SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
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[ ] 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 PREMIER BOND FUND
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(1) Title of each class of securities to which transaction applies:
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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:
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WESTERN ASSET PREMIER BOND FUND
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 4, 2004
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To the Shareholders of
WESTERN ASSET PREMIER BOND FUND
The Annual Meeting of Shareholders of Western Asset Premier Bond Fund (the
"Fund") will be held in the Board Room, Fifth Floor, 385 E. Colorado Boulevard,
Pasadena, California, on Tuesday, May 4, 2004 at 8:00 a.m., California time, for
the following purposes:
(1) Electing two Trustees, each to hold office for the term indicated;
(2) Approving an amendment to the Trust's Agreement and Declaration of
Trust in order to declassify the Board of Trustees of the Fund;
(3) Approving an amendment to the Trust's Agreement and Declaration of
Trust relating to a Trustee's standard of care and right to indemnification
in connection with his or her service to the Fund; and
(4) Transacting such other business as may properly come before the
Annual Meeting and any adjournment thereof.
The Board of Trustees has fixed the close of business on March 10, 2004 as
the record date for the determination of shareholders entitled to receive notice
of and to vote at the Annual Meeting and any adjournment thereof.
By Order of the Board of Trustees
Lisa G. Mrozek, Secretary
Pasadena, California
March , 2004
SHAREHOLDERS 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 PREMIER BOND FUND
385 EAST COLORADO BOULEVARD
PASADENA, CALIFORNIA 91101
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PROXY STATEMENT
The accompanying proxy is solicited by the Board of Trustees of the Fund
for use at the annual meeting of shareholders of the Fund to be held on May 4,
2004 at 8:00 a.m., California time (the "Annual Meeting"), and at any
adjournment thereof. At the Annual Meeting, shareholders of the Fund will be
asked to consider (1) the re-election of Anita L. DeFrantz and William G. McGagh
to the Board of Trustees of the Fund, (2) the approval of an amendment to the
Fund's Amended and Restated Agreement and Declaration of Trust (the "Declaration
of Trust") in order to declassify the Board of Trustees and (3) the approval of
an amendment to the Declaration of Trust relating to a Trustee's standard of
care and right to indemnification in connection with his or her service to the
Fund. This Proxy Statement and the form of proxy were first mailed to
shareholders on or about March , 2004.
The Board of Trustees has fixed the close of business on March 10, 2004 as
the record date for the determination of shareholders entitled to notice of and
to vote at the Annual Meeting and any adjournment thereof. As of the close of
business on that date, the Fund had issued and outstanding 11,355,366 common
shares of beneficial interest, no par value ("Common Shares"), and 2,880
preferred shares of beneficial interest, no par value ("Preferred Shares" and,
together with the Common Shares, the "Shares"). The Common Shares and Preferred
Shares are the only classes of shares currently authorized by the Fund. As of
the close of business on March 10, 2004, no person owned of record or, to the
knowledge of the Fund, owned beneficially more than five percent (5%) of the
outstanding Shares of either class, except that Cede & Co., as nominee for
participants in The Depository Trust Company, held of record Common
Shares (representing approximately % of the outstanding Common Shares) and all
2,880 outstanding Preferred Shares. Cede & Co.'s address is 55 Water Street,
25th Floor, New York, New York 10041-0001.
Shareholders of the Fund as of the close of business on March 10, 2004 will
be entitled to one vote for each Share held, and a fractional vote with respect
to fractional Shares, on each matter to which they are entitled to vote, with no
cumulative voting rights. As summarized in the table below, holders of the
Preferred Shares ("Preferred Shareholders"), voting as a single class, have the
right to vote on the election of William G. McGagh as a Trustee. The holders of
the Common Shares ("Common Shareholders") do not have the right to vote with
respect to the election of Mr. McGagh. Common Shareholders and
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Preferred Shareholders will vote as a single class on the election of Anita L.
DeFrantz as a Trustee and on Proposals 2 and 3 described in this Proxy
Statement.
PROPOSAL COMMON SHAREHOLDERS PREFERRED SHAREHOLDERS
-------- ------------------- ----------------------
- Proposal 1: Election of Anita L DeFrantz... (check mark) (check mark)
- Proposal 1: Election of William G McGagh... X (check mark)
- Proposal 2: Approval of an amendment to the
Declaration of Trust in order to declassify
the Board of Trustees...................... (check mark) (check mark)
- Proposal 3: Approval of an amendment to the
Declaration of Trust relating to a
Trustee's standard of care and right to
indemnification in connection with his or
her service to the Fund.................... (check mark) (check mark)
Thirty percent (30%) of the total Shares of the Fund entitled to vote at
the Annual Meeting must be represented in person or by proxy to constitute a
quorum for the Annual Meeting, except that thirty percent (30%) of the Preferred
Shares entitled to vote at the Annual Meeting must be represented in person or
by proxy to constitute a quorum for the election of Mr. McGagh as a Trustee.
Each shareholder has the right to revoke his or her proxy at any time before it
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 shareholder 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, 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, Georgeson Shareholder Communications, Inc.
("GS"), which has been retained to assist shareholders in the voting process.
For these services, the Fund will pay GS a fee that is not expected to exceed
$2,000. 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 shares of the Fund.
All expenses incurred in connection with the solicitation of proxies, including
the services of GS, 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
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having been voted on the matter in question. Abstentions and broker non-votes
will accordingly have no effect for the purpose of determining whether a Trustee
has been elected, but will have the effect of a negative vote on Proposals 2 and
3.
James W. Hirschmann III, Lisa G. Mrozek and Ilene S. Harker, the persons
named as proxies on the proxy card accompanying this Proxy Statement, were
selected by the Board of Trustees to serve in such capacity. Mr. Hirschmann and
Mesdames Mrozek and Harker 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 approval of
each of Proposals 1, 2 and 3. Discretionary authority is provided in the proxy
as to any matters not specifically referred to therein. The Board of Trustees 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 matters other than the
proposals described in this Proxy Statement, except where a different vote is
required by any provision of law or the Declaration of Trust or Bylaws, a
plurality of a quorum of the Shares necessary for the transaction of business at
a shareholders' meeting shall decide any question.
PROPOSAL 1
ELECTION OF TRUSTEES
In accordance with the Declaration of Trust, the Trustees have been divided
into the following three classes (each a "Class"): Class I, whose term will
expire at the 2006 annual meeting of shareholders; Class II, whose term will
expire at the Annual Meeting; and Class III, whose term will expire at the
Fund's 2005 annual meeting of shareholders. At each annual meeting successors to
the Class of Trustees whose term expires at that annual meeting shall be elected
for a three-year term. However, if the proposed declassification of the Fund's
Board of Trustees described in Proposal 2 of this Proxy Statement is approved,
then all of the Trustees would stand for election at each annual meeting
beginning in 2005, rather than serve the remainder of their respective terms. In
either case, each Trustee will serve until the expiration of his or her term and
until his or her successor is elected and qualified, subject, however, to prior
death, resignation, retirement, disqualification or removal from office.
The following table sets forth the nominees who will stand for election at
the Annual Meeting, the Class of Trustees to which they have been designated and
the expiration of their terms if elected:
TRUSTEE CLASS EXPIRATION OF TERM IF ELECTED
------- -------- -----------------------------
Anita L. DeFrantz................................ Class II 2007 Annual Meeting
William G. McGagh................................ Class II 2007 Annual Meeting
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Under the Fund's classified Board structure, ordinarily only those Trustees
in a single Class may be replaced in any one year, and it would require a
minimum of two years to change a majority of the Board of the Fund under normal
circumstances. This structure, which may be regarded as an "anti-takeover"
measure, may make it more difficult for the Fund's shareholders to change the
majority of Trustees of the Fund and, thus, promotes the continuity of
management. As described in Proposal 2 below, it is currently proposed that this
classified Board structure be removed.
It is the intention of the persons designated as proxies in the proxy,
unless otherwise directed therein, to vote at the Annual Meeting for the
election of Ms. DeFrantz and Mr. McGagh. Each of the nominees has agreed to
serve if elected at the Annual Meeting. If either 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 Trustees may recommend.
Information Regarding the Trustees. Information about the Trustees is set
forth below. No Trustee of the Fund serves as an officer of the Fund. Of the
Trustees listed below, only Ms. DeFrantz and Mr. McGagh are nominees for
election at the Annual Meeting. The address of each Trustee is c/o the Fund at
its principal business address listed above.
NUMBER OF
PORTFOLIOS SHARES
IN FUND OTHER BENEFICIALLY
TERM OF OFFICE COMPLEX** DIRECTORSHIPS OWNED ON
POSITION(S) AND LENGTH OF PRINCIPAL OCCUPATIONS OVERSEEN HELD BY MARCH 1,
NAME AND AGE HELD WITH FUND TIME SERVED* DURING THE PAST 5 YEARS BY TRUSTEE TRUSTEE 2004
------------ -------------- -------------- ----------------------- ---------- ------------- ------------
Ronald J. Arnault Trustee Term expires Retired (1996) 14
Age 60 (Class I) in 2006; Executive Vice
(2) served since President, Chief
2002 Financial Officer and
Director of Atlantic
Richfield Company.
John E. Bryson Trustee Term expires Chairman and CEO, 14 Director of
Age 60 (Class I) in 2006; Edison International The Boeing
(1)(3)(4) served since (electric power Company and
2002 generator, distributor The Walt
and structured finance Disney
provider) (since 1990); Company.
Chairman of Southern
California Edison
Company (1990-1999 and
2003-present); Chief
Executive Officer of
Southern California
Edison Company (1990 to
1999).
4
NUMBER OF
PORTFOLIOS SHARES
IN FUND OTHER BENEFICIALLY
TERM OF OFFICE COMPLEX** DIRECTORSHIPS OWNED ON
POSITION(S) AND LENGTH OF PRINCIPAL OCCUPATIONS OVERSEEN HELD BY MARCH 1,
NAME AND AGE HELD WITH FUND TIME SERVED* DURING THE PAST 5 YEARS BY TRUSTEE TRUSTEE 2004
------------ -------------- -------------- ----------------------- ---------- ------------- ------------
Anita L. DeFrantz Trustee and Term expires President, since 1987, 14
Age 51 Nominee at the Annual and Director, since
(Class II) Meeting; 1990, Amateur Athletic
(2) served since Foundation of Los
2002 Angeles; President and
Director, Kids in
Sports, since 1994;
Vice President and
Director, International
Rowing Federation,
since 1997; Member,
International Olympic
Committee ("IOC"),
since 1986; Member, IOC
Executive Board,
1992-2001; Member, U.S.
Olympic Committee
("USOC"), since 1976;
Member, USOC Executive
Board, since 1977.
William G. McGagh Trustee and Term expires Consultant, McGagh 14
Age 74 Nominee at the Annual Associates (corporate
(Class II) Meeting; financial consulting),
(1)(4) served since since 1989; Chairman of
2002 the Board of the John
Tracy Clinic; Chairman
of the Board of the Los
Angeles Orthopedic
Hospital. Formerly:
Senior Vice President,
Chief Financial Officer
and Director of
Northrop Grumman Corp.
(defense, aerospace and
cyberspace products).
5
NUMBER OF
PORTFOLIOS SHARES
IN FUND OTHER BENEFICIALLY
TERM OF OFFICE COMPLEX** DIRECTORSHIPS OWNED ON
POSITION(S) AND LENGTH OF PRINCIPAL OCCUPATIONS OVERSEEN HELD BY MARCH 1,
NAME AND AGE HELD WITH FUND TIME SERVED* DURING THE PAST 5 YEARS BY TRUSTEE TRUSTEE 2004
------------ -------------- -------------- ----------------------- ---------- ------------- ------------
William E. B. Siart Trustee Term expires Chairman, Walt Disney 14 Director of
Age 57 (Class III) in 2005; Concert Hall, Inc., Sybron Dental
(1)(2)(3)(4) served since since 1998; Chairman, Specialties,
2002 since 2000, President Inc.
and Chief Executive
Officer (1998-2000),
Excellent Education
Development. Formerly:
Chairman and Chief
Executive Officer,
First Interstate
Bancorp.
Louis A. Simpson (Trustee Term expires President and Chief 14 Director of
Age 67 (Class III) in 2005; Executive Officer, ResMed Inc.
(2)(3)(4) served since Capital Operations,
2002 GEICO Corporation,
since 1993. Formerly:
President and Chief
Executive Officer, the
Investment Adviser
(1977-1979).
---------------
(1) Member of the Executive Committee of the Board of Trustees.
(2) Member of the Audit Committee of the Board of Trustees.
(3) Member of the Governance and Nominating Committee of the Board of Trustees.
(4) Member of the Compensation Committee of the Board of Trustees.
* If the proposed declassification of the Fund's Board of Trustees described
in Proposal 2 of this Proxy Statement is approved, each Trustee's term will
expire in 2005, subject, however, to prior death, resignation, retirement,
disqualification or removal from office.
** Each Trustee also serves as a Director for Pacific American Income Shares,
Inc. (closed-end investment company) and Western Asset Funds, Inc. (open-end
investment company), which are considered part of the same Fund Complex as
the Fund. The Fund's investment adviser, Western Asset Management Company
(the "Investment Adviser"), and the Fund's subadviser, Western Asset
Management Company Limited (the "Subadviser"), also serve as adviser and
subadviser, respectively, to Pacific American Income Shares, Inc. and as
subadviser to one or more series of Western Asset Funds, Inc.
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The following table states the dollar range of equity securities
beneficially owned as of March 1, 2004 by each Trustee in the Fund and, on an
aggregate basis, in any registered investment companies overseen or to be
overseen by the Trustee in the same "family of investment companies."
DOLLAR RANGE AGGREGATE DOLLAR RANGE OF EQUITY
OF EQUITY SECURITIES IN ALL FUNDS OVERSEEN
SECURITIES IN OR TO BE OVERSEEN BY TRUSTEE IN
NAME OF NOMINEE THE FUND FAMILY OF INVESTMENT COMPANIES
--------------- ------------- --------------------------------
Ronald J. Arnault..................................
John E. Bryson..................................... 0 $10,001 - $50,000
Anita L. DeFrantz..................................
William G. McGagh.................................. 0 $10,001 > $50,000
William E. B. Siart................................ 0 $50,001 - $100,000
Louis A. Simpson................................... 0 > $100,000
As of March 1, 2004, all Trustees and officers of the Fund as a group
beneficially owned less than 1% of the outstanding Common Shares or Preferred
Shares on such date.
Audit Committee. The Board of Trustees has established an Audit Committee
composed solely of Trustees who are not "interested persons" (as defined in the
Investment Company Act of 1940, as amended (the "1940 Act")) of the Fund or the
Investment Adviser or Subadviser, consisting of Messrs. Arnault, Siart and
Simpson and Ms. DeFrantz. 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
Shares of the Fund are 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 independent
public accountants for the Fund and the scope of the audit and approves services
proposed to be performed by those accountants on behalf of the Fund and, under
certain circumstances, the Investment Adviser, Subadviser and certain
affiliates. The Trustees have adopted a written charter for the Audit Committee,
a copy of which is attached hereto as Appendix A.
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 accountants the matters required to be
discussed by Statements on Auditing Standards No. 61 (SAS 61). SAS 61 requires
independent accountants 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
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and the basis for the accountant'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
accountants required by Independence Standards Board Standard No. 1 (requiring
accountants to make written disclosures to and discuss with the Audit Committee
various matters relating to the accountants' independence), and has discussed
with such accountants the independence of such accountants. Based on the
foregoing review and discussions, the Audit Committee recommended to the
Trustees the inclusion of the audited financial statements for the last fiscal
year in the Fund's annual report to shareholders.
Ronald J. Arnault (Chairman)
Anita L. DeFrantz
William E. B. Siart
Louis A. Simpson
Governance and Nominating Committee. The Board of Trustees has established
a Governance and Nominating Committee composed solely of Trustees who are not
"interested persons" (as defined in the 1940 Act) of the Fund or the Investment
Adviser or Subadviser, consisting of Messrs. Bryson, Siart and Simpson. The
Governance and Nominating Committee meets to select nominees for election as
Trustees of the Fund and consider other matters of Board policy. The Trustees
have adopted a written charter for the Governance and Nominating Committee, a
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 made available.
The Governance and Nominating Committee requires that Trustee 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 Trustee. The Governance
and Nominating Committee may take into account a wide variety of factors in
considering Trustee 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 Trustees, (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 of Trustees' composition. The Governance and Nominating
Committee may consider candidates for Trustee recommended by the Fund's current
Trustees, officers, Investment Adviser or Subadviser, shareholders or any other
source deemed to be appropriate by the Governance and Nominating Committee.
Candidates properly submitted by shareholders (as described below) will be
considered and evaluated on the same basis as candidates recommended by other
sources.
It is the policy of the Governance and Nominating Committee to consider
nominees recommended by shareholders to serve as Trustee, provided that any such
recommendation is submitted in writing to the
8
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 shareholders to submit nominee candidates, which are a
part of the Governance and Nominating Committee's Charter (see Appendix B to
this Proxy Statement). The Governance and Nominating Committee has full
discretion to reject nominees recommended by shareholders, 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
Trustees.
Executive Committee. The Board of Trustees has established an Executive
Committee consisting of Messrs. Bryson, McGagh and Siart. The Executive
Committee may meet from time to time between Board meetings in order to consider
relevant items requiring its consideration.
Compensation Committee. The Board of Trustees has established a
Compensation Committee consisting of Messrs. Bryson, McGagh, Siart and Simpson.
The Compensation Committee meets to review and make recommendations to the Board
with respect to Trustee compensation for services to the Fund.
Meetings. During 2003, the Board of Trustees held five meetings, the Audit
Committee held five meetings, the Governance and Nominating Committee held four
meetings, the Compensation Committee held one meeting, and the Executive
Committee did not meet. Each Trustee attended each of the meetings of the Board
of Trustees and the Committees of the Board of Trustees on which he or she
served. Although the Fund's policies do not require the Trustees to attend the
Fund's annual shareholder meetings, annual meetings are generally held in
connection with a regularly scheduled meeting of the Board of Trustees in order
to facilitate attendance. Each current Trustee attended the Fund's first annual
shareholder meeting in May 2003.
Shareholder Communications. The Board of Trustees provides a process for
shareholders to send communications to the Board of Trustees. Shareholders may
mail written communications to the attention of the Board of Trustees, care of
the Fund's Secretary, to the principal executive offices of the Fund. The
written communication must include the shareholder's name, be signed by the
shareholder, refer to the Fund, and include the class and number of shares held
by the shareholder as of a recent date.
Trustee Compensation. Effective February 2004, each Trustee 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 $40,000
annually for serving on the combined Board of Directors/Trustees of the Fund,
Western Asset Funds, Inc. and Pacific American Income Shares, Inc. Each Trustee
also receives a fee of $5,000 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
9
Committee each receive an additional $10,000 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 Pacific American Income Shares, Inc. according to
each such investment company's net assets.
For the fiscal year ended December 31, 2003, the Trustees received the
compensation set forth in the following table for serving as Trustees of the
Fund and as Directors 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 PERSON FUND EXPENSES RETIREMENT PAID TO TRUSTEES(1)
-------------- ------------ --------------------- --------------- --------------------
Ronald J. Arnault............ $18,000 $0 $0 $56,500
John E. Bryson............... $15,000 $0 $0 $49,000
Anita L. DeFrantz............ $15,000 $0 $0 $50,500
William G. McGagh............ $16,000 $0 $0 $54,500
William E. B. Siart.......... $17,000 $0 $0 $55,000
Louis A. Simpson............. $17,000 $0 $0 $55,000
---------------
(1) Includes amounts received in 2003 from the Fund and from Pacific American
Income Shares, Inc. and Western Asset Funds, Inc., which are considered part
of the same Fund Complex as the Fund. Effective February 2004, the Trustees
will earn compensation for their service as described in the preceding
paragraph.
During 2003, 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. Election of Ms. DeFrantz to the Board of Trustees of the
Fund requires the affirmative vote of a plurality of the Shares voted on the
election of Trustees at the Annual Meeting, in person or by proxy. Election of
Mr. McGagh to the Board of Trustees of the Fund requires the affirmative vote of
a plurality of the Preferred Shares (voting as a separate class) voted for the
election of Trustees at the Annual Meeting, in person or by proxy. The Trustees
unanimously recommend that shareholders vote to re-elect Ms. DeFrantz and Mr.
McGagh to the Board of Trustees.
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PROPOSAL 2
PROPOSAL TO DECLASSIFY THE BOARD OF TRUSTEES
The Trustees of the Fund are proposing to declassify the Fund's Board of
Trustees. As described under Proposal 1 above, under the current classified
Board structure, the Trustees are divided into three Classes, with each Class
serving a three-year term. The classified structure of the Board of Trustees
results in Trustees serving staggered terms, with approximately one-third of the
Trustees up for re-election at any given annual meeting. If the proposed
declassification is approved, all of the Trustees would stand for election at
each annual meeting beginning in 2005 rather than serve the remainder of their
respective terms. If elected, each Trustee would serve until the next meeting of
shareholders of the Fund at which Trustees are elected and until his or her
successor is elected and qualified, or until he or she sooner dies, resigns,
retires or is disqualified or removed from office.
The Fund's Board of Trustees was originally structured on a classified
basis at the time of the Fund's initial public offering. This structure, which
may be regarded as an "anti-takeover" measure, was intended (i) to make it more
difficult for a shareholder of the Fund to obtain control of the Board of
Trustees of the Fund and, thus, (ii) to promote the continuity of management and
enhance the Fund's ability to pursue long-term strategies that are consistent
with its investment objectives and management policies. Declassification of the
Board offers shareholders more frequent opportunities to consider and vote on
the Fund's Trustees.
This change will require an amendment to the Declaration of Trust to
reflect the conversion of the Fund's Board of Trustees into an unclassified
Board. At the Annual Meeting, shareholders will be asked to authorize the
Trustees to effect such an amendment to the Declaration of Trust. In the event
that shareholders do not approve the declassification of the Board of Trustees,
the Trustees would continue to be divided into three classes, with each class
serving a three-year term as described in Proposal 1 above.
Proposed Vote. Approval of Proposal 2 will require the affirmative vote of
a majority of the Fund's Shares entitled to vote on the matter. The Trustees
unanimously recommend that shareholders vote for Proposal 2 and the resulting
declassification of the Fund's Board of Trustees.
11
PROPOSAL 3
PROPOSAL TO APPROVE AN AMENDMENT TO THE
DECLARATION OF TRUST RELATING TO LIABILITY OF THE TRUSTEES
The Trustees are proposing to amend the Declaration of Trust to add a
provision intended to clarify that all Trustees are held to the same standard of
care, have the same duties and obligations and have the same rights to
indemnification, including those Trustees who bring special skills or expertise
to the Board or who take on additional responsibilities for the Fund. If
Proposal 3 is approved, the following provision would be added to the
Declaration of Trust:
"For the sake of clarification and without limiting any foregoing
provision, the appointment, designation or identification of a Trustee as
the chairperson of the Trustees, the lead or assistant lead independent
Trustee, a member or chairperson of a committee of the Trustees, an expert
on any topic or in any area (including audit committee financial expert) or
having any other special appointment, designation or identification shall
not (a) impose on that person any duty, obligation or liability that is
greater than the duties, obligations and liabilities imposed on that person
as a Trustee in the absence of the appointment, designation or
identification or (b) affect in any way such Trustee's rights or
entitlement to indemnification, and no Trustee who has special skills or
expertise, or is appointed, designated or identified as aforesaid, shall
(x) be held to a higher standard of care by virtue thereof or (y) be
limited with respect to any indemnification to which such Trustee would
otherwise be entitled."
The proposed change is designed to encourage current Trustees to take on
(or continue to take on) additional responsibilities for the Fund, and may help
the Fund to continue to attract qualified Trustee candidates. If Proposal 3 is
approved, a Trustee may under certain circumstances be protected from liability
to which he or she could potentially have been subject in the absence of the
provision.
Proposed Vote. Approval of Proposal 3 will require the affirmative vote of
a majority of the Fund's Shares entitled to vote on the matter. The Trustees
unanimously recommend that shareholders vote for Proposal 3.
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
securities brokerage, investment advisory, corporate and public finance, and
mortgage banking services to individuals, institutions, corporations and
municipalities, and the provision of other financial services. 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 155 Bishopsgate, London, England EC2N3TY.
13
Information regarding the executive officers of the Fund and their
ownership of Shares of the Fund is set forth below. The address of each officer
is c/o the Fund at the address listed above.
SHARES
TERM OF OFFICE BENEFICIALLY
POSITION(S) HELD AND LENGTH PRINCIPAL OCCUPATION(S) OWNED ON
NAME AND AGE WITH FUND OF TIME SERVED(1) DURING THE PAST 5 YEARS MARCH 1, 2004
------------ ---------------- ----------------- ----------------------- -------------
James W. Hirschmann III President Served since Director, President and
Age 43 2001. Chief Executive Officer
of the Investment
Adviser, March 1999 to
present; Director of
the Subadviser, 1999 to
present; Member, Board
of Directors of Medical
Simulation Corporation;
Member, Board of
Trustees of Widener
College; President,
Western Asset Funds,
Inc. and Pacific
American Income Shares,
Inc. Formerly: Managing
Director of the
Subadviser, 1996-1999;
Director of Marketing
of the Investment
Adviser, April 1989 to
1998; Vice President
and Director of
Marketing, Financial
Trust Corporation (bank
holding company), 1988
to 1989; Vice President
of Marketing
Atalanta/Sosnoff
Capital (investment
management company),
1986 to 1988.
14
SHARES
TERM OF OFFICE BENEFICIALLY
POSITION(S) HELD AND LENGTH PRINCIPAL OCCUPATION(S) OWNED ON
NAME AND AGE WITH FUND OF TIME SERVED(1) DURING THE PAST 5 YEARS MARCH 1, 2004
------------ ---------------- ----------------- ----------------------- -------------
Ilene S. Harker Vice President Served since Head of Enterprise Risk
Age 49 2001. of the Investment
Adviser, 2003 to
present; Vice
President, Western
Asset Funds, Inc., 1990
to present, and Pacific
American Income Shares,
Inc., 1996 to present.
Formerly: Secretary and
Director of Compliance
and Controls of the
Investment Adviser,
1978 to 2003; Secretary
of Western Asset Funds,
Inc. and Pacific
American Income Shares,
Inc., 1993 to 1996.
15
SHARES
TERM OF OFFICE BENEFICIALLY
POSITION(S) HELD AND LENGTH PRINCIPAL OCCUPATION(S) OWNED ON
NAME AND AGE WITH FUND OF TIME SERVED(1) DURING THE PAST 5 YEARS MARCH 1, 2004
------------ ---------------- ----------------- ----------------------- -------------
S. Kenneth Leech Vice President Served since Chief Investment
Age 49 2001. Officer of the
Investment Adviser,
1998 to present; Vice
President, Western
Asset Funds, Inc. and
Pacific American Income
Shares, Inc. Formerly:
Director of Portfolio
Management of the
Investment Adviser,
1990 to 1998; Senior
Trader, Greenwich
Capital, 1988 to 1990;
Fixed Income Manager of
The First Boston
Corporation (holding
company; stock and bond
dealers), 1980 to 1987;
Portfolio Manager of
National Bank of
Detroit, 1977 to 1980.
16
SHARES
TERM OF OFFICE BENEFICIALLY
POSITION(S) HELD AND LENGTH PRINCIPAL OCCUPATION(S) OWNED ON
NAME AND AGE WITH FUND OF TIME SERVED(1) DURING THE PAST 5 YEARS MARCH 1, 2004
------------ ---------------- ----------------- ----------------------- -------------
Marie K. Karpinski Treasurer and Served since Vice President, Legg 500
Age 55 Principal 2001. Mason Wood Walker,
Financial and Incorporated (1992 to
Accounting present); Vice
Officer President and Treasurer
of all Legg Mason
retail funds (open-end
investment companies),
1986 to present; Vice
President and Treasurer
of Legg Mason Charles
Street Trust, Inc.
(open-end investment
company), 1998 to
present; Vice
President, Treasurer
and Principal Financial
and Accounting Officer,
Western Asset Funds,
Inc., 1990 to present;
Treasurer and Principal
Financial and
Accounting Officer of
Pacific American Income
Shares, Inc., 2001 to
present, Western
Asset/Claymore U.S.
Treasury Inflation
Protected Securities
Fund, 2003 to present,
and Western
Asset/Claymore U.S.
Treasury Inflation
Protected Securities
Fund 2,
17
SHARES
TERM OF OFFICE BENEFICIALLY
POSITION(S) HELD AND LENGTH PRINCIPAL OCCUPATION(S) OWNED ON
NAME AND AGE WITH FUND OF TIME SERVED(1) DURING THE PAST 5 YEARS MARCH 1, 2004
------------ ---------------- ----------------- ----------------------- -------------
2004 to present.
Formerly: Assistant
Treasurer of the
Company, 1988 to 2001.
18
SHARES
TERM OF OFFICE BENEFICIALLY
POSITION(S) HELD AND LENGTH PRINCIPAL OCCUPATION(S) OWNED ON
NAME AND AGE WITH FUND OF TIME SERVED(1) DURING THE PAST 5 YEARS MARCH 1, 2004
------------ ---------------- ----------------- ----------------------- -------------
Erin K. Morris Assistant Served since Assistant Vice
Age 37 Treasurer 2001. President of Legg Mason
Wood Walker,
Incorporated, 2002 to
present; Assistant
Treasurer (2001 to
present) of: Legg Mason
Income Trust, Inc.,
Legg Mason Cash Reserve
Trust, Legg Mason Tax
Exempt Trust, Inc.,
Legg Mason Tax-Free
Income Fund, Pacific
American Income Shares,
Inc. and Western Asset
Funds, Inc.; Assistant
Treasurer of Western
Asset/Claymore U.S.
Treasury Inflation
Protected Securities
Fund, 2003 to present
and Western
Asset/Claymore U.S.
Treasury Inflation
Protected Securities
Fund 2, 2004 to
present. Manager, Fund
Accounting, Legg Mason
Wood Walker,
Incorporated (2000 to
present). Formerly:
Assistant Manager, Fund
Accounting, Legg Mason
Wood Walker,
Incorporated
19
SHARES
TERM OF OFFICE BENEFICIALLY
POSITION(S) HELD AND LENGTH PRINCIPAL OCCUPATION(S) OWNED ON
NAME AND AGE WITH FUND OF TIME SERVED(1) DURING THE PAST 5 YEARS MARCH 1, 2004
------------ ---------------- ----------------- ----------------------- -------------
(1993 to 2000).
Lisa G. Mrozek Secretary Served since Senior Compliance
Age 41 2001. Officer of the
Investment Adviser;
President of the Board
of Directors of
California Dollars for
Scholars; Member of the
Board of Trustees of
Scholarship America;
Secretary, Western
Asset Funds, Inc. and
Pacific American Income
Shares, Inc. Formerly:
Assistant Vice
President, Fund
Business Management,
Capital Research and
Management Company (an
investment management
firm), 1990 to 1999.
---------------
(1) Each officer shall hold office until his or her respective successor is
chosen and qualified, or in each case until he or she sooner dies, resigns,
is removed with or without cause or becomes disqualified.
SHAREHOLDER PROPOSALS FOR 2005 ANNUAL MEETING
Proposals that shareholders wish to present to the 2005 Annual Meeting and
to have included in the Fund's proxy materials relating to such meeting must be
delivered to the Secretary of the Fund not less than 120 days prior to March ,
2005.
Shareholders who wish to make a proposal at the 2005 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 March ,
2005.
20
Shareholders who wish to propose one or more nominees for election as
Trustees, or to make a proposal fixing the number of Trustees, at the 2005
annual meeting must provide written notice to the Fund (including all required
information) so that such notice is received in good order by the Fund no
earlier than February , 2005 and no later than March , 2005.
The proper submission of a shareholder proposal does not guarantee that it
will be included in the Fund's proxy materials or presented at a shareholder
meeting. Shareholder proposals are subject to the requirements of applicable law
and the Fund's Declaration of Trust and Bylaws.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 30(h) of the 1940 Act and Section 16(a) of the Securities Exchange
Act of 1934, as amended, require the Fund's officers and Trustees, 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 2003, all such filing requirements were met.
ANNUAL REPORT TO SHAREHOLDERS
The Fund's Annual Report to Shareholders for the fiscal year ended December
31, 2003 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 Shareholders.
Requests for copies of the Annual Report to Shareholders should be directed to
Western Asset Premier Bond Fund, Attention: Investor Relations, 385 E. Colorado
Boulevard, Pasadena, California 91101 or you may call 866-290-4386.
INDEPENDENT ACCOUNTANTS
The Audit Committee of the Board of Trustees has selected
PricewaterhouseCoopers LLP as the independent public accountants of the Fund for
the fiscal year ending December 31, 2004, and the Board of Trustees, including a
majority of the Trustees 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 removal by a majority of the
outstanding Shares of the Fund. Representatives of Price-
21
waterhouseCoopers LLP are currently expected to attend the meeting, and may, as
they see fit, make a statement and/or respond to appropriate questions.
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, 2002 $23,300 $18,785 $800 N/A
December 31, 2003 $26,900 $ 8,700 $870 N/A
"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 review of the rating agency compliance testing for the Fund's
Preferred Shares and audit test pricing of the Fund's holdings at an interim
date.
"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, review of excise
tax distribution requirements 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, 2002 and December 31, 2003,
PricewaterhouseCoopers LLP billed aggregate non-audit fees in the amounts of
$562,238 and $892,920, 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 (a "Service Affiliate").
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
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. The percentage of "Audit-Related Fees," "Tax-Fees" and "Other
Fees" set forth in the table above that were waived pursuant to 17 CFR
210.2-01(c)(7)(i)(c) was zero.
22
PricewaterhouseCoopers LLP did not bill fees for non-audit services 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 last two fiscal years.
The Audit Committee has considered whether the provision of the non-audit
services rendered by PricewaterhouseCoopers LLP since May 6, 2003 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, in the event that 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 the affirmative vote of a
plurality of the Shares of the Fund entitled to vote thereon present in person
or represented by proxy at the session of the Annual Meeting to be adjourned.
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 will be
acted upon and such action will be final regardless of whether the Annual
Meeting is adjourned to permit additional solicitation with respect to any other
proposal.
23
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 Trustees
Lisa G. Mrozek, Secretary
March , 2004
24
APPENDIX A
PACIFIC AMERICAN INCOME SHARES, INC.
WESTERN ASSET FUNDS, INC.
WESTERN ASSET PREMIER BOND FUND (THE "FUNDS")
AUDIT COMMITTEE CHARTER
REVISED AS OF FEBRUARY 10, 2004
The respective Boards of Directors/Trustees (each a "Board") of Pacific
American Income Shares, Inc., 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 prepare the report required by applicable rules of the
Securities and Exchange Commission to be included in the annual proxy
statements of Pacific American Income Shares, Inc. and Western Asset
Premier Bond Fund.
A-1
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 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
A-2
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.
(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
A-3
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.
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 Pacific American Income Shares, Inc. 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
A-4
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 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 performance of the Audit Committee shall be reviewed at least annually
by the Board.
A-5
APPENDIX B
PACIFIC AMERICAN INCOME SHARES, INC.
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 Pacific American Income
Shares, Inc., 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 Pacific American Income Shares, Inc. or Western Asset
Funds, Inc. may be taken without a meeting if all members of the Committee
consent
---------------
(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
thereto in writing. Any action of the 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 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;
B-3
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.
B-4
WESTERN ASSET PREMIER BOND FUND
Dear Shareholder,
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, detach it and return your proxy vote in the enclosed
postage paid envelope. Your vote must be received prior to the Annual Meeting of
Shareholders, May 4, 2004.
Thank you in advance for your prompt consideration of this matter.
Sincerely,
Western Asset Premier Bond Fund
DETACH HERE
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WESTERN ASSET PREMIER BOND FUND
COMMON SHARES
ANNUAL MEETING OF SHAREHOLDERS - MAY 4, 2004
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
TRUSTEES OF WESTERN ASSET PREMIER BOND FUND
The undersigned, revoking all prior proxies, hereby appoints James W. Hirschmann
III, Lisa G. Mrozek and Ilene S. Harker, and each of them, attorneys and proxies
of the undersigned, each with full power of substitution, to attend the Annual
Meeting of the Shareholders of Western Asset Premier Bond Fund, a Massachusetts
business trust (the "Fund"), to be held in the Board Room, Fifth Floor, 385 E.
Colorado Blvd., Pasadena, California, on May 4, 2004, at 8:00 a.m., California
time, and at any adjournments thereof, and thereat to vote as indicated all
common shares of beneficial interest 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 Proxy Statement of the Fund dated
March __, 2004, receipt of which is acknowledged by the undersigned.
PLEASE VOTE, DATE, SIGN ON REVERSE AND RETURN PROMPTLY
USING THE ENCLOSED ENVELOPE.
Please sign this Proxy exactly as your name(s) appear(s) on the reverse side.
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.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
1
WESTERN ASSET PREMIER BOND FUND
C/O EQUISERVE TRUST COMPANY, N.A.
P.O. BOX 8694
EDISON, NJ 08818-8694
DETACH HERE IF YOU ARE RETURNING YOUR PROXY CARD BY MAIL
[X] Please mark
vote as in
this example
WESTERN ASSET PREMIER BOND FUND
1. Election of Class II Trustee.
(01) ANITA L. DEFRANTZ
FOR [ ] [ ] WITHHELD
2. Amendment to the Fund's Amended and Restated Agreement and Declaration
of Trust to Declassify the Board of Trustees.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Amendment to the Fund's Amended and Restated Agreement and Declaration of
Trust Relating to a Trustee's standard of care and right to indemnification in
connection with his or her service to the Fund.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
With discretionary power upon such other matters as may properly come before the
meeting or any adjournment thereof.
Mark box at right if an address change or comment has been noted on the reverse
side of this card. [ ]
THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE, THIS
PROXY WILL BE VOTED FOR EACH PROPOSAL LISTED ABOVE.
Please be sure to sign and date this Proxy.
Signature: Date:
---------------------------- -----------
Signature: Date:
---------------------------- -----------
2
WESTERN ASSET PREMIER BOND FUND
Dear Shareholder,
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, detached it and return your proxy vote in the
enclosed postage paid envelope. Your vote must be received prior to the Annual
Meeting of Shareholders, May 4, 2004.
Thank you in advance for your prompt consideration of this matter.
Sincerely,
Western Asset Premier Bond Fund
DETACH HERE
-------------------------------------------------------------------------------
WESTERN ASSET PREMIER BOND FUND
PREFERRED SHARES
ANNUAL MEETING OF SHAREHOLDERS - MAY 4, 2004
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
TRUSTEES OF WESTERN ASSET PREMIER BOND FUND
The undersigned, revoking all prior proxies, hereby appoints James W. Hirschmann
III, Lisa G. Mrozek and Ilene S. Harker, and each of them, attorneys and proxies
of the undersigned, each with full power of substitution, to attend the Annual
Meeting of the Shareholders of Western Asset Premier Bond Fund, a Massachusetts
business trust (the "Fund"), to be held in the Board Room, Fifth Floor, 385 E.
Colorado Blvd., Pasadena, California, on May 4, 2004, at 8:00 a.m., California
time, and at any adjournments thereof, and there at to vote as indicated all
preferred shares of beneficial interest 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 Proxy Statement of the Fund
dated March __, 2004, receipt of which is acknowledged by the undersigned.
PLEASE VOTE, DATE, SIGN ON REVERSE AND RETURN PROMPTLY
USING THE ENCLOSED ENVELOPE.
Please sign this Proxy exactly as your name(s) appear(s) on the reverse side.
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.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
3
WESTERN ASSET PREMIER BOND FUND
C/O EQUISERVE TRUST COMPANY, N.A.
P.O. BOX 8694
EDISON, NJ 08818-8694
DETACH HERE IF YOU ARE RETURNING YOUR PROXY CARD BY MAIL
[X] Please mark
vote as in
this example
WESTERN ASSET PREMIER BOND FUND
1. Election of Class II Trustees.
(01) ANITA L. DEFRANTZ
(02) WILLIAM G. MCGAGH
FOR [ ] [ ] WITHHELD
ALL FROM ALL
NOMINEES NOMINEES
[ ] For all nominees except as noted above
2. Amendment to the Fund's Amended and Restated Agreement and Declaration
of Trust to Declassify the Board of Trustees.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Amendment to the Fund's Amended and Restated Agreement and Declaration of
Trust Relating to a Trustee's standard of care and right to indemnification in
connection with his or her service to the Fund.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
With discretionary power upon such other matters as may properly come before the
meeting or any adjournment thereof.
Mark box at right if an address change or comment has been noted on the reverse
side of this card. [ ]
THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE, THIS
PROXY WILL BE VOTED FOR EACH PROPOSAL LISTED ABOVE.
Please be sure to sign and date this Proxy.
Signature: --------------------------------- Date: -----------
Signature: --------------------------------- Date: -----------
4