Investment Commentary and Annual Report to ... - Western Asset

Annual Report to ShareholdersNotes to Financial Statements—ContinuedUnder the terms of the Administration Agreement among the Fund, Western Asset and Legg Mason Fund Adviser, Inc.(“LMFA”), Western Asset pays LMFA, a monthly fee at an annual rate of 0.125% of the Fund’s average weekly total managed assets,subject to a monthly minimum fee of $12,500.7. Trustee Compensation:Each Independent Trustee receives an aggregate fee of $70,000 annually for serving on the combined Board of Trustees/Directors of the Fund, Western Asset Income Fund and Western Asset Funds, Inc. Each Trustee also receives a fee of $7,500 andrelated expenses for each meeting of the Board or of a committee attended in-person and a fee of $2,500 for participating in eachtelephonic meeting. The Chairman of the Board and the Chairman of the Audit Committee each receive an additional $25,000 peryear for serving in such capacities. Each member of the Audit Committee receives a fee of $6,000 for serving as a member of theAudit Committee. Other committee members receive a fee of $3,000 for serving as a member of each committee upon which theyserve. All such fees are allocated among the Fund, Western Asset Income Fund and Western Asset Funds, Inc. according to eachsuch investment company’s annual net assets. Trustee Ronald Olson receives from Western Asset an aggregate fee of $70,000annually for serving on the combined Board of Trustees/Directors of the Fund, Western Asset Income Fund and Western AssetFunds, Inc., as well as a fee of $7,500 and related expenses for each meeting of the Board attended in person and a fee of $2,500for participating in each telephonic meeting.8. Recent Accounting Pronouncements:In March 2008, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting StandardsNo. 161, “Disclosures about Derivative Instruments and Hedging Activities” (“FAS 161”). FAS 161 is effective for fiscal years andinterim periods beginning after November 15, 2008. FAS 161 requires enhanced disclosures about a fund’s derivative and hedgingactivities, including how such activities are accounted for and their effect on a fund’s financial position, performance and cashflows. Management is currently evaluating the impact the adoption of FAS 161 will have on the Fund’s financial statements andrelated disclosures.42