortgage pass-through securities issued by governmental, government-related and private entities which are stripped MBS (“SMBS”). As new types of MBS are developed and offered to investors, the Adviser will, consistent with the Fund’s investment objectives, policies and quality standards, consider making investments in such new types of mortgage-backed securities.

The Fund may invest in floating rate, inverse floating rate and index obligations whose interest payments or maturity values float with, or inversely to, an underlying index or price.

The Fund may invest in foreign securities. The Fund may enter into certain foreign currency transactions, including both “spot” purchases and sales, and forward foreign currency contracts. Typically, the Fund would not enter into a forward currency contract with a term of greater than one year, although it may on some occasions do so.

Investment Restrictions

Except as otherwise noted, the Fund’s investment objectives, strategies and investment policies are not fundamental and may be changed by the Board of Directors without the approval of the shareholders. The following investment restrictions are fundamental policies for the protection of the Fund’s shareholders and, subject to compliance with the requirements of the 1940 Act, may only be changed with the approval of the holders of the Fund’s voting securities as specified below and provide that the Fund will not:

 

1.	Issue any senior securities (as defined in the 1940 Act), except in connection with borrowings permitted in Item 2 below or insofar as interest rate futures contracts as permitted by Item 17 below might be considered to be the issuance of a senior security.

 

2.

Borrow any money except (a) as described under “Principal Investment Policies and Strategies” and (b) from banks for temporary or emergency purposes in an amount not exceeding 5% of the value of its total assets, provided, however, that without reference to such 5% limitation the Fund may enter into and hold interest rate futures contracts and may make deposits or have similar arrangements in connection therewith.

 

3.

Mortgage, pledge or hypothecate its assets except (a) as described under “Principal Investment Policies and Strategies” and (b) that up to 15% of the value of its assets may be security for temporary borrowing, provided, however, that this limitation shall not apply to deposits or similar arrangements made in connection with the entering into and

 

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Summary of information regarding the Fund (unaudited) (cont’d)

 

holding of interest rate futures contracts or to the writing of call options in an amount not to exceed 15% of the value of its assets.

 

4.	Act as an underwriter, except to the extent that, in connection with the disposition of restricted portfolio securities, the Fund may be deemed to be an underwriter under applicable laws.

 

5.	Purchase or sell real estate, except that the Fund may purchase or sell securities secured by real estate or interests therein or issued by companies, including real estate investment trusts, which own real estate or interests therein.

 

6.

Purchase or sell commodities or commodity contracts, provided that the Fund may enter into and hold interest rate futures contracts and make deposits or have similar arrangements in connection therewith, and the Fund may write listed covered call options and buy and sell put and call options on debt securities in an amount not to exceed 15% of the value of its total assets.

 

7.	Invest more than 5% of the value of its total assets in the securities of any one issuer (other than cash items and securities of the U.S. Government or its agencies or instrumentalities) or purchase more than 10% of any class of the outstanding voting securities of any one issuer.

 

8.	Invest more than 25% of the value of its total assets in restricted securities, which are securities acquired in private placement transactions.

 

9.	Concentrate its investments in any particular industry; however, it may invest up to 25% of the value of its total assets in the securities of issues in any one industry. As to utility companies, gas, electric, water and telephone companies will be considered as separate industries.

 

10.	Invest more than 25% of the value of its total assets in securities of, or guaranteed by, the Government of Canada or a Province of Canada or any instrumentality or political subdivision thereof.

 

11.

Purchase or retain the securities of any issuer, if, to the Fund’s knowledge, those officers or directors of the Fund or of its investment adviser who individually own beneficially more than 0.5% of the outstanding securities of such issuer, together own beneficially more than 5% of such outstanding securities.

 

12.	Make loans to other persons, except for the purchase of debt securities in private placement transactions or public offerings in accordance with the Fund’s investment objectives and policies and for loans of portfolio securities subject to compliance with the requirements of the SEC.

 

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13.

Purchase securities on margin, except that it may obtain such short-term credits as may be necessary for the clearance of purchases or sales of securities, provided that the Fund may enter into and hold interest rate futures contracts and may make deposits or have similar arrangements in connection therewith.

 

14.	Participate on a joint or a joint and several basis in any securities trading account.

 

15.

Invest in puts, calls or combinations thereof, provided that the Fund may enter into and hold interest rate futures contracts and make deposits or have similar arrangements in connection therewith, and the Fund may write listed covered call options and buy and sell put and call options on debt securities in an amount not to exceed 15% of the value of its total assets.

 

16.	Make short sales, except for sales “against the box,” provided that the Fund may enter into and hold interest rate futures contracts and may make deposits or have similar arrangements in connection therewith.

 

17.

Enter into and hold any interest rate futures contracts, if, immediately thereafter, the sum of (a) the then aggregate futures market prices of financial instruments required to be delivered under open futures contract sales of the Fund and (b) the aggregate purchase prices under open futures contract purchases of the Fund, would exceed 30% of the total assets of the Fund, at market value.

The foregoing fundamental policies may not be changed without approval of the holders of the lesser of (a) 67% of the Fund’s voting securities present at a meeting, if the holders of more than 50% of outstanding voting securities are present in person or by proxy, or (b) more than 50% of the Fund’s outstanding voting securities.

Any investment policy or restriction which involves a maximum percentage of securities or assets shall not be considered to be violated unless an excess over the percentage occurs immediately after an acquisition of securities and results therefrom. Securities received upon conversion or upon exercise of warrants and securities remaining upon the breakup of units or detachment of warrants may be retained to permit advantageous disposition.

Principal Risk Factors

The Fund is a diversified, closed-end management investment company designed primarily as a long-term investment and not as a trading vehicle. The Fund is not intended to be a complete investment program and, due to the uncertainty inherent in all investments, there can be no assurance that the Fund will achieve its investment objectives. The Fund’s share price will fluctuate with market conditions and, at the time of sale, may be worth more or less than the original investment. Shares of closed-end funds often trade at a discount to their net asset value. Diversification does not assure against market loss.

 

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Summary of information regarding the Fund (unaudited) (cont’d)

 

Investment and Market Risk. An investment in the Fund is subject to investment risk, including the possible loss of the entire amount that you invest. Your investment in the common stock represents an indirect investment in the fixed income securities and other investments owned by the Fund, most of which could be purchased directly. The value of the Fund’s portfolio securities may move up or down, sometimes rapidly and unpredictably. At any point in time, your common stock may be worth less than your original investment, even after taking into account the reinvestment of Fund dividends and distributions.

Market Discount Risk. Shares of closed-end investment companies frequently trade at a discount from their net asset value. This risk is separate and distinct from the risk that the Fund’s net asset value could decrease as a result of its investment activities. Whether investors will realize gains or losses upon the sale of shares of the Fund’s common stock will depend not upon the Fund’s net asset value but upon whether the market price of the common stock at the time of sale is above or below the investor’s purchase price for the common stock.

Because the market price of the common stock will be determined by factors such as relative supply of and demand for the common stock in the market, general market and economic conditions and other factors beyond the control of the Fund, the Fund cannot predict whether the shares of common stock will trade at, above or below net asset value or at, above or below the initial public offering price. The Fund’s common stock is designed primarily for long term investors and you should not view the Fund as a vehicle for trading purposes.

Fixed Income Securities Risk. In addition to the risks described elsewhere in this section with respect to valuations and liquidity, fixed income securities, including high-yield securities, are also subject to certain risks, including:

 

•

Issuer Risk. The value of fixed income securities may decline for a number of reasons that directly relate to the issuer, such as management performance, financial leverage and reduced demand for the issuer’s goods and services.

 

•

Interest Rate Risk. The market price of the Fund’s investments will change in response to changes in interest rates and other factors. During periods of declining interest rates, the market price of fixed income securities generally rises. Conversely, during periods of rising interest rates, the market price of such securities generally declines. The magnitude of these fluctuations in the market price of fixed income securities is generally greater for securities with longer maturities. Fluctuations in the market price of the Fund’s securities will not affect interest income derived from securities already owned by the Fund, but will be reflected in the Fund’s net asset value. The Fund may utilize certain strategies, including futures contracts, options on futures and options based on U.S. Treasury securities, for the purpose of reducing the interest rate sensitivity of the

 

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portfolio, although there is no assurance that it will do so or that such strategies will be successful. Recently, there have been inflationary price movements. As such, fixed income securities markets may experience heightened levels of interest rate volatility and liquidity risk.

 

•

Prepayment Risk. Many issuers have a right to prepay their securities. During periods of declining interest rates, the issuer of a security may exercise its option to prepay principal earlier than scheduled, forcing the Fund to reinvest the proceeds from such prepayment in lower yielding securities, which may result in a decline in the Fund’s income and distributions to shareholders. This is known as prepayment or “call” risk. Debt securities frequently have call features that allow the issuer to redeem the security at dates prior to its stated maturity at a specified price (typically greater than par) only if certain prescribed conditions are met. An issuer may choose to redeem a debt security if, for example, the issuer can refinance the debt at a lower cost due to declining interest rates or an improvement in the credit standing of the issuer.

 

•

Reinvestment Risk. Reinvestment risk is the risk that income from the Fund’s portfolio will decline if and when the Fund invests the proceeds from matured, traded or called fixed income securities at market interest rates that are below the portfolio’s current earnings rate. A decline in income could affect the Fund’s common stock price, its distributions or its overall return.

 

•

Extension Risk. When interest rates rise, repayments of fixed income securities, particularly asset- and mortgage- backed securities, may occur more slowly than anticipated, extending the effective duration of these fixed income securities at below market interest rates and causing their market prices to decline more than they would have declined due to the rise in interest rates alone. This may cause the Fund’s share price to be more volatile.

 

•

Duration Risk. For the simplest fixed income securities, “duration” indicates the average time at which the security’s cash flows are to be received. For simple fixed income securities with interest payments occurring prior to the payment of principal, duration is always less than maturity. In general, the lower the stated or coupon rate of interest of a fixed income security, the closer its duration will be to its final maturity; conversely, the higher the stated or coupon rate of interest of a fixed income security, the shorter its duration will be compared to its final maturity.

Determining duration becomes more complex when fixed income security features like floating or adjustable coupon payments, optionality (for example, the right of the issuer to prepay or call the security), and structuring (for example, the right of the holders of certain securities to receive priority as to the issuer’s cash flows) are considered. The calculation of “effective duration” attempts to take into account optionality and other

 

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Summary of information regarding the Fund (unaudited) (cont’d)

 

complex features. Generally, the longer the effective duration of a security, the greater will be the expected change in the percentage price of the security with respect to a change in the security’s own yield. By way of illustration, a security with an effective duration of 3.5 years might normally be expected to go down in price by 35 bps if its yield goes up by 10 bps, while another security with an effective duration of 4.0 years might normally be expected to go down in price by 40 bps if its yield goes up by 10 bps. The assumptions that are made about a security’s features and options when calculating effective duration may prove to be incorrect. For example, many mortgage pass-through securities may have stated final maturities of 30 years, but current prepayment rates, which can vary widely under different economic conditions, may have a large influence on the pass-through security’s response to changes in yield. In these situations, the Fund’s portfolio manager may consider other analytical techniques that seek to incorporate the security’s additional features into the determination of its response to changes in its yield.

A security may change in price for a variety of reasons. For example, floating rate securities may have final maturities of ten or more years, but their effective durations will tend to be very short. If there is an adverse credit event, or a perceived change in the issuer’s creditworthiness, these securities could experience a far greater negative price movement than would be predicted by the change in the security’s yield in relation to its effective duration. As a result, investors should be aware that effective duration is not an exact measurement and may not reliably predict a security’s price sensitivity to changes in yield or interest rates.

Financials Sector Risk. The Fund may be susceptible to adverse economic or regulatory occurrences affecting the financial services sector. Financial services companies are subject to extensive government regulation and, as a result, their profitability may be affected by new regulations or regulatory interpretations. Unstable interest rates can have a disproportionate effect on the financial services sector and financial services companies whose securities the Fund may purchase may themselves have concentrated portfolios, which makes them vulnerable to economic conditions that affect that sector. Financial services companies have also been affected by increased competition, which could adversely affect the profitability or viability of such companies.

Credit Risk. If an issuer or guarantor of a security held by the Fund or a counterparty to a financial contract with the Fund defaults or its credit is downgraded, or is perceived to be less creditworthy, or if the value of the assets underlying a security declines, the value of your investment will typically decline. Changes in actual or perceived creditworthiness may occur quickly. The Fund could be delayed or hindered in its enforcement of rights against an issuer, guarantor or counterparty. Subordinated securities (meaning securities that rank below other securities with respect to claims on the issuer’s assets) are more likely to suffer

 

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a credit loss than non-subordinated securities of the same issuer and will be disproportionately affected by a default, downgrade or perceived decline in creditworthiness.

Counterparty Risk. The Fund may enter into transactions with counterparties that become unable or unwilling to fulfill their contractual obligations. There can be no assurance that any such counterparty will not default on its obligations to the Fund. In the event of a counterparty default, the Fund may be hindered or delayed in exercising rights against a counterparty and may experience significant losses. To the extent that the Fund enters into multiple transactions with a single or small set of counterparties, the Fund will be subject to increased counterparty risk.

Lower and Unrated Securities Risk. The Fund may invest in below investment grade securities (commonly referred to as “high-yield” securities or “junk bonds”) at the time of investment. High yield debt securities are generally subject to greater credit risks than higher-grade debt securities, including the risk of default on the payment of interest or principal. High yield debt securities are considered speculative, typically have lower liquidity and are more difficult to value than higher grade bonds. High yield debt securities tend to be volatile and more susceptible to adverse events, credit downgrades and negative sentiments and may be difficult to sell at a desired price, or at all, during periods of uncertainty or market turmoil.

Mortgage-backed and Asset-backed Securities Risk. When market interest rates increase, the market values of mortgage-backed securities decline. At the same time, mortgage refinancings and prepayments slow, which lengthens the effective duration of these securities. As a result, the negative effect of the interest rate increase on the market value of mortgage-backed securities is usually more pronounced than it is for other types of fixed income securities, potentially increasing the volatility of the Fund. Conversely, when market interest rates decline, while the value of mortgage-backed securities may increase, the rate of prepayment of the underlying mortgages also tends to increase, which shortens the effective duration of these securities. Mortgage-backed securities are also subject to the risk that underlying borrowers will be unable to meet their obligations and the value of property that secures the mortgage may decline in value and be insufficient, upon foreclosure, to repay the associated loan. Investments in asset-backed securities are subject to similar risks. The ability of an issuer of asset-backed securities to enforce its security interest in the underlying assets may be limited, and therefore certain asset-backed securities present a heightened level of risk.

Variable and Floating Rate Securities Risk. Variable rate securities reset at specified intervals, while floating rate securities reset whenever there is a change in a specified index rate. In most cases, these reset provisions reduce the impact of changes in market interest rates on the value of the security. However, the value of these securities may

 

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Summary of information regarding the Fund (unaudited) (cont’d)

 

decline if their interest rates do not rise as much, or as quickly, as other interest rates. Conversely, these securities will not generally increase in value if interest rates decline. The Fund may also invest in inverse floating rate debt instruments (“inverse floaters”). Interest payments on inverse floaters vary inversely with changes in interest rates. Inverse floaters pay higher interest (and therefore generally increase in value) when interest rates decline, and vice versa. An inverse floater may exhibit greater price volatility than a fixed rate obligation of similar credit quality.

Leverage Risk. The value of your investment may be more volatile if the Fund uses leverage through borrowing of money and, under certain circumstances, short sales, futures contracts, and other investment techniques. The Fund’s leveraging strategy may not be successful. Leverage is a speculative technique that may expose the Fund to greater risk and increased costs. Increases and decreases in the value of the Fund’s portfolio will be magnified when the Fund uses leverage. As a result, leverage will cause greater changes in the Fund’s net asset value than if leverage were not used. The Fund will also have to pay interest with respect to its leverage, which may reduce the Fund’s return. This expense may be greater than the Fund’s return on the underlying investments. It is anticipated that interest with respect to leverage will be based on shorter-term interest rates that would be periodically reset. There can be no assurance that the use of leverage will result in a higher yield on the shares. When leverage is employed, the net asset value and market price of the shares and the yield to shareholders will be more volatile. The use of leverage will cause the Fund’s net asset value to fall more sharply in response to increases in interest rates than it would in the absence of the use of leverage. Leverage creates two major types of risks for shareholders: the likelihood of greater volatility of net asset value and market price of the shares because changes in the value of the Fund’s assets, including investments bought with the proceeds from the use of leverage, are borne entirely by the shareholders; and the possibility either that net investment income will fall if the interest and dividend rates on leverage rise or that net investment income will fluctuate because the interest and dividend rates on leverage vary.

Foreign Securities and Emerging Markets Risk. A fund that invests in foreign (non-U.S.) securities may experience more rapid and extreme changes in value than a fund that invests exclusively in securities of U.S. companies. The securities markets of many foreign countries are relatively small, with a limited number of companies representing a small number of industries. Investments in foreign securities (including those denominated in U.S. dollars) are subject to economic and political developments in the countries and regions where the issuers operate or are domiciled, or where the securities are traded, such as changes in economic or monetary policies. Values may also be affected by restrictions on receiving the investment proceeds from a foreign country. Less information may be publicly available about foreign companies than about U.S. companies. Foreign companies are generally not subject to the same accounting, auditing and financial reporting standards as

 

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are U.S. companies. The Public Company Accounting Oversight Board, which regulates auditors of U.S. public companies, is unable to inspect audit work papers in certain foreign countries. Investors in foreign countries often have limited rights and few practical remedies to pursue shareholder claims, including class actions or fraud claims, and the ability of the SEC, the U.S. Department of Justice and other authorities to bring and enforce actions against foreign issuers or foreign persons is limited. Foreign investments may also be adversely affected by U.S. government or international interventions, restrictions or economic sanctions, which could negatively affect the value of an investment or result in the Fund selling an investment at a disadvantageous time. In addition, the Fund’s investments in foreign securities may be subject to the risk of nationalization or expropriation of assets, imposition of currency exchange controls or restrictions on the repatriation of foreign currency, confiscatory taxation, political or financial instability and adverse diplomatic developments. In addition, there may be difficulty in obtaining or enforcing a court judgment abroad. Dividends or interest on, or proceeds from the sale of, foreign securities may be subject to non-U.S. withholding taxes, and special U.S. tax considerations may apply.

The risks of foreign investment are greater for investments in emerging markets. Emerging market countries typically have economic and political systems that are less fully developed, and that can be expected to be less stable, than those of more advanced countries. Low trading volumes may result in a lack of liquidity and in price volatility. Emerging market countries may have policies that restrict investment by foreigners, that require governmental approval prior to investments by foreign persons, or that prevent foreign investors from withdrawing their money at will. An investment in emerging market securities should be considered speculative.

Restricted Securities. Restricted securities are securities subject to legal or contractual restrictions on their resale, such as private placements. Such restrictions might prevent the sale of restricted securities at a time when the sale would otherwise be desirable. Under SEC regulations, certain restricted securities acquired through private placements can be traded freely among qualified purchasers. While restricted securities are generally presumed to be illiquid, it may be determined that a particular restricted security is liquid. Investing in these restricted securities could have the effect of increasing the Fund’s illiquidity if qualified purchasers become, for a time, uninterested in buying these securities.

Restricted securities may be sold only (1) pursuant to SEC Rule 144A or another exemption, (2) in privately negotiated transactions or (3) in public offerings with respect to which a registration statement is in effect under the 1933 Act. Rule 144A securities, although not registered in the U.S., may be sold to qualified institutional buyers in accordance with Rule 144A under the 1933 Act. As noted above, the Fund may determine that some Rule 144A securities are liquid. Where registration is required, the Fund may be obligated

 

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Summary of information regarding the Fund (unaudited) (cont’d)

 

to pay all or part of the registration expenses and a considerable period may elapse between the time of the decision to sell and the time the Fund may be permitted to sell a restricted security under an effective registration statement. If, during such a period, adverse market conditions were to develop, the Fund might obtain a less favorable price than prevailed when it decided to sell.

Illiquid securities may be difficult to value, and the Fund may have difficulty disposing of such securities promptly. The Fund does not consider non-U.S. securities to be restricted if they can be freely sold in the principal markets in which they are traded, even if they are not registered for sale in the U.S.

Foreign Currency Risk. The value of investments in securities denominated in foreign currencies increases or decreases as the rates of exchange between those currencies and the U.S. dollar change. Currency conversion costs and currency fluctuations could erase investment gains or add to investment losses. Currency exchange rates can be volatile, and are affected by factors such as general economic conditions, the actions of the U.S. and foreign governments or central banks, the imposition of currency controls and speculation. The Fund may be unable or may choose not to hedge its foreign currency exposure. The Fund may also engage in foreign currency transactions on a spot (cash) basis at the rate prevailing in the currency exchange market at the time of the transaction. In cases when a particular currency is difficult to hedge or difficult to hedge against the U.S. dollar, the Fund may seek to hedge against price movements in that currency by entering into transactions using options and futures contracts on foreign currencies and forward currency contracts (collectively, “Currency Instruments”), on another currency or a basket of currencies, the value of which Western Asset believes will have a high degree of positive correlation to the value of the currency being hedged. The risk that movements in the price of the Currency Instrument will not correlate perfectly with movements in the price of the currency subject to the hedging transaction is magnified when this strategy is used.

Derivatives Risk. Using derivatives can increase Fund losses and reduce opportunities for gains when market prices, interest rates, currencies, or the derivatives themselves behave in a way not anticipated by the Fund. Using derivatives also can have a leveraging effect and increase Fund volatility. Certain derivatives have the potential for unlimited loss, regardless of the size of the initial investment. Derivatives may not be available at the time or price desired, may be difficult to sell, unwind or value, and the counterparty may default on its obligations to the Fund. Derivatives are generally subject to the risks applicable to the assets, rates, indices or other indicators underlying the derivative. The value of a derivative may fluctuate more than the underlying assets, rates, indices or other indicators to which it relates. Use of derivatives may have different tax consequences for the Fund than an investment in the underlying security, and those differences may affect the amount, timing and character of income distributed to shareholders. The U.S. government and foreign

 

66				Western Asset Investment Grade Income Fund Inc.

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governments have adopted and implemented regulations governing derivatives markets, including mandatory clearing of certain derivatives, margin and reporting requirements. The ultimate impact of the regulations remains unclear. Additional regulation of derivatives may make derivatives more costly, limit their availability or utility, otherwise adversely affect their performance or disrupt markets.

Futures contracts require the Fund to deposit “initial margin” and may require the Fund to increase the level of its initial margin payment as a result of margin calls. If the Fund has insufficient cash to meet daily variation margin requirements, it might need to sell securities at a disadvantageous time or price. If the Fund were unable to liquidate a futures contract or an option on a futures position due to the absence of a liquid secondary market, the imposition of price limits or otherwise, it could incur substantial losses. The Fund would continue to be subject to market risk with respect to the position. In addition, except in the case of purchased options, the Fund would continue to be required to make daily variation margin payments and might be required to maintain the position being hedged by the future or option or to maintain cash or securities in a segregated account.

Effective August 19, 2022, the Fund began operating under Rule 18f-4 under the 1940 Act which, among other things, governs the use of derivative investments and certain financing transactions (e.g., reverse repurchase agreements) by registered investment companies. Among other things, Rule 18f-4 requires funds that invest in derivative instruments beyond a specified limited amount to apply a value at risk (VaR) based limit to their use of certain derivative instruments and financing transactions and to adopt and implement a derivatives risk management program. A fund that uses derivative instruments in a limited amount is not subject to the full requirements of Rule 18f-4. Compliance with Rule 18f-4 by the Fund could, among other things, make derivatives more costly, limit their availability or utility, or otherwise adversely affect their performance. Rule 18f-4 may limit the Fund’s ability to use derivatives as part of its investment strategy.

Portfolio Turnover Risk. The length of time the Fund has held a particular security is not generally a consideration in investment decisions. A change in the securities held by the Fund is known as “portfolio turnover.” As a result of the Fund’s investment policies, under certain market conditions the Fund’s turnover rate may be higher than that of other investment companies. Portfolio turnover generally involves some expense to the Fund, including brokerage commissions or dealer mark-ups and other transaction costs on the sale of securities and reinvestment in other securities. These transactions may result in realization of taxable capital gains.

Higher portfolio turnover rates, such as those above 100%, are likely to result in higher brokerage commissions or other transaction costs and could give rise to a greater amount of taxable capital gains.

 

Western Asset Investment Grade Income Fund Inc.					67

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Summary of information regarding the Fund (unaudited) (cont’d)

 

Management Risk. The Fund is subject to management risk because it is an actively managed investment portfolio. Western Asset will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that these will produce the desired results.

Inflation/Deflation Risk. Inflation risk is the risk that the Fund’s assets or income from the Fund’s investments will be worth less in the future as inflation decreases the value of money. As inflation increases, the real value of the Fund’s portfolio could decline. Shares of common stock and distributions on the shares of common stock can decline. In addition, during any periods of rising inflation, the dividend rates or borrowing costs associated with the Fund’s use of leverage would likely increase, which would tend to further reduce returns to shareholders. Deflation risk is the risk that prices throughout the economy may decline over time—the opposite of inflation. Deflation may have an adverse effect on the creditworthiness of issuers and may make issuer defaults more likely, which may result in a decline in the value of the Fund’s portfolio.

Investment in Other Investment Companies Risk. If the Fund acquires shares of investment companies, including ones affiliated with the Fund, shareholders bear both their proportionate share of expenses in the Fund (including management and advisory fees) and, indirectly, the expenses of the investment companies (to the extent not offset by Western Asset or its affiliates through waivers).

Market Events Risk. The market values of securities or other assets will fluctuate, sometimes sharply and unpredictably, due to factors such as economic events, governmental actions or intervention, actions taken by the U.S. Federal Reserve or foreign central banks, market disruptions caused by trade disputes or other factors, political developments, armed conflicts, economic sanctions and countermeasures in response to sanctions, major cybersecurity events, the global and domestic effects of widespread or local health, weather or climate events, and other factors that may or may not be related to the issuer of the security or other asset. Economies and financial markets throughout the world are increasingly interconnected. Economic, financial or political events, trading and tariff arrangements, public health events, terrorism, wars, natural disasters and other circumstances in one country or region could have profound impacts on global economies or markets. As a result, whether or not the fund invests in securities of issuers located in or with significant exposure to the countries or markets directly affected, the value and liquidity of the Fund’s investments may be negatively affected. Following Russia’s invasion of Ukraine, Russian stocks lost all, or nearly all, of their market value. Other securities or markets could be similarly affected by past or future geopolitical or other events or conditions. Furthermore, events involving limited liquidity, defaults, non-performance or other adverse developments that affect one industry, such as the financial services industry, or concerns or rumors about any events of these kinds, have in the past and may in the

 

68				Western Asset Investment Grade Income Fund Inc.

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future lead to market-wide liquidity problems, may spread to other industries, and could negatively affect the value and liquidity of the Fund’s investments.

The long-term impact of the COVID-19 pandemic and its subsequent variants on economies, markets, industries and individual issuers is not known. Some sectors of the economy and individual issuers have experienced or may experience particularly large losses. Periods of extreme volatility in the financial markets, reduced liquidity of many instruments, increased government debt, inflation, and disruptions to supply chains, consumer demand and employee availability, may continue for some time. The U.S. government and the Federal Reserve, as well as certain foreign governments and central banks, took extraordinary actions to support local and global economies and the financial markets in response to the COVID-19 pandemic. This and other government intervention into the economy and financial markets may not work as intended, and have resulted in a large expansion of government deficits and debt, the long term consequences of which are not known. In addition, the COVID-19 pandemic, and measures taken to mitigate its effects, could result in disruptions to the services provided to the Fund by its service providers.

Raising the ceiling on U.S. government debt has become increasingly politicized. Any failure to increase the total amount that the U.S. government is authorized to borrow could lead to a default on U.S. government obligations, with unpredictable consequences for economies and markets in the U.S. and elsewhere. Recently, inflation and interest rates have increased and may rise further. These circumstances could adversely affect the value and liquidity of the Fund’s investments, impair the Fund’s ability to satisfy redemption requests, and negatively impact the Fund’s performance.

The United States and other countries are periodically involved in disputes over trade and other matters, which may result in tariffs, investment restrictions and adverse impacts on affected companies and securities. For example, the United States has imposed tariffs and other trade barriers on Chinese exports, has restricted sales of certain categories of goods to China, and has established barriers to investments in China. Trade disputes may adversely affect the economies of the United States and its trading partners, as well as companies directly or indirectly affected and financial markets generally. The United States government has prohibited U.S. persons from investing in Chinese companies designated as related to the Chinese military. These and possible future restrictions could limit the Fund’s opportunities for investment and require the sale of securities at a loss or make them illiquid. Moreover, the Chinese government is involved in a longstanding dispute with Taiwan that has included threats of invasion. If the political climate between the United States and China does not improve or continues to deteriorate, if China were to attempt unification of Taiwan by force, or if other geopolitical conflicts develop or get worse, economies, markets and individual securities may be severely affected both regionally and globally, and the value of the Fund’s assets may go down.

 

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Summary of information regarding the Fund (unaudited) (cont’d)

 

Liquidity Risk. Liquidity risk exists when particular investments are difficult to sell. Securities may become “illiquid securities” after purchase by the Fund, particularly during periods of market turmoil. When the Fund holds illiquid investments, the portfolio may be harder to value, especially in changing markets, and if the Fund is forced to sell these investments in order to segregate assets or for other cash needs, the Fund may suffer a loss.

LIBOR Risk. 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 was the offered rate for short-term Eurodollar deposits between major international banks. In 2017, the U.K. Financial Conduct Authority (“FCA”) announced its intention to cease compelling banks to provide the quotations needed to sustain LIBOR after 2021. In addition, global regulators have announced that, with limited exceptions, no new LIBOR-based contracts should be entered into after 2021. Actions by regulators have resulted in the establishment of alternative reference rates to LIBOR in most major currencies. In March 2022, the U.S. federal government enacted legislation to establish a process for replacing LIBOR in certain existing contracts that do not already provide for the use of a clearly defined or practicable replacement benchmark rate as described in the legislation. Generally speaking, for contracts that do not contain a fallback provision as described in the legislation, a benchmark replacement recommended by the Federal Reserve Board effectively automatically replaced the USD LIBOR benchmark in the contract upon LIBOR’s cessation at the end of June 2023. The recommended benchmark replacement is based on the Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York, including certain spread adjustments and benchmark replacement conforming changes. Various financial industry groups have been planning for the transition away from LIBOR, but there remains uncertainty regarding the impact of the transition from LIBOR on the Fund’s transactions and the financial markets generally. The transition away from LIBOR may lead to increased volatility and illiquidity in markets that rely on LIBOR and may adversely affect the Fund’s performance. The transition may also result in a reduction in the value of certain LIBOR-based investments held by the Fund or reduce the effectiveness of related transactions such as hedges. Any such effects of the transition away from LIBOR, as well as other unforeseen effects, could result in losses for the Fund.

Operational Risk. Your ability to transact with the Fund or the valuation of your investment may be negatively impacted because of the operational risks arising from factors such as processing errors and human errors, inadequate or failed internal or external processes, failures in systems and technology (including those due to cybersecurity incidents), changes in personnel, and errors caused by third party service providers or trading counterparties. It is not possible to identify all of the operational risks that may affect the Fund or to develop processes and controls that eliminate or mitigate the occurrence of such failures. The Fund and its shareholders could be negatively impacted as a result.

 

70				Western Asset Investment Grade Income Fund Inc.

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Valuation Risk. The sales price the Fund could receive for any particular portfolio investment may differ from the Fund’s valuation of the investment, particularly for securities that trade in thin or volatile markets or that are valued using a fair value methodology. These differences may increase significantly and affect Fund investments more broadly during periods of market volatility. The Fund’s ability to value its investments may be impacted by technological issues and/or errors by pricing services or other third party service providers. The valuation of the Fund’s investments involves subjective judgment.

Cybersecurity Risk. Like other funds and business enterprises, the Fund, the Fund’s investment advisers and their service providers are subject to the risk of cyber incidents occurring from time to time. Cybersecurity incidents, whether intentionally caused by third parties or otherwise, may allow an unauthorized party to gain access to Fund assets, Fund or customer data (including private stockholder information) or proprietary information, cause the Fund, the manager, the subadviser and/or their service providers (including, but not limited to, Fund accountants, custodians, sub-custodians, transfer agents and financial intermediaries) to suffer data breaches, data corruption or loss of operational functionality, or prevent Fund investors from purchasing, redeeming or exchanging shares of common stock, receiving distributions or receiving timely information regarding the Fund or their investment in the Fund. The Fund and the Fund’s investment advisers have limited ability to prevent or mitigate cybersecurity incidents affecting third party service providers, and such third party service providers may have limited indemnification obligations to the Fund and/or the Fund’s investment advisers. Cybersecurity incidents may result in financial losses to the Fund and its shareholders, and substantial costs may be incurred in order to prevent or mitigate any future cybersecurity incidents. Issuers of securities in which the Fund invests are also subject to cybersecurity risks, and the value of these securities could decline if the issuers experience cybersecurity incidents.

New ways to carry out cyber attacks continue to develop. There is a chance that some risks have not been identified or prepared for, or that an attack may not be detected, which puts limitations on the Fund’s ability to plan for or respond to a cyber attack.

More Information

For a complete list of the Fund’s fundamental investment restrictions and more detailed descriptions of the Fund’s investment policies, strategies and risks, see the Fund’s prospectus, dated March 15, 1973, as amended or superseded by subsequent disclosures. The Fund’s fundamental investment restrictions may not be changed without the approval of the holders of a majority of the outstanding voting securities, as defined in the 1940 Act.

 

Western Asset Investment Grade Income Fund Inc.					71

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Dividend reinvestment plan (unaudited)

 

The Fund offers to all shareholders a Dividend Reinvestment Plan (“Plan”). For participants in the Plan, cash distributions (e.g., dividends and capital gains) of registered shareholders (those who own shares in their own name on the Fund’s records) are automatically invested in shares of the Fund. Interested shareholders may obtain more information or sign up for the Plan by contacting the agent. Shareholders who own shares in a brokerage, bank, or other financial institution account must contact the Company where their account is held in order to participate in the Plan.

If you elect to participate in the Plan you will automatically receive your dividend or net capital gains distribution in newly issued shares of the Fund if the market price of a share on the date of the distribution is at or above the net asset value (“NAV”) of a Fund share. The number of shares to be issued to you will be determined by dividing the amount of the cash distribution to which you are entitled (net of any applicable withholding taxes) by the greater of the NAV per share on such date or 95% of the market price of a share on such date. If the market price of a share on such distribution date is below the NAV the Agent will, as agent for the participants, buy shares of the Fund’s stock through a broker on the open market or in a negotiated transaction (subject to price and other terms to which the agent may agree). The price per share of shares purchased for each participant’s account with respect to a particular dividend or other distribution will be the average price (including brokerage commissions, transfer taxes and any other costs of purchase) of all shares purchased with respect to that dividend or other distribution. All shares of common stock acquired on your behalf through the Plan will be automatically credited to an account maintained on the books of the Agent. Full and fractional shares will be voted by the Agent in accordance with your instructions.

Additional information regarding the plan

The Fund will pay all costs applicable to the Plan, with the exceptions noted below. Brokerage commissions, transfer taxes and any other costs of purchase or sale by the Agent under the Plan will be charged to participants. The commission participants pay for selling shares under the Plan is calculated as $2.50 plus $0.15 per share. Beneficial shareholders should contact the company holding their account for further information concerning fees that may apply to selling shares under the Plan. In the event the Fund determines to no longer pay the costs applicable to the Plan, the Agent will terminate the Plan and may, but is not obligated to, offer a new plan under which it would impose a direct service charge on participants.

All shares acquired through the Plan receive voting rights and are eligible for any stock split, stock dividend, or other rights accruing to shareholders that the Board of Directors may declare. Distributions to Plan participants will be in the form of stock, unless the Agent is notified in writing 10 days prior to the record date fixed by the Board of Directors for the distribution that you wish to receive a cash payment. Beneficial shareholders should contact the company holding their account for further information regarding deadlines that might apply.

You may terminate participation in the Plan at any time by giving written notice to the Agent. Such termination will be effective prior to the record date next succeeding the receipt of such instructions or by a later date of termination specified in such instructions.

 

72				Western Asset Investment Grade Income Fund Inc.

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Upon termination of the Plan, a participant may request a certificate for the full shares credited to his or her account or may request the sale of all or part of such shares. If the participant instructs the Agent to sell the shares credited to the participant’s account, the Agent may accumulate such shares and those of any other terminating participants for purposes of such sale. Brokerage charges, transfer taxes, and any other costs of sale will be allocated pro rata among the selling participants. Any such sale may be made on any securities exchange where such shares are traded, in the over-the-counter market or in negotiated transactions, and may be subject to such terms of price, delivery, etc., as the Agent may agree to. Fractional shares credited to a terminating account will be paid for in cash at the current market price at the time of termination.

Dividends and other distributions invested in additional shares under the Plan are subject to income tax just as if they had been received in cash. After year end, dividends paid on the accumulated shares will be included in the Form 1099-DIV information return to the Internal Revenue Service and only one Form 1099-DIV will be sent to each participant each year.

Registered shareholders can make inquiries regarding the Plan, as well as sign up or terminate their participation in the Plan by contacting Computershare Inc., P.O. Box 43006 Providence, RI 02940-3078, telephone number 1-888-888-0151. Beneficial Shareholders can make inquiries regarding the Plan as well as sign up or terminate their participation in the Plan by contacting the company where their account is held.

 

Western Asset Investment Grade Income Fund Inc.					73

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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, 2023:

 

		Pursuant to:				Amount Reported
Income Eligible for Dividends Received Deduction (DRD)			§854(b)(1)(A)				$12,039
Qualified Dividend Income Earned (QDI)			§854(b)(1)(B)				$12,039
Qualified Net Interest Income (QII)			§871(k)(1)(C)				$3,652,431
Section 163(j) Interest Earned			§163(j)				$6,696,090

 

74				Western Asset Investment Grade Income Fund Inc.

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Western Asset

Investment Grade Income Fund Inc.

 

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

Officers

Jane Trust

President and Chief Executive Officer

Christopher Berarducci

Treasurer and Principal Financial Officer

Ted P. Becker

Chief Compliance Officer

Marc A. De Oliveira

Secretary and Chief Legal Officer

Thomas C. Mandia

Senior Vice President

Jeanne M. Kelly

Senior Vice President

Western Asset Investment Grade Income Fund Inc.

620 Eighth Avenue

47th Floor

New York, NY 10018

Investment advisers

Western Asset Management Company, LLC

Western Asset Management Company Limited

Custodian

The Bank of New York Mellon

Independent registered public accounting firm

PricewaterhouseCoopers LLP

100 East Pratt Street

Baltimore, MD 21202

Legal counsel

Ropes & Gray LLP

1211 Avenue of the Americas

New York, NY 10036

Transfer agent

Computershare Inc.

P.O. Box 43006

Providence, RI 02940-3078

New York Stock Exchange Symbol

PAI

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Legg Mason Funds Privacy and Security Notice

 

Your Privacy and the Security of Your Personal Information is Very Important to the 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 the Western Asset Money Market Funds sold by the Funds’ distributor, Franklin Distributors, LLC, as well as Legg Mason-sponsored closed-end funds. The provisions of this Privacy Notice apply to your information both while you are a shareholder and after you are no longer invested with the Funds.

The Type of Nonpublic Personal Information the Funds Collect About You

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

 

•

Personal information included on applications or other forms;

 

•

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

 

•

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

 

•

Online account access user IDs, passwords, security challenge question responses.

How the Funds Use Nonpublic Personal Information About You

The Funds do not sell or share your nonpublic personal information with third parties or with affiliates for their marketing purposes, unless you have authorized the Funds to do so. The Funds do not disclose any nonpublic personal information about you except as may be required to perform transactions or services you have authorized or as permitted or required by law.

The Funds may disclose information about you to:

 

•

Employees, agents, and affiliates on a “need to know” basis to enable the Funds to conduct ordinary business or to comply with obligations to government regulators;

 

•

Service providers, including the Funds’ affiliates, who assist the Funds as part of the ordinary course of business (such as printing, mailing services, or processing or servicing your account with us) or otherwise perform services on the Funds’ behalf, including companies that may perform statistical analysis, market research and marketing services 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

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

 

Except as otherwise permitted by applicable law, companies acting on the Funds’ behalf, including those outside the United States, are contractually obligated to keep nonpublic personal information the Funds provide to them confidential and to use the information the Funds share only to provide the services the Funds ask them to perform.

The Funds may disclose nonpublic personal information about you when necessary to enforce their rights or protect against fraud, or as permitted or required by applicable law, such as in connection with a law enforcement or regulatory request, subpoena, or similar legal process. In the event of a corporate action or in the event a Fund service provider changes, the Funds may be required to disclose your nonpublic personal information to third parties. While it is the Funds’ practice to obtain protections for disclosed information in these types of transactions, the Funds cannot guarantee their privacy policy will remain unchanged.

Keeping You Informed of the Funds’ Privacy and Security Practices

The Funds will notify you annually of their privacy policy as required by federal law. While the Funds reserve the right to modify this policy at any time, they will notify you promptly if this privacy policy changes.

The Funds’ Security Practices

The Funds maintain appropriate physical, electronic and procedural safeguards designed to guard your nonpublic personal information. The Funds’ internal data security policies restrict access to your nonpublic personal information to authorized employees, who may use your nonpublic personal information for Fund business purposes only.

Although the Funds strive to protect your nonpublic personal information, they cannot ensure or warrant the security of any information you provide or transmit to them, and you do so at your own risk. In the event of a breach of the confidentiality or security of your nonpublic personal information, the Funds will attempt to notify you as necessary so you can take appropriate protective steps. If you have consented to the Funds using electronic communications or electronic delivery of statements, they may notify you under such circumstances using the most current email address you have on record with them.

In order for the Funds to provide effective service to you, keeping your account information accurate is very important. If you believe that your account information is incomplete, not accurate or not current, if you have questions about the Funds’ privacy practices, or our use of your nonpublic personal information, write the Funds using the contact information on your account statements, email the Funds by clicking on the Contact Us section of the Funds’ website at www.franklintempleton.com, or contact the Funds at 1-877-721-1926 for the Western Asset Money Market Funds or 1-888-777-0102 for the Legg Mason-sponsored closed-end funds.

Revised October 2022

 

NOT PART OF THE ANNUAL REPORT

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

 

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, 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 2022

 

NOT PART OF THE ANNUAL REPORT

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Western Asset Investment Grade Income Fund Inc.

Western Asset Investment Grade Income Fund Inc.

620 Eighth Avenue

47^th Floor

New York, NY 10018

Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940, as amended, that from time to time the Fund may purchase, at market prices, shares of its stock.

The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The Fund’s Forms N-PORT are available on the SEC’s website at www.sec.gov. To obtain information on Form N-PORT, shareholders can call the Fund at 1-888-777-0102 or visit the Fund’s website at www.franklintempleton.com.

Information on how the Fund voted proxies relating to portfolio securities during the prior 12-month period ended June 30th of each year and a description of the policies and procedures that the Fund uses to determine how to vote proxies related to portfolio transactions are available (1) without charge, upon request, by calling 1-888-777-0102, (2) at www.franklintempleton.com and (3) on the SEC’s website at www.sec.gov.

Quarterly performance, semi-annual and annual reports, current net asset value and other information regarding the Fund may be found on Franklin Templeton’s website, which can be accessed at www.franklintempleton.com. Any reference to Franklin Templeton’s website in this report is intended to allow investors public access to information regarding the Fund and does not, and is not intended to, incorporate Franklin Templeton’s website in this report.

This report is transmitted to the shareholders of Western Asset Investment Grade Income Fund Inc. for their information. This is not a prospectus, circular or representation intended for use in the purchase of shares of the Fund or any securities mentioned in this report.

Computershare Inc.

P.O. Box 43006

Providence, RI 02940-3078

 

WASX013146 2/24 SR24-4830

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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 previous fiscal years ending December 31, 2022 and December 31, 2023 (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 $39,384 in December 31, 2022 and $39,384 in December 31, 2023.
		(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, 2022 and $0 in December 31, 2023.
		(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 $10,000 in December 31, 2022 and $10,000 in December 31, 2023. These services consisted of (i) review or preparation of U.S. federal, state, local and excise tax returns; (ii) U.S. federal, state and local tax planning, advice and assistance regarding statutory, regulatory or administrative developments, and (iii) tax advice regarding tax qualification matters and/or treatment of various financial instruments held or proposed to be acquired or held.
		There were no fees billed for tax services by the Auditors to service affiliates during the Reporting Periods that required pre-approval by the Audit Committee.
		(d) All Other Fees. The aggregate fees for other fees billed in the Reporting Periods for products and services provided by the Auditor, other than the services reported in paragraphs (a) through (c) of this Item for the Western Asset Investment Grade Income Fund Inc. were $0 in December 31, 2022 and $0 in December 31, 2023.
		All Other Fees. There were no other non-audit services rendered by the Auditor to Franklin Templeton Fund Adviser, LLC (“FTFA”), and any entity controlling, controlled by or under common control with FTFA that provided ongoing services to Western Asset Investment Grade Income Fund 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 FTFA 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

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		relates directly to the operations and financial reporting of the Fund. The Committee may implement policies and procedures by which such services are approved other than by the full Committee.
		The Committee shall not approve non-audit services that the Committee believes may impair the independence of the auditors. As of the date of the approval of this Audit Committee Charter, permissible non-audit services include any professional services (including tax services), that are not prohibited services as described below, provided to the Fund by the independent auditors, other than those provided to the Fund in connection with an audit or a review of the financial statements of the Fund. Permissible non-audit services may not include: (i) bookkeeping or other services related to the accounting records or financial statements of the Fund; (ii) financial information systems design and implementation; (iii) appraisal or valuation services, fairness opinions or contribution-in-kind reports; (iv) actuarial services; (v) internal audit outsourcing services; (vi) management functions or human resources; (vii) broker or dealer, investment adviser or investment banking services; (viii) legal services and expert services unrelated to the audit; and (ix) any other service the Public Company Accounting Oversight Board determines, by regulation, is impermissible.
		Pre-approval by the Committee of any permissible non-audit services is not required so long as: (i) the aggregate amount of all such permissible non-audit services provided to the Fund, the Adviser and any service providers controlling, controlled by or under common control with the Adviser that provide ongoing services to the Fund (“Covered Service Providers”) constitutes not more than 5% of the total amount of revenues paid to the independent auditors during the fiscal year in which the permissible non-audit services are provided to (a) the Fund, (b) the Adviser and (c) any entity controlling, controlled by or under common control with the Adviser that provides ongoing services to the Fund during the fiscal year in which the services are provided that would have to be approved by the Committee; (ii) the permissible non-audit services were not recognized by the Fund at the time of the engagement to be non-audit services; and (iii) such services are promptly brought to the attention of the Committee and approved by the Committee (or its delegate(s)) prior to the completion of the audit.
		(2) None of the services described in paragraphs (b) through (d) of this Item were performed in reliance on paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
		(f) Not applicable.
		(g) Non-audit fees billed by the Auditor for services rendered to Western Asset Investment Grade Income Fund Inc., FTFA and any entity controlling, controlled by, or under common control with FTFA that provides ongoing services to Western Asset Investment Grade Income Fund Inc. during the reporting period were $350,359 in December 31, 2022 and $342,635 in December 31, 2023.
		(h) Yes. Western Asset Investment Grade Income Fund 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 Investment Grade Income Fund Inc. or to Service Affiliates, which were required to be pre-approved, were pre-approved as required.
		(i) Not applicable.
		(j) Not applicable.

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ITEM 5.		AUDIT COMMITTEE OF LISTED REGISTRANTS.
		a) Registrant has a separately-designated standing Audit Committee established in accordance with Section 3(a)58(A) of the Exchange Act. The Audit Committee consists of the following Board members:
		Robert Abeles, Jr Jane 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

Western Asset Management Company, LLC

Proxy Voting Policies and Procedures

NOTE

The policy below relating to proxy voting and corporate actions is a global policy for Western Asset Management Company, LLC (“Western Asset” or the “Firm”) and all Western Asset affiliates, including Western Asset Management Company Limited (“Western Asset Limited”), Western Asset Management Company Ltd (“Western Asset Japan”) and Western Asset Management Company Pte. Ltd. (“Western Asset Singapore”), as applicable. As compliance with the policy is monitored by Western Asset, the policy has been adopted from the US Compliance Manual and all defined terms are those defined in the US Compliance Manual rather than the compliance manual of any other Western Asset affiliate.

BACKGROUND

An investment adviser is required to adopt and implement policies and procedures that we believe are reasonably designed to ensure that proxies are voted in the best interest of clients, in accordance with fiduciary duties and Rule 206(4)-6 under the Investment Advisers Act of 1940 (“Advisers Act”). The authority to vote the proxies of our clients is established through investment management agreements or comparable documents. In addition to SEC requirements governing advisers, long-standing fiduciary standards and responsibilities have been established for ERISA accounts. Unless a manager of ERISA assets has been expressly precluded from voting proxies, the Department of Labor has determined that the responsibility for these votes lies with the investment manager.

POLICY

As a fixed income only manager, the occasion to vote proxies is very rare. However, the Firm has adopted and implemented policies and procedures that we believe are reasonably designed to ensure that proxies are voted in the best interest of clients, in accordance with our fiduciary duties and Rule 206(4)-6 under the Advisers Act. In addition to SEC requirements governing advisers, our proxy voting policies reflect the long-

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standing fiduciary standards and responsibilities for ERISA accounts. Unless a manager of ERISA assets has been expressly precluded from voting proxies, the Department of Labor has determined that the responsibility for these votes lies with the investment manager.

While the guidelines included in the procedures are intended to provide a benchmark for voting standards, each vote is ultimately cast on a case-by-case basis, taking into consideration the Firm’s contractual obligations to our clients and all other relevant facts and circumstances at the time of the vote (such that these guidelines may be overridden to the extent the Firm deems appropriate).

In exercising its voting authority, Western Asset will not consult or enter into agreements with officers, directors or employees of Franklin Resources (Franklin Resources includes Franklin Resources, Inc. and organizations operating as Franklin Resources) or any of its affiliates (other than Western Asset affiliated companies) regarding the voting of any securities owned by its clients.

 

•

PROCEDURES

Responsibility and Oversight

The Regulatory Affairs Group is responsible for administering and overseeing the proxy voting process. The gathering of proxies is coordinated through the Corporate Actions area of Investment Operations Group (“Corporate Actions”). Research analysts and portfolio managers are responsible for determining appropriate voting positions on each proxy utilizing any applicable guidelines contained in these procedures.

Client Authority

The Investment Management Agreement for each client is reviewed at account start-up for proxy voting instructions. If an agreement is silent on proxy voting, but contains an overall delegation of discretionary authority or if the account represents assets of an ERISA plan, Western Asset will assume responsibility for proxy voting. The Regulatory Affairs Group maintains a matrix of proxy voting authority.

Proxy Gathering

Registered owners of record, client custodians, client banks and trustees (“Proxy Recipients”) that receive proxy materials on behalf of clients should forward them to Corporate Actions. Proxy Recipients for new clients (or, if Western Asset becomes aware that the applicable Proxy Recipient for an existing client has changed, the Proxy Recipient for the existing client) are notified at start-up of appropriate routing to Corporate Actions of proxy materials received and reminded of their responsibility to forward all proxy materials on a timely basis. If Western Asset personnel other than Corporate Actions receive proxy materials, they should promptly forward the materials to Corporate Actions.

Proxy Voting

Once proxy materials are received by Corporate Actions, they are forwarded to the Regulatory Affairs Group for coordination and the following actions:

Proxies are reviewed to determine accounts impacted.

Impacted accounts are checked to confirm Western Asset voting authority.

The Regulatory Affairs Group reviews proxy issues to determine any material conflicts of interest. (See Conflicts of Interest section of these procedures for further information on determining material conflicts of interest.)

If a material conflict of interest exists, (i) to the extent reasonably practicable and permitted by applicable law, the client is promptly notified, the conflict is disclosed and Western Asset obtains the client’s proxy voting instructions, and (ii) to the extent that it is not reasonably practicable or permitted by applicable law to notify the client and obtain such instructions (e.g., the client is a mutual fund or other commingled vehicle or is an ERISA plan client), Western Asset seeks voting instructions from an independent third party.

The Regulatory Affairs Group provides proxy material to the appropriate research analyst or portfolio manager to obtain their recommended vote. Research analysts and portfolio managers determine votes on a case-by-case basis taking into account the voting guidelines contained in these procedures. For avoidance of

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doubt, depending on the best interest of each individual client, Western Asset may vote the same proxy differently for different clients. The analyst’s or portfolio manager’s basis for their decision is documented and maintained by the Regulatory Affairs Group.

Portfolio Compliance Group votes the proxy pursuant to the instructions received in (d) or (e) and returns the voted proxy as indicated in the proxy materials.

Timing

Western Asset’s Legal and Compliance Department personnel act in such a manner to ensure that, absent special circumstances, the proxy gathering and proxy voting steps noted above can be completed before the applicable deadline for returning proxy votes.

Recordkeeping

Western Asset maintains records of proxies voted pursuant to Rule 204-2 of the Advisers Act and ERISA DOL Bulletin 94-2. These records include:

 

•

A copy of Western Asset’s proxy voting policies and procedures.

Copies of proxy statements received with respect to securities in client accounts.

A copy of any document created by Western Asset that was material to making a decision how to vote proxies.

Each written client request for proxy voting records and Western Asset’s written response to both verbal and written client requests.

A proxy log including:

 

1.

Issuer name;

 

2.

Exchange ticker symbol of the issuer’s shares to be voted;

 

3.

Committee on Uniform Securities Identification Procedures (“CUSIP”) number for the shares to be voted;

 

4.

A brief identification of the matter voted on;

 

5.

Whether the matter was proposed by the issuer or by a shareholder of the issuer;

 

6.

Whether a vote was cast on the matter;

 

7.

A record of how the vote was cast; and

 

8.

Whether the vote was cast for or against the recommendation of the issuer’s management team.

Records are maintained in an easily accessible place for a period of not less than five (5) years with the first two (2) years in Western Asset’s offices.

Disclosure

Western Asset’s proxy policies and procedures are described in the Firm’s Form ADV Part 2A. Clients are provided with a copy of these policies and procedures upon request. In addition, clients may receive reports on how their proxies have been voted, upon request.

Conflicts of Interest

All proxies are reviewed by the Regulatory Affairs Group for material conflicts of interest. Issues to be reviewed include, but are not limited to:

 

1.

Whether Western Asset (or, to the extent required to be considered by applicable law, its affiliates) manages assets for the company or an employee group of the company or otherwise has an interest in the company;

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2.

Whether Western Asset or an officer or director of Western Asset or the applicable portfolio manager or analyst responsible for recommending the proxy vote (together, “Voting Persons”) is a close relative of or has a personal or business relationship with an executive, director or person who is a candidate for director of the company or is a participant in a proxy contest; and

 

3.

Whether there is any other business or personal relationship where a Voting Person has a personal interest in the outcome of the matter before shareholders.

Voting Guidelines

Western Asset’s substantive voting decisions are based on the particular facts and circumstances of each proxy vote and are evaluated by the designated research analyst or portfolio manager. The examples outlined below are meant as guidelines to aid in the decision making process.

Situations can arise in which more than one Western Asset client invests in instruments of the same issuer or in which a single client may invest in instruments of the same issuer but in multiple accounts or strategies. Multiple clients or the same client in multiple accounts or strategies may have different investment objectives, investment styles, or investment professionals involved in making decisions. While there may be differences, votes are always cast in the best interests of the client and the investment objectives agreed with Western Asset. As a result, there may be circumstances where Western Asset casts different votes on behalf of different clients or on behalf of the same client with multiple accounts or strategies.

Guidelines are grouped according to the types of proposals generally presented to shareholders. Part I deals with proposals which have been approved and are recommended by a company’s board of directors; Part II deals with proposals submitted by shareholders for inclusion in proxy statements; Part III addresses issues relating to voting shares of investment companies; and Part IV addresses unique considerations pertaining to foreign issuers.

 

I.	Board Approved Proposals

The vast majority of matters presented to shareholders for a vote involve proposals made by a company itself that have been approved and recommended by its board of directors. In view of the enhanced corporate governance practices currently being implemented in public companies, Western Asset generally votes in support of decisions reached by independent boards of directors. More specific guidelines related to certain board-approved proposals are as follows:

 

1.

Matters relating to the Board of Directors

Western Asset votes proxies for the election of the company’s nominees for directors and for board-approved proposals on other matters relating to the board of directors with the following exceptions:

 

a.

Votes are withheld for the entire board of directors if the board does not have a majority of independent directors or the board does not have nominating, audit and compensation committees composed solely of independent directors.

 

b.

Votes are withheld for any nominee for director who is considered an independent director by the company and who has received compensation from the company other than for service as a director.

 

c.

Votes are withheld for any nominee for director who attends less than 75% of board and committee meetings without valid reasons for absences.

 

d.

Votes are cast on a case-by-case basis in contested elections of directors.

 

2.

Matters relating to Executive Compensation

Western Asset generally favors compensation programs that relate executive compensation to a company’s long-term performance. Votes are cast on a case-by-case basis on board-approved proposals relating to executive compensation, except as follows:

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•

Except where the firm is otherwise withholding votes for the entire board of directors, Western Asset votes for stock option plans that will result in a minimal annual dilution.

 

•

Western Asset votes against stock option plans or proposals that permit replacing or repricing of underwater options.

 

•

Western Asset votes against stock option plans that permit issuance of options with an exercise price below the stock’s current market price.

 

•

Except where the firm is otherwise withholding votes for the entire board of directors, Western Asset votes for employee stock purchase plans that limit the discount for shares purchased under the plan to no more than 15% of their market value, have an offering period of 27 months or less and result in dilution of 10% or less.

 

3.

Matters relating to Capitalization

The Management of a company’s capital structure involves a number of important issues, including cash flows, financing needs and market conditions that are unique to the circumstances of each company. As a result, Western Asset votes on a case-by-case basis on board-approved proposals involving changes to a company’s capitalization except where Western Asset is otherwise withholding votes for the entire board of directors.

 

a.

Western Asset votes for proposals relating to the authorization of additional common stock.

 

b.

Western Asset votes for proposals to effect stock splits (excluding reverse stock splits).

 

c.

Western Asset votes for proposals authorizing share repurchase programs.

 

4.

Matters relating to Acquisitions, Mergers, Reorganizations and Other Transactions

Western Asset votes these issues on a case-by-case basis on board-approved transactions.

 

5.

Matters relating to Anti-Takeover Measures

Western Asset votes against board-approved proposals to adopt anti-takeover measures except as follows:

 

a.

Western Asset votes on a case-by-case basis on proposals to ratify or approve shareholder rights plans.

 

b.

Western Asset votes on a case-by-case basis on proposals to adopt fair price provisions.

 

6.

Other Business Matters

Western Asset votes for board-approved proposals approving such routine business matters such as changing the company’s name, ratifying the appointment of auditors and procedural matters relating to the shareholder meeting.

 

a.

Western Asset votes on a case-by-case basis on proposals to amend a company’s charter or bylaws.

 

b.

Western Asset votes against authorization to transact other unidentified, substantive business at the meeting.

 

7.

Reporting of Financially Material Information

Western Asset generally believes issuers should disclose information that is material to their business. This principle extends to Environmental, Social and Governance matters. What qualifies as “material” can vary, so votes are cast on a case by case basis but consistent with the overarching principle.

 

II.	Shareholder Proposals

SEC regulations permit shareholders to submit proposals for inclusion in a company’s proxy statement. These proposals generally seek to change some aspect of a company’s corporate governance structure or to

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change some aspect of its business operations. Western Asset votes in accordance with the recommendation of the company’s board of directors on all shareholder proposals, except as follows:

 

1.

Western Asset votes for shareholder proposals to require shareholder approval of shareholder rights plans.

 

2.

Western Asset votes for shareholder proposals that are consistent with Western Asset’s proxy voting guidelines for board-approved proposals.

 

3.

Western Asset votes on a case-by-case basis on other shareholder proposals where the firm is otherwise withholding votes for the entire board of directors.

Environmental or social issues that are the subject of a proxy vote will be considered on a case by case basis. Constructive proposals that seek to advance the health of the issuer and the prospect for risk-adjusted returns to Western Assets clients are viewed more favorably than proposals that advance a single issue or limit the ability of management to meet its operating objectives.

 

III.	Voting Shares of Investment Companies

Western Asset may utilize shares of open or closed-end investment companies to implement its investment strategies. Shareholder votes for investment companies that fall within the categories listed in Parts I and II above are voted in accordance with those guidelines.

 

1.

Western Asset votes on a case-by-case basis on proposals relating to changes in the investment objectives of an investment company taking into account the original intent of the fund and the role the fund plays in the clients’ portfolios.

 

2.

Western Asset votes on a case-by-case basis all proposals that would result in increases in expenses (e.g., proposals to adopt 12b-1 plans, alter investment advisory arrangements or approve fund mergers) taking into account comparable expenses for similar funds and the services to be provided.

 

IV.	Voting Shares of Foreign Issuers

In the event Western Asset is required to vote on securities held in non-U.S. issuers – i.e. issuers that are incorporated under the laws of a foreign jurisdiction and that are not listed on a U.S. securities exchange or the NASDAQ stock market, the following guidelines are used, which are premised on the existence of a sound corporate governance and disclosure framework. These guidelines, however, may not be appropriate under some circumstances for foreign issuers and therefore apply only where applicable.

 

1.

Western Asset votes for shareholder proposals calling for a majority of the directors to be independent of management.

 

2.

Western Asset votes for shareholder proposals seeking to increase the independence of board nominating, audit and compensation committees.

 

3.

Western Asset votes for shareholder proposals that implement corporate governance standards similar to those established under U.S. federal law and the listing requirements of U.S. stock exchanges, and that do not otherwise violate the laws of the jurisdiction under which the company is incorporated.

 

4.

Western Asset votes on a case-by-case basis on proposals relating to (1) the issuance of common stock in excess of 20% of a company’s outstanding common stock where shareholders do not have preemptive rights, or (2) the issuance of common stock in excess of 100% of a company’s outstanding common stock where shareholders have preemptive rights.

 

V.	Environmental, Social and Governance Matters

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Western Asset considers ESG matters as part of the overall investment process where appropriate. The Firm seeks to identify and consider material risks to the investment thesis, including material risks presented by ESG factors. While Western Asset is primarily a fixed income manager, opportunities to vote proxies are considered on the investment merits of the instruments and strategies involved.

As a general proposition, Western Asset votes to encourage disclosure of information material to their business. This principle extends to ESG matters. What qualifies as “material” can vary, so votes are cast on a case by case basis but consistent with the overarching principle. Western Asset recognizes that objective standards and criteria may not be available or universally agreed and that there may be different views and subjective analysis regarding factors and their significance.

As a general matter, Western Asset votes to encourage management and governance practices that enhance the strength of the issuer, build value for investors, and mitigate risks that might threaten their ability to operate and navigate competitive pressures.

Targeted environmental or social issues that are the subject of a proxy vote will be considered on a case by case basis. Constructive proposals that seek to advance the health of the issuer and the prospect for risk-adjusted returns to Western Assets clients are viewed more favorably than proposals that advance a single issue or limit the ability of management to meet its operating objectives.

Situations can arise in which different clients and strategies have explicit ESG objectives beyond generally taking into account material ESG risks. Votes may be cast for such clients with the ESG objectives in mind. Votes involving ESG proposals that are not otherwise addressed in this policy will be voted on a case-by-case basis consistent with the Firm’s fiduciary duties to its clients, the potential consequences to the investment thesis for that issuer, and the specific facts and circumstances of each proposal.

 

•

Retirement Accounts

For accounts subject to ERISA, as well as other retirement accounts, Western Asset is presumed to have the responsibility to vote proxies for the client. The Department of Labor has issued a bulletin that states that investment managers have the responsibility to vote proxies on behalf of Retirement Accounts unless the authority to vote proxies has been specifically reserved to another named fiduciary. Furthermore, unless Western Asset is expressly precluded from voting the proxies, the Department of Labor has determined that the responsibility remains with the investment manager.

In order to comply with the Department of Labor’s position, Western Asset will be presumed to have the obligation to vote proxies for its retirement accounts unless Western Asset has obtained a specific written instruction indicating that: (a) the right to vote proxies has been reserved to a named fiduciary of the client, and (b) Western Asset is precluded from voting proxies on behalf of the client. If Western Asset does not receive such an instruction, Western Asset will be responsible for voting proxies in the best interests of the retirement account client and in accordance with any proxy voting guidelines provided by the client.

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ITEM 8.		PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
(a)(1):		As of the date of filing this report:

 

NAME AND ADDRESS		LENGTH OF TIME SERVED		PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
S. Kenneth Leech   Western Asset 385 East Colorado Blvd. Pasadena, CA 91101		Since 2014		Responsible for the day-to-day management with other members of the Fund’s portfolio management team; Chief Investment Officer of Western Asset from 1998 to 2008 and since 2014; Senior Advisor/Chief Investment Officer Emeritus of Western Asset from 2008-2013; Co- Chief Investment Officer of Western Asset from 2013-2014.
Michael C. Buchanan   Western Asset 385 East Colorado Blvd. Pasadena, CA 91101		Since 2012		Responsible for the day-to-day management with other members of the Fund’s portfolio management team; employed by Western Asset Management as an investment professional for at least the past five years; Managing Director and head of U.S. Credit Products from 2003-2005 at Credit Suisse Asset Management
Ryan Brist   Western Asset 385 East Colorado Blvd. Pasadena, CA 91101		Since 2010		Responsible for the day-to-day management with other members of the Fund’s portfolio management team; Head of U.S. Investment Grade Credit of Western Asset since 2009; Chief Investment Officer and Portfolio Manager at Logan Circle Partners, L.P. from 2007-2009; Co-Chief Investment Officer and Senior Portfolio Manager at Delaware Investment Advisors from 2000-2007
Kurt Halvorson   Western Asset 385 East Colorado Blvd. Pasadena, CA 91101		Since 2021		Co-portfolio manager of the fund; He has been employed by Western Asset as an investment professional for at least the past five years.
Blanton Keh   Western Asset 385 East Colorado Blvd. Pasadena, CA 91101		Since 2021		Co-portfolio manager of the fund; He has been employed by Western Asset as an investment professional for at least the past five years.

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Dan Alexander		Since 2021		Co-portfolio manager of the fund; He has been employed by Western Asset as an investment professional for at least the past five years.
Western Asset 385 East Colorado Blvd. Pasadena, CA 91101

(a)(2): DATA TO BE PROVIDED BY FINANCIAL CONTROL

The following tables set forth certain additional information with respect to the fund’s portfolio managers for the fund. Unless noted otherwise, all information is provided as of December 31, 2023.

Other Accounts Managed by Portfolio Managers

The table below identifies the number of accounts (other than the fund) for which the fund’s portfolio managers have day-to-day management responsibilities and the total assets in such accounts, within each of the following categories:

registered investment companies, other pooled investment vehicles, and other accounts. For each category, the number of accounts and total assets in the accounts where fees are based on performance is also indicated.

 

Name of PM		Type of Account		Number of Accounts Managed		Total Assets Managed		Number of Accounts Managed for which Advisory Fee is Performance -Based		Assets Managed for which Advisory Fee is Performance- Based
S. Kenneth Leech‡		Other Registered Investment Companies		93		$129.23 billion		None		None
		Other Pooled Vehicles		295		$69.79 billion		23		$2.65 billion
		Other Accounts		592		$189.61 billion		21		$12.77 billion
Ryan Brist‡		Other Registered Investment Companies		11		$5.93 billion		None		None
		Other Pooled Vehicles		26		$12.53 billion		None		None
		Other Accounts		118		$49.00 billion		4		$1.08 billion
Michael Buchanan‡		Other Registered Investment Companies		32		$16.36 billion		None		None
		Other Pooled Vehicles		55		$18.68 billion		7		$1.46 billion

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		Other Accounts		148		$58.25 billion		6		$1.61 billion
Kurt Halvorson‡		Other Registered Investment Companies		6		$1.71 billion		None		None
		Other Pooled Vehicles		11		$3.85 billion		None		None
		Other Accounts		103		$42.86 billion		4		$1.08 billion
Blanton Keh‡		Other Registered Investment Companies		6		$1.71 billion		None		None
		Other Pooled Vehicles		14		$9.32 billion		None		None
		Other Accounts		108		$46.10 billion		4		$1.08 billion
Dan Alexander‡		Other Registered Investment Companies		6		$1.71 billion		None		None
		Other Pooled Vehicles		11		$3.85 billion		None		None
		Other Accounts		103		$42.86 billion		4		$1.08 billion

 

‡

The numbers above reflect the overall number of portfolios managed by employees of Western Asset Management Company, LLC (“Western Asset”). Mr. Leech is involved in the management of all the Firm’s portfolios, but they are not solely responsible for particular portfolios. Western Asset’s investment discipline emphasizes a team approach that combines the efforts of groups of specialists working in different market sectors. They are responsible for overseeing implementation of Western Asset’s overall investment ideas and coordinating the work of the various sector teams. This structure ensures that client portfolios benefit from a consensus that draws on the expertise of all team members.

(a)(3): As of December 31, 2023:

Investment Professional Compensation

Conflicts of Interest

The Subadviser has adopted compliance policies and procedures to address a wide range of potential conflicts of interest that could directly impact client portfolios. For example, potential conflicts of interest may arise in connection with the management of multiple portfolios (including portfolios managed in a personal capacity). These could include potential conflicts of interest related to the knowledge and timing of a portfolio’s trades, investment opportunities and broker selection. Portfolio managers are privy to the size, timing, and possible market impact of a portfolio’s trades.

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It is possible that an investment opportunity may be suitable for both a portfolio and other accounts managed by a portfolio manager, but may not be available in sufficient quantities for both the portfolio and the other accounts to participate fully. Similarly, there may be limited opportunity to sell an investment held by a portfolio and another account. A conflict may arise where the portfolio manager may have an incentive to treat an account preferentially as compared to a portfolio because the account pays a performance-based fee or the portfolio manager, the Subadviser or an affiliate has an interest in the account. The Subadviser has adopted procedures for allocation of portfolio transactions and investment opportunities across multiple client accounts on a fair and equitable basis over time. Eligible accounts that can participate in a trade generally share the same price on a pro-rata allocation basis, taking into account differences based on factors such as cash availability, investment restrictions and guidelines, and portfolio composition versus strategy.

With respect to securities transactions, the Subadviser determines which broker or dealer to use to execute each order, consistent with their duty to seek best execution of the transaction. However, with respect to certain other accounts (such as pooled investment vehicles that are not registered investment companies and other accounts managed for organizations and individuals), the Subadviser may be limited by the client with respect to the selection of brokers or dealers or may be instructed to direct trades through a particular broker or dealer. In these cases, trades for a portfolio in a particular security may be placed separately from, rather than aggregated with, such other accounts. Having separate transactions with respect to a security may temporarily affect the market price of the security or the execution of the transaction, or both, to the possible detriment of a portfolio or the other account(s) involved. Additionally, the management of multiple portfolios and/or other accounts may result in a portfolio manager devoting unequal time and attention to the management of each portfolio and/or other account. The Subadviser’s team approach to portfolio management and block trading approach seeks to limit this potential risk.

The Subadviser also maintains a gift and entertainment policy to address the potential for a business contact to give gifts or host entertainment events that may influence the business judgment of an employee. Employees are permitted to retain gifts of only a nominal value and are required to make reimbursement for entertainment events above a certain value. All gifts (except those of a de minimis value) and entertainment events that are given or sponsored by a business contact are required to be reported in a gift and entertainment log which is reviewed on a regular basis for possible issues.

Employees of the Subadviser have access to transactions and holdings information regarding client accounts and the Subadviser’s overall trading activities. This information represents a potential conflict of interest because employees may take advantage of this information as they trade in their personal accounts. Accordingly, the Subadviser maintains a Code of Ethics that is compliant with Rule 17j-1 under the 1940 Act and Rule 204A-1 under the Advisers Act to address personal trading. In addition, the Code of Ethics seeks to establish broader principles of good conduct and fiduciary responsibility in all aspects of the Subadviser’s business. The Code of Ethics is administered by the Legal and Compliance Department and monitored through the Subadviser’s compliance monitoring program.

The Subadviser may also face other potential conflicts of interest with respect to managing client assets, and the description above is not a complete description of every conflict of interest that could be deemed to exist. The Subadviser also maintains a compliance monitoring program and engages independent auditors to conduct a SOC1/ISAE 3402 audit on an annual basis. These steps help to ensure that potential conflicts of interest have been addressed.

Investment Professional Compensation

With respect to the compensation of the Fund’s investment professionals, the Subadviser’s compensation system assigns each employee a total compensation range, which is derived from annual market surveys that benchmark each role with its job function and peer universe. This method is designed to reward employees with total compensation reflective of the external market value of their skills, experience and ability to produce desired results. Standard compensation includes competitive base salaries, generous employee benefits and a retirement plan.

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In addition, the Subadviser’s employees are eligible for bonuses. These are structured to closely align the interests of employees with those of the Subadviser, and are determined by the professional’s job function and pre-tax performance as measured by a formal review process. All bonuses are completely discretionary. The principal factor considered is an investment professional’s investment performance versus appropriate peer groups and benchmarks (e.g., a securities index and with respect to the Fund, the benchmark set forth in the Fund’s Prospectus to which the Fund’s average annual total returns are compared or, if none, the benchmark set forth in the Fund’s annual report). Performance is reviewed on a 1, 3 and 5 year basis for compensation—with 3 and 5 years having a larger emphasis. The Subadviser may also measure an investment professional’s pre-tax investment performance against other benchmarks, as it determines appropriate. Because investment professionals are generally responsible for multiple accounts (including the Fund) with similar investment strategies, they are generally compensated on the performance of the aggregate group of similar accounts, rather than a specific account. Other factors that may be considered when making bonus decisions include client service, business development, length of service to the Subadviser, management or supervisory responsibilities, contributions to developing business strategy and overall contributions to the Subadviser’s business.

Finally, in order to attract and retain top talent, all investment professionals are eligible for additional incentives in recognition of outstanding performance. These are determined based upon the factors described above and include long-term incentives that vest over a set period of time past the award date.

(a)(4): Investment Professional Securities Ownership

The table below identifies the dollar range of securities beneficially owned by each investment professional as of December 31, 2023.

 

Investment Professional(s)		Dollar Range of Portfolio Securities Beneficially Owned
S. Kenneth Leech		E
Michael C. Buchanan		A
Ryan Brist		A
Kurt Halvorson		A
Blanton Keh		A
Dan Alexander		A

Dollar Range ownership is as follows:

A: none

B: $1 - $10,000

C: 10,001 - $50,000

D: $50,001 - $100,000

E: $100,001 - $500,000

F: $500,001 - $1 million

G: over $1 million

 

ITEM 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.

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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 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.

RECOVERY OF ERRONEOUSLY AWARDED COMPENSATION.

 

(a)

Not applicable.

 

(b)

Not applicable.

 

ITEM 14.

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

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SIGNATURES

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

Western Asset Investment Grade Income Fund Inc.

 

By:		/s/ Jane Trust
		Jane Trust
		Chief Executive Officer
Date:		February 29, 2024

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 29, 2024
By:		/s/ Christopher Berarducci
		Christopher Berarducci
		Principal Financial Officer
Date:		February 29, 2024

Code of Conduct for Principal Executive and Financial Officers (SOX)

Covered Officers and Purpose of the Code

The Funds’ code of ethics (the “Code”) for investment companies within the Legg Mason family of mutual funds (each a “Fund,” and collectively, the “Funds”) applies to each Fund’s Principal Executive Officer, Principal Financial Officer, and Controller (the “Covered Officers”) for the purpose of promoting:

 

•

honest and ethical conduct, including ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

 

•

full, fair, accurate, timely and understandable disclosure in reports and documents a registrant files with, or submits to, the Securities and Exchange Commission (“SEC”) and in other public communications made by the Funds;

 

•

compliance with applicable laws and governmental rules and regulations;

 

•

prompt internal reporting of Code violations to appropriate persons identified in the Code; and

 

•

accountability for adherence to the Code.

Each Covered Officer should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest.

Covered Officers Should Ethically Handle Actual and Apparent Conflicts of Interest

A “conflict of interest” occurs when a Covered Officer’s private interest interferes with the interests of, or his or her service to, a Fund. For example, a conflict of interest would arise if a Covered Officer, or a member of his or her family, receives improper personal benefits as a result of his or her position with a Fund.

Certain conflicts of interest arise out of the relationships between Covered Officers and a Fund and already are subject to conflict of interest provisions in the Investment Company Act of 1940 (“Investment Company Act”) and the Investment Advisers Act of 1940 (“Investment Advisers Act”). For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with a Fund because of their status as “affiliated persons” of the Fund. The Funds’ and the investment advisers’ compliance programs and procedures are designed to prevent, or identify and correct, violations of these provisions. This Code does not, and is not intended to, repeat or replace these programs and procedures, and such conflicts fall outside of the parameters of this Code.

Although typically not presenting an opportunity for improper personal benefit, conflicts arise from, or as a result of, the contractual relationship between a Fund and an investment adviser of which Covered Officers are also officers or employees. As a result, this Code recognizes Covered Officers will, in the normal course of their duties (whether formally for a Fund or for the adviser, or for both), be involved in establishing policies and

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implementing decisions that will have different effects on the adviser and the Funds. The participation of Covered Officers in such activities is inherent in the contractual relationship between a Fund and an adviser and is consistent with the performance by Covered Officers of their duties as officers of the Funds. Thus, if performed in conformity with the provisions of the Investment Company Act and the Investment Advisers Act, such activities will be deemed to have been handled ethically. In addition, it is recognized by the Funds’ Boards of Directors/Trustees (“Boards”) that Covered Officers may also be officers or employees of one or more other investment companies covered by this or other codes and that such service, by itself does not give rise to a conflict of interest.

Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions in the Investment Company Act and the Investment Advisers Act. The following list provides examples of conflicts of interest under the Code, but Covered Officers should keep in mind these examples are not exhaustive. The overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of a Fund.

Each Covered Officer must:

 

•

not use his or her personal influence or personal relationships improperly to influence investment decisions or financial reporting by a Fund;

 

•

not cause a Fund to take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than the benefit the Fund; and,

 

•

not use material non-public knowledge of portfolio transactions made or contemplated for the Trust to trade personally or cause others to trade personally in contemplation of the market effect of such transactions.

There are some actual or potential conflict of interest situations that, if material, should always be discussed with the Chief Compliance Officer (“CCO”) or designate that has been appointed by the Board of the Funds. Examples of these include:

 

•

service as a director on the board of any public company (other than the Funds or their investment advisers or any affiliated person thereof);

 

•

the receipt of any non-nominal gifts (i.e., in excess of $100);

 

•

the receipt of any entertainment from any company with which a Fund has current or prospective business dealings unless such entertainment is business-related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety;

 

•

any ownership interest in, or any consulting or employment relationship with, any of the Funds’ service providers (other than their investment advisers, or principal underwriter, or any affiliated person thereof);

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•

a direct or indirect financial interest in commissions, transaction charges or spreads paid by a Fund for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officer’s employment, such as compensation or equity ownership.

Disclosure and Compliance

Each Covered Officer should:

 

•

familiarize him or herself with the disclosure requirements generally applicable to the Funds;

 

•

not knowingly misrepresent, or cause others to misrepresent, facts about a Fund to others, whether within or outside the Fund, including to the Fund’s Directors/Trustees and auditors, and to governmental regulators and self-regulatory organizations; and

 

•

to the extent appropriate within his or her area of responsibility, consult with other officers and employees of the Funds and the advisers with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Funds file with, or submit to, the SEC and in other public communications made by the Funds.

It is the responsibility of each Covered Officer to promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations.

Reporting and Accountability

Each Covered Officer must:

 

•

upon adoption of the Code (or thereafter as applicable, upon becoming a Covered Officer), affirm in writing to the Board that he or she has received, read, and understands the Code;

 

•

annually thereafter affirm to the Board that he or she has complied with the requirements of the Code;

 

•

not retaliate against any other Covered Officer or any employee of the Funds or their advisers or any affiliated persons thereof or service providers of the Funds for reports of potential violations that are made in good faith;

 

•

notify the CCO promptly if he or she knows of any violation of this Code, of which failure to do so is itself a violation; and

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•

report at least annually, if necessary, any employment position, including officer or directorships, held by the Covered Officer or any immediate family member of a Covered Officer with affiliated persons of or Service Providers to the Funds.

The CCO is responsible for applying this Code to specific situations in which questions are presented and has the authority to interpret this Code in any particular situation. However, approvals or waivers sought by a Covered Officer will be considered by the Compliance Committee or Audit Committee, (the “Committee”) responsible for oversight of the Fund’s code of ethics under Rule 17j-1 under the Investment Company Act. If a Covered Officer seeking an approval or waiver sits on the Committee, the Covered Person shall recuse him or herself from any such deliberations. Any approval or waiver granted by the Committee will be reported promptly to the Chair of the Audit Committees of the Funds.

The Funds will follow these procedures in investigating and enforcing this Code:

 

•

the CCO will take all appropriate action to investigate any potential violations reported to him, which actions may include the use of internal or external counsel, accountants or other personnel;

 

•

if, after such investigation, the CCO believes that no violation has occurred, the CCO is not required to take any further action;

 

•

any matter that the CCO believes is a violation will be reported to the Committee;

 

•

if the Committee concurs that a violation has occurred, it will inform the Board, which will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of the investment adviser or its board; or a recommendation to dismiss the Covered Officer;

 

•

the Committee will be responsible for granting waivers, as appropriate; and,

 

•

any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules.

Other Policies and Procedures

This Code shall be the sole code of ethics adopted by the Funds for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of the Funds, the Funds’ advisers, principal underwriter, or other service providers govern or purport to govern the behavior or activities of Covered Officers subject to this Code, they are superseded by this Code to the extent they overlap or conflict with the provisions of this Code. The Funds’ and their investment advisers’ and principal underwriter’s codes of

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ethics under Rule 17j-1 under the Investment Company Act are separate requirements applying to Covered Officers and others, and are not part of this Code.

Confidentiality

All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the appropriate Board and Fund counsel, and the board of Directors/Trustees and fund counsel of any other investment company for whom a Covered Officer serves in a similar capacity.

Annual Report

No less than annually, the CCO shall provide the Board with a written report describing any issues having arisen since the prior year’s report.

Internal Use

This Code is intended solely for the internal use by the Funds and does not constitute an admission by or on behalf of any Fund, as to any fact, circumstance or legal consideration.

CERTIFICATIONS PURSUANT TO SECTION 302

EX-99.CERT

CERTIFICATIONS

I, Jane Trust, certify that:

 

1.	I have reviewed this report on Form N-CSR of Western Asset Investment Grade Income Fund Inc.;

 

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;

 

4.

The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:

 

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and

 

d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.	The registrant’s other certifying officers and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

 

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date:  February 29, 2024						/s/ Jane Trust
						Jane Trust
						Chief Executive Officer

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CERTIFICATIONS

I, Christopher Berarducci, certify that:

 

1.	I have reviewed this report on Form N-CSR of Western Asset Investment Grade Income Fund Inc.;

 

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial information included in this report, and the financial statements on which the financial information is based, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;

 

4.

The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:

 

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and

 

d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.	The registrant’s other certifying officers and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

 

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date:  February 29, 2024						/s/ Christopher Berarducci
						Christopher Berarducci
						Principal Financial Officer

CERTIFICATIONS PURSUANT TO SECTION 906

EX-99.906CERT

CERTIFICATION

Jane Trust, Chief Executive Officer, and Christopher Berarducci, Principal Financial Officer of Western Asset Investment Grade Income Fund Inc. (the “Registrant”), each certify to the best of their knowledge that:

1. The Registrant’s periodic report on Form N-CSR for the period ended December 31, 2023 (the “Form N-CSR”) fully complies with the requirements of section 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

 

Chief Executive Officer				Principal Financial Officer
Western Asset Investment Grade Income Fund Inc.				Western Asset Investment Grade Income Fund Inc.
/s/ Jane Trust				/s/ Christopher Berarducci
Jane Trust				Christopher Berarducci
Date: February 29, 2024				Date: February 29, 2024

This certification is being furnished to the Securities and Exchange Commission solely pursuant to 18 U.S.C. § 1350 and is not being filed as part of the Form N-CSR with the Commission.

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