Form of Advisor Class Distribution Agreement

AGREEMENT made this [—] day of November, 2012, between PERMAL HEDGE STRATEGIES FUND, a Maryland statutory trust, (the “Fund”), and Legg Mason Investor Services, LLC (the “Distributor”).

WHEREAS, the Fund is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as a closed-end management investment company and it is in the interest of the Fund to offer its Adviser Class Shares of beneficial interest, par value $0.00001 per share (the “Adviser Class Shares”) for sale continuously and to appoint one or more principal underwriters for the purpose of facilitating such offers and sales;

WHEREAS, the Distributor serves as the principal underwriter for the Fund’s Broker Class Shares of beneficial interest, par value $.00001 per share pursuant to a distribution agreement between the Fund and the Distributor;

WHEREAS, the Fund and the Distributor wish to enter into an agreement with each other with respect to the continuous offering of the Fund’s Adviser Class Adviser;

The Fund hereby appoints the Distributor a principal underwriter in connection with the offering and sale of the Adviser Class Shares on the terms set forth in this Agreement and the Distributor hereby accepts such appointment and agrees to act hereunder.

(a) The Distributor agrees to distribute Adviser Class Shares, as agent for the Fund, from time to time during the term of this Agreement, upon the terms described in the Prospectus (the “Offering”). As used in this Agreement, the term “Prospectus” shall mean the prospectus included as part of the Fund’s Registration Statement on Form N-2, as such prospectus may be amended or supplemented from time to time, and the term “Registration Statement” shall mean the Registration Statement most recently filed from time to time by the Fund with the Securities and Exchange Commission (the “Commission”) and effective under the Securities Act of 1933, as amended (the “1933 Act”), as such Registration Statement is amended by any amendments thereto at the time in effect.

(b) The Distributor will hold itself available to receive orders, satisfactory to the Distributor, for the purchase of Adviser Class Adviser Class Shares and will accept such orders on behalf of the Fund and will transmit such orders as are so accepted to the Fund’s transfer and shareholder servicing agent as promptly as practicable. The Distributor shall promptly forward to

the Fund’s custodian funds received in respect of purchases of Adviser Class Shares in accordance with the instructions provided by or on behalf of the Fund. Purchase orders shall be deemed effective at the time and in the manner set forth in the Prospectus.

(c) The Fund shall be obligated to provide the Distributor the Adviser Class Shares needed, but not more than the Adviser Class Shares needed (except for clerical errors in transmission), to fill unconditional orders for Adviser Class Shares placed with the Distributor by investors and securities dealers. The price at which each Adviser Class Share shall be sold shall be the net asset value per Adviser Class Share, determined as set forth in the Prospectus, used in determining the offering price on which such orders were based. The Distributor will perform its duties hereunder on a best efforts basis, and it is understood that the Distributor does not undertake to distribute any specific number or amount of Adviser Class Shares or to purchase any Adviser Class Shares for its own account.

(e) The Distributor will not make offers or sales of Adviser Class Shares except in the manner set forth in the Registration Statement. The Fund has established procedures that are to be followed in connection with the offer and sale of Adviser Class Shares, and the Distributor agrees not to make offers or sales of any Adviser Class Shares except in compliance with such procedures. In this regard, the Distributor agrees that:

(i) No sale of Adviser Class Shares to any one investor will be for less than the minimum amount as may be specified in the Prospectus or as the Fund otherwise shall advise the Distributor.

(ii) No offer or sale of Adviser Class Shares will be made in any state or jurisdiction, or to any prospective investor located in any state or jurisdiction, where Adviser Class Shares have not been registered or qualified for offer and sale under applicable state securities laws unless Adviser Class Shares are exempt from the registration or qualification requirements of such laws.

(iii) Sales of Adviser Class Shares will be made only to “accredited investors” as that term is defined by Rule 501(a) of Regulation D promulgated under the 1933 Act.

(f) In connection with such purchases and repurchases, the Fund authorizes and designates the Distributor to take any action, and to make any arrangements for the collection of purchase monies or for the payment of repurchase proceeds authorized or permitted to be taken or made in accordance with the 1940 Act and as set forth in the Declaration of Trust, By-Laws and the then-current Prospectus of the Fund.

(g) The authority of the Distributor under this Section 2 may, with the consent of the Fund, be redelegated in whole or in part to another person or firm. If, consistent with this paragraph, the Distributor enters into selling agreements with other brokers or dealers as selling agents or selected dealers or with registered investment advisers or other intermediaries (each, an “Intermediary”) which may recommend, or make available for purchase, to their own respective clients or customers Adviser Class Shares of the Fund, it agrees to do so on a form approved by the Fund’s officers.

(h) The Fund shall furnish the Distributor, with all possible promptness, an advice of each computation of net asset value.

(i) The Distributor shall be responsible for reviewing and making such filings with the FINRA, as required, of advertisements and sales literature relating to the Fund. The Distributor shall be responsible for reviewing the Registration Statement for compliance with the requirement of the FINRA Conduct Rules that the Fund’s Prospectus contain disclosure of the details of any arrangement by which special cash compensation arrangements are made available to a FINRA member distributing the Fund’s securities, which arrangements are not made available on the same terms to all FINRA members who distribute the Fund’s securities.

(j) The Distributor shall adopt and follow procedures for the confirmation of sales to investors and Intermediaries timeliness of orders, the collection of amounts payable by investors and Intermediaries on such sales, the correction of errors related to distribution of Adviser Class Shares, the cancellation of unsettled transactions, and assisting with the solicitation of proxies, and any other matters governed by Rule 38a-1 under the 1940 Act (as may apply to a principal underwriter for a registered investment company), each as may be necessary to comply with the requirements of the FINRA, any other self-regulatory organization, and the federal and state securities laws. The Distributor shall provide reports or other information to the Fund at the Fund’s reasonable request, including, without limitation, reports related to the operation and implementation of the Fund’s policies related to customer privacy, safeguarding of customer information, sales and marketing practices or other policies and procedures of the Fund.

(k) The Distributor agrees that it has adopted and implemented an anti-money-laundering program in compliance with the USA PATRIOT Act of 2001, the regulations thereunder and FINRA Conduct Rules, including, without limitation, customer identification program procedures and monitoring for suspicious activity. The Distributor additionally agrees that it has adopted and implemented procedures to comply with applicable law and regulation related to cash transaction reporting requirements, as well as monitoring and reporting under FinCEN, OFAC and other government watch lists. The Distributor shall provide reports or other information to the Fund at the Fund’s reasonable request, related to the operation and implementation of any of the Fund’s anti-money-laundering policies for which the Distributor is responsible.

Nothing herein contained shall prevent the Distributor from entering into like distribution arrangements with other investment companies.

(a) Any of the outstanding Adviser Class Shares may be tendered for repurchase pursuant to tender offers made from time to time by the Fund, and the Fund agrees to repurchase the Adviser Class Shares so tendered in accordance with the requirements of the Securities Exchange Act of 1934, as amended (the “1934 Act”), and the rules and regulations thereunder

and the applicable tender offer provisions set forth in the Prospectus of the Fund. The price to be paid to repurchase the Adviser Class Shares shall be equal to the net asset value per Share, determined as set forth in the Prospectus.

(b) The Fund shall pay the total amount of the repurchase price as described in Section 3(a) above paragraph pursuant to the instructions of the Distributor or return the tendered Adviser Class Shares promptly following the termination or withdrawal of the tender offer.

(c) The proceeds of any repurchase of Adviser Class Shares shall be paid by the Fund to or for the account of the shareholder in accordance with the applicable provisions of the Prospectus.

(d) Repurchases of Adviser Class Shares pursuant to a tender offer or payment may be suspended at such times as may be determined by the Board of Trustees of the Fund as set forth in the Prospectus including, without limitation, in order to comply with Regulation M-A under the 1934 Act.

(e) The Distributor acknowledges that repurchase proceeds may be reduced by the amount of any redemption or similar fee described in the Prospectus and any related offer to purchase.

(a) The Fund agrees to sell its Adviser Class Shares so long as it has Adviser Class Shares available for sale and to cause the Fund’s transfer and shareholder servicing agent to record on its books the ownership of such Adviser Class Shares registered in such names and amounts as the Distributor has requested in writing or other means of data transmission, as promptly as practicable after receipt by the Fund of the net asset value thereof and written request of the Distributor therefor.

(b) The Fund shall keep the Distributor fully informed with regard to its affairs and shall, to the extent permitted by applicable law, furnish to the Distributor copies of all publicly available information, financial statements and other documents which the Distributor may reasonably request for use in connection with the distribution of Adviser Class Shares of the Fund, and this shall include one certified copy, upon request by the Distributor, of all financial statements prepared for the Fund by independent accountants and such reasonable number of copies of its most current Prospectus and annual and interim reports as the Distributor may request and shall cooperate fully in the efforts of the Distributor to arrange for the sale of the Adviser Class Shares and in the performance of the Distributor under this Agreement.

(c) The Fund shall take, from time to time, such steps as may be necessary so that there will be available for sale such number of Adviser Class Shares as the Distributor may be expected to sell. The Fund agrees to file from time to time such amendments, reports and other documents as may be necessary in order that there may be no untrue statement of a material fact in the Registration Statement or Prospectus, or necessary in order that there may be no omission to state a material fact in the Registration Statement or Prospectus which omission would make the statements therein misleading.

(d) The Fund shall use its best efforts to qualify and maintain the qualification of an appropriate number of its Adviser Class Shares for sale under the securities laws of such states as the Distributor and the Fund may approve, and, if necessary or appropriate in connection therewith, to qualify and maintain the qualification of the Fund as a broker or dealer in such states; provided that the Fund shall not be required to amend its Declaration of Trust or By-Laws to comply with the laws of any state, to maintain an office in any state, to change the terms of the offering of the Adviser Class Shares in any state from the terms set forth in its Registration Statement and Prospectus, to qualify as a foreign corporation in any state or to consent to service of process in any state other than with respect to claims arising out of the offering of the Adviser Class Shares. The Distributor shall furnish such information and other material relating to its affairs and activities as may be required by the Fund in connection with such qualifications.

(a) The Fund shall bear all costs and expenses of the continuous offering of the Adviser Class Shares in connection with: (i) its fees and disbursements of its counsel and independent accountants, (ii) the preparation, filing and printing of any registration statements and/or prospectuses required to be filed by and under the federal and state securities laws, (iii) the preparation and mailing of annual and interim reports, prospectuses and proxy materials to shareholders and (iv) the qualifications of Adviser Class Shares for sale and of the Fund as a broker or dealer under the securities laws of such states or other jurisdictions as shall be selected by the Fund and the Distributor pursuant to Section 4(d) hereof and the cost and expenses payable to each such state for continuing qualification therein.

(b) The Distributor shall bear (i) the costs and expenses of preparing, printing and distributing any materials used by the Distributor in connection with its distribution of the Adviser Class Shares, including the additional cost of printing copies, at printer’s over-run cost, of the Prospectus and of annual and interim reports to shareholders other than copies thereof required for distribution to shareholders or for filing with any federal and state securities authorities, (ii) any expenses of advertising incurred by the Distributor in connection with such distribution of the Adviser Class Shares and (iii) the expenses of registration or qualification of the Distributor as a dealer or broker under federal or state laws and the expenses of continuing such registration or qualification.

The Fund agrees to indemnify, defend, and hold free and harmless, the Distributor, its officers and directors and any person who controls the Distributor within the meaning of Section 15 of the 1933 Act from and against any and all claims, demands, liabilities and expenses (including the cost of investigating or defending such claims, demands or liabilities and any counsel fees incurred in connection therewith) which the Distributor, its officers, directors or any such controlling person may incur under common law or otherwise, arising out of or based upon any untrue statement of a material fact contained in the Registration Statement or Prospectus or arising out of or based upon any alleged omission to state a material fact required

to be stated in either thereof or necessary to make the statements in either thereof not misleading, except insofar as such claims, demands, liabilities or expenses arise out of or are based upon any such untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with information furnished in writing by the Distributor to the Fund for use in the Registration Statement or Prospectus; provided, however, that this indemnity agreement, to the extent that it might require indemnity of any person who is also an officer or Trustee of the Fund or who controls the Fund within the meaning of Section 15 of the 1933 Act, shall not inure to the benefit of such officer, Trustee or controlling person unless a court of competent jurisdiction shall determine, or it shall have been determined by controlling precedent, that such result would not be against public policy; and further provided, that in no event shall anything contained herein be so construed as to protect the Distributor against any liability to the Fund or to its security holders to which the Distributor would otherwise be subject by reason of willful misfeasance, bad faith, or gross negligence in the performance of its duties, or by reason of its reckless disregard of its obligations under this Agreement. The Fund’s agreement to indemnify the Distributor, its officers and directors and any such controlling person as aforesaid is expressly conditioned upon the Fund’s being promptly notified of any action brought against the Distributor, its officers or directors, or any such controlling person, such notification to be given to the Fund at its principal business office. The Fund agrees promptly to notify the Distributor of the commencement of any litigation or proceedings against it or any of its officers or Trustees in connection with the issue and sale of any Adviser Class Shares.

The Distributor agrees to indemnify, defend, and hold free and harmless, the Fund, its Trustees and officers and any person who controls the Fund, if any, within the meaning of Section 15 of the 1933 Act from and against any and all claims, demands, liabilities and expenses (including the cost of investigating or defending against such claims, demands or liabilities and any counsel fees incurred in connection therewith) which the Fund, its Trustees or officers or any such controlling person may incur under common law or otherwise, but only to the extent that such liability or expense incurred by the Fund, its Trustees or officers or such controlling person resulting from such claims or demands shall arise out of or be based upon any alleged untrue statement of a material fact contained in information furnished in writing by the Distributor to the Fund for use in the preparation of the Registration Statement or Prospectus or shall arise out of or be based upon any alleged omission to state a material fact in such information or a fact necessary to make such information not misleading, or its performance or failure to perform its duties and obligations under this agreement, it being understood that the Fund will rely upon the information provided by the Distributor for use in the preparation of the Registration Statement and Prospectus. The Distributor’s agreement to indemnify the Fund, its Trustees and officers, and any such controlling person as aforesaid is expressly conditioned upon the Distributor’s being promptly notified of any action brought against the Fund, its Trustees or officers or any such controlling person, such notification to be given to the Distributor at its principal business office.

The Fund represents that it is registered as a closed-end management investment company under the 1940 Act, and agrees that it will comply with the provisions of the 1940 Act and of the rules and regulations thereunder. The Fund and the Distributor each agree to comply with the applicable terms and provisions of the 1940 Act, the 1933 Act and, subject to the provisions of Section 4(d), applicable state “Blue Sky” laws. The Distributor agrees to comply with the applicable terms and provisions of the 1934 Act.

This Agreement shall commence on the date first set forth above. This Agreement shall continue in effect for a period more than two years from the date hereof only so long as such continuance is specifically approved at least annually in conformity with the requirements of the 1940 Act.

This Agreement shall terminate automatically in the event of its assignment (as defined by the 1940 Act) unless the Commission has issued an order exempting the Fund and the Distributor from the provisions of the 1940 Act which would otherwise have effected the termination of this Agreement. In addition, this Agreement may be terminated by either party at any time, without penalty, on not more than sixty days’ nor less than thirty days’ written notice to the other party.

Any notice required to be given pursuant to this Agreement shall be deemed duly given if delivered or mailed by registered mail, postage prepaid, (1) to the Distributor at 100 Light Street, Baltimore, Maryland 21202., Attention: [ ], or (2) to the Fund at
620 Eighth Avenue, New York, NY 10018, Attention: R. Jay Gerken.

The Trustees have authorized the execution of this Agreement in their capacity as Trustees and not individually and the Distributor agrees that neither the shareholders nor the Trustees nor any officer, employee, representative or agent of the Fund shall be personally liable upon, nor shall resort be had to their private property for the satisfaction of, obligations given, executed or delivered on behalf of or by the Fund, that the shareholders, Trustees, officers, employees, representatives and agents of the Fund shall not be personally liable hereunder, and that it shall look solely to the property of the Fund for the satisfaction of any claim hereunder.

This Agreement shall be governed and construed in accordance with the laws of the State of New York.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written.



LEGG MASON INVESTOR SERVICES, LLC

By:
		Name:
		Title:

PERMAL HEDGE STRATEGIES FUND

By:
		Name:
		Title