SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
[X] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
240.14a-11(c) or 240.14a-12
WESTERN ASSET INCOME FUND
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(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was previously paid. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
WESTERN ASSET INCOME FUND
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 8, 2007
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To the Stockholders of
WESTERN ASSET INCOME FUND
The Annual Meeting of Stockholders of Western Asset Income Fund (the
"Fund") will be held in the Board Room, Fifth Floor, 385 E. Colorado Boulevard,
Pasadena, California, on Tuesday, May 8, 2007 at 8:30 a.m., Pacific time, for
the following purposes:
(1) Electing seven Directors to the Board of Directors of the Fund;
(2) Approving an amendment to the Fund's Certificate of Incorporation
to add an exculpatory provision; and
(3) Transacting such other business as may properly come before the
Annual Meeting and any adjournment thereof.
The Board of Directors has fixed the close of business on March 16, 2007 as
the record date for the determination of stockholders entitled to receive notice
of and to vote at the Annual Meeting and any adjournment thereof.
By Order of the Board of Directors
Lisa G. Mrozek, Secretary
Pasadena, California
March 30, 2007
STOCKHOLDERS WHO DO NOT EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON ARE
URGED TO DATE, FILL IN, SIGN AND MAIL THE ENCLOSED PROXY IN THE ACCOMPANYING
ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
WESTERN ASSET INCOME FUND
385 EAST COLORADO BOULEVARD
PASADENA, CALIFORNIA 91101
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PROXY STATEMENT
The accompanying proxy is solicited by the Board of Directors of the Fund
for use at the annual meeting of stockholders of the Fund to be held on May 8,
2007 at 8:30 a.m., Pacific time (the "Annual Meeting"), and at any adjournment
thereof. At the Annual Meeting, stockholders of the Fund will be asked to
consider (1) the election of seven Directors to the Board of Directors of the
Fund and (2) an amendment to the Fund's Certificate of Incorporation to add an
exculpatory provision. This Proxy Statement and the form of proxy were first
mailed to stockholders on or about April 2, 2007.
The Board of Directors has fixed the close of business on March 16, 2007 as
the record date for the determination of stockholders entitled to notice of and
to vote at the Annual Meeting and any adjournment thereof. As of the close of
business on March 16, 2007, there were 9,389,431 shares of the Fund's common
stock (the "Common Stock") outstanding and entitled to one vote per share (and a
fractional vote with respect to fractional shares) with respect to each matter
to be voted on at the Annual Meeting. The outstanding shares of Common Stock
constitute the only outstanding voting securities of the Fund entitled to be
voted at the Annual Meeting. As of the close of business on March 16, 2007, no
person owned of record, or, to the Fund's knowledge, beneficially, more than
five percent of the Fund's Common Stock, except that Cede & Co., as nominee for
participants in The Depository Trust Company, held of record 7,944,487 shares of
Common Stock, representing approximately 84.61% of the Fund's Common Stock. Cede
& Co.'s address is 55 Water Street, 25th Floor, New York, New York 10041-0001.
A majority (greater than 50%) of the outstanding shares of Common Stock as
of the close of business on March 16, 2007 must be represented in person or by
proxy to constitute a quorum for the Annual Meeting. Directors will be elected
by a plurality of the votes of the shares of the Fund's Common Stock present in
person or represented by proxy and entitled to vote on the election of
Directors. Approval of the proposed amendment to the Fund's Certificate of
Incorporation will require the affirmative vote of a majority (greater than 50%)
of the Fund's Common Stock entitled to vote on the matter. In all matters other
than the election of Directors and the proposed amendment to the Fund's
Certificate of Incorporation, and except where a different vote is required by
any provision of law or the Fund's Bylaws, the affirmative vote of the majority
of shares of the Fund's Common Stock present in person or represented by proxy
at the Annual Meeting and entitled to vote on the subject matter will be the act
of the stockholders. Each stockholder has the right to revoke his or her proxy
at any time before it
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is voted. A proxy may be revoked by filing with the Secretary of the Fund a
written revocation or a properly executed proxy bearing a later date or by
voting in person at the Annual Meeting. Any stockholder may attend the Annual
Meeting, whether or not he or she has previously given a proxy.
The solicitation of proxies for the Annual Meeting will be made primarily
by mail. However, if necessary to ensure satisfactory representation at the
Annual Meeting, additional solicitation may take place in writing or by
telephone or personal interview by officers of the Fund (or their designees),
who will not receive compensation from the Fund for such services. As the date
of the meeting approaches, if we have not received your proxies, you may receive
a telephone call from our proxy solicitor, Computershare Fund Services, Inc.
("CFS"), which has been retained to assist stockholders in the voting process.
For these services, the Fund will pay CFS a fee that is not expected to exceed
$5,000. However, the exact cost will depend on the amount and types of services
rendered. The Fund will reimburse brokers and other nominees, in accordance with
New York Stock Exchange approved reimbursement rates, for their expenses in
forwarding solicitation material to the beneficial owners of stock of the Fund.
All expenses incurred in connection with the solicitation of proxies, including
the services of CFS, will be borne by the Fund.
Abstentions and "broker non-votes" (i.e., shares held by brokers or
nominees as to which (i) instructions have not been received from the beneficial
owners or the persons entitled to vote and (ii) the broker or nominee does not
have discretionary voting power on a particular matter) will be counted as
shares present for purposes of determining whether a quorum is present, but will
not be counted as having been voted on the matter in question. Assuming that a
quorum would otherwise be present, abstentions and broker non-votes will
accordingly have no effect for the purpose of determining whether a Director has
been elected, but will have the effect of a negative vote on Proposal 2 below.
James W. Hirschmann III, D. Daniel Fleet and Lisa G. Mrozek, the persons
named as proxies on the proxy card accompanying this Proxy Statement, were
selected by the Board of Directors to serve in such capacity. Messrs. Hirschmann
and Fleet and Ms. Mrozek are each officers of the Fund. Each executed and
returned proxy will be voted in accordance with the directions indicated thereon
or, if no direction is indicated, such proxy will be voted for the election as
Directors of the Board of Directors' nominees listed in this proxy statement and
the approval of the amendment to the Fund's Certificate of Incorporation.
Discretionary authority is provided in the proxy as to any matters not
specifically referred to therein. The Board of Directors is not aware of any
other matters which are likely to be brought before the Annual Meeting. However,
if any such matters properly come before the Annual Meeting, the persons named
in the proxy are fully authorized to vote thereon in accordance with their
judgment and discretion. In all matters other than the election of Directors and
the proposal to amend the Fund's Certificate of Incorporation, except where a
different vote is required by any provision of law or the Certificate of
Incorporation or Bylaws, the affirmative vote of a majority of shares of the
Fund's Common Stock present in person or represented by proxy at the Annual
Meeting and entitled to vote on the subject matter will be the act of the
stockholders, provided a quorum is present.
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HOW TO SUBMIT A PROXY
Stockholders of record may submit a proxy in respect of their shares by
using any of the following methods:
By Telephone. Submit a proxy by calling the toll-free telephone
number printed on the proxy card. The proxy card should be in hand when
making the call. Easy-to-follow voice prompts allow the stockholder of
record to authenticate his or her identity by entering the validation
numbers printed on the enclosed proxy card, provide voting instructions for
the shares, and confirm that the instructions have been properly recorded.
On the Internet. Submit a proxy by logging onto the Internet website
listed on the proxy card. The proxy card should be in hand when submitting
a proxy online. As with telephone proxy submission, simple instructions
allow the stockholder of record to authenticate his or her identity by
entering the validation numbers printed on the enclosed proxy card, provide
voting instructions for the shares, and confirm that the instructions have
been properly recorded.
By Mail. Stockholders of record may complete, sign, and date the
proxy card and return it in the prepaid envelope provided.
Please see the instructions on the enclosed card for telephone touch-tone
proxy submission and Internet proxy submission. Stockholders will have an
opportunity to review their voting instructions and to make any necessary
changes before submitting their voting instructions and terminating their
telephone call or Internet link.
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PROPOSAL 1
ELECTION OF DIRECTORS
Seven Directors are to be elected at the Annual Meeting to serve until
their successors have been duly elected and qualified or until they shall resign
or shall have been removed, subject to applicable law and the rules of the New
York Stock Exchange. Information about each nominee is set forth in the table
below. Each of the nominees is presently a Director of the Fund.
It is the intention of the persons designated as proxies in the proxy card,
unless otherwise directed therein, to vote at the Annual Meeting for the
election of the nominees named below as Directors of the Fund. Each of the
nominees has agreed to serve if elected at the Annual Meeting. If any nominee is
unable or unavailable to serve, the persons named in the proxies will vote the
proxies for such other person as the Board of Directors may recommend.
Information Regarding the Nominees. Information about the nominees is set
forth below. No nominee serves as an officer of the Fund. The address of each
nominee is c/o the Fund at its principal business address (385 East Colorado
Boulevard, Pasadena, California 91101).
SHARES OF
COMMON
NUMBER OF STOCK
PORTFOLIOS OF THE
TERM OF IN FUND FUND
OFFICE AND COMPLEX OTHER BENEFICIALLY
POSITION(S) LENGTH OF OVERSEEN DIRECTORSHIPS OWNED ON
NAME AND YEAR HELD WITH TIME PRINCIPAL OCCUPATIONS BY HELD BY MARCH 1,
BORN FUND SERVED+ DURING THE PAST 5 YEARS NOMINEE++ NOMINEE 2007
------------- ----------- ---------- ------------------------- ---------- ------------- --------------------
Ronald J. Director Served Retired. 15 None 1,000
Arnault 1943 (1) (2) since 1997
Anita L. Director Served President (1987-present) 15 None 820
DeFrantz 1952 (2) (3) since 1998 and Director (1990-
present) of Amateur
Athletic Foundation of
Los Angeles; President
and Director of Kids in
Sports (1994-present);
Member of the
International Olympic
Committee (1986-present).
4
SHARES OF
COMMON
NUMBER OF STOCK
PORTFOLIOS OF THE
TERM OF IN FUND FUND
OFFICE AND COMPLEX OTHER BENEFICIALLY
POSITION(S) LENGTH OF OVERSEEN DIRECTORSHIPS OWNED ON
NAME AND YEAR HELD WITH TIME PRINCIPAL OCCUPATIONS BY HELD BY MARCH 1,
BORN FUND SERVED+ DURING THE PAST 5 YEARS NOMINEE++ NOMINEE 2007
------------- ----------- ---------- ------------------------- ---------- ------------- --------------------
Avedick B. Director Served Executive Vice President 15 California None
Poladian 1951 (1) (2) since 2007 and Chief Administrative Pizza
Officer of Lowe Kitchen, Inc.
Enterprises, Inc. and
Executive Vice President
and Chief Operating
Officer of Lowe
Enterprises Real Estate
Group (2003-present);
Partner, Arthur Andersen,
LLP (1974-2002).
William E. B. Director Served Chairman of Walt Disney 15 None 4,000
Siart 1946 and since Concert Hall, Inc. (1998-
Chairman 1997 2006); Chairman of
(1) (2) (3) Excellent Education
Development (2000-
present).
Jaynie Miller Director Served Chief Operating Officer 15 aQuantive None
Studenmund (1) (3) since 2004 of Overture Services, Inc.
1954 Inc. (2001-2004);
President and Chief
Operating Officer of
Paymybills.com (2000-
2001).
5
SHARES OF
COMMON
NUMBER OF STOCK
PORTFOLIOS OF THE
TERM OF IN FUND FUND
OFFICE AND COMPLEX OTHER BENEFICIALLY
POSITION(S) LENGTH OF OVERSEEN DIRECTORSHIPS OWNED ON
NAME AND YEAR HELD WITH TIME PRINCIPAL OCCUPATIONS BY HELD BY MARCH 1,
BORN FUND SERVED+ DURING THE PAST 5 YEARS NOMINEE++ NOMINEE 2007
------------- ----------- ---------- ------------------------- ---------- ------------- --------------------
Interested
Nominees
R. Jay Gerken Director Served Managing Director of Legg 171 None None
1951 since 2006 Mason & Co., LLC,
(4) Chairman, President and
Chief Executive Officer
of certain mutual funds
associated with Legg
Mason & Co., LLC or its
affiliates (2005-
present); President of
Legg Mason Partners Fund
Administration, LLC
("LMPFA") (2006-present);
Chairman of Smith Barney
Fund Management LLC and
Citi Fund Management Inc.
(2002-2005); Chairman,
President and Chief
Executive Officer of
Travelers Investment
Adviser, Inc. (2002-
2005).
Ronald L. Director Served Senior Partner of Munger, 15 Edison 1,000
Olson 1941 since 2005 Tolles & Olson LLP (a law International,
(5) partnership) (1968- City National
present). Corporation,
The Washington
Post Company,
and Berkshire
Hathaway, Inc.
--------
(1) Member of the Audit Committee of the Board of Directors.
(2) Member of the Executive and Contracts Committee of the Board of
Directors.
(3) Member of the Governance and Nominating Committee of the Board of
Directors.
(4) Mr. Gerken is an "interested person" (as defined in section 2(a)(19) of
the Investment Company Act of 1940, as amended (the "1940 Act")) of the
Fund because of his positions with subsidiaries of, and ownership of
6
shares of common stock of, Legg Mason, Inc., the parent company of the
Fund's investment adviser, Western Asset Management Company (the
"Investment Adviser").
(5) Mr. Olson is an "interested person" (as defined above) of the Fund
because his law firm has provided legal services to the Investment
Adviser.
+ Each of the Directors of the Fund holds office until his or her successor
shall have been duly elected and shall qualify or until he or she shall
resign or shall have been removed, subject to applicable law and the
rules of the New York Stock Exchange.
++ Each Director also serves as a Trustee for Western Asset Premier Bond
Fund (closed-end investment company) and a Director of Western Asset
Funds, Inc. (open-end investment company), which are considered part of
the same Fund Complex as the Fund. The Investment Adviser and the Fund's
subadviser, Western Asset Management Company Limited (the "Subadviser"),
also serve as adviser and subadviser, respectively, to Western Asset
Premier Bond Fund, and each serves as subadviser to one or more series of
Western Asset Funds, Inc. In addition, Mr. Gerken serves as
Director/Trustee to an additional 168 funds associated with Legg Mason &
Co., LLC or its affiliates. Legg Mason & Co., LLC is an affiliate of the
Investment Adviser.
The following table states the dollar range of equity securities
beneficially owned as of March 1, 2007 by each nominee in the Fund and, on an
aggregate basis, in any registered investment companies overseen or to be
overseen by the nominee in the same "family of investment companies."
AGGREGATE DOLLAR RANGE OF EQUITY
SECURITIES IN ALL FUNDS OVERSEEN
DOLLAR RANGE OF EQUITY OR TO BE OVERSEEN BY NOMINEE IN
NAME OF NOMINEE SECURITIES IN THE FUND FAMILY OF INVESTMENT COMPANIES
--------------- ---------------------- --------------------------------
Ronald J. Arnault........................ $10,001 - $50,000 $10,001 - $50,000
Anita L. DeFrantz........................ $10,001 - $50,000 $10,001 - $50,000
Avedick B. Poladian...................... None None
William E. B. Siart...................... $50,001 - $100,000 $50,001 - $100,000
Jaynie Miller Studenmund No.............. None None
Interested Nominees
R. Jay Gerken............................ None None
Ronald L. Olson.......................... $10,001 - $50,000 $10,001 - $50,000
As of March 1, 2007, all Directors and officers of the Fund as a group
beneficially owned less than 1% of the outstanding shares of the Fund on such
date.
Audit Committee. The Board of Directors has established an Audit Committee
composed solely of Directors who are not "interested persons" (as defined in the
1940 Act) of the Fund or the Investment Adviser or
7
Subadviser, consisting of Messrs. Arnault, Poladian and Siart and Ms.
Studenmund. Each member of the Audit Committee is "independent," as independence
for audit committee members is defined in the currently applicable listing
standards of the New York Stock Exchange, on which the Common Stock of the Fund
is listed and traded. The Audit Committee provides oversight with respect to the
accounting and financial reporting policies and procedures of the Fund and,
among other things, considers the selection of the independent registered public
accounting firm for the Fund and the scope of the audit and approves services
proposed to be performed by the independent registered public accounting firm on
behalf of the Fund and, under certain circumstances, the Investment Adviser,
Subadviser and certain affiliates. The Directors have adopted a written charter
for the Audit Committee, a current copy of which is attached as Appendix A to
this Proxy Statement. The Fund does not currently maintain a website on which
the charter is available.
The Audit Committee of the Fund has submitted the following report:
The Audit Committee has reviewed and discussed with management of the Fund
the audited financial statements for the last fiscal year. The Audit Committee
has discussed with the Fund's independent registered public accounting firm the
matters required to be discussed by Statements on Auditing Standards No. 61 (SAS
61). SAS 61 requires the independent registered public accounting firm to
communicate to the Audit Committee matters including, if applicable: (1) methods
used to account for significant unusual transactions; (2) the effect of
significant accounting policies in controversial or emerging areas for which
there is a lack of authoritative guidance or consensus; (3) the process used by
management in formulating particularly sensitive accounting estimates and the
basis for the independent registered public accounting firm's conclusions
regarding the reasonableness of those estimates; and (4) disagreements with
management over the application of accounting principles and certain other
matters. The Audit Committee has received the written disclosures and the letter
from the Fund's independent registered public accounting firm required by
Independence Standards Board Standard No. 1 (requiring the independent
registered public accounting firm to make written disclosures to and discuss
with the Audit Committee various matters relating to its independence), and has
discussed with such independent registered public accounting firm the
independence of such independent registered public accounting firm. Based on the
foregoing review and discussions, the Audit Committee recommended to the
Directors the inclusion of the audited financial statements for the last fiscal
year in the Fund's annual report to stockholders.
Ronald J. Arnault (Chairman)
Avedick B. Poladian
William E. B. Siart
Jaynie Miller Studenmund
8
Governance and Nominating Committee. The Board of Directors has
established a Governance and Nominating Committee composed solely of Directors
who are not "interested persons" (as defined in the 1940 Act) of the Fund or the
Investment Adviser or Subadviser, consisting of Mses. DeFrantz and Studenmund
and Mr. Siart. The Governance and Nominating Committee meets to select nominees
for election as Directors of the Fund and consider other matters of Board
policy. The Directors have adopted a written charter for the Governance and
Nominating Committee, a current copy of which is included as Appendix B to this
Proxy Statement. The Fund does not currently maintain a website on which the
charter is available.
The Governance and Nominating Committee requires that Director candidates
have a college degree or equivalent business experience, but has not otherwise
established specific, minimum qualifications that must be met by an individual
to be considered by the Committee for nomination as a Director. The Governance
and Nominating Committee may take into account a wide variety of factors in
considering Director candidates, including, but not limited to: (i) availability
and commitment of a candidate to attend meetings and perform his or her
responsibilities to the Board of Directors, (ii) relevant industry and related
experience, (iii) educational background, (iv) financial expertise, (v) an
assessment of the candidate's ability, judgment and expertise and (vi) overall
diversity of the Board's composition. The Governance and Nominating Committee
may consider candidates for Director recommended by the Fund's current
Directors, officers, Investment Adviser or Subadviser, shareholders or any other
source deemed to be appropriate by the Governance and Nominating Committee.
Candidates properly submitted by stockholders (as described below) will be
considered and evaluated on the same basis as candidates recommended by other
sources.
The policy of the Governance and Nominating Committee is to consider
nominees recommended by stockholders to serve as Director, provided that any
such recommendation is submitted in writing to the Fund, to the attention of the
Secretary, at the address of the principal executive offices of the Fund, not
less than one hundred and twenty calendar days nor more than one hundred and
thirty-five calendar days prior to the date of the meeting at which the nominee
would be elected and that such shareholder recommendation contains the
information about such nominee required by the Fund's procedures for
stockholders to submit nominee candidates, which are a part of the Governance
and Nominating Committee's Charter. The Governance and Nominating Committee has
full discretion to reject nominees recommended by stockholders, and there is no
assurance that any such person so recommended and considered by the Governance
and Nominating Committee will be nominated for election to the Fund's Board of
Directors.
Executive and Contracts Committee. The Board of Directors has established
an Executive and Contracts Committee consisting of Messrs. Siart, Arnault,
Poladian and Ms. DeFrantz. The Executive and Contracts Committee may meet from
time to time between Board meetings in order to consider appropriate matters and
to review the various contractual arrangements between the Fund and its
affiliated persons.
9
Meetings. During 2006, the Board of Directors held six meetings, the Audit
Committee held six meetings, the Governance and Nominating Committee held three
meetings and the Executive and Contracts Committee held four meetings. Each
Director attended at least 75% of the aggregate of the total number of meetings
of the Board of Directors and the Committees of the Board of Directors on which
he or she served. The Fund also had a Compensation Committee that met one time
in 2006 and was responsible for reviewing and making recommendations to the
Board with respect to Director compensation for services to the Fund. As part of
the Board's review of committee structure and functions, the Board dissolved the
Compensation Committee in February 2007. It is currently expected that the
Governance and Nominating Committee will be responsible for reviewing and making
recommendations to the Board with respect to Director compensation. Although the
Fund's policies do not require the Directors to attend the Fund's annual
stockholder meetings, annual meetings are generally held in connection with
regularly scheduled meetings of the Board of Directors. Each current Director
except Messrs. Poladian and Gerken attended the Fund's annual stockholder
meeting in May 2006; Messrs. Poladian and Gerken were not Directors of the Fund
at the time of the Fund's annual stockholder meeting in May 2006.
Stockholder Communications. The Board of Directors has adopted a process
for stockholders to send communications to the Board of Directors. Stockholders
may mail written communications to the attention of the Board of Directors, care
of the Fund's Secretary, at the principal executive offices of the Fund. The
written communication must include the stockholder's name, be signed by the
stockholder, refer to the Fund, and include the class and number of shares held
by the stockholder as of a recent date.
Director Compensation. Each Director of the Fund who is not an "interested
person" (as defined in the 1940 Act) of the Fund, the Investment Adviser or the
Subadviser receives an aggregate fee of $60,000 annually for serving on the
combined Board of Directors/Trustees of the Fund, Western Asset Funds, Inc. and
Western Asset Premier Bond Fund. Each Director also receives a fee of $7,500 and
related expenses for each meeting of the Board attended in-person and a fee of
$2,500 for participating in each telephonic meeting. The Chairman of the Board
and the Chairman of the Audit Committee each receive an additional $25,000 per
year for serving in such capacities. Each member of the Audit Committee receives
a fee of $5,000 for serving as a member of the Audit Committee. Other committee
members receive $2,500 for serving as a member of each committee upon which they
serve. Committee members also receive a fee of $2,500 for participating in each
telephonic committee meeting. All such fees are allocated among the Fund,
Western Asset Funds, Inc. and Western Asset Premier Bond Fund according to each
such investment company's average annual net assets. Additionally, Mr. Olson
receives from the Investment Adviser an aggregate fee of $60,000 annually for
serving on the combined Board of Directors/Trustees of the Fund, Western Asset
Funds, Inc. and Western Asset Premier Bond Fund, as well as a fee of $7,500 and
related expenses for each meeting of the Board attended in-person and a fee of
$2,500 for participating in each telephonic meeting.
10
For the fiscal year ended December 31, 2006, the Directors received the
compensation set forth in the following table for serving as Directors of the
Fund and as Directors or Trustees of other funds in the same "Fund Complex."
AGGREGATE PENSION OR RETIREMENT ESTIMATED TOTAL COMPENSATION
COMPENSATION BENEFITS ACCRUED AS ANNUAL FROM THE FUND
FROM THE PART OF FUND'S BENEFITS UPON AND ITS FUND COMPLEX
NAME OF NOMINEE FUND EXPENSES RETIREMENT PAID TO DIRECTORS(1)
--------------- ------------ --------------------- ------------- --------------------
Ronald J. Arnault............ $3,212 $0 $0 $137,500
Anita L. DeFrantz............ $1,997 $0 $0 $107,500
Avedick B. Poladian(2)....... $ 0 $0 $0 $ 0
William E. B. Siart.......... $3,281 $0 $0 $144,375
Jaynie M. Studenmund......... $2,959 $0 $0 $112,500
Interested Nominees
R. Jay Gerken................ $ 0 $0 $0 $ 0
Ronald L. Olson.............. $ 0 $0 $0 $ 0
--------
(1) Includes amounts received in 2006 from the Fund and from Western Asset
Funds, Inc. and Western Asset Premier Bond Fund, which are considered
part of the same Fund Complex as the Fund.
(2) Mr. Poladian did not serve on the Board of Directors/Trustees of the
Fund, Western Asset Funds, Inc. and Western Asset Premier Bond Fund
during the fiscal year ended December 31, 2006.
During 2006, the Fund paid no remuneration to its officers, all of whom
were also officers or employees of the Investment Adviser or one of its
affiliates.
Required Vote. The Directors of the Fund will be elected by a plurality
vote of the shares of the Fund's Common Stock present in person or represented
by proxy and entitled to vote on the election of Directors. The Directors
unanimously recommend that stockholders vote to elect each of the nominees
listed above to the Board of Directors.
11
PROPOSAL 2
AMENDMENT OF THE FUND'S CERTIFICATE OF INCORPORATION
The Directors of the Fund are proposing to amend the Fund's Certificate of
Incorporation (the "Certificate") to add the following exculpatory provision to
be inserted as Paragraph Tenth:
"Paragraph TENTH: A director of the Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except to the extent that exculpation from
liability is not permitted under applicable law, including Section 17(h) of
the Investment Company Act of 1940, as amended. No amendment or repeal of
this paragraph TENTH shall apply to or have any effect on the liability or
alleged liability of any director of the Corporation for or with respect to
any acts or omissions of such director occurring prior to such amendment or
repeal."
The proposed amendment would add to the Fund's Certificate a provision
intended to grant the Directors protection from liability to the Fund and its
stockholders under certain circumstances. Pursuant to Section 102(b)(7) of the
Delaware General Corporation Law, a certificate of incorporation can include a
provision eliminating the personal liability of a director for monetary damages
to the company or its stockholders for breach of fiduciary duty as a director,
except with respect to liability of a director for: (i) breaches of the
director's duty of loyalty to the company or its stockholders; (ii) acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law; (iii) the willful or negligent declaration of unlawful
dividends or stock repurchase or redemption; or (iv) any transaction from which
the director derived an improper personal benefit. Section 17(h) of the 1940 Act
provides that a company's certificate of incorporation or bylaws cannot contain
any provision that protects a director of such company against liability to the
company or its shareholders that would otherwise result by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of the director's office. The amendment, if adopted,
would not retroactively eliminate liability for any act or omission occurring
prior to the date when it becomes effective.
If Proposal 2 is approved at the Annual Meeting, it is expected that the
amendment of the Fund's Certificate of Incorporation would be effective on or
about May 11, 2007.
Required Vote. Approval of Proposal 2 will require the affirmative vote of
a majority (greater than 50%) of the Fund's Common Stock entitled to vote on the
matter. If the vote required to approve Proposal 2 is not obtained, the Fund's
Certificate of Incorporation will not be amended and Directors will consider
what other actions, if any, to take in the best interests of the Fund. The
Directors unanimously recommend that stockholders vote for Proposal 2.
12
INFORMATION CONCERNING THE INVESTMENT
ADVISER AND SUBADVISER AND THE FUND'S OFFICERS
The Investment Adviser and the Subadviser are subsidiaries of Legg Mason,
Inc., a holding company which, through its subsidiaries, is engaged in providing
investment advisory services to individuals and institutions. The address of
Legg Mason, Inc. is 100 Light Street, Baltimore, Maryland 21202. The Investment
Adviser's address is 385 East Colorado Boulevard, Pasadena, California 91101.
The Subadviser's address is 10 Exchange Square, London, England EC2A2EN. An
affiliate of the Investment Adviser, Legg Mason Fund Adviser, Inc., 100 Light
Street, Baltimore, Maryland 21202, provides administrative services to the Fund.
Information regarding the executive officers of the Fund and their
ownership of Common Stock is set forth below. Unless otherwise noted, the
address of each officer is c/o the Fund at the address listed above.
SHARES OF
COMMON STOCK
OF THE FUND
TERM OF OFFICE BENEFICIALLY
POSITION(S) HELD AND LENGTH PRINCIPAL OCCUPATION(S) OWNED ON
NAME AND YEAR BORN WITH FUND OF TIME SERVED(1) DURING THE PAST 5 YEARS MARCH 1, 2007
------------------ ---------------- ------------------- ----------------------------- -------------
James W. Hirschmann President Served since 1999 President of Legg Mason, Inc. 10,000
III (2006-present); Director,
1960 President and Chief Executive
Officer of the Investment
Adviser (1999-2006); Director
of the Subadviser (1999-
2006); President of Western
Asset Funds, Inc. (1999-
present) and Western Asset
Premier Bond Fund (2001-
present).
D. Daniel Fleet Vice President Served since 2006 President of the Investment None
1957 Adviser (2006-present); Vice
President of Western Asset
Funds, Inc. and Western Asset
Premier Bond Fund (2006-
present); Director of Risk
Management of the Investment
Adviser (1999-2006).
S. Kenneth Leech Vice President Served since 1998 Chief Investment Officer of 26,500
1954 the Investment Adviser (1998-
present); Vice President of
Western Asset Funds, Inc.
(1990-present) and Western
Asset Premier Bond Fund
(2001-present).
13
SHARES OF
COMMON STOCK
OF THE FUND
TERM OF OFFICE BENEFICIALLY
POSITION(S) HELD AND LENGTH PRINCIPAL OCCUPATION(S) OWNED ON
NAME AND YEAR BORN WITH FUND OF TIME SERVED(1) DURING THE PAST 5 YEARS MARCH 1, 2007
------------------ ---------------- ------------------- ----------------------------- -------------
Stephen A. Walsh Vice President Served since 1999 Deputy Chief Investment None
1958 Officer of the Investment
Adviser (2000-present); Vice
President of Western Asset
Funds, Inc. (1994-present).
Marie K. Karpinski Principal Financial Served since 2001 Vice President, Legg Mason & 500
1949 and Accounting Co., LLC (2005-present); Vice
100 Light Street Officer President and Chief Financial
Baltimore, MD 21202 Officer (1986-present) and
Treasurer (1986-2006) of all
Legg Mason retail, open-end
investment companies; Vice
President, Legg Mason Wood
Walker, Incorporated (1992-
2005); Treasurer and
Principal Financial and
Accounting Officer of Western
Asset/Claymore U.S. Treasury
Inflation Protected
Securities Fund (2003-
present) and Western
Asset/Claymore U.S. Treasury
Inflation Protected
Securities Fund 2 (2004-
present); Principal Financial
and Accounting Officer of
Western Asset Funds, Inc.
(1990-present) and Western
Asset Premier Bond Fund
(2001-present); Treasurer of
the Fund (2001-2006), Western
Asset Funds, Inc. (1990-2006)
and Western Asset Premier
Bond Fund (2001-2006).
14
SHARES OF
COMMON STOCK
OF THE FUND
TERM OF OFFICE BENEFICIALLY
POSITION(S) HELD AND LENGTH PRINCIPAL OCCUPATION(S) OWNED ON
NAME AND YEAR BORN WITH FUND OF TIME SERVED(1) DURING THE PAST 5 YEARS MARCH 1, 2007
------------------ ---------------- ------------------- ----------------------------- -------------
Erin K. Morris Treasurer Served since 2006 Assistant Vice President and None
1966 Manager, Funds Accounting,
100 Light Street Legg Mason & Co., LLC (2005-
Baltimore, MD 21202 present); Assistant Vice
President of Legg Mason Wood
Walker, Incorporated (2002-
2005); Treasurer of Legg
Mason Income Trust, Inc.,
Legg Mason Tax-Free Income
Fund, Western Asset Funds,
Inc. and Western Asset
Premier Bond Fund (2006-
present); Assistant
Treasurer, Western
Asset/Claymore U.S. Treasury
Inflation Protected
Securities Fund (2003-
present) and Western
Asset/Claymore U.S. Treasury
Inflation Protected
Securities Fund 2 (2004-
present); Assistant
Treasurer, the Fund, Western
Asset Funds, Inc., Western
Asset Premier Bond Fund, Legg
Mason Income Trust, Inc. and
Legg Mason Tax-Free Income
Fund (2001-2006); Manager,
Funds Accounting, Legg Mason
Wood Walker, Incorporated
(2000-2005).
15
SHARES OF
COMMON STOCK
OF THE FUND
TERM OF OFFICE BENEFICIALLY
POSITION(S) HELD AND LENGTH PRINCIPAL OCCUPATION(S) OWNED ON
NAME AND YEAR BORN WITH FUND OF TIME SERVED(1) DURING THE PAST 5 YEARS MARCH 1, 2007
------------------ ---------------- ------------------- ----------------------------- -------------
Susan C. Curry Assistant Treasurer Served since 2007 Director of Tax -- Mutual None
1966 Funds, Legg Mason & Co.,
LLC(2005-present); Director
of Tax -- Mutual Funds,
125 Broad St. Citigroup (2004-2005);
New York, NY 10004 Assistant Treasurer, Western
Asset Funds, Inc., Western
Asset Premier Bond Fund,
Western Asset/Claymore U.S.
Treasury Inflation Protected
Securities Fund and Western
Asset/Claymore U.S. Treasury
Inflation Protected
Securities Fund 2 (2007-
present); Partner, Deloitte &
Touche (1990-2004).
Todd F. Kuehl Chief Compliance Served since 2007 Vice President, Legg Mason & None
1969 Officer Co., LLC (2006-present);
Chief Compliance Officer of
100 Light Street Western Asset/Claymore U.S.
Baltimore, MD 21202 Treasury Inflation Protected
Securities Fund, Western
Asset/Claymore U.S. Treasury
Inflation Protected
Securities Fund 2, Western
Asset Funds, Inc., Western
Asset Premier Bond Fund
(2007-present) and Barrett
Growth Fund and Barrett
Opportunity Fund (2006-
present); Branch Chief,
Division of Investment
Management, U.S. Securities
and Exchange Commission
(2002-2006).
Lisa G. Mrozek Secretary Served since 1999 Senior Compliance Officer of None
1962 the Investment Adviser (1999-
present); Secretary of
Western Asset Funds, Inc.
(1999-present) and Western
Asset Premier Bond Fund
(2001-present).
16
--------
(1) Each officer holds office until his or her respective successor shall
have been duly chosen and shall qualify or until his or her resignation
or removal.
STOCKHOLDER PROPOSALS FOR 2008 ANNUAL MEETING
Proposals that stockholders wish to present to the 2008 Annual Meeting and
to have included in the Fund's proxy materials relating to such meeting pursuant
to Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the "1934
Act"), must be delivered to the Secretary of the Fund not less than 120 days
prior to April 2, 2008.
Stockholders who wish to make a proposal at the 2008 Annual
Meeting -- other than one that will be included in the Fund's proxy
materials -- should notify the Fund not less than 45 days prior to April 2,
2008.
The proper submission of a stockholder proposal does not guarantee that it
will be included in the Fund's proxy materials or presented at a stockholder
meeting. Stockholder proposals are subject to the requirements of applicable law
and the Fund's Certificate of Incorporation and Bylaws.
17
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 30(h) of the 1940 Act and Section 16(a) of the 1934 Act require the
Fund's officers and Directors, the Investment Adviser, the Subadviser, certain
affiliates of the Investment Adviser or Subadviser, and persons who beneficially
own more than ten percent of a registered class of the Fund's equity securities,
among others, to file reports of ownership and changes in ownership with the
Securities and Exchange Commission ("SEC") and the New York Stock Exchange.
These persons are required by SEC regulation to furnish the Fund with copies of
all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons, the Fund believes that,
during 2006, all such filing requirements were met.
ANNUAL REPORT TO STOCKHOLDERS
The Fund's Annual Report to Stockholders for the fiscal year ended December
31, 2006 contains financial and other information pertaining to the Fund. The
Fund will furnish without charge to each person whose proxy is being solicited,
upon request of such person, a copy of the Annual Report to Stockholders.
Requests for copies of the Annual Report to Stockholders should be directed to
Western Asset Income Fund, Attention: Investor Relations, 385 E. Colorado
Boulevard, Pasadena, California 91101 or you may call 800-426-5523.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of the Board of Directors has selected
PricewaterhouseCoopers LLP as the independent registered public accounting firm
of the Fund for the fiscal year ending December 31, 2006, and the Board of
Directors, including a majority of the Directors who are not "interested
persons" (as defined in the 1940 Act) of the Fund, has unanimously ratified such
selection. PricewaterhouseCoopers LLP's service is subject to termination by a
majority of the outstanding shares of the Fund. Representatives of
PricewaterhouseCoopers LLP are not currently expected to attend the meeting.
The following table presents fees billed in each of the last two fiscal
years for services rendered to the Fund by PricewaterhouseCoopers LLP:
FISCAL YEAR ENDED AUDIT FEES AUDIT-RELATED FEES TAX FEES ALL OTHER FEES
----------------- ---------- ------------------ -------- --------------
December 31, 2005 $32,200 $2,500 $1,050 $0
December 31, 2006 $33,800 $2,600 $1,100 $0
18
"Audit Fees" represents fees billed for each of the last two fiscal years
for professional services rendered for the audit of the Fund's annual financial
statements for those fiscal years or services that are normally provided by the
accountant in connection with statutory or regulatory filings or engagements for
those fiscal years.
"Audit-Related Fees" represents fees billed for each of the last two fiscal
years for assurance and related services reasonably related to the performance
of the audit of the Fund's annual financial statements for those years,
including interim audit security pricing.
"Tax Fees" represents fees billed for each of the last two fiscal years for
professional services related to tax compliance, tax advice and tax planning,
including preparation of federal and state income tax returns and preparation of
excise tax returns.
"All Other Fees" represents fees, if any, billed for other products and
services rendered by PricewaterhouseCoopers LLP to the Fund for the last two
fiscal years.
For the fiscal years ended December 31, 2005 and December 31, 2006,
PricewaterhouseCoopers LLP billed aggregate non-audit fees in the amounts of
$202,047 and $348,454, respectively, to the Fund, the Investment Adviser and any
entity controlling, controlled by or under common control with the Investment
Adviser that provides ongoing services to the Fund.
Pre-Approval Policies of the Audit Committee. The Audit Committee has
determined that all work performed for the Fund by PricewaterhouseCoopers LLP
will be pre-approved by the full Audit Committee and, therefore, has not adopted
pre-approval procedures. Since May 6, 2003, all audit and non-audit services
performed by PricewaterhouseCoopers LLP for the Fund, and all non-audit services
performed by PricewaterhouseCoopers LLP for the Investment Adviser and any
entity controlling, controlled by or under common control with the Investment
Adviser that provides ongoing services to the Fund (a "Service Affiliate"), to
the extent that such services related directly to the operations and financial
reporting of the Fund, have been pre-approved by the Audit Committee. No "Audit-
Related Fees," "Tax Fees" and "Other Fees" set forth in the table above were
waived pursuant to paragraph (c)(7)(i)(c) of Rule 2-01 of Regulation S-X.
PricewaterhouseCoopers LLP billed "Audit-Related Fees" in the amount of $127,460
and $145,000, respectively, for non-audit services (a SAS 70 audit to review and
test operating effectiveness of controls placed in operation for the Investment
Adviser and a review of the Investment Adviser's Australian Superannuation
Circular) that required pre-approval by the Audit Committee pursuant to
paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X during the Fund's fiscal
years ended December 31, 2005 and December 31, 2006. PricewaterhouseCoopers LLP
did not bill any "Tax Fees" or "All Other Fees" that required pre-approval by
the Audit Committee pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation
S-X during the Fund's fiscal years ended December 31, 2005 or December 31, 2006.
19
The Audit Committee has considered whether the provision of the non-audit
services rendered by PricewaterhouseCoopers LLP to the Investment Adviser and
any Service Affiliate that were not required to be pre-approved by the Audit
Committee pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is
compatible with maintaining the independence of PricewaterhouseCoopers LLP.
ADJOURNMENT
In the absence of a quorum at the Annual Meeting, or (even if a quorum is
so present) if sufficient votes in favor of a proposal set forth in the Notice
of Annual Meeting are not received by the time scheduled for the Annual Meeting,
the persons named as proxies may propose one or more adjournments of the Annual
Meeting after the date set for the original Annual Meeting, with no other notice
than announcement at the Annual Meeting, to permit further solicitation of
proxies with respect to such proposal. In addition, if, in the judgment of the
persons named as proxies, it is advisable to defer action on a proposal, the
persons named as proxies may propose one or more adjournments of the Annual
Meeting with respect to such proposal for a reasonable time. Any adjournments
with respect to a proposal will require a majority in voting interest of the
stockholders present in person or represented by proxy and entitled to vote at
the Annual Meeting or, in the absence therefrom of all the stockholders, any
officer entitled to preside at, or to act as secretary of, the Annual Meeting,
may adjourn such meeting from time to time. The persons named as proxies will
vote in favor of such adjournment those proxies which they are entitled to vote
in favor of the proposal in question. They will vote against any such
adjournment those proxies required to be voted against such proposal. The costs
of any additional solicitation and of any adjourned session will be borne by the
Fund. Any proposals for which sufficient favorable votes have been received by
the time of the Annual Meeting may be acted upon and, if so, such action will be
final regardless of whether the Annual Meeting is adjourned to permit additional
solicitation with respect to any other proposal. At any such adjourned meeting
at which a quorum is present, any business may be transacted which might have
been transacted at the meeting as originally called.
20
OTHER BUSINESS
The Fund is not aware of any other matters to be presented for action at
the Annual Meeting. However, if any such other matters are properly presented,
it is the intention of the persons designated in the enclosed proxy to vote in
accordance with their best judgment.
By Order of the Board of Directors
Lisa G. Mrozek, Secretary
March 30, 2007
21
APPENDIX A
WESTERN ASSET INCOME FUND
WESTERN ASSET FUNDS, INC.
WESTERN ASSET PREMIER BOND FUND (THE "FUNDS")
AUDIT COMMITTEE CHARTER
REVISED AS OF SEPTEMBER 13, 2005
The respective Boards of Directors/Trustees (each a "Board") of Western
Asset Income Fund, Western Asset Funds, Inc. and Western Asset Premier Bond Fund
have adopted this Charter to govern the activities of the Audit Committee of the
Boards with respect to their oversight of the Funds. This Charter applies
separately to each Fund and its Board and Audit Committee, and shall be
interpreted accordingly.
The Audit Committee of the Board shall be comprised entirely of
"independent" Directors/Trustees, as such term is interpreted for purposes of
Section 10A(m)(3) of the Securities Exchange Act of 1934, as amended, and the
listing standards of the New York Stock Exchange (the "Exchange"). The Audit
Committee shall have at least three members, who shall collectively satisfy the
independence and expertise requirements of the Exchange.
The purposes of the Audit Committee shall be:
(a) to assist with the Board's oversight of the integrity of the
Fund's financial statements, the Fund's compliance with legal and
regulatory requirements, the qualifications and independence of the Fund's
independent auditors, and the performance of the Fund's internal control
systems and independent auditors;
(b) to oversee generally the Fund's accounting and financial reporting
policies and practices, the Fund's internal controls and, as appropriate,
the internal controls of certain service providers;
(c) to oversee generally the quality and objectivity of the Fund's
financial statements and the independent audit thereof;
(d) to act as a liaison between the Fund's independent auditors and
the full Board; and
(e) to oversee the preparation of the report required by applicable
rules of the Securities and Exchange Commission to be included in the
annual proxy statements of Western Asset Income Fund and Western Asset
Premier Bond Fund.
To carry out its purposes and responsibilities, the Audit Committee shall
have the duty and power to:
(a) be directly responsible for the appointment, termination,
compensation, and oversight of the work of the independent auditors engaged
by the Fund for the purpose of preparing or issuing an audit report or
performing other audit, review or attest services for the Fund, including
resolution of disagreements between management and the independent auditors
regarding financial reporting. The independent auditors
A-1
shall report directly to the Audit Committee, and the Audit Committee shall
have ultimate authority for all audit engagement fees and terms. The Board
and the Fund's shareholders shall have such rights to approve, ratify and
replace the Fund's independent auditors as are provided by applicable law.
(b) consider the independence of the Fund's independent auditors, and
in connection therewith to obtain at least annually formal written reports
from the auditors regarding the auditors' independence, including a
delineation of all relationships between the auditors and the Fund, discuss
with the auditors any disclosed relationships or services that may impact
the objectivity and independence of the auditors, and if so determined by
the Audit Committee, recommend that the Board take appropriate action to
satisfy itself of the independence of the auditors.
(c) meet with the Fund's independent auditors, including private
meetings, as necessary (i) to review the arrangements for and scope of the
annual audit and any special audits; (ii) to discuss any matters of concern
relating to the Fund's financial statements, including any adjustments to
such statements recommended by the independent auditors, or other results
of said audit; (iii) to consider the independent auditors' comments with
respect to the Fund's financial policies, procedures and internal
accounting controls and the responses of LM Fund Adviser, Inc. ("LMFA"),
Western Asset Management Company ("Western Asset"), and Western Asset
Management Company Limited ("WAML," and together with LMFA and Western
Asset, the "Managers"), as applicable, thereto; and (iv) to review the form
of opinion the auditors propose to render to the Board and the Fund's
shareholders.
(d) discuss with management and the independent auditors the Fund's
annual financial statements, including any narrative discussion by
management concerning the Fund's financial condition and investment
performance.
(e) discuss with management the Fund's semi-annual financial
statements, including any narrative discussion by management concerning the
Fund's financial condition and investment performance.
(f) review major issues regarding accounting principles and financial
statement presentations, including, to the extent applicable: (A) any
significant changes in management's selection or application of accounting
principles for the Fund, and major issues as to the adequacy of the Fund's
internal controls and any special audit steps adopted in light of material
control deficiencies; (B) analyses prepared by management and/or the
independent auditors setting forth significant reporting issues and
judgments made in connection with the preparation of the Fund's financial
statements, including analyses of the effects of alternative GAAP methods
on the financial statements; and (C) the effect of regulatory and
accounting initiatives, as well as off-balance sheet structures, on the
Fund's financial statements.
(g) consider the effect upon the Fund of any changes in accounting
principles or practices proposed by the Managers or the auditors.
A-2
(h) pre-approve, to the extent contemplated by applicable regulations,
audit and non-audit services rendered to the Fund by the auditors and non-
audit services rendered to the Managers and certain of their affiliates by
the auditors, and review the fees charged by the auditors for such
services; provided, however, that the Audit Committee may implement
policies and procedures pursuant to which services are pre-approved other
than by the full Audit Committee, subject to the requirement that the full
Audit Committee be notified in a timely manner of each such service.
(i) establish procedures for (A) the receipt, retention, and treatment
of complaints received by the Fund regarding accounting, internal
accounting controls, or auditing matters, and (B) the confidential,
anonymous submission by employees of the Fund, the Fund's investment
adviser(s), administrator, principal underwriter (if any) or any other
provider of accounting-related services for the Fund of concerns regarding
questionable accounting or auditing matters.
(j) if and to the extent that the Fund intends to have employees, set
clear policies for the hiring by the Fund of employees or former employees
of the Fund's independent auditors.
(k) obtain and review at least annually a report from the independent
auditors describing (i) the independent auditors' internal quality-control
procedures and (ii) any material issues raised by the independent auditors'
most recent internal quality-control review or peer review or by any
governmental or other professional inquiry or investigation performed
within the preceding five years respecting one or more independent audits
carried out by the independent auditors, and any steps taken to address any
such issues.
(l) review with the independent auditors any audit problems or
difficulties encountered in the course of their audit work and management's
responses thereto.
(m) discuss with management any press releases discussing the Fund's
investment performance and other financial information about the Fund, as
well as any financial information and earnings guidance provided by
management to analysts or rating agencies. The Audit Committee may
discharge this responsibility by discussing the general types of
information to be disclosed by the Fund and the form of presentation (i.e.,
a case-by-case review is not required) and need not discuss in advance each
such release of information.
(n) discuss with management its guidelines and policies with respect
to risk assessment and risk management.
(o) review such other matters or information that it believes may be
relevant to the auditors, the audit engagement or the Fund's financial
policies and procedures or internal accounting controls.
(p) report its activities to the full Board on a regular basis.
A-3
The Audit Committee shall also have the power to make such recommendations
with respect to the above and other matters as it may deem necessary or
appropriate.
The Audit Committee shall meet on a regular basis and be empowered to hold
special meetings, as circumstances require. Any action of the Audit Committee
with respect to Western Asset Income Fund or Western Asset Funds, Inc. may be
taken without a meeting if all members of the Committee consent thereto in
writing. Any action of the Audit Committee with respect to Western Asset Premier
Bond Fund may be taken without a meeting if at least a majority of the members
of the Audit Committee consent thereto in writing.
At least annually, the Audit Committee shall meet separately with the
independent auditors and separately with the representatives of Fund management
responsible for the financial and accounting operations of the Fund. The Audit
Committee shall regularly meet with the Treasurer of the Fund and may seek to
meet with internal auditors, if any, for the Managers as circumstances warrant.
The Audit Committee shall have the resources and authority appropriate to
discharge its responsibilities, including the authority to retain special
counsel and other experts or consultants. The Fund shall provide the necessary
funding, as determined by the Audit Committee, to compensate the Fund's
independent auditors and any advisers employed by the Audit Committee, as well
as for the payment of ordinary administrative expenses of the Audit Committee
that are necessary or appropriate in carrying out its duties. The Audit
Committee may request any officer or employee of the Fund or of any of the
Fund's service providers or the Fund's outside counsel or independent auditors
to attend a meeting of the Audit Committee or to meet with any member of, or
consultants to, the Audit Committee.
Nothing in this Charter shall be construed to reduce the responsibilities
or liabilities of the Managers or the Fund's independent auditors. The function
of the Audit Committee shall be oversight; it shall be the responsibility of the
Managers to maintain appropriate systems for accounting and internal control;
the independent auditors' responsibility to plan and carry out a proper audit
and report thereon to the Board and shareholders, as required by law; and
management's and the independent auditors' responsibility to determine that the
Fund's financial statements are accurate and complete and in accordance with
generally accepted accounting principles. Members of the Audit Committee are not
employees of a Fund and, in serving on this Audit Committee, are not, and do not
hold themselves out to be, acting as auditors. As such, it is not the duty or
responsibility of the Audit Committee or its members to conduct "field work" or
other types of auditing or accounting reviews or procedures. Each member of the
Audit Committee shall be entitled to rely on (i) the integrity of those persons
and organizations within management and outside the Fund from which the Audit
Committee receives information and (ii) the accuracy of financial and other
information provided to the Audit Committee by such persons or organizations
absent actual knowledge to the contrary.
The Audit Committee shall assess its own performance at least annually.
A-4
APPENDIX B
WESTERN ASSET INCOME FUND
WESTERN ASSET FUNDS, INC.
WESTERN ASSET PREMIER BOND FUND
GOVERNANCE AND NOMINATING COMMITTEE CHARTER
AS OF FEBRUARY 10, 2004
Purposes and Organization
The purpose of the Governance and Nominating Committee of the respective
Boards of Directors/Trustees (each a "Board") of Western Asset Income Fund,
Western Asset Funds, Inc., and Western Asset Premier Bond Fund (each a "Fund")
is to review matters pertaining to the composition, committees, and operations
of the Boards. Members of the Committee may not be "interested persons" of a
Fund, as such term is defined in the Investment Company Act of 1940, as amended
("Interested Persons").(1) This Charter applies separately to each Fund and its
Governance and Nominating Committee, and shall be interpreted accordingly. The
Committee shall have the following duties and powers:
(1) To evaluate and recommend all candidates for election or
appointment as members of the Board and recommend the appointment of
members and chairs of each Board Committee.
(2) To review policy matters affecting the operation of the Board and
Board committees and make such recommendations to the Board as deemed
appropriate by the Committee.
(3) To evaluate periodically the effectiveness of the Board and Board
Committees and make such recommendations to the Board as deemed appropriate
by the Committee.
The Committee shall have the resources and authority appropriate to
discharge its responsibilities.
The Committee shall meet on a regular basis and be empowered to hold
special meetings, as circumstances require. Any action of the Committee shall be
taken by the affirmative vote of a majority of the members. Any action of the
Committee with respect to Western Asset Income Fund or Western Asset Funds, Inc.
may be taken without a meeting if all members of the Committee consent thereto
in writing. Any action of the Committee with
----------
(1) As contemplated by certain rules under the Investment Company Act of
1940, as amended, the selection and nomination of candidates for election as
members of the Board who are not Interested Persons shall be made by the
incumbent members of the Board who are not Interested Persons.
B-1
respect to Western Asset Premier Bond Fund may be taken without a meeting if at
least a majority of the members of the Committee consent thereto in writing.
Qualifications for Director/Trustee Nominees
The Committee requires that Director/Trustee candidates have a college
degree or equivalent business experience. The Committee may take into account a
wide variety of factors in considering Director/Trustee candidates, including
(but not limited to): (i) availability and commitment of a candidate to attend
meetings and perform his or her responsibilities on the Board, (ii) relevant
industry and related experience, (iii) educational background, (iv) financial
expertise, (v) an assessment of the candidate's ability, judgment and expertise
and (v) overall diversity of the Board's composition.
Identification of Nominees
In identifying potential nominees for the Board, the Committee may consider
candidates recommended by one or more of the following sources: (i) a Fund's
current Directors/Trustees, (ii) a Fund's officers, (iii) a Fund's investment
adviser(s), (iv) a Fund's shareholders (see below) and (v) any other source the
Committee deems to be appropriate. The Committee may, but is not required to,
retain a third party search firm at the expense of the Funds to identify
potential candidates.
Consideration of Candidates Recommended By Shareholders
The Committee will consider and evaluate nominee candidates properly
submitted by shareholders on the same basis as it considers and evaluates
candidates recommended by other sources. Appendix A to this Charter, as it may
be amended from time to time by the Committee, sets forth procedures that must
be followed by shareholders to properly submit a nominee candidate to the
Committee (recommendations not properly submitted in accordance with Appendix A
will not be considered by the Committee).
B-2
APPENDIX A
PROCEDURES FOR SHAREHOLDERS TO SUBMIT NOMINEE CANDIDATES
(AS OF FEBRUARY 10, 2004)
A Fund shareholder must follow the following procedures in order to properly
submit a nominee recommendation for the Committee's consideration.
1. The shareholder must submit any such recommendation (a "Shareholder
Recommendation") in writing to the Fund, to the attention of the Secretary, at
the address of the principal executive offices of the Fund.
2. The Shareholder Recommendation must be delivered to or mailed and
received at the principal executive offices of the Fund not less than one
hundred and twenty (120) calendar days nor more than one hundred and thirty-five
(135) calendar days prior to the date of the Board or shareholder meeting at
which the nominee would be elected.
3. The Shareholder Recommendation must include: (i) a statement in writing
setting forth (A) the name, age, date of birth, business address, residence
address and nationality of the person recommended by the shareholder (the
"candidate"); (B) the class or series and number of all shares of the Fund owned
of record or beneficially by the candidate, as reported to such shareholder by
the candidate; (C) any other information regarding the candidate called for with
respect to director/trustee nominees by paragraphs (a), (d), (e) and (f) of Item
401 of Regulation S-K or paragraph (b) of Item 22 of Rule 14a-101 (Schedule 14A)
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
adopted by the Securities and Exchange Commission (or the corresponding
provisions of any regulation or rule subsequently adopted by the Securities and
Exchange Commission or any successor agency applicable to the Fund); (D) any
other information regarding the candidate that would be required to be disclosed
if the candidate were a nominee in a proxy statement or other filing required to
be made in connection with solicitation of proxies for election of trustees or
directors pursuant to Section 14 of the Exchange Act and the rules and
regulations promulgated thereunder; and (E) whether the recommending shareholder
believes that the candidate is or will be an "interested person" of the Fund (as
defined in the Investment Company Act of 1940, as amended) and, if not an
"interested person," information regarding the candidate that will be sufficient
for the Fund to make such determination; (ii) the written and signed consent of
the candidate to be named as a nominee and to serve as a director/trustee if
elected; (iii) the recommending shareholder's name as it appears on the Fund's
books; (iv) the class or series and number of all shares of the Fund owned
beneficially and of record by the recommending shareholder; and (v) a
description of all arrangements or understandings between the recommending
shareholder and the candidate and any other person or persons (including their
names) pursuant to which the recommendation is being made by the recommending
shareholder. In addition, the Committee may require the candidate to furnish
such other information as it may reasonably require or deem necessary to
determine the eligibility of such candidate to serve on the Board.
[BAR CODE]
WESTERN ASSET INCOME FUND
000004 000000000.000000 ext 000000000.000000 ext
000000000.000000 ext 000000000.000000 ext
MR A SAMPLE 000000000.000000 ext 000000000.000000 ext
DESIGNATION
(IF ANY) ELECTRONIC VOTING INSTRUCTIONS
ADD 1 YOU CAN VOTE BY INTERNET OR TELEPHONE!
ADD 2 AVAILABLE 24 HOURS A DAY, 7 DAYS A WEEK!
ADD 3
ADD 4 Instead of mailing your proxy, you may choose one of the
ADD 5 two voting methods outlined below to vote your proxy.
ADD 6
VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR.
[BAR CODE] PROXIES SUBMITTED BY THE INTERNET OR TELEPHONE MUST BE
RECEIVED BY 11:59 P.M., EASTERN TIME, on MAY 7, 2007.
VOTE BY INTERNET
[COMPUTER LOGO] - Log on to the Internet and go to
WWW.INVESTORVOTE.COM
- Follow the steps outlined on the secured
website.
VOTE BY TELEPHONE
[PHONE LOGO] - Call toll free 1-800-652-VOTE (8683) within
the United States, Canada & Puerto Rico any
time on a touch tone telephone. There is
NO CHARGE to you for the call.
- Follow the instructions provided by the
recorded message.
Using a BLACK INK pen, mark your votes with an X as shown in
this example. Please do not write outside the designated areas. [X]
ANNUAL MEETING PROXY CARD 123456 C0123456789 12345
- IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE
PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. -
A PROPOSALS - THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL THE NOMINEES
LISTED AND FOR PROPOSAL 2.
1. Election of Directors:
FOR WITHHOLD FOR WITHHOLD FOR WITHHOLD +
01 - RONALD J. [ ] [ ] 02 - ANITA L. [ ] [ ] 03 - RONALD [ ] [ ]
ARNAULT DEFRANTZ L. OLSON
04 - WILLIAM [ ] [ ] 05 - JAYNIE [ ] [ ] 06 - AVEDICK [ ] [ ]
E.B. SIART MILLER B. POLADIAN
STUDENMUND
07 - R. JAY
GERKEN [ ] [ ]
FOR AGAINST ABSTAIN
2. Amendment to the Fund's [ ] [ ] [ ]
Certificate of Incorporation
to add the proposed
exculpatory provision.
With discretionary power upon THIS PROXY WILL BE VOTED AS
such other matters as may SPECIFIED. IF NO
properly come before the SPECIFICATION IS MADE, THIS
meeting or any adjournment PROXY WILL BE VOTED FOR
thereof. THEELECTION AS DIRECTORS OF
THE NOMINEES OF THE BOARD OF
DIRECTORS AND FOR THE
AMENDMENT OF THE
FUND'S CERTIFICATE OF
INCORPORATION.
B NON-VOTING ITEMS
CHANGE OF ADDRESS -- Please COMMENTS -- Please print
print address below. your comments below.
[ ] [ ]
C AUTHORIZED SIGNATURES -- THIS SECTION MUST BE COMPLETED FOR YOUR VOTE TO BE
COUNTED. -- DATE AND SIGN BELOW
Please sign this Proxy exactly as your name(s) appear(s) above. Joint owners
should each sign personally. Trustees and other fiduciaries should indicate the
capacity in which they sign. If a corporation, this signature should be that of
an authorized officer who should state his or her title.
Date (mm/dd/yyyy) -- Please Signature 1 -- Please keep Signature 2 -- Please
keep print date below. signature within the box. signature within the box.
[ / / ] [ ] [ ]
[BAR CODE] C 1234567890 JNT MR A SAMPLE (THIS AREA IS
SET UP TO ACCOMMODATE
140 CHARACTERS) MR A
SAMPLE AND
MR A SAMPLE AND MR A
SAMPLE AND MR A SAMPLE AND
MR A SAMPLE AND
7 1 B V 0 1 2 6 0 7 1 MR A SAMPLE AND MR A
SAMPLE AND MR A SAMPLE AND
WESTERN ASSET INCOME FUND
Dear Stockholder,
Please take note of the important information enclosed with this Proxy Ballot.
There are several issues related to the management and operation of your Fund
that require your immediate attention and approval. These matters are discussed
in detail in the enclosed proxy materials.
Your vote counts, and you are strongly encouraged to exercise your right to vote
your shares.
Please mark the boxes on this proxy card to indicate how your shares will be
voted. Then sign the card and return your proxy vote in the enclosed postage
paid envelope. Your vote must be received prior to the Annual Meeting of
Stockholders, May 8, 2007.
Thank you in advance for your prompt consideration of this matter.
Sincerely,
Western Asset Income Fund
- IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE -
PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
--------------------------------------------------------------------------------
================================================================================
PROXY -- WESTERN ASSET INCOME FUND
================================================================================
WESTERN ASSET INCOME FUND
ANNUAL MEETING OF STOCKHOLDERS - MAY 8, 2007
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
WESTERN ASSET INCOME FUND
The undersigned, revoking all prior proxies, hereby appoints James W. Hirschmann
III, Lisa G. Mrozek and D. Daniel Fleet, and each of them, attorneys and proxies
of the undersigned, each with full power of substitution, to attend the Annual
Meeting of the Stockholders of Western Asset Income Fund, a Delaware corporation
(the "Fund"), to be held in the Board Room, Fifth Floor, 385 E. Colorado Blvd.,
Pasadena, California, on May 8, 2007, at 8:30 a.m., Pacific time, and at any
adjournments thereof, and thereat to vote as indicated all shares of the Common
Stock of the Fund which the undersigned would be entitled to vote if personally
present with respect to the matters listed on the reverse, which are more fully
described in the Notice of Meeting and Proxy Statement of the Fund, receipt of
which is acknowledged by the undersigned.
PLEASE VOTE, DATE, SIGN ON REVERSE AND RETURN PROMPTLY USING THE ENCLOSED
ENVELOPE.