Western Asset Funds N-CSR Certified annual shareholder report (management investment company)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number 811-06110

Western Asset Funds, Inc.

(Exact name of registrant as specified in charter)

100 International Drive, Baltimore, MD, 21202

(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: 877-6LM-FUND/656-3863

Date of fiscal year end: May 31

Date of reporting period: May 31, 2023

ITEM 1. REPORT TO STOCKHOLDERS.

The Annual Report to Stockholders is filed herewith.

Annual Report May 31, 2023

WESTERN ASSET

TOTAL RETURN

UNCONSTRAINED FUND

The Securities and Exchange Commission has adopted new regulations that will result in changes to the design and delivery of annual and semi-annual shareholder reports beginning in July 2024.

If you have previously elected to receive shareholder reports electronically, you will continue to do so and need not take any action.

Otherwise, paper copies of the Fund’s shareholder reports will be mailed to you beginning in July 2024. If you would like to receive shareholder reports and other communications from the Fund electronically instead of by mail, you may make that request at any time by contacting your financial intermediary (such as a broker-dealer or bank) or, if you are a direct investor, enrolling at franklintempleton.com.

You may access franklintempleton.com by scanning the code below.

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

What’s inside
Letter from the president	II
Fund overview	1
Fund at a glance	7
Fund expenses	8
Fund performance	10
Schedule of investments	12
Statement of assets and liabilities	45
Statement of operations	47
Statements of changes in net assets	49
Financial highlights	50
Notes to financial statements	56
Report of independent registered public accounting firm	81
Board approval of management and subadvisory agreements	82
Statement regarding liquidity risk management program	86
Additional information	88
Important tax information	95

Fund objective

The Fund seeks to maximize long-term total return.

Letter from the president

Dear Shareholder,

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

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

• Fund prices and performance,

• Market insights and commentaries from our portfolio managers, and

• A host of educational resources.

We look forward to helping you meet your financial goals.

Sincerely,

Jane Trust, CFA

President and Chief Executive Officer

June 30, 2023

II Western Asset Total Return Unconstrained Fund

Fund overview

Q. What is the Fund’s investment strategy?

A. The Fund’s investment objective is to maximize long-term total return. The Fund has a flexible investment strategy and will invest in a variety of securities and instruments and use a variety of investment techniques in pursuing its objective. Under normal market conditions, the Fund will invest at least 50% of its net assets in debt and fixed income securities rated at least in the Baa or BBB categories (“investment grade” securities) at the time of purchase by one or more Nationally Recognized Statistical Rating Organizations (“NRSROs”) or unrated securities that we determined to be of comparable quality at the time of purchase. The Fund intends to invest a substantial portion of its assets in mortgage-backed and asset-backed securities.

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

In particular, the Fund may use certain derivatives, including interest rate swaps, credit default swaps (including buying and selling credit default swaps on individual securities and/or baskets of securities), options (including options on credit default swaps) and/or futures contracts (including options on futures contracts) to a significant extent, although the amounts invested in these instruments may change from time to time. Other derivative instruments may also be used to a significant extent from time to time.

The Fund may use currency related transactions involving options and futures contracts, indexed securities and other derivative instruments (collectively, “Financial Instruments”). These Financial Instruments may be used without limit, for either hedging purposes, or to implement a currency investment strategy.

We use fundamental investment techniques to select issues. In deciding among the securities and instruments in which the Fund may invest, we may take into account the credit quality, country of issue, interest rate, liquidity, maturity and yield of a security or instrument as well as other factors, including the Fund’s dollar-weighted average effective duration and prevailing or anticipated market conditions. Although the Fund may invest in securities of any maturity, the Fund will normally maintain a dollar-weighted average effective duration (including futures positions), as estimated by Western Asset Management Company, LLC (“Western Asset”), the Fund’s primary subadviser, within the range of -3 to 8 years. Although the Fund may invest in debt and fixed income securities of any credit quality, including securities that are in default, under normal market conditions, it is expected that the Fund will maintain a dollar-weighted average credit quality of portfolio holdings of at least the Baa/BBB categories or their equivalent (as determined by Western Asset).

Western Asset Total Return Unconstrained Fund 2023 Annual Report 1

Fund overview (cont’d)

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

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

A. The overall U.S. fixed income market experienced periods of volatility and declined over the twelve-month reporting period ended May 31, 2023. The market’s weakness was driven by several factors, including elevated and persistent inflation, aggressive Federal Reserve Board (the “Fed”) monetary policy tightening, the repercussions from the COVID-19 pandemic, the war in Ukraine, turmoil in the banking industry, and the debt ceiling debate.

Short-term U.S. Treasury yields moved sharply higher as the Fed began to raise interest rates in March 2022 (before the reporting period began) in attempt to rein in inflation. Over the next twelve months, the central bank hiked rates an additional nine times, bringing the federal funds rate to a range between 5.00% and 5.25% — the highest level since 2007. The yield for the two-year Treasury note began the reporting period at 2.53% (the low for the period) and ended at 4.40%. The high of 5.05% took place on March 8, 2023. The yield for the ten-year Treasury note began the reporting period at 2.85% and ended the period at 3.64%. The low of 2.60% occurred on August 1, 2022, and the peak of 4.25% took place on October 24, 2022.

All told, the Bloomberg U.S. Aggregate Indexⁱ returned -2.14% for the twelve months ended May 31, 2023. Riskier fixed income securities, including high yield bonds, were also weak. Over the fiscal year, the Bloomberg U.S. Corporate High Yield — 2% Issuer Cap Indexⁱⁱ returned 0.05%. Elsewhere, the JPMorgan Emerging Markets Bond Index Globalⁱⁱⁱ returned -0.98% for the reporting period.

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

A. A number of adjustments were made to the Fund during the reporting period. We decreased the Fund’s allocations to short inflation swaps, bank loans, and high yield bonds in the industrials sector. In contrast, we increased its exposure to agency residential mortgage-backed securities.

Interest rate derivatives, used in conjunction with cash bonds to establish the Fund’s duration and yield curve positioning, significantly detracted from performance. Credit default swaps (“CDS”) and options on CDS were used to adjust the Fund’s exposures to certain sectors and individual issuers; they were headwinds for performance. Finally, currency derivatives that were utilized to adjust the Fund’s currency exposure detracted from returns.

2 Western Asset Total Return Unconstrained Fund 2023 Annual Report

Performance review

For the twelve months ended May 31, 2023, Class I shares of Western Asset Total Return Unconstrained Fund returned -3.76%. The Fund’s unmanaged benchmarks, the Bloomberg U.S. Aggregate Index and the ICE BofA 3-Month U.S. Treasury Bill Index^iv, returned -2.14% and 3.14%, respectively, for the same period.

Performance Snapshot as of May 31, 2023 (unaudited)
(excluding sales charges)	6 months			12 months
Western Asset Total Return Unconstrained Fund:
Class A		0.82	%		-4.13	%
Class C		0.58	%		-4.70	%
Class FI		0.88	%		-4.08	%
Class R		0.77	%		-4.27	%
Class I		0.96	%		-3.76	%
Class IS		1.05	%		-3.69	%
Bloomberg U.S. Aggregate Index		2.00	%		-2.14	%
ICE BofA 3-Month U.S. Treasury Bill Index		2.16	%		3.14	%

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

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

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

The 30-Day SEC Yields for the period ended May 31, 2023 for Class A, Class C, Class FI, Class R, Class I and Class IS shares were 4.94%, 4.49%, 4.96%, 4.77%, 5.37% and 5.47%, respectively. Absent fee waivers and/or expense reimbursements, the 30-Day SEC Yields for Class C, Class R, Class I and Class IS shares would have been 4.46%, 4.32%, 5.30% and 5.43%, respectively. The 30-Day SEC Yield, calculated pursuant to the standard SEC formula, is based on the Fund’s investments over an annualized trailing 30-day period, and not on the distributions paid by the Fund, which may differ.

Total Annual Operating Expenses (unaudited)

As of the Fund’s current prospectus dated September 30, 2022, the gross total annual fund operating expense ratios for Class A, Class C, Class FI, Class R, Class I and Class IS shares were 1.08%, 1.77%, 1.05%, 1.30%, 0.74% and 0.65%, respectively.

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

Western Asset Total Return Unconstrained Fund 2023 Annual Report 3

Fund overview (cont’d)

As a result of expense limitation arrangements, the ratio of total annual fund operating expenses, other than interest, brokerage commissions, taxes, extraordinary expenses, deferred organizational expenses and acquired fund fees and expenses, to average net assets will not exceed 1.07% for Class A shares, 1.80% for Class C shares, 1.10% for Class FI shares, 1.35% for Class R shares, 0.75% for Class I shares and 0.65% for Class IS shares. In addition, the ratio of total annual fund operating expenses for Class IS shares will not exceed the ratio of total annual fund operating expenses for Class I shares. These expense limitation arrangements cannot be terminated prior to December 31, 2024 without the Board of Directors’ consent. In addition, the manager has agreed to waive the Fund’s management fee to an extent sufficient to offset the net management fee payable in connection with any investment in an affiliated money market fund. This management fee waiver is not subject to the recapture provision discussed below.

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

Q. What were the leading contributors to performance?

A. The largest contributor to the Fund’s absolute performance during the reporting period was its allocation to emerging markets debt, specifically its exposure to local currency sovereigns. Yield curve positioning was also additive for results as the curve flattened over the reporting period. The Fund’s short inflation swap positions added to performance, as did its allocation to collateralized loan obligations.

Q. What were the leading detractors from performance?

A. The largest detractor from the Fund’s absolute performance during the reporting period was its duration positioning, as developed market yields rose significantly. The Fund’s non-U.S. dollar exposure was a headwind for returns, as were its high-yield and bank loan exposures. The Fund’s exposure to structured products, in aggregate, was negative. In particular, an allocation to commercial mortgage-backed securities detracted from returns as their spreads widened. Finally, the Fund’s allocation to investment-grade corporate bonds was also negative for returns.

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

Sincerely,

Western Asset Management Company, LLC

June 13, 2023

4 Western Asset Total Return Unconstrained Fund 2023 Annual Report

RISKS: Fixed income securities involve interest rate, credit, inflation and reinvestment risks. As interest rates rise, the value of fixed income securities falls. High yield securities, commonly known as “junk bonds,” include greater price volatility, illiquidity and possibility of default. 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 use of leverage may increase volatility and possibility of loss. Potential active and frequent trading may result in higher transaction costs and increased investor liability. Asset-backed, mortgage-backed or mortgage-related securities are subject to prepayment and extension risks. Derivatives, such as options, futures and swaps, can be illiquid, may disproportionately increase losses, and have a potentially large impact on Fund performance. The market values of securities or other assets will fluctuate, sometimes sharply and unpredictably, due to changes in general market conditions, overall economic trends or events, governmental actions or intervention, actions taken by the U.S. Federal Reserve or foreign central banks, market disruptions caused by trade disputes or other factors, political developments, armed conflicts, economic sanctions and countermeasures in response to sanctions, major cybersecurity events, investor sentiment, the global and domestic effects of a pandemic, and other factors that may or may not be related to the issuer of the security or other asset. Please see the Fund’s prospectus for a more complete discussion of these and other risks and the Fund’s investment strategies.

Portfolio holdings and breakdowns are as of May 31, 2023 and are subject to change and may not be representative of the portfolio managers’ current or future investments. Please refer to pages 12 through 44 for a list and percentage breakdown of the Fund’s holdings.

The mention of sector breakdowns is for informational purposes only and should not be construed as a recommendation to purchase or sell any securities. The information provided regarding such sectors is not a sufficient basis upon which to make an investment decision. Investors seeking financial advice regarding the appropriateness of investing in any securities or investment strategies discussed should consult their financial professional. Portfolio holdings are subject to change at any time and may not be representative of the portfolio managers’ current or future investments. The Fund’s top five sector holdings (as a percentage of net assets) as of May 31, 2023 were: corporate bonds & notes (35.2%), mortgage-backed securities (14.7%), collateralized mortgage obligations (13.9%), sovereign bonds (12.6%) and asset-backed securities (10.9%). The Fund’s portfolio composition is subject to change at any time.

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

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

Western Asset Total Return Unconstrained Fund 2023 Annual Report 5

Fund overview (cont’d)

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

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

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

^iv The ICE BofA 3-Month U.S. Treasury Bill Index is an unmanaged index that comprises a single U.S. Treasury issue with approximately three months to final maturity, purchased at the beginning of each month and held for one full month.

6 Western Asset Total Return Unconstrained Fund 2023 Annual Report

Fund at a glance^† (unaudited)

Investment breakdown (%) as a percent of total investments

† The bar graph above represents the composition of the Fund’s investments as of May 31, 2023 and May 31, 2022 and does not include derivatives, such as written options, futures contracts, forward foreign currency contracts and swap contracts. The Fund is actively managed. As a result, the composition of the Fund’s investments is subject to change at any time.

* Prior year percentages have been restated to reflect current classifications.

Western Asset Total Return Unconstrained Fund 2023 Annual Report 7

Fund expenses (unaudited)

Example

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

This example is based on an investment of $1,000 invested on December 1, 2022 and held for the six months ended May 31, 2023.

Actual expenses

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

Hypothetical example for comparison purposes

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

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

Based on actual total return1													Based on hypothetical total return1
	Actual Total Return Without Sales Charge2			Beginning Account Value		Ending Account Value		Annualized Expense Ratio			Expenses Paid During the Period3			Hypothetical Annualized Total Return			Beginning Account Value		Ending Account Value		Annualized Expense Ratio			Expenses Paid During the Period3
Class A		0.82	%	$	1,000.00	$	1,008.20		1.03	%	$	5.16	Class A		5.00	%	$	1,000.00	$	1,019.80		1.03	%	$	5.19
Class C		0.58			1,000.00		1,005.80		1.70			8.50	Class C		5.00			1,000.00		1,016.45		1.70			8.55
Class FI		0.88			1,000.00		1,008.80		1.05			5.26	Class FI		5.00			1,000.00		1,019.70		1.05			5.29
Class R		0.77			1,000.00		1,007.70		1.35			6.76	Class R		5.00			1,000.00		1,018.20		1.35			6.79
Class I		0.96			1,000.00		1,009.60		0.75			3.76	Class I		5.00			1,000.00		1,021.19		0.75			3.78
Class IS		1.05			1,000.00		1,010.50		0.65			3.26	Class IS		5.00			1,000.00		1,021.69		0.65			3.28

8 Western Asset Total Return Unconstrained Fund 2023 Annual Report

¹  For the six months ended May 31, 2023.

²  Assumes the reinvestment of all distributions, including returns of capital, if any, at net asset value and does not reflect the deduction of the applicable sales charge with respect to Class A shares or the applicable contingent deferred sales charge (“CDSC”) with respect to Class C shares. Total return is not annualized, as it may not be representative of the total return for the year. Performance figures may reflect compensating balance arrangements, fee waivers and/or expense reimbursements. In the absence of compensating balance arrangements, fee waivers and/or expense reimbursements, the total return would have been lower. Past performance is no guarantee of future results.

³  Expenses (net of compensating balance arrangements, fee waivers and/or expense reimbursements) are equal to each class’ respective annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year (182), then divided by 365.

Western Asset Total Return Unconstrained Fund 2023 Annual Report 9

Fund performance (unaudited)

Average annual total returns
Without sales charges1	Class A			Class C			Class FI			Class R			Class I			Class IS
Twelve Months Ended 5/31/23		-4.13	%		-4.70	%		-4.08	%		-4.27	%		-3.76	%		-3.69	%
Five Years Ended 5/31/23		-0.84			-1.50			-0.82			-1.04			-0.49			-0.40
Ten Years Ended 5/31/23		0.72			0.02			0.75			0.50			1.05			1.14
With sales charges2	Class A			Class C			Class FI			Class R			Class I			Class IS
Twelve Months Ended 5/31/23		-8.22	%		-5.65	%		-4.08	%		-4.27	%		-3.76	%		-3.69	%
Five Years Ended 5/31/23		-1.70			-1.50			-0.82			-1.04			-0.49			-0.40
Ten Years Ended 5/31/23		0.29			0.02			0.75			0.50			1.05			1.14

Cumulative total returns
Without sales charges1
Class A (5/31/13 through 5/31/23)	7.46	%
Class C (5/31/13 through 5/31/23)	0.21
Class FI (5/31/13 through 5/31/23)	7.78
Class R (5/31/13 through 5/31/23)	5.10
Class I (5/31/13 through 5/31/23)	11.06
Class IS (5/31/13 through 5/31/23)	12.01

All figures represent past performance and are not a guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Performance figures may reflect compensating balance arrangements, fee waivers and/or expense reimbursements. In the absence of compensating balance arrangements, fee waivers and/or expense reimbursements, the total return would have been lower.

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

²  Assumes the reinvestment of all distributions, including returns of capital, if any, at net asset value. In addition, Class A shares reflect the deduction of the maximum initial sales charge of 4.25% on purchases made prior to August 15, 2022. Purchases made on or after August 15, 2022 incur a maximum initial sales charge of 3.75%. Class C shares reflect the deduction of a 1.00% CDSC, which applies if shares are redeemed within one year from purchase payment.

10 Western Asset Total Return Unconstrained Fund 2023 Annual Report

Historical performance

Value of $1,000,000 invested in

Class I Shares of Western Asset Total Return Unconstrained Fund vs. Bloomberg U.S. Aggregate Index and ICE BofA 3-Month U.S. Treasury Bill Index† — May 2013 - May 2023

All figures represent past performance and are not a guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Performance figures may reflect compensating balance arrangements, fee waivers and/or expense reimbursements. In the absence of compensating balance arrangements, fee waivers and/or expense reimbursements, the total return would have been lower.

† Hypothetical illustration of $1,000,000 invested in Class I shares of Western Asset Total Return Unconstrained Fund on May 31, 2013, assuming the reinvestment of all distributions, including returns of capital, if any, at net asset value through May 31, 2023. The hypothetical illustration also assumes a $1,000,000 investment in the Bloomberg U.S. Aggregate Index and the ICE BofA 3-Month U.S. Treasury Bill Index (each an “Index” and together, the “Indices”). The Bloomberg U.S. Aggregate Index is a broad-based bond index comprised of government, corporate, mortgage- and asset-backed issues, rated investment grade or higher, and having at least one year to maturity. The ICE BofA 3-Month U.S. Treasury Bill Index is an unmanaged index that comprises a single U.S. Treasury issue with approximately three months to final maturity, purchased at the beginning of each month and held for one full month. The Indices are unmanaged and are not subject to the same management and trading expenses as a mutual fund. Please note that an investor cannot invest directly in an index. The performance of the Fund’s other classes may be greater or less than the Class I shares’ performance indicated on this chart, depending on whether greater or lesser sales charges and fees were incurred by shareholders investing in the other classes.

Western Asset Total Return Unconstrained Fund 2023 Annual Report 11

Schedule of investments

May 31, 2023

Western Asset Total Return Unconstrained Fund

(Percentages shown based on Fund net assets)

Security	Rate			Maturity Date		Face Amount†			Value
Corporate Bonds & Notes — 35.2%
Communication Services — 3.4%
Diversified Telecommunication Services — 0.4%
AT&T Inc., Senior Notes		1.700	%		3/25/26		370,000		$	338,349
AT&T Inc., Senior Notes		2.250	%		2/1/32		660,000			528,728
AT&T Inc., Senior Notes		2.550	%		12/1/33		120,000			94,355
NTT Finance Corp., Senior Notes		4.372	%		7/27/27		270,000			267,399	(a)
Total Diversified Telecommunication Services										1,228,831
Entertainment — 0.7%
Netflix Inc., Senior Notes		3.875	%		11/15/29		840,000	EUR		879,610	(b)
Walt Disney Co., Senior Notes		8.450	%		8/1/34		350,000			441,449
Warnermedia Holdings Inc., Senior Notes		3.755	%		3/15/27		480,000			449,989
Warnermedia Holdings Inc., Senior Notes		5.050	%		3/15/42		250,000			202,418
Warnermedia Holdings Inc., Senior Notes		5.141	%		3/15/52		300,000			234,353
Total Entertainment										2,207,819
Media — 1.4%
CCO Holdings LLC/CCO Holdings Capital Corp., Senior Notes		4.250	%		1/15/34		2,560,000			1,896,266	(a)
Charter Communications Operating LLC/Charter Communications Operating Capital Corp., Senior Secured Notes		4.908	%		7/23/25		270,000			265,592
Charter Communications Operating LLC/Charter Communications Operating Capital Corp., Senior Secured Notes		5.375	%		4/1/38		260,000			219,486
Charter Communications Operating LLC/Charter Communications Operating Capital Corp., Senior Secured Notes		3.500	%		3/1/42		40,000			26,150
Charter Communications Operating LLC/Charter Communications Operating Capital Corp., Senior Secured Notes		4.800	%		3/1/50		180,000			131,928
Charter Communications Operating LLC/Charter Communications Operating Capital Corp., Senior Secured Notes		5.500	%		4/1/63		585,000			453,004
Comcast Corp., Senior Notes		2.800	%		1/15/51		90,000			58,926

See Notes to Financial Statements.

12 Western Asset Total Return Unconstrained Fund 2023 Annual Report

Western Asset Total Return Unconstrained Fund

(Percentages shown based on Fund net assets)

Security	Rate			Maturity Date		Face Amount†		Value
Media — continued
Comcast Corp., Senior Notes		2.887	%		11/1/51		190,000	$	125,226
DISH DBS Corp., Senior Secured Notes		5.250	%		12/1/26		380,000		300,882	(a)
DISH DBS Corp., Senior Secured Notes		5.750	%		12/1/28		320,000		232,704	(a)
Time Warner Cable LLC, Senior Secured Notes		6.550	%		5/1/37		10,000		9,535
Time Warner Cable LLC, Senior Secured Notes		7.300	%		7/1/38		500,000		511,178
Total Media									4,230,877
Wireless Telecommunication Services — 0.9%
CSC Holdings LLC, Senior Notes		3.375	%		2/15/31		590,000		403,913	(a)
CSC Holdings LLC, Senior Notes		4.500	%		11/15/31		680,000		473,404	(a)
CSC Holdings LLC, Senior Notes		5.000	%		11/15/31		1,240,000		537,671	(a)
T-Mobile USA Inc., Senior Notes		2.250	%		2/15/26		120,000		111,338
T-Mobile USA Inc., Senior Notes		5.375	%		4/15/27		570,000		570,659
T-Mobile USA Inc., Senior Notes		2.625	%		2/15/29		80,000		70,051
T-Mobile USA Inc., Senior Notes		3.375	%		4/15/29		120,000		108,726
T-Mobile USA Inc., Senior Notes		3.500	%		4/15/31		790,000		704,398
Total Wireless Telecommunication Services									2,980,160
Total Communication Services									10,647,687
Consumer Discretionary — 2.6%
Automobiles — 1.0%
Ford Motor Co., Senior Notes		3.250	%		2/12/32		1,290,000		981,397
Ford Motor Co., Senior Notes		6.100	%		8/19/32		210,000		197,587
Ford Motor Credit Co. LLC, Senior Notes		2.300	%		2/10/25		660,000		616,664
Ford Motor Credit Co. LLC, Senior Notes		3.625	%		6/17/31		340,000		275,357
General Motors Co., Senior Notes		5.600	%		10/15/32		120,000		115,672
General Motors Co., Senior Notes		6.600	%		4/1/36		30,000		30,477
General Motors Financial Co. Inc., Senior Notes		3.800	%		4/7/25		120,000		116,013
Nissan Motor Co. Ltd., Senior Notes		3.522	%		9/17/25		790,000		733,884	(a)
Total Automobiles									3,067,051
Broadline Retail — 0.3%
Prosus NV, Senior Notes		3.061	%		7/13/31		1,310,000		1,006,523	(a)
Hotels, Restaurants & Leisure — 1.3%
Las Vegas Sands Corp., Senior Notes		3.200	%		8/8/24		760,000		733,445
Las Vegas Sands Corp., Senior Notes		2.900	%		6/25/25		110,000		102,910
Sands China Ltd., Senior Notes		5.625	%		8/8/25		1,650,000		1,606,846

See Notes to Financial Statements.

Western Asset Total Return Unconstrained Fund 2023 Annual Report 13

Schedule of investments (cont’d)

May 31, 2023

Western Asset Total Return Unconstrained Fund

(Percentages shown based on Fund net assets)

Security	Rate			Maturity Date		Face Amount†		Value
Hotels, Restaurants & Leisure — continued
Sands China Ltd., Senior Notes		2.800	%		3/8/27		500,000	$	430,821
Sands China Ltd., Senior Notes		5.900	%		8/8/28		590,000		558,036
Sands China Ltd., Senior Notes		3.350	%		3/8/29		330,000		272,518
Sands China Ltd., Senior Notes		3.750	%		8/8/31		200,000		160,906
Wynn Resorts Finance LLC/Wynn Resorts Capital Corp., Senior Notes		5.125	%		10/1/29		10,000		8,939	(a)
Wynn Resorts Finance LLC/Wynn Resorts Capital Corp., Senior Notes		7.125	%		2/15/31		120,000		120,089	(a)
Total Hotels, Restaurants & Leisure									3,994,510
Total Consumer Discretionary									8,068,084
Consumer Staples — 0.6%
Beverages — 0.3%
Anheuser-Busch Cos. LLC/Anheuser- Busch InBev Worldwide Inc., Senior Notes		3.650	%		2/1/26		885,000		861,991
Anheuser-Busch InBev Worldwide Inc., Senior Notes		4.600	%		4/15/48		44,000		40,469
Anheuser-Busch InBev Worldwide Inc., Senior Notes		5.550	%		1/23/49		100,000		104,681
Total Beverages									1,007,141
Tobacco — 0.3%
Altria Group Inc., Senior Notes		4.400	%		2/14/26		255,000		252,267
Altria Group Inc., Senior Notes		3.875	%		9/16/46		180,000		124,938
Altria Group Inc., Senior Notes		5.950	%		2/14/49		50,000		46,378
Altria Group Inc., Senior Notes		6.200	%		2/14/59		188,000		178,040
BAT Capital Corp., Senior Notes		2.789	%		9/6/24		260,000		250,607
BAT Capital Corp., Senior Notes		4.540	%		8/15/47		180,000		129,153
Total Tobacco									981,383
Total Consumer Staples									1,988,524
Energy — 6.9%
Oil, Gas & Consumable Fuels — 6.9%
Cameron LNG LLC, Senior Secured Notes		3.302	%		1/15/35		170,000		141,951	(a)
Cheniere Energy Partners LP, Senior Notes		4.000	%		3/1/31		350,000		308,398
Cheniere Energy Partners LP, Senior Notes		3.250	%		1/31/32		460,000		376,877
Continental Resources Inc., Senior Notes		2.268	%		11/15/26		320,000		286,304	(a)

See Notes to Financial Statements.

14 Western Asset Total Return Unconstrained Fund 2023 Annual Report

Western Asset Total Return Unconstrained Fund

(Percentages shown based on Fund net assets)

Security	Rate			Maturity Date		Face Amount†		Value
Oil, Gas & Consumable Fuels — continued
Continental Resources Inc., Senior Notes		5.750	%		1/15/31		750,000	$	715,066	(a)
Coterra Energy Inc., Senior Notes		3.900	%		5/15/27		385,000		365,676
Coterra Energy Inc., Senior Notes		4.375	%		3/15/29		230,000		217,140
Devon Energy Corp., Senior Notes		8.250	%		8/1/23		1,370,000		1,371,163
Devon Energy Corp., Senior Notes		5.250	%		10/15/27		26,000		25,732
Devon Energy Corp., Senior Notes		5.875	%		6/15/28		26,000		26,059
Devon Energy Corp., Senior Notes		4.500	%		1/15/30		84,000		79,054
Devon Energy Corp., Senior Notes		5.600	%		7/15/41		205,000		190,425
Devon Energy Corp., Senior Notes		4.750	%		5/15/42		220,000		184,395
Diamondback Energy Inc., Senior Notes		3.250	%		12/1/26		190,000		181,211
Diamondback Energy Inc., Senior Notes		3.500	%		12/1/29		200,000		180,828
Ecopetrol SA, Senior Notes		5.375	%		6/26/26		220,000		209,853
Ecopetrol SA, Senior Notes		5.875	%		5/28/45		1,180,000		777,656
Energy Transfer LP, Junior Subordinated Notes (3 mo. USD LIBOR + 4.028%)		9.349	%		6/16/23		1,930,000		1,724,938	(c)(d)
Energy Transfer LP, Junior Subordinated Notes (6.500% to 11/15/26 then 5 year Treasury Constant Maturity Rate + 5.694%)		6.500	%		11/15/26		80,000		70,200	(c)(d)
Energy Transfer LP, Junior Subordinated Notes (7.125% to 5/15/30 then 5 year Treasury Constant Maturity Rate + 5.306%)		7.125	%		5/15/30		310,000		261,341	(c)(d)
Energy Transfer LP, Senior Notes		4.950	%		6/15/28		90,000		88,000
Energy Transfer LP, Senior Notes		5.250	%		4/15/29		130,000		128,427
Energy Transfer LP, Senior Notes		3.750	%		5/15/30		120,000		108,754
Energy Transfer LP, Senior Notes		5.300	%		4/1/44		60,000		50,858
Energy Transfer LP, Senior Notes		5.400	%		10/1/47		10,000		8,613
Energy Transfer LP, Senior Notes		6.250	%		4/15/49		705,000		672,107
Energy Transfer LP, Senior Notes		5.000	%		5/15/50		230,000		188,406
Enterprise Products Operating LLC, Senior Notes		6.875	%		3/1/33		500,000		563,753
Enterprise Products Operating LLC, Senior Notes		3.700	%		1/31/51		240,000		178,933

See Notes to Financial Statements.

Western Asset Total Return Unconstrained Fund 2023 Annual Report 15

Schedule of investments (cont’d)

May 31, 2023

Western Asset Total Return Unconstrained Fund

(Percentages shown based on Fund net assets)

Security	Rate			Maturity Date		Face Amount†		Value
Oil, Gas & Consumable Fuels — continued
Enterprise Products Operating LLC, Senior Notes (5.375% to 2/15/28 then 3 mo. USD LIBOR + 2.570%)		5.375	%		2/15/78		130,000	$	106,254	(d)
EOG Resources Inc., Senior Notes		4.950	%		4/15/50		160,000		155,411
EQT Corp., Senior Notes		6.125	%		2/1/25		260,000		260,432
EQT Corp., Senior Notes		3.900	%		10/1/27		1,360,000		1,264,936
EQT Corp., Senior Notes		5.000	%		1/15/29		250,000		235,999
KazMunayGas National Co. JSC, Senior Notes		4.750	%		4/19/27		750,000		707,173	(a)
KazMunayGas National Co. JSC, Senior Notes		6.375	%		10/24/48		530,000		434,446	(a)
Kinder Morgan Inc., Senior Notes		7.750	%		1/15/32		310,000		350,880
NGPL PipeCo LLC, Senior Notes		4.875	%		8/15/27		1,480,000		1,416,814	(a)
Occidental Petroleum Corp., Senior Notes		7.950	%		6/15/39		530,000		593,067
Parsley Energy LLC/Parsley Finance Corp., Senior Notes		4.125	%		2/15/28		70,000		65,477	(a)
Petrobras Global Finance BV, Senior Notes		6.850	%		6/5/2115		560,000		477,564
Southwestern Energy Co., Senior Notes		5.375	%		3/15/30		120,000		110,426
Southwestern Energy Co., Senior Notes		4.750	%		2/1/32		320,000		277,197
Targa Resources Corp., Senior Notes		5.200	%		7/1/27		630,000		622,242
Targa Resources Partners LP/Targa Resources Partners Finance Corp., Senior Notes		6.500	%		7/15/27		210,000		210,939
Targa Resources Partners LP/Targa Resources Partners Finance Corp., Senior Notes		6.875	%		1/15/29		30,000		30,414
Western Midstream Operating LP, Senior Notes		3.350	%		2/1/25		280,000		267,422
Western Midstream Operating LP, Senior Notes		4.300	%		2/1/30		1,950,000		1,736,096
Western Midstream Operating LP, Senior Notes		5.450	%		4/1/44		230,000		191,903
Western Midstream Operating LP, Senior Notes		5.500	%		8/15/48		410,000		335,451
Western Midstream Operating LP, Senior Notes		5.500	%		2/1/50		200,000		159,866
Williams Cos. Inc., Senior Notes		3.750	%		6/15/27		460,000		438,425

See Notes to Financial Statements.

16 Western Asset Total Return Unconstrained Fund 2023 Annual Report

Western Asset Total Return Unconstrained Fund

(Percentages shown based on Fund net assets)

Security	Rate			Maturity Date		Face Amount†			Value
Oil, Gas & Consumable Fuels — continued
Williams Cos. Inc., Senior Notes		3.500	%		11/15/30		380,000		$	340,891
Williams Cos. Inc., Senior Notes		5.750	%		6/24/44		130,000			124,815
YPF SA, Senior Secured Notes		9.000	%		2/12/26		822,842			821,773	(a)
Total Energy										21,418,431
Financials — 13.3%
Banks — 7.6%
Banco Santander SA, Senior Notes (4.175% to 3/24/27 then 1 year Treasury Constant Maturity Rate + 2.000%)		4.175	%		3/24/28		800,000			752,784	(d)
Bank of America Corp., Senior Notes (2.551% to 2/4/27 then SOFR + 1.050%)		2.551	%		2/4/28		1,210,000			1,096,266	(d)
Bank of America Corp., Senior Notes (2.972% to 2/4/32 then SOFR + 1.330%)		2.972	%		2/4/33		820,000			684,391	(d)
Bank of America Corp., Senior Notes (3.841% to 4/25/24 then SOFR + 1.110%)		3.841	%		4/25/25		810,000			796,374	(d)
Bank of America Corp., Senior Notes (4.827% to 7/22/25 then SOFR + 1.750%)		4.827	%		7/22/26		240,000			237,512	(d)
Bank of Nova Scotia, Senior Notes		3.450	%		4/11/25		935,000			902,830
BNP Paribas SA, Senior Notes (2.871% to 4/19/31 then SOFR + 1.387%)		2.871	%		4/19/32		1,130,000			932,967	(a)(d)
Citigroup Inc., Senior Notes		4.650	%		7/30/45		98,000			86,957
Citigroup Inc., Senior Notes (3.070% to 2/24/27 then SOFR + 1.280%)		3.070	%		2/24/28		330,000			305,943	(d)
Citigroup Inc., Senior Notes (3.290% to 3/17/25 then SOFR + 1.528%)		3.290	%		3/17/26		750,000			721,748	(d)
Citigroup Inc., Senior Notes (3.785% to 3/17/32 then SOFR + 1.939%)		3.785	%		3/17/33		540,000			479,766	(d)
Citigroup Inc., Subordinated Notes		5.500	%		9/13/25		510,000			510,204
Cooperatieve Rabobank UA, Junior Subordinated Notes (4.625% to 12/29/25 then EUR 5 year Swap Rate + 4.098%)		4.625	%		12/29/25		2,200,000	EUR		2,139,938	(b)(c)(d)

See Notes to Financial Statements.

Western Asset Total Return Unconstrained Fund 2023 Annual Report 17

Schedule of investments (cont’d)

May 31, 2023

Western Asset Total Return Unconstrained Fund

(Percentages shown based on Fund net assets)

Security	Rate			Maturity Date		Face Amount†			Value
Banks — continued
Cooperatieve Rabobank UA, Senior Notes (3.649% to 4/6/27 then 1 year Treasury Constant Maturity Rate + 1.220%)		3.649	%		4/6/28		450,000		$	420,203	(a)(d)
Credit Agricole SA, Junior Subordinated Notes (8.125% to 12/23/25 then USD 5 year ICE Swap Rate + 6.185%)		8.125	%		12/23/25		1,020,000			1,026,375	(a)(c)(d)
Danske Bank A/S, Senior Notes (3.773% to 3/28/24 then 1 year Treasury Constant Maturity Rate + 1.450%)		3.773	%		3/28/25		1,290,000			1,260,032	(a)(d)
Danske Bank A/S, Senior Notes (4.298% to 4/1/27 then 1 year Treasury Constant Maturity Rate + 1.750%)		4.298	%		4/1/28		720,000			676,717	(a)(d)
ING Groep NV, Senior Notes (4.017% to 3/28/27 then SOFR + 1.830%)		4.017	%		3/28/28		400,000			379,226	(d)
JPMorgan Chase & Co., Senior Notes (2.947% to 2/24/27 then SOFR + 1.170%)		2.947	%		2/24/28		790,000			731,680	(d)
JPMorgan Chase & Co., Senior Notes (4.080% to 4/26/25 then SOFR + 1.320%)		4.080	%		4/26/26		640,000			626,712	(d)
JPMorgan Chase & Co., Senior Notes (4.851% to 7/25/27 then SOFR + 1.990%)		4.851	%		7/25/28		920,000			915,663	(d)
Lloyds Banking Group PLC, Junior
Subordinated Notes (4.947% to 6/27/25 then EUR 5 year Swap Rate + 5.290%)		4.947	%		6/27/25		1,312,000	EUR		1,290,549	(b)(c)(d)
Lloyds Banking Group PLC, Subordinated Notes		4.500	%		11/4/24		470,000			457,842
Mitsubishi UFJ Financial Group Inc., Senior Notes (3.837% to 4/17/25 then 1 year Treasury Constant Maturity Rate + 1.125%)		3.837	%		4/17/26		460,000			444,036	(d)
Mitsubishi UFJ Financial Group Inc., Senior Notes (4.080% to 4/19/27 then 1 year Treasury Constant Maturity Rate + 1.300%)		4.080	%		4/19/28		260,000			248,451	(d)
Royal Bank of Canada, Senior Notes		3.375	%		4/14/25		1,195,000			1,156,764

See Notes to Financial Statements.

18 Western Asset Total Return Unconstrained Fund 2023 Annual Report

Western Asset Total Return Unconstrained Fund

(Percentages shown based on Fund net assets)

Security	Rate			Maturity Date		Face Amount†		Value
Banks — continued
Toronto-Dominion Bank, Senior Notes		4.693	%		9/15/27		920,000	$	903,356
Toronto-Dominion Bank, Senior Notes		4.456	%		6/8/32		945,000		894,226
Wells Fargo & Co., Senior Notes (3.350% to 3/2/32 then SOFR + 1.500%)		3.350	%		3/2/33		140,000		120,354	(d)
Wells Fargo & Co., Senior Notes (3.908% to 4/25/25 then SOFR + 1.320%)		3.908	%		4/25/26		1,380,000		1,343,699	(d)
Wells Fargo & Co., Senior Notes (4.808% to 7/25/27 then SOFR + 1.980%)		4.808	%		7/25/28		380,000		374,210	(d)
Wells Fargo & Co., Senior Notes (5.013% to 4/4/50 then 3 mo. Term SOFR + 4.502%)		5.013	%		4/4/51		820,000		751,035	(d)
Total Banks									23,668,810
Capital Markets — 3.6%
Credit Suisse AG, Senior Notes		3.700	%		2/21/25		360,000		342,283
Credit Suisse Group AG, Senior Notes (3.091% to 5/14/31 then SOFR + 1.730%)		3.091	%		5/14/32		2,040,000		1,644,984	(a)(d)
Credit Suisse Group AG, Junior Subordinated Notes (9.750% to 12/23/27 then 5 year Treasury Constant Maturity Rate + 6.383%)		9.750	%		6/23/27		1,680,000		58,800	*(a)(c)(d)(e)
Goldman Sachs Group Inc., Senior Notes (3.615% to 3/15/27 then SOFR + 1.846%)		3.615	%		3/15/28		680,000		642,238	(d)
Goldman Sachs Group Inc., Subordinated Notes		5.150	%		5/22/45		590,000		545,249
Intercontinental Exchange Inc., Senior Notes		4.000	%		9/15/27		1,000,000		984,362
Intercontinental Exchange Inc., Senior Notes		4.600	%		3/15/33		850,000		828,791
Morgan Stanley, Senior Notes (2.475% to 1/21/27 then SOFR + 1.000%)		2.475	%		1/21/28		760,000		690,430	(d)
Morgan Stanley, Senior Notes (3.620% to 4/17/24 then SOFR + 1.160%)		3.620	%		4/17/25		940,000		921,206	(d)

See Notes to Financial Statements.

Western Asset Total Return Unconstrained Fund 2023 Annual Report 19

Schedule of investments (cont’d)

May 31, 2023

Western Asset Total Return Unconstrained Fund

(Percentages shown based on Fund net assets)

Security		Rate			Maturity Date		Face Amount†			Value
Capital Markets — continued
Morgan Stanley, Senior Notes (4.679% to 7/17/25 then SOFR + 1.669%)			4.679	%		7/17/26		760,000		$	751,912	(d)
UBS Group AG, Junior Subordinated Notes (7.000% to 1/31/24 then USD 5 year ICE Swap Rate + 4.344%)			7.000	%		1/31/24		3,910,000			3,743,825	(a)(c)(d)
Total Capital Markets											11,154,080
Consumer Finance — 0.6%
American Express Co., Senior Notes			3.950	%		8/1/25		2,005,000			1,957,349
Financial Services — 1.4%
AerCap Ireland Capital DAC/AerCap Global Aviation Trust, Senior Notes			4.625	%		10/15/27		1,190,000			1,131,187
AerCap Ireland Capital DAC/AerCap Global Aviation Trust, Senior Notes			3.300	%		1/30/32		640,000			520,567
Indian Railway Finance Corp. Ltd., Senior Secured Notes			7.270	%		6/15/27		100,000,000	INR		1,207,780
Park Aerospace Holdings Ltd., Senior Notes			5.500	%		2/15/24		830,000			821,217	(a)
Vanguard Group Inc.			3.050	%		8/22/50		1,000,000			645,271	(f)(g)
Total Financial Services											4,326,022
Insurance — 0.1%
MetLife Inc., Junior Subordinated Notes			6.400	%		12/15/36		510,000			503,239
Total Financials											41,609,500
Health Care — 2.7%
Biotechnology — 0.1%
AbbVie Inc., Senior Notes			3.200	%		11/21/29		90,000			81,728
AbbVie Inc., Senior Notes			4.875	%		11/14/48		60,000			55,666
Total Biotechnology											137,394
Health Care Providers & Services — 1.9%
Cigna Corp., Senior Notes			3.400	%		3/1/27		665,000			632,761
Cigna Group, Senior Notes	��		4.375	%		10/15/28		10,000			9,752
Cigna Group, Senior Notes			4.900	%		12/15/48		60,000			54,636
CommonSpirit Health, Secured Notes			4.350	%		11/1/42		660,000			563,478
CommonSpirit Health, Senior Secured Notes			3.817	%		10/1/49		390,000			298,250
CVS Health Corp., Senior Notes			1.300	%		8/21/27		920,000			794,457
CVS Health Corp., Senior Notes			1.875	%		2/28/31		90,000			71,911
CVS Health Corp., Senior Notes			5.050	%		3/25/48		60,000			54,245

See Notes to Financial Statements.

20 Western Asset Total Return Unconstrained Fund 2023 Annual Report

Western Asset Total Return Unconstrained Fund

(Percentages shown based on Fund net assets)

Security	Rate			Maturity Date		Face Amount†		Value
Health Care Providers & Services — continued
CVS Pass-Through Trust, Senior Secured Trust		6.036	%		12/10/28		35,608	$	35,942
Dignity Health, Secured Notes		5.267	%		11/1/64		860,000		794,960
Elevance Health Inc., Senior Notes		4.100	%		5/15/32		350,000		329,388
Hackensack Meridian Health Inc., Senior Secured Notes		4.211	%		7/1/48		310,000		262,815
HCA Inc., Senior Notes		5.625	%		9/1/28		20,000		20,158
HCA Inc., Senior Notes		3.500	%		9/1/30		380,000		336,193
Humana Inc., Senior Notes		2.150	%		2/3/32		110,000		87,555
Humana Inc., Senior Notes		8.150	%		6/15/38		480,000		579,107
Humana Inc., Senior Notes		4.625	%		12/1/42		30,000		26,577
UnitedHealth Group Inc., Senior Notes		3.700	%		5/15/27		400,000		390,933
UnitedHealth Group Inc., Senior Notes		2.300	%		5/15/31		70,000		59,792
Willis-Knighton Medical Center, Secured Notes		4.813	%		9/1/48		580,000		511,130
Total Health Care Providers & Services									5,914,040
Pharmaceuticals — 0.7%
Teva Pharmaceutical Finance Netherlands III BV, Senior Notes		3.150	%		10/1/26		1,830,000		1,635,571
Teva Pharmaceutical Finance Netherlands III BV, Senior Notes		5.125	%		5/9/29		730,000		658,597
Total Pharmaceuticals									2,294,168
Total Health Care									8,345,602
Industrials — 2.3%
Aerospace & Defense — 0.6%
Boeing Co., Senior Notes		2.700	%		2/1/27		460,000		422,673
Boeing Co., Senior Notes		3.250	%		2/1/35		130,000		104,757
Boeing Co., Senior Notes		3.550	%		3/1/38		150,000		116,488
Boeing Co., Senior Notes		5.705	%		5/1/40		265,000		261,309
Boeing Co., Senior Notes		5.805	%		5/1/50		590,000		578,268
Boeing Co., Senior Notes		5.930	%		5/1/60		290,000		282,976
Total Aerospace & Defense									1,766,471
Building Products — 0.0%††
Builders FirstSource Inc., Senior Notes		4.250	%		2/1/32		30,000		25,802	(a)
Commercial Services & Supplies — 0.1%
California Institute of Technology, Senior Notes		3.650	%		9/1/2119		260,000		177,349

See Notes to Financial Statements.

Western Asset Total Return Unconstrained Fund 2023 Annual Report 21

Schedule of investments (cont’d)

May 31, 2023

Western Asset Total Return Unconstrained Fund

(Percentages shown based on Fund net assets)

Security	Rate			Maturity Date		Face Amount†		Value
Passenger Airlines — 1.0%
Delta Air Lines Inc., Senior Secured Notes		7.000	%		5/1/25		345,000	$	354,606	(a)
Delta Air Lines Inc./SkyMiles IP Ltd., Senior Secured Notes		4.500	%		10/20/25		298,000		292,378	(a)
Delta Air Lines Inc./SkyMiles IP Ltd., Senior Secured Notes		4.750	%		10/20/28		290,000		280,301	(a)
Spirit Loyalty Cayman Ltd./Spirit IP Cayman Ltd., Senior Secured Notes		8.000	%		9/20/25		390,000		394,080	(a)
United Airlines Inc., Senior Secured Notes		4.625	%		4/15/29		2,010,000		1,822,783	(a)
Total Passenger Airlines									3,144,148
Trading Companies & Distributors — 0.6%
H&E Equipment Services Inc., Senior Notes		3.875	%		12/15/28		2,280,000		1,959,580	(a)
Total Industrials									7,073,350
Information Technology — 0.5%
Semiconductors & Semiconductor Equipment — 0.5%
Broadcom Corp./Broadcom Cayman Finance Ltd., Senior Notes		3.875	%		1/15/27		710,000		682,917
TSMC Global Ltd., Senior Notes		4.375	%		7/22/27		1,030,000		1,023,511	(a)
Total Information Technology									1,706,428
Materials — 2.2%
Chemicals — 0.9%
Braskem America Finance Co., Senior Notes		7.125	%		7/22/41		1,010,000		948,308	(b)
Celanese US Holdings LLC, Senior Notes		5.900	%		7/5/24		640,000		639,441
OCP SA, Senior Notes		5.625	%		4/25/24		1,100,000		1,096,947	(a)
Total Chemicals									2,684,696
Metals & Mining — 1.3%
Anglo American Capital PLC, Senior Notes		3.625	%		9/11/24		740,000		720,208	(a)
Anglo American Capital PLC, Senior Notes		4.000	%		9/11/27		290,000		274,861	(a)
Freeport-McMoRan Inc., Senior Notes		4.625	%		8/1/30		200,000		187,445
Freeport-McMoRan Inc., Senior Notes		5.450	%		3/15/43		460,000		417,577
Glencore Funding LLC, Senior Notes		4.125	%		3/12/24		840,000		827,210	(a)

See Notes to Financial Statements.

22 Western Asset Total Return Unconstrained Fund 2023 Annual Report

Western Asset Total Return Unconstrained Fund

(Percentages shown based on Fund net assets)

Security	Rate			Maturity Date		Face Amount†		Value
Metals & Mining — continued
Glencore Funding LLC, Senior Notes		4.000	%		3/27/27		875,000	$	836,356	(a)
Vale Overseas Ltd., Senior Notes		6.875	%		11/21/36		910,000		946,620
Total Metals & Mining									4,210,277
Total Materials									6,894,973
Utilities — 0.7%
Electric Utilities — 0.7%
American Transmission Systems Inc., Senior Notes		2.650	%		1/15/32		130,000		107,988	(a)
Pacific Gas and Electric Co., First Mortgage Bonds		4.950	%		6/8/25		1,030,000		1,013,025
Pacific Gas and Electric Co., First Mortgage Bonds		3.000	%		6/15/28		460,000		403,437
Trans-Allegheny Interstate Line Co., Senior Notes		3.850	%		6/1/25		550,000		533,931	(a)
Total Utilities									2,058,381
Total Corporate Bonds & Notes (Cost — $120,419,760)									109,810,960
Mortgage-Backed Securities — 14.7%
FHLMC — 6.0%
Federal Home Loan Mortgage Corp. (FHLMC)		2.000	%		10/1/41-2/1/42		450,599		385,535	(h)
Federal Home Loan Mortgage Corp. (FHLMC)		4.500	%		3/1/47-12/1/52		394,197		384,713	(h)
Federal Home Loan Mortgage Corp. (FHLMC)		4.000	%		7/1/49		99,382		95,539	(h)
Federal Home Loan Mortgage Corp. (FHLMC)		2.500	%		7/1/50-4/1/52		7,124,611		6,162,967
Federal Home Loan Mortgage Corp. (FHLMC)		2.000	%		11/1/50-5/1/51		2,194,256		1,813,989
Federal Home Loan Mortgage Corp. (FHLMC)		4.500	%		1/1/51-11/1/52		1,015,451		988,820
Federal Home Loan Mortgage Corp. (FHLMC)		2.500	%		10/1/51		180,773		154,949	(h)
Federal Home Loan Mortgage Corp. (FHLMC)		3.000	%		11/1/51-3/1/52		4,025,584		3,613,609
Federal Home Loan Mortgage Corp. (FHLMC)		1.500	%		3/1/52		378,713		295,488
Federal Home Loan Mortgage Corp. (FHLMC)		3.500	%		5/1/52-6/1/52		3,492,967		3,212,817
Federal Home Loan Mortgage Corp. (FHLMC)		4.000	%		7/1/52-2/1/53		492,968		470,926

See Notes to Financial Statements.

Western Asset Total Return Unconstrained Fund 2023 Annual Report 23

Schedule of investments (cont’d)

May 31, 2023

Western Asset Total Return Unconstrained Fund

(Percentages shown based on Fund net assets)

Security	Rate			Maturity Date		Face Amount†		Value
FHLMC — continued
Federal Home Loan Mortgage Corp. (FHLMC)		5.500	%		9/1/52-5/1/53		773,417	$	776,161
Federal Home Loan Mortgage Corp. (FHLMC)		5.000	%		1/1/53		98,718		97,652
Federal Home Loan Mortgage Corp. (FHLMC)		6.500	%		2/1/53		197,163		202,615
Federal Home Loan Mortgage Corp. (FHLMC)		6.000	%		3/1/53		196,453		199,219
Total FHLMC									18,854,999
FNMA — 4.6%
Federal National Mortgage Association (FNMA)		2.000	%		3/1/42-4/1/51		1,028,039		855,180	(h)
Federal National Mortgage Association (FNMA)		4.000	%		4/1/44-4/1/52		583,987		561,166	(h)
Federal National Mortgage Association (FNMA)		3.500	%		12/1/47-6/1/52		751,445		695,762
Federal National Mortgage Association (FNMA)		4.000	%		10/1/48-4/1/52		2,417,109		2,289,763
Federal National Mortgage Association (FNMA)		4.500	%		7/1/49- 9/1/51		211,798		208,529	(h)
Federal National Mortgage Association (FNMA)		4.500	%		5/1/50- 8/1/58		1,178,492		1,145,452
Federal National Mortgage Association (FNMA)		2.000	%		8/1/50- 3/1/52		2,644,651		2,186,287
Federal National Mortgage Association (FNMA)		3.000	%		10/1/50-3/1/52		1,864,263		1,662,782
Federal National Mortgage Association (FNMA)		2.500	%		8/1/51- 2/1/52		717,908		616,783
Federal National Mortgage Association (FNMA)		2.000	%		6/1/52		2,500,000		2,055,988	(i)
Federal National Mortgage Association (FNMA)		4.500	%		6/1/52		100,000		96,865	(i)
Federal National Mortgage Association (FNMA)		5.000	%		6/1/52		400,000		394,055	(i)
Federal National Mortgage Association (FNMA)		5.000	%		6/1/52- 2/1/53		956,967		948,846
Federal National Mortgage Association (FNMA)		6.500	%		6/1/52		300,000		307,102	(i)

See Notes to Financial Statements.

24 Western Asset Total Return Unconstrained Fund 2023 Annual Report

Western Asset Total Return Unconstrained Fund

(Percentages shown based on Fund net assets)

Security	Rate			Maturity Date		Face Amount†		Value
FNMA — continued
Federal National Mortgage Association (FNMA)		6.000	%		4/1/53		98,797	$	100,294
Federal National Mortgage Association (FNMA)		5.500	%		5/1/53		100,000		99,983	(h)
Total FNMA									14,224,837
GNMA — 4.1%
Government National Mortgage Association (GNMA)		3.000	%		10/15/42-11/15/42		239,607		219,436
Government National Mortgage Association (GNMA)		4.000	%		3/15/50		32,121		30,882
Government National Mortgage Association (GNMA)		3.500	%		5/15/50		41,183		39,024
Government National Mortgage Association (GNMA) II		4.500	%		4/20/41- 9/20/52		1,297,292		1,269,213
Government National Mortgage Association (GNMA) II		4.000	%		3/20/48- 3/20/53		1,193,711		1,145,782
Government National Mortgage Association (GNMA) II		5.000	%		5/20/48- 2/20/53		961,051		958,652
Government National Mortgage Association (GNMA) II		3.500	%		10/20/49-12/20/52		1,340,310		1,243,794
Government National Mortgage Association (GNMA) II		3.000	%		1/20/50- 11/20/51		1,329,865		1,201,216
Government National Mortgage Association (GNMA) II		2.500	%		12/20/50-12/20/51		3,468,619		3,030,318
Government National Mortgage Association (GNMA) II		2.000	%		2/20/51- 11/20/51		1,245,992		1,060,090
Government National Mortgage Association (GNMA) II		2.000	%		6/1/52		200,000		169,594	(i)
Government National Mortgage Association (GNMA) II		3.000	%		6/1/52		1,100,000		990,236	(i)
Government National Mortgage Association (GNMA) II		3.500	%		6/1/52		400,000		371,109	(i)
Government National Mortgage Association (GNMA) II		5.000	%		6/1/52		300,000		296,291	(i)
Government National Mortgage Association (GNMA) II		5.500	%		1/20/53		792,503		792,546
Government National Mortgage Association (GNMA) II		6.000	%		3/20/53		99,491		100,548
Total GNMA									12,918,731
Total Mortgage-Backed Securities (Cost — $46,611,410)									45,998,567

See Notes to Financial Statements.

Western Asset Total Return Unconstrained Fund 2023 Annual Report 25

Schedule of investments (cont’d)

May 31, 2023

Western Asset Total Return Unconstrained Fund

(Percentages shown based on Fund net assets)

Security	Rate			Maturity Date		Face Amount†		Value
Collateralized Mortgage Obligations (j) — 13.9%
BANK, 2018-BN15 B		4.658	%		11/15/61		1,050,000	$	939,285	(d)
Bear Stearns Mortgage Funding Trust, 2007-AR1 1A1 (1 mo. USD LIBOR + 0.160%)		5.298	%		1/25/37		1,064,983		930,238	(d)
Benchmark Mortgage Trust, 2023-V2 A3		5.812	%		5/15/55		230,000		235,193
BX Commercial Mortgage Trust, 2021- VOLT G (1 mo. USD LIBOR + 2.850%)		7.957	%		9/15/36		850,000		785,188	(a)(d)
BX Commercial Mortgage Trust, 2021- XL2 J (1 mo. USD LIBOR + 3.890%)		8.997	%		10/15/38		991,585		915,347	(a)(d)
BX Commercial Mortgage Trust, 2023- VLT2 A (1 mo. Term SOFR + 2.281%)		7.340	%		6/15/40		160,000		159,731	(a)(d)(h)
BX Trust, 2018-GWMZ MC (1 mo. USD LIBOR + 5.488%)		10.845	%		5/15/37		1,170,000		1,144,803	(a)(d)
BX Trust, 2021-ARIA G (1 mo. USD LIBOR + 3.142%)		8.249	%		10/15/36		1,030,000		954,237	(a)(d)
BX Trust, 2021-SDMF F (1 mo. USD LIBOR + 1.937%)		7.044	%		9/15/34		860,000		791,311	(a)(d)
CD Mortgage Trust, 2017-CD5 A4		3.431	%		8/15/50		340,000		314,972
CFK Trust, 2020-MF2 E		3.458	%		3/15/39		1,440,000		1,132,291	(a)(d)
CHL Mortgage Pass-Through Trust, 2001-HYB1 1A1		3.253	%		6/19/31		3,393		3,287	(d)
CHL Mortgage Pass-Through Trust, 2003-60 1A1		4.167	%		2/25/34		19,628		19,072	(d)
Citigroup Commercial Mortgage Trust, 2017-C4 A4		3.471	%		10/12/50		170,000		155,602
Citigroup Commercial Mortgage Trust, 2023-SMRT A		6.015	%		6/10/28		330,000		335,762	(a)(d)
Citigroup Mortgage Loan Trust Inc., 2005-9 1A1 (1 mo. USD LIBOR + 0.260%)		5.398	%		11/25/35		89,399		73,675	(d)
Countrywide Alternative Loan Trust, 2005-28CB 2A3		5.750	%		8/25/35		799,925		560,120
Countrywide Alternative Loan Trust, 2005-52CB 1A2, IO (-1.000 x 1 mo. USD LIBOR + 5.100%)		0.000	%		11/25/35		3,241,418		207,804	(d)
Countrywide Alternative Loan Trust, 2005-76 3A1 (1 mo. USD LIBOR + 0.520%)		5.658	%		1/25/46		64,511		57,510	(d)

See Notes to Financial Statements.

26 Western Asset Total Return Unconstrained Fund 2023 Annual Report

Western Asset Total Return Unconstrained Fund

(Percentages shown based on Fund net assets)

Security	Rate			Maturity Date		Face Amount†		Value
Collateralized Mortgage Obligations (j) — continued
Countrywide Alternative Loan Trust, 2006-4CB 1A4, IO (-1.000 x 1 mo. USD LIBOR + 5.300%)		0.162	%		4/25/36		5,612,498	$	455,966	(d)
Countrywide Alternative Loan Trust, 2006-8T1 1A2, IO (-1.000 x 1 mo. USD LIBOR + 5.500%)		0.362	%		4/25/36		3,387,031		359,266	(d)
Countrywide Alternative Loan Trust, 2006-21CB A6, IO (-1.000 x 1 mo. USD LIBOR + 5.600%)		0.462	%		7/25/36		1,499,391		159,789	(d)
CSMC OA LLC, 2014-USA F		4.373	%		9/15/37		4,400,000		1,735,973	(a)
CSMC Trust, 2015-2R 7A1		4.074	%		8/27/36		37,271		37,270	(a)(d)
CSMC Trust, 2017-CHOP H (1 mo. USD LIBOR + 7.350%)		12.457	%		7/15/32		1,229,000		1,128,969	(a)(d)
CSMC Trust, 2021-RPL1 A2		3.937	%		9/27/60		870,000		793,993	(a)
CSMC Trust, 2022-7R 1A1 (30 Day Average SOFR + 2.500%)		7.121	%		10/25/66		1,047,417		1,029,728	(a)(d)
Deutsche Mortgage Securities Inc. Mortgage Loan Trust, 2004-4 7AR2 (1 mo. USD LIBOR + 0.450%)		5.588	%		6/25/34		2,822		2,571	(d)
Federal Home Loan Mortgage Corp. (FHLMC) Seasoned Credit Risk Transfer Trust, 2017-2 M1		4.000	%		8/25/56		981,482		957,079	(a)(d)
Federal Home Loan Mortgage Corp. (FHLMC) Seasoned Credit Risk Transfer Trust, 2020-2 M		4.250	%		11/25/59		2,120,000		1,873,923	(a)(d)
Federal Home Loan Mortgage Corp. (FHLMC) Structured Agency Credit Risk Debt Notes, 2021-DNA2 B1 (30 Day Average SOFR + 3.400%)		8.373	%		8/25/33		520,000		512,156	(a)(d)
Federal National Mortgage Association (FNMA) — CAS, 2019- R05 1B1 (1 mo. USD LIBOR + 4.100%)		9.238	%		7/25/39		1,669,877		1,717,246	(a)(d)
Federal National Mortgage Association (FNMA) — CAS, 2020- R01 1B1 (1 mo. USD LIBOR + 3.250%)		8.388	%		1/25/40		1,790,000		1,753,481	(a)(d)
Federal National Mortgage Association (FNMA) REMIC, 2012-51 B		7.000	%		5/25/42		25,852		27,882
First Horizon Alternative Mortgage Securities Trust, 2005-AA12 1A1		4.878	%		2/25/36		33,977		26,253	(d)
Government National Mortgage Association (GNMA), 2011-142 IO, IO		0.000	%		9/16/46		2,179,143		22	(d)

See Notes to Financial Statements.

Western Asset Total Return Unconstrained Fund 2023 Annual Report 27

Schedule of investments (cont’d)

May 31, 2023

Western Asset Total Return Unconstrained Fund

(Percentages shown based on Fund net assets)

Security	Rate			Maturity Date		Face Amount†		Value
Collateralized Mortgage Obligations (j) — continued
Government National Mortgage Association (GNMA), 2012-112 IO, IO		0.130	%		2/16/53		1,254,149	$	3,690	(d)
Government National Mortgage Association (GNMA), 2014-47 IA, IO		0.147	%		2/16/48		196,365		922	(d)
Government National Mortgage Association (GNMA), 2014-50 IO, IO		0.629	%		9/16/55		927,992		23,208	(d)
Government National Mortgage Association (GNMA), 2014-134 IA, IO		0.148	%		1/16/55		31,247,818		144,549	(d)
Government National Mortgage Association (GNMA), 2017-21 IO, IO		0.633	%		10/16/58		2,886,571		97,294	(d)
Government National Mortgage Association (GNMA), 2017-41 IO, IO		0.594	%		7/16/58		513,197		14,030	(d)
GreenPoint Mortgage Funding Trust, 2006-AR3 3A1 (1 mo. USD LIBOR + 0.460%)		5.598	%		4/25/36		5,832		7,322	(d)
GS Mortgage Securities Trust, 2015- GC30, D		3.384	%		5/10/50		1,000,000		788,006
HarborView Mortgage Loan Trust, 2006-13 A (1 mo. USD LIBOR + 0.180%)		5.312	%		11/19/46		73,232		50,660	(d)
JPMorgan Chase Commercial Mortgage Securities Trust, 2007-LD12 AJ		6.517	%		2/15/51		76,756		67,714	(d)
JPMorgan Chase Commercial Mortgage Securities Trust, 2018- PHMZ M (1 mo. USD LIBOR + 8.508%)		13.615	%		6/15/35		10,150,000		101	(a)(d)
JPMorgan Chase Commercial Mortgage Securities Trust, 2020- MKST G (1 mo. USD LIBOR + 4.500%)		9.607	%		12/15/36		2,079,000		375,856	(a)(d)
JPMorgan Chase Commercial Mortgage Securities Trust, 2020- MKST H (1 mo. USD LIBOR + 7.000%)		12.107	%		12/15/36		2,173,000		233,134	(a)(d)
JPMorgan Chase Commercial Mortgage Securities Trust, 2020- NNNZ M		8.542	%		1/16/37		33,781		29,912	(a)
JPMorgan Chase Commercial Mortgage Securities Trust, 2021-HTL5 F (1 mo. USD LIBOR + 4.265%)		9.373	%		11/15/38		2,140,000		2,003,817	(a)(d)
Legacy Mortgage Asset Trust, 2021- GS2 A2, Step bond (3.500% to 4/25/ 24, 6.500% to 4/25/25 then 7.500%)		3.500	%		4/25/61		1,200,000		1,073,198	(a)

See Notes to Financial Statements.

28 Western Asset Total Return Unconstrained Fund 2023 Annual Report

Western Asset Total Return Unconstrained Fund

(Percentages shown based on Fund net assets)

Security	Rate			Maturity Date		Face Amount†		Value
Collateralized Mortgage Obligations (j) — continued
Med Trust, 2021-MDLN E (1 mo. USD LIBOR + 3.150%)		8.258	%		11/15/38		1,522,692	$	1,432,376	(a)(d)
Merrill Lynch Mortgage Investors Trust, 2004-A3 4A3		4.615	%		5/25/34		31,692		28,486	(d)
ML-CFC Commercial Mortgage Trust, 2007-5 AJ		5.450	%		8/12/48		351,153		90,196	(d)
ML-CFC Commercial Mortgage Trust, 2007-5 AJFL		5.450	%		8/12/48		452,822		116,310	(a)(d)
ML-CFC Commercial Mortgage Trust, 2007-9 AJ		6.193	%		9/12/49		9,708		9,472	(d)
Morgan Stanley Capital I Trust, 2021-L7 XA, IO		1.098	%		10/15/54		6,375,549		366,932	(d)
MSWF Commercial Mortgage Trust, 2023-1 A4		5.472	%		2/15/33		160,000		163,025
Natixis Commercial Mortgage Securities Trust, 2019-FAME D		4.398	%		8/15/36		2,862,000		2,020,216	(a)(d)
New Residential Mortgage Loan Trust, 2019-RPL3 A1		2.750	%		7/25/59		175,731		164,041	(a)(d)
Nomura Asset Acceptance Corp. Alternative Loan Trust, 2006-AF2 4A		5.182	%		8/25/36		65,601		40,105	(d)
PRKCM Trust, 2022-AFC1 A1A		4.100	%		4/25/57		637,899		605,044	(a)(d)
Residential Asset Securitization Trust, 2005-A15 2A11, IO (-1.000 x 1 mo. USD LIBOR + 5.550%)		0.412	%		2/25/36		8,164,709		946,452	(d)
SMR Mortgage Trust, 2022-IND F (1 mo. Term SOFR + 6.000%)		11.059	%		2/15/39		640,130		594,169	(a)(d)
Starwood Retail Property Trust, 2014- STAR E (1 mo. USD LIBOR + 4.400%)		9.508	%		11/15/27		7,530,000		15,098	(a)(d)
Structured Adjustable Rate Mortgage Loan Trust, 2004-4 3A2		5.725	%		4/25/34		28,593		28,147	(d)
Tharaldson Hotel Portfolio Trust, 2018- THL E (1 mo. USD LIBOR + 3.480%)		8.579	%		11/11/34		1,603,959		1,536,331	(a)(d)
Towd Point Mortgage Trust, 2019-4 B1B		3.500	%		10/25/59		1,840,000		1,342,578	(a)(d)
TTAN, 2021-MHC A (1 mo. USD LIBOR + 0.850%)		5.958	%		3/15/38		1,460,694		1,426,357	(a)(d)
UBS Commercial Mortgage Trust, 2017-C7 A3		3.418	%		12/15/50		501,418		466,784
Verus Securitization Trust, 2022-6 A3		4.910	%		6/25/67		1,406,224		1,345,441	(a)

See Notes to Financial Statements.

Western Asset Total Return Unconstrained Fund 2023 Annual Report 29

Schedule of investments (cont’d)

May 31, 2023

Western Asset Total Return Unconstrained Fund

(Percentages shown based on Fund net assets)

Security	Rate			Maturity Date		Face Amount†			Value
Collateralized Mortgage Obligations (j) — continued
WaMu Mortgage Pass-Through Certificates Trust, 2004-AR13 A1A (1 mo. USD LIBOR + 0.720%)		5.858	%		11/25/34		1,464,835		$	1,361,102	(d)
WaMu Mortgage Pass-Through Certificates Trust, 2006-AR3 A1B (Federal Reserve U.S. 12 mo. Cumulative Avg 1 Year CMT + 1.000%)		4.743	%		2/25/46		1,236,094			1,091,677	(d)
Waterfall Commercial Mortgage Trust, 2015-SBC5 A		4.104	%		12/31/23		102,255			97,759	(a)(d)
Wells Fargo Commercial Mortgage Trust, 2022-ONL F		4.928	%		12/15/39		1,190,000			891,969	(a)(d)
Total Collateralized Mortgage Obligations (Cost — $72,622,517)										43,380,475
Sovereign Bonds — 12.6%
Argentina — 0.5%
Argentine Bonos del Tesoro, Bonds		16.000	%		10/17/23		44,960,000	ARS		66,636	(f)
Argentine Republic Government International Bond, Senior Notes		1.000	%		7/9/29		143,435			36,919
Argentine Republic Government International Bond, Senior Notes, Step bond (0.500% to 7/9/23, 0.750% to 7/9/27 then 1.750%)		0.500	%		7/9/30		768,100			203,547
Argentine Republic Government International Bond, Senior Notes, Step bond (3.500% to 7/9/29 then 4.875%)		3.500	%		7/9/41		1,460,000			379,450
Provincia de Buenos Aires, Senior Notes, Step bond (5.250% to 9/1/23, 6.375% to 9/1/24 then 6.625%)		5.250	%		9/1/37		3,198,882			1,027,326	(a)
Total Argentina										1,713,878
Brazil — 2.0%
Brazil Notas do Tesouro Nacional Serie F, Notes		10.000	%		1/1/27		26,142,000	BRL		5,014,946
Brazil Notas do Tesouro Nacional Serie F, Notes		10.000	%		1/1/33		6,665,000	BRL		1,203,244
Total Brazil										6,218,190
Colombia — 0.1%
Colombia Government International Bond, Senior Notes		5.000	%		6/15/45		370,000			246,790
India — 1.6%
India Government Bond		7.590	%		1/11/26		220,000,000	INR		2,704,398
India Government Bond, Senior Notes		5.790	%		5/11/30		200,000,000	INR		2,261,764
Total India										4,966,162

See Notes to Financial Statements.

30 Western Asset Total Return Unconstrained Fund 2023 Annual Report

Western Asset Total Return Unconstrained Fund

(Percentages shown based on Fund net assets)

Security	Rate			Maturity Date		Face Amount†			Value
Indonesia — 2.4%
Indonesia Government International Bond, Senior Notes		3.500	%		1/11/28		490,000		$	468,480
Indonesia Treasury Bond		7.000	%		5/15/27		2,506,000,000	IDR		173,258
Indonesia Treasury Bond		8.250	%		5/15/29		12,451,000,000	IDR		914,397
Indonesia Treasury Bond		7.125	%		6/15/42		88,000,000,000	IDR		6,091,314
Total Indonesia										7,647,449
Kenya — 0.3%
Republic of Kenya Government International Bond, Senior Notes		7.000	%		5/22/27		1,000,000			861,186	(a)
Mexico — 5.5%
Mexican Bonos, Bonds		7.500	%		6/3/27		26,180,000	MXN		1,399,444
Mexican Bonos, Bonds		8.000	%		11/7/47		98,030,000	MXN		4,987,897
Mexican Bonos, Senior Notes		8.500	%		5/31/29		36,440,000	MXN		2,030,167
Mexican Bonos, Senior Notes		7.750	%		11/13/42		177,791,900	MXN		8,851,753
Total Mexico										17,269,261
Russia — 0.2%
Russian Federal Bond — OFZ		6.000	%		10/6/27		180,300,000	RUB		110,546	*(e)(g)
Russian Federal Bond — OFZ		7.050	%		1/19/28		506,371,000	RUB		310,467	*(e)(g)
Russian Federal Bond — OFZ		6.900	%		5/23/29		173,973,000	RUB		106,666	*(e)(g)
Total Russia										527,679
Total Sovereign Bonds (Cost — $55,235,219)										39,450,595
Asset-Backed Securities — 10.9%
AccessLex Institute, 2004-A B1 (28 day Auction Rate Security)		6.525	%		7/1/39		300,000			278,046	(d)
Amortizing Residential Collateral Trust, 2002-BC5 M1 (1 mo. USD LIBOR + 1.035%)		6.173	%		7/25/32		16,564			16,483	(d)
Barings CLO Ltd., 2018-2A B (3 mo. USD LIBOR + 1.900%)		7.160	%		4/15/30		2,480,000			2,381,960	(a)(d)
Bristol Park CLO Ltd., 2016-1A DR (3 mo. USD LIBOR + 2.950%)		8.210	%		4/15/29		1,420,000			1,267,817	(a)(d)
BRSP Ltd., 2021-FL1 A (1 mo. Term SOFR + 1.264%)		6.338	%		8/19/38		1,600,000			1,546,384	(a)(d)
Cook Park CLO Ltd., 2018-1A D (3 mo. USD LIBOR + 2.600%)		7.860	%		4/17/30		840,000			699,707	(a)(d)
Cook Park CLO Ltd., 2018-1A E (3 mo. USD LIBOR + 5.400%)		10.660	%		4/17/30		250,000			200,377	(a)(d)
Countrywide Home Equity Loan Trust, 2007-A A (1 mo. USD LIBOR + 0.120%)		5.227	%		4/15/37		641,759			592,398	(d)
Dividend Solar Loans LLC, 2018-1 C		5.140	%		7/20/38		2,290,979			2,062,054	(a)

See Notes to Financial Statements.

Western Asset Total Return Unconstrained Fund 2023 Annual Report 31

Schedule of investments (cont’d)

May 31, 2023

Western Asset Total Return Unconstrained Fund

(Percentages shown based on Fund net assets)

Security	Rate			Maturity Date		Face Amount†		Value
Asset-Backed Securities — continued
Foundation Finance Trust, 2017-1A C		5.400	%		7/15/33		2,600,000	$	2,488,701	(a)
Fremont Home Loan Trust, 2006-B 2A2 (1 mo. USD LIBOR + 0.200%)		5.338	%		8/25/36		316,661		107,196	(d)
Goldentree Loan Management CLO Ltd., 2018-3A C (3 mo. USD LIBOR + 1.900%)		7.150	%		4/20/30		2,170,000		2,095,491	(a)(d)
GoldenTree Loan Opportunities Ltd., 2014-9A CR2 (3 mo. USD LIBOR + 2.100%)		7.399	%		10/29/29		2,270,000		2,250,120	(a)(d)
GoldenTree Loan Opportunities Ltd., 2014-9A DR2 (3 mo. USD LIBOR + 3.000%)		8.299	%		10/29/29		1,550,000		1,501,984	(a)(d)
Golub Capital Partners CLO Ltd., 2019-45A C (3 mo. USD LIBOR + 3.800%)		9.050	%		10/20/31		950,000		927,019	(a)(d)
GoodLeap Sustainable Home Solutions Trust, 2022-1GS C		3.500	%		1/20/49		1,557,122		1,009,425	(a)
Greywolf CLO Ltd., 2019-1A CR (3 mo. Term SOFR + 3.910%)		8.896	%		4/17/34		1,840,000		1,718,162	(a)(d)
Halsey Point CLO Ltd., 2019-1A F (3 mo. USD LIBOR + 8.200%)		13.450	%		1/20/33		860,000		726,627	(a)(d)
HPS Loan Management Ltd., 10A-16 CR (3 mo. USD LIBOR + 3.150%)		8.400	%		4/20/34		1,520,000		1,378,084	(a)(d)
LCM Ltd., 37A D (3 mo. Term SOFR + 3.650%)		8.636	%		4/15/34		940,000		883,530	(a)(d)
Lehman XS Trust, 2006-16N A4B (1 mo. USD LIBOR + 0.480%)		5.618	%		11/25/46		8,778		9,470	(d)
Lehman XS Trust, 2006-GP3 2A2 (1 mo. USD LIBOR + 0.440%)		5.578	%		6/25/46		10,566		22,770	(d)
Marathon CLO Ltd., 2019-2A BA (3 mo. USD LIBOR + 3.300%)		8.550	%		1/20/33		1,410,000		1,388,395	(a)(d)
MASTR Specialized Loan Trust, 2006-3 A (1 mo. USD LIBOR + 0.260%)		5.658	%		6/25/46		71,787		68,203	(a)(d)
Mosaic Solar Loan Trust, 2021-1A D		3.710	%		12/20/46		482,041		418,950	(a)
National Collegiate Student Loan Trust, 2007-2 A4 (1 mo. USD LIBOR + 0.290%)		5.428	%		1/25/33		702,126		647,613	(d)
Palmer Square Loan Funding Ltd., 2022-3A C (3 mo. Term SOFR + 5.400%)		10.386	%		4/15/31		580,000		579,745	(a)(d)
Saranac CLO Ltd., 2014-3A DR (3 mo. USD LIBOR + 3.250%)		8.197	%		6/22/30		2,000,000		1,716,846	(a)(d)

See Notes to Financial Statements.

32 Western Asset Total Return Unconstrained Fund 2023 Annual Report

Western Asset Total Return Unconstrained Fund

(Percentages shown based on Fund net assets)

Security	Rate			Maturity Date		Face Amount†		Value
Asset-Backed Securities — continued
Sierra Timeshare Receivables Funding LLC, 2021-2A A		1.350	%		9/20/38		251,210	$	232,498	(a)
TSTAT Ltd., 2022-2A C (3 mo. Term SOFR + 4.800%)		9.313	%		1/20/31		820,000		828,697	(a)(d)
UCFC Manufactured Housing Contract, 1997-3 M		7.115	%		1/15/29		814,812		749,105
Whitehorse Ltd., 2018-12A D (3 mo. USD LIBOR + 3.650%)		8.910	%		10/15/31		2,260,000		2,041,746	(a)(d)
Z Capital Credit Partners CLO Ltd., 2021-1A D (3 mo. USD LIBOR + 4.200%)		9.460	%		7/15/33		1,450,000		1,346,578	(a)(d)
Total Asset-Backed Securities (Cost — $36,975,743)									34,182,181
U.S. Government & Agency Obligations — 3.7%
U.S. Government Obligations — 3.7%
U.S. Treasury Bonds		1.125	%		8/15/40		3,380,000		2,180,166
U.S. Treasury Bonds		3.625	%		8/15/43		570,000		539,719
U.S. Treasury Bonds		3.750	%		11/15/43		5,600,000		5,397,328	(k)
U.S. Treasury Bonds		2.875	%		8/15/45		1,170,000		970,232
U.S. Treasury Bonds		2.750	%		8/15/47		1,700,000		1,372,484
U.S. Treasury Bonds		1.625	%		11/15/50		1,000,000		619,922
U.S. Treasury Bonds		3.625	%		2/15/53		570,000		547,645
Total U.S. Government & Agency Obligations (Cost — $14,038,449)									11,627,496
U.S. Treasury Inflation Protected Securities — 1.2%
U.S. Treasury Notes, Inflation Indexed (Cost—$3,812,076)		1.125	%		1/15/33		3,840,369		3,727,076
	Expiration Date			Contracts		Notional Amount†
Purchased Options — 0.2%
Exchange-Traded Purchased Options — 0.2%
3-Month SOFR Futures, Call @ $95.125		6/16/23			435		1,087,500		5,438
3-Month SOFR Futures, Call @ $95.500		6/16/23			411		1,027,500		2,569
3-Month SOFR Futures, Call @ $95.500		9/15/23			451		1,127,500		152,212
3-Month SOFR Futures, Put @ $94.750		6/16/23			435		1,087,500		87,000
SOFR 1-Year Mid-Curve Futures, Call @ $97.000		6/16/23			533		1,332,500		26,650

See Notes to Financial Statements.

Western Asset Total Return Unconstrained Fund 2023 Annual Report 33

Schedule of investments (cont’d)

May 31, 2023

Western Asset Total Return Unconstrained Fund

(Percentages shown based on Fund net assets)

Security			Expiration Date		Contracts		Notional Amount†		Value
Exchange-Traded Purchased Options — continued
SOFR 1-Year Mid-Curve Futures, Put @ $95.000				6/16/23		455		1,137,500	$	2,844
SOFR 1-Year Mid-Curve Futures, Put @ $95.250				6/16/23		898		2,245,000		22,450
SOFR 1-Year Mid-Curve Futures, Put @ $95.500				6/16/23		442		1,105,000		27,625
SOFR 1-Year Mid-Curve Futures, Put @ $95.875				12/15/23		59		147,500		29,131
SOFR 1-Year Mid-Curve Futures, Put @ $96.000				12/15/23		138		345,000		80,212
U.S. Treasury 2-Year Notes Futures, Put @ $103.125				6/23/23		47		94,000		44,797
U.S. Treasury 5-Year Notes Futures, Call @ $109.250				6/2/23		129		129,000		31,242
U.S. Treasury 5-Year Notes Futures, Call @ $109.500				6/2/23		43		43,000		6,719
U.S. Treasury 5-Year Notes Futures, Call @ $109.750				6/2/23		86		86,000		8,063
U.S. Treasury 5-Year Notes Futures, Put @ $107.750				6/2/23		129		129,000		4,031
U.S. Treasury 5-Year Notes Futures, Put @ $108.250				6/2/23		86		86,000		6,047
U.S. Treasury 6 to 7-Year Notes Futures, Call @ $114.750				6/2/23		255		255,000		67,734
U.S. Treasury 6 to 7-Year Notes Futures, Put @ $112.750				6/2/23		255		255,000		7,969
Total Exchange-Traded Purchased Options (Cost — $1,796,418)										612,733
	Counterparty
OTC Purchased Options — 0.0%††
U.S. Dollar/Euro, Put @ $1.160 (Cost — $29,442)		Goldman Sachs Group Inc.		9/1/23		7,870,000		7,870,000		2,477
Total Purchased Options (Cost — $1,825,860)										615,210

See Notes to Financial Statements.

34 Western Asset Total Return Unconstrained Fund 2023 Annual Report

Western Asset Total Return Unconstrained Fund

(Percentages shown based on Fund net assets)

Security	Rate			Maturity Date		Face Amount†		Value
Municipal Bonds — 0.2%
California — 0.2%
Morongo Band of Mission Indians, CA, Revenue, Tribal Economic Development, Series A		7.000	%		10/1/39		360,000	$	384,584	(a)
Regents of the University of California, CA, Medical Center Pooled Revenue, Taxable Bonds, Series N		3.706	%		5/15/2120		190,000		127,344
Total Municipal Bonds (Cost — $550,000)									511,928
						Shares
Investments in Underlying Funds — 0.1%
VanEck J.P. Morgan EM Local Currency Bond ETF (Cost — $497,296)							16,200		405,000
	Rate			Maturity Date		Face Amount†
Senior Loans — 0.1%
Consumer Discretionary — 0.1%
Diversified Consumer Services — 0.1%
WW International Inc., Initial Term Loan (1 mo. USD LIBOR + 3.500%)		8.660	%		4/13/28		507,000		335,888	(d)(l)(m)
Information Technology — 0.0%††
Software — 0.0%††
Magenta Buyer LLC, First Lien Initial Term Loan (3 mo. USD LIBOR + 4.750%)		10.030	%		7/27/28		64,552		46,020	(d)(l)(m)
Total Senior Loans (Cost — $571,516)									381,908
Total Investments before Short-Term Investments (Cost — $353,159,846)									290,091,396
						Shares
Short-Term Investments — 4.3%
Western Asset Premier Institutional Government Reserves, Premium Shares (Cost — $13,448,457)		5.033	%				13,448,457		13,448,457	(n)(o)
Total Investments — 97.1% (Cost — $366,608,303)									303,539,853
Other Assets in Excess of Liabilities — 2.9%									8,926,138
Total Net Assets — 100.0%								$	312,465,991

See Notes to Financial Statements.

Western Asset Total Return Unconstrained Fund 2023 Annual Report 35

Schedule of investments (cont’d)

May 31, 2023

Western Asset Total Return Unconstrained 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 Directors.

^(b)  Security is exempt from registration under Regulation S of the Securities Act of 1933. Regulation S applies to securities offerings that are made outside of the United States and do not involve direct selling efforts in the United States. This security has been deemed liquid pursuant to guidelines approved by the Board of Directors.

^(c)  Security has no maturity date. The date shown represents the next call date.

^(d)  Variable rate security. Interest rate disclosed is as of the most recent information available. Certain variable rate securities are not based on a published reference rate and spread but are determined by the issuer or agent and are based on current market conditions. These securities do not indicate a reference rate and spread in their description above.

^(e)  The coupon payment on this security is currently in default as of May 31, 2023.

^(f)  Security is valued in good faith in accordance with procedures approved by the Board of Directors (Note 1).

^(g)  Security is valued using significant unobservable inputs (Note 1).

^(h)  Securities traded on a when-issued or delayed delivery basis.

⁽ⁱ⁾  This security is traded on a to-be-announced (“TBA”) basis. At May 31, 2023, the Fund held TBA securities with a total cost of $4,730,988.

^(j)  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.

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

^(l)  Interest rates disclosed represent the effective rates on senior loans. Ranges in interest rates are attributable to multiple contracts under the same loan.

^(m)  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.

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

^(o)  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 May 31, 2023, the total market value of investments in Affiliated Companies was $13,448,457 and the cost was $13,448,457 (Note 8).

See Notes to Financial Statements.

36 Western Asset Total Return Unconstrained Fund 2023 Annual Report

Western Asset Total Return Unconstrained Fund

Abbreviation(s) used in this schedule:
ARS	— Argentine Peso
BRL	— Brazilian Real
CAS	— Connecticut Avenue Securities
CD	— Certificate of Deposit
CLO	— Collateralized Loan Obligation
CMT	— Constant Maturity Treasury
ETF	— Exchange-Traded Fund
EUR	— Euro
ICE	— Intercontinental Exchange
IDR	— Indonesian Rupiah
INR	— Indian Rupee
IO	— Interest Only
JSC	— Joint Stock Company
LIBOR	— London Interbank Offered Rate
MXN	— Mexican Peso
OFZ	— Obligatsyi Federal’novo Zaima (Russian Federal Loan Obligation)
REMIC	— Real Estate Mortgage Investment Conduit
RUB	— Russian Ruble
SOFR	— Secured Overnight Financing Rate
USD	— United States Dollar

At May 31, 2023, the Fund had the following written options contracts:

Exchange-Traded Written Options
Security	Expiration Date		Strike Price		Contracts		Notional Amount		Value
3-Month SOFR Futures, Call		6/16/23	$	95.375		435	$	1,087,500	$	(2,719)
3-Month SOFR Futures, Call		6/16/23		96.000		411		1,027,500		(2,569)
3-Month SOFR Futures, Call		9/15/23		98.250		836		2,090,000		(26,125)
3-Month SOFR Futures, Call		12/15/23		96.500		451		1,127,500		(200,131)
3-Month SOFR Futures, Call		6/14/24		96.250		454		1,135,000		(715,050)
3-Month SOFR Futures, Call		6/14/24		97.500		1,078		2,695,000		(741,125)
3-Month SOFR Futures, Call		6/14/24		98.000		178		445,000		(84,550)
3-Month SOFR Futures, Put		6/16/23		94.875		435		1,087,500		(182,156)
3-Month SOFR Futures, Put		12/15/23		94.250		1,353		3,382,500		(321,337)
3-Month SOFR Futures, Put		6/14/24		94.500		442		1,105,000		(157,462)
SOFR 1-Year Mid-Curve Futures, Call		6/16/23		97.500		533		1,332,500		(6,663)
SOFR 1-Year Mid-Curve Futures, Put		6/16/23		94.000		455		1,137,500		(2,844)
SOFR 1-Year Mid-Curve Futures, Put		6/16/23		94.250		898		2,245,000		(5,613)
SOFR 1-Year Mid-Curve Futures, Put		12/15/23		95.250		118		295,000		(25,075)
SOFR 1-Year Mid-Curve Futures, Put		12/15/23		95.375		276		690,000		(69,000)
U.S. Treasury 5-Year Notes Futures, Call		6/2/23		108.500		43		43,000		(29,898)

See Notes to Financial Statements.

Western Asset Total Return Unconstrained Fund 2023 Annual Report 37

Schedule of investments (cont’d)

May 31, 2023

Western Asset Total Return Unconstrained Fund

Security		Expiration Date		Strike Price			Contracts		Notional Amount		Value
U.S. Treasury 5-Year Notes Futures, Call			6/2/23	$	109.000			43	$	43,000	$	(15,453)
U.S. Treasury 5-Year Notes Futures, Put			6/2/23		109.000			43		43,000		(12,094)
U.S. Treasury 6 to 7-Year Notes Futures, Call			6/2/23		113.750			85		85,000		(73,047)
U.S. Treasury 6 to 7-Year Notes Futures, Put			6/2/23		113.750			85		85,000		(11,953)
U.S. Treasury 10-Year Notes Futures, Call			6/23/23		118.500			64		64,000		(7,000)
Total Exchange-Traded Written Options (Premiums received — $3,242,390)											$	(2,691,864)
OTC Written Options
	Counterparty
Interest rate swaption, Put (Premiums received — $62,590)	Morgan Stanley & Co. Inc.		8/31/23		410.000	bps		5,690,000	$	5,690,000	$	(14,422)
Total Written Options (Premiums received — $3,304,980)											$	(2,706,286)

Abbreviation(s) used in this schedule:
bps	— basis point spread (100 basis points = 1.00%)
SOFR	— Secured Overnight Financing Rate

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

	Number of Contracts		Expiration Date		Notional Amount		Market Value		Unrealized Appreciation (Depreciation)
Contracts to Buy:
3-Month SOFR		133		12/23	$	32,010,054	$	31,530,975	$	(479,079)
3-Month SOFR		456		12/25		110,267,458		110,551,500		284,042
3-Month SOFR		4		9/23		965,508		947,200		(18,308)
3-Month SOFR		63		3/25		15,288,451		15,238,912		(49,539)
Australian 10-Year Bonds		116		6/23		8,973,890		9,047,678		73,788
Euro-Bobl		30		6/23		3,694,478		3,788,396		93,918
U.S. Treasury 2-Year Notes		158		9/23		32,605,641		32,520,844		(84,797)
U.S. Treasury 5-Year Notes		1,763		9/23		191,327,090		192,304,743		977,653
U.S. Treasury Long-Term Bonds		376		9/23		47,846,517		48,257,250		410,733
U.S. Treasury Ultra Long- Term Bonds		171		9/23		23,043,250		23,405,625		362,375

See Notes to Financial Statements.

38 Western Asset Total Return Unconstrained Fund 2023 Annual Report

Western Asset Total Return Unconstrained Fund

	Number of Contracts		Expiration Date		Notional Amount		Market Value		Unrealized Appreciation (Depreciation)
Contracts to Buy continued
United Kingdom Long Gilt Bonds		38		9/23	$	4,593,301	$	4,575,273	$	(18,028)
										1,552,758
Contracts to Sell:
3-Month SOFR		255		3/24		61,021,490		60,661,313		360,177
3-Month SOFR		299		6/25		72,589,546		72,436,488		153,058
3-Month SOFR		456		12/26		110,388,817		110,517,300		(128,483)
Euro-Schatz		151		6/23		16,899,602		17,047,480		(147,878)
Japanese 10-Year Bonds		9		6/23		9,398,836		9,599,139		(200,303)
U.S. Treasury 10-Year Notes		1,904		9/23		217,440,673		217,948,500		(507,827)
U.S. Treasury Ultra 10-Year Notes		268		9/23		32,170,758		32,281,438		(110,680)
										(581,936)
Net unrealized appreciation on open futures contracts									$	970,822

Abbreviation(s) used in this table:
Bobl	— Bundesobligation (Medium-term German Federal Government Bond)
SOFR	— Secured Overnight Financing Rate

At May 31, 2023, the Fund had the following open forward foreign currency contracts:

Currency Purchased		Currency Sold		Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
MXN	5,746,475	USD	318,915	Bank of America N.A.		7/18/23	$	2,720
USD	5,004,676	EUR	4,562,510	Bank of America N.A.		7/18/23		114,349
CAD	4,148,905	USD	3,085,139	BNP Paribas SA		7/18/23		(25,318)
USD	129,547	AUD	191,535	Citibank N.A.		7/18/23		4,739
USD	97,327	CAD	130,204	Citibank N.A.		7/18/23		1,301
USD	97,353	NOK	1,027,543	Citibank N.A.		7/18/23		4,572
JPY	20,000,000	USD	153,907	Goldman Sachs Group Inc.		7/18/23		(9,279)
JPY	24,750,000	USD	191,563	Goldman Sachs Group Inc.		7/18/23		(12,586)
JPY	24,900,000	USD	179,107	Goldman Sachs Group Inc.		7/18/23		955
JPY	31,000,000	USD	233,679	Goldman Sachs Group Inc.		7/18/23		(9,506)
JPY	228,256,940	USD	1,766,845	Goldman Sachs Group Inc.		7/18/23		(116,230)
JPY	243,840,000	USD	1,812,890	Goldman Sachs Group Inc.		7/18/23		(49,587)
USD	167,295	JPY	22,000,000	Goldman Sachs Group Inc.		7/18/23		8,205
USD	173,387	JPY	23,011,000	Goldman Sachs Group Inc.		7/18/23		6,985

See Notes to Financial Statements.

Western Asset Total Return Unconstrained Fund 2023 Annual Report 39

Schedule of investments (cont’d)

May 31, 2023

Western Asset Total Return Unconstrained Fund

Currency Purchased		Currency Sold		Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
USD	218,769	JPY	29,488,000	Goldman Sachs Group Inc.		7/18/23	$	5,530
CNY	1,104,474	USD	160,712	JPMorgan Chase & Co.		7/18/23		(4,434)
NZD	2,278,631	USD	1,432,074	JPMorgan Chase & Co.		7/18/23		(59,995)
USD	96,369	CNH	662,910	JPMorgan Chase & Co.		7/18/23		2,827
USD	7,877,799	CNY	53,848,697	JPMorgan Chase & Co.		7/18/23		258,461
USD	2,377,130	IDR	35,609,404,898	JPMorgan Chase & Co.		7/18/23		2,792
AUD	5,113,659	USD	3,438,245	Morgan Stanley & Co. Inc.		7/18/23		(106,085)
CNH	26,151,973	USD	3,822,829	Morgan Stanley & Co. Inc.		7/18/23		(132,604)
EUR	1,713,597	NOK	19,556,768	Morgan Stanley & Co. Inc.		7/18/23		70,852
GBP	1,765,212	USD	2,201,308	Morgan Stanley & Co. Inc.		7/18/23		(3,362)
MXN	8,630,000	USD	478,817	Morgan Stanley & Co. Inc.		7/18/23		4,212
NOK	51,538,608	USD	5,017,998	Morgan Stanley & Co. Inc.		7/18/23		(364,349)
USD	3,008,983	BRL	15,578,105	Morgan Stanley & Co. Inc.		7/18/23		(36,177)
USD	351,418	GBP	285,000	Morgan Stanley & Co. Inc.		7/18/23		(3,448)
USD	2,593,263	INR	214,436,892	Morgan Stanley & Co. Inc.		7/18/23		5,775
USD	186,945	MXN	3,336,000	Morgan Stanley & Co. Inc.		7/18/23		226
USD	13,605,835	MXN	251,326,977	Morgan Stanley & Co. Inc.		7/18/23		(461,158)
Net unrealized depreciation on open forward foreign currency contracts							$	(899,617)

Abbreviation(s) used in this table:
AUD	— Australian Dollar
BRL	— Brazilian Real
CAD	— Canadian Dollar
CNH	— Chinese Offshore Yuan
CNY	— Chinese Yuan Renminbi
EUR	— Euro
GBP	— British Pound
IDR	— Indonesian Rupiah
INR	— Indian Rupee
JPY	— Japanese Yen
MXN	— Mexican Peso
NOK	— Norwegian Krone
NZD	— New Zealand Dollar
USD	— United States Dollar

See Notes to Financial Statements.

40 Western Asset Total Return Unconstrained Fund 2023 Annual Report

Western Asset Total Return Unconstrained Fund

At May 31, 2023, the Fund had the following open swap contracts:

CENTRALLY CLEARED INTEREST RATE SWAPS
Notional Amount*			Termination Date		Payments Made by the Fund†	Payments Received by the Fund†	Market Value			Upfront Premiums Paid (Received)			Unrealized Appreciation (Depreciation)
	119,278,000			7/11/24	Daily SOFR Compound annually	1.323% annually	$	(4,671,815	)	$	(2,503,673	)	$	(2,168,142	)
	45,491,000			3/10/26	Daily SOFR Compound annually	4.100% annually		565,335			266,941			298,394
	26,910,000			3/16/27	Daily SOFR Compound annually	3.550% annually		(138,927	)		(184,408	)		45,481
	20,401,000			7/11/27	Daily SOFR Compound annually	1.600% annually		(1,571,922	)		—			(1,571,922	)
	16,768,000			11/30/27	Daily SOFR Compound annually	2.980% annually		(311,812	)		3,215			(315,027	)
	21,939,000			11/30/27	Daily SOFR Compound annually	3.450% annually		(9,467	)		(3,068	)		(6,399	)
	5,549,000			2/15/29	2.850% annually	Daily SOFR Compound annually		180,234			21,602			158,632
	16,949,000			4/30/29	3.270% annually	Daily SOFR Compound annually		179,010			(298,254	)		477,264
	312,170,000	MXN		7/18/29	28-Day MXN TIIE - Banxico every 28 days	7.450% every 28 days		(796,322	)		137,413			(933,735	)
	5,162,000			9/30/29	3.250% annually	Daily SOFR Compound annually		56,469			3,201			53,268
	2,720,000			12/31/29	Daily SOFR Compound annually	3.300% annually		(20,637	)		(102	)		(20,535	)
	16,566,000			5/15/32	3.220% annually	Daily SOFR Compound annually		207,026			(64,755	)		271,781

See Notes to Financial Statements.

Western Asset Total Return Unconstrained Fund 2023 Annual Report 41

Schedule of investments (cont’d)

May 31, 2023

Western Asset Total Return Unconstrained Fund

	CENTRALLY CLEARED INTEREST RATE SWAPS (cont’d)
	Notional Amount*	Termination Date		Payments Made by the Fund†	Payments Received by the Fund†	Market Value			Upfront Premiums Paid (Received)			Unrealized Appreciation (Depreciation)
	10,838,000		7/11/32	1.800% annually	Daily SOFR Compound annually	$	1,332,427			—		$	1,332,427
	10,062,000		3/10/34	3.400% annually	Daily SOFR Compound annually		(160,003	)	$	(90,190	)		(69,813	)
	2,608,760,000 JPY		4/19/47	0.785% semi-annually	6-Month JPY LIBOR semi-annually		1,286,953			2,141			1,284,812
	15,495,000		5/15/47	1.630% annually	Daily SOFR Compound annually		4,189,860			871,087			3,318,773
	7,166,000		2/15/48	2.600% annually	Daily SOFR Compound annually		797,272			492,576			304,696
	2,040,000		2/15/48	3.050% annually	Daily SOFR Compound annually		73,178			62,886			10,292
	4,147,000		7/11/52	1.780% annually	Daily SOFR Compound annually		1,084,825			—			1,084,825
Total						$	2,271,684		$	(1,283,388	)	$	3,555,072

OTC CREDIT DEFAULT SWAPS ON CORPORATE ISSUES — SELL PROTECTION1

Swap Counterparty (Reference Entity)

Notional Amount2*

Termination Date

Implied Credit Spread at May 31, 20233

Periodic Payments Received by the Fund†

Market Value

Upfront Premiums Paid (Received)

Unrealized Appreciation

BNP Paribas SA (Volkswagen International Finance NV, 4.898%, due 11/16/24)

7,380,000

EUR

12/20/24

0.721%

1.000% quarterly

$

33,478

$

28,540

$

4,938

See Notes to Financial Statements.

42 Western Asset Total Return Unconstrained Fund 2023 Annual Report

Western Asset Total Return Unconstrained Fund

OTC CREDIT DEFAULT SWAPS ON CORPORATE ISSUES — BUY PROTECTION4

Swap Counterparty (Reference Entity)

Notional Amount2*

Termination Date

Implied Credit Spread at May 31, 20233

Periodic Payments Made by the Fund†

Market Value

Upfront Premiums Paid (Received)

Unrealized Depreciation

BNP Paribas SA (Mercedes-Benz Group AG, 1.400%, due 1/12/24)

7,380,000

EUR

12/20/24

0.367%

1.000% quarterly

$

(76,130)

$

(56,039)

$

(20,091)

CENTRALLY CLEARED CREDIT DEFAULT SWAPS ON CREDIT INDICES — BUY PROTECTION4
Reference Entity	Notional Amount2		Termination Date		Periodic Payments Made by the Fund†	Market Value5		Upfront Premiums Paid (Received)		Unrealized Depreciation
Markit CDX.NA.HY.40 Index	$	11,019,600		6/20/28	5.000% quarterly	$	(117,544)	$	21,296	$	(138,840)
Markit CDX.NA.IG.40 Index		19,701,000		6/20/28	1.000% quarterly		(221,031)		(137,877)		(83,154)
Markit CDX.NA.IG.40 Index		29,228,000		6/20/33	1.000% quarterly		287,328		468,756		(181,428)
Total	$	59,948,600				$	(51,247)	$	352,175	$	(403,422)

See Notes to Financial Statements.

Western Asset Total Return Unconstrained Fund 2023 Annual Report 43

Schedule of investments (cont’d)

May 31, 2023

Western Asset Total Return Unconstrained Fund

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.

⁵  The quoted market prices and resulting values for credit default swap agreements on asset-backed securities and credit indices serve as an indicator of the current status of the payment/performance risk and represent the likelihood of an expected loss (or profit) for the credit derivative had the notional amount of the swap agreement been closed/sold as of the period end. Decreasing market values (sell protection) or increasing market values (buy protection) when compared to the notional amount of the swap, represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement.

† Percentage shown is an annual percentage rate.

* Notional amount denominated in U.S. dollars, unless otherwise noted.

Abbreviation(s) used in this table:
EUR	— Euro
JPY	— Japanese Yen
LIBOR	— London Interbank Offered Rate
MXN	— Mexican Peso
SOFR	— Secured Overnight Financing Rate
TIIE	— Tasa de Intere’s Interbancaria de Equilibrio (Equilibrium Interbanking Interest Rate)

See Notes to Financial Statements.

44 Western Asset Total Return Unconstrained Fund 2023 Annual Report

Statement of assets and liabilities

May 31, 2023

Assets:
Investments in unaffiliated securities, at value (Cost — $353,159,846)	$	290,091,396
Investments in affiliated securities, at value (Cost — $13,448,457)		13,448,457
Foreign currency, at value (Cost — $5,908,291)		5,743,724
Cash		1,000,000
Receivable for securities sold		5,915,389
Deposits with brokers for open futures contracts and exchange-traded options		4,776,230
Deposits with brokers for centrally cleared swap contracts		4,227,950
Interest receivable		3,494,166
Foreign currency collateral for open futures contracts and exchange-traded options, at value (Cost — $1,150,569)		1,182,150
Unrealized appreciation on forward foreign currency contracts		494,501
Receivable from brokers — net variation margin on open futures contracts		157,805
Deposits with brokers for OTC derivatives		100,000
Receivable for Fund shares sold		78,044
Receivable from brokers — net variation margin on centrally cleared swap contracts		73,724
Foreign currency collateral for centrally cleared swap contracts, at value (Cost — $47,504)		52,989
Dividends receivable from affiliated investments		35,646
OTC swaps, at value (premiums paid — $28,540)		33,478
Receivable for premiums on written options		29,226
Receivable for open OTC swap contracts		16,298
Total Assets		330,951,173
Liabilities:
Payable for securities purchased		13,611,926
Written options, at value (premiums received — $3,304,980)		2,706,286
Unrealized depreciation on forward foreign currency contracts		1,394,118
Payable for Fund shares repurchased		231,091
Investment management fee payable		148,373
OTC swaps, at value (premiums received — $56,039)		76,130
Accrued foreign capital gains tax		53,883
Payable for open OTC swap contracts		16,298
Payable for written options closed		6,863
Service and/or distribution fees payable		6,317
Directors’ fees payable		1,109
Accrued expenses		232,788
Total Liabilities		18,485,182
Total Net Assets	$	312,465,991
Net Assets:
Par value (Note 7)	$	35,563
Paid-in capital in excess of par value		480,354,106
Total distributable earnings (loss)		(167,923,678)
Total Net Assets	$	312,465,991

See Notes to Financial Statements.

Western Asset Total Return Unconstrained Fund 2023 Annual Report 45

Statement of assets and liabilities (cont’d)

May 31, 2023

Net Assets:
Class A	$8,402,164
Class C	$4,117,302
Class FI	$4,201,710
Class R	$156,816
Class I	$83,834,562
Class IS	$211,753,437
Shares Outstanding:
Class A	956,523
Class C	472,093
Class FI	478,743
Class R	17,849
Class I	9,527,290
Class IS	24,110,856
Net Asset Value:
Class A (and redemption price)	$8.78
Class C*	$8.72
Class FI (and redemption price)	$8.78
Class R (and redemption price)	$8.79
Class I (and redemption price)	$8.80
Class IS (and redemption price)	$8.78
Maximum Public Offering Price Per Share:
Class A (based on maximum initial sales charge of 3.75%; 4.25% prior to August 15, 2022)	$9.12

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

See Notes to Financial Statements.

46 Western Asset Total Return Unconstrained Fund 2023 Annual Report

Statement of operations

For the Year Ended May 31, 2023

Investment Income:
Interest from unaffiliated investments	$	25,690,780
Interest from affiliated investments		18,098
Dividends from unaffiliated investments		22,981
Dividends from affiliated investments		287,233
Less: Foreign taxes withheld		(39,708)
Total Investment Income		25,979,384
Expenses:
Investment management fee (Note 2)		2,986,858
Transfer agent fees (Note 5)		357,975
Registration fees		106,600
Service and/or distribution fees (Notes 2 and 5)		106,103
Fund accounting fees		77,388
Audit and tax fees		66,000
Shareholder reports		35,281
Custody fees		33,368
Legal fees		22,446
Directors’ fees		13,303
Commodity pool reports		11,000
Insurance		5,201
Commitment fees (Note 9)		5,022
Interest expense		3,143
Fees recaptured by investment manager (Note 2)		923
Miscellaneous expenses		14,208
Total Expenses		3,844,819
Less: Fee waivers and/or expense reimbursements (Notes 2 and 5)		(229,951)
Net Expenses		3,614,868
Net Investment Income		22,364,516
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		(73,612,735)	†
Investment transactions in affiliated securities		(88,711)
Futures contracts		(46,510,395)
Written options		18,357,231
Swap contracts		(13,472,442)
Forward foreign currency contracts		(4,409,489)
Foreign currency transactions		(281,724)
Net Realized Loss		(120,018,265)
Change in Net Unrealized Appreciation (Depreciation) From:
Investments in unaffiliated securities		38,757,153	‡
Investments in affiliated securities		65,921
Futures contracts		17,250,243
Written options		4,373,517
Swap contracts		9,354,725

See Notes to Financial Statements.

Western Asset Total Return Unconstrained Fund 2023 Annual Report 47

Statement of operations (cont’d)

For the Year Ended May 31, 2023

Forward foreign currency contracts		243,354
Foreign currencies		71,707
Change in Net Unrealized Appreciation (Depreciation)		70,116,620
Net Loss on Investments, Futures Contracts, Written Options, Swap Contracts, Forward Foreign Currency Contracts and Foreign Currency Transactions		(49,901,645)
Decrease in Net Assets From Operations	$	(27,537,129)

†  Net of foreign capital gains tax of $20,718.

‡  Net of change in accrued foreign capital gains tax of $43,010.

See Notes to Financial Statements.

48 Western Asset Total Return Unconstrained Fund 2023 Annual Report

Statements of changes in net assets

For the Years Ended May 31,	2023		2022
Operations:
Net investment income	$	22,364,516	$	29,501,904
Net realized loss		(120,018,265)		(10,530,257)
Change in net unrealized appreciation (depreciation)		70,116,620		(119,424,637)
Decrease in Net Assets From Operations		(27,537,129)		(100,452,990)
Distributions to Shareholders From (Notes 1 and 6):
Total distributable earnings		(2,400,038)		(42,915,161)
Decrease in Net Assets From Distributions to Shareholders		(2,400,038)		(42,915,161)
Fund Share Transactions (Note 7):
Net proceeds from sale of shares		62,278,245		229,266,987
Reinvestment of distributions		2,128,453		39,876,895
Cost of shares repurchased		(548,020,513)		(352,346,210)
Decrease in Net Assets From Fund Share Transactions		(483,613,815)		(83,202,328)
Decrease in Net Assets		(513,550,982)		(226,570,479)
Net Assets:
Beginning of year		826,016,973		1,052,587,452
End of year	$	312,465,991	$	826,016,973

See Notes to Financial Statements.

Western Asset Total Return Unconstrained Fund 2023 Annual Report 49

Financial highlights

For a share of each class of capital stock outstanding throughout each year ended May 31:
Class A Shares1	2023			2022			2021			2020			2019
Net asset value, beginning of year		$9.18			$10.65			$10.00			$10.28			$10.36
Income (loss) from operations:
Net investment income		0.38			0.27			0.20			0.35			0.38
Net realized and unrealized gain (loss)		(0.76)			(1.33)			0.52			(0.25)			(0.08)
Total income (loss) from operations		(0.38)			(1.06)			0.72			0.10			0.30
Less distributions from:
Net investment income		(0.02)			(0.22)			(0.07)			(0.22)			(0.30)
Net realized gains		—			(0.19)			—			(0.02)			—
Return of capital		—			—			—			(0.14)			(0.08)
Total distributions		(0.02)			(0.41)			(0.07)			(0.38)			(0.38)
Net asset value, end of year		$8.78			$9.18			$10.65			$10.00			$10.28
Total return2		(4.13)	%		(10.28)	%		7.11	%		0.98	%3		3.05	%
Net assets, end of year (000s)		$8,402			$9,584			$14,641			$11,965			$13,086
Ratios to average net assets:
Gross expenses		1.08	%4		1.08	%		1.10	%4		1.37	%4		1.50	%4
Net expenses5,6		1.05	4		1.07			1.10	4		1.10	4		1.10	4
Net investment income		4.30			2.65			1.93			3.38			3.70
Portfolio turnover rate7		55	%		64	%		63	%		63	%		49	%

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

²  Performance figures, exclusive of sales charges, may reflect compensating balance arrangements, fee waivers and/or expense reimbursements. In the absence of compensating balance arrangements, fee waivers and/or expense reimbursements, the total return would have been lower. Past performance is no guarantee of future results.

³  The total return includes gains from settlement of security litigations. Without these gains, the total return would have been 0.88% for the year ended May 31, 2020.

⁴  Reflects recapture of expenses waived/reimbursed from prior fiscal years.

⁵  As a result of an expense limitation arrangement, effective May 21, 2021, the ratio of total annual fund operating expenses, other than interest, brokerage commissions, taxes, extraordinary expenses, deferred organizational expenses and acquired fund fees and expenses, to average net assets of Class A shares did not exceed 1.07%.

This expense limitation arrangement cannot be terminated prior to December 31, 2024 without the Board of Directors’ consent. In addition, the manager has agreed to waive the Fund’s management fee to an extent sufficient to offset the net management fee payable in connection with any investment in an affiliated money market fund. Prior to May 21, 2021, the expense limitation was 1.10%.

⁶  Reflects fee waivers and/or expense reimbursements.

⁷  Excluding mortgage dollar roll transactions. If mortgage dollar roll transactions had been included, the portfolio turnover rate would have been 60%, 64%, 67%, 72% and 51% for the years ended May 31, 2023, 2022, 2021, 2020 and 2019, respectively.

See Notes to Financial Statements.

50 Western Asset Total Return Unconstrained Fund 2023 Annual Report

For a share of each class of capital stock outstanding throughout each year endedMay 31:
Class C Shares1	2023			2022			2021			2020			2019
Net asset value, beginning of year	$	9.15		$	10.62		$	10.00		$	10.28		$	10.35
Income (loss) from operations:
Net investment income		0.31			0.20			0.13			0.27			0.31
Net realized and unrealized gain (loss)		(0.74)			(1.34)			0.51			(0.24)			(0.07)
Total income (loss) from operations		(0.43)			(1.14)			0.64			0.03			0.24
Less distributions from:
Net investment income		—			(0.14)			(0.02)			(0.18)			(0.24)
Net realized gains		—			(0.19)			—			(0.02)			—
Return of capital		—			—			—			(0.11)			(0.07)
Total distributions		—			(0.33)			(0.02)			(0.31)			(0.31)
Net asset value, end of year	$	8.72		$	9.15		$	10.62		$	10.00		$	10.28
Total return2		(4.70)	%		(10.98)	%		6.45	%		0.30	%3		2.36	%
Net assets, end of year (000s)	$	4,117		$	8,978		$	13,227		$	13,319		$	11,858
Ratios to average net assets:
Gross expenses		1.79	%		1.77	%		1.78	%4		1.81	%4		1.81	%4
Net expenses5,6		1.76			1.77			1.78	4		1.80	4		1.80	4
Net investment income		3.50			1.94			1.26			2.65			3.01
Portfolio turnover rate7		55	%		64	%		63	%		63	%		49	%

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

²  Performance figures, exclusive of CDSC, may reflect compensating balance arrangements, fee waivers and/or expense reimbursements. In the absence of compensating balance arrangements, fee waivers and/or expense reimbursements, the total return would have been lower. Past performance is no guarantee of future results.

³  The total return includes gains from settlement of security litigations. Without these gains, the total return would have been unchanged for the year ended May 31, 2020.

⁴  Reflects recapture of expenses waived/reimbursed from prior fiscal years.

⁵  As a result of an expense limitation arrangement, the ratio of total annual fund operating expenses, other than interest, brokerage commissions, taxes, extraordinary expenses, deferred organizational expenses and acquired fund fees and expenses, to average net assets of Class C shares did not exceed 1.80%. This expense limitation arrangement cannot be terminated prior to December 31, 2024 without the Board of Directors’ consent. In addition, the manager has agreed to waive the Fund’s management fee to an extent sufficient to offset the net management fee payable in connection with any investment in an affiliated money market fund.

⁶  Reflects fee waivers and/or expense reimbursements.

⁷  Excluding mortgage dollar roll transactions. If mortgage dollar roll transactions had been included, the portfolio turnover rate would have been 60%, 64%, 67%, 72% and 51% for the years ended May 31, 2023, 2022, 2021, 2020 and 2019, respectively.

See Notes to Financial Statements.

Western Asset Total Return Unconstrained Fund 2023 Annual Report 51

Financial highlights (cont’d)

For a share of each class of capital stock outstanding throughout each year endedMay 31:
Class FI Shares1	2023			2022			2021			2020			2019
Net asset value, beginning of year	$	9.17		$	10.64		$	9.99		$	10.27		$	10.35
Income (loss) from operations:
Net investment income		0.37			0.27			0.21			0.35			0.38
Net realized and unrealized gain (loss)		(0.74)			(1.33)			0.51			(0.24)			(0.08)
Total income (loss) from operations		(0.37)			(1.06)			0.72			0.11			0.30
Less distributions from:
Net investment income		(0.02)			(0.22)			(0.07)			(0.23)			(0.30)
Net realized gains		—			(0.19)			—			(0.02)			—
Return of capital		—			—			—			(0.14)			(0.08)
Total distributions		(0.02)			(0.41)			(0.07)			(0.39)			(0.38)
Net asset value, end of year	$	8.78		$	9.17		$	10.64		$	9.99		$	10.27
Total return2		(4.08)	%		(10.28)	%		7.18	%		0.93	%3		3.10	%
Net assets, end of year (000s)	$	4,202		$	11,518		$	16,871		$	34,171		$	52,650
Ratios to average net assets:
Gross expenses		1.10	%		1.05	%		1.07	%4		1.11	%4		1.11	%4
Net expenses5,6		1.06			1.05			1.07	4		1.10	4		1.10	4
Net investment income		4.22			2.66			1.99			3.42			3.70
Portfolio turnover rate7		55	%		64	%		63	%		63	%		49	%

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

²  Performance figures may reflect compensating balance arrangements, fee waivers and/or expense reimbursements. In the absence of compensating balance arrangements, fee waivers and/or expense reimbursements, the total return would have been lower. Past performance is no guarantee of future results.

³  The total return includes gains from settlement of security litigations. Without these gains, the total return would have been 0.83% for the year ended May 31, 2020.

⁴  Reflects recapture of expenses waived/reimbursed from prior fiscal years.

⁵  As a result of an expense limitation arrangement, the ratio of total annual fund operating expenses, other than interest, brokerage commissions, taxes, extraordinary expenses, deferred organizational expenses and acquired fund fees and expenses, to average net assets of Class FI shares did not exceed 1.10%. This expense limitation arrangement cannot be terminated prior to December 31, 2024 without the Board of Directors’ consent. In addition, the manager has agreed to waive the Fund’s management fee to an extent sufficient to offset the net management fee payable in connection with any investment in an affiliated money market fund.

⁶  Reflects fee waivers and/or expense reimbursements.

⁷  Excluding mortgage dollar roll transactions. If mortgage dollar roll transactions had been included, the portfolio turnover rate would have been 60%, 64%, 67%, 72% and 51% for the years ended May 31, 2023, 2022, 2021, 2020 and 2019, respectively.

See Notes to Financial Statements.

52 Western Asset Total Return Unconstrained Fund 2023 Annual Report

For a share of each class of capital stock outstanding throughout each year ended May 31:
Class R Shares1	2023			2022			2021			2020			2019
Net asset value, beginning of year	$	9.20		$	10.65		$	10.01		$	10.28		$	10.36
Income (loss) from operations:
Net investment income		0.37			0.23			0.20			0.32			0.36
Net realized and unrealized gain (loss)		(0.76)			(1.32)			0.50			(0.23)			(0.09)
Total income (loss) from operations		(0.39)			(1.09)			0.70			0.09			0.27
Less distributions from:
Net investment income		(0.02)			(0.17)			(0.06)			(0.21)			(0.28)
Net realized gains		—			(0.19)			—			(0.02)			—
Return of capital		—			—			—			(0.13)			(0.07)
Total distributions		(0.02)			(0.36)			(0.06)			(0.36)			(0.35)
Net asset value, end of year	$	8.79		$	9.20		$	10.65		$	10.01		$	10.28
Total return2		(4.27)	%		(10.57)	%		7.05	%		0.74	%3		2.80	%
Net assets, end of year (000s)	$	157		$	78		$	477		$	487		$	457
Ratios to average net assets:
Gross expenses		1.45	%		1.35	%4		1.44	%		1.51	%4		1.37	%4
Net expenses5,6		1.35			1.35	4		1.35			1.35	4		1.35	4
Net investment income		4.22			2.21			1.94			3.14			3.50
Portfolio turnover rate7		55	%		64	%		63	%		63	%		49	%

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

²  Performance figures may reflect compensating balance arrangements, fee waivers and/or expense reimbursements. In the absence of compensating balance arrangements, fee waivers and/or expense reimbursements, the total return would have been lower. Past performance is no guarantee of future results.

³  The total return includes gains from settlement of security litigations. Without these gains, the total return would have been unchanged for the year ended May 31, 2020.

⁴  Reflects recapture of expenses waived/reimbursed from prior fiscal years.

⁵  As a result of an expense limitation arrangement, the ratio of total annual fund operating expenses, other than interest, brokerage commissions, taxes, extraordinary expenses, deferred organizational expenses and acquired fund fees and expenses, to average net assets of Class R shares did not exceed 1.35%. This expense limitation arrangement cannot be terminated prior to December 31, 2024 without the Board of Directors’ consent. In addition, the manager has agreed to waive the Fund’s management fee to an extent sufficient to offset the net management fee payable in connection with any investment in an affiliated money market fund.

⁶  Reflects fee waivers and/or expense reimbursements.

⁷  Excluding mortgage dollar roll transactions. If mortgage dollar roll transactions had been included, the portfolio turnover rate would have been 60%, 64%, 67%, 72% and 51% for the years ended May 31, 2023, 2022, 2021, 2020 and 2019, respectively.

See Notes to Financial Statements.

Western Asset Total Return Unconstrained Fund 2023 Annual Report 53

Financial highlights (cont’d)

For a share of each class of capital stock outstanding throughout each year ended May 31:
Class I Shares1	2023			2022			2021			2020			2019
Net asset value, beginning of year	$	9.19		$	10.67		$	10.00		$	10.28		$	10.36
Income (loss) from operations:
Net investment income		0.39			0.30			0.25			0.38			0.41
Net realized and unrealized gain (loss)		(0.74)			(1.34)			0.51			(0.24)			(0.08)
Total income (loss) from operations		(0.35)			(1.04)			0.76			0.14			0.33
Less distributions from:
Net investment income		(0.04)			(0.25)			(0.09)			(0.25)			(0.32)
Net realized gains		—			(0.19)			—			(0.02)			—
Return of capital		—			—			—			(0.15)			(0.09)
Total distributions		(0.04)			(0.44)			(0.09)			(0.42)			(0.41)
Net asset value, end of year	$	8.80		$	9.19		$	10.67		$	10.00		$	10.28
Total return2		(3.76)	%		(10.06)	%		7.61	%		1.26	%3		3.43	%
Net assets, end of year (000s)	$	83,835		$	530,018		$	718,829		$	1,017,885		$	1,131,616
Ratios to average net assets:
Gross expenses		0.80	%		0.74	%		0.74	%4		0.76	%4		0.76	%4
Net expenses5,6		0.75			0.74			0.73	4		0.75	4		0.75	4
Net investment income		4.35			2.96			2.34			3.74			4.06
Portfolio turnover rate7		55	%		64	%		63	%		63	%		49	%

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

²  Performance figures may reflect compensating balance arrangements, fee waivers and/or expense reimbursements. In the absence of compensating balance arrangements, fee waivers and/or expense reimbursements, the total return would have been lower. Past performance is no guarantee of future results.

³  The total return includes gains from settlement of security litigations. Without these gains, the total return would have been unchanged for the year ended May 31, 2020.

⁴  Reflects recapture of expenses waived/reimbursed from prior fiscal years.

⁵  As a result of an expense limitation arrangement, the ratio of total annual fund operating expenses, other than interest, brokerage commissions, taxes, extraordinary expenses, deferred organizational expenses and acquired fund fees and expenses, to average net assets of Class I shares did not exceed 0.75%. This expense limitation arrangement cannot be terminated prior to December 31, 2024 without the Board of Directors’ consent. In addition, the manager has agreed to waive the Fund’s management fee to an extent sufficient to offset the net management fee payable in connection with any investment in an affiliated money market fund.

⁶  Reflects fee waivers and/or expense reimbursements.

⁷  Excluding mortgage dollar roll transactions. If mortgage dollar roll transactions had been included, the portfolio turnover rate would have been 60%, 64%, 67%, 72% and 51% for the years ended May 31, 2023, 2022, 2021, 2020 and 2019, respectively.

See Notes to Financial Statements.

54 Western Asset Total Return Unconstrained Fund 2023 Annual Report

For a share of each class of capital stock outstanding throughout each year ended May 31:
Class IS Shares1	2023			2022			2021			2020			2019
Net asset value, beginning of year	$	9.18		$	10.66		$	9.99		$	10.26		$	10.34
Income (loss) from operations:
Net investment income		0.41			0.31			0.25			0.39			0.43
Net realized and unrealized gain (loss)		(0.75)			(1.34)			0.52			(0.23)			(0.09)
Total income (loss) from operations		(0.34)			(1.03)			0.77			0.16			0.34
Less distributions from:
Net investment income		(0.06)			(0.26)			(0.10)			(0.25)			(0.33)
Net realized gains		—			(0.19)			—			(0.02)			—
Return of capital		—			—			—			(0.16)			(0.09)
Total distributions		(0.06)			(0.45)			(0.10)			(0.43)			(0.42)
Net asset value, end of year	$	8.78		$	9.18		$	10.66		$	9.99		$	10.26
Total return2		(3.69)	%		(9.99)	%		7.69	%		1.44	%3		3.52	%
Net assets, end of year (millions)	$	212		$	266		$	287		$	202		$	206
Ratios to average net assets:
Gross expenses		0.69	%		0.65	%		0.66	%		0.66	%4		0.66	%4
Net expenses5,6		0.65			0.65			0.65			0.65	4		0.65	4
Net investment income		4.69			3.08			2.42			3.82			4.21
Portfolio turnover rate7		55	%		64	%		63	%		63	%		49	%

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

²  Performance figures may reflect compensating balance arrangements, fee waivers and/or expense reimbursements. In the absence of compensating balance arrangements, fee waivers and/or expense reimbursements, the total return would have been lower. Past performance is no guarantee of future results.

³  The total return includes gains from settlement of security litigations. Without these gains, the total return would have been unchanged for the year ended May 31, 2020.

⁴  Reflects recapture of expenses waived/reimbursed from prior fiscal years.

⁵  As a result of an expense limitation arrangement, the ratio of total annual fund operating expenses, other than interest, brokerage commissions, taxes, extraordinary expenses, deferred organizational expenses and acquired fund fees and expenses, to average net assets of Class IS shares did not exceed 0.65%. In addition, the ratio of total annual fund operating expenses for Class IS shares did not exceed the ratio of total annual fund operating expenses for Class I shares. These expense limitation arrangements cannot be terminated prior to December 31, 2024 without the Board of Directors’ consent. In addition, the manager has agreed to waive the Fund’s management fee to an extent sufficient to offset the net management fee payable in connection with any investment in an affiliated money market fund.

⁶  Reflects fee waivers and/or expense reimbursements.

⁷  Excluding mortgage dollar roll transactions. If mortgage dollar roll transactions had been included, the portfolio turnover rate would have been 60%, 64%, 67%, 72% and 51% for the years ended May 31, 2023, 2022, 2021, 2020 and 2019, respectively.

See Notes to Financial Statements.

Western Asset Total Return Unconstrained Fund 2023 Annual Report 55

Notes to financial statements

1. Organization and significant accounting policies

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

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

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

Pursuant to policies adopted by the Board of Directors, the Fund’s manager has been designated as the valuation designee and is responsible for the oversight of the daily

56 Western Asset Total Return Unconstrained Fund 2023 Annual Report

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 Directors. When determining the reliability of third party pricing information for investments owned by the Fund, the Valuation Committee, among other things, conducts due diligence reviews of pricing vendors, monitors the daily change in prices and reviews transactions among market participants.

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

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

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

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)

Western Asset Total Return Unconstrained Fund 2023 Annual Report 57

Notes to financial statements (cont’d)

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

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

ASSETS
Description	Quoted Prices (Level 1)		Other Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Long-Term Investments†:
Corporate Bonds & Notes:
Financials		—	$	40,964,229	$	645,271	$	41,609,500
Other Corporate Bonds & Notes		—		68,201,460		—		68,201,460
Mortgage-Backed Securities		—		45,998,567		—		45,998,567
Collateralized Mortgage Obligations		—		43,380,475		—		43,380,475
Sovereign Bonds		—		38,922,916		527,679		39,450,595
Asset-Backed Securities		—		34,182,181		—		34,182,181
U.S. Government & Agency Obligations		—		11,627,496		—		11,627,496
U.S. Treasury Inflation Protected Securities		—		3,727,076		—		3,727,076
Purchased Options:
Exchange-Traded Purchased Options	$	612,733		—		—		612,733
OTC Purchased Options		—		2,477		—		2,477
Municipal Bonds		—		511,928		—		511,928
Investments in Underlying Funds		405,000		—		—		405,000
Senior Loans		—		381,908		—		381,908
Total Long-Term Investments		1,017,733		287,900,713		1,172,950		290,091,396
Short-Term Investments†		13,448,457		—		—		13,448,457
Total Investments	$	14,466,190	$	287,900,713	$	1,172,950	$	303,539,853
Other Financial Instruments:
Futures Contracts††	$	2,715,744		—		—	$	2,715,744
Forward Foreign Currency Contracts††		—	$	494,501		—		494,501
Centrally Cleared Interest Rate Swaps††		—		8,640,645		—		8,640,645
OTC Credit Default Swaps on Corporate Issues — Sell Protection‡		—		33,478		—		33,478
Total Other Financial Instruments	$	2,715,744	$	9,168,624		—	$	11,884,368
Total	$	17,181,934	$	297,069,337	$	1,172,950	$	315,424,221

58 Western Asset Total Return Unconstrained Fund 2023 Annual Report

LIABILITIES
Description	Quoted Prices (Level 1)		Other Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Other Financial Instruments:
Written Options:
Exchange-Traded Written Options	$	2,691,864		—		—	$	2,691,864
OTC Written Options		—	$	14,422		—		14,422
Futures Contracts††		1,744,922		—		—		1,744,922
Forward Foreign Currency Contracts††		—		1,394,118		—		1,394,118
Centrally Cleared Interest Rate Swaps††		—		5,085,573		—		5,085,573
OTC Credit Default Swaps on Corporate Issues — Buy Protection‡		—		76,130		—		76,130
Centrally Cleared Credit Default Swaps on Credit Indices — Buy Protection††		—		403,422		—		403,422
Total	$	4,436,786	$	6,973,665		—	$	11,410,451

† See Schedule of Investments for additional detailed categorizations.

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

‡ Value includes any premium paid or received with respect to swap contracts.

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

Western Asset Total Return Unconstrained Fund 2023 Annual Report 59

Notes to financial statements (cont’d)

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) Options on futures contracts. An option on a futures contract gives the purchaser the right, in return for the premium paid, to assume a position in the underlying futures contract at the specified option exercise price at any time prior to the expiration date of the option. Upon exercise of an option, the delivery of the futures position by the writer of the option to the holder of the option will be accompanied by delivery of the accumulated balance in the writer’s futures margin account that represents the amount by which the market price of the futures contract exceeds (in the case of a call) or is less than (in the case of a put) the exercise price of the option on the futures contract. The potential for loss related to the purchase of an option on a futures contract is limited to the premium paid for the option plus transaction costs. Because the value of the option is fixed at the point of purchase, there are no daily cash payments by the purchaser to reflect changes in the value of the underlying contract; however, the value of the option changes daily and that change would be reflected in the net asset value of the Fund. The potential for loss related to writing call options is unlimited. The potential for loss related to writing put options is limited only by the aggregate strike price of the put option less the premium received.

(e) 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.

(f) 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.

60 Western Asset Total Return Unconstrained Fund 2023 Annual Report

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

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

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

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

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

Swap contracts are marked-to-market daily and changes in value are recorded as unrealized appreciation (depreciation). The daily change in valuation of Centrally Cleared Swaps, if any, is recorded as a net receivable or payable for variation margin on the 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.

Western Asset Total Return Unconstrained Fund 2023 Annual Report 61

Notes to financial statements (cont’d)

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.

The Fund’s maximum exposure in the event of a defined credit event on a credit default swap to sell protection is the notional amount. As of May 31, 2023, the total notional value of all credit default swaps to sell protection was EUR 7,380,000. 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 year ended May 31, 2023, 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/

62 Western Asset Total Return Unconstrained Fund 2023 Annual Report

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, receive a fixed rate and pay a floating rate, or pay and receive a floating rate, on a notional principal amount. Interest rate swaps are marked-to-market daily based upon quotations from market makers and the change, if any, is recorded as an unrealized 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.

(h) 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.

Western Asset Total Return Unconstrained Fund 2023 Annual Report 63

Notes to financial statements (cont’d)

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.

(i) 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 off-set 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 off-set between the lender and the borrower.

(j) Stripped securities. The Fund may invest in ‘‘Stripped Securities,’’ a term used collectively for components, or strips, of fixed income securities. Stripped Securities can be principal only securities (“PO”), which are debt obligations that have been stripped of unmatured interest coupons, or interest only securities (“IO”), which are unmatured interest coupons that have been stripped from debt obligations. The market value of Stripped Securities will fluctuate in response to changes in economic conditions, rates of prepayment, interest rates and the market’s perception of the securities. However, fluctuations in response to interest rates may be greater in Stripped Securities than for debt obligations of comparable maturities that pay interest currently. The amount of fluctuation may increase with a longer period of maturity.

The yield to maturity on IO’s is sensitive to the rate of principal repayments (including prepayments) on the related underlying debt obligation and principal payments may have a material effect on yield to maturity. If the underlying debt obligation experiences greater than anticipated prepayments of principal, the Fund may not fully recoup its initial investment in IO’s.

(k) 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

64 Western Asset Total Return Unconstrained Fund 2023 Annual Report

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.

(l) Securities traded on a to-be-announced basis. The Fund may trade securities on a to-be-announced (“TBA”) basis. In a TBA transaction, the Fund commits to purchasing or selling securities which have not yet been issued by the issuer and for which specific information, such as the face amount, maturity date and underlying pool of investments in U.S. government agency mortgage pass-through securities, is not announced. Securities purchased on a TBA basis are not settled until they are delivered to the Fund. Beginning on the date the Fund enters into a TBA transaction, cash, U.S. government securities or other liquid high-grade debt obligations are segregated in an amount equal in value to the purchase price of the TBA security. These securities are subject to market fluctuations and their current value is determined in the same manner as for other securities.

(m) Mortgage dollar rolls. The Fund may enter into mortgage dollar rolls in which the Fund sells mortgage-backed securities for delivery in the current month, realizing a gain or loss, and simultaneously entering into contracts to repurchase substantially similar (same type, coupon and maturity) securities to settle on a specified future date.

The Fund executes its mortgage dollar rolls entirely in the TBA market, whereby the Fund makes a forward commitment to purchase a security and, instead of accepting delivery, the position is offset by a sale of the security with a simultaneous agreement to repurchase at a future date. The Fund accounts for mortgage dollar rolls as purchases and sales.

The risk of entering into mortgage dollar rolls is that the market value of the securities the Fund is obligated to repurchase under the agreement may decline below the repurchase price. In the event the buyer of securities under a mortgage dollar roll files for bankruptcy or becomes insolvent, the Fund’s use of the proceeds of the mortgage dollar roll 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.

(n) 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.

Western Asset Total Return Unconstrained Fund 2023 Annual Report 65

Notes to financial statements (cont’d)

(o) 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.

(p) Credit and market risk. The Fund invests in high-yield and emerging market instruments that are subject to certain credit and market risks. The yields of high-yield and emerging market debt obligations reflect, among other things, perceived credit and market risks. The Fund’s investments in securities rated below investment grade typically involve risks not associated with higher rated securities including, among others, greater risk related to timely and ultimate payment of interest and principal, greater market price volatility and less liquid secondary market trading. The consequences of political, social, economic or diplomatic changes may have disruptive effects on the market prices of investments held by the Fund. The Fund’s investments in non-U.S. dollar denominated securities may also result in foreign currency losses caused by devaluations and exchange rate fluctuations.

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

66 Western Asset Total Return Unconstrained Fund 2023 Annual Report

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

(r) 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 of default by the counterparty or a termination of the agreement, the terms of the ISDA

Western Asset Total Return Unconstrained Fund 2023 Annual Report 67

Notes to financial statements (cont’d)

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 May 31, 2023, the Fund held OTC written options, forward foreign currency contracts and OTC credit default swaps with credit related contingent features which had a liability position of $1,484,670. 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 May 31, 2023, the Fund had posted with its counterparties cash and/or securities as collateral to cover the net liability of these derivatives amounting to $100,000 which could be used to reduce the required payment.

At May 31, 2023, the Fund held non-cash collateral from JPMorgan Chase & Co. in the amount of $144,882. This amount could be used to reduce the Fund’s exposure to the counterparty in the event of default.

(s) Security transactions and investment income. Security transactions are accounted for on a trade date basis. Interest income (including interest income from payment-in-kind securities), adjusted for amortization of premium and accretion of discount, is recorded on the accrual basis. Paydown gains and losses on mortgage- and asset-backed securities are recorded as adjustments to interest income. Dividend income is recorded on the ex-dividend date for dividends received in cash and/or securities. Foreign dividend income is recorded on the ex-dividend date or as soon as practicable after the Fund determines the existence of a dividend declaration after exercising reasonable due diligence. The cost of investments sold is determined by use of the specific identification method. To the extent any issuer defaults or a credit event occurs that impacts the issuer, the Fund may halt any additional interest income accruals and consider the realizability of interest accrued up to the date of default or credit event.

(t) Distributions to shareholders. Distributions from net investment income of the Fund, if any, are declared and paid on a quarterly basis. Distributions of net realized gains, if any, are declared at least annually. Distributions to shareholders of the Fund are recorded on the ex-dividend date and are determined in accordance with income tax regulations, which may differ from GAAP.

(u) Share class accounting. Investment income, common expenses and realized/ unrealized gains (losses) on investments are allocated to the various classes of the Fund on the basis of daily net assets of each class. Fees relating to a specific class are charged directly to that share class.

68 Western Asset Total Return Unconstrained Fund 2023 Annual Report

(v) 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.

(w) 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 May 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. Realized gains upon disposition of securities issued in or by certain foreign countries are subject to capital gains tax imposed by those countries. As of May 31, 2023, there were $53,883 of capital gains tax liabilities accrued on unrealized gains.

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

2. Investment management agreement and other transactions with affiliates

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

LMPFA provides the Fund with management and administrative services for which the Fund pays a fee calculated daily and paid monthly, at an annual rate of 0.60% of the Fund’s average daily net assets. For their services, LMPFA pays Western Asset, Western Asset Singapore, Western Asset Japan and Western Asset London monthly all of the management fee that it receives from the Fund. The Fund does not pay any additional advisory or other fees for advisory services provided by Western Asset, Western Asset Singapore, Western Asset Japan or Western Asset London.

Western Asset Total Return Unconstrained Fund 2023 Annual Report 69

Notes to financial statements (cont’d)

As a result of expense limitation arrangements between the Fund and LMPFA, the ratio of total annual fund operating expenses, other than interest, brokerage commissions, taxes, extraordinary expenses, deferred organizational expenses and acquired fund fees and expenses, to average net assets of Class A, Class C, Class FI, Class R, Class I and Class IS shares did not exceed 1.07%, 1.80%, 1.10%, 1.35%, 0.75% and 0.65%, respectively. In addition, the ratio of total annual fund operating expenses for Class IS shares did not exceed the ratio of total annual fund operating expenses for Class I shares. These expense limitation arrangements cannot be terminated prior to December 31, 2024 without the Board of Directors’ consent. In addition, the manager has agreed to waive the Fund’s management fee to an extent sufficient to offset the net management fee payable in connection with any investment in an affiliated money market fund (the “affiliated money market fund waiver”). The affiliated money market fund waiver is not subject to the recapture provision discussed below.

During the year ended May 31, 2023, fees waived and/or expenses reimbursed amounted to $229,951, which included an affiliated money market fund waiver of $7,059.

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

Pursuant to these arrangements, at May 31, 2023, the Fund had remaining fee waivers and/or expense reimbursements subject to recapture by LMPFA and respective dates of expiration as follows:

	Class A		Class C		Class FI		Class R		Class I		Class IS
Expires May 31, 2024		—		—		—		—		—	$	5,563
Expires May 31, 2025	$	2,896	$	1,995	$	2,825	$	162	$	124,401		90,613
Total fee waivers/expense reimbursements subject to recapture	$	2,896	$	1,995	$	2,825	$	162	$	124,401	$	96,176

For the year ended May 31, 2023, fee waivers and/or expense reimbursements recaptured by LMPFA, if any, were as follows:

	Class A
LMPFA recaptured	$	923

Franklin Templeton Investor Services, LLC (“Investor Services”) serves as the Fund’s shareholder servicing agent and acts as the Fund’s transfer agent and dividend-paying agent. Investor Services is an indirect, wholly-owned subsidiary of Franklin Resources. Franklin Distributors, LLC (“Franklin Distributors”) serves as the Fund’s sole and exclusive distributor. Franklin Distributors is an indirect, wholly-owned broker-dealer subsidiary of Franklin Resources.

70 Western Asset Total Return Unconstrained Fund 2023 Annual Report

There is a maximum initial sales charge of 3.75% (4.25% prior to August 15, 2022) for Class A shares. There is a contingent deferred sales charge (“CDSC”) of 1.00% on Class C shares, which applies if redemption occurs within 12 months from purchase payment. In certain cases, Class A shares have a 1.00% CDSC, which applies if redemption occurs within 18 months from purchase payment. This CDSC only applies to those purchases of Class A shares, which, when combined with current holdings of other shares of funds sold by Franklin Distributors, equal or exceed $500,000 ($1,000,000 prior to August 15, 2022) in the aggregate. These purchases do not incur an initial sales charge.

For the year ended May 31, 2023, sales charges retained by and CDSCs paid to Franklin Distributors and its affiliates, if any, were as follows:

	Class A		Class C
Sales charges	$	603		—
CDSCs		—	$	27

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

3. Investments

During the year ended May 31, 2023, the aggregate cost of purchases and proceeds from sales of investments (excluding short-term investments) and U.S. Government & Agency Obligations were as follows:

	Investments		U.S. Government & Agency Obligations
Purchases	$	82,416,853	$	213,459,766
Sales		354,016,053		418,636,874

At May 31, 2023, the aggregate cost of investments and the aggregate gross unrealized appreciation and depreciation of investments for federal income tax purposes were as follows:

	Cost/Premiums Paid (Received)		Gross Unrealized Appreciation		Gross Unrealized Depreciation		Net Unrealized Appreciation (Depreciation)
Securities	$	366,468,073	$	1,415,626	$	(64,343,846)	$	(62,928,220)
Written options		(3,304,980)		1,150,594		(551,900)		598,694
Futures contracts		—		2,715,744		(1,744,922)		970,822
Forward foreign currency contracts		—		494,501		(1,394,118)		(899,617)
Swap contracts		(958,712)		8,645,583		(5,509,086)		3,136,497

Western Asset Total Return Unconstrained Fund 2023 Annual Report 71

Notes to financial statements (cont’d)

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 May 31, 2023.

ASSET DERIVATIVES1
	Interest Rate Risk		Foreign Exchange Risk		Credit Risk		Total
Purchased options2	$	612,733	$	2,477		—	$	615,210
Futures contracts3		2,715,744		—		—		2,715,744
Forward foreign currency contracts		—		494,501		—		494,501
OTC swap contracts4		—		—	$	33,478		33,478
Centrally cleared swap contracts5		8,640,645		—		—		8,640,645
Total	$	11,969,122	$	496,978	$	33,478	$	12,499,578
LIABILITY DERIVATIVES1
	Interest Rate Risk		Foreign Exchange Risk		Credit Risk		Total
Written options	$	2,706,286		—		—	$	2,706,286
Futures contracts3		1,744,922		—		—		1,744,922
Forward foreign currency contracts		—	$	1,394,118		—		1,394,118
OTC swap contracts4		—		—	$	76,130		76,130
Centrally cleared swap contracts5		5,085,573		—		403,422		5,488,995
Total	$	9,536,781	$	1,394,118	$	479,552	$	11,410,451

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 in unaffiliated securities 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  Values include premiums paid (received) on swap contracts which are shown separately in the Statement of Assets and Liabilities.

⁵  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.

72 Western Asset Total Return Unconstrained Fund 2023 Annual Report

The following tables provide information about the effect of derivatives and hedging activities on the Fund’s Statement of Operations for the year ended May 31, 2023. The first table provides additional detail about the amounts and sources of gains (losses) realized on derivatives during the period. The second table provides additional information about the change in net unrealized appreciation (depreciation) resulting from the Fund’s derivatives and hedging activities during the period.

AMOUNT OF NET REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED
	Interest Rate Risk		Foreign Exchange Risk		Credit Risk		Total
Purchased options1	$	(7,763,908)	$	(417,831)	$	(364,708)	$	(8,546,447)
Futures contracts		(46,510,395)		—		—		(46,510,395)
Written options		17,839,193		128,888		389,150		18,357,231
Swap contracts		(13,422,473)		—		(49,969)		(13,472,442)
Forward foreign currency contracts		—		(4,409,489)		—		(4,409,489)
Total	$	(49,857,583)	$	(4,698,432)	$	(25,527)	$	(54,581,542)

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

CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES RECOGNIZED
	Interest Rate Risk		Foreign Exchange Risk		Credit Risk		Total
Purchased options1	$	(1,611,790)	$	27,476	$	(17,930)	$	(1,602,244)
Futures contracts		17,250,243		—		—		17,250,243
Written options		4,610,106		(64,345)		(172,244)		4,373,517
Swap contracts		11,422,279		—		(2,067,554)		9,354,725
Forward foreign currency contracts		—		243,354		—		243,354
Total	$	31,670,838	$	206,485	$	(2,257,728)	$	29,619,595

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

Western Asset Total Return Unconstrained Fund 2023 Annual Report 73

Notes to financial statements (cont’d)

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

	Average Market Value
Purchased options	$	1,932,614
Written options		5,977,551
Futures contracts (to buy)		783,192,013
Futures contracts (to sell)		441,055,754
Forward foreign currency contracts (to buy)		52,697,313
Forward foreign currency contracts (to sell)		62,065,188
	Average Notional Balance
Interest rate swap contracts	$	581,747,248
Credit default swap contracts (buy protection)		92,131,265
Credit default swap contracts (sell protection)		9,377,049

The following table presents the Fund’s OTC derivative assets and liabilities by counterparty net of amounts available for offset under an ISDA Master Agreement and net of the related collateral pledged (received) by the Fund as of May 31, 2023.

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.	$	117,069		—	$	117,069		—	$	117,069
BNP Paribas SA		33,478	$	(101,448)		(67,970)		—		(67,970)
Citibank N.A.		10,612		—		10,612		—		10,612
Goldman Sachs Group Inc.		24,152		(197,188)		(173,036)		—		(173,036)
JPMorgan Chase & Co.		264,080		(64,429)		199,651	$	(144,882)		54,769
Morgan Stanley & Co. Inc.		81,065		(1,121,605)		(1,040,540)		100,000		(940,540)
Total	$	530,456	$	(1,484,670)	$	(954,214)	$	(44,882)	$	(999,096)

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. Class specific expenses, waivers and/or expense reimbursements

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

74 Western Asset Total Return Unconstrained Fund 2023 Annual Report

For the year ended May 31, 2023, class specific expenses were as follows:

	Service and/or Distribution Fees		Transfer Agent Fees
Class A	$	22,256	$	12,489
Class C		61,322		6,749
Class FI		21,704		14,440
Class R		821		431
Class I		—		308,590
Class IS		—		15,276
Total	$	106,103	$	357,975

For the year ended May 31, 2023, waivers and/or expense reimbursements by class were as follows:

	Waivers/Expense Reimbursements
Class A	$	3,037
Class C		2,087
Class FI		2,953
Class R		165
Class I		127,477
Class IS		94,232
Total	$	229,951

6. Distributions to shareholders by class

	Year Ended May 31, 2023		Year Ended May 31, 2022
Net Investment Income:
Class A	$	21,000	$	334,277
Class A2†		—		—
Class C		—		165,909
Class FI		13,760		349,734
Class R		465		3,157
Class I		827,902		16,013,425
Class IS		1,536,911		7,733,704
Total	$	2,400,038	$	24,600,206

Western Asset Total Return Unconstrained Fund 2023 Annual Report 75

Notes to financial statements (cont’d)

	Year Ended May 31, 2023		Year Ended May 31, 2022
Net Realized Gains:
Class A		—	$	294,335
Class A2†		—		—
Class C		—		223,045
Class FI		—		299,398
Class R		—		3,723
Class I		—		11,886,572
Class IS		—		5,607,882
Total		—	$	18,314,955

† On June 24, 2021, the Fund converted its Class A2 shares into Class A shares.

7. Capital shares

At May 31, 2023, the Corporation had 42.7 billion shares of capital stock authorized with a par value of $0.001 per share. Transactions in shares of each class were as follows:

	Year Ended May 31, 2023				Year Ended May 31, 2022
	Shares		Amount		Shares		Amount
Class A
Shares sold		441,566	$	3,876,191		465,908	$	4,883,918
Shares issued on reinvestment		2,318		20,366		58,669		595,292
Shares repurchased		(531,863)		(4,664,843)		(854,431)		(8,237,091)
Net decrease		(87,979)	$	(768,286)		(329,854)	$	(2,757,881)
Class A2†
Shares sold		—		—		152	$	968
Shares issued on reinvestment		—		—		—		—
Shares repurchased		—		—		(122,919)		(1,315,228)
Net decrease		—		—		(122,767)	$	(1,314,260)
Class C
Shares sold		13,051	$	114,816		90,605	$	938,543
Shares issued on reinvestment		—		—		38,313		388,463
Shares repurchased		(522,174)		(4,555,253)		(393,355)		(3,898,779)
Net decrease		(509,123)	$	(4,440,437)		(264,437)	$	(2,571,773)
Class FI
Shares sold		45,142	$	396,840		169,366	$	1,755,271
Shares issued on reinvestment		1,560		13,677		63,807		646,404
Shares repurchased		(824,606)		(7,222,002)		(562,022)		(5,393,181)
Net decrease		(777,904)	$	(6,811,485)		(328,849)	$	(2,991,506)

76 Western Asset Total Return Unconstrained Fund 2023 Annual Report

	Year Ended May 31, 2023				Year Ended May 31, 2022
	Shares		Amount		Shares		Amount
Class R
Shares sold		19,401	$	167,649		39,873	$	416,428
Shares issued on reinvestment		53		465		671		6,880
Shares repurchased		(10,067)		(87,100)		(76,822)		(804,975)
Net increase (decrease)		9,387	$	81,014		(36,278)	$	(381,667)
Class I
Shares sold		3,319,354	$	29,470,744		10,818,285	$	110,414,916
Shares issued on reinvestment		92,219		810,471		2,671,702		27,143,907
Shares repurchased		(51,560,893)		(459,237,071)		(23,185,738)		(234,217,595)
Net decrease		(48,149,320)	$	(428,955,856)		(9,695,751)	$	(96,658,772)
Class IS
Shares sold		3,231,920	$	28,252,005		10,623,164	$	110,856,943
Shares issued on reinvestment		146,295		1,283,474		1,092,537		11,095,949
Shares repurchased		(8,230,946)		(72,254,244)		(9,704,219)		(98,479,361)
Net increase (decrease)		(4,852,731)	$	(42,718,765)		2,011,482	$	23,473,531

† On June 24, 2021, the Fund converted 122,673 Class A2 shares into 122,559 Class A shares, valued at $1,312,602. These amounts are reflected in the Class A shares sold and Class A2 shares repurchased, respectively.

8. Transactions with affiliated companies

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 Fund invested in Western Asset Premier Institutional Government Reserves, Premium Shares, an affiliated registered money market fund managed by Western Asset. Benefit Street Partners is a wholly-owned subsidiary of Franklin Resources. The following companies were considered affiliated companies for all or some portion of the year ended May 31, 2023. The following transactions were effected in such companies for the year ended May 31, 2023.

	Affiliate Value at May 31, 2022		Purchased				Sold
			Cost		Shares/ Face amount		Proceeds		Shares/ Face amount
Benefit Street Partners CLO Ltd., 2014-IVA CRRR	$	1,384,079		—		—	$	1,361,289		1,450,000
Western Asset Premier Institutional Government Reserves, Premium Shares		936,636	$	293,143,714		293,143,714		280,631,893		280,631,893
	$	2,320,715	$	293,143,714			$	281,993,182

Western Asset Total Return Unconstrained Fund 2023 Annual Report 77

Notes to financial statements (cont’d)

(cont’d)	Realized Gain (Loss)		Interest/ Dividend Income		Net Increase (Decrease) in Unrealized Appreciation (Depreciation)		Affiliate Value at May 31, 2023
Benefit Street Partners CLO Ltd., 2014-IVA CRRR	$	(88,711)	$	18,098	$	65,921		—
Western Asset Premier Institutional Government Reserves, Premium Shares		—		287,233		—	$	13,448,457
	$	(88,711)	$	305,331	$	65,921	$	13,448,457

9. Redemption facility

The Fund, together with other U.S. registered and foreign investment funds (collectively, the “Borrowers”) managed by Franklin Resources or its affiliates, is a borrower in a joint syndicated senior unsecured credit facility totaling $2.675 billion (the “Global Credit Facility”). The Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests. Unless renewed, the Global Credit Facility will terminate on February 2, 2024.

Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all the Borrowers, including an annual commitment fee of 0.15% based upon the unused portion of the Global Credit Facility. These fees are reflected in the Statement of Operations. The Fund did not utilize the Global Credit Facility during the year ended May 31, 2023.

10. Income tax information and distributions to shareholders

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

	2023		2022
Distributions paid from:
Ordinary income	$	2,400,038	$	39,410,112
Net long-term capital gains		—		3,505,049
Total distributions paid	$	2,400,038	$	42,915,161

78 Western Asset Total Return Unconstrained Fund 2023 Annual Report

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

Undistributed ordinary income — net	$	2,004,294
Deferred capital losses*		(110,945,040)
Other book/tax temporary differences(a)		99,474
Unrealized appreciation (depreciation)(b)		(59,082,406)
Total distributable earnings (loss) — net	$	(167,923,678)

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

^(a)  Other book/tax temporary differences are attributable to the tax deferral of losses on straddles, the realization for tax purposes of unrealized gains (losses) on futures, options and foreign currency contracts.

^(b)  The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable to the tax deferral of losses on wash sales, book/tax differences in the accrual of interest income on securities in default and other book/tax basis adjustments.

11. Recent accounting pronouncement

In March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2020-04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting. In January 2021 and December 2022, the FASB issued ASU No. 2021-01 and ASU No. 2022-06, with further amendments to Topic 848. The amendments in the ASUs provide optional temporary accounting recognition and financial reporting relief from the effect of certain types of contract modifications due to the planned discontinuation of the London Interbank Offered Rate (LIBOR) and other interbank-offered based reference rates as of the end of 2021 for certain LIBOR settings and 2023 for the remainder. The ASUs are effective for certain reference rate-related contract modifications that occur during the period March 12, 2020 through December 31, 2024. Management has reviewed the requirements and believes the adoption of these ASUs will not have a material impact on the financial statements.

12. Other matters

The Fund’s investments, payment obligations, and financing terms may be based on floating rates, such as the London Interbank Offered Rate, or “LIBOR,” which was the offered rate for short-term Eurodollar deposits between major international banks. In 2017, the U.K. Financial Conduct Authority (“FCA”) announced its intention to cease compelling banks to provide the quotations needed to sustain LIBOR after 2021. In addition, global regulators have announced that, with limited exceptions, no new LIBOR-based contracts should be entered into after 2021. In connection with the global transition away from LIBOR led by regulators and market participants, LIBOR is no longer published on a representative basis. Alternative references rates have been established in most major currencies. In March 2022, the U.S. federal government enacted legislation to establish a process for replacing LIBOR in certain existing contracts that do not already provide for the use of a clearly defined or practicable replacement benchmark rate as described in the legislation. Generally speaking, for contracts that do not contain a fallback provision as described in the legislation, a benchmark replacement recommended by the Federal Reserve Board

Western Asset Total Return Unconstrained Fund 2023 Annual Report 79

Notes to financial statements (cont’d)

effectively automatically replaced the USD LIBOR benchmark in the contract upon LIBOR’s cessation at the end of June 2023. The recommended benchmark replacement is based on the Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York, including certain spread adjustments and benchmark replacement conforming changes. Various industry groups are in the process of facilitating the transition away from LIBOR, but there remains uncertainty regarding the impact of the transition from LIBOR on the Fund’s transactions and the financial markets generally.

*  *  *

Russia’s military invasion of Ukraine in February 2022, the resulting responses by the United States and other countries, and the potential for wider conflict could increase volatility and uncertainty in the financial markets and adversely affect regional and global economies. The United States and other countries have imposed broad-ranging economic sanctions on Russia and certain Russian individuals, banking entities and corporations as a response to its invasion of Ukraine. The United States and other countries have also imposed economic sanctions on Belarus and may impose sanctions on other countries that support Russia’s military invasion. These sanctions, as well as any other economic consequences related to the invasion, such as additional sanctions, boycotts or changes in consumer or purchaser preferences or cyberattacks on governments, companies or individuals, may further decrease the value and liquidity of certain Russian securities and securities of issuers in other countries that are subject to economic sanctions related to the invasion. To the extent that the Fund has exposure to Russian investments or investments in countries affected by the invasion, the Fund’s ability to price, buy, sell, receive or deliver such investments was impaired. The Fund could determine at any time that certain of the most affected securities have little or no value. In addition, any exposure that the Fund may have to counterparties in Russia or in countries affected by the invasion could negatively impact the Fund’s portfolio. The extent and duration of Russia’s military actions and the repercussions of such actions (including any retaliatory actions or countermeasures that may be taken by those subject to sanctions) are impossible to predict, but could result in significant market disruptions, including in the oil and natural gas markets, and may negatively affect global supply chains, inflation and global growth. These and any related events could significantly impact the Fund’s performance and the value of an investment in the Fund, even beyond any direct exposure the Fund may have to Russian issuers or issuers in other countries affected by the invasion. At May 31, 2023, the Fund had 0.17% of its net assets invested in securities with significant economic risk or exposure to Russia.

80 Western Asset Total Return Unconstrained Fund 2023 Annual Report

Report of independent registered public accounting firm

To the Board of Directors of Western Asset Funds, Inc. and Shareholders of Western Asset Total Return Unconstrained Fund

Opinion on the Financial Statements

We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Western Asset Total Return Unconstrained Fund (one of the funds constituting Western Asset Funds, Inc., referred to hereafter as the “Fund”) as of May 31, 2023, the related statement of operations for the year ended May 31, 2023, the statement of changes in net assets for each of the two years in the period ended May 31, 2023, including the related notes, and the financial highlights for each of the five years in the period ended May 31, 2023 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of May 31, 2023, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended May 31, 2023 and the financial highlights for each of the five years in the period ended May 31, 2023 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

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

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

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of May 31, 2023 by correspondence with the custodian, agent banks and brokers; when replies were not received, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

/s/PricewaterhouseCoopers LLP

Baltimore, Maryland

July 20, 2023

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

Western Asset Total Return Unconstrained Fund 2023 Annual Report 81

Board approval of management and subadvisory agreements (unaudited)

The Executive and Contracts Committee of the Board of Directors (the “Executive and Contracts Committee”) considered the Investment Management Agreement between the Corporation and Legg Mason Partners Fund Advisor, LLC (“LMPFA”) with respect to the Fund and the following subadvisory agreements with respect to the Fund (collectively, the “Agreements”) (i) a subadvisory agreement between LMPFA and Western Asset Management Company, LLC (“Western Asset”) with respect to the Fund, (ii) a subadvisory agreement between LMPFA and Western Asset Management Company Limited (“WAML”) with respect to the Fund, (iii) a subadvisory agreement between LMPFA and Western Asset Management Company Pte. Ltd. in Singapore (“Western Singapore”) with respect to the Fund, and (iv) a subadvisory agreement between LMPFA and Western Asset Management Company Ltd in Japan with respect to the Fund (“Western Japan,” and together with Western Singapore, and WAML, the “Non-U.S. Subadvisers,” and together with Western Asset, the “Subadvisers,” and together with LMPFA, the “Advisers”) with respect to the Fund at a meeting held on April 27, 2023. At an in-person meeting held on May 15, 2023, the Executive and Contracts Committee reported to the full Board of Directors their considerations and recommendation with respect to the Agreements, and the Board of Directors, including a majority of the Independent Directors, considered and approved renewal of the Agreements.

The Directors noted that although Western Asset’s business is operated through separate legal entities, such as the Non-U.S. Subadvisers, senior investment personnel at Western Asset have supervisory oversight responsibility over the investment decisions made by the Non-U.S. Subadvisers. Therefore, in connection with their deliberations noted below, the Directors primarily focused on the information provided by Western Asset when considering the approval of the Agreements between LMPFA and the Non-U.S. Subadvisers.

In arriving at their decision to approve the renewal of the Agreements, the Directors met with representatives of the Advisers, including relevant investment advisory personnel; considered a variety of information prepared by the Advisers, materials provided by Broadridge and advice and materials provided by counsel to the Independent Directors; reviewed performance and expense information for peer groups of comparable funds selected by Broadridge (the “Performance Universe”) and certain other comparable products available from Western Asset or affiliates of Western Asset, including separate accounts managed by Western Asset; and requested and reviewed additional information as necessary. These reviews were in addition to information obtained by the Directors at their regular quarterly meetings (and various committee meetings) with respect to the Fund’s performance and other relevant matters and related discussions with the Advisers’ personnel. The information received and considered by the Board both in conjunction with the May meeting and at prior meetings was both written and oral. With respect to the Broadridge materials, the Board was provided with a description of the methodology used to determine the similarity of the Fund with the funds included in the Performance Universe.

82 Western Asset Total Return Unconstrained Fund

It was noted that while the Board found the Broadridge data 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.

As part of their review, the Directors examined LMPFA’s ability to provide high quality oversight and administrative and shareholder support services to the Fund and the Subadvisers’ ability to provide high quality investment management services to the Fund. The Directors considered the experience of LMPFA’s personnel in providing the types of services that LMPFA is responsible for providing to the Fund; the ability of LMPFA to attract and retain capable personnel; and the capability and integrity of LMPFA’s senior management and staff. The Directors also considered the investment philosophy and research and decision-making processes of the Subadvisers; the experience of their key advisory personnel responsible for management of the Fund; the ability of the Subadvisers to attract and retain capable research and advisory personnel; the risks to the Advisers associated with sponsoring the Fund (such as entrepreneurial, operational, reputational, litigation and regulatory risk), as well as LMPFA’s and each Subadviser’s risk management processes; the capability and integrity of the Advisers’ senior management and staff; and the level of skill required to manage the Fund. In addition, the Directors reviewed the quality of the Advisers’ services with respect to regulatory compliance and compliance with the investment policies of the Fund, and conditions that might affect the Advisers’ ability to provide high quality services to the Fund in the future, including their business reputations, financial conditions and operational stabilities. Based on the foregoing, the Directors concluded that the Subadvisers’ investment process, research capabilities and philosophy were well suited to the Fund given its investment objectives and policies, and that the Advisers would be able to meet any reasonably foreseeable obligations under the Agreements.

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

In reviewing the quality of the services provided to the Fund, the Directors also reviewed comparisons of the performance of the Fund to the performance of certain comparable funds and to its investment benchmark over the one-, three-, five- and ten-year periods ended December 31, 2022. The information comparing the Fund’s performance to that of its Performance Universe, consisting of all funds (including the Fund) classified as retail and institutional absolute return bond funds by Broadridge, showed, among other data, that the

Western Asset Total Return Unconstrained Fund 83

Board approval of management and subadvisory agreements (unaudited) (cont’d)

Fund’s performance for the 1-, 3-, 5-, and 10-year periods ended December 31, 2022 were below the median. The Board noted that the Fund’s performance trailed that of its benchmark index for the 1-, 3- and 5-year periods ended December 31, 2022 and exceeded the performance of its benchmark index for the 10-year period ended December 31, 2022. The Board considered the factors involved in the Fund’s performance relative to the performance of its investment benchmark and Performance Universe. The Board discussed the reasons for the Fund’s underperformance and the steps the Advisers were taking to improve the Fund’s performance.

The Directors also considered the management fee payable by the Fund to LMPFA, total expenses payable by the Fund and the fee that LMPFA pays to the Subadvisers. They reviewed information concerning management fees paid to investment advisers of similarly managed funds as well as fees paid by Western Asset’s other clients, including separate accounts managed by Western Asset. The Directors also noted that the Fund does not pay any management fees directly to any of the Subadvisers because LMPFA pays the Subadvisers for services provided to the Fund out of the management fee LMPFA receives from the Fund. The information comparing the Fund’s Contractual and Actual Management Fees as well as its actual total expense ratio to its peer group, consisting of a group of institutional absolute return bond funds (including the Fund) chosen by Broadridge to be comparable to the Fund, showed that the Fund’s Contractual Management Fee was below the median and the Fund’s Actual Management Fee was above the median. The Board noted that the Fund’s actual total expense ratio was approximately equal to the median. The Board also considered that the current limitation on the Fund’s expenses is expected to continue through December 2024.

The Directors further evaluated the benefits of the advisory relationship to the Advisers, including, among others, the profitability of the relationship to the Advisers; the direct and indirect benefits that the Advisers may receive from their relationships with the Fund, including the “fallout benefits,” such as reputational value derived from serving as investment adviser to the Fund; and the affiliation between the Advisers and certain other service providers for the Fund. In that connection, the Board considered that the ancillary benefits that the Advisers receive were reasonable. The Directors noted that Western Asset does not have soft dollar arrangements.

Finally, the Directors considered, in light of the profitability information provided by the Advisers, the extent to which economies of scale would be realized by the Advisers as the assets of the Fund grow. The Board noted that the Fund’s Contractual Management Fee was below the median and the Fund’s Actual Management Fee was above the median of the peer group. The Board also noted the size of the Fund.

In their deliberations with respect to these matters, the Independent Directors were advised by their independent counsel, who is independent, within the meaning of the Securities and

84 Western Asset Total Return Unconstrained Fund

Exchange Commission rules regarding the independence of counsel, of the Advisers. The Independent Directors weighed the foregoing matters in light of the advice given to them by their independent counsel as to the law applicable to the review of investment advisory contracts. In arriving at a decision, the Directors, including the Independent Directors, did not identify any single matter as all-important or controlling, and each Director may have attributed different weight to the various factors in evaluating the Agreements. The foregoing summary does not detail all the matters considered. The Directors judged the terms and conditions of the Agreements, including the investment advisory fees, in light of all of the surrounding circumstances.

Based upon their review, the Directors, including all of the Independent Directors, determined, in the exercise of their business judgment, that they were generally satisfied with the quality of investment advisory services being provided by the Advisers but would continue to closely monitor the Advisers’ performance; that the fees to be paid to the Advisers under the Agreements were fair and reasonable given the scope and quality of the services rendered by the Advisers; and that approval of the Agreements was in the best interest of the Fund and its shareholders.

Western Asset Total Return Unconstrained Fund 85

Statement regarding liquidity risk management program (unaudited)

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

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

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

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

86 Western Asset Total Return Unconstrained Fund

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

At meetings of the Funds’ Board of Trustees/Directors held in May 2023, the Program Administrator provided a written report to the Board addressing the adequacy and effectiveness of the program for the year ended December 31, 2022. The Program Administrator report concluded that (i.) the LRMP, as adopted and implemented, remains reasonably designed to assess and manage each Fund’s liquidity risk; (ii.) the LRMP, including the Highly Liquid Investment Minimum (“HLIM”) where applicable, was implemented and operated effectively to achieve the goal of assessing and managing each Fund’s liquidity risk; and (iii.) each Fund was able to meet requests for redemption without significant dilution of remaining investors’ interests in the Fund.

Western Asset Total Return Unconstrained Fund 87

Additional information (unaudited)

Information about Directors and Officers

The business and affairs of Western Asset Total Return Unconstrained Fund (the “Fund”) are conducted by management under the supervision and subject to the direction of its Board of Directors. The business address of each Director is c/o Jane Trust, Franklin Templeton, 280 Park Avenue, 8th Floor, New York, New York 10017.

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

Independent Directors†
Robert Abeles, Jr.
Year of birth	1945
Position(s) with Fund	Director
Term of office1 and length of time served2	Since 2013
Principal occupation(s) during the past five years	Board Member of Excellent Education Development (since 2012); Senior Vice President Emeritus (since 2016) and formerly, Senior Vice President, Finance and Chief Financial Officer (2009 to 2016) at University of Southern California; and formerly, Board Member of Great Public Schools Now (2018 to 2022)
Number of funds in fund complex overseen by Director3	52
Other Directorships held by Director during the past five years	None
Jane F. Dasher
Year of birth	1949
Position(s) with Fund	Director
Term of office1 and length of time served2	Since 1999
Principal occupation(s) during the past five years	Director (since 2022) and formerly, Chief Financial Officer, Long Light Capital, LLC, formerly known as Korsant Partners, LLC (a family investment company) (since 1997)
Number of funds in fund complex overseen by Director3	52
Other Directorships held by Director during the past five years	Formerly, Director, Visual Kinematics, Inc. (2018 to 2022)
Anita L. DeFrantz
Year of birth	1952
Position(s) with Fund	Director
Term of office1 and length of time served2	Since 1998
Principal occupation(s) during the past five years	President of Tubman Truth Corp. (since 2015); Vice President (since 2017), Member of the Executive Board (since 2013) and Member of the International Olympic Committee (since 1986); and President Emeritus (since 2015) and formerly, President (1987 to 2015) and Director (1990 to 2015) of LA84 (formerly Amateur Athletic Foundation of Los Angeles)
Number of funds in fund complex overseen by Director3	52
Other Directorships held by Director during the past five years	None

88 Western Asset Total Return Unconstrained Fund

Independent Directors† (cont’d)
Susan B. Kerley
Year of birth	1951
Position(s) with Fund	Director
Term of office1 and length of time served2	Since 1992
Principal occupation(s) during the past five years	Investment Consulting Partner, Strategic Management Advisors, LLC (investment consulting) (since 1990)
Number of funds in fund complex overseen by Director3	52
Other Directorships held by Director during the past five years	Director and Trustee (since 1990) and Chairman (since 2017 and 2005 to 2012) of various series of Main Stay Family of Funds (66 funds); formerly, Chairman of the Independent Directors Council (2012 to 2014); ICI Executive Committee (2011 to 2014); and Investment Company Institute (ICI) Board of Governors (2006 to 2014)
Michael Larson
Year of birth	1959
Position(s) with Fund	Director
Term of office1 and length of time served2	Since 2004
Principal occupation(s) during the past five years	Chief Investment Officer for William H. Gates III (since 1994)4
Number of funds in fund complex overseen by Director3	52
Other Directorships held by Director during the past five years	Ecolab Inc. (since 2012); Fomento Economico Mexicano, SAB (since 2011); Republic Services, Inc. (since 2009); and formerly, AutoNation, Inc. (2010 to 2018)
Avedick B. Poladian
Year of birth	1951
Position(s) with Fund	Director
Term of office1 and length of time served2	Since 2007
Principal occupation(s) during the past five years	Director and Advisor (since 2017) and formerly, Executive Vice President and Chief Operating Officer (2002 to 2016) of Lowe Enterprises, Inc. (privately held real estate and hospitality firm); and formerly, Partner, Arthur Andersen, LLP (1974 to 2002)
Number of funds in fund complex overseen by Director3	52
Other Directorships held by Director during the past five years	Public Storage (since 2010); Occidental Petroleum Corporation (since 2008); and formerly, California Resources Corporation (2014 to 2021)

Western Asset Total Return Unconstrained Fund 89

Additional information (unaudited) (cont’d)

Information about Directors and Officers

Independent Directors† (cont’d)
William E.B. Siart
Year of birth	1946
Position(s) with Fund	Director and Chairman of the Board
Term of office1 and length of time served2	Since 1997
Principal occupation(s) during the past five years	Chairman of Excellent Education Development (since 2000); formerly, Chairman of Great Public Schools Now (2015 to 2020); Trustee of The Getty Trust (2005 to 2017); and Chairman of Walt Disney Concert Hall, Inc. (1998 to 2006)
Number of funds in fund complex overseen by Director3	52
Other Directorships held by Director during the past five years	Trustee, University of Southern California (since 1994); and formerly, Member of Board of United States Golf Association, Executive Committee Member (2017 to 2021)
Jaynie Miller Studenmund
Year of birth	1954
Position(s) with Fund	Director
Term of office1 and length of time served2	Since 2004
Principal occupation(s) during the past five years	Corporate Board Member and Advisor (since 2004); formerly, Chief Operating Officer of Overture Services, Inc. (publicly traded internet company that created search engine marketing) (2001 to 2004); President and Chief Operating Officer, PayMyBills (internet innovator in bill presentment/payment space) (1999 to 2001); and Executive vice president for consumer and business banking for three national financial institutions (1984 to 1997)
Number of funds in fund complex overseen by Director3	52
Other Directorships held by Director during the past five years	Director of Pacific Premier Bancorp Inc. and Pacific Premier Bank (since 2019); Director of EXL (operations management and analytics company) (since 2018); formerly, Director of LifeLock, Inc. (identity theft protection company) (2015 to 2017); Director of CoreLogic, Inc. (information, analytics and business services company) (2012 to 2021); and Director of Pinnacle Entertainment, Inc. (gaming and hospitality company) (2012 to 2018)
Peter J. Taylor
Year of birth	1958
Position(s) with Fund	Director
Term of office1 and length of time served2	Since 2019
Principal occupation(s) during the past five years	Retired; formerly, President, ECMC Foundation (nonprofit organization) (2014 to 2023); and Executive Vice President and Chief Financial Officer for University of California system (2009 to 2014)
Number of funds in fund complex overseen by Director3	52
Other Directorships held by Director during the past five years	Director of 23andMe, Inc. (genetics and health care services company) (since 2021); Director of Pacific Mutual Holding Company5 (since 2016); Ralph M. Parson Foundation (since 2015); Edison International (since 2011); formerly, Member of the Board of Trustees of California State University system (2015 to 2022); and Kaiser Family Foundation (2012 to 2022)

90 Western Asset Total Return Unconstrained Fund

Interested Director
Ronald L. Olson6
Year of birth	1941
Position(s) with Fund	Director
Term of office1 and length of time served2	Since 2005
Principal occupation(s) during the past five years	Partner of Munger, Tolles & Olson LLP (a law partnership) (since 1968)
Number of funds in fund complex overseen by Director3	52
Other Directorships held by Director during the past five years	Director of Provivi, Inc. (since 2017); and Director of Berkshire Hathaway, Inc. (since 1997)
Interested Director and Officer
Jane Trust, CFA7
Year of birth	1962
Position(s) with Fund	Director, President and Chief Executive Officer
Term of office1 and length of time served2	Since 2015
Principal occupation(s) during the past five years	Senior Vice President, Fund Board Management, Franklin Templeton (since 2020); Officer and/or Trustee/Director of 127 funds associated with LMPFA or its affiliates (since 2015); President and Chief Executive Officer of LMPFA (since 2015); formerly, Senior Managing Director (2018 to 2020) and Managing Director (2016 to 2018) of Legg Mason & Co., LLC (“Legg Mason & Co.”); and Senior Vice President of LMPFA (2015)
Number of funds in fund complex overseen by Director3	127
Other Directorships held by Director during the past five years	None
Additional Officers
Ted P. Becker Franklin Templeton 280 Park Avenue, 8th Floor, New York, NY 10017
Year of birth	1951
Position(s) with Fund	Chief Compliance Officer
Term of office1 and length of time served2	Since 2007
Principal occupation(s) during the past five years	Vice President, Global Compliance of Franklin Templeton (since 2020); Chief Compliance Officer of LMPFA (since 2006); Chief Compliance Officer of certain funds associated with Legg Mason & Co. or its affiliates (since 2006); formerly, Director of Global Compliance at Legg Mason, Inc. (2006 to 2020); Managing Director of Compliance of Legg Mason & Co. (2005 to 2020)

Western Asset Total Return Unconstrained Fund 91

Additional information (unaudited) (cont’d)

Information about Directors and Officers

Additional Officers (cont’d)
Susan Kerr Franklin Templeton 280 Park Avenue, 8th Floor, New York, NY 10017
Year of birth	1949
Position(s) with Fund	Chief Anti-Money Laundering Compliance Officer
Term of office1 and length of time served2	Since 2013
Principal occupation(s) during the past five years	Senior Compliance Analyst, Franklin Templeton (since 2020); Chief Anti-Money Laundering Compliance Officer of certain funds associated with Legg Mason & Co. or its affiliates (since 2013) and Anti-Money Laundering Compliance Officer (since 2012), Senior Compliance Officer (since 2011) and Assistant Vice President (since 2010) of Franklin Distributors, LLC; formerly, Assistant Vice President of Legg Mason & Co. (2010 to 2020)
Marc A. De Oliveira Franklin Templeton 100 First Stamford Place, 6th Floor, Stamford, CT 06902
Year of birth	1971
Position(s) with Fund	Secretary and Chief Legal Officer
Term of office1 and length of time served2	Since 2020
Principal occupation(s) during the past five years	Associate General Counsel of Franklin Templeton (since 2020); Assistant Secretary of certain funds associated with Legg Mason & Co. or its affiliates (since 2006); formerly, Managing Director (2016 to 2020) and Associate General Counsel of Legg Mason & Co. (2005 to 2020)
Thomas C. Mandia Franklin Templeton 100 First Stamford Place, 6th Floor, Stamford, CT 06902
Year of birth	1962
Position(s) with Fund	Senior Vice President
Term of office1 and length of time served2	Since 2020
Principal occupation(s) during the past five years	Senior Associate General Counsel of Franklin Templeton (since 2020); Secretary of LMPFA (since 2006); Assistant Secretary of certain funds associated with Legg Mason & Co. or its affiliates (since 2006); Secretary of LM Asset Services, LLC (“LMAS”) (since 2002) and Legg Mason Fund Asset Management, Inc. (“LMFAM”) (since 2013) (formerly registered investment advisers); formerly, Managing Director and Deputy General Counsel of Legg Mason & Co. (2005 to 2020)

92 Western Asset Total Return Unconstrained Fund

Additional Officers (cont’d)
Christopher Berarducci Franklin Templeton 280 Park Avenue, 8th Floor, New York, NY 10017
Year of birth	1974
Position(s) with Fund	Treasurer and Principal Financial Officer
Term of office1 and length of time served2	Since 2019
Principal occupation(s) during the past five years	Vice President, Fund Administration and Reporting, Franklin Templeton (since 2020); Treasurer (since 2010) and Principal Financial Officer (since 2019) of certain funds associated with Legg Mason & Co. or its affiliates; formerly, Managing Director (2020), Director (2015 to 2020), and Vice President (2011 to 2015) of Legg Mason & Co.
Jeanne M. Kelly Franklin Templeton 280 Park Avenue, 8th Floor, New York, NY 10017
Year of birth	1951
Position(s) with Fund	Senior Vice President
Term of office1 and length of time served2	Since 2007
Principal occupation(s) during the past five years	U.S. Fund Board Team Manager, Franklin Templeton (since 2020); Senior Vice President of certain funds associated with Legg Mason & Co. or its affiliates (since 2007); Senior Vice President of LMPFA (since 2006); President and Chief Executive Officer of LMAS and LMFAM (since 2015); formerly, Managing Director of Legg Mason & Co. (2005 to 2020); Senior Vice President of LMFAM (2013 to 2015)

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

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

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

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

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

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

Western Asset Total Return Unconstrained Fund 93

Additional information (unaudited) (cont’d)

Information about Directors and Officers

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

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

94 Western Asset Total Return Unconstrained Fund

Important tax information (unaudited)

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

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

The Fund hereby reports the following amounts, or if subsequently determined to be different, the maximum allowable amounts, for the fiscal year ended May 31, 2023:

	Pursuant to:		Amount Reported
Qualified Net Interest Income (QII)		§871(k)(1)(C)		$25,430
Section 163(j) Interest Earned		§163(j)		$341,248
Interest Earned from Federal Obligations		Note (1)		$46,531

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

Western Asset Total Return Unconstrained Fund 95

Western Asset

Total Return Unconstrained Fund

Directors

Robert Abeles, Jr.

Jane F. Dasher

Anita L. DeFrantz

Susan B. Kerley

Michael Larson

Ronald L. Olson

Avedick B. Poladian

William E.B. Siart

Chairman

Jaynie M. Studenmund

Peter J. Taylor

Jane Trust

Investment manager

Legg Mason Partners Fund Advisor, LLC

Subadvisers

Western Asset Management Company, LLC

Western Asset Management Company Limited

Western Asset Management Company Ltd

Western Asset Management Company Pte. Ltd.

Distributor

Franklin Distributors, LLC

Custodian

The Bank of New York Mellon

Transfer agent

Franklin Templeton Investor Services, LLC

3344 Quality Drive

Rancho Cordova, CA 95670-7313

Independent registered public accounting firm

PricewaterhouseCoopers LLP Baltimore, MD

Western Asset Total Return Unconstrained Fund

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

Western Asset Total Return Unconstrained Fund

Legg Mason Funds

100 International Drive

Baltimore, MD 21202

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 877-6LM-FUND/656-3863.

Information on how the Fund voted proxies relating to portfolio securities during the prior 12-month period ended June 30th of each year and a description of the policies and procedures that the Fund uses to determine how to vote proxies related to portfolio transactions are available (1) without charge, upon request, by calling the Fund at 877-6LM-FUND/656-3863, (2) at www.franklintempleton.com and (3) on the SEC’s website at www.sec.gov.

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

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

www.franklintempleton.com

© 2023 Franklin Distributors, LLC, Member FINRA/SIPC. All rights reserved.

Legg Mason Funds Privacy and Security Notice

Your Privacy Is Our Priority

Franklin Templeton* is committed to safeguarding your personal information. This notice is designed to provide you with a summary of the non-public personal information Franklin Templeton may collect and maintain about current or former individual investors; our policy regarding the use of that information; and the measures we take to safeguard the information. We do not sell individual investors’ non-public personal information to anyone and only share it as described in this notice.

Information We Collect

When you invest with us, you provide us with your non-public personal information. We collect and use this information to service your accounts and respond to your requests. The non-public personal information we may collect falls into the following categories:

• Information we receive from you or your financial intermediary on applications or other forms, whether we receive the form in writing or electronically. For example, this information may include your name, address, tax identification number, birth date, investment selection, beneficiary information, and your personal bank account information and/or email address if you have provided that information.

• Information about your transactions and account history with us, or with other companies that are part of Franklin Templeton, including transactions you request on our website or in our app. This category also includes your communications to us concerning your investments.

• Information we receive from third parties (for example, to update your address if you move, obtain or verify your email address or obtain additional information to verify your identity).

• Information collected from you online, such as your IP address or device ID and data gathered from your browsing activity and location. (For example, we may use cookies to collect device and browser information so our website recognizes your online preferences and device information.) Our website contains more information about cookies and similar technologies and ways you may limit them.

• Other general information that we may obtain about you such as demographic information.

Disclosure Policy

To better service your accounts and process transactions or services you requested, we may share non-public personal information with other Franklin Templeton companies. From time to time we may also send you information about products/services offered by other Franklin Templeton companies although we will not share your non-public personal information with these companies without first offering you the opportunity to prevent that sharing.

We will only share non-public personal information with outside parties in the limited circumstances permitted by law. For example, this includes situations where we need to share information with companies who work on our behalf to service or maintain your account or process transactions you requested, when the disclosure is to companies assisting us with our own marketing efforts, when the disclosure is to a party representing you, or when required by law (for example, in response to legal process). Additionally, we will ensure that any outside

NOT PART OF THE ANNUAL REPORT

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

companies working on our behalf, or with whom we have joint marketing agreements, are under contractual obligations to protect the confidentiality of your information, and to use it only to provide the services we asked them to perform.

Confidentiality and Security

Our employees are required to follow procedures with respect to maintaining the confidentiality of our investors’ non-public personal information. Additionally, we maintain physical, electronic and procedural safeguards to protect the information. This includes performing ongoing evaluations of our systems containing investor information and making changes when appropriate.

At all times, you may view our current privacy notice on our website at franklintempleton.com or contact us for a copy at (800) 632-2301.

*For purposes of this privacy notice Franklin Templeton shall refer to the following entities:

Fiduciary Trust International of the South (FTIOS), as custodian for individual retirement plans

Franklin Advisers, Inc.

Franklin Distributors, LLC, including as program manager of the Franklin Templeton 529 College Savings Plan and the NJBEST 529 College Savings Plan

Franklin Mutual Advisers, LLC

Franklin, Templeton and Mutual Series Funds

Franklin Templeton Institutional, LLC

Franklin Templeton Investments Corp., Canada

Franklin Templeton Investments Management, Limited UK

Franklin Templeton Portfolio Advisors, Inc.

Legg Mason Funds serviced by Franklin Templeton Investor Services, LLC

Templeton Asset Management, Limited

Templeton Global Advisors, Limited

Templeton Investment Counsel, LLC

If you are a customer of other Franklin Templeton affiliates and you receive notices from them, you will need to read those notices separately.

NOT PART OF THE ANNUAL REPORT

Western Asset Management Company, LLC

Legg Mason, Inc. Subsidiaries

www.franklintempleton.com

© 2023 Franklin Distributors, LLC, Member FINRA/SIPC. All rights reserved.

WASX013140 07/23 SR23-4689

ITEM 2. CODE OF ETHICS.

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

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.

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

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES

(a) Audit Fees. The aggregate fees billed in the last two fiscal years ending May 31, 2022 and May 31, 2023 (the “Reporting Periods”) for professional services rendered by the Registrant’s principal accountant (the “Auditor”) for the audit of the Registrant’s annual financial statements, or services that are normally provided by the Auditor in connection with the statutory and regulatory filings or engagements for the Reporting Periods, were $169,204 in May 31, 2022 and in $169,204 in May 31, 2023.

(b) Audit-Related Fees. The aggregate fees billed in the Reporting Period for assurance and related services by the Auditor that are reasonably related to the performance of the Registrant’s financial statements were $0 in May 31, 2022 and $0 in May 31, 2023.

(c) Tax Fees. The aggregate fees billed in the Reporting Periods for professional services rendered by the Auditor for tax compliance, tax advice and tax planning (“Tax Services”) were $30,000 in May 31, 2022 and $30,000 in May 31, 2023. These services consisted of (i) review or preparation of U.S. federal, state, local and excise tax returns; (ii) U.S. federal, state and local tax planning, advice and assistance regarding statutory, regulatory or administrative developments, and (iii) tax advice regarding tax qualification matters and/or treatment of various financial instruments held or proposed to be acquired or held.

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

(d) All Other Fees. The aggregate other fees billed in the Reporting Periods for products and services provided by the Auditor were $0 in May 31, 2022 and $0 in May 31, 2023, other than the services reported in paragraphs (a) through (c) for the Item for the Western Asset Funds, Inc.

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

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

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

engagement relates directly to the operations and financial reporting of the Fund. The Committee may implement policies and procedures by which such services are approved other than by the full Committee.

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

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

(2) None of the services described in paragraphs (b) through (d) of this Item were performed in reliance on paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.

(f) Not applicable.

(g) Non-audit fees billed by the Auditor for services rendered to Western Asset Funds, Inc., LMPFA and any entity controlling, controlled by, or under common control with LMPFA that provides ongoing services to Western Asset Funds, Inc. during the reporting period were $343,489 in May 31, 2022 and $350,359 in May 31, 2023.

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

(i) Not applicable.

(j) Not applicable.

ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.

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

Robert Abeles, Jr     

Jane F. Dasher

Anita L. DeFrantz

Susan B. Kerley

Michael Larson

Ronald L. Olson

Avedick B. Poladian

William E.B. Siart

JaynieM. Studenmund

Peter J. Taylor

b) Not applicable.

ITEM 6. SCHEDULE OF INVESTMENTS.

Included herein under Item 1.

ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

Not applicable.

ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

Not applicable.

ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.

Not applicable.

ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

Not applicable.

ITEM 11. CONTROLS AND PROCEDURES.

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

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

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

Not applicable.

ITEM 13. EXHIBITS.

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

Exhibit 99.CODE ETH

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

Exhibit 99.CERT

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

Exhibit 99.906CERT

SIGNATURES

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

Western Asset Funds, Inc.

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

Date: July 25, 2023

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: July 25, 2023
By:	/s/ Christopher Berarducci
	Christopher Berarducci
	Principal Financial Officer
Date: July 25, 2023