Western Asset High Income Fund asked for OK to merge fund to cut costs

By Toni Weeks

San Luis Obispo, Calif., April 23 -Stockholders of the Western Asset High Income Fund Inc. as of March 22 will vote at a stockholder meeting on May 31 on a proposal to merge the fund with the Western Asset High Income Opportunity Fund Inc., according to a 497 filing with the Securities and Exchange Commission.

The board of the Legg Mason Partners Income Trust said that merging the funds will allow additional opportunities for diversification, and stockholders may benefit from enhanced market liquidity and economies of scale, as some fixed expenses would be spread over a larger asset base.

In particular, total annual operating expenses are expected to decline to 0.88% from 1.15% if shareholders approve the merger. In addition, the merger would result in a more streamlined high-yield product offering, allowing for more focused marketing and shareholder servicing efforts.

Both closed-end, diversified management investment companies seek a high level of current income with capital appreciation as a secondary objective.

The High Income Fund invests at least 80% of its net assets, plus any borrowings for investment purposes, in high-yield debt securities issued by U.S. and foreign corporations and foreign governments. Up to 50% of the total assets may be invested in non-dollar-denominated securities, with up to 20% of total assets invested in illiquid securities.

The High Income Opportunity Fund, on the other hand, invests at least 80% of its net assets, plus any borrowings for investment purposes, in high-yield corporate debt securities and preferred stocks as well as up to 20% in common stock equivalents such as options, warrants and rights. This fund may invest up to 20% of its total assets in non-dollar-denominated securities and up to 15% of its assets in illiquid securities.

To compare the two, the High Income Opportunity Fund has greater flexibility to invest in equity securities but less flexibility to invest in foreign government securities, the filing said.

If approved, the merger is anticipated to occur by the end of the second quarter of 2013.

Baltimore-based Legg Mason Partners Fund Advisor, LLC acts as the investment manager to the funds.

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