Edgar Filing: Western Asset Income Fund

Western Asset Income Fund

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-Q

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number: 811-02351

Western Asset Income Fund

(Exact Name of Registrant as Specified In Its Charter)

385 East Colorado Boulevard

Pasadena, CA 91101

Address of Principal Executive Offices:

Charles A. Ruys de Perez

385 East Colorado Boulevard

Pasadena, CA 91101

Name and address of agent for service:

Registrant’s telephone number, including area code: (410) 539-0000

Date of fiscal year end: December 31, 2008

Date of reporting period: September 30, 2008

Item 1 – Schedule of Investments

Page 1 of 3


		Quarterly Report to Shareholders		1

Western Asset Income Fund

September 30, 2008 (Unaudited)


	Rate		Maturity Date	Par/Shares		Value
Long-Term Securities — 94.5%
Corporate Bonds and Notes — 70.6%
Aerospace and Defense — 0.2%
L-3 Communications Corp.	7.625	%	6/15/12	$	275,000	$	270,875

Airlines — 0.6%
Continental Airlines Inc.	6.545	%	2/2/19		163,905		139,319
Continental Airlines Inc.	7.256	%	3/15/20		185,435		165,501
Delta Air Lines Inc.	7.111	%	9/18/11		400,000		369,000

							673,820

Automobiles — 4.2%
Ford Motor Co.	7.450	%	7/16/31		8,050,000		3,461,500	^A
General Motors Corp.	8.250	%	7/15/23		3,450,000		1,354,125	^A

							4,815,625

Beverages — 0.2%
Dr Pepper Snapple Group Inc. Senior Notes	6.820	%	5/1/18		240,000		231,662	^B

Building Products — 0.6%
American Standard Inc.	8.250	%	6/1/09		500,000		507,998
Nortek Inc.	8.500	%	9/1/14		225,000		128,250

							636,248

Capital Markets — 3.5%
BankAmerica Capital III	3.361	%	1/15/27		215,000		159,896	^A,C
Goldman Sachs Capital II	5.793	%	12/29/49		920,000		404,165	^D
Lehman Brothers Holdings Capital Trust VII	5.857	%	12/31/49		1,745,000		175	^D,E
Lehman Brothers Holdings Inc.	5.750	%	5/17/13		350,000		43,750	^E
Lehman Brothers Holdings Inc.	6.500	%	7/19/17		110,000		138	^E
Merrill Lynch and Co. Inc.	6.050	%	8/15/12		400,000		375,053
Merrill Lynch and Co. Inc.	5.700	%	5/2/17		1,000,000		818,515
Merrill Lynch and Co. Inc.	6.400	%	8/28/17		300,000		259,476
Merrill Lynch and Co. Inc.	6.110	%	1/29/37		320,000		222,149
Morgan Stanley	5.050	%	1/21/11		780,000		561,651
Morgan Stanley	4.750	%	4/1/14		60,000		31,806
Morgan Stanley	6.625	%	4/1/18		100,000		66,179
The Bear Stearns Cos. Inc.	5.550	%	1/22/17		720,000		618,293	^A
The Goldman Sachs Group Inc.	6.345	%	2/15/34		555,000		364,674	^A

							3,925,920

Chemicals — 0.7%
The Dow Chemical Co.	7.375	%	11/1/29		800,000		775,454

Commercial Banks — 3.8%
Comerica Capital Trust II	6.576	%	2/20/37		360,000		165,376	^D
Rabobank Capital Funding Trust II	5.260	%	12/31/49		115,000		106,458	^B,D
Rabobank Capital Funding Trust III	5.254	%	12/31/16		1,145,000		986,926	^B,D
RBS Capital Trust III	5.512	%	9/29/49		1,460,000		1,179,743	^D
SunTrust Capital VIII	6.100	%	12/15/36		560,000		345,122	^D
Wachovia Bank NA	7.800	%	8/18/10		650,000		541,351
Wachovia Capital Trust III	5.800	%	3/15/42		410,000		172,200	^D


	Rate		Maturity Date	Par/Shares		Value
Long-Term Securities — Continued
Corporate Bonds and Notes — Continued
Commercial Banks — Continued
Wells Fargo Capital X	5.950	%	12/15/36	$	450,000	$	370,952	^D
Wells Fargo Capital XIII	7.700	%	12/29/49		500,000		436,005	^D

							4,304,133

Commercial Services and Supplies — 0.3%
Waste Management Inc.	7.375	%	5/15/29		415,000		392,951

Communications Equipment — 0.1%
Motorola Inc.	7.625	%	11/15/10		56,000		56,579

Consumer Finance — 2.6%
American Express Co.	6.800	%	9/1/66		1,120,000		957,359	^D
Capital One Financial Corp.	6.750	%	9/15/17		230,000		202,469
GMAC LLC	8.000	%	11/1/31		1,610,000		607,416
Nelnet Inc.	7.400	%	9/29/36		460,000		310,670	^D
SLM Corp.	5.000	%	10/1/13		810,000		502,200
SLM Corp.	5.050	%	11/14/14		130,000		79,300
SLM Corp.	8.450	%	6/15/18		230,000		156,400
SLM Corp.	5.625	%	8/1/33		180,000		90,000

							2,905,814

Containers and Packaging — 0.2%
Graphic Packaging International Corp.	9.500	%	8/15/13		200,000		181,000	^A

Diversified Financial Services — 8.9%
AGFC Capital Trust I	6.000	%	1/15/67		300,000		80,582	^B,D
AIG SunAmerica Global Financing VI	6.300	%	5/10/11		1,880,000		1,523,432	^B
BAC Capital Trust XIV	5.630	%	12/31/49		585,000		302,726	^D
Bank of America Corp.	8.000	%	12/29/49		150,000		118,780	^D
Beaver Valley II Funding	9.000	%	6/1/17		272,000		290,787
Capital One Bank	6.500	%	6/13/13		330,000		281,052
Capmark Financial Group Inc.	5.875	%	5/10/12		350,000		174,473	^F
Chase Capital II	3.301	%	2/1/27		725,000		572,375	^C
Citigroup Capital XXI	8.300	%	12/21/57		320,000		238,420	^D
Citigroup Inc.	6.125	%	8/25/36		550,000		357,256
Citigroup Inc.	8.400	%	4/29/49		200,000		136,132	^D
General Electric Capital Corp.	6.375	%	11/15/67		600,000		485,503	^D
Glen Meadow Pass-Through Certificates	6.505	%	2/12/67		310,000		243,350	^B,D
HSBC Finance Capital Trust IX	5.911	%	11/30/35		1,350,000		1,014,020	^D
HSBC Finance Corp.	5.700	%	6/1/11		1,380,000		1,373,391
ILFC E-Capital Trust II	6.250	%	12/21/65		790,000		236,095	^B,D
Kaupthing Bank Hf	7.625	%	2/28/15		620,000		580,320	^B,G^,H
Liberty Media LLC	8.500	%	7/15/29		130,000		91,865
Liberty Media LLC	8.250	%	2/1/30		65,000		43,861
TNK-BP Finance SA	7.875	%	3/13/18		100,000		70,000	^B
UBS Preferred Funding Trust V	6.243	%	5/12/49		1,120,000		863,005	^D
ZFS Finance USA Trust II	6.450	%	12/15/65		1,440,000		1,036,810	^B,D

							10,114,235

Diversified Telecommunication Services — 1.6%
AT&T Corp.	8.000	%	11/15/31		440,000		445,610
Embarq Corp.	7.082	%	6/1/16		330,000		267,445
Qwest Corp.	6.875	%	9/15/33		1,000,000		672,500


	Rate		Maturity Date	Par/Shares		Value
Long-Term Securities — Continued
Corporate Bonds and Notes — Continued
Diversified Telecommunication Services — Continued
Verizon Global Funding Corp.	5.850	%	9/15/35	$	570,000	$	445,700

							1,831,255

Electric Utilities — 5.2%
Commonwealth Edison Co.	5.800	%	3/15/18		560,000		513,178
Exelon Corp.	6.750	%	5/1/11		550,000		554,136
FirstEnergy Corp.	6.450	%	11/15/11		60,000		60,286
FirstEnergy Corp.	7.375	%	11/15/31		395,000		367,248
Pacific Gas and Electric Co.	6.050	%	3/1/34		800,000		706,144
PNPP II Funding Corp.	9.120	%	5/30/16		2,090,000		2,340,491	^A
Sithe/Independence Funding Corp.	9.000	%	12/30/13		1,345,881		1,356,756

							5,898,239

Energy Equipment and Services — 0.2%
EEB International Ltd.	8.750	%	10/31/14		260,000		258,700	^A,B

Food and Staples Retailing — 0.3%
Wal-Mart Stores Inc.	6.500	%	8/15/37		380,000		356,540

Food Products — 0.2%
Tyson Foods Inc.	7.350	%	4/1/16		340,000		280,500	^F

Gas Utilities — 0.1%
Southern Natural Gas Co.	5.900	%	4/1/17		170,000		150,449	^B

Health Care Equipment and Supplies — 0.2%
Hospira Inc.	6.050	%	3/30/17		290,000		276,499

Health Care Providers and Services — 5.6%
Aetna Inc.	6.500	%	9/15/18		240,000		236,241
Cardinal Health Inc.	5.500	%	6/15/13		210,000		200,930
Cardinal Health Inc.	5.800	%	10/15/16		410,000		383,006
Coventry Health Care Inc.	5.950	%	3/15/17		440,000		366,766
HCA Inc.	7.875	%	2/1/11		250,000		241,250
HCA Inc.	6.300	%	10/1/12		180,000		155,250
HCA Inc.	6.250	%	2/15/13		930,000		776,550
HCA Inc.	5.750	%	3/15/14		65,000		50,700
HCA Inc.	9.125	%	11/15/14		400,000		389,000
HCA Inc.	9.250	%	11/15/16		500,000		486,250
Humana Inc.	6.450	%	6/1/16		220,000		201,802
Tenet Healthcare Corp.	6.375	%	12/1/11		1,465,000		1,351,462
UnitedHealth Group Inc.	6.000	%	11/15/17		520,000		475,837
Universal Health Services Inc.	7.125	%	6/30/16		520,000		527,190
WellPoint Inc.	5.875	%	6/15/17		540,000		499,851

							6,342,085

Hotels, Restaurants and Leisure — 0.1%
Caesars Entertainment Inc.	8.125	%	5/15/11		250,000		147,500	^A

Independent Power Producers and Energy Traders — 2.9%
Dynegy Holdings Inc.	6.875	%	4/1/11		1,300,000		1,183,000
Dynegy Holdings Inc.	8.750	%	2/15/12		735,000		694,575	^A
TXU Corp.	5.550	%	11/15/14		1,500,000		1,119,386


	Rate		Maturity Date	Par/Shares		Value
Long-Term Securities — Continued
Corporate Bonds and Notes — Continued
Independent Power Producers and Energy Traders — Continued
TXU Corp.	6.500	%	11/15/24	$	520,000	$	331,176

							3,328,137

Insurance — 3.2%
Allstate Corp.	6.500	%	5/15/57		480,000		301,115	^A,D
American International Group Inc.	6.250	%	3/15/37		80,000		12,818	^D
ASIF Global Financing XIX	4.900	%	1/17/13		30,000		24,632	^B
Everest Reinsurance Holdings Inc.	6.600	%	5/15/37		260,000		151,961	^D
Hartford Financial Services Group Inc.	8.125	%	6/15/68		325,000		276,810	^A,D
Liberty Mutual Group	5.750	%	3/15/14		270,000		241,187	^B
Liberty Mutual Group	7.800	%	3/15/37		300,000		181,196	^B
MetLife Inc.	6.400	%	12/15/36		1,160,000		723,186	^D
Prudential Financial Inc.	8.875	%	6/15/38		340,000		320,004	^D
The Chubb Corp.	6.375	%	3/29/67		320,000		244,024	^D
The Travelers Cos. Inc.	6.250	%	3/15/37		620,000		476,863	^D
The Travelers Cos. Inc.	6.250	%	6/15/37		280,000		242,742
Willis North America Inc.	5.125	%	7/15/10		280,000		277,160
Willis North America Inc.	5.625	%	7/15/15		230,000		210,192

							3,683,890

IT Services — 0.9%
Electronic Data Systems Corp.	7.125	%	10/15/09		600,000		609,671
Electronic Data Systems Corp.	7.450	%	10/15/29		420,000		431,272

							1,040,943

Leisure Equipment and Products — 0.3%
Hasbro Inc.	6.300	%	9/15/17		320,000		308,766	^F

Media — 2.5%
Clear Channel Communications Inc.	5.500	%	9/15/14		365,000		113,150
Comcast Cable Holdings LLC	9.800	%	2/1/12		375,000		410,025
Comcast Corp.	6.450	%	3/15/37		120,000		96,788
Comcast Corp.	6.950	%	8/15/37		160,000		136,472
Comcast Corp.	6.400	%	5/15/38		260,000		207,987
News America Inc.	6.550	%	3/15/33		545,000		488,461
TCI Communications Inc.	8.750	%	8/1/15		160,000		169,923
Time Warner Entertainment Co. LP	8.375	%	7/15/33		530,000		503,848
Time Warner Inc.	9.125	%	1/15/13		240,000		251,998
Time Warner Inc.	7.700	%	5/1/32		595,000		519,875

							2,898,527

Metals and Mining — 2.4%
Barrick Gold Finance Co.	6.125	%	9/15/13		300,000		294,824
Freeport-McMoRan Copper & Gold Inc.	8.375	%	4/1/17		1,730,000		1,704,050
GTL Trade Finance Inc.	7.250	%	10/20/17		737,000		706,628	^B

							2,705,502

Multi-Utilities — 1.2%
Centerpoint Energy Inc.	6.850	%	6/1/15		1,150,000		1,069,960
DTE Energy Co.	6.350	%	6/1/16		260,000		242,422

							1,312,382


	Rate		Maturity Date	Par/Shares		Value
Long-Term Securities — Continued
Corporate Bonds and Notes — Continued
Multiline Retail — 0.9%
Federated Retail Holdings Inc.	5.350	%	3/15/12	$	270,000	$	248,640
Macy’s Retail Holdings Inc.	5.875	%	1/15/13		330,000		299,056
May Department Stores Co.	5.750	%	7/15/14		400,000		347,072
May Department Stores Co.	6.650	%	7/15/24		180,000		141,930

							1,036,698

Oil, Gas and Consumable Fuels — 9.3%
Apache Corp.	6.000	%	1/15/37		230,000		194,402
DCP Midstream LLC	6.750	%	9/15/37		420,000		349,066	^B
Devon Financing Corp. ULC	7.875	%	9/30/31		350,000		355,413
Duke Capital LLC	6.250	%	2/15/13		800,000		794,355	^A
El Paso Corp.	7.800	%	8/1/31		2,000,000		1,685,034
EOG Resources Inc.	5.875	%	9/15/17		540,000		507,756
Hess Corp.	7.875	%	10/1/29		1,450,000		1,417,314
Kerr-McGee Corp.	6.950	%	7/1/24		300,000		283,588
Kinder Morgan Energy Partners LP	7.125	%	3/15/12		530,000		535,860
Peabody Energy Corp.	6.875	%	3/15/13		285,000		275,025
Pemex Project Funding Master Trust	6.625	%	6/15/35		2,635,000		2,413,107	^A
The Williams Cos. Inc.	7.500	%	1/15/31		102,000		92,818
The Williams Cos. Inc.	8.750	%	3/15/32		1,250,000		1,281,700
XTO Energy Inc.	6.100	%	4/1/36		440,000		364,325

							10,549,763

Paper and Forest Products — 0.7%
Georgia-Pacific Corp.	9.500	%	12/1/11		325,000		321,750
Georgia-Pacific Corp.	7.375	%	12/1/25		250,000		201,875
Weyerhaeuser Co.	6.750	%	3/15/12		235,000		232,259

							755,884

Pharmaceuticals — 0.1%
Wyeth	5.950	%	4/1/37		170,000		153,284

Real Estate Investment Trusts (REITs) — 0.4%
Health Care REIT Inc.	5.875	%	5/15/15		130,000		114,427
iStar Financial Inc.	5.950	%	10/15/13		590,000		306,800

							421,227

Real Estate Management and Development — 0.2%
Forest City Enterprises Inc.	7.625	%	6/1/15		225,000		180,000

Thrifts and Mortgage Finance — 3.5%
BB&T Capital Trust II	6.750	%	6/7/36		640,000		459,946
Countrywide Financial Corp.	5.800	%	6/7/12		950,000		802,522
Countrywide Financial Corp.	6.250	%	5/15/16		500,000		355,961	^A
Residential Capital LLC	8.500	%	5/15/10		3,536,000		1,944,800	^A,B
Residential Capital LLC	9.625	%	5/15/15		1,416,000		339,840	^B
Washington Mutual Inc.	7.250	%	11/1/17		620,000		102,300	^A,E

							4,005,369

Tobacco — 1.2%
Reynolds American Inc.	7.250	%	6/1/12		1,360,000		1,396,362


	Rate		Maturity Date	Par/Shares		Value
Long-Term Securities — Continued
Corporate Bonds and Notes — Continued
Wireless Telecommunication Services — 1.5%
New Cingular Wireless Services Inc.	8.750	%	3/1/31	$	475,000	$	525,189
Nextel Communications Inc.	5.950	%	3/15/14		88,000		58,960
Nextel Communications Inc.	7.375	%	8/1/15		285,000		188,100
Sprint Capital Corp.	6.900	%	5/1/19		330,000		255,750
Sprint Capital Corp.	8.750	%	3/15/32		940,000		733,200

							1,761,199

Total Corporate Bonds and Notes (Cost — $102,181,847)							80,364,016

Mortgage-Backed Securities — 0.7%
Variable Rate Securities^{I —} 0.7%
Thornburg Mortgage Securities Trust 2007-4 2A1	6.217	%	9/25/37		469,656		401,455
Thornburg Mortgage Securities Trust 2007-4 3A1	6.214	%	9/25/37		449,678		377,079

Total Mortgage-Backed Securities (Cost — $911,062)							778,534

U.S. Government Agency Mortgage-Backed Securities — N.M.
Fixed Rate Securities — N.M.
Freddie Mac	10.250	%	5/1/09		497		512

Total U.S. Government Agency Mortgage-Backed Securities (Cost — $484)							512

Yankee Bonds^J — 23.0%
Aerospace and Defense — 0.3%
Systems 2001 Asset Trust	6.664	%	9/15/13		352,531		368,370	^B

Commercial Banks — 9.8%
AES El Salvador Trust	6.750	%	2/1/16		750,000		625,175	^B
ATF Capital BV	9.250	%	2/21/14		810,000		599,400	^A,B
Banco Mercantil del Norte SA	6.135	%	10/13/16		750,000		715,015	^B,D
Barclays Bank PLC	7.434	%	9/29/49		910,000		741,027	^B,D
Barclays Bank PLC	7.700	%	12/31/49		300,000		263,631	^B,D
Glitnir Banki Hf	6.330	%	7/28/11		400,000		316,416	^B^,H
Glitnir Banki Hf	6.693	%	6/15/16		680,000		359,985	^B,D^,H
Glitnir Banki Hf	7.451	%	12/14/49		210,000		108,034	^B,D^,H
HBOS Capital Funding LP	6.071	%	6/30/49		560,000		362,087	^B,D
HSBK Europe BV	7.250	%	5/3/17		490,000		294,000	^B
ICICI Bank Ltd.	6.375	%	4/30/22		100,000		75,927	^B,D
ICICI Bank Ltd.	6.375	%	4/30/22		200,000		138,046	^B,D
Kaupthing Bank Hf	5.750	%	10/4/11		480,000		381,538	^B^,H
Kaupthing Bank Hf	7.125	%	5/19/16		1,250,000		761,107	^B^,H
Landsbanki Islands Hf	7.431	%	12/31/49		730,000		403,482	^B,D^,H
Mizuho Financial Group	5.790	%	4/15/14		1,100,000		1,109,599	^B
Natixis	10.000	%	4/29/49		460,000		443,900	^B,D
Resona Preferred Global Securities	7.191	%	12/29/49		1,095,000		812,918	^B,D
Royal Bank of Scotland Group PLC	7.640	%	3/31/49		100,000		74,502	^D
RSHB Capital SA	7.175	%	5/16/13		970,000		822,269	^B
RSHB Capital SA	7.125	%	1/14/14		370,000		306,175	^B
RSHB Capital SA	6.299	%	5/15/17		380,000		271,282	^B
Shinsei Finance Cayman Ltd.	6.418	%	1/29/49		1,210,000		507,363	^B,D
Sumitomo Mitsui Banking Corp.	5.625	%	12/31/49		270,000		215,697	^B,D


	Rate		Maturity Date	Par/Shares		Value
Long-Term Securities — Continued
Yankee Bonds — Continued
Commercial Banks — Continued
TuranAlem Finance BV	8.250	%	1/22/37	$	740,000	$	414,400	^B

							11,122,975

Consumer Finance — 0.6%
Aiful Corp.	6.000	%	12/12/11		865,000		673,169	^B

Diversified Financial Services — 1.4%
Lukoil International Finance BV	6.356	%	6/7/17		310,000		235,600	^B
Petroplus Finance Ltd.	7.000	%	5/1/17		600,000		498,000	^B
SMFG Preferred Capital	6.078	%	1/29/49		380,000		271,339	^B,D
TNK-BP Finance SA	7.500	%	7/18/16		360,000		252,000	^B
UFJ Finance Aruba AEC	6.750	%	7/15/13		355,000		372,220

							1,629,159

Diversified Telecommunication Services — 2.6%
British Telecommunications PLC	9.125	%	12/15/30		330,000		329,203	^F
Deutsche Telekom International Finance BV	5.750	%	3/23/16		160,000		142,725
Deutsche Telekom International Finance BV	8.750	%	6/15/30		580,000		560,895	^F
Koninklijke (Royal) KPN NV	8.375	%	10/1/30		240,000		257,097
Telecom Italia Capital	7.200	%	7/18/36		760,000		599,001
Telecom Italia Capital	7.721	%	6/4/38		390,000		323,240
Telefonica Emisiones S.A.U.	7.045	%	6/20/36		600,000		542,670
VIP Finance Ireland Ltd	8.375	%	4/30/13		250,000		198,767	^B

							2,953,598

Electric Utilities — 0.7%
Enersis SA	7.375	%	1/15/14		317,000		320,098
Enersis SA/Cayman Island	7.400	%	12/1/16		452,000		456,751

							776,849

Food and Staples Retailing — 0.2%
Delhaize Group	6.500	%	6/15/17		290,000		274,676

Foreign Governments — 1.0%
Quebec Province	7.970	%	7/22/36		650,000		895,135
Russian Federation	7.500	%	3/31/30		53,190		54,453	^B
United Mexican States	6.750	%	9/27/34		235,000		236,175

							1,185,763

Gas Utilities — 0.2%
Intergas Finance BV	6.375	%	5/14/17		270,000		194,400	^B

Industrial Conglomerates — 1.3%
Tyco International Group SA	6.375	%	10/15/11		1,450,000		1,461,803

Insurance — 0.5%
Axa	8.600	%	12/15/30		550,000		534,123

Media — 0.2%
Rogers Cable Inc.	6.250	%	6/15/13		250,000		250,012

Metals and Mining — 1.1%
Evraz Group SA	8.875	%	4/24/13		260,000		197,600	^B


	Rate		Maturity Date	Par/Shares			Value
Long-Term Securities — Continued
Yankee Bonds — Continued
Metals and Mining — Continued
Vale Overseas Ltd.	6.875	%	11/21/36	$	1,148,000		$	1,021,843

								1,219,443

Oil, Gas and Consumable Fuels — 2.4%
Anadarko Finance Co.	7.500	%	5/1/31		1,355,000			1,242,517
Gazprom	9.625	%	3/1/13		20,000			19,500	^B
Gazprom	9.625	%	3/1/13		50,000			50,146	^B
Gazprom	6.212	%	11/22/16		450,000			355,842	^B
Gazprom	6.510	%	3/7/22		400,000			288,000	^B
Petrobras International Finance Co.	5.875	%	3/1/18		879,000			798,907

								2,754,912

Wireless Telecommunication Services — 0.7%
America Movil SA de CV	5.625	%	11/15/17		520,000			487,159
Rogers Wireless Inc.	6.375	%	3/1/14		300,000			286,915

								774,074

Total Yankee Bonds (Cost — $32,200,291)								26,173,326

Preferred Stocks — 0.2%
Fannie Mae	8.250	%			11,700	shs		25,506	^A,D
Freddie Mac	8.375	%			96,825			157,825	^A,D

Total Preferred Stocks (Cost — $1,463,444)								183,331

Total Long-Term Securities (Cost — $136,757,128)								107,499,719

Investment of Collateral From Securities Lending — 10.3%
State Street Navigator Securities Lending Prime Portfolio					11,759,995			11,759,995

Total Investment of Collateral From Securities Lending (Cost — $11,759,995)								11,759,995

Short-Term Securities — 3.3%
Repurchase Agreements — 3.3%
Goldman Sachs & Co. 1.00%, dated 9/30/08, to be repurchased at $3,810,106 on 10/1/08 (Collateral: $3,015,000 Tennessee Valley Authority bond, 7.125%, due 5/1/30, value $3,889,350)				$	3,810,000			3,810,000

Total Short-Term Securities (Cost — $3,810,000)								3,810,000

Total Investments — 108.1% (Cost — $152,327,123)^K								123,069,714
Obligation to Return Collateral For Securities Loaned — (10.3)%								(11,759,995	)
Other Assets Less Liabilities — 2.2%								2,513,756

Net Assets — 100.0%							$	113,823,475

Net Asset Value Per Share:							$	12.12

N.M. Not Meaningful.

^A	All or a portion of this security is on loan.

^B	Rule 144a Security - A security purchased pursuant to Rule 144a under the Securities Act of 1933 which may not be resold subject to that rule except to qualified institutional buyers. These securities, which the Fund’s investment adviser has determined to be liquid, represent 21.09% of net assets.

^C	Indexed Security - The rates of interest earned on these securities are tied to the London Interbank Offered Rate (“LIBOR”), the Consumer Price Index (“CPI”) or the one-year Treasury Bill Rate. The coupon rates are the rates as of September 30, 2008.

^D	Stepped Coupon Security - A security with a predetermined schedule of interest or dividend rate changes at which time it begins to accrue interest or pay dividends according to the predetermined schedule.

^E	Bond is in default as of September 30, 2008.

^F	Credit Linked Security - The rates of interest earned on these securities are tied to the credit rating assigned by Standard & Poor’s Rating Service and/or Moody’s Investors Services.

^G	Illiquid security valued at fair value under the procedures approved by the Board of Directors.

^H	Bond is in default subsequent to September 30, 2008.

^I	The coupon rates shown on variable rate securities are the rates at September 30, 2008. These rates vary with the weighted average coupon of the underlying loans.

^J	Yankee Bond - A dollar-denominated bond issued in the U.S. by foreign entities.

^K	Aggregate cost for federal income tax purposes is substantially the same as book cost. At September 30, 2008, the aggregate gross unrealized appreciation and depreciation of investments for federal income tax purposes were substantially as follows:


Gross unrealized appreciation	$	832,011
Gross unrealized depreciation		(30,089,420	)

Net unrealized depreciation	$	(29,257,409	)

Investment Valuation

The Fund’s securities are valued under policies approved by and under the general oversight of the Board of Directors. Effective January 1, 2008, the Fund adopted Statement of Financial Accounting Standards No. 157 (“FAS 157”). FAS 157 establishes a single definition of fair value, creates a three-tier hierarchy as a framework for measuring fair value based on inputs used to value the Fund’s investments, and requires additional disclosure about fair value. The hierarchy of inputs is summarized below.

•

Level 1 – quoted prices in active markets for identical investments

•

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

•

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

Debt securities are valued at the last quoted bid prices provided by an independent pricing service that are based on transactions in debt obligations, quotations from bond dealers, market transactions in comparable securities and various other relationships between securities. Equity securities for which market quotations are available are valued at the last sale price or official closing price on the primary market or exchange on which they trade. When prices are not readily available, or are determined not to reflect fair value, 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 may value these securities at fair value as determined in accordance with the procedures approved by the Fund’s Board of Directors.

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


	September 30, 2008		Quoted Prices (Level 1)		Other Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Investments in Securities	$	123,069,714	$	183,331	$	122,886,383	—


Total	$	123,069,714	$	183,331	$	122,886,383	—

Securities Lending:

The Fund lends its securities to approved brokers to earn additional income and receives cash and U.S. government securities as collateral against the loans. Cash collateral received is invested in a money market pooled account by the Fund’s lending agent. Collateral is maintained over the life of the loan in an amount not less than 100% of the value of loaned securities. At September 30, 2008, the market value of the securities on loan to broker-dealers was $11,506,620, for which the Fund received collateral of $11,759,995 in cash. Such collateral is in the possession of the Fund’s custodian. The cash was invested in the State Street Navigator Securities Lending Prime Portfolio and is included in the Fund’s Portfolio of Investments. As with other extensions of credit, the Fund may bear the risk of delay in recovery or even loss of rights to the collateral should the borrower of the securities fail financially.

Other information regarding the Fund is available in the Fund’s most recent Report to Shareholders. This information is available on the Securities and Exchange Commission’s website (www.sec.gov).

Item 2 – Controls and Procedures

(a)

Western Asset Income Fund (the “Registrant”) principal executive and principal financial officers have concluded, based on their evaluation of the Registrant’s disclosure controls and procedures as of a date within 90 days of the filing date of this report, that the Registrant’s disclosure controls and procedures are reasonably designed to ensure that information required to be disclosed by the Registrant on Form N-Q is recorded, processed, summarized and reported within the required time periods in the Securities and Exchange Commission’s rules and forms and that information required to be disclosed by the Registrant in the reports that it files or submits on Form N-Q is accumulated and communicated to the Registrant’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

(b)

There were no changes in the Registrant’s internal control over financial reporting during the Registrant’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the internal control over financial reporting.

Item 3 – Exhibits

Certifications pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 – filed as an exhibit hereto.

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, thereunto duly authorized.


Western Asset Income Fund

By:		/s/ R. Jay Gerken
		R. Jay Gerken
		President
		Western Asset Income Fund
Date:		November 19, 2008

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/ R. Jay Gerken
		R. Jay Gerken
		President
		Western Asset Income Fund
Date:		November 19, 2008

By:		/s/ Marie K. Karpinski
		Marie K. Karpinski
		Principal Financial and Accounting Officer
		Western Asset Income Fund
Date:		November 19, 2008