Form N-CSRS - Certified Shareholder Report, Semi-Annual

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number

811-23598

Western Asset Diversified Income Fund

(Exact name of registrant as specified in charter)

620 Eighth Avenue, 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: June 30, 2024

ITEM 1.

REPORT TO STOCKHOLDERS.

The Semi-Annual Report to Stockholders is filed herewith.

Semi-Annual Report

June 30, 2024

WESTERN ASSET
DIVERSIFIED INCOME
FUND (WDI)

Fund objectives

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

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

What’s inside

Letter from the chairman	III
Performance review	V
Fund at a glance	1
Schedule of investments	2
Statement of assets and liabilities	33
Statement of operations	34
Statements of changes in net assets	35
Statement of cash flows	36
Financial highlights	38
Notes to financial statements	40
Board approval of management and subadvisory agreements	63
Additional shareholder information	70
Dividend reinvestment plan	71

Western Asset Diversified Income Fund

Letter from the chairman

Dear Shareholder,

We are pleased to provide the semi-annual report of Western Asset Diversified Income Fund for the six-month reporting period ended June 30, 2024. Please read on for Fund performance information during the Fund’s reporting period.

Special shareholder notice

Effective March 1, 2024, the named portfolio management team responsible for the day-to-day oversight of the Fund is as follows: Michael Buchanan, Greg Handler, Christopher Kilpatrick, Annabel Rudebeck and Rafael Zielonka.

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
Chairman, President and Chief Executive Officer

July 31, 2024

Western Asset Diversified Income Fund

III

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Performance review

For the six months ended June 30, 2024, Western Asset Diversified Income Fund returned 5.12% based on its net asset value (“NAV”)i and 8.50% based on its New York Stock Exchange (“NYSE”) market price per share. The Fund’s unmanaged benchmark, the Bloomberg U.S. Corporate High Yield — 2% Issuer Cap Index (USD)ii, returned 2.58% 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 six-month period, the Fund made distributions to shareholders totaling $0.87 per share. As of June 30, 2024, the Fund estimates that all of the distributions were sourced from net investment income.* The performance table shows the Fund’s six-month total return based on its NAV and market price as of June 30, 2024. Past performance is no guarantee of future results.

Performance Snapshot as of June 30, 2024 (unaudited)
Price Per Share	6-Month Total Return**
$15.46 (NAV)	5.12 %†
$14.41 (Market Price)	8.50 %‡

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

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

† Total return assumes the reinvestment of all distributions, including returns of capital, if any, at NAV.

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

Looking for additional information?

The Fund is traded under the symbol “WDI” and its closing market price is available in most newspapers under the NYSE listings. The daily NAV is available online under the symbol “XWDIX” on most financial websites. Barron’s and The Wall Street Journal’s Monday edition both carry closed-end fund tables that provide additional information. In addition,

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

Western Asset Diversified Income Fund Semi-Annual Report

Performance review (cont’d)

the Fund issues a quarterly press release that can be found on most major financial websites as well as www.franklintempleton.com.

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

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

Sincerely,

Jane Trust, CFA
Chairman, President and Chief Executive Officer

July 31, 2024

RISKS: The Fund is a diversified limited term closed-end management investment company designed primarily as a long-term investment and not as a trading vehicle. The Fund is not intended to be a complete investment program and, due to the uncertainty inherent in all investments, there can be no assurance that the Fund will achieve its investment objectives. The Fund’s common shares are traded on the New York Stock Exchange. Similar to stocks, the Fund’s share price will fluctuate with market conditions and, at the time of sale, may be worth more or less than the original investment. Shares of closed-end funds often trade at a discount to their net asset value. Diversification does not assure against market loss. The Fund’s investments are subject to a number of risks, such as credit risk, inflation risk and interest rate risk. As interest rates rise, the value of fixed income securities falls. The Fund may invest in lower-rated high yield bonds (commonly known as “junk bonds”), which are subject to greater liquidity risk and credit risk (risk of default) than higher-rated obligations. Asset-backed, mortgage-backed or mortgage-related securities are subject to prepayment and extension risks. The Fund may invest in securities backed by subprime mortgages which involve a higher degree of risk and chance of loss. International investments are subject to special risks, including currency fluctuations and social, economic and political uncertainties, which could increase volatility. These risks are magnified in emerging markets. Emerging market countries tend to have economic, political, and legal systems that are less developed and are less stable than those of more developed countries. The Fund may make significant investments in derivative instruments. Derivative instruments can be illiquid, may disproportionately increase losses, and have a potentially large impact on Fund performance. Leverage may result in greater volatility of NAV and the market price of common shares and increases a shareholder’s risk of loss. The market values of securities or other assets will fluctuate, sometimes sharply and unpredictably, due to changes in general market conditions, overall economic trends or events, governmental actions or intervention, actions taken by the U.S. Federal Reserve or foreign central banks, market

Western Asset Diversified Income Fund Semi-Annual Report

disruptions caused by trade disputes or other factors, political developments, armed conflicts, economic sanctions and countermeasures in response to sanctions, major cybersecurity events, investor sentiment, the global and domestic effects of a pandemic, and other factors that may or may not be related to the issuer of the security or other asset. The Fund may also invest in money market funds, including funds affiliated with the Fund’s manager and subadvisers.

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.

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

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

Important data provider notices and terms available at www.franklintempletondatasources.com.

Western Asset Diversified Income Fund Semi-Annual Report

VII

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Fund at a glance† (unaudited)

Investment breakdown (%) as a percent of total investments

†

The bar graph above represents the composition of the Fund’s investments as of June 30, 2024, and December 31, 2023, and does not include derivatives, such as written options, futures contracts, forward foreign currency contracts and swap contracts. The Fund is actively managed. As a result, the composition of the Fund’s investments is subject to change at any time.

‡

Represents less than 0.1%.

Western Asset Diversified Income Fund 2024 Semi-Annual Report

Schedule of investments (unaudited)

June 30, 2024

Western Asset Diversified Income Fund

(Percentages shown based on Fund net assets)

Security	Rate	Maturity Date	Face Amount†	Value
Corporate Bonds & Notes — 65.2%
Communication Services — 8.2%
Diversified Telecommunication Services — 0.9%
Altice Financing SA, Senior Secured Notes	5.750%	8/15/29	4,000,000	$2,910,728 (a)
Altice France Holding SA, Senior Secured Notes	10.500%	5/15/27	7,000,000	2,801,959 (a)
Altice France SA, Senior Secured Notes	5.125%	7/15/29	1,000,000	659,166 (a)
Altice France SA, Senior Secured Notes	5.500%	10/15/29	1,000,000	660,467 (a)
Total Diversified Telecommunication Services				7,032,320
Entertainment — 1.2%
Allen Media LLC/Allen Media Co-Issuer Inc., Senior Notes	10.500%	2/15/28	7,160,000	3,146,074 (a)
AMC Entertainment Holdings Inc., Senior Notes	5.750%	6/15/25	1,700,000	1,559,293
AMC Entertainment Holdings Inc., Senior Secured Notes	7.500%	2/15/29	4,780,000	3,242,978 (a)(b)
Banijay Entertainment SASU, Senior Secured Notes	8.125%	5/1/29	2,000,000	2,047,372 (a)(b)
Total Entertainment				9,995,717
Media — 4.9%
AMC Networks Inc., Senior Secured Notes	10.250%	1/15/29	3,000,000	2,958,405 (a)(b)
Charter Communications Operating LLC/ Charter Communications Operating Capital Corp., Senior Secured Notes	6.834%	10/23/55	10,000,000	9,472,517 (b)
DirecTV Financing LLC, Senior Secured Notes	8.875%	2/1/30	5,000,000	4,897,659 (a)(b)
DISH DBS Corp., Senior Notes	5.875%	11/15/24	3,000,000	2,851,149
DISH DBS Corp., Senior Secured Notes	5.250%	12/1/26	4,500,000	3,558,002 (a)
DISH Network Corp., Senior Secured Notes	11.750%	11/15/27	1,000,000	981,444 (a)
Gray Television Inc., Senior Notes	7.000%	5/15/27	3,250,000	2,995,228 (a)(b)
Historic TW Inc., Senior Notes	8.300%	1/15/36	10,000,000	10,398,262
iHeartCommunications Inc., Senior Secured Notes	6.375%	5/1/26	2,000,000	1,555,964 (b)
Total Media				39,668,630

See Notes to Financial Statements.

Western Asset Diversified Income Fund 2024 Semi-Annual Report

Western Asset Diversified Income Fund

(Percentages shown based on Fund net assets)

Security	Rate	Maturity Date	Face Amount†	Value
Wireless Telecommunication Services — 1.2%
CSC Holdings LLC, Senior Notes	7.500%	4/1/28	5,360,000	$2,850,560 (a)(b)
CSC Holdings LLC, Senior Notes	11.750%	1/31/29	7,530,000	6,426,698 (a)
Total Wireless Telecommunication Services				9,277,258

Total Communication Services				65,973,925
Consumer Discretionary — 15.2%
Automobile Components — 0.5%
Carbon Revolution Ltd., Senior Secured Notes	8.500%	5/15/27	3,008,750	3,012,511 (a)
JB Poindexter & Co. Inc., Senior Notes	8.750%	12/15/31	1,000,000	1,037,241 (a)(b)
Total Automobile Components				4,049,752
Automobiles — 2.9%
Aston Martin Capital Holdings Ltd., Senior Secured Notes	10.000%	3/31/29	2,000,000	1,972,730 (a)
Ford Motor Co., Senior Notes	8.900%	1/15/32	3,150,000	3,644,924
Ford Motor Co., Senior Notes	6.100%	8/19/32	1,000,000	999,253 (b)
Mclaren Finance PLC, Senior Secured Notes	7.500%	8/1/26	8,000,000	6,997,000 (a)(b)
PM General Purchaser LLC, Senior Secured Notes	9.500%	10/1/28	9,410,000	9,623,108 (a)
Total Automobiles				23,237,015
Broadline Retail — 0.9%
QVC Inc., Senior Secured Notes	4.375%	9/1/28	9,670,000	7,081,939 (b)
Distributors — 0.9%
Accelerate360 Holdings LLC, Secured Notes	8.000%	3/1/28	4,259,550	4,405,951 (a)
American News Co. LLC, Secured Notes (8.500% Cash or 10.000% PIK)	8.500%	9/1/26	2,167,004	2,427,044 (a)(b)(c)
Total Distributors				6,832,995
Diversified Consumer Services — 0.2%
WW International Inc., Senior Secured Notes	4.500%	4/15/29	3,500,000	1,360,292 (a)
Hotels, Restaurants & Leisure — 5.1%
888 Acquisitions Ltd., Senior Secured Notes	7.558%	7/15/27	2,000,000 EUR	2,145,731 (a)
Carnival Corp., Senior Notes	10.500%	6/1/30	5,000,000	5,435,100 (a)(b)
Carnival Holdings Bermuda Ltd., Senior Notes	10.375%	5/1/28	6,500,000	7,041,280 (a)(b)
Full House Resorts Inc., Senior Secured Notes	8.250%	2/15/28	8,000,000	7,691,141 (a)(b)

See Notes to Financial Statements.

Western Asset Diversified Income Fund 2024 Semi-Annual Report

Schedule of investments (unaudited) (cont’d)

June 30, 2024

Western Asset Diversified Income Fund

(Percentages shown based on Fund net assets)

Security	Rate	Maturity Date	Face Amount†	Value

Hotels, Restaurants & Leisure — continued
Melco Resorts Finance Ltd., Senior Notes	4.875%	6/6/25	800,000	$784,151 (a)(b)
NCL Corp. Ltd., Senior Secured Notes	8.125%	1/15/29	4,000,000	4,194,070 (a)(b)
Pinnacle Bidco PLC, Senior Secured Notes	10.000%	10/11/28	2,500,000 GBP	3,359,741 (a)
Wheel Bidco Ltd., Senior Secured Notes	6.750%	7/15/26	2,540,000 GBP	2,752,277 (a)
Wynn Macau Ltd., Senior Notes	5.500%	1/15/26	5,000,000	4,898,570 (a)
Wynn Macau Ltd., Senior Notes	5.500%	10/1/27	3,000,000	2,861,058 (a)
Total Hotels, Restaurants & Leisure				41,163,119
Household Durables — 1.1%
Newell Brands Inc., Senior Notes	5.700%	4/1/26	3,500,000	3,460,042 (b)
Newell Brands Inc., Senior Notes	7.000%	4/1/46	6,500,000	5,267,406 (b)
Total Household Durables				8,727,448
Specialty Retail — 3.6%
Bath & Body Works Inc., Senior Notes	6.750%	7/1/36	3,250,000	3,238,877
Bath & Body Works Inc., Senior Notes	7.600%	7/15/37	4,275,000	4,107,256 (b)
Doman Building Materials Group Ltd., Senior Notes	5.250%	5/15/26	1,950,000 CAD	1,391,533 (a)
Foot Locker Inc., Senior Notes	4.000%	10/1/29	6,500,000	5,422,600 (a)(b)
Global Auto Holdings Ltd./AAG FH UK Ltd., Senior Notes	8.375%	1/15/29	2,000,000	1,947,936 (a)(b)
Global Auto Holdings Ltd./AAG FH UK Ltd., Senior Notes	8.750%	1/15/32	4,020,000	3,849,778 (a)(b)
Michaels Cos. Inc., Senior Secured Notes	5.250%	5/1/28	5,965,000	4,778,782 (a)(b)
Staples Inc., Secured Notes	12.750%	1/15/30	3,075,228	2,395,619 (a)
Upbound Group Inc., Senior Notes	6.375%	2/15/29	2,000,000	1,920,322 (a)(b)
Total Specialty Retail				29,052,703

Total Consumer Discretionary				121,505,263
Consumer Staples — 1.3%
Food Products — 0.9%
TKC Holdings Inc., Senior Notes	10.500%	5/15/29	3,500,000	3,455,860 (a)
TKC Holdings Inc., Senior Secured Notes	6.875%	5/15/28	3,500,000	3,408,163 (a)(b)
Total Food Products				6,864,023
Tobacco — 0.4%
Vector Group Ltd., Senior Secured Notes	5.750%	2/1/29	3,500,000	3,283,089 (a)(b)

Total Consumer Staples				10,147,112

See Notes to Financial Statements.

Western Asset Diversified Income Fund 2024 Semi-Annual Report

Western Asset Diversified Income Fund

(Percentages shown based on Fund net assets)

Security	Rate	Maturity Date	Face Amount†	Value

Energy — 10.9%
Energy Equipment & Services — 1.2%
Nabors Industries Ltd., Senior Notes	7.250%	1/15/26	1,000,000	$1,015,278 (a)(b)
Shelf Drilling Holdings Ltd., Senior Secured Notes	9.625%	4/15/29	6,000,000	5,743,212 (a)(b)
Sunnova Energy Corp., Senior Notes	5.875%	9/1/26	3,500,000	2,724,435 (a)(b)
Total Energy Equipment & Services				9,482,925
Oil, Gas & Consumable Fuels — 9.7%
Berry Petroleum Co. LLC, Senior Notes	7.000%	2/15/26	3,922,000	3,880,242 (a)(b)
Blue Racer Midstream LLC/Blue Racer Finance Corp., Senior Notes	6.625%	7/15/26	362,000	362,461 (a)(b)
Blue Racer Midstream LLC/Blue Racer Finance Corp., Senior Notes	7.250%	7/15/32	1,000,000	1,028,798 (a)(b)
Crescent Energy Finance LLC, Senior Notes	9.250%	2/15/28	3,710,000	3,923,484 (a)(b)
Energy Transfer LP, Junior Subordinated Notes (6.625% to 2/15/28 then 3 mo. USD LIBOR + 4.155%)	6.625%	2/15/28	6,645,000	6,473,427 (b)(d)(e)
EnLink Midstream Partners LP, Junior Subordinated Notes, Non Voting Shares (3 mo. Term SOFR + 4.372%)	9.711%	7/29/24	5,000,000	4,983,732 (b)(d)(e)
EQM Midstream Partners LP, Senior Notes	6.500%	7/15/48	3,000,000	3,030,933 (b)
Hilcorp Energy I LP/Hilcorp Finance Co., Senior Notes	6.250%	4/15/32	7,000,000	6,737,037 (a)(b)
Northern Oil & Gas Inc., Senior Notes	8.125%	3/1/28	1,000,000	1,012,035 (a)(b)
Occidental Petroleum Corp., Senior Notes	7.500%	11/1/96	8,610,000	9,125,946
Permian Resources Operating LLC, Senior Notes	9.875%	7/15/31	2,000,000	2,215,572 (a)(b)
Plains All American Pipeline LP, Junior Subordinated Notes (3 mo. Term SOFR + 4.372%)	9.694%	7/29/24	7,000,000	7,004,258 (d)(e)
Rockies Express Pipeline LLC, Senior Notes	7.500%	7/15/38	8,300,000	8,530,092 (a)(b)
Rockies Express Pipeline LLC, Senior Notes	6.875%	4/15/40	1,000,000	956,623 (a)(b)
SilverBow Resources Inc., Secured Notes (3 mo. Term SOFR + 7.750%)	13.089%	12/15/28	4,906,202	5,157,645 (a)(b)(e)
Venture Global LNG Inc., Senior Secured Notes	8.375%	6/1/31	5,000,000	5,189,880 (a)(b)

See Notes to Financial Statements.

Western Asset Diversified Income Fund 2024 Semi-Annual Report

Schedule of investments (unaudited) (cont’d)

June 30, 2024

Western Asset Diversified Income Fund

(Percentages shown based on Fund net assets)

Security	Rate	Maturity Date	Face Amount†	Value

Oil, Gas & Consumable Fuels — continued
Venture Global LNG Inc., Senior Secured Notes	9.875%	2/1/32	4,360,000	$4,748,258 (a)(b)
YPF SA, Senior Notes	8.500%	7/28/25	3,300,000	3,255,905 (f)
Total Oil, Gas & Consumable Fuels				77,616,328

Total Energy				87,099,253
Financials — 6.8%
Banks — 0.5%
Comerica Bank, Senior Notes	2.500%	7/23/24	4,000,000	3,988,040 (b)
Capital Markets — 1.0%
B3 SA - Brasil Bolsa Balcao, Senior Notes	4.125%	9/20/31	2,200,000	1,932,184 (a)(g)
StoneX Group Inc., Senior Secured Notes	7.875%	3/1/31	3,000,000	3,096,576 (a)(b)
UBS AG, Senior Notes	3.625%	9/9/24	680,000	676,784 (b)
UBS AG, Senior Notes	7.950%	1/9/25	2,000,000	2,021,250 (b)
Total Capital Markets				7,726,794
Consumer Finance — 1.1%
Navient Corp., Senior Notes	5.500%	3/15/29	10,000,000	9,139,542 (b)
Financial Services — 3.4%
Boost Newco Borrower LLC, Senior Secured Notes	7.500%	1/15/31	3,000,000	3,130,206 (a)
Burford Capital Global Finance LLC, Senior Notes	6.250%	4/15/28	4,000,000	3,870,914 (a)(b)
Global Aircraft Leasing Co. Ltd., Senior Notes (6.500% Cash or 7.250% PIK)	6.500%	9/15/24	6,905,686	6,654,092 (a)(c)
LD Holdings Group LLC, Senior Notes	6.500%	11/1/25	5,000,000	4,955,658 (a)
LD Holdings Group LLC, Senior Notes	6.125%	4/1/28	1,000,000	751,557 (a)(b)
Rocket Mortgage LLC/Rocket Mortgage Co-Issuer Inc., Senior Notes	4.000%	10/15/33	1,000,000	843,479 (a)(b)
VFH Parent LLC/Valor Co-Issuer Inc., Senior Secured Notes	7.500%	6/15/31	1,000,000	1,005,630 (a)(b)
VistaJet Malta Finance PLC/Vista Management Holding Inc., Senior Notes	7.875%	5/1/27	6,500,000	5,751,994 (a)(b)
Total Financial Services				26,963,530
Mortgage Real Estate Investment Trusts (REITs) — 0.8%
Ladder Capital Finance Holdings LLLP/ Ladder Capital Finance Corp., Senior Notes	4.750%	6/15/29	7,000,000	6,471,718 (a)(b)

Total Financials				54,289,624

See Notes to Financial Statements.

Western Asset Diversified Income Fund 2024 Semi-Annual Report

Western Asset Diversified Income Fund

(Percentages shown based on Fund net assets)

Security	Rate	Maturity Date	Face Amount†	Value

Health Care — 5.0%
Health Care Providers & Services — 3.5%
Akumin Inc., Senior Secured Notes	8.000%	8/1/28	6,982,000	$5,367,412 (a)(b)
CHS/Community Health Systems Inc., Secured Notes	6.125%	4/1/30	14,000,000	9,811,427 (a)(b)
CHS/Community Health Systems Inc., Senior Secured Notes	4.750%	2/15/31	3,000,000	2,361,542 (a)(b)
CHS/Community Health Systems Inc., Senior Secured Notes	10.875%	1/15/32	3,030,000	3,157,371 (a)(b)
LifePoint Health Inc., Senior Secured Notes	9.875%	8/15/30	3,000,000	3,203,022 (a)(b)
Sotera Health Holdings LLC, Senior Secured Notes	7.375%	6/1/31	2,500,000	2,506,837 (a)(b)
U.S. Renal Care Inc., Senior Secured Notes	10.625%	6/28/28	1,883,000	1,652,333 (a)
Total Health Care Providers & Services				28,059,944
Health Care Technology — 0.1%
MPH Acquisition Holdings LLC, Senior Notes	5.750%	11/1/28	2,000,000	1,078,270 (a)
Pharmaceuticals — 1.4%
Bausch Health Cos. Inc., Senior Notes	7.000%	1/15/28	5,000,000	2,728,450 (a)
Bausch Health Cos. Inc., Senior Notes	6.250%	2/15/29	7,616,000	3,903,200 (a)
Teva Pharmaceutical Finance Co. LLC, Senior Notes	6.150%	2/1/36	2,000,000	1,965,481 (b)
Teva Pharmaceutical Finance Netherlands III BV, Senior Notes	4.100%	10/1/46	3,000,000	2,098,574
Total Pharmaceuticals				10,695,705

Total Health Care				39,833,919
Industrials — 10.8%
Aerospace & Defense — 0.9%
Triumph Group Inc., Senior Secured Notes	9.000%	3/15/28	7,200,000	7,556,325 (a)(b)
Commercial Services & Supplies — 1.4%
CoreCivic Inc., Senior Notes	8.250%	4/15/29	4,850,000	5,017,369 (b)
GEO Group Inc., Senior Notes	10.250%	4/15/31	2,100,000	2,199,015 (a)(b)
GEO Group Inc., Senior Secured Notes	8.625%	4/15/29	1,040,000	1,066,089 (a)(b)
PECF USS Intermediate Holding III Corp., Senior Notes	8.000%	11/15/29	6,500,000	2,771,785 (a)
Total Commercial Services & Supplies				11,054,258

See Notes to Financial Statements.

Western Asset Diversified Income Fund 2024 Semi-Annual Report

Schedule of investments (unaudited) (cont’d)

June 30, 2024

Western Asset Diversified Income Fund

(Percentages shown based on Fund net assets)

Security	Rate	Maturity Date	Face Amount†	Value

Construction & Engineering — 1.2%
Empire Communities Corp., Senior Notes	9.750%	5/1/29	3,000,000	$3,056,250 (a)(b)
Tutor Perini Corp., Senior Notes	11.875%	4/30/29	6,000,000	6,459,054 (a)(b)
Total Construction & Engineering				9,515,304
Ground Transportation — 0.9%
Carriage Purchaser Inc., Senior Notes	7.875%	10/15/29	7,000,000	6,468,188 (a)(b)
RXO Inc., Senior Notes	7.500%	11/15/27	1,000,000	1,028,365 (a)(b)
Total Ground Transportation				7,496,553
Machinery — 1.8%
Chart Industries Inc., Senior Secured Notes	7.500%	1/1/30	3,000,000	3,103,848 (a)
Park-Ohio Industries Inc., Senior Notes	6.625%	4/15/27	3,635,000	3,502,773 (b)
Titan International Inc., Senior Secured Notes	7.000%	4/30/28	6,820,000	6,565,300 (b)
TK Elevator US Newco Inc., Senior Secured Notes	5.250%	7/15/27	1,000,000	970,491 (a)(b)
Total Machinery				14,142,412
Marine Transportation — 0.6%
Stena International SA, Senior Secured Notes	7.625%	2/15/31	5,000,000	5,122,825 (a)(b)
Passenger Airlines — 2.4%
American Airlines Group Inc. Pass- Through Trust	4.000%	7/15/25	5,526,564	5,407,215
American Airlines Inc., Senior Secured Notes	8.500%	5/15/29	3,500,000	3,638,572 (a)(b)
RJET 2023-1 A	8.000%	6/15/30	4,750,000	4,805,934 (h)(i)
Spirit Loyalty Cayman Ltd./Spirit IP Cayman Ltd., Senior Secured Notes	8.000%	9/20/25	310,000	226,545 (a)
Spirit Loyalty Cayman Ltd./Spirit IP Cayman Ltd., Senior Secured Notes	8.000%	9/20/25	6,490,000	4,742,819 (a)(b)
Total Passenger Airlines				18,821,085
Professional Services — 0.5%
RR Donnelley & Sons Co., Secured Notes	9.750%	7/31/28	4,000,000	4,361,040 (a)(b)
Transportation Infrastructure — 1.1%
Gatwick Airport Finance PLC, Senior Secured Notes	4.375%	4/7/26	3,000,000 GBP	3,681,091 (f)
Railworks Holdings LP/Railworks Rally Inc., Secured Notes	8.250%	11/15/28	5,000,000	5,093,175 (a)(b)
Total Transportation Infrastructure				8,774,266

Total Industrials				86,844,068

See Notes to Financial Statements.

Western Asset Diversified Income Fund 2024 Semi-Annual Report

Western Asset Diversified Income Fund

(Percentages shown based on Fund net assets)

Security	Rate	Maturity Date	Face Amount†	Value

Information Technology — 4.2%
Communications Equipment — 0.8%
CommScope Technologies LLC, Senior Notes	5.000%	3/15/27	7,589,000	$3,152,972 (a)
Viasat Inc., Senior Notes	7.500%	5/30/31	1,875,000	1,247,885 (a)
Viasat Inc., Senior Secured Notes	5.625%	4/15/27	2,000,000	1,791,745 (a)(b)
Total Communications Equipment				6,192,602
Software — 2.2%
Central Parent Inc./CDK Global Inc., Senior Secured Notes	7.250%	6/15/29	2,000,000	1,991,677 (a)(b)
Citrix Systems Inc., Senior Secured Notes	4.500%	12/1/27	5,936,000	5,268,289
Community Brands Private	0.000%	6/13/29	879,200	874,804 (h)(i)(j)
Community Brands Private	0.000%	6/13/29	3,120,800	3,105,196 (h)(i)(j)
NCR Voyix Corp., Senior Notes	5.125%	4/15/29	3,000,000	2,827,954 (a)(b)
Planview Second Lien Bank	0.000%	12/17/27	4,000,000	3,990,000 (h)(j)
Total Software				18,057,920
Technology Hardware, Storage & Peripherals — 1.2%
CA Magnum Holdings, Senior Secured Notes	5.375%	10/31/26	1,500,000	1,431,307 (a)(b)
Vericast Corp., Secured Notes	12.500%	12/15/27	590,000	686,875 (a)(b)
Vericast Corp., Senior Secured Notes	11.000%	9/15/26	7,020,000	7,528,950 (a)(b)
Total Technology Hardware, Storage & Peripherals				9,647,132

Total Information Technology				33,897,654
Materials — 1.1%
Construction Materials — 0.3%
Smyrna Ready Mix Concrete LLC, Senior Secured Notes	8.875%	11/15/31	2,500,000	2,654,965 (a)(b)
Containers & Packaging — 0.2%
ARD Finance SA, Senior Secured Notes (6.500% Cash or 7.250% PIK)	6.500%	6/30/27	1,000,000	254,510 (a)(c)
Ardagh Packaging Finance PLC/Ardagh Holdings USA Inc., Senior Notes	5.250%	8/15/27	2,000,000	1,247,824 (a)
Total Containers & Packaging				1,502,334
Metals & Mining — 0.6%
First Quantum Minerals Ltd., Secured Notes	9.375%	3/1/29	2,550,000	2,667,620 (a)
First Quantum Minerals Ltd., Senior Notes	6.875%	10/15/27	2,400,000	2,347,335 (a)
Total Metals & Mining				5,014,955

Total Materials				9,172,254

See Notes to Financial Statements.

Western Asset Diversified Income Fund 2024 Semi-Annual Report

Schedule of investments (unaudited) (cont’d)

June 30, 2024

Western Asset Diversified Income Fund

(Percentages shown based on Fund net assets)

Security	Rate	Maturity Date	Face Amount†	Value

Real Estate — 1.2%
Diversified REITs — 0.5%
MPT Operating Partnership LP/MPT Finance Corp., Senior Notes	5.250%	8/1/26	1,000,000	$909,598 (b)
MPT Operating Partnership LP/MPT Finance Corp., Senior Notes	5.000%	10/15/27	4,000,000	3,307,312 (b)
Total Diversified REITs				4,216,910
Hotel & Resort REITs — 0.5%
Service Properties Trust, Senior Secured Notes	8.625%	11/15/31	3,500,000	3,651,493 (a)(b)
Real Estate Management & Development — 0.2%
Add Hero Holdings Ltd., Senior Secured Notes (7.500% Cash or 8.500% PIK)	8.500%	9/30/29	516,154	27,098 (c)(f)
Add Hero Holdings Ltd., Senior Secured Notes (8.000% Cash or 9.000% PIK)	9.000%	9/30/30	397,993	9,950 (c)(f)
Add Hero Holdings Ltd., Senior Secured Notes (8.800% Cash or 9.800% PIK)	9.800%	9/30/31	519,371	12,984 (c)(f)
China Aoyuan Group Ltd., Senior Notes, Step bond (0.000% to 9/30/31 then 1.000%)	0.000%	3/30/2173	786,962	7,870 (d)(f)
China Aoyuan Group Ltd., Senior Secured Notes (5.500% PIK)	5.500%	9/30/31	202,150	2,021 (c)(f)
Country Garden Holdings Co. Ltd., Senior Secured Notes	—	1/27/24	3,500,000	276,500 *(f)(k)
Cushman & Wakefield US Borrower LLC, Senior Secured Notes	8.875%	9/1/31	1,000,000	1,053,035 (a)(b)
Total Real Estate Management & Development				1,389,458

Total Real Estate				9,257,861
Utilities — 0.5%
Independent Power and Renewable Electricity Producers — 0.5%
TransAlta Corp., Senior Notes	6.500%	3/15/40	4,000,000	3,979,088 (b)

Total Corporate Bonds & Notes (Cost — $529,508,391)				522,000,021
Collateralized Mortgage Obligations(l) — 28.0%
BANK, 2021-BN35 H	1.766%	6/15/64	9,451,000	3,140,044 (a)(e)
BANK, 2021-BN35 K	1.766%	6/15/64	21,846,154	5,734,786 (a)(e)
Benchmark Mortgage Trust, 2021-B27 F	2.250%	7/15/54	5,000,000	2,308,842 (a)(e)
Benchmark Mortgage Trust, 2021-B27 G	2.250%	7/15/54	5,000,000	1,779,530 (a)(e)
BSREP Commercial Mortgage Trust, 2021-DC HRR (1 mo. Term SOFR + 5.614%)	10.943%	8/15/38	17,687,987	9,732,548 (a)(e)

See Notes to Financial Statements.

Western Asset Diversified Income Fund 2024 Semi-Annual Report

Western Asset Diversified Income Fund

(Percentages shown based on Fund net assets)

Security	Rate	Maturity Date	Face Amount†	Value
Collateralized Mortgage Obligations(l) — continued
BX Commercial Mortgage Trust, 2019- IMC G (1 mo. Term SOFR + 3.646%)	8.975%	4/15/34	4,000,000	$3,831,300 (a)(b)(e)
CIM Trust, 2021-INV1 AXS, IO	0.190%	7/1/51	155,944,103	1,576,345 (a)(e)
Citigroup Commercial Mortgage Trust, 2015-GC29 D	3.110%	4/10/48	3,439,000	3,088,300 (a)(b)
Citigroup Commercial Mortgage Trust, 2015-P1 D	3.225%	9/15/48	2,000,000	1,774,618 (a)(b)
Citigroup Commercial Mortgage Trust, 2015-P1 E	4.514%	9/15/48	3,500,000	2,697,181 (a)(e)
CSMC Trust, 2021-ADV G (1 mo. Term SOFR + 6.364%)	11.693%	7/15/38	8,350,000	2,779,665 (a)(e)
CSMC Trust, 2021-RPL2 B1	3.641%	1/25/60	6,233,900	3,979,262 (a)(e)
Federal Home Loan Mortgage Corp. (FHLMC) Multifamily Structured Pass- Through Certificates, 2021-MN2 B1 (30 Day Average SOFR + 5.500%)	10.835%	7/25/41	2,500,000	2,108,403 (a)(b)(e)
Federal Home Loan Mortgage Corp. (FHLMC) REMIC, Structured Agency Credit Risk Debt Notes, 2020-DNA1 B2 (30 Day Average SOFR + 5.364%)	10.700%	1/25/50	2,225,000	2,434,919 (a)(b)(e)
Federal Home Loan Mortgage Corp. (FHLMC) REMIC, Structured Agency Credit Risk Debt Notes, 2020-DNA2 B2 (30 Day Average SOFR + 4.914%)	10.250%	2/25/50	7,250,000	7,782,918 (a)(e)
Federal Home Loan Mortgage Corp. (FHLMC) REMIC, Structured Agency Credit Risk Debt Notes, 2020-DNA6 B2 (30 Day Average SOFR + 5.650%)	10.985%	12/25/50	5,000,000	5,691,162 (a)(e)
Federal Home Loan Mortgage Corp. (FHLMC) REMIC, Structured Agency Credit Risk Debt Notes, 2021-DNA1 B2 (30 Day Average SOFR + 4.750%)	10.085%	1/25/51	9,482,500	10,279,526 (a)(e)
Federal Home Loan Mortgage Corp. (FHLMC) REMIC, Structured Agency Credit Risk Debt Notes, 2021-DNA3 B2 (30 Day Average SOFR + 6.250%)	11.585%	10/25/33	5,000,000	5,940,809 (a)(e)
Federal Home Loan Mortgage Corp. (FHLMC) REMIC, Structured Agency Credit Risk Debt Notes, 2021-DNA5 B1 (30 Day Average SOFR + 3.050%)	8.385%	1/25/34	2,470,000	2,642,806 (a)(b)(e)

See Notes to Financial Statements.

Western Asset Diversified Income Fund 2024 Semi-Annual Report

Schedule of investments (unaudited) (cont’d)

June 30, 2024

Western Asset Diversified Income Fund

(Percentages shown based on Fund net assets)

Security	Rate	Maturity Date	Face Amount†	Value
Collateralized Mortgage Obligations(l) — continued
Federal Home Loan Mortgage Corp. (FHLMC) REMIC, Structured Agency Credit Risk Debt Notes, 2021-DNA5 B2 (30 Day Average SOFR + 5.500%)	10.835%	1/25/34	6,700,000	$7,539,908 (a)(e)
Federal Home Loan Mortgage Corp. (FHLMC) REMIC, Structured Agency Credit Risk Debt Notes, 2021-DNA6 B2 (30 Day Average SOFR + 7.500%)	12.835%	10/25/41	6,590,000	7,131,399 (a)(e)
Federal Home Loan Mortgage Corp. (FHLMC) Seasoned Credit Risk Transfer Trust, 2018-3 BX	1.520%	8/25/57	9,438,063	3,258,806 (a)(e)
Federal Home Loan Mortgage Corp. (FHLMC) Seasoned Credit Risk Transfer Trust, 2022-1 M	4.500%	11/25/61	5,000,000	4,006,034 (a)(b)(e)
Federal Home Loan Mortgage Corp. (FHLMC) Structured Agency Credit Risk Debt Notes, 2018-HRP1 B2 (30 Day Average SOFR + 11.864%)	17.200%	5/25/43	4,703,022	5,734,160 (a)(e)
Federal Home Loan Mortgage Corp. (FHLMC) REMIC, Structured Agency Credit Risk Debt Notes, 2021-DNA2 B2 (30 Day Average SOFR + 6.000%)	11.335%	8/25/33	6,000,000	7,047,778 (a)(e)
Federal National Mortgage Association (FNMA) — CAS, 2016-C04 1B (30 Day Average SOFR + 10.364%)	15.700%	1/25/29	2,220,693	2,549,964 (a)(b)(e)
Federal National Mortgage Association (FNMA) — CAS, 2019-R07 1B1 (30 Day Average SOFR + 3.514%)	8.850%	10/25/39	4,715,360	4,901,251 (a)(e)
FREMF Mortgage Trust, 2021-F117 CS (30 Day Average SOFR + 6.400%)	11.724%	7/25/31	4,643,555	4,622,766 (a)(e)
GS Mortgage Securities Corp. Trust, 2018-HULA G (1 mo. Term SOFR + 3.703%)	9.033%	7/15/25	1,800,000	1,746,819 (a)(e)
GS Mortgage Securities Corp. Trust, 2018-LUAU G (1 mo. Term SOFR + 4.747%)	10.076%	11/15/32	5,000,000	4,930,840 (a)(e)
GS Mortgage Securities Corp. Trust, 2021-ARDN H (1 mo. Term SOFR + 6.048%)	11.377%	11/15/26	5,000,000	4,932,113 (a)(e)
GS Mortgage Securities Trust, 2015- GC30 D	3.384%	5/10/50	2,840,000	2,372,293 (b)

See Notes to Financial Statements.

Western Asset Diversified Income Fund 2024 Semi-Annual Report

Western Asset Diversified Income Fund

(Percentages shown based on Fund net assets)

Security	Rate	Maturity Date	Face Amount†	Value
Collateralized Mortgage Obligations(l) — continued
GS Mortgage Securities Corp., 2024-70P HRR	10.333%	3/10/41	17,680,000	$17,574,674 (a)(e)
JPMorgan Chase Commercial Mortgage Securities Trust, 2018-WPT GFX	5.542%	7/5/33	4,000,000	2,140,046 (a)(e)
JPMorgan Chase Commercial Mortgage Securities Trust, 2020-NNN GFX	4.844%	1/16/37	1,580,000	423,095 (a)(e)
JPMorgan Chase Commercial Mortgage Securities Trust, 2021-NYMZ M (1 mo. Term SOFR + 7.364%)	12.943%	6/15/26	10,000,000	8,060,770 (a)(e)
KIND Trust, 2021-KIND F (1 mo. Term SOFR + 4.064%)	9.394%	8/15/38	5,951,129	5,646,852 (a)(e)
Med Trust, 2021-MDLN F (1 mo. Term SOFR + 4.114%)	9.443%	11/15/38	6,558,524	6,568,197 (a)(e)
MIRA Trust, 2023-MILE HRR	9.300%	6/10/38	13,750,000	13,659,029 (a)
Morgan Stanley Capital I Trust, 2021-L6 F	2.250%	6/15/54	7,195,000	3,722,966 (a)(e)
Multifamily CAS Trust, 2019-1 CE (30 Day Average SOFR + 8.864%)	14.200%	10/25/49	2,000,000	2,005,112 (a)(e)
Multifamily CAS Trust, 2020-1 CE (30 Day Average SOFR + 7.614%)	12.950%	3/25/50	2,500,000	2,497,423 (a)(e)
Natixis Commercial Mortgage Securities Trust, 2022-JERI G (1 mo. Term SOFR + 7.458%)	12.787%	1/15/39	2,500,000	1,891,397 (a)(e)
Natixis Commercial Mortgage Securities Trust, 2022-RRI E (1 mo. Term SOFR + 5.193%)	10.522%	3/15/35	3,750,000	3,754,236 (a)(e)
New Residential Mortgage Loan Trust, 2017-2A B5	5.249%	3/25/57	2,819,937	2,273,084 (a)(e)
New Residential Mortgage Loan Trust, 2020-2A B5D	6.906%	10/25/46	4,342,380	4,150,464 (a)(e)
Soho Trust, 2021-SOHO D	2.786%	8/10/38	7,000,000	4,071,944 (a)(e)
UBS Commercial Mortgage Trust, 2018- NYCH F (1 mo. Term SOFR + 3.868%)	9.197%	2/15/32	6,000,000	5,698,668 (a)(e)

Total Collateralized Mortgage Obligations (Cost — $246,624,625)				224,215,052
			Face Amount†/ Units
Asset-Backed Securities — 23.1%
AGL CLO Ltd., 2020-6A ER (3 mo. Term SOFR + 6.762%)	12.086%	7/20/34	6,990,000	7,041,323 (a)(b)(e)

See Notes to Financial Statements.

Western Asset Diversified Income Fund 2024 Semi-Annual Report

Schedule of investments (unaudited) (cont’d)

June 30, 2024

Western Asset Diversified Income Fund

(Percentages shown based on Fund net assets)

Security	Rate	Maturity Date	Face Amount†/ Units	Value
Asset-Backed Securities — continued
AGL CLO Ltd., 2021-11A E (3 mo. Term SOFR + 6.622%)	11.950%	4/15/34	2,650,000	$2,662,885 (a)(b)(e)
Apex Credit CLO Ltd., 2020-1A DRR (3 mo. Term SOFR + 4.320%)	9.643%	4/20/35	3,130,000	3,129,491 (a)(e)
Apidos CLO Ltd., 2023-46A SUB	12.486%	10/24/36	3,500,000	2,929,010 (a)(e)(m)
Ares CLO Ltd., 2015-2A ER (3 mo. Term SOFR + 7.112%)	12.429%	4/17/33	1,500,000	1,506,321 (a)(b)(e)
Barings CLO Ltd., 2020-4A E (3 mo. Term SOFR + 5.942%)	11.266%	1/20/32	1,090,000	1,094,937 (a)(b)(e)
BlueMountain CLO Ltd., 2020-29A ER (3 mo. Term SOFR + 7.122%)	12.445%	7/25/34	7,000,000	6,859,768 (a)(b)(e)
BlueMountain Fuji US CLO Ltd., 2017-2A D (3 mo. Term SOFR + 6.412%)	11.736%	10/20/30	5,350,000	5,200,112 (a)(e)
CARLYLE US CLO Ltd., 2020-1A ER (3 mo. Term SOFR + 8.142%)	13.466%	7/20/34	5,000,000	4,781,681 (a)(b)(e)
College Avenue Student Loans LLC, 2021-B R	—	6/25/52	17,241	5,572,303 *(a)
Dryden Senior Loan Fund, 2016-43A ER3 (3 mo. Term SOFR + 6.662%)	11.986%	4/20/34	1,539,000	1,471,806 (a)(e)
Dryden CLO Ltd., 2021-95A SUB	28.993%	8/20/34	6,870,000	3,705,933 (a)(e)(m)
Elmwood CLO Ltd., 2019-2A SUB	25.751%	4/20/34	4,600,000	3,411,869 (a)(e)(m)
Fortress Credit BSL Ltd., 2021-4A E (3 mo. Term SOFR + 7.392%)	12.720%	10/15/34	5,000,000	4,818,403 (a)(b)(e)
Goldentree Loan Management US CLO Ltd., 2020-8A FR (3 mo. Term SOFR + 8.312%)	13.636%	10/20/34	7,000,000	6,959,694 (a)(e)
Goldentree Loan Management US CLO Ltd., 2021-10A F (3 mo. Term SOFR + 8.052%)	13.376%	7/20/34	1,000,000	993,782 (a)(e)
Greenwood Park CLO Ltd., 2018-1A E (3 mo. Term SOFR + 5.212%)	10.540%	4/15/31	1,570,000	1,538,606 (a)(b)(e)
Greywolf CLO Ltd., 2015-1A DR (3 mo. Term SOFR + 6.112%)	11.435%	1/27/31	6,250,000	6,238,055 (a)(b)(e)
Greywolf CLO Ltd., 2018-1A D (3 mo. Term SOFR + 6.010%)	11.334%	4/26/31	3,000,000	3,011,501 (a)(e)
Hayfin US Ltd., 2021-14A E (3 mo. Term SOFR + 7.442%)	12.766%	7/20/34	7,000,000	7,064,945 (a)(b)(e)
LCM Ltd., 33A E (3 mo. Term SOFR + 6.612%)	11.936%	7/20/34	3,000,000	2,647,913 (a)(b)(e)

See Notes to Financial Statements.

Western Asset Diversified Income Fund 2024 Semi-Annual Report

Western Asset Diversified Income Fund

(Percentages shown based on Fund net assets)

Security	Rate	Maturity Date	Face Amount†/ Units	Value
Asset-Backed Securities — continued
Lunar Structured Aircraft Portfolio Notes, 2021-1 C	5.682%	10/15/46	5,497,893	$4,924,822 (a)
MACH Cayman Ltd., 2019-1 B	4.335%	10/15/39	868,376	687,791 (a)
Magnetite Ltd., 2020-26A ER (3 mo. Term SOFR + 6.212%)	11.535%	7/25/34	6,750,000	6,791,449 (a)(e)
MAPS Trust, 2021-1A C	5.437%	6/15/46	2,151,784	1,874,868 (a)
Marathon CLO Ltd., 2019-1A C (3 mo. Term SOFR + 4.332%)	9.660%	4/15/32	4,625,000	4,617,621 (a)(b)(e)
National Collegiate Class A-3L Commutation Trust, 2007-4VI O (1 mo. USD LIBOR + 0.850%)	6.281%	3/29/38	27,730,208	3,877,626 (a)(e)
Ocean Trails CLO, 2020-10A ER (3 mo. Term SOFR + 7.832%)	13.160%	10/15/34	3,750,000	3,759,719 (a)(b)(e)
Palmer Square CLO Ltd., 2023-4A E (3 mo. Term SOFR + 6.750%)	12.075%	10/20/33	3,450,000	3,481,362 (a)(e)
Park Avenue Institutional Advisers CLO Ltd., 2019-1A D (3 mo. Term SOFR + 7.112%)	12.434%	5/15/32	6,950,000	6,772,438 (a)(e)
Renew, 2024-1A B	9.001%	11/20/59	742,075	733,509 (a)
Riserva CLO Ltd., 2016-3A ERR (3 mo. Term SOFR + 6.762%)	12.089%	1/18/34	2,000,000	1,995,005 (a)(b)(e)
Riserva CLO Ltd., 2016-3A FRR (3 mo. Term SOFR + 8.772%)	14.099%	1/18/34	2,500,000	2,186,178 (a)(b)(e)
RR Ltd., 2021-18A D (3 mo. Term SOFR + 6.512%)	11.840%	10/15/34	7,190,000	7,190,000 (a)(b)(e)
Saratoga Investment Corp. CLO Ltd., 2013-1A (3 mo. Term SOFR + 10.262%)	15.587%	4/20/33	4,000,000	3,527,477 (a)
SEB Funding LLC, 2024-1A A2	7.386%	4/30/54	2,030,000	2,062,450 (a)
SMB Private Education Loan Trust, 2015-C R	11.919%	9/18/46	7,570	2,138,774 (a)(m)
Sound Point CLO Ltd., 2020-1A ER (3 mo. Term SOFR + 7.122%)	12.446%	7/20/34	4,200,000	3,989,844 (a)(b)(e)
Subway Funding LLC, 2024-1A A2I	6.028%	7/30/54	2,390,000	2,414,575 (a)
Sunnova Hellios II Issuer LLC, 2018-1A B	7.710%	7/20/48	3,897,343	3,383,136 (a)
Symphony CLO Ltd., 2016-18A ER (3 mo. Term SOFR + 7.332%)	12.658%	7/23/33	3,000,000	2,776,284 (a)(e)
Symphony CLO Ltd., 2019-21A ER (3 mo. Term SOFR + 6.862%)	12.190%	7/15/32	2,800,000	2,807,277 (a)(b)(e)
Symphony CLO Ltd., 2021-28A SUB	26.686%	10/23/50	6,045,000	3,864,961 (a)(e)(m)

See Notes to Financial Statements.

Western Asset Diversified Income Fund 2024 Semi-Annual Report

Schedule of investments (unaudited) (cont’d)

June 30, 2024

Western Asset Diversified Income Fund

(Percentages shown based on Fund net assets)

Security	Rate	Maturity Date	Face Amount†/ Units	Value
Asset-Backed Securities — continued
TCI-Symphony CLO Ltd., 2016-1A ER2 (3 mo. Term SOFR + 7.012%)	12.340%	10/13/32	3,500,000	$3,464,621 (a)(e)
Venture CLO Ltd., 2021-43A D (3 mo. Term SOFR + 3.732%)	9.060%	4/15/34	2,360,000	2,301,000 (a)(e)
Voya CLO Ltd., 2018-2A E (3 mo. Term SOFR + 5.512%)	10.840%	7/15/31	6,750,000	6,479,553 (a)(b)(e)
Voya CLO Ltd., 2021-1A E (3 mo. Term SOFR + 6.612%)	11.940%	7/15/34	2,250,000	2,234,631 (a)(b)(e)
Whitebox CLO Ltd., 2020-2A ER (3 mo. Term SOFR + 7.362%)	12.685%	10/24/34	1,350,000	1,363,434 (a)(b)(e)
Wind River CLO Ltd., 2021-4A E3 (3 mo. Term SOFR + 8.512%)	13.836%	1/20/35	3,000,000	2,885,991 (a)(b)(e)
Wind River CLO Ltd., 2021-4A F (3 mo. Term SOFR + 6.522%)	11.846%	1/20/35	2,450,000	1,858,542 (a)(e)
Zais CLO Ltd., 2021-17A E (3 mo. Term SOFR + 8.512%)	13.836%	10/20/33	6,000,000	6,023,121 (a)(e)

Total Asset-Backed Securities (Cost — $200,252,278)				185,108,397
			Face Amount†
Senior Loans — 16.1%
Communication Services — 1.9%
Entertainment — 0.7%
Allen Media LLC, Term Loan B (3 mo. Term SOFR + 5.650%)	10.985%	2/10/27	7,272,228	5,485,987 (e)(n)(o)
Media — 1.2%
CB Poly US Holdings Inc., Initial Term Loan (3 mo. Term SOFR + 5.500%)	10.835%	5/18/29	4,912,500	4,817,934 (e)(n)(o)
iHeartCommunications Inc., New Term Loan (1 mo. Term SOFR + 3.114%)	8.458%	5/1/26	6,000,000	4,672,800 (e)(n)(o)
Total Media				9,490,734

Total Communication Services				14,976,721
Consumer Discretionary — 3.2%
Automobile Components — 1.2%
Autokiniton US Holdings Inc., 2024 Replacement Term Loan B (1 mo. Term SOFR + 4.114%)	9.458%	4/6/28	3,880,500	3,906,829 (e)(n)(o)
First Brands Group LLC, 2021 First Lien Term Loan (3 mo. Term SOFR + 5.262%)	10.591%	3/30/27	5,794,051	5,766,008 (e)(n)(o)
Total Automobile Components				9,672,837

See Notes to Financial Statements.

Western Asset Diversified Income Fund 2024 Semi-Annual Report

Western Asset Diversified Income Fund

(Percentages shown based on Fund net assets)

Security	Rate	Maturity Date	Face Amount†	Value

Diversified Consumer Services — 0.2%
Adtalem Global Education Inc., 2024 Repricing Term Loan (1 mo. Term SOFR + 3.500%)	8.844%	8/11/28	1,455,822	$1,465,219 (e)(n)(o)
WW International Inc., Initial Term Loan (1 mo. Term SOFR + 3.614%)	8.958%	4/13/28	330,000	126,225 (e)(n)(o)
Total Diversified Consumer Services				1,591,444
Specialty Retail — 1.8%
Empire Today LLC, Closing Date Term Loan (3 mo. Term SOFR + 5.262%)	10.591%	4/3/28	2,425,000	1,847,717 (e)(n)(o)
Michaels Cos. Inc., Term Loan B (3 mo. Term SOFR + 4.512%)	9.846%	4/15/28	3,236,363	2,917,144 (e)(n)(o)
Rising Tide Holdings Inc., 2023 Term Loan (3 mo. Term SOFR + 8.250%)	13.584%	9/12/28	2,355,094	2,051,876 (e)(n)(o)
Spencer Spirit IH LLC, Initial Term Loan (1 mo. Term SOFR + 6.100%)	11.429%	6/19/26	7,279,440	7,293,089 (e)(n)(o)
Total Specialty Retail				14,109,826

Total Consumer Discretionary				25,374,107
Consumer Staples — 0.2%
Beverages — 0.2%
Triton Water Holdings Inc., First Lien Initial Term Loan (3 mo. Term SOFR + 3.512%)	8.846%	3/31/28	1,484,734	1,486,962 (e)(n)(o)
Household Products — 0.0%††
Knight Health Holdings LLC, Term Loan B (1 mo. Term SOFR + 5.364%)	10.708%	12/23/28	975,000	468,487 (e)(n)(o)

Total Consumer Staples				1,955,449
Financials — 2.9%
Financial Services — 1.5%
Boost Newco Borrower LLC, Initial USD Term Loan (3 mo. Term SOFR + 3.000%)	8.335%	1/31/31	3,000,000	3,007,920 (e)(n)(o)
Deerfield Dakota Holding LLC, 2021 Replacement Term Loan (3 mo. Term SOFR + 7.012%)	12.346%	4/7/28	2,000,000	2,005,000 (e)(n)(o)
Greystone Select Holdings LLC, Term Loan B (3 mo. Term SOFR + 5.262%)	10.588%	6/16/28	3,370,371	3,361,945 (e)(n)(o)
Nexus Buyer LLC, Initial Term Loan (1 mo. Term SOFR + 3.850%)	9.194%	11/9/26	3,938,144	3,940,054 (e)(n)(o)
Total Financial Services				12,314,919

See Notes to Financial Statements.

Western Asset Diversified Income Fund 2024 Semi-Annual Report

Schedule of investments (unaudited) (cont’d)

June 30, 2024

Western Asset Diversified Income Fund

(Percentages shown based on Fund net assets)

Security	Rate	Maturity Date	Face Amount†	Value

Insurance — 1.4%
Asurion LLC, New Term Loan B4 (1 mo. Term SOFR + 5.364%)	10.708%	1/20/29	5,000,000	$4,626,950 (e)(n)(o)
Asurion LLC, Second Lien Term Loan B3 (1 mo. Term SOFR + 5.364%)	10.708%	1/31/28	5,000,000	4,671,875 (e)(n)(o)
Sedgwick Claims Management Services Inc., 2023 Term Loan (1 mo. Term SOFR + 3.750%)	9.094%	2/24/28	1,570,125	1,573,830 (e)(n)(o)
Total Insurance				10,872,655

Total Financials				23,187,574
Health Care — 1.0%
Health Care Providers & Services — 0.5%
EyeCare Partners LLC, Term Loan B (3 mo. Term SOFR + 4.610%)	10.037%	11/30/28	1,032,762	639,022 (e)(n)(o)
EyeCare Partners LLC, Term Loan C (3 mo. Term SOFR + 6.850%)	12.177%	11/30/28	391,738	78,347 (e)(i)(n)(o)
Team Services Group LLC, Incremental Term Loan	—	12/20/27	3,000,000	2,955,000 (p)
Total Health Care Providers & Services				3,672,369
Health Care Technology — 0.5%
MPH Acquisition Holdings LLC, Initial Term Loan (3 mo. Term SOFR + 4.512%)	9.859%	9/1/28	4,987,179	4,164,495 (e)(n)(o)

Total Health Care				7,836,864
Industrials — 3.2%
Air Freight & Logistics — 0.8%
WWEX Uni Topco Holdings LLC, Second Lien Initial Term Loan (3 mo. Term SOFR + 7.262%)	12.596%	7/26/29	7,000,000	6,720,000 (e)(n)(o)
Building Products — 0.5%
ACProducts Holdings Inc., Initial Term Loan (3 mo. Term SOFR + 4.512%)	9.846%	5/17/28	4,948,980	4,208,687 (e)(n)(o)
Commercial Services & Supplies — 1.9%
DS Parent Inc., Term Loan B (3 mo. Term SOFR + 5.500%)	10.835%	1/31/31	5,000,000	5,006,275 (e)(n)(o)
GEO Group Inc., Term Loan (1 mo. Term SOFR + 5.250%)	10.594%	4/4/29	6,171,875	6,301,731 (e)(n)(o)
Neptune Bidco US Inc., Term Loan A (3 mo. Term SOFR + 4.850%)	10.156%	10/11/28	3,960,000	3,725,370 (e)(n)(o)
Total Commercial Services & Supplies				15,033,376

Total Industrials				25,962,063

See Notes to Financial Statements.

Western Asset Diversified Income Fund 2024 Semi-Annual Report

Western Asset Diversified Income Fund

(Percentages shown based on Fund net assets)

Security	Rate	Maturity Date	Face Amount†	Value

Information Technology — 3.1%
IT Services — 1.0%
Nielsen Consumer Inc., Fifth Amendment Incremental Term Loan (1 mo. Term SOFR + 6.250%)	11.594%	3/6/28	4,950,000	$4,962,375 (e)(n)(o)
Redstone Holdco 2 LP, First Lien Initial Term Loan (1 mo. Term SOFR + 4.864%)	10.208%	4/27/28	3,240,726	2,922,956 (e)(n)(o)
Total IT Services				7,885,331
Software — 2.1%
Cloudera Inc., Second Lien Term Loan (1 mo. Term SOFR + 6.100%)	11.444%	10/8/29	2,120,000	2,108,075 (e)(n)(o)
DCert Buyer Inc., Second Lien Initial Term Loan (1 mo. Term SOFR + 7.000%)	12.344%	2/19/29	5,000,000	4,487,500 (e)(n)(o)
Magenta Buyer LLC, First Lien Initial Term Loan (3 mo. Term SOFR + 5.262%)	10.591%	7/27/28	3,153,404	1,767,877 (e)(n)(o)
Mitchell International Inc., Second Lien Term Loan	—	6/7/32	4,000,000	3,997,520 (p)
Planview Parent Inc., First Lien Closing Date Term Loan (3 mo. USD LIBOR + 3.750%)	9.085%	12/17/27	4,152,545	4,154,269 (e)(n)(o)
Total Software				16,515,241

Total Information Technology				24,400,572
Materials — 0.6%
Chemicals — 0.6%
Plastics Management LLC, First Lien Initial Term Loan (3 mo. Term SOFR + 5.100)	10.409%	8/3/27	4,868,307	4,878,385 (e)(n)(o)

Total Senior Loans (Cost — $134,225,297)				128,571,735
Sovereign Bonds — 6.3%
Angola — 0.4%
Angolan Government International Bond, Senior Notes	8.750%	4/14/32	3,500,000	3,106,215 (a)(g)
Angolan Government International Bond, Senior Notes	9.125%	11/26/49	620,000	509,985 (f)
Total Angola				3,616,200
Argentina — 1.2%
Ciudad Autonoma De Buenos Aires, Senior Notes	7.500%	6/1/27	5,100,000	5,005,369 (a)

See Notes to Financial Statements.

Western Asset Diversified Income Fund 2024 Semi-Annual Report

Schedule of investments (unaudited) (cont’d)

June 30, 2024

Western Asset Diversified Income Fund

(Percentages shown based on Fund net assets)

Security	Rate	Maturity Date	Face Amount†	Value

Argentina — continued
Ciudad Autonoma De Buenos Aires, Senior Notes	7.500%	6/1/27	2,000,000	$1,962,890 (f)
Provincia de Cordoba, Senior Notes	6.875%	12/10/25	3,250,130	3,014,496 (a)
Total Argentina				9,982,755
Bahamas — 0.1%
Bahamas Government International Bond, Senior Notes	8.950%	10/15/32	600,000	563,250 (f)
Brazil — 0.4%
Brazil Notas do Tesouro Nacional Serie F, Notes	10.000%	1/1/31	21,052,000 BRL	3,389,114
Dominican Republic — 0.4%
Dominican Republic International Bond, Senior Notes	4.500%	1/30/30	430,000	391,846 (f)
Dominican Republic International Bond, Senior Notes	4.875%	9/23/32	2,750,000	2,468,484 (f)(g)
Total Dominican Republic				2,860,330
Ecuador — 0.3%
Ecuador Government International Bond, Senior Notes	0.000%	7/31/30	5,593,000	2,684,688 (a)(g)
Egypt — 0.1%
Egypt Government International Bond, Senior Notes	7.053%	1/15/32	700,000	560,998 (f)
El Salvador — 0.1%
El Salvador Government International Bond, Senior Notes	6.375%	1/18/27	180,000	160,964 (f)
El Salvador Government International Bond, Senior Notes	9.250%	4/17/30	440,000	392,136 (a)
Total El Salvador				553,100
Ethiopia — 0.0%††
Ethiopia International Bond, Senior Notes	6.625%	12/11/24	560,000	405,973 *(f)(q)
Ghana — 0.1%
Ghana Government International Bond, Senior Notes	10.750%	10/14/30	970,000	658,499 (f)
Ivory Coast — 0.4%
Ivory Coast Government International Bond, Senior Notes	7.625%	1/30/33	2,040,000	1,984,945 (a)
Ivory Coast Government International Bond, Senior Notes	8.250%	1/30/37	1,000,000	970,600 (a)
Total Ivory Coast				2,955,545

See Notes to Financial Statements.

Western Asset Diversified Income Fund 2024 Semi-Annual Report

Western Asset Diversified Income Fund

(Percentages shown based on Fund net assets)

Security	Rate	Maturity Date	Face Amount†	Value

Jamaica — 0.1%
Jamaica Government International Bond, Senior Notes	9.625%	11/3/30	82,000,000 JMD	$560,327
Kenya — 0.3%
Republic of Kenya Government International Bond, Senior Notes	6.300%	1/23/34	3,200,000	2,399,835 (a)(g)
Republic of Kenya Government International Bond, Senior Notes	6.300%	1/23/34	550,000	412,472 (f)
Total Kenya				2,812,307
Mexico — 0.9%
Mexican Bonos, Bonds	5.750%	3/5/26	40,930,000 MXN	2,069,207
Mexican Bonos, Senior Notes	8.500%	5/31/29	98,350,000 MXN	5,063,506
Total Mexico				7,132,713
Mozambique — 0.0%††
Mozambique International Bond, Senior Notes	9.000%	9/15/31	460,000	381,929 (f)
Nigeria — 0.1%
Nigeria Government International Bond, Senior Notes	7.143%	2/23/30	940,000	818,282 (f)
Senegal — 0.1%
Senegal Government International Bond, Senior Notes	6.250%	5/23/33	550,000	462,554 (f)
Sri Lanka — 0.0%††
Sri Lanka Government International Bond, Senior Notes	6.200%	5/11/27	570,000	335,983 *(f)(q)
Supranational — 0.7%
International Bank for Reconstruction & Development, Senior Notes	8.050%	5/10/28	227,000,000 UYU	5,698,478
Turkey — 0.4%
Turkiye Ihracat Kredi Bankasi AS, Senior Notes	5.750%	7/6/26	3,200,000	3,116,624 (a)(g)
Ukraine — 0.1%
Ukraine Government International Bond, Senior Notes	7.375%	9/25/34	2,280,000	659,587 *(f)(q)
Uzbekistan — 0.1%
Republic of Uzbekistan International Bond, Senior Notes	3.900%	10/19/31	590,000	480,452 (f)

Total Sovereign Bonds (Cost — $53,335,620)				50,689,688

See Notes to Financial Statements.

Western Asset Diversified Income Fund 2024 Semi-Annual Report

Schedule of investments (unaudited) (cont’d)

June 30, 2024

Western Asset Diversified Income Fund

(Percentages shown based on Fund net assets)

Security	Rate	Maturity Date	Face Amount†	Value

Convertible Bonds & Notes — 1.2%
Communication Services — 0.6%
Media — 0.6%
DISH Network Corp., Senior Notes	0.000%	12/15/25	4,500,000	$3,336,088
DISH Network Corp., Senior Notes	3.375%	8/15/26	2,000,000	1,250,320

Total Communication Services				4,586,408
Financials — 0.4%
Mortgage Real Estate Investment Trusts (REITs) — 0.4%
Two Harbors Investment Corp., Senior Notes	6.250%	1/15/26	3,010,000	2,889,600

Health Care — 0.2%
Health Care Technology — 0.2%
Multiplan Corp., Senior Notes (6.000% Cash or 7.000% PIK)	6.000%	10/15/27	2,500,000	1,762,500 (a)(c)

Real Estate — 0.0%††
Real Estate Management & Development — 0.0%††
China Aoyuan Group Ltd., Senior Notes	0.000%	9/30/28	70,334	1,163 (f)

Total Convertible Bonds & Notes (Cost — $9,500,679)				9,239,671
			Shares
Convertible Preferred Stocks — 1.1%
Energy — 1.1%
Oil, Gas & Consumable Fuels — 1.1%
Equitrans Midstream Corp. (3 mo. USD LIBOR + 8.150%) (Cost — $9,192,642)	13.736%		416,711	9,167,642 (e)
		Maturity Date	Face Amount†
Non-U.S. Treasury Inflation Protected Securities — 0.1%
Uruguay — 0.1%
Uruguay Government International Bond, Senior Notes	3.875%	7/2/40	18,096,988 UYU	488,179
Uruguay Government International Bond, Senior Notes	3.400%	5/16/45	3,748,027 UYU	95,458

Total Non-U.S. Treasury Inflation Protected Securities (Cost — $562,371)				583,637
			Shares
Common Stocks — 0.1%
Consumer Discretionary — 0.1%
Specialty Retail — 0.1%
West Marine			146,250	402,187 (h)(i)

See Notes to Financial Statements.

Western Asset Diversified Income Fund 2024 Semi-Annual Report

Western Asset Diversified Income Fund

(Percentages shown based on Fund net assets)

Security				Shares	Value
Textiles, Apparel & Luxury Goods — 0.0%††
West Marine 1A Common Units				16,250	$44,688 (h)(i)

Total Consumer Discretionary					446,875
Real Estate — 0.0%††
Real Estate Management & Development — 0.0%††
China Aoyuan Group Ltd.				196,741	3,766 *(h)

Total Common Stocks (Cost — $3,949)					450,641
	Counterparty	Expiration Date	Contracts	Notional Amount†
Purchased Options — 0.0%††
OTC Purchased Options — 0.0%††
Credit default swaption to buy protection on Markit CDX.NA.IG.42 Index, Put @ 60.000bps, 100.000bps quarterly payments paid by the Fund, maturing on 6/20/29 (Cost — $88,920)	Goldman Sachs Group Inc.	11/20/24	31,200,000	31,200,000	84,285
Total Investments before Short-Term Investments (Cost — $1,183,294,772)					1,130,110,769
		Rate		Shares
Short-Term Investments — 3.7%
Western Asset Premier Institutional Government Reserves, Premium Shares (Cost — $29,552,490)		5.254%		29,552,490	29,552,490 (r)(s)
Total Investments — 144.9% (Cost — $1,212,847,262)					1,159,663,259
Liabilities in Excess of Other Assets — (44.9)%					(359,200,064 )
Total Net Assets — 100.0%					$800,463,195

See Notes to Financial Statements.

Western Asset Diversified Income Fund 2024 Semi-Annual Report

Schedule of investments (unaudited) (cont’d)

June 30, 2024

Western Asset Diversified Income Fund

†	Face amount/notional amount denominated in U.S. dollars, unless otherwise noted.
††	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 Trustees.
(b)	All or a portion of this security is pledged as collateral pursuant to the loan agreement (Note 5).
(c)	Payment-in-kind security for which the issuer has the option at each interest payment date of making interest payments in cash or additional securities.
(d)	Security has no maturity date. The date shown represents the next call date.
(e)	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.
(f)	Security is exempt from registration under Regulation S of the Securities Act of 1933. Regulation S applies to securities offerings that are made outside of the United States and do not involve direct selling efforts in the United States. This security has been deemed liquid pursuant to guidelines approved by the Board of Trustees.
(g)	All or a portion of this security is held by the counterparty as collateral for open reverse repurchase agreements.
(h)	Security is fair valued in accordance with procedures approved by the Board of Trustees (Note 1).
(i)	Security is valued using significant unobservable inputs (Note 1).
(j)	Securities traded on a when-issued or delayed delivery basis.
(k)	The maturity principal is currently in default as of June 30, 2024.
(l)	Collateralized mortgage obligations are secured by an underlying pool of mortgages or mortgage pass-through certificates that are structured to direct payments on underlying collateral to different series or classes of the obligations. The interest rate may change positively or inversely in relation to one or more interest rates, financial indices or other financial indicators and may be subject to an upper and/or lower limit.
(m)	Rate shown is the current yield based on income received over the trailing twelve months.
(n)	Interest rates disclosed represent the effective rates on senior loans. Ranges in interest rates are attributable to multiple contracts under the same loan.
(o)	Senior loans may be considered restricted in that the Fund ordinarily is contractually obligated to receive approval from the agent bank and/or borrower prior to the disposition of a senior loan.
(p)	All or a portion of this loan has not settled as of June 30, 2024. Interest rates are not effective until settlement date. Interest rates shown, if any, are for the settled portion of the loan.
(q)	The coupon payment on this security is currently in default as of June 30, 2024.
(r)	Rate shown is one-day yield as of the end of the reporting period.
(s)	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 June 30, 2024, the total market value of investments in Affiliated Companies was $29,552,490 and the cost was $29,552,490 (Note 8).

See Notes to Financial Statements.

Western Asset Diversified Income Fund 2024 Semi-Annual Report

Western Asset Diversified Income Fund

Abbreviation(s) used in this schedule:
bps	—	basis point spread (100 basis points = 1.00%)
BRL	—	Brazilian Real
CAD	—	Canadian Dollar
CAS	—	Connecticut Avenue Securities
CLO	—	Collateralized Loan Obligation
EUR	—	Euro
GBP	—	British Pound
IO	—	Interest Only
JMD	—	Jamaican Dollar
LIBOR	—	London Interbank Offered Rate
MXN	—	Mexican Peso
PIK	—	Payment-In-Kind
REMIC	—	Real Estate Mortgage Investment Conduit
SOFR	—	Secured Overnight Financing Rate
USD	—	United States Dollar
UYU	—	Uruguayan Peso

At June 30, 2024, the Fund had the following open reverse repurchase agreements:

Counterparty	Rate	Effective Date	Maturity Date	Face Amount of Reverse Repurchase Agreements	Asset Class of Collateral*	Collateral Value**
Goldman Sachs Group Inc.	6.000%	10/20/2023	TBD ***	$10,724,704	Sovereign Bonds Corporate Bonds & Notes	$13,771,123 1,953,825
				$10,724,704		$15,724,948

*	Refer to the Schedule of Investments for positions held at the counterparty as collateral for reverse repurchase agreements.
**	Including accrued interest.
***	TBD — To Be Determined; These reverse repurchase agreements have no maturity dates because they are renewed daily and can be terminated by either the Fund or the counterparty in accordance with the terms of the agreements. The rates for these agreements are variable. The rate disclosed is the rate as of June 30, 2024.

See Notes to Financial Statements.

Western Asset Diversified Income Fund 2024 Semi-Annual Report

Schedule of investments (unaudited) (cont’d)

June 30, 2024

Western Asset Diversified Income Fund

At June 30, 2024, the Fund had the following written options contracts:


OTC Written Options
Security	Counterparty	Expiration Date	Strike Price	Contracts	Notional Amount	Value
Credit default swaption to sell protection on Markit CDX.NA.IG.42 Index, Put, 100.000bps quarterly payments received by the Fund, maturing on 6/20/29 (Premiums received — $88,920)	Goldman Sachs Group Inc.	11/20/24	80.000 bps	62,400,000	$62,400,000 ‡	$(78,563 )

‡	In the event an option is exercised and a credit event occurs as defined under the terms of the swap agreement, the notional amount is the maximum potential amount that could be required to be paid as a seller of credit protection or received as a buyer of credit protection.

Abbreviation(s) used in this schedule:
bps	—	basis point spread (100 basis points = 1.00%)

At June 30, 2024, the Fund had the following open futures contracts:

	Number of Contracts	Expiration Date	Notional Amount	Market Value	Unrealized Appreciation (Depreciation)
Contracts to Buy:
3-Month SOFR	141	3/25	$34,059,821	$33,538,613	$(521,208 )
3-Month SONIA	103	9/24	30,720,117	30,873,407	153,290
3-Month SONIA	3	3/25	898,401	903,278	4,877
Euro-Bund	185	9/24	25,807,080	26,077,311	270,231
U.S. Treasury 10-Year Notes	1,048	9/24	114,397,278	115,263,630	866,352
U.S. Treasury Long-Term Bonds	165	9/24	19,308,161	19,521,563	213,402
U.S. Treasury Ultra 10-Year Notes	170	9/24	19,079,568	19,300,312	220,744
					1,207,688
Contracts to Sell:
U.S. Treasury 2-Year Notes	339	9/24	69,161,421	69,230,156	(68,735 )
U.S. Treasury 5-Year Notes	20	9/24	2,119,497	2,131,563	(12,066 )

See Notes to Financial Statements.

Western Asset Diversified Income Fund 2024 Semi-Annual Report

Western Asset Diversified Income Fund

	Number of Contracts	Expiration Date	Notional Amount	Market Value	Unrealized Appreciation (Depreciation)
Contracts to Sell continued
U.S. Treasury Ultra Long- Term Bonds	38	9/24	$4,708,669	$4,763,063	$(54,394 )
					(135,195 )
Net unrealized appreciation on open futures contracts					$1,072,493

Abbreviation(s) used in this table:
SOFR	—	Secured Overnight Financing Rate
SONIA	—	Sterling Overnight Index Average

At June 30, 2024, the Fund had the following open forward foreign currency contracts:

Currency Purchased		Currency Sold		Counterparty	Settlement Date	Unrealized Appreciation (Depreciation)
BRL	620,000	USD	115,319	Citibank N.A.	7/2/24	$(4,455 )
BRL	840,000	USD	158,286	Citibank N.A.	7/2/24	(8,084 )
BRL	1,690,000	USD	314,503	Citibank N.A.	7/2/24	(12,309 )
BRL	1,950,000	USD	380,321	Citibank N.A.	7/2/24	(31,636 )
USD	111,533	BRL	620,000	Citibank N.A.	7/2/24	669
USD	151,109	BRL	840,000	Citibank N.A.	7/2/24	906
USD	304,017	BRL	1,690,000	Citibank N.A.	7/2/24	1,823
USD	350,789	BRL	1,950,000	Citibank N.A.	7/2/24	2,104
BRL	4,537,938	USD	816,337	Goldman Sachs Group Inc.	7/2/24	(4,896 )
BRL	5,550,000	USD	1,060,334	Goldman Sachs Group Inc.	7/2/24	(67,923 )
BRL	10,417,062	USD	1,873,943	Goldman Sachs Group Inc.	7/2/24	(11,240 )
USD	842,496	BRL	4,537,938	Goldman Sachs Group Inc.	7/2/24	31,055
USD	998,399	BRL	5,550,000	Goldman Sachs Group Inc.	7/2/24	5,988
USD	1,908,761	BRL	10,417,062	Goldman Sachs Group Inc.	7/2/24	46,057
BRL	4,305,000	USD	818,254	Morgan Stanley & Co. Inc.	7/2/24	(48,466 )
USD	774,434	BRL	4,305,000	Morgan Stanley & Co. Inc.	7/2/24	4,645
CHF	710,000	USD	778,890	Bank of America N.A.	7/19/24	13,411
EUR	480,000	USD	511,905	Bank of America N.A.	7/19/24	2,672
EUR	680,000	USD	724,495	Bank of America N.A.	7/19/24	4,489
EUR	930,000	USD	993,778	Bank of America N.A.	7/19/24	3,215
EUR	940,000	USD	1,007,211	Bank of America N.A.	7/19/24	503
EUR	1,260,000	USD	1,345,259	Bank of America N.A.	7/19/24	5,506
MXN	10,290,000	USD	589,511	Bank of America N.A.	7/19/24	(28,909 )
MXN	11,830,000	USD	659,432	Bank of America N.A.	7/19/24	(14,930 )

See Notes to Financial Statements.

Western Asset Diversified Income Fund 2024 Semi-Annual Report

Schedule of investments (unaudited) (cont’d)

June 30, 2024

Western Asset Diversified Income Fund

Currency Purchased		Currency Sold		Counterparty	Settlement Date	Unrealized Appreciation (Depreciation)
MXN	18,060,000	USD	1,057,836	Bank of America N.A.	7/19/24	$(73,922 )
MXN	36,110,000	USD	2,112,783	Bank of America N.A.	7/19/24	(145,499 )
USD	691,223	CHF	620,000	Bank of America N.A.	7/19/24	(645 )
USD	710,000	CHF	646,402	Bank of America N.A.	7/19/24	(11,331 )
USD	710,000	CHF	647,069	Bank of America N.A.	7/19/24	(12,075 )
USD	387,249	EUR	360,000	Bank of America N.A.	7/19/24	1,317
USD	387,278	EUR	360,000	Bank of America N.A.	7/19/24	1,345
USD	387,802	EUR	360,000	Bank of America N.A.	7/19/24	1,869
USD	773,931	EUR	720,000	Bank of America N.A.	7/19/24	2,066
USD	775,098	EUR	720,000	Bank of America N.A.	7/19/24	3,232
USD	1,060,537	EUR	980,000	Bank of America N.A.	7/19/24	9,942
USD	10,801,062	EUR	10,107,600	Bank of America N.A.	7/19/24	(34,646 )
NOK	25,990,000	USD	2,369,364	BNP Paribas SA	7/19/24	66,207
USD	124,707	CAD	170,000	BNP Paribas SA	7/19/24	380
USD	2,011,056	CAD	2,740,000	BNP Paribas SA	7/19/24	7,212
USD	775,340	CHF	700,000	BNP Paribas SA	7/19/24	(5,802 )
USD	775,469	CHF	700,000	BNP Paribas SA	7/19/24	(5,673 )
USD	815,397	CHF	730,000	BNP Paribas SA	7/19/24	778
USD	27,531	JPY	4,116,000	BNP Paribas SA	7/19/24	1,864
USD	113,730	NOK	1,210,000	BNP Paribas SA	7/19/24	339
USD	195,813	NOK	2,090,000	BNP Paribas SA	7/19/24	(45 )
USD	244,355	NOK	2,600,000	BNP Paribas SA	7/19/24	704
USD	262,607	NOK	2,800,000	BNP Paribas SA	7/19/24	214
USD	367,091	NOK	3,910,000	BNP Paribas SA	7/19/24	678
GBP	300,000	USD	371,481	Citibank N.A.	7/19/24	7,797
GBP	300,000	USD	372,614	Citibank N.A.	7/19/24	6,665
GBP	3,243,000	USD	4,075,579	Citibank N.A.	7/19/24	24,419
USD	45,024	AUD	68,900	Citibank N.A.	7/19/24	(966 )
USD	675,450	GBP	540,000	Citibank N.A.	7/19/24	(7,251 )
USD	676,345	GBP	540,000	Citibank N.A.	7/19/24	(6,356 )
USD	1,349,502	GBP	1,080,000	Citibank N.A.	7/19/24	(15,899 )
USD	19,701,473	GBP	15,704,416	Citibank N.A.	7/19/24	(153,004 )
CHF	680,000	USD	745,733	Goldman Sachs Group Inc.	7/19/24	13,091
CHF	680,000	USD	748,874	Goldman Sachs Group Inc.	7/19/24	9,950
USD	830,550	CAD	1,130,000	Goldman Sachs Group Inc.	7/19/24	4,147
USD	380,109	CHF	340,000	Goldman Sachs Group Inc.	7/19/24	697
USD	457,183	CHF	410,000	Goldman Sachs Group Inc.	7/19/24	(343 )
USD	746,730	CHF	680,000	Goldman Sachs Group Inc.	7/19/24	(12,093 )
USD	840,140	CHF	760,000	Goldman Sachs Group Inc.	7/19/24	(7,957 )

See Notes to Financial Statements.

Western Asset Diversified Income Fund 2024 Semi-Annual Report

Western Asset Diversified Income Fund

Currency Purchased		Currency Sold		Counterparty	Settlement Date	Unrealized Appreciation (Depreciation)
USD	1,587,098	CHF	1,420,000	Goldman Sachs Group Inc.	7/19/24	$2,496
USD	1,664,196	CHF	1,490,000	Goldman Sachs Group Inc.	7/19/24	1,480
USD	991,236	GBP	780,000	Goldman Sachs Group Inc.	7/19/24	5,112
USD	4,231,595	MXN	76,503,000	Goldman Sachs Group Inc.	7/19/24	63,687
USD	182,881	NOK	1,960,000	Goldman Sachs Group Inc.	7/19/24	(795 )
USD	244,029	NOK	2,610,000	Goldman Sachs Group Inc.	7/19/24	(559 )
USD	815,459	NOK	8,810,000	Goldman Sachs Group Inc.	7/19/24	(10,142 )
MXN	2,670,000	USD	158,500	JPMorgan Chase & Co.	7/19/24	(13,037 )
MXN	3,990,000	USD	222,197	JPMorgan Chase & Co.	7/19/24	(4,821 )
MXN	12,180,000	USD	687,651	JPMorgan Chase & Co.	7/19/24	(24,081 )
MXN	15,530,000	USD	910,622	JPMorgan Chase & Co.	7/19/24	(64,542 )
MXN	27,450,000	USD	1,627,135	JPMorgan Chase & Co.	7/19/24	(131,651 )
MXN	62,130,000	USD	3,636,977	JPMorgan Chase & Co.	7/19/24	(252,114 )
USD	183,752	MXN	3,067,184	JPMorgan Chase & Co.	7/19/24	16,651
USD	421,819	MXN	7,010,000	JPMorgan Chase & Co.	7/19/24	39,912
BRL	14,712,456	USD	2,853,408	Morgan Stanley & Co. Inc.	7/19/24	(228,144 )
BRL	29,330,000	USD	5,741,074	Morgan Stanley & Co. Inc.	7/19/24	(507,483 )
CAD	1,380,000	USD	1,001,276	Morgan Stanley & Co. Inc.	7/19/24	7,959
CAD	1,380,000	USD	1,002,722	Morgan Stanley & Co. Inc.	7/19/24	6,514
CAD	1,460,000	USD	1,059,933	Morgan Stanley & Co. Inc.	7/19/24	7,809
MXN	5,390,000	USD	308,090	Morgan Stanley & Co. Inc.	7/19/24	(14,441 )
MXN	31,940,000	USD	1,869,824	Morgan Stanley & Co. Inc.	7/19/24	(129,723 )
USD	7,350	CAD	10,000	Morgan Stanley & Co. Inc.	7/19/24	37
USD	249,907	CAD	340,000	Morgan Stanley & Co. Inc.	7/19/24	1,255
USD	2,405,444	CAD	3,289,012	Morgan Stanley & Co. Inc.	7/19/24	91
BRL	10,417,062	USD	1,902,330	Goldman Sachs Group Inc.	8/2/24	(46,625 )
Net unrealized depreciation on open forward foreign currency contracts						$(1,713,554 )

Abbreviation(s) used in this table:
AUD	—	Australian Dollar
BRL	—	Brazilian Real
CAD	—	Canadian Dollar
CHF	—	Swiss Franc
EUR	—	Euro
GBP	—	British Pound
JPY	—	Japanese Yen
MXN	—	Mexican Peso
NOK	—	Norwegian Krone
USD	—	United States Dollar

See Notes to Financial Statements.

Western Asset Diversified Income Fund 2024 Semi-Annual Report

Schedule of investments (unaudited) (cont’d)

June 30, 2024

Western Asset Diversified Income Fund

At June 30, 2024, the Fund had the following open swap contracts:

OTC INTEREST RATE SWAPS
Swap Counterparty	Notional Amount	Termination Date	Payments Made by the Fund†	Payments Received by the Fund†	Market Value	Upfront Premiums Paid (Received)	Unrealized Depreciation
JPMorgan Chase & Co.	63,990,000BRL	1/2/29	BRL-CDI*	10.230%*	$(658,253)	—	$(658,253)

CENTRALLY CLEARED CREDIT DEFAULT SWAPS ON CORPORATE ISSUES — SELL PROTECTION1
Reference Entity	Notional Amount2	Termination Date	Implied Credit Spread at June 30, 20243	Periodic Payments Received by the Fund†	Market Value	Upfront Premiums Paid (Received)	Unrealized Appreciation (Depreciation)
Ford Motor Co., 4.346%, due 12/8/26	$2,260,000	6/20/26	0.570%	5.000% quarterly	$189,056	$129,243	$59,813
Ford Motor Co., 4.346%, due 12/8/26	2,060,000	6/20/29	1.567%	5.000% quarterly	306,641	300,112	6,529
Nabors Industries Inc., 5.750%, due 2/1/25	2,130,000	6/20/29	5.283%	1.000% quarterly	(354,700)	(352,005)	(2,695)
Total	$6,450,000				$140,997	$77,350	$63,647

CENTRALLY CLEARED CREDIT DEFAULT SWAPS ON CORPORATE ISSUES — BUY PROTECTION4
Reference Entity	Notional Amount2	Termination Date	Implied Credit Spread at June 30, 20243	Periodic Payments Made by the Fund†	Market Value	Upfront Premiums Paid (Received)	Unrealized Appreciation (Depreciation)
General Motors Co., 4.200%, due 10/1/27	$2,260,000	6/20/26	0.321%	5.000% quarterly	$(200,182)	$(173,838)	$(26,344)
General Motors Co., 4.200%, due 10/1/27	2,060,000	6/20/29	1.163%	5.000% quarterly	(347,260)	(348,403)	1,143
Transocean Inc., 8.000%, due 2/1/27	2,130,000	6/20/29	3.871%	1.000% quarterly	252,530	251,165	1,365
Total	$6,450,000				$(294,912)	$(271,076)	$(23,836)

See Notes to Financial Statements.

Western Asset Diversified Income Fund 2024 Semi-Annual Report

Western Asset Diversified Income Fund

OTC TOTAL RETURN SWAPS
Swap Counterparty	Notional Amount	Termination Date	Periodic Payments Made by the Fund†	Periodic Payments Received by the Fund‡	Market Value	Upfront Premiums Paid (Received)	Unrealized Depreciation
JPMorgan Chase & Co.	$3,936,000	8/1/24	Daily SOFR Compound + 1.100% quarterly	JPEIFNTR quarterly^	$(67,130)	—	$(67,130)

1	If the Fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation or underlying securities comprising the referenced index or (ii) pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index.
2	The maximum potential amount the Fund could be required to pay as a seller of credit protection or receive as a buyer of credit protection if a credit event occurs as defined under the terms of that particular swap agreement.
3	Implied credit spreads, utilized in determining the market value of credit default swap agreements on corporate or sovereign issues as of period end, serve as an indicator of the current status of the payment/performance risk and represent the likelihood or risk of default for the credit derivative. The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement. A credit spread identified as “Defaulted” indicates a credit event has occurred for the referenced entity or obligation.
4	If the Fund is a buyer of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) receive from the seller of protection an amount equal to the notional amount of the swap and deliver the referenced obligation or the underlying securities comprising the referenced index or (ii) receive a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or the underlying securities comprising the referenced index.
†	Percentage shown is an annual percentage rate.
*	One time payment made at termination date.
‡	Periodic payments made/received by the Fund are based on the total return of the referenced entity.
^	Custom emerging markets debt basket is comprised of 32 bonds in the Sovereign Frontier sector.

Reference rate(s) and their value(s) as of period end used in this table:

Reference Index	Reference Rate
BRL-CDI	10.400%
Daily SOFR Compound	5.330%

See Notes to Financial Statements.

Western Asset Diversified Income Fund 2024 Semi-Annual Report

Schedule of investments (unaudited) (cont’d)

June 30, 2024

Western Asset Diversified Income Fund

Abbreviation(s) used in this table:
BRL	—	Brazilian Real
BRL-CDI	—	Brazilian Cetip InterBank Deposit Rate
JPEIFNTR	—	Western Asset Management Emerging Markets Frontier Custom Basket
SOFR	—	Secured Overnight Financing Rate

See Notes to Financial Statements.

Western Asset Diversified Income Fund 2024 Semi-Annual Report

Statement of assets and liabilities (unaudited)

June 30, 2024

Assets:
Investments in unaffiliated securities, at value (Cost — $1,183,294,772)	$1,130,110,769
Investments in affiliated securities, at value (Cost — $29,552,490)	29,552,490
Foreign currency, at value (Cost — $9,158,382)	8,172,385
Cash	587,721
Interest receivable	18,881,866
Deposits with brokers for centrally cleared swap contracts	4,231,800
Deposits with brokers for open futures contracts and exchange-traded options	4,010,768
Receivable for securities sold	1,445,640
Deposits with brokers for OTC derivatives	1,350,000
Foreign currency collateral for open futures contracts and exchange-traded options, at value (Cost — $467,675)	472,433
Unrealized appreciation on forward foreign currency contracts	440,959
Dividends receivable from affiliated investments	99,457
Principal paydown receivable	45,982
Receivable from brokers — net variation margin on centrally cleared swap contracts	3,061
Other receivables	54,499
Prepaid expenses	14,328
Total Assets	1,199,474,158
Liabilities:
Loan payable (Note 5)	358,000,000
Payable for securities purchased	15,087,779
Payable for open reverse repurchase agreements (Note 3)	10,724,704
Distributions payable	7,690,549
Interest expense payable	2,341,267
Unrealized depreciation on forward foreign currency contracts	2,154,513
Investment management fee payable	1,056,965
OTC swaps, at value (paid — $0)	725,383
Payable to brokers — net variation margin on open futures contracts	534,860
Deposits from brokers for open reverse repurchase agreements	330,000
Written options, at value (premiums received — $88,920)	78,563
Trustees’ fees payable	50,574
Payable for open OTC swap contracts	42,328
Accrued expenses	193,478
Total Liabilities	399,010,963
Total Net Assets	$800,463,195
Net Assets:
Par value ($0.001 par value; 51,788,210 shares issued and outstanding; Unlimited shares authorized)	$51,788
Paid-in capital in excess of par value	1,034,911,002
Total distributable earnings (loss)	(234,499,595 )
Total Net Assets	$800,463,195
Shares Outstanding	51,788,210
Net Asset Value	$15.46

See Notes to Financial Statements.

Western Asset Diversified Income Fund 2024 Semi-Annual Report

Statement of operations (unaudited)

For the Six Months Ended June 30, 2024

Investment Income:
Interest	$63,765,074
Dividends from affiliated investments	663,411
Dividends from unaffiliated investments	164,143
Less: Foreign taxes withheld	(8,510 )
Total Investment Income	64,584,118
Expenses:
Interest expense (Notes 3 and 5)	11,803,413
Investment management fee (Note 2)	6,430,465
Legal fees	142,766
Trustees’ fees	132,325
Fund accounting fees	48,331
Audit and tax fees	38,789
Transfer agent fees	36,356
Shareholder reports	14,359
Stock exchange listing fees	13,199
Insurance	4,540
Custody fees	729
Miscellaneous expenses	6,748
Total Expenses	18,672,020
Less: Fee waivers and/or expense reimbursements (Note 2)	(12,731 )
Net Expenses	18,659,289
Net Investment Income	45,924,829
Realized and Unrealized Gain (Loss) on Investments, Futures Contracts, Written Options, Swap Contracts, Forward Foreign Currency Contracts and Foreign Currency Transactions (Notes 1, 3 and 4):
Net Realized Gain (Loss) From:
Investment transactions in unaffiliated securities	(8,064,588 )
Futures contracts	733,152
Written options	197,480
Swap contracts	1,742,799
Forward foreign currency contracts	330,459
Foreign currency transactions	6,967
Net Realized Loss	(5,053,731 )
Change in Net Unrealized Appreciation (Depreciation) From:
Investments in unaffiliated securities	12,913,455
Futures contracts	(10,550,677 )
Written options	121,375
Swap contracts	(1,427,713 )
Forward foreign currency contracts	(739,303 )
Foreign currencies	(635,958 )
Change in Net Unrealized Appreciation (Depreciation)	(318,821 )
Net Loss on Investments, Futures Contracts, Written Options, Swap Contracts, Forward Foreign Currency Contracts and Foreign Currency Transactions	(5,372,552 )
Increase in Net Assets From Operations	$40,552,277

See Notes to Financial Statements.

Western Asset Diversified Income Fund 2024 Semi-Annual Report

Statements of changes in net assets

For the Six Months Ended June 30, 2024 (unaudited) and the Year Ended December 31, 2023	2024	2023
Operations:
Net investment income	$45,924,829	$89,667,410
Net realized loss	(5,053,731 )	(92,528,298 )
Change in net unrealized appreciation (depreciation)	(318,821 )	127,696,589
Increase in Net Assets From Operations	40,552,277	124,835,701
Distributions to Shareholders From (Note 1):
Total distributable earnings	(44,796,802 )	(83,586,171 )
Decrease in Net Assets From Distributions to Shareholders	(44,796,802 )	(83,586,171 )
Increase (Decrease) in Net Assets	(4,244,525 )	41,249,530
Net Assets:
Beginning of period	804,707,720	763,458,190
End of period	$800,463,195	$804,707,720

See Notes to Financial Statements.

Western Asset Diversified Income Fund 2024 Semi-Annual Report

Statement of cash flows (unaudited)

For the Six Months Ended June 30, 2024

Increase (Decrease) in Cash:
Cash Flows from Operating Activities:
Net increase in net assets resulting from operations	$40,552,277
Adjustments to reconcile net increase in net assets resulting from operations to net cash provided (used) by operating activities:
Purchases of portfolio securities	(237,798,378 )
Sales of portfolio securities	221,697,842
Net purchases, sales and maturities of short-term investments	14,100,392
Payment-in-kind	(260,973 )
Net inflation adjustment	(14,893 )
Net amortization of premium (accretion of discount)	(8,420,042 )
Decrease in receivable for securities sold	6,444,962
Increase in interest receivable	(725,945 )
Decrease in receivable from brokers — net variation margin on centrally cleared swap contracts	115,463
Increase in prepaid expenses	(8,803 )
Increase in other receivables	(54,499 )
Decrease in dividends receivable from affiliated investments	106,758
Increase in principal paydown receivable	(45,982 )
Increase in deposits from brokers for open reverse repurchase agreements	330,000
Decrease in deposits from brokers for OTC derivatives	(230,000 )
Increase in payable for securities purchased	5,914,045
Decrease in investment management fee payable	(25,034 )
Increase in Trustees’ fees payable	1,202
Increase in interest expense payable	240,628
Decrease in accrued expenses	(720,065 )
Decrease in premiums received from written options	(77,981 )
Increase in payable to brokers — net variation margin on futures contracts	167,501
Increase in payable for open OTC swap contracts	42,328
Net realized loss on investments	8,064,588
Change in net unrealized appreciation (depreciation) of investments, written options, OTC swap contracts and forward foreign currency contracts	(11,519,716 )
Net Cash Provided in Operating Activities*	37,875,675
Cash Flows from Financing Activities:
Distributions paid on common stock (net of distributions payable)	(37,106,253 )
Decrease in payable for open reverse repurchase agreements	(1,795,038 )
Net Cash Used by Financing Activities	(38,901,291 )
Net Decrease in Cash and Restricted Cash	(1,025,616 )
Cash and restricted cash at beginning of period	19,850,723
Cash and restricted cash at end of period	$18,825,107

*	Included in operating expenses is $11,562,785 paid for interest on borrowings.

See Notes to Financial Statements.

Western Asset Diversified Income Fund 2024 Semi-Annual Report

The following table provides a reconciliation of cash (including foreign currency) and restricted cash reported within the Statement of Assets and Liabilities that sums to the total of such amounts shown on the Statement of

Cash Flows.

	June 30, 2024
Cash	$8,760,106
Restricted cash	10,065,001
Total cash and restricted cash shown in the Statement of Cash Flows	$18,825,107

Restricted cash consists of cash that has been segregated to cover the Fund’s collateral or margin obligations under derivative contracts and for reverse repurchase agreements. It is separately reported on the Statement of Assets and Liabilities as Deposits with brokers.

See Notes to Financial Statements.

Western Asset Diversified Income Fund 2024 Semi-Annual Report

Financial highlights

For a share of capital stock outstanding throughout each year ended December 31, unless otherwise noted:
	20241,2	20231	20221	20211,3
Net asset value, beginning of period	$15.54	$14.74	$19.65	$20.00
Income (loss) from operations:
Net investment income	0.89	1.73	1.59	0.58
Net realized and unrealized gain (loss)	(0.10 )	0.68	(5.05 )	(0.34 )
Total income (loss) from operations	0.79	2.41	(3.46)	0.24
Less distributions from:
Net investment income	(0.87 )4	(1.61 )	(1.45 )	(0.59 )
Total distributions	(0.87 )	(1.61 )	(1.45 )	(0.59 )
Net asset value, end of period	$15.46	$15.54	$14.74	$19.65
Market price, end of period	$14.41	$14.10	$12.70	$18.31
Total return, based on NAV5,6	5.12 %	17.32 %	(18.07 )%	1.19 %
Total return, based on Market Price7	8.50 %	24.97 %	(23.44 )%	(5.62 )%
Net assets, end of period (millions)	$800	$805	$763	$1,018
Ratios to average net assets:
Gross expenses	4.66 %8	4.79 %	2.98 %	1.82 %8
Net expenses9,10	4.66 8	4.79	2.98	1.82 8
Net investment income	11.47 8	11.46	9.48	5.57 8
Portfolio turnover rate	20 %	35 %	42 %	19 %
Supplemental data:
Loan Outstanding, End of Period (000s)	$358,000	$358,000	$358,000	$370,000
Asset Coverage Ratio for Loan Outstanding11	324 %	325 %	313 %	375 %
Asset Coverage, per $1,000 Principal Amount of Loan Outstanding11	$3,236	$3,248	$3,133	$3,751
Weighted Average Loan (000s)	$358,000	$358,000	$370,288	$314,938
Weighted Average Interest Rate on Loan	6.32 %	6.11 %	2.71 %	1.13 %

See Notes to Financial Statements.

Western Asset Diversified Income Fund 2024 Semi-Annual Report

1	Per share amounts have been calculated using the average shares method.
2	For the six months ended June 30, 2024 (unaudited).
3	For the period June 25, 2021 (commencement of operations) to December 31, 2021.
4	The actual source of the Fund’s current fiscal year distributions may be from net investment income, realized capital gains, return of capital or a combination thereof. Shareholders will be informed of the tax characteristics of the distributions after the close of the fiscal year.
5	Performance figures may reflect compensating balance arrangements, fee waivers and/or expense reimbursements. In the absence of compensating balance arrangements, fee waivers and/or expense reimbursements, the total return would have been lower. Past performance is no guarantee of future results. Total returns for periods of less than one year are not annualized.
6	The total return calculation assumes that distributions are reinvested at NAV. Past performance is no guarantee of future results. Total returns for periods of less than one year are not annualized.
7	The total return calculation assumes that distributions are reinvested in accordance with the Fund’s dividend reinvestment plan. Past performance is no guarantee of future results. Total returns for periods of less than one year are not annualized.
8	Annualized.
9	Reflects fee waivers and/or expense reimbursements.
10	The manager has agreed to waive the Fund’s management fee to an extent sufficient to offset the net management fee payable in connection with any investment in an affiliated money market fund.
11	Represents value of net assets plus the loan outstanding at the end of the period divided by the loan outstanding at the end of the period.

See Notes to Financial Statements.

Western Asset Diversified Income Fund 2024 Semi-Annual Report

Notes to financial statements (unaudited)

1. Organization and significant accounting policies

Western Asset Diversified Income Fund (the “Fund”) was organized in Maryland on July 27, 2020 and is registered as a diversified, closed-end management investment company under the Investment Company Act of 1940, as amended (the “1940 Act”). The Board of Trustees has authorized the issuance of an unlimited number of common shares of beneficial interest, $0.001 par value per share (the “Common Shares”). The Fund’s primary investment objective is to seek high current income. As a secondary investment objective, the Fund will seek capital appreciation. The Fund seeks to achieve its investment objectives by investing, under normal market conditions, across fixed income sectors and securities in seeking to deliver a well-diversified portfolio. The Fund expects to dissolve on or about June 24, 2033 (the “Dissolution Date”); provided that the Board of Trustees may, without shareholder approval, extend the Dissolution Date for up to two years. As of a date within the 6-18 months preceding the Dissolution Date, the Board of Trustees may cause the Fund to conduct a tender offer to all shareholders to purchase 100% of the then outstanding Common Shares of the Fund at a price equal to the NAV per Common Share on the expiration date of the tender offer (the “Eligible Tender Offer”). The Board of Trustees has established that the Fund must have at least $200 million of aggregate net assets immediately following the completion of an Eligible Tender Offer to ensure the continued viability of the Fund (the “Dissolution Threshold”). In an Eligible Tender Offer, the Fund will offer to purchase all Common Shares held by each Common Shareholder; provided that if the payment for properly tendered Common Shares would result in the Fund having aggregate net assets below the Dissolution Threshold, the Eligible Tender Offer will be canceled, no Common Shares will be repurchased and the Fund will dissolve as scheduled. If an Eligible Tender Offer is conducted and the payment for properly tendered Common Shares would result in the Fund having aggregate net assets greater than or equal to the Dissolution Threshold, all Common Shares properly tendered and not withdrawn will be purchased by the Fund pursuant to the terms of the Eligible Tender Offer. Following the completion of an Eligible Tender Offer, the Board may eliminate the Dissolution Date without shareholder approval and provide for the Fund’s perpetual existence. Upon its dissolution, it is anticipated that the Fund will have distributed substantially all of its net assets to shareholders, although securities for which no market exists or securities trading at depressed prices, if any, may be placed in a liquidating trust.

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

Western Asset Diversified Income Fund 2024 Semi-Annual Report

estimates could cause actual results to differ. Subsequent events have been evaluated through the date the financial statements were issued.

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

Pursuant to policies adopted by the Board of Trustees, the Fund’s manager has been designated as the valuation designee and is responsible for the oversight of the daily valuation process. The Fund’s manager 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 manager and the Board of Trustees. When determining the reliability of third party pricing information for investments owned by the Fund, the Valuation Committee, among other things, conducts due diligence reviews of pricing vendors, monitors the daily change in prices and reviews transactions among market participants.

The Valuation Committee will consider pricing methodologies it deems relevant and appropriate when making fair value determinations. Examples of possible methodologies include, but are not limited to, multiple of earnings; discount from market of a similar freely traded security; discounted cash-flow analysis; book value or a multiple thereof; risk

Western Asset Diversified Income Fund 2024 Semi-Annual Report

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

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

For each portfolio security that has been fair valued pursuant to the policies adopted by the Board of Trustees, the fair value price is compared against the last available and next available market quotations. The Valuation Committee reviews the results of such back testing monthly and fair valuation occurrences are reported to the Board of Trustees quarterly.

The Fund uses valuation techniques to measure fair value that are consistent with the market approach and/or income approach, depending on the type of security and the particular circumstance. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable securities. The income approach uses valuation techniques to discount estimated future cash flows to present value.

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.

Western Asset Diversified Income Fund 2024 Semi-Annual Report

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:
Industrials	—	$82,038,134	$4,805,934	$86,844,068
Information Technology	—	29,917,654	3,980,000	33,897,654
Other Corporate Bonds & Notes	—	401,258,299	—	401,258,299
Collateralized Mortgage Obligations	—	224,215,052	—	224,215,052
Asset-Backed Securities	—	185,108,397	—	185,108,397
Senior Loans:
Health Care	—	7,758,517	78,347	7,836,864
Other Senior Loans	—	120,734,871	—	120,734,871
Sovereign Bonds	—	50,689,688	—	50,689,688
Convertible Bonds & Notes	—	9,239,671	—	9,239,671
Convertible Preferred Stocks	—	9,167,642	—	9,167,642
Non-U.S. Treasury Inflation Protected Securities	—	583,637	—	583,637
Common Stocks:
Consumer Discretionary	—	—	446,875	446,875
Real Estate	—	3,766	—	3,766
Purchased Options	—	84,285	—	84,285
Total Long-Term Investments	—	1,120,799,613	9,311,156	1,130,110,769
Short-Term Investments†	$29,552,490	—	—	29,552,490
Total Investments	$29,552,490	$1,120,799,613	$9,311,156	$1,159,663,259

Western Asset Diversified Income Fund 2024 Semi-Annual Report

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

ASSETS (cont’d)
Description	Quoted Prices (Level 1)	Other Significant Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	Total
Other Financial Instruments:
Futures Contracts††	$1,728,896	—	—	$1,728,896
Forward Foreign Currency Contracts††	—	$440,959	—	440,959
Centrally Cleared Credit Default Swaps on Corporate Issues — Sell Protection††	—	66,342	—	66,342
Centrally Cleared Credit Default Swaps on Corporate Issues — Buy Protection††	—	2,508	—	2,508
Total Other Financial Instruments	$1,728,896	$509,809	—	$2,238,705
Total	$31,281,386	$1,121,309,422	$9,311,156	$1,161,901,964
LIABILITIES
Description	Quoted Prices (Level 1)	Other Significant Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	Total
Other Financial Instruments:
Written Options	—	$78,563	—	$78,563
Futures Contracts††	$656,403	—	—	656,403
Forward Foreign Currency Contracts††	—	2,154,513	—	2,154,513
OTC Interest Rate Swaps	—	658,253	—	658,253
Centrally Cleared Credit Default Swaps on Corporate Issues — Sell Protection††	—	2,695	—	2,695
Centrally Cleared Credit Default Swaps on Corporate Issues — Buy Protection††	—	26,344	—	26,344
OTC Total Return Swaps	—	67,130	—	67,130
Total	$656,403	$2,987,498	—	$3,643,901

†	See Schedule of Investments for additional detailed categorizations.
††	Reflects the unrealized appreciation (depreciation) of the instruments.

Western Asset Diversified Income Fund 2024 Semi-Annual Report

The following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining fair value:

Investments in Securities	Balance as of December 31, 2023	Accrued premiums/ discounts	Realized gain (loss)1	Change in unrealized appreciation (depreciation)2	Purchases
Corporate Bonds & Notes:
Energy	$4,950,000	$7,199	$1,730	$292,514	—
Industrials	4,884,925	—	—	46,009	—
Information Technology	—	—	—	(4,396)	$3,984,396
Collateralized Mortgage Obligations	8,499,714	541	123	(378)	—
Senior Loans:
Health Care	—	—	—	(313,390)	391,737
Materials	4,763,566	5,654	127	134,061	—
Convertible Preferred Stocks:
Energy	8,856,703	—	1,097,352	3,141	—
Common Stocks:
Consumer Discretionary	528,125	—	—	(81,250)	—
Total	$32,483,033	$13,394	$1,099,332	$76,311	$4,376,133

Investments in Securities (cont’d)	Sales	Transfers into Level 3	Transfers out of Level 33	Balance as of June 30, 2024	Net change in unrealized appreciation (depreciation) for investments in securities still held at June 30, 20242
Corporate Bonds & Notes:
Energy	$(93,798)	—	$(5,157,645)	—	—
Industrials	(125,000)	—	—	$4,805,934	$46,009
Information Technology	—	—	—	3,980,000	(4,396)
Collateralized Mortgage Obligations	(8,500,000)	—	—	—	—
Senior Loans:
Health Care	—	—	—	78,347	(313,390)
Materials	(25,023)	—	(4,878,385)	—	—

Western Asset Diversified Income Fund 2024 Semi-Annual Report

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

Investments in Securities (cont’d)	Sales	Transfers into Level 3	Transfers out of Level 33	Balance as of June 30, 2024	Net change in unrealized appreciation (depreciation) for investments in securities still held at June 30, 20242
Convertible Preferred Stocks:
Energy	$(9,957,196)	—	—	—	—
Common Stocks:
Consumer Discretionary	—	—	—	$446,875	$(81,250)
Total	$(18,701,017)	—	$(10,036,030)	$9,311,156	$(353,027)

1	This amount is included in net realized gain (loss) from investment transactions in the accompanying Statement of Operations.
2	This amount is included in the change in net unrealized appreciation (depreciation) in the accompanying Statement of Operations. Change in unrealized appreciation (depreciation) includes net unrealized appreciation (depreciation) resulting from changes in investment values during the reporting period and the reversal of previously recorded unrealized appreciation (depreciation) when gains or losses are realized.
3	Transferred out of Level 3 as a result of the availability of a quoted price in an active market for an identical investment or the availability of other significant observable inputs.

(b) Purchased options. The Fund may purchase option contracts generally to gain or reduce exposure to certain types of investments or market factors or as a means of attempting to enhance returns. When the Fund purchases an option, an amount equal to the premium paid by the Fund is recorded as an investment on the Statement of Assets and Liabilities, the value of which is marked-to-market to reflect the current market value of the option purchased. If the purchased option expires, the Fund realizes a loss equal to the amount of premium paid. When an instrument is purchased or sold through the exercise of an option, the related premium paid is added to the basis of the instrument acquired or deducted from the proceeds of the instrument sold. The risk associated with purchasing put and call options is limited to the premium paid.

(c) Written options. The Fund may write option contracts generally to gain or reduce exposure to certain types of investments or market factors or as a means of attempting to enhance returns. When the Fund writes an option, an amount equal to the premium received by the Fund is recorded as a liability, the value of which is marked-to-market daily to reflect the current market value of the option written. If the option expires, the premium received is recorded as a realized gain. When a written call option is exercised, the difference between the premium received plus the option exercise price and the Fund’s basis in the underlying security (in the case of a covered written call option), or the cost to purchase the underlying security (in the case of an uncovered written call option), including

Western Asset Diversified Income Fund 2024 Semi-Annual Report

brokerage commission, is recognized as a realized gain or loss. When a written put option is exercised, the amount of the premium received is subtracted from the cost of the security purchased by the Fund from the exercise of the written put option to form the Fund’s basis in the underlying security purchased. The writer or buyer of an option traded on an exchange can liquidate the position before the exercise of the option by entering into a closing transaction. The cost of a closing transaction is deducted from the original premium received resulting in a realized gain or loss to the Fund.

The risk in writing a covered call option is that the Fund may forego the opportunity of profit if the market price of the underlying security increases and the option is exercised. The risk in writing a put option is that the Fund may incur a loss if the market price of the underlying security decreases and the option is exercised. The risk in writing an uncovered call option is that the Fund is exposed to the risk of loss if the market price of the underlying security increases. In addition, there is the risk that the Fund may not be able to enter into a closing transaction because of an illiquid secondary market.

(d) 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.

(e) Forward foreign currency contracts. The Fund enters into a forward foreign currency contract to hedge exposure of bond positions or in an attempt to increase the Fund’s return. A forward foreign currency contract is an agreement between two parties to buy and sell a currency at a set price with delivery and settlement at a future date. The contract is marked-to-market daily and the change in value is recorded by the Fund as an unrealized gain or loss. When a forward foreign currency contract is closed, through either delivery or offset by entering into another forward foreign currency contract, the Fund recognizes a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value of the contract at the time it is closed.

Western Asset Diversified Income Fund 2024 Semi-Annual Report

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

Non-deliverable forward foreign currency exchange contracts are settled with the counterparty in cash without the delivery of foreign currency.

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

(f) Swap agreements. The Fund invests in swaps for the purpose of managing its exposure to interest rate, credit or market risk, or for other purposes, including to increase the Fund’s return. The use of swaps involves risks that are different from those associated with other portfolio transactions. Swap agreements are privately negotiated in the over-the-counter market and may be entered into as a bilateral contract (“OTC Swaps”) or centrally cleared (“Centrally Cleared Swaps”). Unlike Centrally Cleared Swaps, the Fund has credit exposure to the counterparties of OTC Swaps.

In a Centrally Cleared Swap, immediately following execution of the swap, the swap agreement is submitted to a clearinghouse or central counterparty (the “CCP”) and the CCP becomes the ultimate counterparty of the swap agreement. The Fund is required to interface with the CCP through a broker, acting in an agency capacity. All payments are settled with the CCP through the broker. Upon entering into a Centrally Cleared Swap, the Fund is required to deposit initial margin with the broker in the form of cash or securities.

Swap contracts are marked-to-market daily and changes in value are recorded as unrealized appreciation (depreciation). The daily change in valuation of Centrally Cleared Swaps, if any, is recorded as a net receivable or payable for variation margin on the Statement of Assets and Liabilities. Gains or losses are realized upon termination of the swap agreement. Collateral, in the form of restricted cash or securities, may be required to be held in segregated accounts with the Fund’s custodian in compliance with the terms of the swap contracts. Securities posted as collateral for swap contracts are identified in the Schedule of Investments and restricted cash, if any, is identified on the Statement of Assets and Liabilities. Risks may exceed amounts recorded in the Statement of Assets and Liabilities. These risks include changes in the returns of the underlying instruments, failure of the counterparties to perform under the contracts’ terms, and the possible lack of liquidity with respect to the swap agreements.

OTC Swap payments received or made at the beginning of the measurement period are reflected as a premium or deposit, respectively, on the Statement of Assets and Liabilities. These upfront payments are amortized over the life of the swap and are recognized as realized gain or loss in the Statement of Operations. Net periodic payments received or paid by the Fund are recognized as a realized gain or loss in the Statement of Operations.

Western Asset Diversified Income Fund 2024 Semi-Annual Report

The Fund’s maximum exposure in the event of a defined credit event on a credit default swap to sell protection is the notional amount. As of June 30, 2024, the total notional value of all credit default swaps to sell protection was $6,450,000. This amount would be offset by the value of the swap’s reference entity, upfront premiums received on the swap and any amounts received from the settlement of a credit default swap where the Fund bought protection for the same referenced security/entity.

For average notional amounts of swaps held during the six months ended June 30, 2024, see Note 4.

Credit default swaps

The Fund enters into credit default swap (“CDS”) contracts for investment purposes, to manage its credit risk or to add leverage. CDS agreements involve one party making a stream of payments to another party in exchange for the right to receive a specified return in the event of a default by a third party, typically corporate or sovereign issuers, on a specified obligation, or in the event of a write-down, principal shortfall, interest shortfall or default of all or part of the referenced entities comprising a credit index. The Fund may use a CDS to provide protection against defaults of the issuers (i.e., to reduce risk where the Fund has exposure to an issuer) or to take an active long or short position with respect to the likelihood of a particular issuer’s default. As a seller of protection, the Fund generally receives an upfront payment or a stream of payments throughout the term of the swap provided that there is no credit event. If the Fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the maximum potential amount of future payments (undiscounted) that the Fund could be required to make under a CDS agreement would be an amount equal to the notional amount of the agreement. These amounts of potential payments will be partially offset by any recovery of values from the respective referenced obligations. As a seller of protection, the Fund effectively adds leverage to its portfolio because, in addition to its total net assets, the Fund is subject to investment exposure on the notional amount of the swap. As a buyer of protection, the Fund generally receives an amount up to the notional value of the swap if a credit event occurs.

Implied spreads are the theoretical prices a lender receives for credit default protection. When spreads rise, market perceived credit risk rises and when spreads fall, market perceived credit risk falls. The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to enter into the agreement. Wider credit spreads and decreasing market values, when compared to the notional amount of the swap, represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement. Credit spreads utilized in determining the period end market value of CDS agreements on corporate or sovereign issues are disclosed in the Schedule of Investments and serve as an indicator of the current status of the payment/

Western Asset Diversified Income Fund 2024 Semi-Annual Report

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

performance risk and represent the likelihood or risk of default for credit derivatives. For CDS agreements on asset-backed securities and credit indices, the quoted market prices and resulting values, particularly in relation to the notional amount of the contract as well as the annual payment rate, serve as an indication of the current status of the payment/performance risk.

The Fund’s maximum risk of loss from counterparty risk, as the protection buyer, is the fair value of the contract (this risk is mitigated by the posting of collateral by the counterparty to the Fund to cover the Fund’s exposure to the counterparty). As the protection seller, the Fund’s maximum risk is the notional amount of the contract. CDS are considered to have credit risk-related contingent features since they require payment by the protection seller to the protection buyer upon the occurrence of a defined credit event.

Entering into a CDS agreement involves, to varying degrees, elements of credit, market and documentation risk in excess of the related amounts recognized on the Statement of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparty to the agreement may default on its obligation to perform or disagree as to the meaning of the contractual terms in the agreement, and that there will be unfavorable changes in net interest rates.

Interest rate swaps

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

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

Total return swaps

The Fund enters into total return swaps for investment purposes. Total return swaps are agreements to exchange the return generated by one instrument for the return generated by another instrument. For example, the agreement to pay a predetermined or fixed interest

Western Asset Diversified Income Fund 2024 Semi-Annual Report

rate in exchange for a market-linked return based on a notional amount. To the extent the total return of a referenced index or instrument exceeds the offsetting interest obligation, the Fund will receive a payment from the counterparty. To the extent it is less, the Fund will make a payment to the counterparty.

(g) Swaptions. The Fund may purchase or write swaption contracts to manage exposure to fluctuations in interest rates or to enhance yield. The Fund may also purchase and write swaption contracts to manage exposure to an underlying instrument. Swaption contracts written by the Fund represent an option that gives the purchaser the right, but not the obligation, to enter into a previously agreed upon swap contract at a future date. Swaption contracts purchased by the Fund represent an option that gives the Fund the right, but not the obligation, to enter into a previously agreed upon swap contract at a future date.

When the Fund writes a swaption, an amount equal to the premium received by the Fund is recorded as a liability, the value of which is marked-to-market daily to reflect the current market value of the swaption written. If the swaption expires, the Fund realizes a gain equal to the amount of the premium received.

When the Fund purchases a swaption, an amount equal to the premium paid by the Fund is recorded as an investment on the Statement of Assets and Liabilities, the value of which is marked-to-market daily to reflect the current market value of the swaption purchased. If the swaption expires, the Fund realizes a loss equal to the amount of the premium paid.

Swaptions are marked-to-market daily based upon quotations from market makers. Changes in the value of the swaption are reported as unrealized gains or losses in the Statement of Operations.

(h) Loan participations. The Fund may invest in loans arranged through private negotiation between one or more financial institutions. The Fund’s investment in any such loan may be in the form of a participation in or an assignment of the loan. In connection with purchasing participations, the Fund generally will have no right to enforce compliance by the borrower with the terms of the loan agreement related to the loan, or any rights of offset against the borrower and the Fund may not benefit directly from any collateral supporting the loan in which it has purchased the participation.

The Fund assumes the credit risk of the borrower, the lender that is selling the participation and any other persons interpositioned between the Fund and the borrower. In the event of the insolvency of the lender selling the participation, the Fund may be treated as a general creditor of the lender and may not benefit from any offset between the lender and the borrower.

(i) Reverse repurchase agreements. The Fund may enter into reverse repurchase agreements. Under the terms of a typical reverse repurchase agreement, a fund sells a security subject to an obligation to repurchase the security from the buyer at an agreed

Western Asset Diversified Income Fund 2024 Semi-Annual Report

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

upon time and price. In the event the buyer of securities under a reverse repurchase agreement files for bankruptcy or becomes insolvent, the Fund’s use of the proceeds of the agreement may be restricted pending a determination by the counterparty, or its trustee or receiver, whether to enforce the Fund’s obligation to repurchase the securities. In entering into reverse repurchase agreements, the Fund will pledge cash, U.S. government securities or other liquid debt obligations at least equal in value to its obligations with respect to reverse repurchase agreements or will take other actions permitted by law to cover its obligations. If the market value of the collateral declines during the period, the Fund may be required to post additional collateral to cover its obligation. Cash collateral that has been pledged to cover obligations of the Fund under reverse repurchase agreements, if any, will be reported separately in the Statement of Assets and Liabilities. Securities pledged as collateral are noted in the Schedule of Investments. Interest payments made on reverse repurchase agreements are recognized as a component of “Interest expense” on the Statement of Operations. In periods of increased demand for the security, the Fund may receive a fee for use of the security by the counterparty, which may result in interest income to the Fund.

(j) Securities traded on a when-issued and delayed delivery basis. The Fund may trade securities on a when-issued or delayed delivery basis. In when-issued and delayed delivery transactions, the securities are purchased or sold by the Fund with payment and delivery taking place in the future in order to secure what is considered to be an advantageous price and yield to the Fund at the time of entering into the transaction.

Purchasing such securities involves risk of loss if the value of the securities declines prior to settlement. These securities are subject to market fluctuations and their current value is determined in the same manner as for other securities.

(k) Inflation-indexed bonds. Inflation-indexed bonds are fixed income securities whose principal value or interest rate is periodically adjusted according to the rate of inflation. As the index measuring inflation changes, the principal value or interest rate of inflation-indexed bonds will be adjusted accordingly. Inflation adjustments to the principal amount of inflation-indexed bonds are reflected as an increase or decrease to investment income on the Statement of Operations. Repayment of the original bond principal upon maturity (as adjusted for inflation) is guaranteed in the case of U.S. Treasury inflation-indexed bonds. For bonds that do not provide a similar guarantee, the adjusted principal value of the bond repaid at maturity may be less than the original principal.

(l) Cash flow information. The Fund invests in securities and distributes dividends from net investment income and net realized gains, which are paid in cash and may be reinvested at the discretion of shareholders. These activities are reported in the Statements of Changes in Net Assets and additional information on cash receipts and cash payments is presented in the Statement of Cash Flows.

Western Asset Diversified Income Fund 2024 Semi-Annual Report

(m) Foreign currency translation. Investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts based upon prevailing exchange rates on the date of valuation. Purchases and sales of investment securities and income and expense items denominated in foreign currencies are translated into U.S. dollar amounts based upon prevailing exchange rates on the respective dates of such transactions.

The Fund does not isolate that portion of the results of operations resulting from fluctuations in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.

Net realized foreign exchange gains or losses arise from sales of foreign currencies, including gains and losses on forward foreign currency contracts, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the values of assets and liabilities, other than investments in securities, on the date of valuation, resulting from changes in exchange rates.

Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of U.S. dollar denominated transactions as a result of, among other factors, the possibility of lower levels of governmental supervision and regulation of foreign securities markets and the possibility of political or economic instability.

(n) Credit and market risk. The Fund invests in high-yield instruments that are subject to certain credit and market risks. The yields of high-yield 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.

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.

(o) 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

Western Asset Diversified Income Fund 2024 Semi-Annual Report

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

currencies, may require settlement in foreign currencies or may pay interest or dividends in foreign currencies, changes in the relationship of these foreign currencies to the U.S. dollar can significantly affect the value of the investments and earnings of the Fund. Foreign investments may also subject the Fund to foreign government exchange restrictions, expropriation, taxation or other political, social or economic developments, all of which affect the market and/or credit risk of the investments.

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

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

The Fund has entered into master agreements, such as an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar 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

Western Asset Diversified Income Fund 2024 Semi-Annual Report

of default by the counterparty or a termination of the agreement, the terms of the ISDA Master Agreements do not result in an offset of reported amounts of financial assets and financial liabilities in the Statement of Assets and Liabilities across transactions between the Fund and the applicable counterparty. The enforceability of the right to offset may vary by jurisdiction.

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

As of June 30, 2024, the Fund held OTC written options, forward foreign currency contracts, OTC interest rate swaps and OTC total return swaps with credit related contingent features which had a liability position of $2,958,459. If a contingent feature in the master agreements would have been triggered, the Fund would have been required to pay this amount to its derivatives counterparties. As of June 30, 2024, the Fund had posted with its counterparties cash and/or securities as collateral to cover the net liability of these derivatives amounting to $1,350,000 which could be used to reduce the required payment.

(q) 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. 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.

(r) Partnership accounting policy. The Fund records its pro rata share of the income (loss) and capital gains (losses), to the extent of distributions it has received, allocated from the underlying partnerships and accordingly adjusts the cost basis of the underlying partnerships for return of capital. These amounts are included in the Fund’s Statement of Operations.

(s) Distributions to shareholders. Distributions from net investment income of the Fund, if any, are declared quarterly and paid on a monthly basis. The actual source of the Fund’s monthly distributions may be from net investment income, return of capital or a combination of both. Distributions of net realized gains, if any, are declared at least annually.

Western Asset Diversified Income Fund 2024 Semi-Annual Report

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

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.

(t) 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.

(u) 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 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.

(v) Reclassification. GAAP requires that certain components of net assets be reclassified to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset value per share.

2. Investment management agreement and other transactions with affiliates

Franklin Templeton Fund Adviser, LLC (“FTFA”) is the Fund’s investment manager. Western Asset Management Company, LLC (“Western Asset”), Western Asset Management Company Pte. Ltd. (“Western Asset Singapore”), Western Asset Management Company Ltd (“Western Asset Japan”) and Western Asset Management Company Limited (“Western Asset London”) are the Fund’s sub-subadvisers. FTFA, Western Asset, Western Asset Singapore, Western Asset Japan and Western Asset London are indirect, wholly-owned subsidiaries of Franklin Resources, Inc. (“Franklin Resources”).

FTFA provides administrative and certain oversight services to the Fund. The Fund pays FTFA an investment management fee, calculated daily and paid monthly, at an annual rate of 1.10% of the Fund’s average daily managed assets, which are the net assets of the Fund plus the principal amount of any borrowings or preferred shares that may be outstanding, reverse repurchase agreements, dollar rolls or similar transactions.

FTFA delegates to Western Asset the day-to-day portfolio management of the Fund. Western Asset Singapore, Western Asset Japan and Western Asset London provide certain

Western Asset Diversified Income Fund 2024 Semi-Annual Report

subadvisory services to the Fund relating to currency transactions and investments in non-U.S. dollar denominated securities and related foreign currency instruments. For its services, FTFA pays Western Asset a fee monthly, at an annual rate equal to 70% of the net management fee it receives from the Fund. In turn, Western Asset pays Western Asset Singapore, Western Asset Japan and Western Asset London a monthly subadvisory fee in an amount equal to 100% of the management fee paid to Western Asset on the assets that Western Asset allocates to each such non-U.S. subadviser to manage.

During periods in which the Fund utilizes financial leverage, the fees paid to FTFA will be higher than if the Fund did not utilize leverage because the fees are calculated as a percentage of the Fund’s assets, including those investments purchased with leverage.

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

During the six months ended June 30, 2024, fees waived and/or expenses reimbursed amounted to $12,731, all of which was an affiliated money market fund waiver.

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

3. Investments

During the six months ended June 30, 2024, the aggregate cost of purchases and proceeds from sales of investments (excluding short-term investments) and U.S. Government & Agency Obligations were as follows:

	Investments	U.S. Government & Agency Obligations
Purchases	$237,792,370	$6,008
Sales	221,656,553	41,289

At June 30, 2024, the aggregate cost of investments and the aggregate gross unrealized appreciation and depreciation of investments for federal income tax purposes were substantially as follows:

	Cost/Premiums Paid (Received)	Gross Unrealized Appreciation	Gross Unrealized Depreciation	Net Unrealized Appreciation (Depreciation)
Securities	$1,212,847,262	$35,189,990	$(88,373,993)	$(53,184,003)
Written options	(88,920)	10,357	—	10,357
Futures contracts	—	1,728,896	(656,403)	1,072,493
Forward foreign currency contracts	—	440,959	(2,154,513)	(1,713,554)
Swap contracts	(193,726)	68,850	(754,422)	(685,572)

Western Asset Diversified Income Fund 2024 Semi-Annual Report

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

Transactions in reverse repurchase agreements for the Fund during the six months ended June 30, 2024, were as follows:

Average Daily Balance*	Weighted Average Interest Rate*	Maximum Amount Outstanding
$12,253,445	6.000%	$12,519,742

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

The interest rate on reverse repurchase agreements was 6.000% during the six months ended June 30, 2024. Interest expense incurred on reverse repurchase agreements totaled $368,098.

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 June 30, 2024.

ASSET DERIVATIVES1
	Interest Rate Risk	Foreign Exchange Risk	Credit Risk	Total
Purchased options2	—	—	$84,285	$84,285
Futures contracts3	$1,728,896	—	—	1,728,896
Forward foreign currency contracts	—	$440,959	—	440,959
Centrally cleared swap contracts4	—	—	68,850	68,850
Total	$1,728,896	$440,959	$153,135	$2,322,990

LIABILITY DERIVATIVES1
	Interest Rate Risk	Foreign Exchange Risk	Credit Risk	Market Risk	Total
Written options	—	—	$78,563	—	$78,563
Futures contracts3	$656,403	—	—	—	656,403
Forward foreign currency contracts	—	$2,154,513	—	—	2,154,513
OTC swap contracts5	658,253	—	—	$67,130	725,383
Centrally cleared swap contracts4	—	—	29,039	—	29,039
Total	$1,314,656	$2,154,513	$107,602	$67,130	$3,643,901

1	Generally, the balance sheet location for asset derivatives is receivables/net unrealized appreciation and for liability derivatives is payables/net unrealized depreciation.
2	Market value of purchased options is reported in Investments at value in the Statement of Assets and Liabilities.
3	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.
4	Includes cumulative unrealized appreciation (depreciation) of centrally cleared swap 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.
5	Values include premiums paid (received) on swap contracts which are shown separately in the Statement of Assets and Liabilities.

Western Asset Diversified Income Fund 2024 Semi-Annual Report

The following tables provide information about the effect of derivatives and hedging activities on the Fund’s Statement of Operations for the six months ended June 30, 2024. The first table provides additional detail about the amounts and sources of gains (losses) realized on derivatives during the period. The second table provides additional information about the change in net unrealized appreciation (depreciation) resulting from the Fund’s derivatives and hedging activities during the period.

AMOUNT OF NET REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED
	Interest Rate Risk	Foreign Exchange Risk	Credit Risk	Market Risk	Total
Purchased options1	$90,564	$(389,016 )	—	—	$(298,452 )
Futures contracts	733,152	—	—	—	733,152
Written options	83,115	114,365	—	—	197,480
Swap contracts	1,734,525	—	$50,602	$(42,328 )	1,742,799
Forward foreign currency contracts	—	330,459	—	—	330,459
Total	$2,641,356	$55,808	$50,602	$(42,328 )	$2,705,438

1	Net realized gain (loss) from purchased options is reported in Net Realized Gain (Loss) From Investment transactions in the Statement of Operations.

CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES RECOGNIZED
	Interest Rate Risk	Foreign Exchange Risk	Credit Risk	Market Risk	Total
Purchased options1	$73,320	$(144,829 )	$(4,635 )	—	$(76,144 )
Futures contracts	(10,550,677 )	—	—	—	(10,550,677 )
Written options	40,886	70,132	10,357	—	121,375
Swap contracts	(1,334,946 )	—	(25,637 )	$(67,130 )	(1,427,713 )
Forward foreign currency contracts	—	(739,303 )	—	—	(739,303 )
Total	$(11,771,417 )	$(814,000 )	$(19,915 )	$(67,130 )	$(12,672,462 )

1	The change in net unrealized appreciation (depreciation) from purchased options is reported in the Change in Net Unrealized Appreciation (Depreciation) From Investments in the Statement of Operations.

During the six months ended June 30, 2024, the volume of derivative activity for the Fund was as follows:

	Average Market Value
Purchased options	$106,951
Written options	59,144
Futures contracts (to buy)	319,987,546
Futures contracts (to sell)	111,123,345
Forward foreign currency contracts (to buy)	27,311,308
Forward foreign currency contracts (to sell)	53,627,291

Western Asset Diversified Income Fund 2024 Semi-Annual Report

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

	Average Notional Balance
Interest rate swap contracts	$17,439,554
Credit default swap contracts (buy protection)	5,414,471
Credit default swap contracts (sell protection)	5,414,471
Total return swap contracts	1,686,857

The following table presents the Fund’s OTC derivative assets and liabilities by counterparty net of amounts available for offset under an ISDA Master Agreement and net of the related collateral pledged (received) by the Fund as of June 30, 2024.

Counterparty	Gross Assets Subject to Master Agreements1	Gross Liabilities Subject to Master Agreements1	Net Assets (Liabilities) Subject to Master Agreements	Collateral Pledged (Received)2,3	Net Amount4,5
Bank of America N.A.	$49,567	$(321,957)	$(272,390)	—	$(272,390)
BNP Paribas SA	78,376	(11,520)	66,856	—	66,856
Citibank N.A.	44,383	(239,960)	(195,577)	$30,000	(165,577)
Goldman Sachs Group Inc.	268,045	(241,136)	26,909	—	26,909
JPMorgan Chase & Co.	56,563	(1,215,629)	(1,159,066)	670,000	(489,066)
Morgan Stanley & Co. Inc.	28,310	(928,257)	(899,947)	650,000	(249,947)
Total	$525,244	$(2,958,459)	$(2,433,215)	$1,350,000	$(1,083,215)

1	Absent an event of default or early termination, derivative assets and liabilities are presented gross and not offset in the Statement of Assets and Liabilities.
2	Gross amounts are not offset in the Statement of Assets and Liabilities.
3	In some instances, the actual collateral received and/or pledged may be more than the amount shown here due to overcollateralization.
4	Net amount may also include forward foreign currency exchange contracts that are not required to be collateralized.
5	Represents the net amount receivable (payable) from (to) the counterparty in the event of default.

5. Loan

The Fund entered into a revolving credit agreement (the “BNYM Credit Agreement”) with The Bank of New York Mellon (“BNYM”). The BNYM Credit Agreement allows the Fund to borrow up to an aggregate amount of $385,000,000 and renews daily for a 179-day term unless notice to the contrary is given to the Fund. The Fund pays interest on borrowings calculated based on SOFR plus applicable margin. The Fund pays a commitment fee on the unutilized portion of the loan commitment amount at an annual rate of 0.25% except that the commitment fee is 0.00% when the aggregate outstanding balance of the loan is equal to or greater than 75% of the maximum commitment amount. To the extent of the borrowing outstanding, the Fund is required to maintain collateral in a special custody account at the Fund’s custodian on behalf of BNYM. The BNYM Credit Agreement contains customary covenants that, among other things, may limit the Fund’s ability to pay distributions in certain circumstances, incur additional debt, change certain material investment policies

Western Asset Diversified Income Fund 2024 Semi-Annual Report

and engage in certain transactions, including mergers and consolidations, and require asset coverage ratios in addition to those required by the 1940 Act. In addition, the BNYM Credit Agreement may be subject to early termination under certain conditions and may contain other provisions that could limit the Fund’s ability to utilize borrowing under the agreement. Interest expense related to the loan for the six months ended June 30, 2024 was $11,435,316. For the six months ended June 30, 2024, the Fund incurred commitment fees in the amount of $0. For the six months ended June 30, 2024, based on the number of days during the reporting period that the Fund had a loan balance outstanding, the average daily loan balance was $358,000,000 and the weighted average interest rate was 6.32%. At June 30, 2024, the Fund had $358,000,000 of borrowings outstanding per the Credit Agreement.

6. Distributions subsequent to June 30, 2024

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

Record Date	Payable Date	Amount
6/21/2024	7/1/2024	$0.1485
7/24/2024	8/1/2024	$0.1485
8/23/2024	9/3/2024	$0.1485
9/23/2024	10/1/2024	$0.1485
10/24/2024	11/1/2024	$0.1485
11/21/2024	12/2/2024	$0.1485

7. Stock repurchase program

On July 29, 2021, the Fund announced that the Fund’s Board of Trustees (the “Board”) had authorized the Fund to repurchase in the open market up to approximately 10% of the Fund’s outstanding common stock when the Fund’s shares are trading at a discount to net asset value. The Board has directed management of the Fund to repurchase shares of common stock at such times and in such amounts as management reasonably believes may enhance stockholder value. The Fund is under no obligation to purchase shares at any specific discount levels or in any specific amounts. During the year ended December 31, 2023 and the six months ended June 30, 2024, the Fund did not repurchase any shares.

8. Transactions with affiliated company

As defined by the 1940 Act, an affiliated company is one in which the Fund owns 5% or more of the outstanding voting securities, or a company which is under common ownership or control with the Fund. The following company was considered an affiliated company for

Western Asset Diversified Income Fund 2024 Semi-Annual Report

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

all or some portion of the six months ended June 30, 2024. The following transactions were effected in such company for the six months ended June 30, 2024.

	Affiliate Value at December 31, 2023	Purchased		Sold
	Affiliate Value at December 31, 2023	Cost	Shares	Proceeds	Shares
Western Asset Premier Institutional Government Reserves, Premium Shares	$42,910,231	$170,744,812	170,744,812	$184,102,553	184,102,553

(cont’d)	Realized Gain (Loss)	Dividend Income	Net Increase (Decrease) in Unrealized Appreciation (Depreciation)	Affiliate Value at June 30, 2024
Western Asset Premier Institutional Government Reserves, Premium Shares	—	$663,411	—	$29,552,490

9. Deferred capital losses

As of December 31, 2023, the Fund had deferred capital losses of $180,219,509, which have no expiration date, that will be available to offset future taxable capital gains.

10. Recent accounting pronouncement

In March 2020, the 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.

Western Asset Diversified Income Fund 2024 Semi-Annual Report

Board approval of management and

subadvisory agreements (unaudited)

Background

The Investment Company Act of 1940, as amended (the “1940 Act”), requires that the Board of Trustees (the “Board”) of Western Asset Diversified Income Fund (the “Fund”), including a majority of its members who are not considered to be “interested persons” under the 1940 Act (the “Independent Trustees”) voting separately, approve on an annual basis the continuation of the investment management agreement (the “Management Agreement”) between the Fund and the Fund’s manager, Franklin Templeton Fund Adviser, LLC (formerly, Legg Mason Partners Fund Advisor, LLC) (the “Manager”), and the sub-advisory agreements (individually, a “Sub-Advisory Agreement,” and collectively, the “Sub-Advisory Agreements”) with the Manager’s affiliates, Western Asset Management Company, LLC (“Western Asset”), Western Asset Management Company Limited (“Western Asset London”), Western Asset Management Company Pte. Ltd. (“Western Asset Singapore”) and Western Asset Management Company Ltd (“Western Asset Japan,” and together with Western Asset, Western Asset London and Western Asset Singapore, collectively, the “Sub-Advisers”), with respect to the Fund.

At an in-person meeting (the “Contract Renewal Meeting”) held on May 20-21, 2024, the Board, including the Independent Trustees, considered and approved the continuation of each of the Management Agreement and the Sub-Advisory Agreements for an additional one-year period. To assist in its consideration of the renewal of each of the Management Agreement and the Sub-Advisory Agreements, the Board received and considered extensive information (together with the information provided at the Contract Renewal Meeting, the “Contract Renewal Information”) about the Manager and the Sub-Advisers, as well as the management and sub-advisory arrangements for the Fund and the other closed-end funds in the same complex under the Board’s purview (the “Franklin Templeton Closed-end Funds”), certain portions of which are discussed below.

A presentation made by the Manager and the Sub-Advisers to the Board at the Contract Renewal Meeting in connection with the Board’s evaluation of each of the Management Agreement and the Sub-Advisory Agreements encompassed the Fund and other Franklin Templeton Closed-end Funds. In addition to the Contract Renewal Information, the Board received performance and other information throughout the year related to the respective services rendered by the Manager and the Sub-Advisers to the Fund. The Board’s evaluation took into account the information received throughout the year and also reflected the knowledge and experience gained as members of the Boards of the Fund and other Franklin Templeton Closed-end Funds with respect to the services provided to the Fund by the Manager and the Sub-Advisers. The information received and considered by the Board (including its various committees) in conjunction with both the Contract Renewal Meeting and throughout the year was both written and oral. The contractual arrangements discussed below are the product of multiple years of review and negotiation and information received and considered by the Board during each of those years.

Western Asset Diversified Income Fund

Board approval of management and

subadvisory agreements (unaudited) (cont’d)

At a meeting held on April 26, 2024, the Independent Trustees, in preparation for the Contract Renewal Meeting, met in a private session with their independent legal counsel to review the Contract Renewal Information regarding the Franklin Templeton Closed-end Funds, including the Fund, received to date. No representatives of the Manager or the Sub-Advisers participated in this meeting. Following the April 26, 2024 meeting, the Independent Trustees submitted certain questions and requests for additional information to Fund management. The Independent Trustees also met in private sessions with their independent legal counsel to consider the Contract Renewal Information and Fund management’s responses to the Independent Trustees’ questions and requests for additional information in advance of and during the Contract Renewal Meeting. The discussion below reflects all of these reviews.

The Manager provides the Fund with investment advisory and administrative services pursuant to the Management Agreement and the Sub-Advisers together provide the Fund with investment sub-advisory services pursuant to the Sub-Advisory Agreements. The discussion below covers both the advisory and administrative functions being rendered by the Manager, each such function being encompassed by the Management Agreement, and the investment sub-advisory functions being rendered by the Sub-Advisers pursuant to the Sub-Advisory Agreements.

Board Approval of Management Agreement and Sub-Advisory Agreements

The Independent Trustees were advised by separate independent legal counsel throughout the process. Prior to voting, the Independent Trustees received a memorandum discussing the legal standards for their consideration of the proposed continuation of the Management Agreement and the Sub-Advisory Agreements. The Independent Trustees considered the Management Agreement and each Sub-Advisory Agreement separately during the course of their review. In doing so, they noted the respective roles of the Manager and the Sub-Advisers in providing services to the Fund.

In approving the continuation of the Management Agreement and Sub-Advisory Agreements, the Board, including the Independent Trustees, considered a variety of factors, including those factors discussed below. No single factor reviewed by the Board was identified by the Board as the principal factor in determining whether to approve the continuation of the Management Agreement and the Sub-Advisory Agreements. Each Trustee may have attributed different weight to the various factors in evaluating the Management Agreement and the Sub-Advisory Agreements.

After considering all relevant factors and information, the Board, exercising its reasonable business judgment, determined that the continuation of the Management Agreement and Sub-Advisory Agreements were in the best interests of the Fund’s stockholders and approved the continuation of each such agreement for an additional one-year period.

Western Asset Diversified Income Fund

Nature, Extent and Quality of the Services under the Management Agreement and Sub-Advisory Agreements

The Board received and considered Contract Renewal Information regarding the nature, extent, and quality of services provided to the Fund by the Manager and the Sub-Advisers under the Management Agreement and the Sub-Advisory Agreements, respectively, during the past year. The Board noted information received at regular meetings throughout the year related to the services provided by the Manager in its management of the Fund’s affairs and the Manager’s role in coordinating the activities of the Sub-Advisers and the Fund’s other service providers. The Board observed that the scope of services provided by the Manager and the Sub-Advisers, and of the undertakings required of the Manager and Sub-Advisers in connection with those services, including maintaining and monitoring their respective compliance programs as well as the Fund’s compliance programs, had expanded over time as a result of regulatory, market and other developments. The Board also noted that on a regular basis it received and reviewed information from the Manager and the Sub-Advisers regarding the Fund’s compliance policies and procedures established pursuant to Rule 38a-1 under the 1940 Act. The Board also considered the risks borne by the Manager, the Sub-Advisers and their respective affiliates on behalf of the Fund, including entrepreneurial, operational, reputational, litigation and regulatory risks, as well as the Manager’s and the Sub-Advisers’ risk management processes.

The Board reviewed the qualifications, backgrounds, and responsibilities of the Manager’s senior personnel and the Sub-Advisers’ portfolio management teams primarily responsible for the day-to-day portfolio management of the Fund. The Board also considered, based on its knowledge of the Manager and its affiliates, the financial resources of Franklin Resources, Inc., the parent organization of the Manager and the Sub-Advisers. The Board recognized the importance of having a fund manager with significant resources.

The Board considered the division of responsibilities between the Manager and the Sub-Advisers under the Management Agreement and the Sub-Advisory Agreements, respectively, including the Manager’s coordination and oversight of the services provided to the Fund by the Sub-Advisers and other fund service providers and Western Asset’s coordination and oversight of the services provided to the Fund by Western Asset London, Western Asset Singapore and Western Asset Japan. The Management Agreement permits the Manager to delegate certain of its responsibilities, including its investment advisory duties thereunder, provided that the Manager, in each case, will supervise the activities of the delegee.

In reaching its determinations regarding continuation of the Management Agreement and the Sub-Advisory Agreements, the Board took into account that Fund stockholders, in pursuing their investment goals and objectives, may have purchased their shares of the

Western Asset Diversified Income Fund

Board approval of management and

subadvisory agreements (unaudited) (cont’d)

Fund based upon the reputation and the investment style, philosophy and strategy of the Manager and the Sub-Advisers, as well as the resources available to the Manager and the Sub-Advisers.

The Board concluded that, overall, the nature, extent, and quality of the management and other services provided (and expected to be provided) to the Fund, under the Management Agreement and the Sub-Advisory Agreements were satisfactory.

Fund Performance

The Board received and considered information regarding Fund performance, including information and analyses (the “Broadridge Performance Information”) for the Fund, as well as for a group of comparable funds (the “Performance Universe”) selected by Broadridge Financial Solutions, Inc. (“Broadridge”), an independent third-party provider of investment company data. The Board was provided with a description of the methodology Broadridge used to determine the similarity of the Fund with the funds included in the Performance Universe, which included all leveraged closed-end general bond funds. It was noted that while the Board found the Broadridge Performance Information generally useful, they recognized its limitations, including that the data may vary depending on the end date selected, and that the results of the performance comparisons may vary depending on the selection of the peer group and its composition over time. The Board also noted that Board members had received and discussed with the Manager and the Sub-Advisers information throughout the year at periodic intervals comparing the Fund’s performance against its benchmark and against the Fund’s peers. In addition, the Board considered the Fund’s performance in view of overall financial market conditions.

The Broadridge Performance Information comparing the Fund’s performance to that of its Performance Universe, consisting of the Fund and all leveraged closed-end general bond funds classified by Broadridge, regardless of asset size, showed, among other data, that based on net asset value per share, the Fund’s performance was above the median for the 1-year period ended December 31, 2023. The Board noted the explanations from the Manager and the Sub-Advisers regarding the Fund’s relative performance versus the Performance Universe for the various periods.

Based on the reviews and discussions of Fund performance and considering other relevant factors, including those noted above, the Board concluded, under the circumstances, that continuation of the Management Agreement and the Sub-Advisory Agreements for an additional one-year period would be consistent with the interests of the Fund and its stockholders.

Management and Sub-Advisory Fees and Expense Ratios

The Board reviewed and considered the contractual management fee (the “Contractual Management Fee”) and the actual management fee (the “Actual Management Fee”)

Western Asset Diversified Income Fund

payable by the Fund to the Manager under the Management Agreement and the sub-advisory fees (the “Sub-Advisory Fees”) payable by the Manager to the Sub-Advisers under the Sub-Advisory Agreements in view of the nature, extent and overall quality of the management, investment advisory and other services provided by the Manager and the Sub-Advisers, respectively. The Board noted that the Sub-Advisory Fee payable to Western Asset under its Sub-Advisory Agreement with the Manager is paid by the Manager, not the Fund, and, accordingly, that the retention of Western Asset does not increase the fees or expenses otherwise incurred by the Fund’s stockholders. Similarly, the Board noted that the Sub-Advisory Fees payable to Western Asset London, Western Asset Singapore and Western Asset Japan under their respective Sub-Advisory Agreements with Western Asset are paid by Western Asset, not the Fund, and, accordingly, that the retention of Western Asset London, Western Asset Singapore and Western Asset Japan does not increase the fees or expenses otherwise incurred by the Fund’s stockholders.

In addition, the Board received and considered information and analyses prepared by Broadridge (the “Broadridge Expense Information”) comparing the Contractual Management Fee and the Actual Management Fee and the Fund’s total actual expenses with those of funds in an expense group (the “Expense Group”), as well as a broader group of funds, each selected and provided by Broadridge. The comparison was based upon the constituent funds’ latest fiscal years. It was noted that while the Board found the Broadridge Expense Information generally useful, they recognized its limitations, including that the data may vary depending on the selection of the peer group.

The Broadridge Expense Information showed that the Fund’s Contractual Management Fee was above the median. The Broadridge Expense Information also showed that the Fund’s Actual Management Fee was above the median based on both common share assets and leveraged assets. The Broadridge Expense Information also showed that the Fund’s actual total expenses were above the median based on both common share assets and leveraged assets. The Board took into account management’s discussion of the Fund’s expenses.

The Board also reviewed Contract Renewal Information regarding fees charged by the Manager and/or the Sub-Advisers to other U.S. clients investing primarily in an asset class similar to that of the Fund, including, where applicable, institutional and separate accounts. The Manager reviewed with the Board the differences in services provided to these different types of accounts, noting that the Fund is provided with certain administrative services, office facilities, and Fund officers, and that the Fund is subject not only to heightened regulatory requirements relative to institutional clients but also to requirements for listing on the New York Stock Exchange, and that the Manager coordinates and oversees the provision of services to the Fund by other fund service providers. The Board considered the fee comparisons in view of the different services provided in managing these other types of clients and funds.

Western Asset Diversified Income Fund

Board approval of management and

subadvisory agreements (unaudited) (cont’d)

The Board considered the overall management fee, the fees of the Sub-Advisers and the amount of the management fee retained by the Manager after payment of the subadvisory fees in each case in view of the services rendered for those amounts. The Board also received an analysis of complex-wide management fees provided by the Manager, which, among other things, set out a framework of fees based on asset classes.

Taking all of the above into consideration, as well as the factors identified below, the Board determined that the management fee and the Sub-Advisory Fees were reasonable in view of the nature, extent and overall quality of the management, investment advisory and other services provided by the Manager and the Sub-Advisers to the Fund under the Management Agreement and the Sub-Advisory Agreements, respectively.

Manager Profitability

The Board, as part of the Contract Renewal Information, received an analysis of the profitability to the Manager and its affiliates in providing services to the Fund for the Manager’s fiscal years ended September 30, 2023 and September 30, 2022. The Board also received profitability information with respect to the Franklin Templeton fund complex as a whole. In addition, the Board received Contract Renewal Information with respect to the Manager’s revenue and cost allocation methodologies used in preparing such profitability data. It was noted that the allocation methodologies had been reviewed by an outside consultant. The profitability to each of the Sub-Advisers was not considered to be a material factor in the Board’s considerations since the Sub-Advisory Fee is paid by the Manager in the case of Western Asset and by Western Asset in the case of Western Asset London, Western Asset Singapore and Western Asset Japan, not the Fund, although the Board noted the affiliation of the Manager with the Sub-Advisers. The profitability of the Manager and its affiliates was considered by the Board to be reasonable in view of the nature, extent and quality of services provided to the Fund.

Economies of Scale

The Board received and discussed Contract Renewal Information concerning whether the Manager realizes economies of scale if the Fund’s assets grow. The Board noted that because the Fund is a closed-end fund it has limited ability to increase its assets. The Board determined that the management fee structure was appropriate under the circumstances. For similar reasons as stated above with respect to the Sub-Advisers’ profitability and the costs of the Sub-Advisers’ provision of services, the Board did not consider the potential for economies of scale in the Sub-Advisers’ management of the Fund to be a material factor in the Board’s consideration of the Sub-Advisory Agreements.

Other Benefits to the Manager and the Sub-Advisers

The Board considered other benefits received by the Manager, the Sub-Advisers and their affiliates as a result of their relationship with the Fund, including the opportunity to offer

Western Asset Diversified Income Fund

additional products and services to the Fund’s stockholders. In view of the costs of providing investment management and other services to the Fund and the ongoing commitment of the Manager and the Sub-Advisers to the Fund, the Board considered that the ancillary benefits that the Manager and its affiliates, including the Sub-Advisers, were reasonable.

Western Asset Diversified Income Fund

Additional shareholder information (unaudited)

Results of annual meeting of shareholders

The Annual Meeting of Shareholders Western Asset Diversified Income Fund was held on April 12, 2024 for the purpose of considering and voting upon the proposals presented at the Meeting. The following table provides information concerning the matters voted upon at the Meeting:

Election of Trustees

Nominees	FOR	WITHHELD	ABSTAIN
Nisha Kumar	41,669,813	926,621	418,906
Jane Trust	41,767,241	853,272	394,827

At the Meeting, Mses. Kumar and Trust were each duly elected by the shareholders to serve as Class III Directors of the Fund until the 2027 Annual Meeting of Shareholders, or until their successors have been duly elected and qualified or until their resignation or are otherwise removed.

At June 30, 2024, in addition to Mses. Kumar and Trust, the other Trustees of the Fund were as follows:

Robert D. Agdern
Carol L. Colman
Daniel P. Cronin
Paolo M. Cucchi
Eileen A. Kamerick

Ratification of Selection of Independent Registered Public Accountants

To ratify the selection of PricewaterhouseCoopers LLP (“PwC”) as independent registered public accountants of the Fund for the fiscal year ended December 31, 2023.

FOR	AGAINST	ABSTAIN	BROKER NON-VOTES
42,495,249	300,105	219,984	2

Western Asset Diversified Income Fund

Dividend reinvestment plan (unaudited)

Unless you elect to receive distributions in cash (i.e., opt-out), all dividends, including any capital gain dividends and return of capital distributions, on your Common Shares will be automatically reinvested by Computershare Trust Company, N.A., as agent for the shareholders (the “Plan Agent”), in additional Common Shares under the Fund’s Dividend Reinvestment Plan (the “Plan”). You may elect not to participate in the Plan by contacting the Plan Agent. If you do not participate, you will receive all cash distributions paid by check mailed directly to you by Computershare Trust Company, N.A., as dividend paying agent.

In the case of a registered shareholder such as a broker, bank or other nominee (together, a “nominee”) that holds Common Shares for others who are the beneficial owners, the Plan Agent will administer the Plan on the basis of the number of Common Shares certified by the nominee/record shareholder as representing the total amount registered in such shareholder’s name and held for the account of beneficial owners who are to participate in the Plan. If your Common Shares are held through a nominee and are not registered with the Plan Agent, neither you nor the nominee will be participants in or have distributions reinvested under the Plan. If you are a beneficial owner of Common Shares and wish to participate in the Plan, and your nominee is unable or unwilling to become a registered shareholder and a Plan participant on your behalf, you may request that your nominee arrange to have all or a portion of your shares re-registered with the Plan Agent in your name so that you may be enrolled as a participant in the Plan. Please contact your nominee for details or for other possible alternatives. Registered shareholders whose shares are registered in the name of one nominee firm may not be able to transfer the shares to another firm and continue to participate in the Plan.

If you participate in the Plan, the number of Common Shares you will receive will be determined as follows:

(1) If the market price of the Common Shares (plus $0.03 per share processing fee which includes any brokerage commission the Plan Agent is required to pay) on the payment date (or, if the payment date is not a NYSE trading day, the immediately preceding trading day) is equal to or exceeds the net asset value per share of the Common Shares at the close of trading on the NYSE on the payment date, the Fund will issue new Common Shares at a price equal to the greater of (a) the net asset value per share at the close of trading on the NYSE on the payment date or (b) 95% of the market price per share of the Common Shares on the payment date.

(2) If the net asset value per share of the Common Shares exceeds the market price of the Common Shares (plus $0.03 per share processing fee) at the close of trading on the NYSE on the payment date, the Plan Agent will receive the dividend or distribution in cash and will buy Common Shares in the open market, on the NYSE or elsewhere, for your account as soon as practicable commencing on the trading day following the payment date and terminating no later than the earlier of (a) 30 days after the dividend or distribution payment date, or (b) the payment date for the next succeeding dividend or distribution to be made to the shareholders; except when necessary to comply with

Western Asset Diversified Income Fund

Dividend reinvestment plan (unaudited) (cont’d)

applicable provisions of the federal securities laws. If during this period: (i) the market price (plus $0.03 per share processing fee) rises so that it equals or exceeds the net asset value per share of the Common Shares at the close of trading on the NYSE on the payment date before the Plan Agent has completed the open market purchases or (ii) if the Plan Agent is unable to invest the full amount eligible to be reinvested in open market purchases, the Plan Agent will cease purchasing Common Shares in the open market and the Fund will issue the remaining Common Shares at a price per share equal to the greater of (a) the net asset value per share at the close of trading on the NYSE on the day prior to the issuance of shares for reinvestment or (b) 95% of the then current market price per share.

Common Shares in your account will be held by the Plan Agent in non-certificated form. Any proxy you receive will include all Common Shares you have received under the Plan.

You may withdraw from the Plan (i.e., opt-out) by notifying the Plan Agent through the Internet at www.computershare.com/investor, in writing at P.O. Box 43006 Providence, RI 02940-3078 or by calling the Plan Agent at 1-888-888-0151. Such withdrawal will be effective immediately if notice is received by the Plan Agent prior to any dividend or distribution record date; otherwise such withdrawal will be effective as soon as practicable after the Plan Agent’s investment of the most recently declared dividend or distribution on the Common Shares.

Plan participants who sell their shares will be charged a service charge (currently $5.00 per transaction) and the Plan Agent is authorized to deduct per share processing fees actually incurred from the proceeds (currently $0.05 per share, which includes any brokerage commission the Plan Agent is required to pay). There is no service charge for reinvestment of your dividends or distributions in Common Shares. However, all participants will pay per share processing fees (currently $0.03 per share) incurred by the Plan Agent when it makes open market purchases. Because all dividends and distributions will be automatically reinvested in additional Common Shares, this allows you to add to your investment through dollar cost averaging, which may lower the average cost of your Common Shares over time. Dollar cost averaging is a technique for lowering the average cost per share over time if the Fund’s net asset value declines. While dollar cost averaging has definite advantages, it cannot assure profit or protect against loss in declining markets.

Automatically reinvesting dividends and distributions does not mean that you do not have to pay income taxes due upon receiving dividends and distributions. Investors will be subject to income tax on amounts reinvested under the Plan.

The Fund reserves the right to amend or terminate the Plan if, in the judgment of the Board of Trustees, the change is warranted. The Plan may be terminated, amended or supplemented by the Fund upon notice in writing mailed to shareholders at least 30 days prior to the record date for the payment of any dividend or distribution by the Fund for which the termination or amendment is to be effective. Upon any termination, you will be sent cash for any fractional share of Common Shares in your account less any applicable fees.

Western Asset Diversified Income Fund

You may elect to notify the Plan Agent in advance of such termination to have the Plan Agent sell part or all of your Common Shares on your behalf. Additional information about the Plan and your account may be obtained from the Plan Agent through the Internet at www.computershare.com/investor, in writing at P.O. Box 43006 Providence, RI 02940-3078 or by calling the Plan Agent at 1-888-888-0151.

Western Asset Diversified Income Fund

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Western Asset

Diversified Income Fund

Trustees

Robert D. Agdern

Carol L. Colman

Daniel P. Cronin

Paolo M. Cucchi

Eileen A. Kamerick

Nisha Kumar

Jane Trust
Chairman

Officers

Jane Trust
President and Chief Executive
Officer

Christopher Berarducci
Treasurer and Principal Financial
Officer

Fred Jensen
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 Diversified Income Fund

620 Eighth Avenue
47th Floor
New York, NY 10018

Investment manager

Franklin Templeton Fund Adviser, LLC

Subadviser

Western Asset Management Company, LLC

Western Asset Management Company Limited

Western Asset Management Company Ltd

Western Asset Management Company Pte. Ltd.

Custodian

The Bank of New York Mellon

Transfer agent

Computershare Inc.
P.O. Box 43006
Providence, RI 02940-3078

Independent registered
public accounting firm

PricewaterhouseCoopers LLP
Baltimore, MD

Legal counsel

Simpson Thacher & Bartlett LLP
900 G Street NW
Washington, DC 20001

New York Stock
Exchange Symbol

WDI

Franklin Templeton Funds Privacy and Security Notice

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

This Privacy and Security Notice (the “Privacy Notice”) addresses the Funds’ privacy and data protection practices with respect to nonpublic personal information the Fund receives. The Legg Mason Funds include the Western Asset Money Market Funds (Funds) sold by the Funds’ distributor, Franklin Distributors, LLC, as well as Legg Mason-sponsored closed-end funds. The provisions of this Privacy Notice apply to your information both while you are a shareholder and after you are no longer invested with the Funds.

The Type of Nonpublic Personal Information the Funds Collect About You

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

•

Personal information included on applications or other forms;

•

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

•

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

•

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

How the Funds Use Nonpublic Personal Information About You

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

•

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

•

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

•

Permit access to transfer, whether in the United States or countries outside of the United States to such Funds’ employees, agents and affiliates and service providers as required to enable the Funds to conduct ordinary business, or to comply with obligations to government regulators;

•

The Funds’ representatives such as legal counsel, accountants and auditors to enable the Funds to conduct ordinary business, or to comply with obligations to government regulators;

•

Fiduciaries or representatives acting on your behalf, such as an IRA custodian or trustee of a grantor trust.

NOT PART OF THE SEMI-ANNUAL REPORT

Franklin Templeton Funds Privacy and Security Notice

(cont’d)

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

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

Keeping You Informed of the Funds’ Privacy and Security Practices

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

The Funds’ Security Practices

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

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

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

Revised December 2023.

NOT PART OF THE SEMI-ANNUAL REPORT

Western Asset Diversified Income Fund

Western Asset Diversified Income Fund
620 Eighth Avenue
47th Floor
New York, NY 10018

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

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

Information on how the Fund voted proxies relating to portfolio securities during the prior 12-month period ended June 30th of each year and a description of the policies and procedures that the Fund uses to determine how to vote proxies related to portfolio transactions are available (1) without charge, upon request, by calling 1-888-777-0102, (2) at www.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 Diversified Income Fund for their information. This is not a prospectus, circular or representation intended for use in the purchase of shares of the Fund or any securities mentioned in this report.

Computershare Inc.
P.O. Box 43006
Providence, RI 02940-3078

WASX647409 8/24

ITEM 2.

CODE OF ETHICS.

Not applicable.

ITEM 3.

AUDIT COMMITTEE FINANCIAL EXPERT.

Not applicable.

ITEM 4.

PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Not applicable.

ITEM 5.

AUDIT COMMITTEE OF LISTED REGISTRANTS.

Not applicable.

ITEM 6.

SCHEDULE OF INVESTMENTS.

Included herein under Item 1.

ITEM 7.

FINANCIAL STATEMENTS AND FINANCIAL HIGHLIGHTS FOR OPEN-END MANAGEMENT INVESTMENT COMPANIES.

Not applicable.

ITEM 8.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS FOR OPEN-END MANAGEMENT INVESTMENT COMPANIES.

Not applicable.

ITEM 9.

PROXY DISCLOSURES FOR OPEN-END MANAGEMENT INVESTMENT COMPANIES.

Not applicable.

ITEM 10.

REMUNERATION PAID TO DIRECTORS, OFFICERS, AND OTHERS OF OPEN-END MANAGEMENT INVESTMENT COMPANIES.

Not applicable.

ITEM 11.

STATEMENT REGARDING BASIS FOR APPROVAL OF INVESTMENT ADVISORY CONTRACT.

Included herein under Item 1

ITEM 12.

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

Not applicable.

ITEM 13.

INVESTMENT PROFESSIONALS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

Effective March 1, 2024, the individuals responsible for day-to-day portfolio management, development of investment strategy, oversight and coordination of the Fund are Annabel Rudebeck, Chris Kilpatrick, Michael Buchanan, Greg Handler and Rafael Zielonka. These investment professionals, all of whom are employed by Western Asset Management Company work together with a broader investment management team.

ITEM 14.

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

Not applicable.

ITEM 15.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

Not applicable.

ITEM 16.

CONTROLS AND PROCEDURES.

(a)

The registrant’s principal executive officer and principal financial officer have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a- 3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”)) are effective as of a date within 90 days of the filing date of this report that includes the disclosure required by this paragraph, based on their evaluation of the disclosure controls and procedures required by Rule 30a-3(b) under the 1940 Act and 15d-15(b) under the Securities Exchange Act of 1934.

(b)

There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the period covered by this report that have materially affected, or are likely to materially affect the registrant’s internal control over financial reporting.

ITEM 17.

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

Not applicable.

ITEM 18.

RECOVERY OF ERRONEOUSLY AWARDED COMPENSATION.

(a)

Not applicable.

(b)

Not applicable.

ITEM 19.

EXHIBITS.

	(a) (1) Not applicable.
	Exhibit 99.CODE ETH

	(a) (2) Certifications pursuant to section 302 of the Sarbanes-Oxley Act of 2002 attached hereto.
	Exhibit 99.CERT

	(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 attached hereto.
	Exhibit 99.906CERT

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 Diversified Income Fund

By:	/s/ Jane Trust
	Jane Trust
	Chief Executive Officer

Date:	August 26, 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:	August 26, 2024

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

Date:	August 26, 2024

CERTIFICATIONS PURSUANT TO SECTION 302

EX-99.CERT

CERTIFICATIONS

I, Jane Trust, certify that:

I have reviewed this report on Form N-CSR of Western Asset Diversified Income Fund;

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;

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;

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:

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;

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;

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

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

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):

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

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:	August 26, 2024	/s/ Jane Trust
		Jane Trust
		Chief Executive Officer

CERTIFICATIONS

I, Christopher Berarducci, certify that:

I have reviewed this report on Form N-CSR of Western Asset Diversified Income Fund;

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;

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:	August 26, 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 Diversified Income Fund (the “Registrant”), each certify to the best of their knowledge that:

1. The Registrant’s periodic report on Form N-CSR for the period ended June 30, 2024 (the “Form N-CSR”) fully complies with the requirements of section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

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

Chief Executive Officer		Principal Financial Officer
Western Asset Diversified Income Fund		Western Asset Diversified Income Fund

/s/ Jane Trust		/s/ Christopher Berarducci
Jane Trust		Christopher Berarducci
Date: August 26, 2024		Date: August 26, 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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