As filed with the Securities and Exchange Commission on June 6, 2016

Securities Act File No. 333-209666

Investment Company Act File No. 811-21337

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-14

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

Western Asset Global High Income Fund Inc.

(Exact Name of Registrant as Specified in Charter)

620 Eighth Avenue

New York, New York 10018

(Address of Principal Executive Offices: Number, Street, City, State, Zip Code)

1-888-777-0102

(Area Code and Telephone Number)

Jane E. Trust

Legg Mason & Co., LLC

100 International Drive

Baltimore, MD 21202

(Name and Address of Agent for Services)

with copies to:

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission acting pursuant to said section 8(a), may determine.

WESTERN ASSET GLOBAL PARTNERS INCOME FUND INC.

WESTERN ASSET GLOBAL HIGH INCOME FUND INC.

620 Eighth Avenue

New York, New York 10018

            , 2016

Dear Stockholder:

A Joint Special Meeting of Stockholders (the “Meeting”) of Western Asset Global Partners Income Fund Inc. (“GDF”) and Western Asset Global High Income Fund Inc. (“EHI” and together with GDF, the “Funds”) will be held at 620 Eighth Avenue, 49th Floor, New York, New York, on Friday, July 22, 2016 at 10:00 a.m., Eastern Time, for the purposes of considering and voting on a proposal to approve the merger of GDF with and into EHI in accordance with the Maryland General Corporation Law (the “Merger”). The attached Proxy Statement/Prospectus asks for your approval of the proposed Merger. After careful consideration, the Board of each Fund recommends that you vote “FOR” the proposed Merger.

As a result of the Merger, each share of common stock of GDF would convert into an equivalent dollar amount (to the nearest $0.001) of full shares of common stock of EHI, based on the net asset value of each Fund on the date preceding the Merger. EHI will not issue fractional shares to GDF stockholders. In lieu of issuing fractional shares, EHI will pay cash to each former holder of GDF common stock in an amount equal to the value of the fractional shares of EHI common stock that the investor would otherwise have received in the Merger. The currently issued and outstanding common shares of EHI will remain issued and outstanding.

Both GDF and EHI are closed-end, diversified management investment companies listed on the New York Stock Exchange. GDF and EHI have identical primary investment objectives, different secondary investment objectives and similar policies and strategies. GDF seeks to maintain a high level of current income. Capital appreciation is a secondary objective. EHI’s primary investment objective is high current income and EHI’s secondary investment objective is total return. A more detailed comparison of the Funds’ investment objectives and policies appears in the attached Proxy Statement/Prospectus. The current investment objectives and policies of EHI will continue unchanged if the Merger occurs.

The Board believes that the Merger is in the best interests of both GDF stockholders and EHI stockholders. GDF and EHI have identical primary investment objectives and similar policies and strategies, which will allow GDF stockholders to continue to have exposure to emerging market and high yield securities. Moreover, the combined Fund will likely benefit from economies of scale, as one set of fixed expenses would be spread over a larger asset base, as well as from enhanced market liquidity and additional opportunities for diversification. Furthermore, the Merger will result in more streamlined high yield product offering, allowing for more focused marketing and stockholder servicing efforts.

Your vote is very important to us regardless of the number of shares you own. Whether or not you plan to attend the Meeting in person, please read the Proxy Statement/Prospectus and cast your vote promptly. To vote, simply date, sign and return the proxy card in the enclosed postage-paid envelope or follow the instructions on the proxy card for voting by touch-tone telephone or on the Internet.

If you have any questions about the proposal to be voted on, please call Georgeson LLC, the proxy solicitor, at 888-565-5190.

It is important that your vote be received no later than the time of the Meeting.

Sincerely,

Jane E. Trust

President and Chief Executive Officer

Western Asset Global Partners Income Fund Inc.

Western Asset Global High Income Fund Inc.

WESTERN ASSET GLOBAL PARTNERS INCOME FUND INC.

WESTERN ASSET GLOBAL HIGH INCOME FUND INC.

IMPORTANT NEWS FOR STOCKHOLDERS

The enclosed combined Proxy Statement/Prospectus describes a proposal to merge Western Asset Global Partners Income Fund Inc. (“GDF”) with and into Western Asset Global High Income Fund Inc. (“EHI,” and together with GDF, the “Funds”) in accordance with the Maryland General Corporation Law (the “Merger”).

While we encourage you to read the full text of the enclosed combined Proxy Statement/Prospectus, here is a brief overview of the proposed Merger. Please refer to the more complete information contained elsewhere in the combined Proxy Statement/Prospectus about the Merger.

COMMON QUESTIONS ABOUT THE PROPOSED MERGER

A.    As a stockholder of either GDF or EHI, you are being asked to vote in favor of a proposal to merge GDF with and into EHI in accordance with the Maryland General Corporation Law.

A.    If the Merger is approved, GDF will be merged with and into EHI in accordance with the Maryland General Corporation Law. GDF’s assets and liabilities will be combined with the assets and liabilities of EHI, and stockholders of GDF will become stockholders of EHI.

As a result of the Merger, each share of common stock of GDF would convert into an equivalent dollar amount (to the nearest $0.001) of full shares of common stock of EHI, based on the net asset value of each Fund on the date preceding the Merger. EHI will not issue fractional shares to GDF stockholders. In lieu of issuing fractional shares, EHI will pay cash to each former GDF stockholder in an amount equal to the value of the fractional shares of EHI common stock that the investor would otherwise have received in the merger. The currently issued and outstanding shares of EHI common stock will remain issued and outstanding. Stockholders of EHI will be stockholders in a larger fund.

A.    The Board believes that the Merger is in the best interests of both GDF stockholders and EHI stockholders. GDF and EHI have identical primary investment objectives and similar policies and strategies, which will allow GDF stockholders to continue to have exposure to emerging market and high yield securities. Moreover, the combined Fund will likely benefit from economies of scale, as one set of fixed expenses would be spread over a larger asset base, as well as from enhanced market liquidity and additional opportunities for diversification. Furthermore, the Merger will result in more streamlined high yield product offering, allowing for more focused marketing and stockholder servicing efforts.

At a meeting held on November 11 and 12, 2015, the Board of Directors of each Fund, including all of the Directors who are not “interested persons” of the Funds under the Investment Company Act of 1940, as amended (the “Independent Directors”), unanimously approved an Agreement and Plan of Merger with respect to both Funds.

A.    GDF and EHI have identical primary investment objectives, different secondary investment objectives and similar policies and strategies.

GDF seeks to maintain a high level of current income. Capital appreciation is a secondary objective. EHI’s primary investment objective is high current income and EHI’s secondary investment objective is total return.

Under normal market conditions, GDF will invest at least 33% of its total assets in high yield U.S. corporate debt securities. GDF also will be able to invest up to 33% of its total assets in a broad range of other U.S. and non-U.S. fixed income securities, both investment grade and high yield securities, including but not limited to corporate bonds, loans, mortgage- and asset-backed securities, preferred stock and sovereign debt, derivative instruments of the foregoing securities and dollar rolls. In addition, under normal market conditions, GDF will invest at least 33% of its total assets in securities of issuers that are, or are incorporated in or generate the majority of their revenue in, emerging market countries. GDF may invest up to 50% of its total assets in non-U.S. dollar denominated securities.

Under normal market conditions, EHI will invest (i) at least 10% of its total assets in below investment grade (high yield) fixed income (debt) securities issued by corporate issuers and (ii) at least 10% and up to 80% of its assets in emerging market fixed income securities or investment grade fixed income securities. The Fund has broad discretion to allocate its assets among the following segments of the global market for below investment and investment grade fixed income securities: corporate bonds, loans, preferred stock, mortgage and asset-backed securities and sovereign debt, and derivatives instruments of the foregoing securities.

The current investment objectives and policies of EHI will continue unchanged if the Merger occurs.

It is currently anticipated that minimal, if any, portfolio turnover will occur as a result of the Merger. Additionally, GDF utilizes Western Management Company Ltd. (“Western Japan”) for investment in Japan, while EHI does not utilize Western Japan as a subadviser. Because GDF does not have any investments in Japan, nor are any investments in Japan currently being contemplated, it is not anticipated that any changes to EHI’s portfolio will be made as a result of the non-utilization of Western Japan.

Please see “Comparison of Investment Objectives, Strategies, and Principal Risks of Investing in the Funds” in the Proxy Statement/Prospectus for a more complete comparison of the Funds’ investment objectives, policies and a summary of the principal risks of investing in the Funds.

A.    As further described below, assuming the impact of EHI’s voluntary investment management fee waiver of 0.05%, it is anticipated that GDF’s total expense ratio will decline by 0.07% on net assets, from 1.67% to 1.60% as a result of the Merger, and EHI’s pro forma total expense ratio will be reduced by 0.07% on net assets from 1.67% to 1.60% as a result of the Merger. Legg Mason Partners Fund Advisor, LLC (“LMPFA”) provides administrative and certain oversight services to the Funds. GDF pays an investment management fee, calculated daily and paid monthly, at an annual rate of 1.05% of GDF’s average weekly net assets. Similarly, EHI currently pays LMPFA, which is also EHI’s investment manager, an investment management fee, calculated daily and paid monthly, at an annual rate of 0.85% of average daily net assets plus the proceeds of any outstanding borrowings (“managed assets”), along with a voluntary investment management fee waiver of 0.05%, which reduced the annual rate of that fee to 0.80% of the average daily managed assets. LMPFA implemented a voluntary investment management fee waiver on EHI of 0.05% beginning on March 1, 2010 through December 31, 2016. LMPFA has a financial interest in the Merger because its respective fees under agreements with EHI, which are based on managed assets that take into account the use of leverage, are higher than under the respective agreements with GDF, which are based on net assets and do not account for the use leverage, and increase as the assets of EHI increase, including the use of leverage. In addition, it is anticipated that former stockholders of GDF will experience a management fee increase of 0.11%, or approximately $161,000, following the Merger as a result of EHI’s management fee (not including the management fee waiver) being calculated on managed assets, rather than net assets. GDF also pays 0.62% in other expenses based on its average daily net assets, whereas EHI only pays 0.54% in other expenses based on its average daily net assets. It is anticipated that GDF’s total expense ratio will remain the same and EHI’s will decline by 0.03% as a result of the Merger. However, assuming the impact of EHI’s voluntary investment management fee waiver of 0.05%, it is anticipated that GDF will experience a management fee increase of 0.04%, or approximately $58,000, and GDF’s total expense ratio will decline by 0.07% on net assets, from 1.67% to 1.60% as a result of the Merger.

A.    The Merger is intended to qualify as a tax-free reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended. Assuming the Merger qualifies for such treatment, you generally will not recognize a gain or loss for federal income tax purposes as a result of the Merger. GDF stockholders may, however, recognize gain or loss with respect to any cash those stockholders receive pursuant to the Merger in lieu of fractional shares. As a condition to the closing of the Merger, GDF and EHI will each receive an opinion of counsel to the effect that the Merger will qualify for such treatment. Opinions of counsel are not binding on the Internal Revenue Service or the courts. You should talk to your

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tax advisor about any state, local and other tax consequences of the Merger. See “Proposal 1—Information About the Proposed Merger—Federal Income Tax Consequences.”

A.    The costs of Merger, including the costs of preparing, printing, assembling and mailing material in connection with this solicitation of proxies for GDF and EHI are estimated to be approximately $216,700 and $250,700, respectively. LMPFA will bear 50% of each Fund’s costs of the Merger, with the remaining costs shared equally by the Funds.

A.    After careful consideration, GDF’s Board of Directors, including all of the Independent Directors, and EHI’s Board of Directors, including all of the Independent Directors, unanimously recommend that you vote FOR the Merger.

A.    If the Merger is not approved, GDF and EHI will continue as separate investment companies, and each Board will consider such alternatives as it determines to be in the best interests of such Fund’s stockholders, including reproposing the Merger.

A.    If each Fund’s stockholders approve the Merger, the Merger is expected to occur on or about August 12, 2016.

A.    Your vote is very important and can make a difference in the governance of each Fund, no matter how many shares you own. Your vote can help ensure that the proposal recommended by the Board of Directors of each Fund can be implemented. We encourage all stockholders to participate in the governance of each Fund.

A.    If you need more information, or have any questions about voting, please call Georgeson Inc., the proxy solicitor, at 888-565-5190.

A.    You can provide voting instructions by telephone by calling the toll-free number on the enclosed proxy card or electronically by going to the Internet address provided on the proxy card and following the instructions, using your proxy card as a guide. Alternatively, you can vote your shares by signing and dating the enclosed proxy card and mailing it in the enclosed postage-paid envelope.

A stockholder may revoke a proxy at any time on or before the Meeting by (1) submitting to the applicable Fund a subsequently dated proxy, (2) delivering to the applicable Fund a written notice of revocation (addressed to the Secretary at the principal executive office of the Funds at the address shown at the beginning of this Proxy Statement/Prospectus) or (3) otherwise giving notice of revocation at the Meeting, at all times prior to the exercise of the authority granted in the proxy card. Merely attending the Meeting, however, will not revoke any previously executed proxy. Unless revoked, all valid and executed proxies will be voted in accordance with the specifications thereon or, in the absence of such specifications, for approval of the proposed Merger.

You may also attend the Meeting and vote in person. However, even if you intend to attend the Meeting, we encourage you to provide voting instructions by one of the methods described above.

It is important that you vote promptly.

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WESTERN ASSET GLOBAL PARTNERS INCOME FUND INC.

WESTERN ASSET GLOBAL HIGH INCOME FUND INC. 620 Eighth Avenue New York, New York 10018

NOTICE OF A JOINT SPECIAL MEETING OF STOCKHOLDERS

                , 2016

To the Stockholders:

A Joint Special Meeting of Stockholders (the “Meeting”) of Western Asset Global Partners Income Fund Inc. (“GDF”) and Western Asset Global High Income Fund Inc. (“EHI,” and together with GDF, the “Funds”) will be held at 620 Eighth Avenue, 49th Floor, New York, New York, on Friday, July 22, 2016 at 10:00 a.m., Eastern Time, to consider and vote on a proposal to approve the merger of GDF with and into EHI in accordance with the Maryland General Corporation Law (the “Merger”).

The Board of each Fund recommends that you vote “FOR” the Merger upon which you are being asked to vote.

Stockholders of record at the close of business on May 3, 2016 are entitled to vote at the Meeting and at any adjournments or postponements thereof.

By order of the Board of Directors,

Robert I. Frenkel

Secretary

Western Asset Global Partners Income Fund Inc.

Western Asset Global High Income Fund Inc.

            , 2016

INSTRUCTIONS FOR SIGNING PROXY CARDS

The following general rules for signing proxy cards may be of assistance to you and avoid the time and expense to GDF and EHI involved in validating your vote if you fail to sign your proxy card properly.

1. Individual Accounts: Sign your name exactly as it appears in the registration on the proxy card.

2. Joint Accounts: Either party may sign, but the name of the party signing should conform exactly to a name shown in the registration.

3. All Other Accounts: The capacity of the individual signing the proxy card should be indicated unless it is reflected in the form of registration. For example:

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The information contained in this Proxy Statement/Prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This Proxy Statement/Prospectus is not an offer to sell these securities, and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED JUNE 6, 2016

PROXY STATEMENT/PROSPECTUS

            , 2016

PROXY STATEMENT FOR:

WESTERN ASSET GLOBAL PARTNERS INCOME FUND INC.

WESTERN ASSET GLOBAL HIGH INCOME FUND INC.

620 Eighth Avenue

New York, New York 10018

888-777-0102

PROSPECTUS FOR:

WESTERN ASSET GLOBAL HIGH INCOME FUND INC.

620 Eighth Avenue

New York, New York 10018

888-777-0102

This combined Proxy Statement and Prospectus (the “Proxy Statement/Prospectus”) is being furnished in connection with the solicitation of proxies by the Board of Directors (the “Board”) of Western Asset Global Partners Income Fund Inc. (“GDF”) and Western Asset Global High Income Fund Inc. (“EHI,” and together with GDF, the “Funds”) for a Joint Special Meeting of Stockholders (the “Meeting”) for each Fund. The Meeting will be held Friday, July 22, 2016 at 620 Eighth Avenue, 49th Floor, New York, New York at 10:00 a.m., Eastern Time. At the Meeting, stockholders of GDF and EHI will be asked to consider and act upon a proposal to approve the merger of GDF with and into EHI in accordance with the Maryland General Corporation Law (the “Merger”).

If the Merger is approved, each share of common stock, par value $0.001 per share, of GDF (the “GDF Common Shares”) would convert into an equivalent dollar amount (to the nearest $0.001) of full shares of common stock, par value $0.001 per share, of EHI (the “EHI Common Shares”), based on the net asset value of each Fund on the date preceding the Merger. EHI will not issue fractional EHI Common Shares to holders of GDF Common Shares. In lieu of issuing fractional shares, EHI will pay cash to each former holder of GDF Common Shares in an amount equal to the value of the fractional EHI Common Shares that the investor would otherwise have received in the Merger. Although the EHI Common Shares received in the Merger will have the same total net asset value as the GDF Common Shares held immediately before the Merger (disregarding fractional shares), their stock price on the New York Stock Exchange (“NYSE”) may be greater or less than that of the GDF Common Shares, based on current market prices persisting at the time of the Merger. All EHI Common Shares currently issued and outstanding will remain issued and outstanding following the Merger.

The Board believes that the Merger is in the best interests of both GDF stockholders and EHI stockholders. GDF and EHI have identical primary investment objectives and similar policies and strategies, which will allow GDF stockholders to continue to have exposure to emerging market and high yield securities. Moreover, the combined Fund will likely benefit from economies of scale, as one set of fixed expenses would be spread over a larger asset base, as well as from enhanced market liquidity and additional opportunities for diversification. Furthermore, the Merger will result in more streamlined high yield product offering, allowing for more focused marketing and stockholder servicing efforts.

At a meeting held on November 11 and 12, 2015, the Board of Directors of each Fund, including all of the Directors who are not “interested persons” of the Funds under the Investment Company Act of 1940, as amended (the “1940 Act”) (the “Independent Directors”), unanimously approved an Agreement and Plan of Merger with respect to both Funds.

GDF was incorporated in Maryland on September 3, 1993; EHI was incorporated in Maryland on April 16, 2003. Both GDF and EHI are closed-end, non-diversified management investment companies listed on the NYSE.

GDF seeks to maintain a high level of current income. Capital appreciation is a secondary objective. EHI’s primary investment objective is high current income and EHI’s secondary investment objective is total return. The current investment policies of EHI, which differ from those of GDF, will continue unchanged if the Merger occurs. Please see “Proposal 1—Comparison of Investment Objectives, Strategies, and Principal Risks of Investing in the Funds” in the Proxy Statement/Prospectus for a more complete comparison of the Funds’ investment objectives and policies.

The Merger will be effected pursuant to an Agreement and Plan of Merger, a form of which is attached to this Proxy Statement/Prospectus as Appendix A. The material terms and conditions of the Agreement and Plan of Merger are summarized in this Proxy Statement/Prospectus. See “Proposal 1—Information About the Proposed Merger-The Agreement and Plan of Merger.”

This Proxy Statement/Prospectus serves as a prospectus for EHI Common Shares under the Securities Act of 1933, as amended (the “Securities Act”), in connection with the issuance of EHI Common Shares in the Merger.

Assuming the holders of GDF Common Shares approve the Merger and all other conditions to the consummation of the Merger are satisfied or waived, the Funds will jointly file articles of merger (the “Articles of Merger”) with the State Department of Assessments and Taxation of Maryland (the “SDAT”). The Merger will become effective when the SDAT accepts for record the Articles of Merger or at such later time, which may not exceed 30 days after the Articles of Merger are accepted for record, as specified in the Articles of Merger. The date when the Articles of Merger are accepted for record, or the later date, is referred to in this Proxy Statement/Prospectus as the “Closing Date.” GDF, as soon as practicable after the Closing Date, will withdraw its registration under the 1940 Act.

The Merger is being structured as a tax-free reorganization for federal income tax purposes. See “Proposal 1— Information About the Proposed Merger—Federal Income Tax Consequences.” Stockholders should consult their tax advisors to determine the actual impact of the Merger on them in light of their individual tax circumstances.

You should retain this Proxy Statement/Prospectus for future reference as it sets forth concisely information about GDF and EHI that you should know before voting on the proposed Merger described below.

A Statement of Additional Information (“SAI”) dated             , 2016, which contains additional information about the Merger and the Funds, has been filed with the Securities and Exchange Commission (“SEC”). The SAI, as well as GDF’s Semi-Annual Report to Stockholders for the six-month period ended February 29, 2016, filed with the SEC on April 22, 2016 (accession no. 0001193125-16-551892), GDF’s Annual Report to Stockholders for the Fiscal Year Ended August 31, 2015, filed with the SEC on October 22, 2015 (accession no. 0001193125-15-350735), EHI’s Annual Report to Stockholders for the Fiscal Year Ended May 31, 2015, filed with the SEC on July 27, 2015 (accession no. 0001193125-15-263659), and EHI’s Semi-Annual Report to Stockholders for the six-month period ended November 30, 2015, filed with the SEC on January 25, 2016 (accession no. 0001193125-16-436681), which highlight certain important information such as investment performance and expense and financial information, are incorporated by reference into this Proxy Statement/Prospectus. In addition, stockholder reports, proxy materials and other information concerning EHI (File No. 811-07994) and GDF (File No. 811-21337) can be inspected at the NYSE. You may receive free of charge a copy of the SAI, or the annual report and semi-annual report for either Fund, by contacting GDF and EHI at 888-777-0102, by writing either Fund at the address listed above or by visiting our website at www.lmcef.com .

In addition, you can copy and review this Proxy Statement/Prospectus and the complete filing on Form N-14 containing the Proxy Statement/Prospectus (File No. 333-209666) and any of the above-referenced documents at the SEC’s Public Reference Room in Washington, DC. You may obtain information about the operation of the Public Reference Room by calling the SEC at 202-551-8090. Reports and other information about each Fund are available on the EDGAR Database on the SEC’s Internet site at www.sec.gov. You may also obtain copies of this information, after paying a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov , or by writing the SEC’s Public Reference Room, 100 F Street, N.E., Washington, DC 20549.

GDF Common Shares are listed on the NYSE under the symbol “GDF,” and EHI Common Shares are listed on the NYSE under the symbol “EHI.” After the Closing Date, EHI Common Shares will continue to be listed on the NYSE under the symbol “EHI.”

The information contained herein concerning GDF and EHI has been provided by, and is included herein in reliance upon, GDF and EHI, respectively.

The Securities and Exchange Commission has not approved or disapproved these securities nor passed upon the accuracy or adequacy of this Proxy Statement/Prospectus. Any representation to the contrary is a criminal offense.

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TABLE OF CONTENTS

PROPOSAL 1—TO APPROVE THE MERGER OF GDF WITH AND INTO EHI IN ACCORDANCE WITH THE MARYLAND GENERAL CORPORATION LAW

Summ ary

This summary is qualified in its entirety by reference to the additional information contained elsewhere in this Proxy Statement/Prospectus and the Agreement and Plan of Merger, a form of which is attached to this Proxy Statement/Prospectus as Appendix A.

Proposed Me rger

The Board believes that the Merger is in the best interests of both GDF stockholders and EHI stockholders. GDF and EHI have identical primary investment objectives and similar policies and strategies, which will allow GDF stockholders to continue to have exposure to emerging market and high yield securities. Moreover, the combined Fund will likely benefit from economies of scale, as one set of fixed expenses would be spread over a larger asset base, as well as from enhanced market liquidity and additional opportunities for diversification. Furthermore, the Merger will result in more streamlined high yield product offering, allowing for more focused marketing and stockholder servicing efforts.

At a meeting held on November 11 and 12, 2015, the Boards of GDF and EHI, including all of the Independent Directors, unanimously approved the Agreement and Plan of Merger with respect to each Fund. As a result of the Merger:

If the Merger is not approved, each Fund will continue as a separate investment company, and the Boards of GDF and EHI will consider such alternatives as they determine to be in the best interests of their respective stockholders, including reproposing the Merger.

For the reasons set forth below in “Information About the Proposed Merger-Reasons for the Merger and Board Considerations,” the Boards of GDF and EHI, including all of the Independent Directors, have concluded that the Merger would be in the best interests of each Fund, and that the interests of the holders of GDF Common Shares and EHI Common Shares would not be diluted as a result of the Merger. The Board of each Fund, therefore, is hereby submitting the Merger to the holders of GDF Common Shares and EHI Common shares and recommends that stockholders of GDF and EHI vote “FOR” the Merger.

Because the Merger has been approved by at least 75% of GDF’s “Continuing Directors” (as that term is defined in GDF’s charter), approval of the Merger requires the affirmative vote of the holders of a majority of the outstanding GDF Common Shares. Similarly, because the Merger has been approved by at least 75% of EHI’s “Continuing Directors” (as that term is defined in EHI’s charter), approval of the Merger requires the affirmative vote of the holders of a majority of the outstanding EHI Common Shares. See “Voting Information” below. If stockholders of each Fund approve the Merger, the Closing Date of the Merger is expected to be on or about August 12, 2016.

Prior to completion of the Merger, GDF and EHI will each have received an opinion of Simpson Thacher & Bartlett LLP to the effect that the Merger will qualify as a tax-free reorganization for federal income tax purposes. Accordingly, for federal income tax purposes, (i) no gain or loss will generally be recognized by GDF (except for consequences regularly attributable to a termination of GDF’s taxable year) or (subject to the following sentence) the holders of GDF Common Shares as a result of the Merger, (ii) the aggregate tax basis of the EHI Common Shares (including fractional EHI Common Shares purchased by EHI) received by the holders of GDF Common Shares will be the same as the aggregate tax basis of the holders’ GDF Common Shares immediately prior to the completion of the Merger and (iii) a holder’s holding period for EHI Common Shares (including that of fractional EHI Common Shares purchased by EHI) will generally be determined by including the period for which such stockholder held GDF Common Shares converted pursuant to the Merger, provided that such shares were held by such stockholder as capital assets. Holders of GDF Common Shares may, however, recognize gain

or loss with respect to cash such holders receive pursuant to the Merger in lieu of fractional shares. For more information about the federal income tax consequences of the Merger, see “Information about the Proposed Merger—Federal Income Tax Consequences” below.

Comparison of Investme nt Objectives, Principal Investment Strategies and Principal Risks

GDF and EHI have identical primary investment objectives, different secondary investment objectives and similar policies and strategies.

GDF seeks to maintain a high level of current income. Capital appreciation is a secondary objective. EHI’s primary investment objective is high current income and EHI’s secondary investment objective is total return.

Under normal market conditions, GDF will invest at least 33% of its total assets in high yield U.S. corporate debt securities. GDF also will be able to invest up to 33% of its total assets in a broad range of other U.S. and non-U.S. fixed income securities, both investment grade and high yield securities, including but not limited to corporate bonds, loans, mortgage- and asset-backed securities, preferred stock and sovereign debt, derivative instruments of the foregoing securities and dollar rolls. In addition, under normal market conditions, GDF will invest at least 33% of its total assets in securities of issuers that are, or are incorporated in or generate the majority of their revenue in, emerging market countries. GDF may invest up to 50% of its total assets in non-U.S. dollar denominated securities.

Under normal market conditions, EHI will invest (i) at least 10% of its total assets in below investment grade (high yield) fixed income (debt) securities issued by corporate issuers and (ii) at least 10% and up to 80% of its assets in emerging market fixed income securities or investment grade fixed income securities.

The current investment objectives and policies of EHI will continue unchanged if the Merger occurs.

It is currently anticipated that minimal, if any, portfolio turnover will occur as a result of the Merger. Additionally, GDF utilizes Western Management Company Ltd. (“Western Japan”) for investment in Japan, while EHI does not utilize Western Japan as a subadviser. Because GDF does not have any investments in Japan, nor are any investments in Japan currently being contemplated, it is not anticipated that any changes to EHI’s portfolio will be made as a result of the non-utilization of Western Japan.

Please see “Comparison of Investment Objectives, Strategies, and Principal Risks of Investing in the Funds” in the Proxy Statement/Prospectus for a more complete comparison of the Funds’ investment objectives, policies and a summary of the principal risks of investing in the Funds.

Neither Fund is intended to be a complete investment program, and there is no assurance that either Fund will achieve its objectives.

Effect on Expen ses

As further described below, assuming the impact of EHI’s voluntary investment management fee waiver of 0.05%, it is anticipated that GDF’s total expense ratio will decline by 0.07% on net assets, from 1.67% to 1.60% as a result of the Merger, and EHI’s pro forma total expense ratio will be reduced by 0.07% on net assets from 1.67% to 1.60% as a result of the Merger. Legg Mason Partners Fund Advisor, LLC (“LMPFA”) provides administrative and certain oversight services to the Funds. GDF pays an investment management fee, calculated daily and paid monthly, at an annual rate of 1.05% of GDF’s average weekly net assets. Similarly, EHI currently pays LMPFA, which is also EHI’s investment manager, an investment management fee, calculated daily and paid monthly, at an annual rate of 0.85% average daily net assets plus the proceeds of any outstanding borrowings (“managed assets”), along with a voluntary investment management fee waiver of 0.05%, which reduced the annual rate of that fee to 0.80% of the average daily managed assets. LMPFA implemented a voluntary investment management fee waiver on EHI of 0.05% beginning on March 1, 2010 through December 31, 2016. LMPFA, Western Asset and Non-U.S. Subadvisers (as defined below), have a financial interest in the Merger because their respective fees under agreements with EHI, which are based on managed assets that take into account the use of leverage, are higher than under the respective agreements with GDF, which are based on net assets and do not account for the use leverage, and increase as the assets of EHI increase, including the use of leverage. In addition, it is anticipated that former stockholders of GDF will experience a management fee increase of 0.11%, or approximately $161,000, following the Merger as a result of EHI’s management fee (not including the management fee waiver) being calculated on managed assets, rather than net assets. GDF also pays 0.62% in other expenses based on its average daily net assets, whereas EHI only pays 0.54% in other expenses based on its average daily net assets. It is anticipated that GDF’s total expense ratio will remain the same and EHI’s will decline by 0.03% as a result of the Merger. However, assuming the impact of EHI’s voluntary investment management fee waiver of 0.05%, it is anticipated that GDF will experience a management fee increase of 0.04%, or approximately $58,000, and GDF’s total expense ratio will decline by 0.07% on net assets, from 1.67% to 1.60% as a result of the Merger.

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EHI’s assets will increase as a result of the Merger (although this increase in assets is expected to be offset by the concomitant loss of GDF’s assets and the related fees).

Fee Table and Expen se Example

The table below (1) compares the fees and expenses of GDF and EHI as of April 30, 2016 and (2) shows the estimated fees and expenses of the combined Fund, on a pro forma basis, as of April 30, 2016. The estimates are based on the contracts and agreements in effect for GDF and EHI as of April 30, 2016 and reflect the operating expense accrual rates on such date. Accordingly, the actual fees and expenses of each Fund and the combined Fund as of the Closing Date of the Merger may differ from those reflected in the tables below due to changes in net assets from those at April 30, 2016 for GDF and EHI. No amount of any prior fee waiver or expense reimbursement to EHI or GDF may be recovered by any person.

Changes in net assets may result from market appreciation or depreciation and other factors occurring between April 30, 2016 and the Closing Date of the Merger. As a general matter, changes (positive or negative) in a Fund’s expense ratio resulting from fluctuations in the Fund’s net assets will be borne by the stockholders of that Fund and the combined Fund. For information concerning the net assets of each Fund as of November 30, 2015, please see “Capitalization.”

The estimated expenses of GDF and EHI and pro forma expenses following the proposed Merger are set forth below. The percentages in the table below are percentages of the Funds’ net assets attributable to Common Shares.

Example

The following example helps you compare the costs of investing in each Funds’ Common Shares with the costs of investing in other funds. The example assumes that you invest $1,000 in each Fund’s Common Shares for the periods shown, that your investment has a 5% return each year, that you reinvest all distributions and dividends and that the Funds’ operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions, your costs would be:

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COMPARISON OF INVESTMENT OBJECTIVES, STRATEGIES AND PRINCIPAL RISKS OF INVESTING IN THE FUNDS

The following chart lists the investment objectives, principal investment policies and fundamental investment restrictions of EHI and GDF and describes the principal differences between the Funds’ respective policies. The chart provides EHI and GDF stockholders with a means of comparing the investment objectives, policies and strategies of EHI and GDF.

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Fundamental Investment Restrictions

The following restrictions, along with the Funds’ investment objectives, are each Fund’s only fundamental policies- that is, policies that cannot be changed without the approval of the holders of a “1940 Act Majority” of the Fund’s outstanding voting securities. As used in this Proxy Statement/Prospectus, a “1940 Act Majority” means the lesser of (i) 67% or more of the shares present at a meeting if the holders of more than 50% of the outstanding shares are present in person or represented by proxy or (ii) more than 50% of the outstanding shares.

With respect to each Fund, the other policies and investment restrictions referred to in this Proxy Statement/Prospectus are not fundamental policies of the Fund and may be changed by the Fund’s Board without stockholder approval. If a percentage restriction set forth below is adhered to at the time a transaction is effected, later changes in percentage resulting from any cause other than actions by the Fund will not be considered a violation.

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Risk Factors

There is no assurance that EHI or GDF will meet its investment objectives. You may lose money on your investment in either Fund. The value of each Fund’s shares may go up or down, sometimes rapidly and unpredictably. Market conditions, financial conditions of issuers represented in each Fund’s portfolio, investment strategies, portfolio management, and other factors affect the volatility of each Fund’s shares. An investment in EHI is not insured or guaranteed by the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other government agency.

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The following section includes a summary of the principal risks of investing in EHI. Except as described below, your investment in GDF is subject to the same risks.

Investment and Market Risk. An investment in EHI is subject to investment risk, including the possible loss of the entire amount that you invest. Your investment in EHI Common Shares represents an indirect investment in the fixed income securities and other investments owned by EHI, most of which could be purchased directly. The value of EHI’s portfolio securities may move up or down, sometimes rapidly and unpredictably. If the current global economic downturn continues or deteriorates further, the ability of issuers to service their obligations could be materially and adversely affected. At any point in time, your EHI Common Shares may be worth less than your original investment, even after taking into account the reinvestment of Fund dividends and distributions.

Fixed Income Securities Risk. In addition to the risks described elsewhere in this section with respect to valuations and liquidity, fixed income securities, including high-yield securities, are also subject to certain risks, including:

Below Investment Grade (High-Yield or Junk Bond) Securities Risk. EHI may invest in high-yield debt securities. Debt securities rated below investment grade are commonly referred to as “high-yield” securities or “junk bonds” and are regarded as having predominantly speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal in

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accordance with the terms of the obligations and involve major risk exposure to adverse conditions. Debt securities rated C or lower by Moody’s, CCC or lower by S&P or CC or lower by Fitch or comparably rated by another nationally recognized statistical rating organization (“NRSRO”) or, if unrated, determined by Western Asset to be of comparable quality are considered to have extremely poor prospects of ever attaining any real investment standing, to have a current identifiable vulnerability to default, to be unlikely to have the capacity to pay interest and repay principal when due in the event of adverse business, financial or economic conditions and/or to be in default or not current in the payment of interest or principal. Ratings may not accurately reflect the actual credit risk associated with a corporate security.

Debt securities rated below investment grade generally offer a higher current yield than that available from higher grade issues, but typically involve greater risk. These securities are especially sensitive to adverse changes in general economic conditions, to changes in the financial condition of their issuers and to price fluctuation in response to changes in interest rates. During periods of economic downturn or rising interest rates, issuers of below investment grade instruments may experience financial stress that could adversely affect their ability to make payments of principal and interest and increase the possibility of default. The secondary market for high-yield securities may not be as liquid as the secondary market for more highly rated securities, a factor which may have an adverse effect on EHI’s ability to dispose of a particular security. There are fewer dealers in the market for high-yield securities than for investment grade obligations. The prices quoted by different dealers may vary significantly, and the spread between the bid and asked price is generally much larger for high-yield securities than for higher quality instruments. Under continuing adverse market or economic conditions, the secondary market for high-yield securities could contract further, independent of any specific adverse changes in the condition of a particular issuer, and these securities may become illiquid. In addition, adverse publicity and investor perceptions, whether or not based on fundamental analysis, may also decrease the values and liquidity of below investment grade securities, especially in a market characterized by a low volume of trading.

Default, or the market’s perception that an issuer is likely to default, could reduce the value and liquidity of securities held by EHI, thereby reducing the value of your investment in EHI’s Common Shares. In addition, default may cause EHI to incur expenses in seeking recovery of principal or interest on its portfolio holdings. In any reorganization or liquidation proceeding relating to a portfolio company, EHI may lose its entire investment or may be required to accept cash or securities with a value less than its original investment. Among the risks inherent in investments in a troubled entity is the fact that it frequently may be difficult to obtain information as to the true financial condition of such issuer. Western Asset’s judgment about the credit quality of an issuer and the relative value of its securities may prove to be wrong. Investments in below investment grade securities may present special tax issues for EHI to the extent that the issuers of these securities default on their obligations pertaining thereto, and the U.S. federal income tax consequences to EHI as a holder of such distressed securities may not be clear.

Foreign Securities and Emerging Markets Risk. A fund that invests in foreign (non-U.S.) securities may experience more rapid and extreme changes in value than a fund that invests exclusively in securities of U.S. companies. The securities markets of many foreign countries are relatively small, with a limited number of companies representing a small number of industries. Investments in foreign securities (including those denominated in U.S. dollars) are subject to economic and political developments in the countries and regions where the issuers operate or are domiciled, or where the securities are traded, such as changes in economic or monetary policies. Values may also be affected by restrictions on receiving the investment proceeds from a foreign country. Less information may be publicly available about foreign companies than about U.S. companies. Foreign companies are generally not subject to the same accounting, auditing and financial reporting standards as are U.S. companies. In addition, EHI’s investments in foreign securities may be subject to the risk of nationalization or expropriation of assets, imposition of currency exchange controls or restrictions on the repatriation of foreign currency, confiscatory taxation, political or financial instability and adverse diplomatic developments. In addition, there may be difficulty in obtaining or enforcing a court judgment abroad. Dividends or interest on, or proceeds from the sale of, foreign securities may be subject to non-U.S. withholding taxes, and special U.S. tax considerations may apply.

The risks of foreign investment are greater for investments in emerging markets. EHI considers a country to be an emerging market country if, at the time of investment, it is (i) represented in the J.P. Morgan Emerging Market Bond Index Global or the J.P. Morgan Corporate Emerging Market Bond Index Broad or (ii) categorized by the World Bank in its annual categorization as middle- or low-income. Emerging market countries typically have economic and political systems that are less fully developed, and that can be expected to be less stable, than those of more advanced countries. Low trading volumes may result in a lack of liquidity and in price volatility. Emerging market countries may have policies that restrict investment

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by foreigners, that require governmental approval prior to investments by foreign persons, or that prevent foreign investors from withdrawing their money at will. An investment in emerging market securities should be considered speculative.

Non-U.S. Government, or Sovereign, Debt Securities Risk. EHI invests in non-U.S. government, or sovereign, debt securities. The ability of a government issuer, especially in an emerging market country, to make timely and complete payments on its debt obligations will be strongly influenced by the government issuer’s balance of payments, including export performance, its access to international credits and investments, fluctuations of interest rates and the extent of its foreign reserves. A country whose exports are concentrated in a few commodities or whose economy depends on certain strategic imports could be vulnerable to fluctuations in international prices of these commodities or imports. To the extent that a country receives payment for its exports in currencies other than U.S. dollars, its ability to make debt payments denominated in U.S. dollars could be adversely affected. If a government issuer cannot generate sufficient earnings from foreign trade to service its external debt, it may need to depend on continuing loans and aid from foreign governments, commercial banks, and multinational organizations. There are no bankruptcy proceedings similar to those in the United States by which defaulted non-U.S. government debt may be collected. Additional factors that may influence a government issuer’s ability or willingness to service debt include, but are not limited to, a country’s cash flow situation, the availability of sufficient foreign exchange on the date a payment is due, the relative size of its debt service burden to the economy as a whole, and the issuer’s policy towards the International Monetary Fund, the International Bank for Reconstruction and Development and other international agencies to which a government debtor may be subject.

Since 2010, the risks of investing in foreign sovereign debt have increased dramatically as a result of the ongoing European debt crisis which began in Greece and has begun to spread throughout various other European countries. These debt crises and the ongoing efforts of governments around the world to address these debt crises have also resulted in increased volatility and uncertainty in the United States and the global economy and securities markets, and it is impossible to predict the effects of these or similar events in the future on the United States and the global economy and securities markets or on EHI’s investments, though it is possible that these or similar events could have a significant adverse impact on the value and risk profile of EHI. Moreover, as the European debt crisis has progressed, the possibility of one or more Eurozone countries exiting the European monetary union, or even the collapse of the Euro as a common currency, has arisen. The effects of the collapse of the Euro, or of the exit of one or more countries from the European monetary union, on the United States and the global economy and securities markets are impossible to predict and any such events could have a significant adverse impact on the value and risk profile of EHI. See “—Risk Factors—Currency Risk.”

Currency Risk. If EHI invests directly in foreign (non-U.S.) currencies or in securities that trade in, and receive revenues in, foreign (non-U.S.) currencies, or in derivatives that provide exposure to foreign (non-U.S.) currencies, it will be subject to the risk that those currencies will decline in value relative to the U.S. dollar, or, in the case of hedging positions intended to protect EHI from decline in the value of foreign (non-U.S.) currencies, that the U.S. dollar will decline in value relative to the currency being hedged. Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates, intervention (or the failure to intervene) by U.S. or foreign governments, central banks or supranational entities such as the International Monetary Fund, or by the imposition of currency controls or other political developments in the United States or abroad. The currencies of emerging market countries may experience significant declines against the U.S. dollar, and devaluation may occur subsequent to investments in these currencies by EHI. As a result, EHI’s investments in foreign currency denominated securities may reduce the returns of EHI. EHI will compute, and expects to distribute, its income in U.S. dollars, and the computation of income is made on the date that the income is earned by EHI at the foreign exchange rate in effect on that date. If the value of the foreign currencies in which EHI receives its income falls relative to the U.S. dollar between the earning of the income and the time at which EHI converts the foreign currencies to U.S. dollars, EHI may be required to liquidate securities in order to make distributions if EHI has insufficient cash in U.S. dollars to meet distribution requirements. See “Dividends and Distributions—Distributions” and “EHI Dividend Reinvestment Plan.” The liquidation of investments, if required, may have an adverse impact on EHI’s performance.

EHI may, from time to time, seek to protect the value of some portion or all of its portfolio holdings against currency risks by engaging in currency hedging transactions. In addition, there may be instances in which EHI’s portfolio contains synthetic exposure to a particular currency even though EHI does not own any bonds denominated in such a currency. Such transactions may include entering into forward currency exchange contracts, currency futures contracts and options on such futures contracts, the use of other derivatives, as well as purchasing put or call options on currencies, in U.S. or foreign

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markets. Currency hedging involves special risks, including possible default by the other party to the transaction, illiquidity and, to the extent Western Asset’s view as to certain market movements is incorrect, the risk that the use of hedging could result in losses greater than if they had not been used. In addition, in certain countries in which EHI may invest, currency hedging opportunities may not be available. See “—Risk Factors—Derivatives Risk.”

In addition, realizations and drawdowns in EHI’s currency exposure may add to volatility to EHI’s distributable income. If EHI’s currency exposure results in a negative return to EHI, it may result in EHI making distributions, some or all of which consist of a return of capital.

Liquidity Risk. EHI may invest in illiquid securities. Illiquid securities are securities that cannot be disposed of within seven days in the ordinary course of business at approximately the value at which EHI has valued the securities. Liquidity risk exists when particular investments are difficult to sell. Securities may become illiquid after purchase by EHI, particularly during periods of market turmoil. When EHI holds illiquid investments, the portfolio may be harder to value, especially in changing markets, and if EHI is forced to sell these investments in order to segregate assets or for other cash needs, EHI may suffer a loss.

Common Stock Risk. EHI may invest up to 20% of its assets in all types of equity securities. An adverse event, such as an unfavorable earnings report, may depress the value of a particular common stock held by the Fund. In addition, the prices of common stocks are sensitive to general movements in the stock market, and a drop in the stock market may depress the prices of common stocks to which the Fund has exposure. Common stock prices fluctuate for several reasons including changes in investors’ perceptions of the financial condition of an issuer or the general condition of the relevant stock market, or when political or economic events affecting an issuer occur. In addition, common stock prices may be particularly sensitive to rising interest rates, as the cost of capital rises and borrowing costs increase. The value of the common stocks in which the Fund may invest will be affected by changes in the stock markets generally, which may be the result of domestic or international political or economic news, changes in interest rates or changing investor sentiment. At times, stock markets can be volatile and stock prices can change substantially. The common stocks of smaller companies are more sensitive to these changes than those of larger companies. Common stock risk will affect the Fund’s net asset value per share, which will fluctuate as the value of the securities held by the Fund change.

Preferred Stock Risk. EHI may invest up to 20% of its assets in all types of equity securities. Generally, EHI has a greater flexibility to invest in equity securities. Preferred stocks are unique securities that combine some of the characteristics of both common stocks and bonds. Preferred stocks generally pay a fixed rate of return and are sold on the basis of current yield, like bonds. However, because they are equity securities, preferred stock provides equity ownership of a company, and the income is paid in the form of dividends. Preferred stocks typically have a yield advantage over common stocks as well as comparably-rated fixed income investments. Preferred stocks are typically subordinated to bonds and other debt instruments in a company’s capital structure, in terms of priority to corporate income, and therefore will be subject to greater credit risk than those debt instruments. Unlike interest payments on debt securities, preferred stock dividends are payable only if declared by the issuer’s board of directors. Preferred stocks also may be subject to optional or mandatory redemption provisions.

Convertible Securities Risk. EHI may invest up to 20% of its assets in all types of equity. A convertible security is a bond, debenture, note, preferred stock or other security that may be converted into or exchanged for a prescribed amount of common stock or other equity security of the same or a different issuer within a particular period of time at a specified price or formula. Before conversion, convertible securities have characteristics similar to nonconvertible income securities in that they ordinarily provide a stable stream of income with generally higher yields than those of common stocks of the same or similar issuers, but lower yields than comparable nonconvertible securities. Similar to traditional fixed income securities, the market values of convertible securities tend to decline as interest rates increase and, conversely, to increase as interest rates decline. However, when the market price of the common stock underlying a convertible security exceeds the conversion price, the convertible security tends to reflect the market price of the underlying common stock. As the market price of the underlying common stock declines, the convertible security tends to trade increasingly on a yield basis and thus may not decline in price to the same extent as the underlying common stock. The credit standing of the issuer and other factors also may have an effect on the convertible security’s investment value. Convertible securities rank senior to common stock in a corporation’s capital structure but are usually subordinated to comparable nonconvertible securities. Convertible securities may be subject to redemption at the option of the issuer at a price established in the convertible security’s governing instrument.

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Risks of Warrants and Rights. Warrants and rights are subject to the same market risks as stocks, but may be more volatile in price. Warrants and rights do not carry the right to dividends or voting rights with respect to their underlying securities, and they do not represent any rights in the assets of the issuer. An investment in warrants or rights may be considered speculative. In addition, the value of a warrant or right does not necessarily change with the value of the underlying security and a warrant or right ceases to have value if it is not exercised prior to its expiration date. The purchase of warrants or rights involves the risk that the Fund could lose the purchase value of a warrant or right if the right to subscribe to additional shares is not exercised prior to the warrants’ or rights’ expiration. Also, the purchase of warrants and rights involves the risk that the effective price paid for the warrant or right added to the subscription price of the related security may exceed the value of the subscribed security’s market price such as when there is no movement in the price of the underlying security.

REITs Risk. Investing in REITs involves certain unique risks in addition to those risks associated with investing in the real estate industry in general. An equity or hybrid REIT may be affected by changes in the value of the underlying properties owned by the REIT. A mortgage or hybrid REIT may be affected by changes in interest rates and the ability of the issuers of its portfolio mortgages to repay their obligations. Mortgage and hybrid REITs are subject to the risks of accelerated prepayments of mortgage pools or pass-through securities, reliance on short-term financing and more highly leveraged capital structures. REITs are dependent upon the skills of their managers and are not diversified.

REITs are generally dependent upon maintaining cash flows to repay borrowings and to make distributions to stockholders and are subject to the risk of default by lessees and borrowers. REITs whose underlying assets are concentrated in properties used by a particular industry, such as healthcare, are also subject to industry related risks. Certain “special purpose” REITs may invest their assets in specific real estate sectors, such as hotels, nursing homes or warehouses, and are therefore subject to the risks associated with adverse developments in any such sectors.

REITs (especially mortgage REITs) are also subject to interest rate risks. When interest rates decline, the value of a REIT’s investment in fixed rate obligations can be expected to rise, but mortgages are often refinanced, which may reduce the yield on investments in mortgage REITs. Rising interest rates may cause REIT investors to demand a higher annual yield, which may, in turn, cause a decline in the market price of the equity securities issued by a REIT. Rising interest rates also generally increase the costs of obtaining financing, which could cause the value of a REIT’s investment in fixed rate obligations can be expected to decline. If the REIT invests in adjustable rate mortgage loans (the interest rates on which are reset periodically), yields on a REIT’s investments in such loans will gradually align themselves to reflect changes in market interest rates. This causes the value of such investments to fluctuate less dramatically in response to interest rate fluctuations than would investments in fixed rate obligations.

REITs may have limited financial resources, may trade less frequently and in a limited volume and maybe subject to more abrupt or erratic price movements than larger company securities. In addition to these risks, REITs may be affected by changes in the value of the underlying property owned by the trusts or by the quality of any credit they extend. Further, REITs are dependent upon management skills and generally may not be diversified. REITs are also subject to heavy cash flow dependency, defaults by borrowers and self-liquidation.

REITs are subject to management fees and other expenses. Therefore, investments in REITs will cause CRO to bear its proportionate share of the costs of the REITs’ operations. At the same time, CRO will continue to pay its own management fees and expenses with respect to all of its assets, including any portion invested in REITs.

Mortgage-Backed and Asset-Backed Securities Risks. Mortgage-backed securities include, among other things, participation interests in pools of residential mortgage loans purchased from individual lenders by a federal agency or originated and issued by private lenders and involve, among others, the following risks:

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Like bond investments, the value of fixed rate mortgage-backed securities will tend to rise when interest rates fall, and fall when rates rise. Floating rate mortgage-backed securities will generally tend to have more moderate changes in price when interest rates rise or fall, but their current yield will be affected.

In addition, the mortgage-backed securities market in general may be adversely affected by changes in governmental legislation or regulation. Factors that could affect the value of a mortgage-backed security include, among other things, the types and amounts of insurance which an individual mortgage or specific mortgage-backed security carries, the default and delinquency rate of the mortgage pool, the amount of time the mortgage loan has been outstanding, the loan-to-value ratio of each mortgage and the amount of overcollateralization or undercollateralization of the mortgage pool.

Ongoing developments in the residential mortgage market may have additional consequences to the market for mortgage-backed securities. Delinquencies and losses generally have been increasing with respect to securitizations involving residential mortgage loans and may continue to increase as a result of the weakening housing market and the seasoning of securitized pools of mortgage loans. Many so-called “sub-prime” mortgage pools are currently distressed and in some cases may be trading at significant discounts to their face value.

Additionally, mortgage lenders recently have adjusted their loan programs and underwriting standards, which has reduced the availability of mortgage credit to prospective mortgagors. This has resulted in reduced availability of financing alternatives for mortgagors seeking to refinance their mortgage loans. The reduced availability of refinancing options for mortgagors has resulted in higher rates of delinquencies, defaults and losses on mortgage loans, particularly in the case of, but not limited to, mortgagors with adjustable rate mortgage loans or interest-only mortgage loans that experience significant increases in their monthly payments following the adjustment date or the end of the interest-only period (see “—Adjustable Rate Mortgages” below for further discussion of adjustable rate mortgage risks). These events, alone or in combination with each other and with deteriorating economic conditions in the general economy, may continue to contribute to higher delinquency and default rates on mortgage loans. The tighter underwriting guidelines for residential mortgage loans, together with lower levels of home sales and reduced refinance activity, also may have contributed to a reduction in the prepayment rate for mortgage loans generally and this trend may continue. The values of mortgage-backed securities may be substantially dependent on the servicing of the underlying mortgage pools, and therefore are subject to risks associated with the negligence or malfeasance by their servicers and to the credit risk of their servicers. In certain circumstances, the mishandling of related documentation also may affect the rights of security holders in and to the underlying collateral.

The United States Government conservatorship of Federal Home Loan Mortgage Corporation (“Freddie Mac”) and the Federal National Mortgage Corporation (“Fannie Mae”) in September 2008 may adversely affect the real estate market and the value of real estate assets generally. It is unclear as of the date of this prospectus what the ultimate resolution of the conservatorship arrangement will be and what impact that resolution will have on the financial markets.

The Federal Housing Finance Agent (“FHFA”), as conservator or receiver of Fannie Mae and Freddie Mac, has the power to repudiate any contract entered into by Fannie Mae or Freddie Mac prior to its appointment if it determines that performance of the contract is burdensome and repudiation of the contract promotes the orderly administration of Fannie Mae’s or Freddie Mac’s affairs. In the event the guaranty obligations of Fannie Mae or Freddie Mac are repudiated, payments of interest to holders of Fannie Mae or Freddie Mac mortgage-backed securities would be reduced if payments on the mortgage loans represented in the mortgage loan groups related to such mortgage-backed securities are not made by the borrowers or advanced by the servicer. Any actual direct compensatory damages for repudiating these guaranty obligations may not be sufficient to offset any shortfalls experienced by such mortgage-backed security holders.

Further, in its capacity as conservator or receiver, FHFA has the right to transfer or sell any asset or liability of Fannie Mae or Freddie Mac without any approval, assignment or consent. If FHFA were to transfer any such guaranty obligation to

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another party, holders of Fannie Mae or Freddie Mac mortgage-backed securities would have to rely on that party for satisfaction of the guaranty obligation and would be exposed to the credit risk of that party.

Asset-backed securities represent participation in, or are secured by and payable from, assets such as installment sales or loan contracts, leases, credit card receivables, and other categories of receivables. Certain debt instruments may only pay principal at maturity or may only represent the right to receive payments of principal or payments of interest on underlying pools or mortgages, assets, or government securities, but not both. The value of these types of instruments may change more drastically than debt securities that pay both principal and interest. EHI may obtain a below market yield or incur a loss on such instruments during periods of declining interest rates. Principal only and interest only instruments are subject to extension risk. For mortgage derivatives and structured securities that have imbedded leverage features, small changes in interest or prepayment rates may cause large and sudden price movements. Mortgage derivatives can also become illiquid and hard to value in declining markets.

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In addition, certain ARMs may provide for an initial fixed, below-market or “teaser” interest rate. During this initial fixed-rate period, the payment due from the related mortgagor may be less than that of a traditional loan. However, after the “teaser” rate expires, the monthly payment required to be made by the mortgagor may increase dramatically when the interest rate on the mortgage loan adjusts. This increased burden on the mortgagor may increase the risk of delinquency or default on the mortgage loan and in turn, losses on the mortgage-backed security into which that loan has been bundled.

Derivatives Risk. The Fund may utilize a variety of derivative instruments for investment or risk management purposes, such as options, futures contracts, swap agreements and credit default swaps. Generally derivatives are financial contracts whose value depends on, or is derived from, the value of an underlying asset, reference rate or index, and may relate to individual debt or equity instruments, interest rates, currencies or currency exchange rates and related indexes. Derivatives are subject to a number of risks, such as liquidity risk, interest rate risk, credit risk and management risk. Derivatives are also subject to counterparty risk, which is the risk that the other party in the transaction will not fulfill its contractual obligation. Changes in the credit quality of the companies that serve as EHI’s counterparties with respect to its derivative transactions will affect the value of those instruments. By using derivatives that expose EHI to counterparties, EHI assumes the risk that its counterparties could experience financial hardships that could call into question their continued ability to perform their obligations. In addition, in the event of the insolvency of a counterparty to a derivative transaction, the derivative transaction would typically be terminated at its fair market value. If EHI is owed this fair market value in the termination of the derivative transaction and its claim is unsecured, EHI will be treated as a general creditor of such counterparty, and will not have any claim with respect to the underlying security. As a result, concentrations of such derivatives in any one counterparty would subject EHI to an additional degree of risk with respect to defaults by such counterparty. See “—Counterparty Risk”. Derivatives also involve the risk of mispricing or improper valuation and the risk that changes in the value of a derivative may not correlate perfectly with an underlying asset, interest rate or index. Suitable derivative transactions may not be available in all circumstances and there can be no assurance that EHI will engage in these transactions to reduce exposure to other risks when that would be beneficial. If EHI invests in a derivative instrument, it could lose more than the principal amount invested. Changes to the derivatives markets as a result of the Dodd-Frank Wall Street Reform and Consumer Protection Act and other government regulation may have an adverse effect on EHI’s ability to make use of derivative transactions.

Derivative instruments can be illiquid, may disproportionately increase losses and may have a potentially large impact on EHI’s performance.

It is possible that government regulation of various types of derivative instruments, including interest rate swaps, interest rate options, credit linked notes, foreign currency forward contracts, credit default swaps and total return swaps on individual securities and groups or indexes of securities may limit or prevent EHI from using such instruments as part of its investment strategy, which could negatively affect EHI’s performance. For example, the U.S. Government recently enacted legislation that provides for new regulation of certain portions of the derivatives market, including clearing, margin, reporting, recordkeeping, and registration requirements. Although the CFTC has released final rules relating to clearing, reporting, recordkeeping and registration requirements, many of the provisions contained in the Dodd-Frank Act are subject to further final rulemaking. New regulations could, among other things, restrict EHI’s ability to engage in derivatives transactions (for example, by making certain types of derivatives transactions no longer available to EHI) and/or increase the

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costs of such derivatives transactions (for example, by increasing margin or capital requirements), and EHI may be unable to execute its investment strategy as a result. It is unclear how the regulatory changes will affect counterparty risk.

EHI is operated by persons who have claimed an exclusion, granted to operators of registered investment companies like EHI, from registration as a “commodity pool operator” with respect to EHI under the Commodity Exchange Act (the “CEA”), and who, therefore, are not subject to registration or regulation with respect to EHI under the CEA. As a result, effective December 31, 2012, EHI is limited in its ability to use commodity futures (which include futures on broad-based securities indexes and interest rate futures) or options on commodity futures, engage in swaps transactions or make certain other investments (whether directly or indirectly through investments in other investment vehicles) for purposes other than bona fide hedging. With respect to transactions other than for bona fide hedging purposes, either: (1) the aggregate initial margin and premiums required to establish EHI’s positions in such investments may not exceed 5% of the liquidation value of EHI’s portfolio (after accounting for unrealized profits and unrealized losses on any such investments); or (2) the aggregate net notional value of such instruments, determined at the time the most recent position was established, may not exceed 100% of the liquidation value of EHI’s portfolio (after accounting for unrealized profits and unrealized losses on any such positions). In addition to meeting one of the foregoing trading limitations, EHI may not market itself as a commodity pool or otherwise as a vehicle for trading in the futures, options or swaps markets.

Risks of Futures and Options on Futures. The use by EHI of futures contracts and options on futures contracts to hedge interest rate risks involves special considerations and risks, as described below.

Derivatives Regulation Risk. In connection with an ongoing review by the SEC and its staff of the regulation of investment companies’ use of derivatives, on August 31, 2011, the SEC issued a concept release to seek public comment on a wide range of issues raised by the use of derivatives by investment companies. The SEC noted that it intends to consider the comments to help determine whether regulatory initiatives or guidance are needed to improve the current regulatory regime for investment companies and, if so, the nature of any such initiatives or guidance. While the nature of any such regulations is uncertain at this time, it is possible that such regulations could limit the implementation of EHI’s use of derivatives, which could have an adverse impact on EHI. Neither LMPFA nor Western Asset can predict the effects of these regulations on EHI’s portfolio. LMPFA and Western Asset monitor developments and seek to manage EHI’s portfolio in a manner consistent with achieving EHI’s investment objectives, but there can be no assurance that they will be successful in doing so.

Credit Default Swap Risk . EHI may invest in credit default swap transactions for hedging or investment purposes. Credit default swap agreements involve greater risks than if EHI had invested in the reference obligation directly since, in addition to general market risks, credit default swaps are subject to illiquidity risk, counterparty risk and credit risk. The “buyer” in a credit default contract is obligated to pay the “seller” a periodic stream of payments over the term of the contract, provided that no event of default on an underlying reference obligation has occurred. If an event of default occurs, the seller must pay the buyer the full notional value, or “par value,” of the reference obligation through either physical settlement or cash

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settlement. EHI may be either the buyer or seller in a credit default swap transaction. If EHI is a buyer and no event of default occurs, EHI will have made a series of periodic payments and recover nothing of monetary value. However, if an event of default occurs, EHI (if the buyer) will receive the full notional value of the reference obligation either through a cash payment in exchange for the asset or a cash payment in addition to owning the reference assets. As a seller, EHI receives a fixed rate of income throughout the term of the contract, which typically is between six months and five years, provided that there is no event of default. The sale of a credit default swap is a form of leverage. EHI currently segregates assets on EHI’s records in the form of cash, cash equivalents or liquid securities in an amount equal to the notional value of the credit default swaps of which it is the seller or otherwise covers such obligations. If such assets are not fully segregated or otherwise covered by EHI, the use of credit default swap transactions could then be considered senior securities for purposes of the 1940 Act. Recent market developments related to credit default swaps have prompted increased scrutiny with respect to these instruments. As a result of the Dodd-Frank Wall Street Reform and Consumer Protection Act, credit default swaps may in the future be subject to increased regulation. Such regulation may limit EHI’s ability to use credit default swaps. Although EHI will seek to realize gains by writing credit default swaps that increase in value, to realize gains on writing credit default swaps, an active secondary market for such instruments must exist or EHI must otherwise be able to close out these transactions at advantageous times. If no such secondary market exists or EHI is otherwise unable to close out these transactions at advantageous times, writing credit default swaps may not be profitable for EHI.

The market for credit default swaps has become more volatile in recent years as the creditworthiness of certain counterparties has been questioned and/or downgraded. If a counterparty’s credit becomes significantly impaired, multiple requests for collateral posting in a short period of time could increase the risk that EHI may not receive adequate collateral. As of the date of this prospectus, credit default swaps are not currently traded on any securities exchange, however certain credit default swaps will be cleared through swaps clearing houses. EHI may exit its obligations under a credit default swap only by terminating the contract and paying applicable breakage fees, or by entering into an offsetting credit default swap position, which may cause EHI to incur more losses.

Repurchase Agreements Risk. Subject to its investment objectives and policies, EHI may invest in repurchase agreements for investment purposes. Repurchase agreements typically involve the acquisition by EHI of debt securities from a selling financial institution such as a bank, savings and loan association or broker-dealer. The agreement provides that EHI will sell the securities back to the institution at a fixed time in the future. EHI does not bear the risk of a decline in the value of the underlying security unless the seller defaults under its repurchase obligation. In the event of the bankruptcy or other default of a seller of a repurchase agreement, EHI could experience both delays in liquidating the underlying securities and losses, including possible decline in the value of the underlying security during the period in which EHI seeks to enforce its rights thereto; possible lack of access to income on the underlying security during this period; and expenses of enforcing its rights. In addition, as described above, the value of the collateral underlying the repurchase agreement will be at least equal to the repurchase price, including any accrued interest earned on the repurchase agreement. In the event of a default or bankruptcy by a selling financial institution, EHI generally will seek to liquidate such collateral. However, the exercise of EHI’s right to liquidate such collateral could involve certain costs or delays and, to the extent that proceeds from any sale upon a default of the obligation to repurchase are less than the repurchase price, EHI could suffer a loss.

Reverse Repurchase Agreements Risk. To the extent that EHI utilizes reverse repurchase agreements, such agreements are subject to many of the same risks involved in EHI’s use of leverage described above, as the proceeds from reverse repurchase agreements generally will be invested in additional securities. There is a risk that the market value of the securities sold by EHI in the reverse repurchase agreement may decline below the price at which EHI remains obligated to repurchase such securities. In addition, there is a risk that the market value of the securities retained by EHI may decline. If the buyer of securities under a reverse repurchase agreement were to file for bankruptcy or experience insolvency, EHI may be adversely affected. Also, in entering into reverse repurchase agreements, EHI would bear the risk of loss to the extent that the proceeds of the reverse repurchase agreement are less than the value of the underlying securities. In addition, due to the interest costs associated with reverse repurchase agreement transactions, EHI’s net asset value (“NAV”) will decline, and, in some cases, EHI may be worse off than if it had not used such instruments.

Senior Loans Risk. EHI may invest in first lien senior secured loans (“Senior Loans”) issued by banks, other financial institutions, and other investors to corporations, partnerships, limited liability companies and other entities to finance leveraged buyouts, recapitalizations, mergers, acquisitions, stock repurchases, debt refinancings and, to a lesser extent, for general operating and other purposes. An investment in Senior Loans involves risk that the borrowers under Senior Loans

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may default on their obligations to pay principal or interest when due. In the event a borrower fails to pay scheduled interest or principal payments on a Senior Loan held by EHI, EHI will experience a reduction in its income and a decline in the market value of the Senior Loan, which will likely reduce dividends and lead to a decline in the net asset value of EHI. If EHI acquires a Senior Loan from another lender, for example, by acquiring a participation, EHI may also be subject to credit risk with respect to that lender.

EHI will generally invest in Senior Loans that are secured with specific collateral. However, there can be no assurance that liquidation of collateral would satisfy the borrower’s obligation in the event of non-payment or that such collateral could be readily liquidated. In the event of the bankruptcy of a borrower, EHI could experience delays and limitations on its ability to realize the benefits of the collateral securing the Senior Loan. Senior Loans are typically structured as floating rate instruments in which the interest rate payable on the obligation fluctuates with interest rate changes. As a result, the yield on Senior Loans will generally decline in a falling interest rate environment causing EHI to experience a reduction in the income it receives from a Senior Loan. Senior Loans are generally of below investment grade quality and may be unrated at the time of investment; are generally not registered with the SEC or state securities commissions; and are generally not listed on any securities exchange. In addition, the amount of public information available on Senior Loans is generally less extensive than that available for other types of assets.

Second Lien Loans Risk. Second senior secured lien loans (“Second Lien Loans”) generally are subject to similar risks as those associated with investments in Senior Loans. Because Second Lien Loans are subordinated or unsecured and thus lower in priority of payment to Senior Loans, they are subject to the additional risk that the cash flow of the borrower and property securing the loan or debt, if any, may be insufficient to meet scheduled payments after giving effect to the senior secured obligations of the borrower. This risk is generally higher for subordinated unsecured loans or debt, which are not backed by a security interest in any specific collateral. Second Lien Loans generally have greater price volatility than Senior Loans and may be less liquid. There is also a possibility that originators will not be able to sell participations in Second Lien Loans, which would create greater credit risk exposure for the holders of such loans. Second Lien Loans share the same risks as other below investment grade securities.

Loan Participations and Assignments Risk. EHI may invest in participations in loans or assignments of all or a portion of loans from third parties. In connection with purchasing participations, EHI generally will have no right to enforce compliance by the borrower with the terms of the loan agreement relating to the loan, nor any rights of set-off against the borrower, and EHI may not directly benefit from any collateral supporting the loan in which it has purchased the participation. As a result, EHI may be subject to the credit risk of both the borrower and the lender that is selling the participation. In the event of the insolvency of the lender selling a participation, EHI may be treated as a general creditor of the lender and may not benefit from any set-off between the lender and the borrower. Certain participations may be structured in a manner designed to avoid purchasers of participations being subject to the credit risk of the lender with respect to the participation, but even under such a structure, in the event of the lender’s insolvency, the lender’s servicing of the participation may be delayed and the assignability of the participation impaired. EHI will acquire participations only if the lender interpositioned between EHI and the borrower is determined by Western Asset to be creditworthy.

Smaller Company Risk. The general risks associated with income-producing securities are particularly pronounced for securities issued by companies with smaller market capitalizations. These companies may have limited product lines, markets or financial resources or they may depend on a few key employees. As a result, they may be subject to greater levels of credit, market and issuer risk. Securities of smaller companies may trade less frequently and in lesser volume than more widely held securities and their values may fluctuate more sharply than other securities. Companies with medium-sized market capitalizations may have risks similar to those of smaller companies.

Management Risk. EHI is subject to management risk because it is an actively managed investment portfolio. Western Asset, Western Asset Management Company Pte. Ltd. in Singapore (“Western Singapore”) and Western Asset Management Company Limited in London (“Western Asset Limited”, together with Western Singapore, the “Non-U.S. Subadvisers” and individually, each a “Non-U.S. Subadviser”) and each individual investment professional may not be successful in selecting the best performing securities or investment techniques, and EHI’s performance may lag behind that of similar funds.

Potential Conflicts of Interest Risk. LMPFA, Western Asset, the Non-U.S. Subadvisers (together with LMPF and Western Asset, the “Managers”) and EHI’s investment professionals have interests which may conflict with the interests of

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EHI. In particular, LMPFA also manages, and Western Asset serves as subadviser to, another closed-end investment company listed on the NYSE that has an investment objective and investment strategies that are substantially similar to EHI. Further, the Managers may at some time in the future manage and/or advise other investment funds or accounts with the same investment objective and strategies as EHI. As a result, the Managers and EHI’s investment professionals may devote unequal time and attention to the management of EHI and those other funds and accounts, and may not be able to formulate as complete a strategy or identify equally attractive investment opportunities as might be the case if they were to devote substantially more attention to the management of EHI. The Managers and EHI’s investment professionals may identify a limited investment opportunity that may be suitable for multiple funds and accounts, and the opportunity may be allocated among these several funds and accounts, which may limit EHI’s ability to take full advantage of the investment opportunity. Additionally, transaction orders may be aggregated for multiple accounts for purpose of execution, which may cause the price or brokerage costs to be less favorable to EHI than if similar transactions were not being executed concurrently for other accounts. At times, an investment professional may determine that an investment opportunity may be appropriate for only some accounts for which he or she exercises investment responsibility, or may decide that certain accounts should take differing positions with respect to a particular security. In these cases, the investment professional may place separate transactions for one or more funds or accounts which may affect the market price of the security or the execution of the transaction, or both, to the detriment or benefit of one or more other funds and accounts. For example, an investment professional may determine that it would be in the interest of another account to sell a security that EHI holds, potentially resulting in a decrease in the market value of the security held by EHI.

Rating Agency Risk. Credit ratings are issued by rating agencies which are private services that provide ratings of the credit quality of debt obligations, including convertible securities. Ratings assigned by a rating agency are not absolute standards of credit quality and do not evaluate market risks or the liquidity of securities. Rating agencies may fail to make timely changes in credit ratings and an issuer’s current financial condition may be better or worse than a rating indicates. In addition, in recent years there have been instances in which the initial rating assigned by a rating agency to a security failed to take account of adverse economic developments which subsequently occurred, leading to losses that were not anticipated based on the initial rating. To the extent that the issuer of a security pays a rating agency for the analysis of its security, an inherent conflict of interest may exist that could affect the reliability of the rating. The ratings of a debt security may change over time. As a result, debt instruments held by EHI could receive a higher rating or a lower rating during the period in which they are held. EHI will not necessarily sell a security when its rating is reduced below its rating at the time of purchase.

Investments in mortgage-related securities may involve particularly high levels of risk under current market conditions.

Inflation/Deflation Risk. Inflation risk is the risk that the value of certain assets or income from EHI’s investments will be worth less in the future as inflation decreases the value of money. As inflation increases, the real value of the Common Stock and distributions on the Common Stock can decline. Deflation risk is the risk that prices throughout the economy decline over time—the opposite of inflation. Deflation may have an adverse effect on the creditworthiness of issuers and may make issuer defaults more likely, which may result in a decline in the value of EHI’s portfolio.

Counterparty Risk. Changes in the credit quality of the companies that serve as EHI’s counterparties (whether a clearing corporation in the case of cleared instruments or another third party in the case of uncleared instruments) with respect to derivatives or other transactions supported by another party’s credit will affect the value of those instruments. Certain entities that have served as counterparties in the markets for these transactions have recently incurred significant financial hardships including bankruptcy and losses as a result of exposure to sub-prime mortgages and other lower quality credit investments that have experienced recent defaults or otherwise suffered extreme credit deterioration. If a counterparty becomes bankrupt or otherwise fails to perform its obligations under a derivative contract due to financial difficulties, EHI may experience significant delays in obtaining any recovery under the derivative contract in a bankruptcy dissolution, assignment for the benefit of creditors, liquidation, winding-up or analogous or other reorganization proceeding. EHI may obtain only a limited recovery or may obtain no recovery in such circumstances. Some, but not all, derivative transactions may be cleared, in which case a central clearing counterparty stands between the direct parties to the derivative transaction and effectively guarantees performance of each contract, to the extent of its available resources for such purpose. Uncleared derivative transactions have no such protection; each party bears the risk that its direct counterparty will default. Counterparty risk with respect to certain exchange-traded and over-the-counter derivatives may be further complicated by recently enacted U.S. financial reform legislation. See “Derivatives Risk” above for more information.

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When-Issued and Delayed-Delivery Transactions Risk. EHI may purchase fixed income securities on a when-issued basis, and may purchase or sell those securities for delayed delivery. When-issued and delayed-delivery transactions occur when securities are purchased or sold by EHI with payment and delivery taking place in the future to secure an advantageous yield or price. Securities purchased on a when-issued or delayed-delivery basis may expose EHI to counterparty risk of default as well as the risk that securities may experience fluctuations in value prior to their actual delivery. EHI will not accrue income with respect to a when-issued or delayed-delivery security prior to its stated delivery date. Purchasing securities on a when-issued or delayed-delivery basis can involve the additional risk that the price or yield available in the market when the delivery takes place may not be as favorable as that obtained in the transaction itself.

Leverage Risk . EHI has borrowings in the form of a revolving credit agreement with State Street Bank and Trust Co. that allows the Fund to borrow up to an aggregate amount of $125,000,000 ($100,000,000 prior to March 2, 2015) and renews daily for a 270-day term unless notice to the contrary is given to the Fund. EHI may elect to utilize leverage in an amount up to 33 1/3% of the Fund’s total assets through borrowings, including loans from certain financial institutions, mortgage dollar rolls, reverse repurchase agreements and debt securities, and 50% of EHI’s total assets through the issuance of preferred stock. Leverage may result in greater volatility of the net asset value, distributions on EHI Common Shares and market price of EHI Common Shares because changes in the value of EHI’s portfolio investments, including investments purchased with the proceeds from borrowings or the issuance of preferred stock, if any, are borne entirely by holders of EHI Common Shares. Common Stock income may fall if the interest rate on borrowings or the dividend rate on preferred stock rises, and may fluctuate as the interest rate on borrowings or the dividend rate on preferred stock varies. On the other hand, EHI’s use of leverage results in increased operating costs. Thus, to the extent that the then-current cost of any leverage, together with other related expenses, approaches the net return on EHI’s investment portfolio, the benefit of leverage to holders of EHI Common Shares will be reduced, and if the then-current cost of any leverage together with related expenses were to exceed the net return on EHI’s portfolio, EHI’s leveraged capital structure would result in a lower rate of return to holders of EHI Common Shares than if EHI were not so leveraged. In addition, the costs associated with EHI’s incursion and maintenance of leverage could increase over time. There can be no assurance that EHI’s leveraging strategy will be successful.

Portfolio Turnover Risk. Changes to the investments of EHI may be made regardless of the length of time particular investments have been held. A high portfolio turnover rate may result in increased transaction costs for EHI in the form of increased dealer spreads and other transactional costs, which may have an adverse impact on EHI’s performance. In addition, high portfolio turnover may result in the realization of net short-term capital gains by EHI which, when distributed to stockholders, will be taxable as ordinary income. A high portfolio turnover may increase EHI’s current and accumulated earnings and profits, resulting in a greater portion of EHI’s distributions being treated as a dividend to EHI’s stockholders. The portfolio turnover rate of EHI will vary from year to year, as well as within a given year.

Temporary Defensive Strategies Risk. When Western Asset anticipates unusual market or other conditions, EHI may temporarily depart from its principal investment strategies as a defensive measure and invest all or a portion of its assets in obligations of the U.S. government, its agencies or instrumentalities; other investment grade debt securities; investment grade commercial paper; certificates of deposit and bankers’ acceptances; repurchase agreements with respect to any of the foregoing investments or any other fixed income securities that Western Asset considers consistent with this strategy. To the extent that EHI invests defensively, it may not achieve its investment objectives.

Market Price Discount from Net Asset Value Risk. Shares of closed-end investment companies frequently trade at a discount from their net asset value. This risk is separate and distinct from the risk that EHI’s net asset value could decrease as a result of its investment activities and may be a greater risk to investors expecting to sell their Common Stock in a relatively short period. Whether investors will realize gains or losses upon the sale of the Common Stock will depend not upon EHI’s net asset value but upon whether the market price of the Common Stock at the time of sale is above or below the investor’s purchase price for the Common Stock. Because the market price of the Common Stock will be determined by factors such as relative supply of and demand for the Common Stock in the market, general market and economic conditions and other factors beyond the control of EHI, EHI cannot predict whether the Common Stock will trade at, above or below net asset value. EHI’s Common Stock is designed primarily for long-term investors and you should not view EHI as a vehicle for trading purposes.

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Anti-Takeover Provisions. EHI’s charter and bylaws include provisions that could limit the ability of other entities or persons to acquire control of EHI or convert EHI to an open-end fund. These provisions could have the effect of depriving Common Stockholders of opportunities to sell their Common Stock at a premium over the then-current market price of the Common Stock.

Market Disruption and Geopolitical Risk. Instability in the Middle East and terrorist attacks in the United States and around the world may have a substantial impact on the U.S. and world economies and securities markets. Terrorist attacks closed some of the U.S. securities markets in 2001, and similar events cannot be ruled out in the future. War, occupation, terrorism and related geopolitical risks have led, and may in the future lead to, increased short-term market volatility and adverse long-term effects on the U.S. and world economies and markets generally. These risks may adversely affect individual issuers and securities markets, interest rates, secondary trading, ratings, investor psychology, credit risk, inflation and other factors relating to the Common Stock. High-yield securities tend to be more volatile than higher-rated securities, so these or similar events may have a greater impact on the prices and volatility of high-yield securities than on higher rated securities.

Current Economic Conditions—Credit Crisis Liquidity and Volatility Risk. The markets for credit instruments, including fixed income securities, have experienced periods of extreme illiquidity and volatility since the latter half of 2007. Tightening of credit conditions occurred just as a record amount of corporate bonds (as measured by transaction volume) were scheduled to enter the markets in the third quarter of 2007. This imbalance has caused a significant dislocation in the markets, marked by sharply widened credit spreads, delayed high-yield bond offerings and a general reduction in liquidity. General market uncertainty and consequent repricing risk have led to market imbalances of sellers and buyers, which in turn have also resulted in significant valuation uncertainties in a variety of debt securities, including certain fixed income securities. In addition, during 2008, several major dealers of fixed income securities exited the market via acquisition or bankruptcy. These conditions resulted, and in many cases continue to result in greater volatility, less liquidity, widening credit spreads and a lack of price transparency, with many debt securities remaining illiquid and of uncertain value. During times of reduced market liquidity, EHI may not be able to sell securities readily at prices reflecting the values at which the securities are carried on EHI’s books. Sales of large blocks of securities by market participants, such as EHI, that are seeking liquidity can further reduce security prices in an illiquid market. These market conditions may make valuation of some of EHI’s securities uncertain and/or result in sudden and significant valuation increases or decreases in its holdings. Illiquidity and volatility in the credit markets may directly and adversely affect the setting of dividend rates on the Common Stock.

Furthermore, because of the current conditions in the credit markets, issuers of fixed income securities may be subject to increased costs associated with incurring debt, tightening underwriting standards and reduced liquidity generally. The worsening general economic conditions have materially and adversely impacted the broader financial and credit markets and have reduced the availability of debt and equity capital for the market as a whole. The reduced willingness of some lenders to extend credit, in general, may make it more difficult for issuers of Senior Loans and Second Lien Loans to finance their operations. These developments have adversely affected the broader economy, and may continue to do so, which in turn may adversely affect the ability of issuers of securities owned by EHI to make payments of principal and interest when due, lead to lower credit ratings and increased defaults. Such developments could, in turn, reduce the value of securities owned by EHI and adversely affect the net asset value of EHI’s Common Stock.

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INFORMATION ABOUT THE PROPOSED MERGER

The Agreement and Plan of Merger

The following is a summary of the material terms and conditions of the Agreement and Plan of Merger. This summary is qualified in its entirety by reference to the form of Agreement and Plan of Merger attached as Appendix A to this Proxy Statement/Prospectus. Under the Agreement and Plan of Merger, GDF will merge with and into EHI on the Closing Date. As a result of the Merger and on the Closing Date:

GDF will then:

Each outstanding GDF Common Share will be converted into an equivalent dollar amount (to the nearest one tenth of one cent) of full EHI Common Shares, based on the net asset value per share of each of the parties at 4:00 p.m. Eastern Time on the business day prior to the Closing Date. No fractional EHI Common Shares will be issued to the holders of GDF Common Shares. In lieu thereof, EHI will pay cash to each former holder of GDF Common Shares in an amount equal to the value of the fractional EHI Common Shares that the investor would otherwise have received in the Merger.

No sales charge or fee of any kind will be charged to holders of GDF Common Shares in connection with their receipt of EHI Common Shares in the Merger.

From and after the Closing Date, EHI will possess all of the properties, assets, rights, privileges and powers and shall be subject to all of the restrictions, liabilities, obligations, disabilities and duties of GDF, all as provided under Maryland law.

Under Maryland law, stockholders of a corporation whose shares are traded publicly on a national securities exchange, such as the Funds’ Common Shares, are not entitled to demand the fair value of their shares upon a merger; therefore, the holders of the Funds’ Common Shares will be bound by the terms of the Merger, if approved. However, any holder of either Fund’s Common Shares may sell his or her Common Shares on the NYSE at any time prior to the Merger.

The Agreement and Plan of Merger may be terminated and the Merger abandoned, whether before or after approval by GDF’s or EHI’s stockholders, at any time prior to the Closing Date by resolution of either Fund’s Board, if circumstances should develop that, in the opinion of that Board, make proceeding with the Merger inadvisable with respect to EHI or GDF, respectively.

Prior to the Merger, GDF shall have declared and paid a dividend or dividends which, together with all such previous dividends, shall have the effect of distributing to GDF’s stockholders substantially all of its net investment income that has accrued through the Closing Date, if any, and substantially all of its net capital gain realized through the Closing Date, if any.

The Agreement and Plan of Merger provides that either Fund may waive compliance with any of the terms or conditions made therein for the benefit of that Fund, other than the requirements that: (a) the Agreement and Plan of Merger be approved by stockholders of GDF or EHI; and (b) GDF and EHI receive the opinion of Simpson Thacher & Bartlett LLP that the transactions contemplated by the Agreement and Plan of Merger will constitute a tax-free reorganization for federal income tax purposes, if, in the judgment of the Fund’s Board, after consultation with Fund counsel, such waiver will not have a material adverse effect on the benefits intended to be provided by the Merger to the stockholders of the Fund.

Under the Agreement and Plan of Merger, each Fund, out of its assets and property, will indemnify and hold harmless the other Fund and the members of the Board and officers of the other Fund from and against any and all losses, claims,

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damages, liabilities or expenses (including, without limitation, the payment of reasonable legal fees and reasonable costs of investigation) to which the other Fund and those board members and officers may become subject, insofar as such loss, claim, damage, liability or expense (or actions with respect thereto) arises out of or is based on (a) any breach by the Fund of any of its representations, warranties, covenants or agreements set forth in this Agreement or (b) any act, error, omission, neglect, misstatement, materially misleading statement, breach of duty or other act wrongfully done or attempted to be committed by the Fund or the members of the Board or officers of the Fund prior to the Closing Date, provided that such indemnification by the Fund is not (i) in violation of any applicable law or (ii) otherwise prohibited as a result of any applicable order or decree issued by any governing regulatory authority or court of competent jurisdiction. In no event will a Fund or the members of the Board or officers of a Fund be indemnified for any losses, claims, damages, liabilities or expenses arising out of or based on conduct constituting willful misfeasance, bad faith, gross negligence or the reckless disregard of duties.

The Board of each Fund, including the Independent Directors, has determined, with respect to its Fund, that the interests of the holders of that Fund’s Common Shares will not be diluted as a result of the Merger and that participation in the Merger is in the best interests of that Fund. LMPFA will bear half the costs of the Merger, with the remaining costs shared equally by the Funds. Such expenses shall also include, but not be limited to, all costs related to the preparation and distribution of this Proxy Statement/Prospectus, proxy solicitation expenses, SEC registration fees and NYSE listing fees.

Approval of the Agreement and Plan of Merger requires the affirmative vote of a majority of the outstanding GDF Common Shares and EHI Common Shares. See “Voting Information” below.

Reasons for the Merge r and Board Considerations

Board Considerations

The Funds may be deemed affiliated investment companies as a result of LMPFA and Western Asset serving as each Fund’s investment advisers. In connection with a merger of affiliated investment companies, Rule 17a-8 requires the board of each affiliated investment company, including a majority of the directors who are not interested persons of the investment company, to determine that (1) participation in the transaction is in the best interests of the investment company, and (2) the interests of the existing stockholders of the investment company will not be diluted as a result of the transaction.

Moreover, Rule 17a-8 requires that the directors request and evaluate such information as may reasonably be necessary to make their findings. Rule 17a-8 does not specify the factors to be considered in making the findings required by the rule. The SEC has recommended that boards consider the following factors, in addition to any others that may be appropriate under the circumstances:

A proposal to merge was presented to the Board of each Fund for consideration at simultaneous in-person meetings held on November 11-12, 2015 (together, the “Meeting”), and was approved by both Boards at that meeting. LMPFA at the meeting expressed its belief that the Merger would be in the best interests of each Fund and provided information and analyses (the “Merger Evaluation Information”) sufficient in LMPFA’s belief for each Board to evaluate the Merger. In considering the Merger, with the advice of counsel to the Independent Directors, the Boards considered the factors noted above in light of LMPFA’s belief that the Merger would be in the best interests of each Fund, the Merger Evaluation Information and additional information received on an on-going basis in connection with the oversight of each Fund, including information received at the Meeting in connection with the approval of the continuation of each Fund’s management agreements, as well as the following:

Factor 1

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Factor 2

Factor 3

Factor 4

Following extensive discussions, based on its evaluation of the above factors in light of the Merger Evaluation Information and of any other factors regarded by the Board as relevant in the exercise of its business judgment, including those described above, the Board of each Fund, including all of the Independent Directors, determined, with respect to each Fund, that: (1) the Merger would be in the best interests of such Fund; and (2) the Merger would not result in the dilution of the interests of such Fund or its stockholders. The Boards did not identify a single factor or piece of Merger Evaluation Information as all determinative or controlling. As a result, each Board approved the Agreement and Plan of Merger, subject to approval by stockholders.

Federal Income Tax Conse quences

The following is a summary of the material federal income tax consequences of the Merger applicable to a holder of GDF Common Shares that receives EHI Common Shares in the Merger. This discussion is based upon the Internal Revenue

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Code of 1986, as amended (the “Code”), Treasury regulations, judicial authorities, published positions of the Internal Revenue Service (the “IRS”) and other applicable authorities, all as currently in effect and all of which are subject to change or differing interpretations (possibly with retroactive effect). This discussion is limited to U.S. holders (as defined below) that hold their GDF Common Shares as capital assets for federal income tax purposes (generally, assets held for investment). This discussion does not address all of the tax consequences that may be relevant to a particular GDF stockholder or to GDF stockholders that are subject to special treatment under federal income tax laws.

This discussion does not address the tax consequences of the Merger under state, local or foreign tax laws. No assurance can be given that the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax consequences set forth below.

Holders of GDF Common Shares are urged to consult with their own tax advisors as to the tax consequences of the Merger in their particular circumstances, including the applicability and effect of the alternative minimum tax and any state, local or foreign and other tax laws and of changes in those laws.

For purposes of this section, the term “U.S. holder” means a beneficial owner of GDF Common Shares that for federal income tax purposes is:

Tax Consequences of the Merger Generally

GDF and EHI intend the Merger to qualify as a tax-free reorganization within the meaning of Section 368(a)(1) of the Code. The Merger is conditioned upon the receipt by both GDF and EHI of an opinion from Simpson Thacher & Bartlett LLP to the effect that, based upon certain facts, assumptions and representations of the parties, for federal income tax purposes:

(i) the Merger will constitute a reorganization within the meaning of Section 368(a)(1) of the Code and that GDF and EHI will each be a “party to a reorganization” within the meaning of Section 368(b) of the Code;

(ii) except for consequences regularly attributable to a termination of GDF’s taxable year, no gain or loss will be recognized by GDF as a result of the Merger or upon the conversion of GDF Common Shares into EHI Common Shares;

(iii) no gain or loss will be recognized by EHI as a result of the Merger or upon the conversion of GDF Common Shares into EHI Common Shares;

(iv) no gain or loss will be recognized by the holders of GDF Common Shares upon the conversion of their GDF Common Shares into EHI Common Shares, except to the extent such holders are paid cash in lieu of fractional EHI Common Shares in the Merger;

(v) the tax basis of GDF assets in the hands of EHI will be the same as the tax basis of such assets in the hands of GDF immediately prior to the consummation of the Merger;

(vi) immediately after the Merger, the aggregate tax basis of the EHI Common Shares received by each holder of GDF Common Shares in the Merger (including that of fractional share interests purchased by EHI) will be equal to the aggregate tax basis of the GDF Common Shares owned by such holder immediately prior to the Merger;

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(vii) a stockholder’s holding period for EHI Common Shares (including that of fractional share interests purchased by EHI) will be determined by including the period for which such stockholder held GDF Common Shares converted pursuant to the Merger, provided that such GDF Common Shares were held by such stockholder as capital assets;

(viii) EHI’s holding period with respect to the GDF assets transferred pursuant to the Merger will include the period for which such assets were held by GDF; and

(ix) the payment of cash to the holders of GDF Common Shares in lieu of fractional EHI Common Shares will be treated as though such fractional shares were distributed as part of the Merger and then redeemed by EHI with the result that the holder of GDF Common Shares will generally have a capital gain or loss to the extent the cash distribution differs from such stockholder’s basis allocable to the fractional EHI Common Shares.

Assuming that, in accordance with the opinion referred to above, the Merger qualifies as a reorganization within the meaning of Section 368(a)(1) of the Code, the Merger will result in the tax consequences described above in clauses (i) through (ix).

Information Reporting and Backup Withholding

Cash payments received in lieu of fractional EHI Common Shares by a U.S. holder will generally be subject to information reporting unless the holder is an exempt recipient. In addition, backup withholding at a rate of 28% may apply to the cash payable to a U.S. holder, unless the holder furnishes its taxpayer identification number (in the case of individuals, their social security number) and otherwise complies with applicable requirements of the backup withholding rules, or the holder otherwise establishes an exemption. Any amounts withheld from payments to a holder under the backup withholding rules are not additional tax and will be allowed as a refund or credit against the holder’s federal income tax liability, provided the required information is timely furnished to the IRS.

Reporting Requirements

A holder of GDF Common Shares who receives EHI Common Shares as a result of the Merger will be required to retain records pertaining to the Merger. Each holder of GDF Common Shares who is required to file a U.S. tax return and who is a “significant holder” that receives EHI Common Shares in the Merger will be required to file a statement with the holder’s federal income tax return setting forth certain information, including such holder’s basis in and the fair market value of such holder’s GDF Common Shares surrendered in the Merger. A “significant holder” is a holder of GDF Common Shares who, immediately before the Merger, owned (i) at least 5% of the outstanding stock of GDF or (ii) securities of GDF with a tax basis of $1,000,000 or more. Holders of GDF Common Shares should consult with their own tax advisors regarding the application of these reporting requirements.

Other Tax Considerations

While neither EHI nor GDF is aware of any adverse state or local tax consequences of the Merger, they have not requested any ruling or opinion with respect to such consequences, and stockholders should consult their own tax advisor with respect to such matters.

Immediately prior to the Closing Date, GDF, to the extent necessary, will pay a dividend or dividends, which together with all previous dividends, are intended to have the effect of distributing to its stockholders substantially all of its net investment income that has accrued through the Closing Date, if any, and substantially all of its net capital gain, if any, realized through the Closing Date. Such dividends will be included in the taxable income of the stockholders of GDF.

Information Regarding Tax Capital Loss Carryforwards

Federal income tax law permits a regulated investment company to carry forward its net capital losses generated in taxable years beginning after December 22, 2010 (“Post-2010 Losses”) for an unlimited period. Federal income tax law also permits a regulated investment company to carry forward capital losses generated in taxable years beginning on or prior to December 22, 2010 (“Pre-2011 Losses”) for a period of up to eight taxable years, provided that such loss carryovers are utilized only after the full utilization of all Post-2010 Losses.

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The Merger will cause the taxable year of GDF to close, which will accelerate the schedule for expiration of its carryovers of Pre-2011 Losses, and could also result in a net capital loss for the taxable year ending on the Closing Date. Because EHI has a carryover of Post-2010 Losses, the Merger may also delay the utilization of each Fund’s Pre-2011 Losses, which may only be utilized after the full utilization of all Post-2010 Losses. In addition, the Merger is expected to result in a limitation on EHI’s ability to use carryovers of GDF and, potentially, to use unrealized capital losses inherent in the tax bases of the assets acquired, if realized within five years following the Merger. Those limitations, imposed by Section 382 of the Code, will apply if, as expected, the stockholders of GDF own less than 50% of EHI immediately after the Merger, and will be imposed on an annual basis. The annual Section 382 limitation for periods following the Merger generally will equal the product of the net asset value of GDF immediately prior to the Merger and the “long-term tax-exempt rate,” published by the Internal Revenue Service, in effect at the time of the Merger.

As of their most recent fiscal year ends, the Funds are entitled to capital loss carryovers for federal income tax purposes in the amounts set forth below:

GDF

Based on the recent data referred to above, the Merger would impact the use of GDF’s capital loss carryovers in the following manner: (1) the expiration date of the Pre-2011 Losses would be accelerated by one year and realigned to the year of EHI; for example, the carryovers due to expire on August 31, 2017 would expire on May 31, 2016; (2) the Pre-2011 Losses would not be available to be utilized until all Post-2010 Losses of EHI have been used; (3) GDF’s carryovers would benefit the stockholders of the combined Fund, rather than only the stockholders of GDF; (4) the aggregate amount of the carryovers that could be utilized in any taxable year would be limited to the product of the long-term tax-exempt rate at the time of the Merger and the net asset value of GDF at that time (approximately $3,507,587 per year based on data as of a recent date); and (5) any losses realized after the Merger attributable to unrealized depreciation, if any, in GDF’s portfolio at the time of the Merger would also be subject to the annual limitation described in (4).

Based on such data, the combination of the above referenced limitations on the use of loss carryovers would result in some portion (approximately $31.2 million based on data as of a recent date) of GDF’s loss carryovers expiring unused. It should be noted that there would be no assurances that GDF would be able to use such losses in the absence of the Merger. Additionally, GDF stockholders may benefit from the use of EHI’s capital loss carryovers by the combined Fund after the Merger.

EHI

Based on the recent data referred to above, the Merger would impact the use of EHI’s capital loss carryovers by benefiting the stockholders of the combined Fund, rather than only the stockholders of EHI.

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INFORMATION APPLICABLE TO BOTH FUNDS

The capital loss carryovers and limitations described above may change significantly between now and the Closing Date. Further, the ability of each Fund to use loss carryovers (even in the absence of the Merger) depends on factors other than loss limitations, such as the future realization of capital gains or losses. The effect of the combination of these factors on the use of loss carryovers may result in some portion of the Pre-2011 Losses of either or both of the Funds expiring unused. This may result in stockholders paying more taxes or paying taxes sooner than they otherwise would if the Merger did not occur.

PORTFOLIO SECURITIES

The securities in which GDF may invest are permissible for investment under EHI’s investment objectives and strategies. It is currently anticipated that minimal, if any, portfolio turnover will occur as a result of the Merger. The Funds may buy and sell securities in the normal course of their operations.

INFORMATION ABOUT MANAGEMENT OF THE FUNDS

Information About Directors and Officers

The overall management of the business and affairs is vested in the Board of Directors of each Fund. In accordance with each Fund’s charter, each Board of Directors is divided into three classes: Class I, Class II and Class III. Each Board approves all significant agreements between such Fund and persons or companies furnishing services to the Fund. The day-to-day operation of the Fund is delegated to the officers of each Fund, LMPFA and Western Asset, subject always to the investment objectives, restrictions and policies of each Fund and to the general supervision of the Board. The following table provides information concerning the Directors of each Fund.

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The Directors were selected to join each Board based upon the following as to each Director: his or her character and integrity; such person’s service as a board member of other funds in the Legg Mason, Inc. fund complex; such person’s willingness to serve and willingness and ability to commit the time necessary to perform the duties of a Director; as to each Director other than Ms. Trust, his or her status as not being an “interested person” as defined in the 1940 Act; and, as to Ms. Trust, her role with Legg Mason, Inc. No factor, by itself, was controlling.

In addition to the information provided in the table included above, each Director possesses the following attributes: Mr. Agdern, experience in business and as a legal professional; Ms. Colman, experience as a consultant and investment professional; Mr. Cronin, legal and managerial experience; Mr. Cucchi, experience as a college professor and leadership experience as an academic dean; Mr. Gelb, academic and world affairs and foreign relations experience and service as a board member of other registered investment companies; Mr. Hutchinson, experience in accounting and working with auditors, consulting, business and finance and service as a board member of another highly regulated financial services company; Ms. Kamerick, experience in business and finance, including financial reporting, and service as a board member of another highly regulated financial services company; Dr. Roett, expertise in Latin and South American societies and economies and academic leadership experience; and Ms. Trust, investment management and risk oversight experience as an executive and portfolio manager and leadership roles within Legg Mason and affiliated entities. References to the qualifications, attributes and skills of the Directors are pursuant to requirements of the Securities and Exchange Commission, do not constitute holding out of the Board or any Director as having any special expertise or experience, and shall not impose any greater responsibility or liability on any such person or on the Board by reason thereof.

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At December 31, 2015, the Directors and officers of the Funds as a group beneficially owned less than 1% of the outstanding shares of each Fund’s common stock.

No Director or nominee for election as Director who is not an “interested person” of the Funds as defined in the 1940 Act, nor any immediate family members, to the best of the Funds’ knowledge, had any interest in the Funds’ investment adviser, or any person or entity (other than the Funds) directly or indirectly controlling, controlled by, or under common control with Legg Mason as of December 31, 2015.

Director Compensation

Under the federal securities laws, and in connection with the Meeting, the Funds are required to provide to stockholders in connection with the Meeting information regarding compensation paid to the Directors by the Funds, as well as by the various other investment companies advised by LMPFA. The following table provides information concerning the compensation paid to each Director by the Funds and the Fund Complex during the calendar year ended December 31, 2015 and the total compensation paid to each Director during the fiscal years ended May 31, 2015 for EHI and August 31, 2015 for GDF. Certain of the Directors listed below are members of the Funds’ committees, as well as other committees of the boards of certain other investment companies advised by LMPFA. Accordingly, the amounts provided in the table include compensation for service on all such committees. The Funds do not provide any pension or retirement benefits to Directors. In addition, no remuneration was paid during the fiscal years ended May 31, 2015 for EHI and August 31, 2015 for GDF, respectively, to Ms. Trust who is an “interested person” as defined in the 1940 Act.

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As of January 1, 2014, the Fund Complex (with cost allocated to each fund in proportion to its assets under management) paid each of the Independent Directors an annual fee of $120,000, plus $22,500 for each regularly scheduled Board meeting attended in person and $2,000 for each telephonic meeting of the Board. In addition to the payments described above, (a) the Lead Independent Director of the Board receives $35,000; (b) the chairperson of the Audit Committee receives $30,000; (c) the chairperson of the Nominating Committee receives $15,000; and (d) the chairperson of the Investment Committee receives $15,000. The following changes became effective January 1, 2015, the chairperson of the Compensation Committee receives $15,000. The following changes became effective January 1, 2016, (1) each Independent Director’s annual retainer increased to $150,000, (2) the Lead Independent Director received an additional annual fee of $50,000, and (3) each member of the Audit Sub-Committee received an additional annual fee of $15,000. The following change became effective January 1, 2016, the chairperson of the Compensation Committee receives $15,000. The annual compensation, fees and expenses are allocated among all the funds in the fund complex on the basis of average net assets.

Responsibilities of the Board of GDF and EHI

The Board of Directors is responsible under applicable state law for overseeing generally the management and operations of each Fund. The Directors oversee each Fund’s operations by, among other things, meeting at its regularly scheduled meetings and as otherwise needed with each Fund’s management and evaluating the performance of each Fund’s service providers including LMPFA, Western Asset, the Non-U.S. Subadvisers, the custodian and the transfer agent. As part of this process, the Directors consult with each Fund’s independent auditors and with their own separate independent counsel.

The Directors review each Fund’s financial statements, performance, net asset value and market price and the relationship between them, as well as the quality of the services being provided to each Fund. As part of this process, the Directors review the Fund’s fees and expenses in light of the nature, quality and scope of the services being received while also seeking to ensure that each Fund continues to have access to high quality services in the future.

The Board of Directors has four regularly scheduled meetings each year, and additional meetings may be scheduled as needed. In addition, the Board has a standing Audit Committee, Nominating Committee, Investment, Performance and Pricing Committee (the “Investment Committee”) and Compensation Committee that meet periodically and whose responsibilities are described below.

With respect to GDF, during the fiscal year ended August 31, 2015, the Board of Directors held four regular meetings and two special meetings. Each Director attended at least 75% of the aggregate number of meetings of the Board and the

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committees for which he or she was eligible. With respect to EHI, during the fiscal year ended May 31, 2015, the Board of Directors held four regular meetings and two special meetings. Each Director attended at least 75% of the aggregate number of meetings of the Board and the committees for which he or she was eligible. The Funds does not have a formal policy regarding attendance by Directors at annual meetings of stockholders.

Each of the Audit Committee, the Nominating Committee, the Investment Committee and the Compensation Committee is composed of all Directors who have been determined not to be “interested persons” of each Fund, LMPFA, Western Asset or their affiliates within the meaning of the 1940 Act, and who are “independent” as defined in the New York Stock Exchange listing standards (“Independent Directors”), and is chaired by an Independent Director. The Board in its discretion from time to time may establish ad hoc committees.

The Board of Directors is currently comprised of nine directors, eight of whom are Independent Directors. Jane E. Trust currently serves as Chairman of the Board. Ms. Trust is an “interested person” of each Fund. The appointment of Ms. Trust as Chairman reflects the Board’s belief that her experience, familiarity with each Fund’s day-to-day operations and access to individuals with responsibility for each Fund’s management and operations provides the Board with insight into each Fund’s business and activities and, with her access to appropriate administrative support, facilitates the efficient development of meeting agendas that address each Fund’s business, legal and other needs and the orderly conduct of board meetings. Mr. Hutchinson serves as Lead Independent Director. The Chairman develops agendas for Board meetings in consultation with the Lead Independent Director and presides at all meetings of the Board. The Lead Independent Director, among other things, chairs executive sessions of the Independent Directors, serves as a spokesperson for the Independent Directors and serves as a liaison between the Independent Directors and each Fund’s management between Board meetings. The Independent Directors regularly meet outside the presence of management and are advised by independent legal counsel. The Board also has determined that its leadership structure, as described above, is appropriate in light of the size and complexity of each Fund, the number of Independent Directors (who constitute a super-majority of the Board’s membership) and the Board’s general oversight responsibility. The Board also believes that its leadership structure not only facilitates the orderly and efficient flow of information to the Independent Directors from management, including Western Asset and the Non-U.S. Subadvisers, but also enhances the independent and orderly exercise of its responsibilities.

Audit Committee

Each Fund’s Audit Committee is composed entirely of all of the Independent Directors: Mses. Colman and Kamerick and Messrs. Agdern, Cronin, Cucchi, Gelb, Hutchinson and Roett. Ms. Kamerick serves as the Chair of the Audit Committee and has been determined by the Board to be an “audit committee financial expert.” The principal functions of the Audit Committee are: to (a) oversee the scope of each Fund’s audit, each Fund’s accounting and financial reporting policies and practices and its internal controls and enhance the quality and objectivity of the audit function; (b) approve, and recommend to the Independent Board Members (as such term is defined in the Audit Committee Charter) for their ratification, the selection, appointment, retention or termination of each Fund’s independent registered public accounting firm, as well as approving the compensation thereof; and (c) approve all audit and permissible non-audit services provided to each Fund and certain other persons by each Fund’s independent registered public accounting firm. With respect to GDF, the Audit Committee met twice during the fiscal year ended August 31, 2015. In addition, the Board of Directors most recently reviewed and adopted an Audit Committee Charter at a meeting held on February 11, 2014, a copy of which was attached as Annex A to GDF’s proxy statement dated November 10, 2014. With respect to EHI, the Audit Committee met twice during the fiscal year ended May 31, 2015. In addition, the Board of Directors most recently reviewed and adopted an Audit Committee Charter at a meeting held on February 11, 2014, a copy of which was attached as Annex A to EHI’s proxy statement dated August 27, 2014.

Nominating Committee

Each Fund’s Nominating Committee, the principal function of which is to select and nominate candidates for election as Directors of each Fund, is composed of all of the Independent Directors: Mses. Colman and Kamerick and Messrs. Agdern, Cronin, Cucchi, Gelb, Hutchinson and Roett. Mr. Cronin serves as the Chair of the Nominating Committee. The Nominating Committee may consider nominees recommended by the stockholder as it deems appropriate. Stockholders who wish to recommend a nominee should send recommendations to the Fund’s Secretary that include all information relating to such person that is required to be disclosed in solicitations of proxies for the election of Directors. A recommendation must be accompanied by a written consent of the individual to stand for election if nominated by the Board of Directors and to serve

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if elected by the stockholders. With respect to GDF, the Nominating Committee met three times during the fiscal year ended August 31, 2015. In addition, the Board of Directors most recently reviewed and adopted a Nominating Committee Charter at a meeting held on February 14, 2013, a copy of which was attached as Annex B to GDF’s Proxy Statement dated November 8, 2013. With respect to EHI, the Nominating Committee met twice during the fiscal year ended May 31, 2015. In addition, the Fund’s Board of Directors most recently reviewed and adopted a Nominating Committee Charter at a meeting held on February 14, 2013, a copy of which was attached as Annex B to EHI’s proxy statement dated August 23, 2013.

The Nominating Committee identifies potential nominees through its network of contacts, and in its discretion may also engage a professional search firm. The Nominating Committee meets to discuss and consider such candidates’ qualifications and then chooses a candidate by majority vote. The Nominating Committee does not have specific, minimum qualifications for nominees and has not established specific qualities or skills that it regards as necessary for one or more of each Fund’s Directors to possess (other than any qualities or skills that may be required by applicable law, regulation or listing standard). However, as set forth in the Nominating Committee Charter, in evaluating a person as a potential nominee to serve as a Director of the Fund, the Nominee Committee may consider the following factors, among any others it may deem relevant:

The Nominating Committee does not have a formal diversity policy with regard to the identification of potential director nominees but may consider diversity of professional experience, education and skills when evaluating potential nominees for Board membership.

Investment Committee

Each Fund’s Investment Committee is composed entirely of all of the Independent Directors. The members of the Investment Committee are Mses. Colman and Kamerick and Messrs. Agdern, Cronin, Cucchi, Gelb, Hutchinson and Roett. Ms. Colman serves as Chair of each Fund’s Investment Committee. The principal functions of the Investment Committee are: (a) to review and revise, with LMPFA and/or Clearbridge, the investment performance data and related reports provided to the Board, (b) to review with LMPFA the investment performance benchmarks and peer groups used in reports delivered to the Board and (c) to perform other functions as the Board may delegate from time to time. With respect to GDF, the Investment Committee met four times during the fiscal year ended August 31, 2015. With respect to EHI, the Investment Committee met four times during the fiscal year ended May 31, 2015.

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Compensation Committee

Each Fund’s Compensation Committee is composed entirely of all of the Independent Directors. The members of the Compensation Committee are Mses. Colman and Kamerick and Messrs. Agdern, Cronin, Cucchi, Gelb, Hutchinson and Roett. Mr. Cucchi serves as Chair of each Fund’s Compensation Committee. The principal function of the Compensation Committee is to recommend the appropriate compensation of the Independent Directors for their service on the Board and the committees of the Board. Each Fund’s Compensation Committee was formed on January 1, 2016. As a newly formed committee, the Compensation Committee has not held a meeting.

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Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended, and Section 30(h) of the 1940 Act in combination require each Fund’s Directors and principal officers, persons who own more than 10% of the Funds’ common stock, LMPFA and certain of its affiliates, to file reports of ownership and changes in ownership with the SEC and the NYSE. Such persons and entities are required by SEC regulations to furnish each of the Funds with copies of all such filings. Based solely on its review of the copies of such forms received by it, or written representations from certain reporting persons, GDF believes that, during the fiscal year ended August 31, 2015, all such filing requirements were met with respect to GDF. In addition, based solely on its review of the copies of such forms received by it, or written representations from certain reporting persons, EHI believes that, during the fiscal year ended May 31, 2015, all such filing requirements were met with respect to EHI, except, due to an administrative oversight, a late filing of an initial Form 3 was made on behalf of each of the following

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persons: Amy Olmert, Manager of LMPFA (Form 3 was due in April 2011); Peter Nachtwey, Manager of LMPFA (Form 3 was due in April 2011); and Barry Bilson, Director of Western Asset (Form 3 was due in September 2013).

Investment Manager and S ub-Advisers

LMPFA has served as each Fund’s investment manager since August 1, 2006. LMPFA, located at 620 Eighth Avenue, New York, NY 10018, is a registered investment adviser that provides administrative and compliance oversight services to each Fund.

Under each Fund’s management agreement with LMPFA (the “Management Agreements”), subject to the supervision and direction of each Fund’s Board, LMPFA is delegated the responsibility of managing the Fund’s portfolio in accordance with the Fund’s stated investment objective and policies, making investment decisions for the Fund and placing orders to purchase and sell securities. LMPFA performs administrative and management services necessary for the operation of each Fund, such as (i) supervising the overall administration of the Fund, including negotiation of contracts and fees with and the monitoring of performance and billings of the Fund’s transfer agent, stockholder servicing agents, custodian and other independent contractors or agents; (ii) providing certain compliance, Fund accounting, regulatory reporting, and tax reporting services; (iii) preparing or participating in the preparation of Board materials, registration statements, proxy statements and reports and other communications to stockholders; (iv) maintaining the Fund’s existence, and (v) maintaining the registration and qualification of the Fund’s shares under federal and state laws.

Each Fund’s Management Agreement will continue in effect from year to year provided such continuance is specifically approved at least annually (a) by the Fund’s Board or by a majority of the outstanding voting securities of the Fund (as defined in the 1940 Act), and (b) in either event, by a majority of the Independent Directors with such Independent Directors casting votes in person at a meeting called for such purpose. Each Fund’s Management Agreement provides that LMPFA may render services to others. Each Fund’s Management Agreement is terminable without penalty on not more than 60 days’ nor less than 30 days’ written notice by the Fund when authorized either by a vote of holders of shares representing a majority of the voting power of the outstanding voting securities of the Fund (as defined in the 1940 Act) or by a vote of a majority of the Fund’s Directors, or by LMPFA on not less than 90 days’ written notice, and will automatically terminate in the event of its assignment. Each Fund’s Management Agreement provides that neither LMPFA nor its personnel shall be liable for any error of judgment or mistake of law or for any loss arising out of any investment or for any act or omission in the execution of security transactions for the Fund, except for willful misfeasance, bad faith or gross negligence or reckless disregard of its or their obligations and duties.

LMPFA does not provide day-to-day portfolio management services. Rather, portfolio management for each Fund is provided by Western Asset, located at 385 East Colorado Boulevard, Pasadena, California 91101.

Western Asset provides services to each Fund pursuant to a sub-advisory agreement between LMPFA and Western Asset (the “Western Asset Sub-Advisory Agreements”). Under each Western Asset Sub-Advisory Agreement, subject to the supervision and direction of each Fund’s Board and LMPFA, Western Asset will manage the Fund’s portfolio in accordance with the Fund’s stated investment objective and policies, assist in supervising all aspects of the Fund’s operations, make investment decisions for the Fund, place orders to purchase and sell securities, and employ professional portfolio managers and securities analysts who provide research services to the Fund.

The Western Asset Sub-Advisory Agreements will continue in effect from year to year provided such continuance is specifically approved at least annually (a) by the Board or by a majority of the outstanding voting securities of the Fund (as defined in the 1940 Act), and (b) in either event, by a majority of the Independent Directors with such Independent Directors casting votes in person at a meeting called for such purpose. The Board or a majority of the outstanding voting securities of each Fund (as defined in the 1940 Act) may terminate that Western Asset Sub-Advisory Agreement without penalty, in each case on not more than 60 days’ nor less than 30 days’ written notice to Western Asset. Western Asset may terminate each Western Asset Sub-Advisory Agreement on 90 days’ written notice to each Fund and LMPFA. LMPFA and Western Asset may terminate each Western Asset Sub-Advisory Agreement upon their mutual written consent. Each Western Asset Sub-Advisory Agreement will terminate automatically in the event of assignment by Western Asset and shall not be assignable by LMPFA without the consent of Western Asset.

In connection with Western Asset’s service to each Fund, Western Asset Management Company Pte. Ltd. in Singapore and Western Asset Management Company Limited in London provide certain subadvisory services to each Fund pursuant to

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sub-advisory agreements with each of Western Singapore and Western Asset Limited (collectively, the “Non-U.S. Sub-Advisory Agreements”). Additionally, GDF utilizes Western Japan for investment in Japan, while EHI does not. Western Singapore, Western Japan and Western Asset Limited are responsible, generally, for managing Asian (excluding Japan), Japanese, and global and non-U.S. dollar fixed income mandates, respectively. Because GDF does not have any investments in Japan, nor are any investments in Japan currently being contemplated, it is not anticipated that any changes to EHI’s portfolio will be made as a result of the non-utilization of Western Japan.

Western Singapore was established in 2000 and has offices at 1 George Street #23-01, Singapore 049145. Western Japan was founded in 1991 and has offices at 36F Shin- Marunouchi Building, 5-1 Marunouchi 1-Chome Chiyoda-Ku, Tokyo 100-6536, Japan. Western Asset Limited was founded in 1984 and has offices at 10 Exchange Square, Primrose Street, London EC2A2EN. Each of Western Singapore, Western Japan and Western Asset Limited is a corporation organized under the laws of Singapore, Japan and England, respectively. Each of Western Singapore, Western Japan and Western Asset Limited is registered under the Investment Advisers Act of 1940, as amended, and has irrevocably designated the Secretary of the U.S. Securities and Exchange Commission, as its agent to accept service of process in any suit, action or proceeding to enforce the provisions of U.S. securities laws. There can be no assurance that the Non-U.S. Sub-Advisers or Western Japan will have any assets in the United States that could be attached in connection with any action, suit or proceeding. In addition, it may not be possible to enforce judgments of U.S. courts or liabilities in original actions predicated upon civil liability provisions of U.S. law in foreign courts against any Non-U.S. Sub-Adviser or Western Japan.

The Non-U.S. Sub-Advisory Agreements will continue in effect from year to year provided such continuance is specifically approved at least annually (a) by the Board or by a majority of the outstanding voting securities of each Fund (as defined in the 1940 Act), and (b) in either event, by a majority of the Independent Directors with such Independent Directors casting votes in person at a meeting called for such purpose. The Board or a majority of the outstanding voting securities of each Fund (as defined in the 1940 Act) may terminate each Non-U.S. Sub-Advisory Agreement without penalty, in each case on not more than 60 days’ nor less than 30 days’ written notice to a respective Non-U.S. Subadviser. Each Non-U.S. Subadviser may terminate the Non-U.S. Sub-Advisory Agreement on 90 days’ written notice to each Fund and Western Asset. Western Asset and the Non-U.S. Subadviser may terminate the Non-U.S. Sub-Advisory Agreement upon their mutual written consent. The Non-U.S. Sub-Advisory Agreement will terminate automatically in the event of assignment by the Non-U.S. Subadviser and shall not be assignable by Western Asset without the consent of the Non-U.S. Subadviser.

Western Japan provides certain sub-advisory services to GDF pursuant to a sub-advisory agreement dated February 3, 2009 (the “Western Japan Sub-Advisory Agreement”). The Western Japan Sub-Advisory Agreement will continue in effect from year to year provided such continuance is specifically approved at least annually (a) by the Board or by a majority of the outstanding voting securities of GDF (as defined in the 1940 Act), and (b) in either event, by a majority of the Independent Directors with such Independent Directors casting votes in person at a meeting called for such purpose. The Board or a majority of the outstanding voting securities of GDF (as defined in the 1940 Act) may terminate the Western Japan Sub-Advisory Agreement without penalty, in each case on not more than 60 days’ nor less than 30 days’ written notice to Western Japan. Western Japan may terminate the Western Japan Sub-Advisory Agreement on 90 days’ written notice to GDF and Western Asset. Western Asset and Western Japan may terminate the Western Japan Sub-Advisory Agreement upon their mutual written consent. The Western Japan Sub-Advisory Agreement will terminate automatically in the event of assignment by Western Japan and shall not be assignable by Western Asset without the consent of Western Asset Limited. EHI does not utilize Western Japan as a subadviser. Because GDF does not have any investments in Japan, nor are any investments in Japan currently being contemplated, it is not anticipated that any changes to EHI’s portfolio will be made as a result of the non-utilization of Western Japan.

GDF currently pays LMPFA an investment management fee, calculated daily and paid monthly, at an annual rate of 1.05% of GDF’s average weekly net assets. EHI currently pays LMPFA an investment management fee, calculated daily and paid monthly, at an annual rate of 0.85% of EHI’s managed assets, along with a voluntary investment management fee waiver of 0.05%, which reduced the annual rate of that fee to 0.80% of the average daily managed assets. LMPFA implemented a voluntary investment management fee waiver on EHI of 0.05% beginning on March 1, 2010 continuing through December 31, 2016. LMPFA has a financial interest in the Merger because its respective fees under agreements with EHI, which are based on managed assets that take into account the use of leverage, are higher than under the respective agreements with GDF, which are based on net assets and do not account for the use leverage, and increase as the assets of EHI increase, including the use of leverage. In addition, it is anticipated that former stockholders of GDF will experience a management fee increase of 0.11%, or approximately $161,000 following the Merger as a result of EHI’s management fee being calculated on managed assets, rather than net assets. However, assuming the impact of EHI’s voluntary

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investment management fee waiver of 0.05%, it is anticipated that GDF will experience a management fee increase of 0.04%, or approximately $58,000 and GDF’s total expense ratio will decline by 0.07% on net assets, from 1.67% to 1.60% as a result of the Merger.

The total dollar amounts paid to LMPFA under the Management Agreements with each Fund for the last three fiscal years are as follows:

With respect to each Fund, LMPFA pays sub-advisory fees to Western Asset at the rate of 70% of the management fee paid to LMPFA.

Western Asset pays each of Western Singapore, Western Japan and Western Asset Limited a fee for its services at no additional expense to the Funds. The fee is based upon a percentage of the management fee equal to the amount of the Funds’ assets Western Asset allocates to each of Western Singapore, Western Japan and Western Asset Limited to manage.

LMPFA, Western Asset, Western Singapore, Western Japan and Western Asset Limited are wholly-owned subsidiaries of Legg Mason. Legg Mason, whose principal executive offices are at 100 International Drive, Baltimore, Maryland 21202, is a global asset management company.

Additional information about the factors considered by the Board of EHI in approving its Management Agreement and Sub-Advisory Agreements is set forth in EHI’s Semi-Annual Report to Stockholders for the Semi-Six-Month Period ended March 31, 2015. Additional information about the factors considered by the Board of GDF in approving its Management Agreement and Sub-Advisory Agreements is set forth in GDF’s Semi-Annual Report to Stockholders for the Six-Month Period ended February 28, 2015.

Codes of Ethics

Pursuant to Rule 17j-1 under the 1940 Act, each of the Funds, LMPFA, Western Asset, Western Singapore, Western Japan and Western Asset Limited have adopted codes of ethics that permit their respective personnel to invest in securities for their own accounts, including securities that may be purchased or held by the Funds (the “Codes of Ethics”). All personnel must place the interests of clients first and avoid activities, interests and relationships that might interfere with the duty to make decisions in the best interests of the clients. All personal securities transactions by employees must adhere to the requirements of the applicable Codes of Ethics and must be conducted in such a manner as to avoid any actual or potential conflict of interest, the appearance of such a conflict, or the abuse of an employee’s position of trust and responsibility.

When personnel covered by either Fund’s Code of Ethics are employed by more than one of the managers affiliated with Legg Mason, those employees may be subject to such affiliate’s Code of Ethics adopted pursuant to Rule 17j-1, rather than the codes of ethics of the Funds.

Copies of the Codes of Ethics of the Funds, LMPFA, Western Asset, Western Singapore, Western Japan and Western Asset Limited are on file with the SEC.

Proxy Voting Policies

Although individual Directors may not agree with particular policies or votes by LMPFA, Western Asset, Western Singapore, or Western Asset Limited, each Fund’s Board has delegated proxy voting discretion to LMPFA and/or Western Asset, believing that LMPFA and/or Western Asset should be responsible for voting because it is a matter relating to the investment decision making process.

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LMPFA delegates the responsibility for voting proxies for each Fund to Western Asset through its contracts with Western Asset. Western Asset will use its own proxy voting policies and procedures to vote proxies. Accordingly, LMPFA does not expect to have proxy-voting responsibility for the Funds. Should LMPFA become responsible for voting proxies for any reason, such as the inability of Western Asset to provide investment advisory services, LMPFA shall utilize the proxy voting guidelines established by the most recent subadviser to vote proxies until a new subadviser is retained. In the case of a material conflict between the interests of LMPFA (or its affiliates if such conflict is known to persons responsible for voting at LMPFA) and either Fund, the Board of Directors of LMPFA shall consider how to address the conflict and/or how to vote the proxies. LMPFA shall maintain records of all proxy votes in accordance with applicable securities laws and regulations, to the extent that LMPFA votes proxies. LMPFA shall be responsible for gathering relevant documents and records related to proxy voting from Western Asset and providing them to the relevant Fund as required for the Fund to comply with applicable rules under the 1940 Act.

LMPFA’s, Western Asset’s, Western Singapore’s and Western Asset Limited’s Proxy Voting Policies and Procedures govern in determining how proxies relating to each Fund’s portfolio securities are voted and are attached as Appendix D, Appendix E and Appendix F, respectively, to this Proxy Statement/Prospectus. Information regarding how each Fund voted proxies (if any) relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge (1) by calling 888-777-0102, (2) on the Fund’s website at http://www.lmcef.com and (3) on the SEC’s website at http://www.sec.gov .

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Other Accounts Managed by Investment Professionals

The table below identifies the number of accounts (other than the Funds) for which the each Fund’s investment professionals have day-to-day management responsibilities and the total assets in such accounts, within each of the following categories: registered investment companies, other pooled investment vehicles and other accounts. Data for registered investment companies is based on the specific investment professionals that are named in the applicable disclosure documents. Data for other pooled investment vehicles and other accounts is based on Western Asset’s practice of naming a particular individual to maintain oversight responsibility for each vehicle/account. Where the named individual has been assigned primary responsibility for oversight of another pooled investment vehicle or other account, that vehicle/account has been allocated exclusively to that individual for disclosure purposes. For each category, the number of accounts and total assets in the accounts where fees are based on performance is also indicated as of February 29, 2016.

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Investment Professional Compensation

With respect to the compensation of the investment professionals, Western Asset’s compensation system assigns each employee a total compensation range, which is derived from annual market surveys that benchmark each role with its job function and peer universe. This method is designed to reward employees with total compensation reflective of the external market value of their skills, experience, and ability to produce desired results. Standard compensation includes competitive base salaries, generous employee benefits, and a retirement plan.

In addition, Western Asset’s employees are eligible for bonuses. These are structured to closely align the interests of employees with those of Western Asset, and are determined by the professional’s job function and pre-tax performance as measured by a formal review process. All bonuses are completely discretionary. The principal factor considered is an investment professional’s investment performance versus appropriate peer groups and benchmarks (e.g., a securities index and with respect to a fund, the benchmark set forth in the fund’s Prospectus to which the fund’s average annual total returns are compared or, if none, the benchmark set forth in the fund’s annual report). Performance is reviewed on a 1, 3 and 5 year basis for compensation—with 3 years having the most emphasis. Western Asset may also measure an investment professional’s pre-tax investment performance against other benchmarks, as it determines appropriate. Because investment professionals are generally responsible for multiple accounts (including the funds) with similar investment strategies, they are generally compensated based on the performance of the aggregate group of similar accounts, rather than a specific account. Other factors that may be considered when making bonus decisions include client service, business development, length of service to Western Asset, management or supervisory responsibilities, contributions to developing business strategy and overall contributions to Western Asset’s business.

Finally, in order to attract and retain top talent, all professionals are eligible for additional incentives in recognition of outstanding performance. These are determined based upon the factors described above and include Legg Mason stock options and long-term incentives that vest over a set period of time past the award date.

Potential Conflicts of Interest

Conflicts of Interest. The Managers and investment professionals have interests which may conflict with the interests of the Fund. There is no guarantee that the policies and procedures adopted by the Managers and the Funds will be able to identify or mitigate these conflicts of interest.

Some examples of material conflicts of interest include:

Allocation of Limited Time and Attention. An investment professional who is responsible for managing multiple funds and/or accounts may devote unequal time and attention to the management of those funds and/or accounts. An investment

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professional may not be able to formulate as complete a strategy or identify equally attractive investment opportunities for each of those funds and accounts as might be the case if he or she were to devote substantially more attention to the management of a single fund. Such an investment professional may make general determinations across multiple funds, rather than tailoring a unique approach for each fund. The effects of this conflict may be more pronounced where funds and/or accounts overseen by a particular investment professional have different investment strategies.

Allocation of Limited Investment Opportunities; Aggregation of Orders. If an investment professional identifies a limited investment opportunity that may be suitable for multiple funds and/or accounts, the opportunity may be allocated among these several funds or accounts, which may limit a fund’s ability to take full advantage of the investment opportunity. Additionally, Western Asset, Western Singapore, Western Japan or Western Asset Limited may aggregate transaction orders for multiple accounts for purpose of execution. Such aggregation may cause the price or brokerage costs to be less favorable to a particular client than if similar transactions were not being executed concurrently for other accounts. In addition, Western Asset’s, Western Singapore’s, Western Japan’s or Western Asset Limited’s trade allocation policies may result in a fund’s orders not being fully executed or being delayed in execution.

Pursuit of Differing Strategies. At times, an investment professional may determine that an investment opportunity may be appropriate for only some of a funds and/or accounts for which he or she exercises investment responsibility, or may decide that certain of a funds and/or accounts should take differing positions with respect to a particular security. In these cases, the investment professional may place separate transactions for one or more funds or accounts which may affect the market price of the security or the execution of the transaction, or both, to the detriment or benefit of one or more other funds and/or accounts. For example, an investment professional may determine that it would be in the interest of another account to sell a security that a fund holds long, potentially resulting in a decrease in the market value of the security held by a fund.

Cross Trades. Investment professionals may manage funds that engage in cross trades, where one of the manager’s funds or accounts sells a particular security to another fund or account managed by the same manager. Cross trades may pose conflicts of interest because of, for example, the possibility that one account sells a security to another account at a higher price than an independent third party would pay or otherwise enters into a transaction that it would not enter into with an independent party, such as the sale of a difficult-to-obtain security.

Selection of Broker/Dealers. Investment professionals may select or influence the selection of the brokers and dealers that are used to execute securities transactions for the funds and/or accounts that they supervise. In addition to executing trades, some brokers and dealers provide Western Asset, Western Singapore or Western Asset Limited with brokerage and research services. These services may be taken into account in the selection of brokers and dealers, in determination whether to select a dealer to effect a trade on a principal basis (as normally is the case for the funds) or determination whether to select a broker to effect a trade on an agency basis for a commission. This may result in the payment of higher brokerage fees and/or execution at a less favorable price than might have otherwise been available. The services obtained may ultimately be more beneficial to certain of the Managers’ funds or accounts than to others (but not necessarily to the funds that pay the increased commission or incur the less favorable execution). A decision as to the selection of brokers and dealers could therefore yield disproportionate costs and benefits among the funds and/or accounts managed.

Variation in Financial and Other Benefits. A conflict of interest arises where the financial or other benefits available to an investment professional differ among the funds and/or accounts that he or she manages. If the amount or structure of the investment manager’s management fee and/or an investment professional’s compensation differs among funds and/or accounts (such as where certain funds or accounts pay higher management fees or performance-based management fees), the investment professional might be motivated to help certain funds and/or accounts over others. Similarly, the desire to maintain assets under management or to enhance the investment professional’s performance record or to derive other rewards, financial or otherwise, could influence the investment professional in affording preferential treatment to those funds and/or accounts that could most significantly benefit the investment professional. An investment professional may, for example, have an incentive to allocate favorable or limited opportunity investments or structure the timing of investments to favor such funds and/or accounts. Also, an investment professional’s or the Managers’ desire to increase assets under management could influence the investment professional to keep a fund open for new investors without regard to potential benefits of closing the fund to new investors. Additionally, the investment professional might be motivated to favor funds and/or accounts in which he or she has an ownership interest or in which the investment manager and/or its affiliates have ownership interests. Conversely, if an investment professional does not personally hold an investment in a particular fund, the investment professional’s conflicts of interest with respect to such Fund be more acute.

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Related Business Opportunities. LMPFA or its affiliates may provide more services (such as distribution or recordkeeping) for some types of funds or accounts than for others. In such cases, an investment professional may benefit, either directly or indirectly, by devoting disproportionate attention to the management of funds and/or accounts that provide greater overall returns to LMPFA and its affiliates.

An investment professional may also face other potential conflicts of interest in managing the Fund, and the description above is not a complete description of every conflict of interest that could be deemed to exist in managing both the Fund and the other funds and accounts listed above.

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ADDITIONAL INFORMATION ABOUT THE FUNDS

Legg Mason, Western Asset and Non-U.S. Subadvisers, have a financial interest in the Merger because their respective fees under agreements with EHI, which are based on managed assets that take into account the use of leverage, are higher than under the respective agreements with GDF, which are based on net assets and do not account for the use leverage, and increase as the assets of EHI increase, including the use of leverage. EHI’s assets will increase as a result of the Merger (although this increase in assets is expected to be offset by the concomitant loss of GDF’s assets and the related fees).

Further information about EHI is included in EHI’s Annual Report to Stockholders for the Fiscal Year Ended May 31, 2015, filed with the SEC on July 27, 2015 (accession no. 0001193125-15-263659), EHI’s Semi-Annual Report to Stockholders for the six-month period ended November 30, 2015, filed with the SEC on January 25, 2016 (accession no. 0001193125-16-436681), and GDF’s Annual Report to Stockholders for the Fiscal Year Ended August 31, 2015, filed with the SEC on October 22, 2015 (accession no. 0001193125-15-350735). Copies of these documents, the SAI related to this Proxy Statement/Prospectus and any subsequently released stockholder reports are available upon request and without charge, by writing to the Funds at 620 Eighth Avenue, New York, New York 10041, by visiting the Funds’ website at www.lmcef.com or by calling the Funds at 888-777-0102.

The Funds are subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and in accordance therewith, file reports and other information including proxy material, reports and charter documents with the SEC. These reports and other information can be inspected and copied at the public reference facilities maintained by the SEC at 100 F Street, NE, Washington, DC 20549. Reports and other information about each Fund are available on the Edgar Database on the SEC’s website at www.sec.gov. Copies of such material can also be obtained from the Public Reference Branch, Office of Consumer Affairs and Information Services, SEC, 100 F Street, NE, Washington, DC 20549 at prescribed rates. You may obtain information about the operation of the Public Reference Room by calling the SEC at 202-551-8090.

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Financial Highligh ts

The financial highlights tables are intended to help you understand the performance of each Fund for the past five years. Certain information reflects financial results for a single share. Total return represents the rate that a stockholder would have earned (or lost) on a Fund share assuming reinvestment of all dividends and distributions. The information in the following tables has been derived from the Funds’ financial statements. The financial statements of EHI for the fiscal years ended, 2011, 2012, 2013, 2014 and 2015 and the financial statements of GDF for the fiscal years ended 2011, 2012, 2013, 2014 and 2015 have been audited by KPMG LLP, an independent registered public accounting firm, whose reports, along with the Funds’ financial statements, are included in the Funds’ annual reports (available upon request). The financial highlights of EHI for the six-month period ended November 30, 2015 and GDF for the six-month period ended February 29, 2016 are unaudited.