|
|
|
ClearBridge Energy Midstream Opportunity Fund Inc. 2021 Semi-Annual Report
|
|
3
|
Statement of assets and liabilities (unaudited)
May 31, 2021
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
Investments, at value (Cost $517,825,269)
|
|
$
|
492,931,209
|
|
Income tax receivable
|
|
|
6,251,723
|
|
Dividends and distributions receivable
|
|
|
398,808
|
|
Interest receivable
|
|
|
56
|
|
Prepaid expenses
|
|
|
43,886
|
|
Total Assets
|
|
|
499,625,682
|
|
|
|
Liabilities:
|
|
|
|
|
Loan payable (Note 5)
|
|
|
57,000,000
|
|
Senior Secured Notes (net of deferred debt issuance and offering costs of $183,413) (Note 6)
|
|
|
44,920,166
|
|
Mandatory Redeemable Preferred Stock ($100,000 liquidation value per share; 431 shares issued and outstanding) (net of
deferred offering costs of $272,773) (Note 7)
|
|
|
42,827,227
|
|
Investment management fee payable
|
|
|
394,721
|
|
Interest expense payable
|
|
|
363,948
|
|
Distributions payable to Mandatory Redeemable Preferred Stockholders
|
|
|
84,045
|
|
Directors fees payable
|
|
|
1,533
|
|
Accrued expenses
|
|
|
270,749
|
|
Total Liabilities
|
|
|
145,862,389
|
|
Total Net Assets Applicable to Common Shareholders
|
|
$
|
353,763,293
|
|
|
|
Net Assets Applicable to Common Shareholders:
|
|
|
|
|
Common stock par value ($0.001 par value; 13,307,118 shares issued and outstanding; 100,000,000 common shares
authorized)
|
|
$
|
13,307
|
|
Paid-in capital in excess of par value
|
|
|
766,455,355
|
|
Total distributable earnings (loss), net of income taxes
|
|
|
(412,705,369)
|
|
Total Net Assets Applicable to Common Shareholders
|
|
$
|
353,763,293
|
|
|
|
Common Shares Outstanding
|
|
|
13,307,118
|
|
|
|
Net Asset Value Per Common Share
|
|
$
|
26.58
|
|
See Notes to Financial
Statements.
|
|
|
4
|
|
ClearBridge Energy Midstream Opportunity Fund Inc. 2021 Semi-Annual Report
|
Statement of operations (unaudited)
For the
Six Months Ended May 31, 2021
|
|
|
|
|
|
|
Investment Income:
|
|
|
|
|
Dividends and distributions
|
|
$
|
15,752,117
|
|
Return of capital (Note 1(g))
|
|
|
(13,265,275)
|
|
Net Dividends and Distributions
|
|
|
2,486,842
|
|
Interest
|
|
|
11,182
|
|
Less: Foreign taxes withheld
|
|
|
(112,927)
|
|
Total Investment Income
|
|
|
2,385,097
|
|
|
|
Expenses:
|
|
|
|
|
Investment management fee (Note 2)
|
|
|
2,081,084
|
|
Interest expense (Notes 5 and 6)
|
|
|
1,135,376
|
|
Distributions to Mandatory Redeemable Preferred Stockholders (Notes 1 and 7)
|
|
|
1,042,537
|
|
Audit and tax fees
|
|
|
140,418
|
|
Legal fees
|
|
|
90,210
|
|
Commitment fees (Note 5)
|
|
|
54,263
|
|
Transfer agent fees
|
|
|
52,740
|
|
Amortization of preferred stock offering costs (Note 7)
|
|
|
48,232
|
|
Directors fees
|
|
|
42,753
|
|
Amortization of debt issuance and offering costs (Note 6)
|
|
|
36,344
|
|
Fund accounting fees
|
|
|
33,656
|
|
Rating agency fees
|
|
|
27,811
|
|
Stock exchange listing fees
|
|
|
14,125
|
|
Shareholder reports
|
|
|
7,416
|
|
Franchise taxes
|
|
|
7,184
|
|
Insurance
|
|
|
1,776
|
|
Custody fees
|
|
|
1,197
|
|
Miscellaneous expenses
|
|
|
65,415
|
|
Total Expenses
|
|
|
4,882,537
|
|
Less: Fee waivers and/or expense reimbursements (Note 2)
|
|
|
(57,699)
|
|
Net Expenses
|
|
|
4,824,838
|
|
Net Investment Loss, before income taxes
|
|
|
(2,439,741)
|
|
Current tax benefit (Note 11)
|
|
|
572,783
|
|
Net Investment Loss, net of income taxes
|
|
|
(1,866,958)
|
|
|
|
Realized and Unrealized Gain (Loss) on Investments (Notes 1, 3 and 11):
|
|
|
|
|
Net Realized Loss From Investment Transactions, net of income
taxes
|
|
|
(9,456,024)
|
|
Change in Net Unrealized Appreciation (Depreciation) From Investments, net of
income taxes
|
|
|
145,982,166
|
|
Net Gain on Investments, net of income taxes
|
|
|
136,526,142
|
|
Increase in Net Assets Applicable to Common Shareholders From Operations
|
|
$
|
134,659,184
|
|
See Notes to Financial
Statements.
|
|
|
ClearBridge Energy Midstream Opportunity Fund Inc. 2021 Semi-Annual Report
|
|
5
|
Statements of changes in net assets
|
|
|
|
|
|
|
|
|
For the Six Months Ended May 31, 2021 (unaudited)
and the Year Ended November 30, 2020
|
|
2021
|
|
|
2020
|
|
|
|
|
Operations:
|
|
|
|
|
|
|
|
|
Net investment loss, net of income taxes
|
|
$
|
(1,866,958)
|
|
|
$
|
(15,243,886)
|
|
Net realized loss, net of income taxes
|
|
|
(9,456,024)
|
|
|
|
(252,704,016)
|
|
Change in net unrealized appreciation (depreciation), net of income taxes
|
|
|
145,982,166
|
|
|
|
(86,426,558)
|
|
Increase (Decrease) in Net Assets Applicable to Common Shareholders From
Operations
|
|
|
134,659,184
|
|
|
|
(354,374,460)
|
|
|
|
|
Distributions to Common Shareholders From (Note 1):
|
|
|
|
|
|
|
|
|
Return of capital
|
|
|
(9,459,069)
|
|
|
|
(30,336,861)
|
|
Decrease in Net Assets From Distributions to Common
Shareholders
|
|
|
(9,459,069)
|
|
|
|
(30,336,861)
|
|
|
|
|
Fund Share Transactions:
|
|
|
|
|
|
|
|
|
Cost of shares repurchased (560,196 and 579,300 shares repurchased, respectively) (Note 8)
|
|
|
(9,048,040)
|
|
|
|
(5,398,982)
|
|
Net share reduction due to reverse stock split (0 and 57,267,373 shares repurchased, respectively) (Note
9)
|
|
|
|
|
|
|
|
|
Decrease in Net Assets From Fund Share Transactions
|
|
|
(9,048,040)
|
|
|
|
(5,398,982)
|
|
Increase (Decrease) in Net Assets Applicable to Common
Shareholders
|
|
|
116,152,075
|
|
|
|
(390,110,303)
|
|
|
|
|
Net Assets Applicable to Common Shareholders:
|
|
|
|
|
|
|
|
|
Beginning of period
|
|
|
237,611,218
|
|
|
|
627,721,521
|
|
End of period
|
|
$
|
353,763,293
|
|
|
$
|
237,611,218
|
|
See Notes to Financial
Statements.
|
|
|
6
|
|
ClearBridge Energy Midstream Opportunity Fund Inc. 2021 Semi-Annual Report
|
Statement of cash flows (unaudited)
For the
Six Months Ended May 31, 2021
|
|
|
|
|
Increase (Decrease) in Cash:
|
|
|
|
|
Cash Flows from Operating Activities:
|
|
|
|
|
Net increase in net assets applicable to common shareholders resulting from operations
|
|
$
|
134,659,184
|
|
Adjustments to reconcile net increase in net assets resulting from operations to net cash provided (used) by operating
activities:
|
|
|
|
|
Purchases of portfolio securities
|
|
|
(66,838,302)
|
|
Sales of portfolio securities
|
|
|
18,919,509
|
|
Net purchases, sales and maturities of short-term investments
|
|
|
9,244,295
|
|
Return of capital
|
|
|
13,265,275
|
|
Increase in dividends and distributions receivable
|
|
|
(182,493)
|
|
Increase in interest receivable
|
|
|
(4)
|
|
Decrease in prepaid expenses
|
|
|
45,242
|
|
Increase in income tax receivable
|
|
|
(971,596)
|
|
Amortization of preferred stock offering costs
|
|
|
48,232
|
|
Amortization of debt issuance and offering costs
|
|
|
36,344
|
|
Increase in investment management fee payable
|
|
|
158,126
|
|
Decrease in Directors fees payable
|
|
|
(6,944)
|
|
Increase in interest expense payable
|
|
|
6,126
|
|
Increase in accrued expenses
|
|
|
35,171
|
|
Decrease in distributions payable to Mandatory Redeemable Preferred Stockholders
|
|
|
(40,881)
|
|
Net realized loss on investments
|
|
|
9,456,024
|
|
Change in net unrealized appreciation (depreciation) of investments
|
|
|
(145,982,166)
|
|
Net Cash Used in Operating Activities*
|
|
|
(28,148,858)
|
|
|
|
Cash Flows from Financing Activities:
|
|
|
|
|
Distributions paid on common stock
|
|
|
(9,459,069)
|
|
Proceeds from loan facility borrowings
|
|
|
57,000,000
|
|
Repayment of loan facility borrowings
|
|
|
(10,000,000)
|
|
Payment for Fund shares repurchased (net of payable for Fund shares repurchased)
|
|
|
(9,392,073)
|
|
Net Cash Provided by Financing Activities
|
|
|
28,148,858
|
|
Cash and restricted cash at beginning of period
|
|
|
|
|
Cash and restricted cash at end of period
|
|
|
|
|
|
* Included in operating expenses is cash of $1,204,070 paid for interest and commitment fees on borrowings,
$1,083,418 paid for distributions to Mandatory Redeemable Preferred Stockholders and $398,813 paid for income taxes, net of refunds, if any.
|
|
|
The following table provides a reconciliation of cash and restricted cash reported within the Statement of Assets and Liabilities that sums to the total of such amounts shown on
the Statement of Cash Flows.
|
|
|
|
|
|
May 31, 2021
|
|
Cash
|
|
|
|
|
Restricted cash
|
|
|
|
|
Total cash and restricted cash shown in the Statement of Cash Flows
|
|
|
|
|
See Notes to Financial
Statements.
|
|
|
ClearBridge Energy Midstream Opportunity Fund Inc. 2021 Semi-Annual Report
|
|
7
|
Financial highlights
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For a common share of capital stock outstanding
throughout each year ended November 30,
unless otherwise
noted:
|
|
|
|
20211,2
|
|
|
20201,3
|
|
|
20191,3
|
|
|
20181,3
|
|
|
20171,3
|
|
|
20161,3
|
|
|
|
|
|
|
|
|
Net asset value, beginning of period
|
|
|
$17.13
|
|
|
|
$43.75
|
|
|
|
$51.35
|
|
|
|
$56.85
|
|
|
|
$69.20
|
|
|
|
$76.25
|
|
|
|
|
|
|
|
|
Income (loss) from operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income (loss)
|
|
|
(0.14)
|
|
|
|
(1.07)
|
|
|
|
(0.70)
|
|
|
|
0.30
|
|
|
|
(1.00)
|
|
|
|
(2.00)
|
|
Net realized and unrealized gain (loss)
|
|
|
10.12
|
|
|
|
(23.54)
|
|
|
|
(2.30)
|
|
|
|
0.60
|
|
|
|
(4.95)
|
|
|
|
1.35
|
|
Total income (loss) from operations
|
|
|
9.98
|
|
|
|
(24.61)
|
|
|
|
(3.00)
|
|
|
|
0.90
|
|
|
|
(5.95)
|
|
|
|
(0.65)
|
|
|
Less distributions to common shareholders from:
|
|
Dividends
|
|
|
|
|
|
|
|
|
|
|
(1.70)
|
|
|
|
(1.60)
|
|
|
|
|
|
|
|
|
|
Return of capital
|
|
|
(0.71)
|
4
|
|
|
(2.13)
|
|
|
|
(2.90)
|
|
|
|
(4.80)
|
|
|
|
(6.40)
|
|
|
|
(6.40)
|
|
Total distributions to common shareholders
|
|
|
(0.71)
|
|
|
|
(2.13)
|
|
|
|
(4.60)
|
|
|
|
(6.40)
|
|
|
|
(6.40)
|
|
|
|
(6.40)
|
|
Anti-dilutive impact of repurchase plan
|
|
|
0.18
|
5
|
|
|
0.12
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value, end of period
|
|
|
$26.58
|
|
|
|
$17.13
|
|
|
|
$43.75
|
|
|
|
$51.35
|
|
|
|
$56.85
|
|
|
|
$69.20
|
|
|
|
|
|
|
|
|
Market price, end of period
|
|
|
$22.13
|
|
|
|
$12.70
|
|
|
|
$38.10
|
|
|
|
$46.15
|
|
|
|
$52.35
|
|
|
|
$64.15
|
|
Total return, based on NAV6,7
|
|
|
59.87
|
%
|
|
|
(57.35)
|
%
|
|
|
(6.57)
|
%
|
|
|
0.67
|
%
|
|
|
(9.34)
|
%
|
|
|
0.68
|
%
|
Total return, based on Market Price8
|
|
|
80.38
|
%
|
|
|
(62.74)
|
%
|
|
|
(8.15)
|
%
|
|
|
(0.87)
|
%
|
|
|
(9.54)
|
%
|
|
|
(2.83)
|
%
|
|
|
|
|
|
|
|
Net assets applicable to common shareholders, end of period (millions)
|
|
|
$354
|
|
|
|
$238
|
|
|
|
$628
|
|
|
|
$736
|
|
|
|
$355
|
|
|
|
$432
|
|
|
|
|
|
|
|
|
Ratios to average net assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management fees
|
|
|
1.40
|
%9
|
|
|
1.52
|
%
|
|
|
1.50
|
%
|
|
|
1.49
|
%
|
|
|
1.43
|
%
|
|
|
1.43
|
%
|
Other expenses
|
|
|
1.89
|
9
|
|
|
3.65
|
10
|
|
|
2.16
|
|
|
|
2.12
|
|
|
|
1.72
|
|
|
|
2.65
|
11
|
Subtotal
|
|
|
3.29
|
9
|
|
|
5.17
|
10
|
|
|
3.66
|
|
|
|
3.61
|
|
|
|
3.15
|
|
|
|
4.08
|
11
|
Income tax expenses
|
|
|
|
12
|
|
|
1.32
|
|
|
|
|
12
|
|
|
|
12
|
|
|
|
12
|
|
|
0.10
|
|
Total gross expenses
|
|
|
3.29
|
9
|
|
|
6.49
|
10
|
|
|
3.66
|
|
|
|
3.61
|
|
|
|
3.15
|
|
|
|
4.18
|
11
|
Total net expenses
|
|
|
3.25
|
9,13
|
|
|
6.42
|
10,13
|
|
|
3.59
|
13
|
|
|
3.60
|
13
|
|
|
3.15
|
|
|
|
4.18
|
11
|
Net investment income (loss), net of income taxes
|
|
|
(1.26)
|
9
|
|
|
(4.71)
|
10
|
|
|
(1.37)
|
|
|
|
0.52
|
|
|
|
(1.45)
|
|
|
|
(3.12)
|
11
|
|
|
|
|
|
|
|
Portfolio turnover rate
|
|
|
5
|
%
|
|
|
19
|
%
|
|
|
29
|
%
|
|
|
14
|
%
|
|
|
16
|
%
|
|
|
23
|
%
|
See Notes to Financial
Statements.
|
|
|
8
|
|
ClearBridge Energy Midstream Opportunity Fund Inc. 2021 Semi-Annual Report
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For a common share of capital stock outstanding
throughout each year ended November 30,
unless otherwise
noted:
|
|
|
|
20211,2
|
|
|
20201,3
|
|
|
20191,3
|
|
|
20181,3
|
|
|
20171,3
|
|
|
20161,3
|
|
|
|
|
|
|
|
|
Supplemental data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan and Debt Issuance Outstanding, End of Period (000s)
|
|
|
$102,104
|
|
|
|
$55,104
|
|
|
|
$278,500
|
|
|
|
$343,000
|
|
|
|
$158,000
|
|
|
|
$147,000
|
|
Asset Coverage Ratio for Loan and Debt Issuance Outstanding14
|
|
|
489
|
%
|
|
|
609
|
%
|
|
|
343
|
%
|
|
|
329
|
%
|
|
|
339
|
%
|
|
|
409
|
%
|
Asset Coverage, per $1,000 Principal Amount of Loan and Debt Issuance Outstanding14
|
|
|
$4,887
|
|
|
|
$6,094
|
|
|
|
$3,426
|
|
|
|
$3,286
|
|
|
|
$3,390
|
|
|
|
$4,093
|
|
Weighted Average Loan and Debt Issuance (000s)
|
|
|
$77,170
|
|
|
|
$122,617
|
|
|
|
$318,462
|
|
|
|
$163,197
|
|
|
|
$157,819
|
|
|
|
$137,883
|
|
Weighted Average Interest Rate on Loan and Debt Issuance
|
|
|
2.95
|
%
|
|
|
6.14
|
%15
|
|
|
3.83
|
%
|
|
|
3.51
|
%
|
|
|
3.32
|
%
|
|
|
4.38
|
%15
|
Mandatory Redeemable Preferred Stock at Liquidation Value, End of Period (000s)
|
|
|
$43,100
|
|
|
|
$43,100
|
|
|
|
$48,000
|
|
|
|
$48,000
|
|
|
|
$23,000
|
|
|
|
$23,000
|
|
Asset Coverage Ratio for Mandatory Redeemable Preferred Stock16
|
|
|
344
|
%
|
|
|
342
|
%
|
|
|
292
|
%
|
|
|
288
|
%
|
|
|
296
|
%
|
|
|
354
|
%
|
Asset Coverage, per $100,000 Liquidation Value per Share of Mandatory Redeemable Preferred Stock16
|
|
|
$343,633
|
|
|
|
$341,958
|
|
|
|
$292,258
|
|
|
|
$288,277
|
|
|
|
$295,913
|
|
|
|
$353,918
|
|
See Notes to Financial
Statements.
|
|
|
ClearBridge Energy Midstream Opportunity Fund Inc. 2021 Semi-Annual Report
|
|
9
|
Financial highlights (contd)
|
Calculation of the net gain per share (both realized and unrealized) does not correlate to the aggregate realized and unrealized losses presented in the
Statement of Operations due to the timing of the sales and repurchases of Fund shares in relation to fluctuating market values of the investments of the Fund.
|
1
|
Per share amounts have been calculated using the average shares method.
|
2
|
For the six months ended May 31, 2021 (unaudited).
|
3
|
On July 28, 2020, the Fund completed a 1-for-5 reverse stock split. Prior
year per share amounts have been restated to reflect the impact of the reverse stock split.
|
4
|
The actual source of the Funds current fiscal year distributions may be from dividends, return of capital or a combination of both. Shareholders will be
informed of the tax characteristics of the distributions after the close of the fiscal year.
|
5
|
The repurchase plan was completed at an average repurchase price of $16.15 for 560,196 shares and $9,048,041 for the six months ended May 31, 2021 and $9.32
for 579,300 shares and $5,398,982 for the year ended November 30, 2020.
|
6
|
Performance figures may reflect compensating balance arrangements, fee waivers and/or expense reimbursements. In the absence of compensating balance
arrangements, fee waivers and/or expense reimbursements, the total return would have been lower. Past performance is no guarantee of future results. Total returns for periods of less than one year are not annualized.
|
7
|
The total return calculation assumes that distributions are reinvested at NAV. Past performance is no guarantee of future results. Total returns for periods of
less than one year are not annualized.
|
8
|
The total return calculation assumes that distributions are reinvested in accordance with the Funds dividend reinvestment plan. Past performance is no
guarantee of future results. Total returns for periods of less than one year are not annualized.
|
10
|
Includes non-recurring prepayment penalties, the write-off of debt issuance and
offering costs and the write-off of preferred stock offering costs recognized during the period totaling 0.92% of average net assets.
|
11
|
Includes non-recurring prepayment penalties and the write-off of debt issuance
and offering costs recognized during the period totaling 0.66% of average net assets.
|
12
|
For the six months ended May 31, 2021 and the years ended November 30, 2019, 2018 and 2017, the net income tax benefit was 0.19% (not annualized),
0.88%, 3.08% and 4.20%, respectively. The net income tax benefit is not reflected in the Funds expense ratios.
|
13
|
Reflects fee waivers and/or expense reimbursements.
|
14
|
Represents value of net assets plus the loan outstanding, debt issuance outstanding and mandatory redeemable preferred stock at the end of the period divided by
the loan and debt issuance outstanding at the end of the period.
|
15
|
Includes prepayment penalties recognized during the period.
|
16
|
Represents value of net assets plus the loan outstanding, debt issuance outstanding and mandatory redeemable preferred stock at the end of the period divided by
the loan, debt issuance and mandatory redeemable preferred stock outstanding at the end of the period.
|
See Notes to Financial Statements.
|
|
|
10
|
|
ClearBridge Energy Midstream Opportunity Fund Inc. 2021 Semi-Annual Report
|
Notes to financial statements (unaudited)
1. Organization and significant accounting policies
ClearBridge Energy Midstream Opportunity Fund Inc. (the Fund) was incorporated in Maryland on April 5, 2011 and is registered as a non-diversified, closed-end management investment company under the Investment Company Act of 1940, as amended (the 1940 Act). The Board of Directors authorized 100 million shares of $0.001 par value common stock.
The Funds investment objective is to provide long-term investors a high level of total return with an emphasis on cash distributions. There can be no assurance that the Fund will achieve its investment objective.
The Fund seeks to achieve its objective by investing primarily in energy midstream entities. Under normal market conditions, the Fund invests at least 80% of its
Managed Assets in energy midstream entities including entities structured as both partnerships and corporations (the 80% policy). For purposes of the 80% policy, the Fund considers investments in midstream entities as those entities that provide
midstream services including the gathering, transporting, processing, fractionation, storing, refining, and distribution of oil, natural gas liquids and natural gas. The Fund considers an entity to be within the Energy sector if it derives at least
50% of its revenues from the business of exploring, developing, producing, gathering, transporting, processing, fractionating, storing, refining, distributing, mining or marketing natural gas, natural gas liquids (including propane), crude oil,
refined petroleum products or coal. Managed Assets means net assets plus the amount of borrowings and assets attributable to any preferred stock of the Fund that may be outstanding.
The following are significant accounting policies consistently followed by the Fund and are in conformity with U.S. generally accepted accounting principles
(GAAP). Estimates and assumptions are required to be made regarding assets, liabilities and changes in net assets resulting from operations when financial statements are prepared. Changes in the economic environment, financial markets
and any other parameters used in determining these estimates could cause actual results to differ. Subsequent events have been evaluated through the date the financial statements were issued.
(a) Investment valuation. Equity securities for which market quotations are available are valued at the last reported sales price or official
closing price on the primary market or exchange on which they trade. The valuations for fixed income securities (which may include, but are not limited to, corporate, government, municipal, mortgage-backed, collateralized mortgage obligations and
asset-backed securities) and certain derivative instruments are typically the prices supplied by independent third party pricing services, which may use market prices or broker/dealer quotations or a variety of valuation techniques and
methodologies. The independent third party pricing services typically use inputs that are observable such as issuer details, interest rates, yield curves, prepayment speeds, credit risks/spreads, default rates and quoted prices for similar
securities. Investments in open-end funds are valued at the closing net asset value per share of each fund on the day of valuation. When the Fund holds securities or other assets that are
|
|
|
ClearBridge Energy Midstream Opportunity Fund Inc. 2021 Semi-Annual Report
|
|
11
|
Notes to financial statements
(unaudited) (contd)
denominated in a foreign currency, the Fund will normally use the currency exchange rates as of 4:00 p.m. (Eastern Time). If independent third party pricing
services are unable to supply prices for a portfolio investment, or if the prices supplied are deemed by the manager to be unreliable, the market price may be determined by the manager using quotations from one or more broker/dealers or at the
transaction price if the security has recently been purchased and no value has yet been obtained from a pricing service or pricing broker. When reliable prices are not readily available, such as when the value of a security has been significantly
affected by events after the close of the exchange or market on which the security is principally traded, but before the Fund calculates its net asset value, the Fund values these securities as determined in accordance with procedures approved by
the Funds Board of Directors.
The Board of Directors is responsible for the valuation process and has delegated the supervision of the daily
valuation process to the Global Fund Valuation Committee (formerly known as Legg Mason North Atlantic Fund Valuation Committee prior to March 1, 2021) (the Valuation Committee). The Valuation Committee, pursuant to the policies
adopted by the Board of Directors, is responsible for making fair value determinations, evaluating the effectiveness of the Funds pricing policies, and reporting to the Board of Directors. When determining the reliability of third party
pricing information for investments owned by the Fund, the Valuation Committee, among other things, conducts due diligence reviews of pricing vendors, monitors the daily change in prices and reviews transactions among market participants.
The Valuation Committee will consider pricing methodologies it deems relevant and appropriate when making fair value determinations. Examples of
possible methodologies include, but are not limited to, multiple of earnings; discount from market of a similar freely traded security; discounted cash-flow analysis; book value or a multiple thereof; risk premium/yield analysis; yield to maturity;
and/or fundamental investment analysis. The Valuation Committee will also consider factors it deems relevant and appropriate in light of the facts and circumstances. Examples of possible factors include, but are not limited to, the type of security;
the issuers financial statements; the purchase price of the security; the discount from market value of unrestricted securities of the same class at the time of purchase; analysts research and observations from financial institutions;
information regarding any transactions or offers with respect to the security; the existence of merger proposals or tender offers affecting the security; the price and extent of public trading in similar securities of the issuer or comparable
companies; and the existence of a shelf registration for restricted securities.
For each portfolio security that has been fair valued pursuant to the
policies adopted by the Board of Directors, the fair value price is compared against the last available and next
|
|
|
12
|
|
ClearBridge Energy Midstream Opportunity Fund Inc. 2021 Semi-Annual Report
|
available market quotations. The Valuation Committee reviews the results of such back testing monthly and fair
valuation occurrences are reported to the Board of Directors quarterly.
The Fund uses valuation techniques to measure fair value that are consistent
with the market approach and/or income approach, depending on the type of security and the particular circumstance. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable
securities. The income approach uses valuation techniques to discount estimated future cash flows to present value.
GAAP establishes a disclosure
hierarchy that categorizes the inputs to valuation techniques used to value assets and liabilities at measurement date. These inputs are summarized in the three broad levels listed below:
|
|
Level 1 quoted prices in active markets for identical investments
|
|
|
Level 2 other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)
|
|
|
Level 3 significant unobservable inputs (including the Funds own assumptions in determining the fair value of investments)
|
The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those
securities.
The following is a summary of the inputs used in valuing the Funds assets carried at fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
Description
|
|
Quoted Prices
(Level 1)
|
|
|
Other Significant
Observable Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
Total
|
|
Long-Term Investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Master Limited Partnerships:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gathering/Processing
|
|
$
|
78,058,017
|
|
|
$
|
7,073,001
|
|
|
|
|
|
|
$
|
85,131,018
|
|
Other Master Limited Partnerships
|
|
|
256,579,773
|
|
|
|
|
|
|
|
|
|
|
|
256,579,773
|
|
Common Stocks
|
|
|
146,209,725
|
|
|
|
|
|
|
|
|
|
|
|
146,209,725
|
|
Total Long-Term Investments
|
|
|
480,847,515
|
|
|
|
7,073,001
|
|
|
|
|
|
|
|
487,920,516
|
|
Short-Term Investments
|
|
|
5,010,693
|
|
|
|
|
|
|
|
|
|
|
|
5,010,693
|
|
Total Investments
|
|
$
|
485,858,208
|
|
|
$
|
7,073,001
|
|
|
|
|
|
|
$
|
492,931,209
|
|
|
See Schedule of Investments for additional detailed categorizations.
|
(b) Net asset value. The Fund determines the net asset value of its common stock on each day the NYSE is open for business, as of the close of
the customary trading session
|
|
|
ClearBridge Energy Midstream Opportunity Fund Inc. 2021 Semi-Annual Report
|
|
13
|
Notes to financial statements
(unaudited) (contd)
(normally 4:00 p.m. Eastern Time), or any earlier closing time that day. The Fund determines the net asset value per share of common stock by dividing the value of
the Funds securities, cash and other assets (including interest accrued but not collected) less all its liabilities (including accrued expenses, borrowings, interest payables and the aggregate liquidation value (i.e., $100,000 per outstanding
share) of the Mandatory Redeemable Preferred Stock (MRPS)), net of income taxes, by the total number of shares of common stock outstanding.
(c) Master limited partnerships. Entities commonly referred to as MLPs are generally organized under state law as limited
partnerships or limited liability companies. The Fund intends to primarily invest in MLPs receiving partnership taxation treatment under the Internal Revenue Code of 1986, as amended (the Code), and whose interests or units
are traded on securities exchanges like shares of corporate stock. To be treated as a partnership for U.S. federal income tax purposes, an MLP whose units are traded on a securities exchange must receive at least 90% of its income from qualifying
sources such as interest, dividends, real estate rents, gain from the sale or disposition of real property, income and gain from mineral or natural resources activities, income and gain from the transportation or storage of certain fuels, and, in
certain circumstances, income and gain from commodities or futures, forwards and options with respect to commodities. Mineral or natural resources activities include exploration, development, production, processing, mining, refining, marketing and
transportation (including pipelines) of oil and gas, minerals, geothermal energy, fertilizer, timber or industrial source carbon dioxide. An MLP consists of a general partner and limited partners (or in the case of MLPs organized as limited
liability companies, a managing member and members). The general partner or managing member typically controls the operations and management of the MLP and has an ownership stake in the partnership. The limited partners or members, through their
ownership of limited partner or member interests, provide capital to the entity, are intended to have no role in the operation and management of the entity and receive cash distributions. The MLPs themselves generally do not pay U.S. federal income
taxes. Thus, unlike investors in corporate securities, direct MLP investors are generally not subject to double taxation (i.e., corporate level tax and tax on corporate dividends). Currently, most MLPs operate in the energy and/or natural resources
sector.
(d) Foreign investment risks. The Funds investments in foreign
securities may involve risks not present in domestic investments. Since securities may be denominated in foreign currencies, may require settlement in foreign currencies or pay interest or dividends in foreign currencies, changes in the relationship
of these foreign currencies to the U.S. dollar can significantly affect the value of the investments and earnings of the Fund. Foreign investments may also subject the Fund to foreign government exchange restrictions, expropriation, taxation or
other political, social or economic developments, all of which affect the market and/or credit risk of the investments.
|
|
|
14
|
|
ClearBridge Energy Midstream Opportunity Fund Inc. 2021 Semi-Annual Report
|
(e) Concentration risk. Concentration in the
energy sector may present more risks than if the Fund were broadly diversified over numerous sectors of the economy. A downturn in the energy sector of the economy could have a larger impact on the Fund than on an investment company that does not
concentrate in the sector. At times, the performance of securities of companies in the sector may lag the performance of other sectors or the broader market as a whole.
(f) Security transactions and investment income. Security transactions are accounted for on a trade date basis. Interest income (including
interest income from payment-in-kind securities), adjusted for amortization of premium and accretion of discount, is recorded on the accrual basis. Dividend income is
recorded on the ex-dividend date for dividends received in cash and/or securities. Foreign dividend income is recorded on the ex-dividend date or as soon as practicable
after the Fund determines the existence of a dividend declaration after exercising reasonable due diligence. The cost of investments sold is determined by use of the specific identification method. To the extent any issuer defaults or a credit event
occurs that impacts the issuer, the Fund may halt any additional interest income accruals and consider the realizability of interest accrued up to the date of default or credit event.
(g) Return of capital estimates. Distributions received from the Funds investments in MLPs generally are comprised of income and return
of capital. The Fund records investment income and return of capital based on estimates made at the time such distributions are received. Such estimates are based on historical information available from each MLP and other industry sources. These
estimates may subsequently be revised based on information received from the MLPs after their tax reporting periods are concluded.
For the six months
ended May 31, 2021, the Fund estimated that approximately 87% of the MLP distributions received would be treated as a return of capital. The Fund recorded as return of capital the amount of $13,763,190 of dividends and distributions received
from its investments.
Additionally, the Fund updated the return of capital estimates from the year ended November 30, 2020 based on actual amounts
subsequently reported to the Fund. This resulted in an increase of $497,915 in dividends and distributions received from investments.
(h) Partnership accounting policy. The Fund records its pro rata share of the income (loss)
and capital gains (losses), to the extent of distributions it has received, allocated from the underlying partnerships and accordingly adjusts the cost basis of the underlying partnerships for return of capital. These amounts are included in the
Funds Statement of Operations.
(i) Distributions to shareholders.
Distributions to common shareholders are declared and paid on a quarterly basis and are recorded on the ex-dividend date. The estimated
|
|
|
ClearBridge Energy Midstream Opportunity Fund Inc. 2021 Semi-Annual Report
|
|
15
|
Notes to financial statements
(unaudited) (contd)
characterization of the distributions paid to common shareholders will be either a dividend (ordinary income), distribution (return of capital) or combination of
both. This estimate is based on the Funds operating results during the period. The Fund anticipates that 100% of its current period distribution will be comprised of return of capital. The actual tax characterization of the common stock
distributions made during the current year will not be determined until after the end of the fiscal year when the Fund can determine its earnings and profits and, therefore, may differ from the preliminary estimates.
Distributions to holders of MRPS are accrued on a daily basis as described in Note 7 and are treated as an operating expense as required by GAAP. For tax purposes,
the payments made to the holders of the Funds MRPS are treated as a dividend (ordinary income) or distribution (return of capital) similar to the treatment of distributions made to common shareholders as described above. The Fund anticipates
that 100% of its current period distribution to the MRPS shareholders will be treated as return of capital. The actual tax characterization of the MRPS distributions made during the current year will not be determined until after the end of the
fiscal year when the Fund can determine its earnings and profits and, therefore, may differ from the preliminary estimates.
(j)
Compensating balance arrangements. The Fund has an arrangement with its custodian bank whereby a portion of the custodians fees is paid indirectly by credits earned on the Funds cash on
deposit with the bank.
(k) Federal and other taxes. The Fund, as a corporation,
is obligated to pay federal and state income tax on its taxable income. The Fund invests its assets primarily in MLPs, which generally are treated as partnerships for federal income tax purposes. As a limited partner in the MLPs, the Fund includes
its allocable share of the MLPs taxable income in computing its own taxable income. The Fund, and entities in which the Fund invests, may be subject to audit by the Internal Revenue Service or other applicable tax authorities. The Funds
taxable income or tax liability for prior taxable years could be adjusted if there is an audit of the Fund, or of any entity that is treated as a partnership for tax purposes in which the Fund holds an equity interest. The Fund may be required to
pay tax, as well as interest and penalties, in connection with such an adjustment.
Deferred income taxes reflect (i) taxes on unrealized gains
(losses), which are attributable to the temporary difference between fair market value and book basis, (ii) the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes and, as applicable, (iii) the net tax benefit of accumulated net operating losses, capital losses and tax credit carryforwards. To the extent the Fund has a deferred tax asset, consideration is given as
to whether or not a valuation allowance is required. The need to establish a valuation allowance for deferred tax assets is assessed periodically by management of the Fund based on Financial Accounting Standards Board (FASB), Accounting
Standards Codification Topic 740, Income Taxes (ASC 740) that it is more likely than not that some
|
|
|
16
|
|
ClearBridge Energy Midstream Opportunity Fund Inc. 2021 Semi-Annual Report
|
portion or all of the deferred tax asset will not be realized. In the assessment for a valuation allowance, consideration is given to all positive and negative evidence related to the realization
of the deferred tax asset. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability (which are highly dependent on future allocations of taxable income and
future cash distributions from the Funds MLP holdings), the duration of statutory carryforward periods and the associated risk that net operating losses, capital losses and tax credit carryforwards may expire unused.
For all open tax years and for all major jurisdictions, management of the Fund has concluded that there are no significant uncertain tax positions that would
require recognition in the financial statements. Furthermore, management of the Fund is also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next
twelve months.
The Fund may rely to some extent on information provided by the MLPs, which may not necessarily be timely, to estimate taxable income and
gains allocable from the MLP units held in the portfolio and to estimate the associated deferred tax liability. Such estimates are made in good faith. From time to time, as new information becomes available, the Fund modifies its estimates or
assumptions regarding the current and deferred tax liabilities.
The Funds policy is to classify interest and penalties associated with
underpayment of federal and state income taxes, if any, as income tax expense on its Statement of Operations. The 2016 through 2020 tax years remain open and subject to examination by tax jurisdictions.
(l) Reclassification. GAAP requires that certain components of net assets be reclassified to
reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset value per share. During the six months ended May 31, 2021, the Fund had no reclassification.
2. Investment management agreement and other transactions with affiliates
Legg Mason Partners Fund Advisor, LLC (LMPFA) is the Funds investment manager and ClearBridge Investments, LLC (ClearBridge) is the Funds subadviser. LMPFA and ClearBridge are
indirect, wholly-owned subsidiaries of Franklin Resources, Inc. (Franklin Resources).
Under the investment management agreement, the Fund
pays LMPFA an annual fee, paid monthly, in an amount equal to 1.00% of the Funds average daily Managed Assets.
LMPFA provides administrative and
certain oversight services to the Fund. LMPFA delegates to the subadviser the day-to-day portfolio management of the Fund. For its services, LMPFA pays ClearBridge a fee
monthly, at an annual rate equal to 70% of the net management fee it receives from the Fund.
|
|
|
ClearBridge Energy Midstream Opportunity Fund Inc. 2021 Semi-Annual Report
|
|
17
|
Notes to financial statements
(unaudited) (contd)
During periods in which the Fund utilizes financial leverage, the fees paid to LMPFA will be higher than if the Fund did not utilize leverage because the fees are
calculated as a percentage of the Funds assets, including those investments purchased with leverage.
Effective March 1, 2021, LMPFA
implemented a voluntary investment management fee waiver of 0.05% that will continue until February 28, 2022.
During the six months ended
May 31, 2021, fees waived and/or expenses reimbursed amounted to $57,699.
All officers and one Director of the Fund are employees of Franklin
Resources or its affiliates and do not receive compensation from the Fund.
3. Investments
During the six months ended May 31, 2021, the aggregate cost of purchases and proceeds from sales of investments (excluding short-term investments) were as
follows:
|
|
|
|
|
Purchases
|
|
|
$66,838,302
|
|
Sales
|
|
|
18,919,509
|
|
4. Derivative instruments and hedging activities
During the six months ended May 31, 2021, the Fund did not invest in derivative instruments.
5. Loan
The Fund has a revolving credit
agreement with The Bank of Nova Scotia (Credit Agreement), which allows the Fund to borrow up to an aggregate amount of $75,000,000 and renews daily for a 179-day term, unless notice to the
contrary is given to the Fund. Effective January 7, 2021, the Credit Agreement is subject to a scheduled commitment termination date of January 6, 2022, unless extended. The Fund pays a commitment fee on the unutilized portion of the loan
commitment amount at an annual rate of 0.25%, except that the commitment fee is 0.15% in the event that the aggregate outstanding principal balance of the loan is equal to or greater than 75% of $75,000,000. The interest on the loan is calculated at
a variable rate based on LIBOR plus any applicable margin. Securities held by the Fund are subject to a lien, granted to The Bank of Nova Scotia, to the extent of the borrowing outstanding and any additional expenses. The Funds Credit
Agreement contains customary covenants that, among other things, may limit the Funds ability to pay distributions in certain circumstances, incur additional debt, change its fundamental investment policies and engage in certain transactions,
including mergers and consolidations and require asset coverage ratios in addition to those required by the 1940 Act. In addition, the Credit Agreement may be subject to early termination under certain conditions and may contain other provisions
that could limit the Funds ability to utilize borrowing under the agreement. At May 31, 2021, the Fund had $57,000,000 of borrowings outstanding per this credit agreement. Interest expense related to this loan for the six
|
|
|
18
|
|
ClearBridge Energy Midstream Opportunity Fund Inc. 2021 Semi-Annual Report
|
months ended May 31, 2021 was $191,116. For the six months ended May 31, 2021, the Fund incurred commitment fees of $54,263. For the year ended May 31, 2021, based on the number of
days during the reporting period that the Fund had a loan balance outstanding, the average daily loan balance was $32,065,934 and the weighted average interest rate was 1.20%.
6. Senior secured notes
At May 31, 2021, the Fund had $45,103,579 aggregate principal
amount of fixed-rate senior secured notes (Senior Notes) outstanding. Interest expense related to the Senior Notes for the six months ended May 31, 2021 was $944,261. Costs incurred by the Fund in connection with the Senior Notes
are recorded as a deferred charge and are amortized over the life of the notes. Securities held by the Fund are subject to a lien, granted to the Senior Notes holders, to the extent of the borrowings outstanding and any additional expenses. The
Senior Notes holders and the lender have equal access to the lien (See Note 5).
On February 7, 2020, Series A Senior Notes in the amount of
$27,420,382 matured. On October 15, 2020 Series F Senior Notes in the amount of $8,176,039 matured.
The table below summarizes the key terms of
each series of Senior Notes at May 31, 2021.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Security
|
|
Amount
|
|
|
Rate
|
|
|
Maturity
|
|
|
Estimated
Fair Value
|
|
Senior secured notes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series B
|
|
$
|
8,364,254
|
|
|
|
3.87%
|
|
|
|
February 7, 2023
|
|
|
$
|
8,694,577
|
|
Series C
|
|
|
10,075,124
|
|
|
|
4.02%
|
|
|
|
February 7, 2025
|
|
|
|
10,730,713
|
|
Series D
|
|
|
3,801,934
|
|
|
|
3.33%
|
|
|
|
August 26, 2022
|
|
|
|
3,861,617
|
|
Series E
|
|
|
950,483
|
|
|
|
3.76%
|
|
|
|
August 26, 2026
|
|
|
|
1,003,860
|
|
Series G
|
|
|
11,609,975
|
|
|
|
4.51%
|
|
|
|
October 15, 2023
|
|
|
|
12,213,082
|
|
Series H
|
|
|
10,301,809
|
|
|
|
4.66%
|
|
|
|
October 15, 2025
|
|
|
|
11,221,389
|
|
|
|
$
|
45,103,579
|
|
|
|
|
|
|
|
|
|
|
$
|
47,725,238
|
|
The Senior Notes are not listed on any exchange or automated quotation system. The estimated fair value of the Senior Notes was
calculated, for disclosure purposes, based on estimated market yields and credit spreads for comparable instruments with similar maturity, terms and structure. The Senior Notes are categorized as Level 3 within the fair value hierarchy.
7. Mandatory redeemable preferred stock
At May 31, 2021, the Fund had 431 shares of fixed rate MRPS outstanding with an aggregate liquidation value of $43,100,000. Offering costs incurred by the Fund in connection with the MRPS issuance are being
amortized to expense over the respective life of each series of MRPS.
|
|
|
ClearBridge Energy Midstream Opportunity Fund Inc. 2021 Semi-Annual Report
|
|
19
|
Notes to financial statements
(unaudited) (contd)
The table below summarizes the key terms of each series of the MRPS at May 31, 2021.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series
|
|
Term
Redemption
Date
|
|
|
Rate
|
|
|
Shares
|
|
|
Liquidation
Preference
Per Share
|
|
|
Aggregate
Liquidation
Value
|
|
|
Estimated
Fair Value
|
|
Series B
|
|
|
3/28/2022
|
|
|
|
4.07%
|
|
|
|
41
|
|
|
$
|
100,000
|
|
|
$
|
4,100,000
|
|
|
$
|
4,157,406
|
|
Series C
|
|
|
3/28/2024
|
|
|
|
4.26%
|
|
|
|
140
|
|
|
|
100,000
|
|
|
|
14,000,000
|
|
|
|
14,540,460
|
|
Series D
|
|
|
7/23/2024
|
|
|
|
4.37%
|
|
|
|
30
|
|
|
|
100,000
|
|
|
|
3,000,000
|
|
|
|
3,125,166
|
|
Series E
|
|
|
7/23/2026
|
|
|
|
4.55%
|
|
|
|
70
|
|
|
|
100,000
|
|
|
|
7,000,000
|
|
|
|
7,332,019
|
|
Series F
|
|
|
8/7/2022
|
|
|
|
4.01%
|
|
|
|
41
|
|
|
|
100,000
|
|
|
|
4,100,000
|
|
|
|
4,155,009
|
|
Series G
|
|
|
8/7/2024
|
|
|
|
4.30%
|
|
|
|
109
|
|
|
|
100,000
|
|
|
|
10,900,000
|
|
|
|
11,333,144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
43,100,000
|
|
|
$
|
44,643,204
|
|
The MRPS are not listed on any exchange or automated quotation system. The estimated fair value of the MRPS was calculated, for
disclosure purposes, based on estimated market yields and credit spreads for comparable instruments with similar maturity, terms and structure. The MRPS are categorized as Level 3 within the fair value hierarchy.
Holders of MRPS are entitled to receive quarterly cumulative cash dividends payable on the first business day following each quarterly dividend date (February 15,
May 15, August 15 and November 15). In the event of a rating downgrade of any series of the MRPS below A by Fitch Ratings Inc. (Fitch) or other nationally recognized statistical ratings organization then providing a
rating, the applicable dividend rate will increase, according to a predetermined schedule, by 0.5% to 4.0%. In March 2020, Fitch revised its ratings assigned to the MRPS from AA to BBB and, consequently, holders of MRPS were
entitled to receive enhanced dividends by 2.0%. Effective January 22, 2021, after Fitch withdrew its ratings and Kroll Bond Rating Agency (KBRA) assigned the rating of A to each series of the Funds MRPS, the
holders receive dividends payable at the rates shown in the table above.
The MRPS rank senior to the Funds outstanding common stock and on parity
with any other preferred stock. The Fund may, at its option, redeem the MRPS, in whole or in part, at the liquidation preference amount plus all accumulated but unpaid dividends plus the make whole amount equal to the discounted value of the
remaining scheduled payments. If the Fund fails to maintain a total leverage (debt and preferred stock) asset coverage ratio of at least 225% or is in default of specified rating agency requirements, the MRPS are subject to mandatory redemption
under certain provisions.
The Fund may not declare dividends or make other distributions on shares of its common stock unless the Fund has declared and
paid full cumulative dividends on the MRPS, due on or prior to the date of the common stock dividend or distribution, and meets the MRPS asset coverage and rating agency requirements.
The holders of the MRPS have one vote per share and vote together with the holders of common stock of the Fund as a single class, except on matters affecting only the holders of
|
|
|
20
|
|
ClearBridge Energy Midstream Opportunity Fund Inc. 2021 Semi-Annual Report
|
MRPS or the holders of common stock. Pursuant to the 1940 Act, holders of the MRPS have the right to elect two
Directors of the Fund, voting separately as a class.
8. Stock repurchase program
On November 16, 2015, the Fund announced that the Funds Board of Directors (the Board) had authorized the Fund to repurchase in the open
market up to approximately 10% of the Funds outstanding common stock when the Funds shares are trading at a discount to net asset value. The Board has directed management of the Fund to repurchase shares of common stock at such times and
in such amounts as management reasonably believes may enhance stockholder value. The Fund is under no obligation to purchase shares at any specific discount levels or in any specific amounts.
During the six months ended May 31, 2021, the Fund repurchased and retired 3.91% of its common shares outstanding under the repurchase plan. The weighted average discount per share on these repurchases was
21.19% for the six months ended May 31, 2021. Shares repurchased and the corresponding dollar amount are included in the Statements of Changes in Net Assets. The anti-dilutive impact of these share repurchases is included in the Financial
Highlights.
Since the commencement of the stock repurchase program through May 31, 2021, the Fund repurchased 1,139,496 shares or 7.22% of its
common shares outstanding for a total amount of $14,447,022.
9. Reverse stock split
On July 14, 2020, the Fund announced that the Funds Board had approved a
1-for-5 reverse stock split, which was completed prior to the open of trading on the New York Stock Exchange on July 28, 2020. As a result of the reverse stock
split, every five outstanding shares of common stock of the Fund were automatically converted into one share of common stock. The reverse stock split decreased the number of the Funds shares of common stock outstanding and increased the net
asset value per share by a proportional amount. Neither the Funds portfolio holdings nor the total value of stockholders investments in the Fund were affected as a result of the reverse stock split. The details of the reverse stock split
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rate
|
|
Net Asset Value
Before Reverse
Stock Split
|
|
|
Net Asset Value After
Reverse Stock Split
|
|
|
Shares Outstanding
Before Reverse
Stock Split
|
|
|
Shares Outstanding
After Reverse Stock
Split
|
|
1-for-5
|
|
$
|
2.94
|
|
|
$
|
14.70
|
|
|
|
71,584,218
|
|
|
|
14,316,845
|
|
|
|
|
ClearBridge Energy Midstream Opportunity Fund Inc. 2021 Semi-Annual Report
|
|
21
|
Notes to financial statements
(unaudited) (contd)
10. Restricted securities
The following Fund
investment is restricted as to resale and, in the absence of a readily ascertainable market value, is valued in good faith in accordance with procedures approved by the Board of Directors.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Security
|
|
Number of
Units
|
|
|
Acquisition
Date
|
|
|
Cost
|
|
|
Fair Value
at 5/31/2021
|
|
|
Value Per
Unit
|
|
|
Percent of
Net Assets
|
|
Crestwood Equity Partners LP
|
|
|
246,790
|
|
|
|
3/21
|
|
|
$
|
5,429,380
|
|
|
$
|
7,073,001
|
|
|
$
|
28.66
|
|
|
|
2.00
|
%
|
11. Income taxes
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted in response to the COVID-19 pandemic. The CARES Act
contains several corporate income tax provisions, including but not limited to, (1) providing a 5-year carryback of net operating loss (NOL) tax carryforwards generated in tax years beginning
after December 31, 2017 and before January 1, 2021; (2) temporarily removing the 80% taxable income limitation on NOL utilization for tax years beginning before January 1, 2021; (3) temporarily increasing the allowable interest
expense deductions under Sec. 163(j) of the Code; and (4) accelerating the refundability of corporate alternative minimum tax credits. The Fund continues to evaluate the potential impact for the year ended November 30, 2021.
The Funds federal and state income tax provision consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
State
|
|
|
Total
|
|
Current tax expense (benefit)
|
|
$
|
(490,867)
|
|
|
$
|
(81,916)
|
|
|
$
|
(572,783)
|
|
Deferred tax expense (benefit)
|
|
|
|
|
|
|
|
|
|
|
|
|
Total tax expense (benefit)
|
|
$
|
(490,867)
|
|
|
$
|
(81,916)
|
|
|
$
|
(572,783)
|
|
Total income taxes have been computed by applying the U.S. federal statutory income tax rate of 21% plus a blended net state income
tax rate of 1.7%. The Fund applied this rate to net investment income (loss) and realized and unrealized gains (losses) on investments before income taxes in computing its total income tax expense (benefit).
The provision for income taxes differs from the amount derived from applying the statutory income tax rate to net investment income (loss) and realized and
unrealized gains (losses) before income taxes as follows:
|
|
|
|
|
|
|
|
|
Provision at statutory rates
|
|
|
21.00
|
%
|
|
$
|
28,158,144
|
|
State taxes, net of federal tax benefit
|
|
|
1.70
|
%
|
|
|
2,279,469
|
|
Non-deductible distributions on MRPS, dividends received deduction, and other, net (federal and
state)
|
|
|
0.09
|
%
|
|
|
119,210
|
|
Change in valuation allowance
|
|
|
(23.22)
|
%
|
|
|
(31,129,606)
|
|
Total tax expense (benefit)
|
|
|
(0.43)
|
%
|
|
$
|
(572,783)
|
|
|
|
|
22
|
|
ClearBridge Energy Midstream Opportunity Fund Inc. 2021 Semi-Annual Report
|
Components of the Funds net deferred tax asset (liability) as of May 31, 2021 are as follows:
|
|
|
|
|
Deferred tax assets
|
|
|
|
|
Net operating loss carryforwards
|
|
$
|
37,008,773
|
|
Capital loss carryforward
|
|
|
88,125,449
|
|
Unrealized losses on investment securities
|
|
|
5,650,952
|
|
Other deferred tax assets
|
|
|
327,642
|
|
|
|
Deferred tax liabilities
|
|
|
|
|
Basis reduction resulting from differences in the book vs. taxable income received from MLPs
|
|
|
(27,111,216)
|
|
Net deferred tax asset (liability) before valuation allowance
|
|
|
104,001,600
|
|
Less: Valuation allowance
|
|
|
(104,001,600)
|
|
Total net deferred tax asset (liability)
|
|
|
|
|
At May 31, 2021, the Fund had federal and state net operating loss carryforwards of $157,576,272 and $70,574,076 (net of state
apportionment), respectively (deferred tax asset of $37,008,773). Several states compute net operating losses before apportionment, therefore the value of the state net operating loss carryforward disclosed may fluctuate for changes in apportionment
factors. Realization of the deferred tax asset related to the net operating loss carryforwards is dependent, in part, on generating sufficient taxable income in each respective jurisdiction prior to expiration of the loss carryforwards. If not
utilized, the federal net operating loss carryforward expires in tax years 2033 and 2036, and the state net operating loss carryforwards expire in tax years between 2020 and 2040. The federal net operating loss carryforward generated in the current
year does not have an expiration.
Additionally, at May 31, 2021, the Fund had a federal and state capital loss carryforward of $388,217,837
(deferred tax asset of $88,125,449), which may be carried forward for 5 years. If not utilized, this capital loss carryforward expires in tax years 2020, 2023, 2024 and 2025. For corporations, capital losses can only be used to offset capital gains
and cannot be used to offset ordinary income. Therefore, the use of this capital loss carryforward is dependent upon the Fund generating sufficient net capital gains prior to the expiration of the loss carryforward.
As a result of the November 16, 2018 acquisition of ClearBridge American Energy MLP Fund, Inc., the Funds
pre-acquisition loss carryovers are now subject to an annual limitation of approximately $8.0 million under Section 382 of the Code. Additionally, under Section 384 of the Code, the Fund is
limited in its ability to use the acquired funds loss carryovers to offset the recognition of its built-in gains in assets that existed at the time of the acquisition for a period of
five-years.
The amount of net operating loss and capital loss carryforwards differed from the amounts disclosed in the prior year financial statements
due to differences between the estimated and actual amounts of taxable income received from the MLPs for the prior year.
|
|
|
ClearBridge Energy Midstream Opportunity Fund Inc. 2021 Semi-Annual Report
|
|
23
|
Notes to financial statements
(unaudited) (contd)
Significant declines in the fair market value of its portfolio of investments, in conjunction with cumulative net operating losses and capital losses incurred and
expected to be incurred, have resulted in the Fund having a net deferred tax asset as of May 31, 2021. Based on the assessment, as described in Note 1(k), and considering the limitations imposed under Sections 382 and 384 as discussed above,
management of the Fund has determined that it is not more likely than not that it will be able to generate significant future taxable income of the appropriate character in order to realize its deferred tax assets. Accordingly, management of the
Fund has determined that a full valuation allowance on its net deferred tax asset is appropriate at this time.
At May 31, 2021, the cost basis of
investments for Federal income tax purposes was $396,898,873. At May 31, 2021, gross unrealized appreciation and depreciation of investments for Federal income tax purposes were as follows:
|
|
|
|
|
Gross unrealized appreciation
|
|
$
|
123,026,604
|
|
Gross unrealized depreciation
|
|
|
(26,994,268)
|
|
Net unrealized appreciation (depreciation) before tax
|
|
$
|
96,032,336
|
|
Net unrealized appreciation (depreciation) after tax
|
|
$
|
74,232,996
|
|
12. Recent accounting pronouncement
In March 2020, the Financial Accounting Standards Board issued Accounting Standards Update No. 2020-04, Reference Rate Reform (Topic 848) Facilitation of the
Effects of Reference Rate Reform on Financial Reporting (the ASU). The amendments in the ASU provide optional temporary financial reporting relief from the effect of certain types of contract modifications due to the planned
discontinuation of the London Interbank Offered Rate and other interbank-offered based reference rates as of the end of 2021. The ASU is effective for certain reference rate-related contract modifications that occur during the period March 12,
2020 through December 31, 2022. Management has reviewed the requirements and believes the adoption of this ASU will not have a material impact on the financial statements.
13. Other matters
The outbreak of the respiratory illness
COVID-19 (commonly referred to as coronavirus) has continued to rapidly spread around the world, causing considerable uncertainty for the global economy and financial markets. The ultimate economic
fallout from the pandemic, and the long-term impact on economies, markets, industries and individual issuers, are not known. The COVID-19 pandemic could adversely affect the value and liquidity of the
Funds investments and negatively impact the Funds performance. In addition, the outbreak of COVID-19, and measures taken to mitigate its effects, could result in disruptions to the services
provided to the Fund by its service providers.
|
|
|
24
|
|
ClearBridge Energy Midstream Opportunity Fund Inc. 2021 Semi-Annual Report
|
* * *
The London Interbank Offered Rate, or LIBOR, the offered rate for short-term Eurodollar deposits between major international banks, is used extensively in the United States and globally as a reference
rate in various financing and commercial transactions. On March 5, 2021, the ICE Benchmark Administration, the administrator of LIBOR, stated that it will cease the publication of (i) the overnight and
one-, three-, six- and twelve-month USD LIBOR settings immediately following the LIBOR publication on Friday, June 30, 2023 and (ii) all other LIBOR settings,
including the one-week and two-month USD LIBOR settings, immediately following the LIBOR publication on Friday, December 31, 2021. There remains uncertainty
regarding the nature of any replacement rate and the impact of the transition from LIBOR on the financial markets generally, transactions that use LIBOR as a reference rate and financial institutions that engage in such transactions, including
issuers of securities in which the Fund invests. As such, the potential effect of a transition away from LIBOR on the Fund or the Funds investments cannot yet be determined.
|
|
|
ClearBridge Energy Midstream Opportunity Fund Inc. 2021 Semi-Annual Report
|
|
25
|
Additional shareholder information (unaudited)
Results of annual meeting of shareholders
The Annual Meeting of Shareholders of ClearBridge Energy Midstream Opportunity Fund Inc. was held on June 4, 2021 for the purpose of considering and voting
upon the proposals presented at the Meeting. The following table provides information concerning the matters voted upon at the Meeting:
Election of directors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominees
|
|
Common
Shares
and Preferred
Shares,
voting
together,
Voted FOR
Election
|
|
|
Common
Shares
and Preferred
Shares,
voting
together,
WITHHELD
|
|
|
Common
Shares
and Preferred
Shares,
voting
together,
ABSTAIN
|
|
|
Preferred
Shares,
Voted
FOR
Election
|
|
|
Preferred
Shares,
WITHHELD
|
|
Carol L. Colman
|
|
|
7,193,987
|
|
|
|
4,787,824
|
|
|
|
219,865
|
|
|
|
|
|
|
|
|
|
Daniel P. Cronin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
305
|
|
|
|
10
|
|
Paolo M. Cucchi
|
|
|
7,168,792
|
|
|
|
4,802,168
|
|
|
|
230,716
|
|
|
|
|
|
|
|
|
|
At May 31, 2021, in addition to Carol L. Colman, Daniel P. Cronin and Paolo M. Cucchi, the other Directors of the Fund were as
follows:
Robert D. Agdern
William R. Hutchinson
Eileen A. Kamerick
Nisha Kumar
Jane Trust
Ratification of Selection of
Independent Registered Public Accountants
To ratify the selection of PricewaterhouseCoopers LLP (PwC) as independent registered
public accountants of the Fund for the fiscal year ended November 30, 2021.
|
|
|
|
|
For
|
|
Against
|
|
Abstain
|
10,598,804
|
|
1,368,521
|
|
234,351
|
|
|
|
26
|
|
ClearBridge Energy Midstream Opportunity Fund Inc.
|
Dividend reinvestment plan (unaudited)
Unless you elect to receive distributions in cash (i.e.,
opt-out), all dividends, including any capital gain dividends and return of capital distributions, on your Common Stock will be automatically reinvested by Computershare Trust Company, N.A., as agent for the
stockholders (the Plan Agent), in additional shares of Common Stock under the Funds Dividend Reinvestment Plan (the Plan). You may elect not to participate in the Plan by contacting the Plan Agent. If you do not
participate, you will receive all cash distributions paid by check mailed directly to you by Computershare Trust Company, N.A., as dividend paying agent.
If you participate in the Plan, the number of shares of Common Stock you will receive will be determined as follows:
(1) If the market price of the Common Stock (plus $0.03 per share commission) on the payment date (or, if the payment date is not a NYSE trading
day, the immediately preceding trading day) is equal to or exceeds the net asset value per share of the Common Stock at the close of trading on the NYSE on the payment date, the Fund will issue new Common Stock at a price equal to the greater of
(a) the net asset value per share at the close of trading on the NYSE on the payment date or (b) 95% of the market price per share of the Common Stock on the payment date.
(2) If the net asset value per share of the Common Stock exceeds the market price of the Common Stock (plus $0.03 per share commission) at the close of trading on the NYSE on the payment date, the Plan Agent will
receive the dividend or distribution in cash and will buy Common Stock in the open market, on the NYSE or elsewhere, for your account as soon as practicable commencing on the trading day following the payment date and terminating no later than the
earlier of (a) 30 days after the dividend or distribution payment date, or (b) the payment date for the next succeeding dividend or distribution to be made to the stockholders; except when necessary to comply with applicable provisions of the
federal securities laws. If during this period: (i) the market price (plus $0.03 per share commission) rises so that it equals or exceeds the net asset value per share of the Common Stock at the close of trading on the NYSE on the payment date
before the Plan Agent has completed the open market purchases or (ii) if the Plan Agent is unable to invest the full amount eligible to be reinvested in open market purchases, the Plan Agent will cease purchasing Common Stock in the open market
and the Fund shall issue the remaining Common Stock at a price per share equal to the greater of (a) the net asset value per share at the close of trading on the NYSE on the day prior to the issuance of shares for reinvestment or (b) 95% of the
then current market price per share.
Common Stock in your account will be held by the Plan Agent in
non-certificated form. Any proxy you receive will include all shares of Common Stock you have received under the Plan. You may withdraw from the Plan (i.e., opt-out) by
notifying the Plan Agent in writing at 462 South 4th Street, Suite 1600, Louisville, KY 40202 or by calling the Plan Agent at
1-888-888-0151. Such withdrawal will be effective immediately if notice is received by the Plan Agent not less than ten business
days prior to any dividend or distribution record date;
|
|
|
ClearBridge Energy Midstream Opportunity Fund Inc.
|
|
27
|
Dividend reinvestment plan
(unaudited) (contd)
otherwise such withdrawal will be effective as soon as practicable after the Plan Agents investment of the most recently declared dividend or distribution on
the Common Stock.
Plan participants who sell their shares will be charged a service charge (currently $5.00 per transaction) and the Plan Agent is
authorized to deduct brokerage charges actually incurred from the proceeds (currently $0.05 per share commission). There is no service charge for reinvestment of your dividends or distributions in Common Stock. However, all participants will pay a
pro rata share of brokerage commissions incurred by the Plan Agent when it makes open market purchases. Because all dividends and distributions will be automatically reinvested in additional shares of Common Stock, this allows you to add to your
investment through dollar cost averaging, which may lower the average cost of your Common Stock over time. Dollar cost averaging is a technique for lowering the average cost per share over time if the Funds net asset value declines. While
dollar cost averaging has definite advantages, it cannot assure profit or protect against loss in declining markets.
Automatically reinvesting dividends
and distributions does not mean that you do not have to pay income taxes due upon receiving dividends and distributions. Investors will be subject to income tax on amounts reinvested under the Plan.
The Fund reserves the right to amend or terminate the Plan if, in the judgment of the Board of Directors, the change is warranted. The Plan may be terminated,
amended or supplemented by the Fund upon notice in writing mailed to stockholders at least 30 days prior to the record date for the payment of any dividend or distribution by the Fund for which the termination or amendment is to be effective. Upon
any termination, you will be sent cash for any fractional share of Common Stock in your account. You may elect to notify the Plan Agent in advance of such termination to have the Plan Agent sell part or all of your Common Stock on your behalf.
Additional information about the Plan and your account may be obtained from the Plan Agent at 462 South 4th Street, Suite 1600, Louisville, KY 40202 or by calling the Plan Agent at 1-888-888-0151.
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28
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ClearBridge Energy Midstream Opportunity Fund Inc.
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ClearBridge
Energy Midstream Opportunity Fund Inc.
Directors
Robert D. Agdern
Carol L. Colman
Daniel P. Cronin
Paolo M. Cucchi
William R. Hutchinson
Eileen A. Kamerick
Nisha Kumar
Jane Trust
Chairman
Officers
Jane Trust
President and Chief Executive Officer
Christopher Berarducci
Treasurer and Principal Financial Officer
Fred Jensen
Chief Compliance Officer
Jenna Bailey
Identity Theft Prevention Officer
George P. Hoyt
Secretary and Chief Legal Officer
Thomas C.
Mandia
Assistant Secretary
Jeanne M. Kelly
Senior Vice President
ClearBridge Energy Midstream Opportunity Fund Inc.
620 Eighth Avenue
47th Floor
New York, NY 10018
Investment manager
Legg Mason Partners Fund Advisor, LLC
Subadviser
ClearBridge Investments, LLC
Custodian
The Bank of New York Mellon
Transfer agent
Computershare Inc.
462 South 4th Street, Suite 1600
Louisville, KY 40202
Independent registered public accounting firm
PricewaterhouseCoopers LLP
Baltimore, MD
Legal counsel
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, NY 10017
New York Stock Exchange Symbol
EMO
Legg Mason Funds Privacy and Security Notice
Your Privacy and the Security of Your Personal Information is Very Important to the Legg Mason Funds
This Privacy and Security Notice (the Privacy Notice) addresses the Legg Mason Funds privacy and data protection practices with respect to
nonpublic personal information the Funds receive. The Legg Mason Funds include any funds sold by the Funds distributor, Legg Mason Investor Services, LLC, as well as Legg Mason-sponsored closed-end
funds. The provisions of this Privacy Notice apply to your information both while you are a shareholder and after you are no longer invested with the Funds.
The Type of Nonpublic Personal Information the Funds Collect About You
The Funds collect and
maintain nonpublic personal information about you in connection with your shareholder account. Such information may include, but is not limited to:
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Personal information included on applications or other forms;
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Account balances, transactions, and mutual fund holdings and positions;
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Bank account information, legal documents, and identity verification documentation;
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Online account access user IDs, passwords, security challenge question responses; and
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Information received from consumer reporting agencies regarding credit history and creditworthiness (such as the amount of an individuals total debt,
payment history, etc.).
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How the Funds Use Nonpublic Personal Information About You
The Funds do not sell or share your nonpublic personal information with third parties or with affiliates for their marketing purposes, or with other financial
institutions or affiliates for joint marketing purposes, unless you have authorized the Funds to do so. The Funds do not disclose any nonpublic personal information about you except as may be required to perform transactions or services you have
authorized or as permitted or required by law.
The Funds may disclose information about you to:
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Employees, agents, and affiliates on a need to know basis to enable the Funds to conduct ordinary business, or to comply with obligations to
government regulators;
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Service providers, including the Funds affiliates, who assist the Funds as part of the ordinary course of business (such as printing, mailing services, or
processing or servicing your account with us) or otherwise perform services on the Funds behalf, including companies that may perform statistical analysis, market research and marketing services solely for the Funds;
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Permit access to transfer, whether in the United States or countries outside of the United States to such Funds employees, agents and affiliates and
service providers as required to enable the Funds to conduct ordinary business, or to comply with obligations to government regulators;
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The Funds representatives such as legal counsel, accountants and auditors to enable the Funds to conduct ordinary business, or to comply with obligations
to government regulators;
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Fiduciaries or representatives acting on your behalf, such as an IRA custodian or trustee of a grantor trust.
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NOT PART OF THE
SEMI-ANNUAL REPORT
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Legg Mason Funds Privacy and Security Notice (contd)
Except as otherwise permitted by applicable law, companies acting on the Funds
behalf, including those outside the United States, are contractually obligated to keep nonpublic personal information the Funds provide to them confidential and to use the information the Funds share only to provide the services the Funds ask them
to perform. The Funds may disclose nonpublic personal information about you when necessary to enforce their rights or protect against fraud, or as permitted or required by applicable law, such as in connection with a law enforcement or regulatory
request, subpoena, or similar legal process. In the event of a corporate action or in the event a Fund service provider changes, the Funds may be required to disclose your nonpublic personal information to third parties. While it is the Funds
practice to obtain protections for disclosed information in these types of transactions, the Funds cannot guarantee their privacy policy will remain unchanged.
Keeping You Informed of the Funds Privacy and Security Practices
The Funds will notify
you annually of their privacy policy as required by federal law. While the Funds reserve the right to modify this policy at any time they will notify you promptly if this privacy policy changes.
The Funds Security Practices
The
Funds maintain appropriate physical, electronic and procedural safeguards designed to guard your nonpublic personal information. The Funds internal data security policies restrict access to your nonpublic personal information to authorized
employees, who may use your nonpublic personal information for Fund business purposes only.
Although the Funds strive to protect your nonpublic personal
information, they cannot ensure or warrant the security of any information you provide or transmit to them, and you do so at your own risk. In the event of a breach of the confidentiality or security of your nonpublic personal information, the Funds
will attempt to notify you as necessary, so you can take appropriate protective steps. If you have consented to the Funds using electronic communications or electronic delivery of statements, they may notify you under such circumstances using the
most current email address you have on record with them.
In order for the Funds to provide effective service to you, keeping your account information
accurate is very important. If you believe that your account information is incomplete, not accurate or not current, if you have questions about the Funds privacy practices, or our use of your nonpublic personal information, write the Funds
using the contact information on your account statements, email the Funds by clicking on the Contact Us section of the Funds website at www.leggmason.com, or contact the Fund at
1-888-777-0102.
Revised April
2018
Legg Mason California Consumer Privacy Act Policy
Although much of the personal information we collect is nonpublic personal information subject to federal law, residents of California may, in certain circumstances, have additional rights under the
California Consumer Privacy Act (CCPA). For example, if you are a broker,
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NOT PART OF THE
SEMI-ANNUAL REPORT
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Legg Mason Funds Privacy and Security Notice (contd)
dealer, agent, fiduciary, or representative acting by or on behalf of, or for, the
account of any other person(s) or household, or a financial advisor, or if you have otherwise provided personal information to us separate from the relationship we have with personal investors, the provisions of this Privacy Policy apply to your
personal information (as defined by the CCPA).
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In addition to the provisions of the Legg Mason Funds Security and Privacy Notice, you may have the right to know the categories and specific pieces of personal
information we have collected about you.
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You also have the right to request the deletion of the personal information collected or maintained by the Funds.
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If you wish to exercise any of the rights you have in respect of your personal information, you should advise the Funds by contacting them as set forth below. The
rights noted above are subject to our other legal and regulatory obligations and any exemptions under the CCPA. You may designate an authorized agent to make a rights request on your behalf, subject to the identification process described below. We
do not discriminate based on requests for information related to our use of your personal information, and you have the right not to receive discriminatory treatment related to the exercise of your privacy rights.
We may request information from you in order to verify your identity or authority in making such a request. If you have appointed an authorized agent to make a
request on your behalf, or you are an authorized agent making such a request (such as a power of attorney or other written permission), this process may include providing a password/passcode, a copy of government issued identification, affidavit or
other applicable documentation, i.e. written permission. We may require you to verify your identity directly even when using an authorized agent, unless a power of attorney has been provided. We reserve the right to deny a request submitted by an
agent if suitable and appropriate proof is not provided.
For the 12-month period prior to the date of this
Privacy Policy, the Legg Mason Funds have not sold any of your personal information; nor do we have any plans to do so in the future.
Contact
Information
Address: Data Privacy Officer, 100 International Dr., Baltimore, MD 21202
Email: DataProtectionOfficer@franklintempleton.com
Phone: 1-800-396-4748
Revised October 2020
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NOT PART OF THE
SEMI-ANNUAL REPORT
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ClearBridge Energy Midstream Opportunity Fund Inc.
ClearBridge Energy Midstream Opportunity Fund Inc.
620 Eighth
Avenue
47th Floor
New York, NY 10018
Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940, as amended, that from time to time the Fund may purchase, at market prices, shares of its stock.
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each
fiscal year as an exhibit to its reports on Form N-PORT. The Funds Forms N-PORT are available on the SECs website at www.sec.gov. To obtain information on
Form N-PORT, shareholders can call the Fund at 1-888-777-0102.
Information on how the Fund voted proxies relating to portfolio securities during the prior 12-month period ended June 30th
of each year and a description of the policies and procedures that the Fund uses to determine how to vote proxies related to portfolio transactions are available (1) without charge, upon request, by calling 1-888-777-0102, (2) at www.lmcef.com and (3) on the SECs website at www.sec.gov.
This report is transmitted to the shareholders of ClearBridge Energy Midstream Opportunity Fund Inc. for their information. This is not a prospectus, circular or representation intended for use in the purchase of
shares of the Fund or any securities mentioned in this report.
Computershare Inc.
462 South 4th Street, Suite 1600
Louisville, KY 40202
CBAX014784 7/21 SR21-4188