UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-22546
(Exact name of registrant as specified in charter)
One Madison Avenue, 17th Floor, New York, NY 10010
(Address of principal executive offices) (Zip code)
Marc A. De Oliveira
Franklin Templeton
100 First Stamford Place
Stamford, CT 06902
(Name and address of agent for service)
Registrant’s telephone number, including area code: 1-888-777-0102
Date of fiscal year end: November 30
Date of reporting period:
| ITEM 1. | REPORT TO STOCKHOLDERS. |
(a) The Report to Shareholders is filed herewith
Semi-Annual
Report
May 31, 2026
CLEARBRIDGE
ENERGY MIDSTREAM OPPORTUNITY FUND
INC. (EMO)
ENERGY MIDSTREAM OPPORTUNITY FUND
INC. (EMO)
If you need assistance
accessing this content, please reach out to your sales representative or send an email to accessibility@franklintempleton.com.
Fund objective
The Fund’s investment objective
is to provide long-term investors a high level of total return with
an emphasis on cash distributions.
The Fund seeks to achieve its objective by investing primarily in energy midstream entities.
The Fund seeks to achieve its objective by investing primarily in energy midstream entities.
What’s inside
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III
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IV
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II
ClearBridge
Energy Midstream Opportunity Fund Inc.
Letter
from the president
Dear Shareholder,
We are pleased to provide the semi-annual
report of ClearBridge Energy Midstream Opportunity Fund
Inc. for the six-month reporting period ended May 31, 2026. Please read on
for Fund performance information during the Fund’s reporting period.
As always, we remain committed to
providing you with excellent service and a full spectrum
of investment choices. We also remain committed to supplementing the support you
receive from your financial advisor. One way we accomplish this is through our website, www.franklintempleton.com.
Here you can gain immediate access to market and investment
information, including:
•
Fund
prices and performance,
•
Market
insights and commentaries from our portfolio managers, and
•
A
host of educational resources.
We look forward to helping you meet
your financial goals.
Sincerely,
Jane
Trust, CFA
President and Chief Executive Officer
President and Chief Executive Officer
June 30, 2026
ClearBridge
Energy Midstream Opportunity Fund Inc.
III
Performance
review
For the six
months ended May 31, 2026, ClearBridge Energy Midstream Opportunity Fund
Inc. returned 19.20% based on its net asset value (NAV)i
and 13.56% based on its New York Stock Exchange (NYSE)
market price per share. The Alerian MLP Index (the Index)ii,
a gauge of the total return of energy infrastructure master limited partnerships, returned
16.61% over the same time frame. The performance of the Index reflects no deduction
for fees, expenses or taxes, or the impact from the use of leverage. The Fund invests
both in securities structured as master limited partnerships and in corporations for federal
income tax purposes, producing an asset allocation that generally differs significantly
from the Index. The Fund’s higher allocation to corporations may produce differences
in performance versus the Index.
The Fund has a practice of seeking
to maintain a relatively stable level of distributions to shareholders.
This practice has no impact on the Fund’s investment strategy and may reduce the
Fund’s NAV. The Fund’s manager believes the practice helps maintain the Fund’s competitiveness
and may benefit the Fund’s market price and premium/discount to the Fund’s
NAV.
During the six-month period, the
Fund made distributions to shareholders totaling $2.16 per share.
As of May 31, 2026, the Fund estimates that all of the distributions during the period constituted
a return of capital.* The performance table shows the
Fund’s six-month total return based on its NAV and
market price as of May 31, 2026. Past performance is no guarantee
of future results.
|
Performance
Snapshot as of May 31, 2026 (unaudited)
| |
|
Price
Per Share |
6-Month
Total
Return** |
|
$56.00
(NAV) |
19.20
%†
|
|
$49.54
(Market Price) |
13.56
%‡
|
All figures represent past performance and are
not a guarantee of future results. Performance figures for periods shorter
than one year represent cumulative figures and are not annualized.
** Total returns are based on changes in NAV or
market price, respectively. Returns reflect the deduction of all Fund
expenses, including management fees, operating expenses, and other Fund expenses.
Returns do not reflect the deduction of brokerage commissions or taxes that investors may
pay on distributions or the sale of shares.
† Total return assumes the reinvestment of
all distributions, including returns of capital, if any, at NAV.
‡ Total return assumes the reinvestment of
all distributions, including returns of capital, if any, in additional
shares in accordance with the Fund’s Dividend Reinvestment Plan.
*
This
estimate is not for tax purposes. The Fund will issue a Form 1099 with final composition of the distributions for
tax purposes after year-end. A return of capital is not taxable and results in a reduction in the tax basis of a shareholder’s
investment. For more information about a distribution’s composition, please refer to the Fund’s distribution
press release or, if applicable, the Section 19 notice located in the press release section of our website,
www.franklintempleton.com.
IV
ClearBridge
Energy Midstream Opportunity Fund Inc.
Looking for additional information?
The Fund is traded under the symbol
“EMO” and its closing market price is available in most newspapers
under the NYSE listings. The daily NAV is available online under the symbol “XEMOX”
on most financial websites. Barron’s
and The Wall Street Journal’s
Monday edition both carry closed-end fund tables that
provide additional information. In addition, the Fund
issues a monthly press release that can be found on most major financial websites as
well as www.franklintempleton.com.
In a continuing effort to provide
information concerning the Fund, shareholders may call 1-888-777-0102
(toll free), Monday through Friday from 8:00 a.m. to 5:30 p.m. Eastern Time, for
the Fund’s current NAV, market price and other information.
Thank you for your investment in
the ClearBridge Energy Midstream Opportunity Fund Inc. As
always, we appreciate that you have chosen us to manage your assets and we remain focused
on achieving the Fund’s investment goals.
Sincerely,
Jane
Trust, CFA
President and Chief Executive Officer
President and Chief Executive Officer
June 30, 2026
RISKS: The
Fund is a non-diversified, closed-end management investment company designed primarily
as a long-term investment and not as a trading vehicle. The Fund is not intended to be a
complete investment program and, due to the uncertainty inherent in all investments, there can be
no assurance that the Fund will achieve its investment objective. The Fund’s common stock is traded
on the New York Stock Exchange. Similar to stocks, the Fund’s share price will fluctuate with
market conditions and, at the time of sale, may be worth more or less than the original investment.
Shares of closed-end funds often trade at a discount to their net asset value. Because
the Fund is non-diversified, it may be more susceptible to economic, political or regulatory
events than a diversified fund. The Fund’s investments are subject to a number of risks
such as stock market risk, MLP and midstream entities risk, market events risk and portfolio management
risk. MLP distributions are not guaranteed and there is no assurance that all distributions
will be tax deferred. Investments in MLP securities and midstream entities are subject
to unique risks. The Fund’s concentration of investments in energy-related MLPs and midstream
entities subjects it to the risks of MLPs, midstream entities and the energy sector, including
the risks of declines in energy or commodity prices, decreases in energy demand, adverse
weather conditions, natural or other disasters, changes in government regulation, and changes
in tax laws. Leverage may result in greater volatility of NAV and the market price of common
shares and increases a shareholder’s risk of loss. The Fund may make significant investments
in derivative instruments. Derivative instruments can be illiquid, may
ClearBridge
Energy Midstream Opportunity Fund Inc.
V
Performance
review (cont’d)
disproportionately increase
losses, and have a potentially large impact on Fund performance. The
Fund may invest in small-capitalization or illiquid securities, which can increase the risk and volatility
of the Fund. The market values of securities or other assets will fluctuate, sometimes sharply
and unpredictably, due to changes in general market conditions, overall economic trends or
events, governmental actions or intervention, actions taken by the U.S. Federal Reserve or foreign
central banks, market disruptions caused by trade disputes or other factors, political developments,
armed conflicts, economic sanctions and countermeasures in response to sanctions,
major cybersecurity events, investor sentiment, the global and domestic effects of a pandemic,
and other factors that may or may not be related to the issuer of the security or other asset.
The Fund may also invest in money market funds, including funds affiliated with the Fund’s manager
and subadviser.
All investments are subject to risk
including the possible loss of principal. Past performance is no guarantee
of future results. All index performance reflects no deduction for fees, expenses or taxes. Please
note that an investor cannot invest directly in an index.
i
Net
asset value (NAV) is calculated by subtracting total liabilities, including liabilities associated with financial leverage
(if any), from the closing value of all securities held by the Fund (plus all other assets) and dividing the result
(total net assets) by the total number of the common shares outstanding. The NAV fluctuates with changes in the
market prices of securities in which the Fund has invested. However, the price at which an investor may buy or sell
shares of the Fund is the Fund’s market price as determined by supply of and demand for the Fund’s shares.
ii
The
Alerian MLP Index is a composite of the 50 most prominent energy master limited partnerships (MLPs) and is calculated
using a float-adjusted, capitalization-weighted methodology.
Important
data provider notices and terms available at www.franklintempletondatasources.com.
VI
ClearBridge
Energy Midstream Opportunity Fund Inc.
Fund
at a glance† (unaudited)
Investment
breakdown (%) as a percent of total investments
†
The
bar graph above represents the composition of the Fund’s investments as of May 31, 2026, and November
30, 2025. The Fund is actively managed. As a result, the composition of the Fund’s investments is subject
to change at any time.
ClearBridge
Energy Midstream Opportunity Fund Inc. 2026 Semi-Annual Report
1
Schedule
of investments (unaudited)
May 31, 2026
ClearBridge
Energy Midstream Opportunity Fund Inc.
(Percentages shown
based on Fund net assets)
|
Security
|
|
|
|
Shares
|
Value
|
|
Common
Stocks — 68.8% | |||||
|
Energy
— 68.8% | |||||
|
Oil,
Gas & Consumable Fuels — 68.8% | |||||
|
Antero
Midstream Corp. |
3,305,098
|
$69,274,854
| |||
|
DT
Midstream Inc. |
221,110
|
30,950,978
| |||
|
Enbridge
Inc. |
1,444,796
|
79,088,133
| |||
|
Kinder
Morgan Inc. |
3,181,212
|
98,872,069
| |||
|
ONEOK
Inc. |
1,173,728
|
98,522,728
| |||
|
Pembina
Pipeline Corp. |
222,482
|
10,356,537
| |||
|
SunocoCorp
LLC |
460,000
|
30,056,400
| |||
|
Targa
Resources Corp. |
710,170
|
181,143,063
| |||
|
TC
Energy Corp. |
797,294
|
53,115,726
| |||
|
Williams
Cos. Inc. |
1,678,726
|
119,844,249
| |||
|
| |||||
|
Total
Common Stocks (Cost — $528,085,768) |
771,224,737
| ||||
|
|
|
|
|
Shares/Units
|
|
|
Master
Limited Partnerships — 60.2% | |||||
|
Diversified
Energy Infrastructure — 34.8% | |||||
|
Energy
Transfer LP |
7,066,316
|
135,461,278
| |||
|
Enterprise
Products Partners LP |
2,378,260
|
87,496,185
| |||
|
Genesis
Energy LP |
2,897,883
|
43,555,181
| |||
|
Plains
All American Pipeline LP |
2,670,671
|
59,903,151
| |||
|
Plains
GP Holdings LP, Class A Shares |
2,614,816
|
63,670,770
*
| |||
|
Total
Diversified Energy Infrastructure |
390,086,565
| ||||
|
Gathering/Processing
— 11.4% | |||||
|
Hess
Midstream LP, Class A Shares |
746,133
|
27,979,988
| |||
|
Western
Midstream Partners LP |
2,332,943
|
100,013,266
| |||
|
Total
Gathering/Processing |
127,993,254
| ||||
|
Liquids
Transportation & Storage — 1.3% | |||||
|
Delek
Logistics Partners LP |
279,818
|
13,817,413
| |||
|
Natural
Gas Transportation & Storage — 3.2% | |||||
|
Cheniere
Energy Partners LP |
611,873
|
36,143,338
| |||
|
Oil/Refined
Products — 9.5% | |||||
|
MPLX
LP |
1,946,431
|
106,372,454
| |||
|
| |||||
|
Total
Master Limited Partnerships (Cost — $483,946,544) |
674,413,024
| ||||
|
Total
Investments before Short-Term Investments (Cost — $1,012,032,312) |
1,445,637,761
| ||||
See
Notes to Financial Statements.
2
ClearBridge
Energy Midstream Opportunity Fund Inc. 2026 Semi-Annual Report
ClearBridge
Energy Midstream Opportunity Fund Inc.
(Percentages shown
based on Fund net assets)
|
Security
|
|
Rate
|
|
Shares
|
Value
|
|
Short-Term
Investments — 3.4% | |||||
|
JPMorgan
100% U.S. Treasury Securities
Money
Market Fund, Institutional Class
(Cost
— $38,451,818) |
|
3.482%
|
|
38,451,818
|
$38,451,818
(a)
|
|
Total
Investments** — 132.4% (Cost — $1,050,484,130) |
1,484,089,579
| ||||
|
Mandatory
Redeemable Preferred Stock, at Liquidation Value — (6.1)% |
(68,200,265
) | ||||
|
Other
Liabilities in Excess of Other Assets — (26.3)% |
(295,113,263
) | ||||
|
Total
Net Assets Applicable to Common Shareholders — 100.0% |
$1,120,776,051
| ||||
|
*
|
Non-income
producing security. |
|
**
|
The
entire portfolio is subject to a lien, granted to the lender and Senior Note holders, to the extent of the
borrowings
outstanding and any additional expenses. |
|
(a)
|
Rate
shown is one-day yield as of the end of the reporting period.
|
See
Notes to Financial Statements.
ClearBridge
Energy Midstream Opportunity Fund Inc. 2026 Semi-Annual Report
3
Statement
of assets and liabilities (unaudited)
May 31, 2026
|
Assets:
|
|
|
Investments,
at value (Cost — $1,050,484,130) |
$1,484,089,579
|
|
Cash
|
40
|
|
Income
tax receivable |
10,026,912
|
|
Excise
tax receivable (Note
1(k)) |
2,803,112
|
|
Dividends
and distributions receivable |
864,059
|
|
Money
market fund distributions receivable |
104,049
|
|
Prepaid
expenses |
383,519
|
|
Total
Assets |
1,498,271,270
|
|
Liabilities:
|
|
|
Loan
payable (Note
5) |
184,000,000
|
|
Deferred
tax liability (Note
12) |
109,329,477
|
|
Mandatory
Redeemable Preferred Stock ($35 liquidation value per share; 1,948,579 shares
issued
and outstanding) (net of deferred offering costs of $798,641) (Note
7) |
67,401,624
|
|
Senior
Secured Notes (net of deferred debt issuance and offering costs of
$28,785) (Note
6) |
14,477,421
|
|
Investment
management fee payable |
1,218,826
|
|
Interest
and commitment fees payable |
450,686
|
|
Distributions
payable to Mandatory Redeemable Preferred Stockholders |
182,293
|
|
Directors’
fees payable |
3,118
|
|
Accrued
expenses |
431,774
|
|
Total
Liabilities |
377,495,219
|
|
Total
Net Assets Applicable to Common Shareholders |
$1,120,776,051
|
|
Net
Assets Applicable to Common Shareholders: |
|
|
Common
stock par value ($0.001 par value; 20,014,627 shares issued and outstanding;
98,051,421
common shares authorized)
|
$20,015
|
|
Paid-in
capital in excess of par value |
825,346,510
|
|
Total
distributable earnings (loss), net of income taxes |
295,409,526
|
|
Total
Net Assets Applicable to Common Shareholders |
$1,120,776,051
|
|
Common
Shares Outstanding |
20,014,627
|
|
Net
Asset Value Per Common Share |
$56.00
|
See
Notes to Financial Statements.
4
ClearBridge
Energy Midstream Opportunity Fund Inc. 2026 Semi-Annual Report
Statement
of operations (unaudited)
For the Six Months Ended May 31,
2026
|
Investment
Income: |
|
|
Dividends
and distributions |
$38,237,114
|
|
Return
of capital (Note
1(h)) |
(26,366,439
) |
|
Net
Dividends and Distributions |
11,870,675
|
|
Money
market fund distributions |
376,595
|
|
Less:
Foreign taxes withheld |
(486,806
) |
|
Total
Investment Income |
11,760,464
|
|
Expenses:
|
|
|
Investment
management fee (Note
2) |
6,653,557
|
|
Interest
expense (Notes
5 and 6)
|
4,402,029
|
|
Distributions
to Mandatory Redeemable Preferred Stockholders (Notes
1(j) and 7) |
2,236,172
|
|
Directors’
fees |
233,390
|
|
Legal
fees |
226,430
|
|
Audit
and tax fees |
153,404
|
|
Transfer
agent fees |
127,829
|
|
Commitment
fees (Note
5) |
106,576
|
|
Shareholder
reports |
100,855
|
|
Amortization
of preferred stock offering costs (Note
7) |
97,530
|
|
Fund
accounting fees |
39,076
|
|
Amortization
of debt issuance and offering costs (Note
6) |
16,914
|
|
Rating
agency fees |
10,858
|
|
Franchise
taxes |
6,981
|
|
Stock
exchange listing fees |
6,240
|
|
Custody
fees |
5,386
|
|
Insurance
|
4,086
|
|
Excise
tax (Notes
1(k) and 7) |
(224,555
) |
|
Miscellaneous
expenses |
26,030
|
|
Total
Expenses |
14,228,788
|
|
Less:
Fee waivers and/or expense reimbursements (Note
2) |
(13,402
) |
|
Net
Expenses |
14,215,386
|
|
Net
Investment Loss, before income taxes |
(2,454,922
) |
|
Net current and deferred tax benefit (Note
12) |
472,544
|
|
Net
Investment Loss, net of income taxes |
(1,982,378
) |
|
Realized
and Unrealized Gain (Loss) on Investments and Foreign Currency Transactions
(Notes
1, 3 and 12): | |
|
Net
Realized Gain (Loss) From: |
|
|
Investment
transactions |
5,667,835
|
|
Foreign
currency transactions |
7,344
|
|
Net
Realized Gain, before income taxes |
5,675,179
|
|
Deferred
tax expense (Note
12) |
(1,234,472
) |
|
Net
Realized Gain, net of income taxes |
4,440,707
|
|
Change
in Net Unrealized Appreciation (Depreciation) From: |
|
|
Investments
|
231,259,930
|
|
Foreign
currencies |
(5,404
) |
|
Change
in Net Unrealized Appreciation (Depreciation), before income taxes |
231,254,526
|
|
Deferred
tax expense (Note
12)
|
(50,413,487
) |
|
Change
in Net Unrealized Appreciation (Depreciation), net of income taxes |
180,841,039
|
|
Net
Gain on Investments and Foreign Currency Transactions, net of income taxes |
185,281,746
|
|
Increase
in Net Assets Applicable to Common Shareholders From Operations |
$183,299,368
|
See
Notes to Financial Statements.
ClearBridge
Energy Midstream Opportunity Fund Inc. 2026 Semi-Annual Report
5
Statements
of changes in net assets
|
For
the Six Months Ended May 31, 2026 (unaudited)
and
the Year Ended November 30, 2025 |
2026
|
2025
|
|
Operations:
|
|
|
|
Net
investment loss, net of income taxes |
$(1,982,378
) |
$(2,310,402
) |
|
Net
realized gain, net of income taxes |
4,440,707
|
21,706,599
|
|
Change
in net unrealized appreciation (depreciation), net of income
taxes
|
180,841,039
|
(54,880,025
) |
|
Increase
(Decrease) in Net Assets Applicable to Common
Shareholders
From Operations |
183,299,368
|
(35,483,828
) |
|
Distributions
to Common Shareholders From (Note
1): |
|
|
|
Dividends
|
—
|
(15,169,627
) |
|
Return
of capital |
(43,231,594
) |
(63,088,598
) |
|
Decrease
in Net Assets From Distributions to Common
Shareholders
|
(43,231,594
) |
(78,258,225
) |
|
Fund
Share Transactions: |
|
|
|
Net
proceeds from sale of shares from rights offering (0 and 1,824,401
shares
issued, respectively) (Note
11) |
(263,274
)†
|
76,724,669
†
|
|
Excise
tax refund on shares repurchased (Note
1(k)) |
2,578,557
|
—
|
|
Increase
in Net Assets From Fund Share Transactions |
2,315,283
|
76,724,669
|
|
Increase
(Decrease) in Net Assets Applicable to Common
Shareholders
|
142,383,057
|
(37,017,384
) |
|
Net
Assets Applicable to Common Shareholders: |
|
|
|
Beginning
of period |
978,392,994
|
1,015,410,378
|
|
End
of period |
$1,120,776,051
|
$978,392,994
|
|
†
|
Net
of rights offering costs of $263,274 and $100,857, respectively. |
See
Notes to Financial Statements.
6
ClearBridge
Energy Midstream Opportunity Fund Inc. 2026 Semi-Annual Report
Statement
of cash flows (unaudited)
For the Six Months Ended May 31,
2026
|
Increase
(Decrease) in Cash: |
|
|
Cash
Flows from Operating Activities: |
|
|
Net
increase in net assets applicable to common shareholders resulting from operations |
$183,299,368
|
|
Adjustments
to reconcile net increase in net assets resulting from operations to net cash
provided
(used) by operating activities: |
|
|
Purchases
of portfolio securities |
(57,630,849
) |
|
Sales
of portfolio securities |
45,541,901
|
|
Net
purchases, sales and maturities of short-term investments |
(5,628,872
) |
|
Return
of capital |
26,366,439
|
|
Increase
in dividends and distributions receivable |
(132,230
) |
|
Decrease
in money market fund distributions receivable |
11,186
|
|
Increase
in prepaid expenses |
(302,497
) |
|
Increase
in income tax receivable |
(1,742,564
) |
|
Decrease
in payable for securities purchased |
(99,460
) |
|
Amortization
of preferred stock offering costs |
97,530
|
|
Amortization
of debt issuance and offering costs |
16,914
|
|
Increase
in investment management fee payable |
302,876
|
|
Decrease
in Directors’ fees payable |
(6,177
) |
|
Increase
in interest and commitment fees payable |
9,900
|
|
Decrease
in distributions payable to Mandatory Redeemable Preferred Stockholders |
(6,147
) |
|
Increase
in deferred tax liability |
50,985,037
|
|
Increase
in excise tax receivable (Notes
1(k) and 7) |
(224,555
) |
|
Decrease
in accrued expenses |
(256,639
) |
|
Net
realized gain on investments |
(5,667,835
) |
|
Change
in net unrealized appreciation (depreciation) of investments |
(231,259,930
) |
|
Net
Cash Provided in Operating Activities* |
3,673,396
|
|
Cash
Flows from Financing Activities: |
|
|
Distributions
paid on common stock (net of distributions payable) |
(50,436,860
) |
|
Proceeds
from loan facility borrowings |
50,000,000
|
|
Repayment
of Senior Secured Notes at maturity |
(2,984,588
) |
|
Additional
rights offering costs |
(263,274
) |
|
Net
Cash Used by Financing Activities |
(3,684,722
) |
|
Net
Decrease in Cash and Restricted Cash |
(11,326
) |
|
Cash
and restricted cash at beginning of period |
11,366
|
|
Cash
and restricted cash at end of period |
$40
|
|
*
|
Included
in operating expenses is $4,498,705 paid for interest and commitment fees on borrowings, $2,242,319
paid
for distributions to Mandatory Redeemable Preferred Stockholders and $1,932,942 paid for income taxes, net
of
refunds, if any. |
See
Notes to Financial Statements.
ClearBridge
Energy Midstream Opportunity Fund Inc. 2026 Semi-Annual Report
7
Statement
of cash flows (unaudited)
(cont’d)
For the Six Months Ended May 31,
2026
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, 2026 |
|
Cash
|
$40
|
|
Restricted
cash |
—
|
|
Total
cash and restricted cash shown in the Statement of Cash Flows |
$40
|
|
Non-Cash
Financing Activities: |
|
|
Excise
tax†
|
$(2,578,557
) |
|
†
|
Excise
tax refund receivable applicable to repurchases of common stock (Note 1(k)). |
See
Notes to Financial Statements.
8
ClearBridge
Energy Midstream Opportunity Fund Inc. 2026 Semi-Annual Report
Financial
highlights
|
For
a common share of capital stock outstanding throughout each year ended November 30,
unless
otherwise noted: | ||||||
|
|
20261,2
|
20251
|
20241
|
20231
|
20221
|
20211
|
|
Net
asset value, beginning of
period
|
$48.88
|
$55.82
|
$38.75
|
$35.97
|
$26.53
|
$17.13
|
|
Income
(loss) from operations: | ||||||
|
Net
investment loss |
(0.10
) |
(0.13
) |
(0.51
) |
(0.69
) |
(0.43
) |
(0.36
) |
|
Net
realized and unrealized gain
(loss)
|
9.38
|
(2.12
) |
20.58
|
5.80
|
11.65
|
11.01
|
|
Total
income (loss)
from
operations |
9.28
|
(2.25)
|
20.07
|
5.11
|
11.22
|
10.65
|
|
Less
distributions to common
shareholders
from: |
|
|
|
|
|
|
|
Dividends
|
—
|
(0.81
) |
(3.00
) |
(2.37
) |
(1.92
) |
(0.54
) |
|
Return
of capital |
(2.16
)4
|
(3.42
) |
—
|
—
|
—
|
(0.93
) |
|
Total
distributions to
common
shareholders
|
(2.16
) |
(4.23
) |
(3.00
) |
(2.37
) |
(1.92
) |
(1.47
) |
|
Anti-dilutive
impact of
repurchase
plan |
—
|
—
|
—
|
0.04
5
|
0.14
5
|
0.22
5
|
|
Dilutive impact of rights offering
|
—
|
(0.46
)6
|
—
|
—
|
—
|
—
|
|
Anti-dilutive
impact of tender
offer
|
—
|
—
|
0.00
7,8
|
—
|
—
|
—
|
|
Net
asset value, end of period |
$56.00
|
$48.88
|
$55.82
|
$38.75
|
$35.97
|
$26.53
|
|
Market
price, end of period |
$49.54
|
$45.55
|
$50.49
|
$34.50
|
$30.43
|
$21.65
|
|
Total
return, based on NAV9,10
|
19.20
% |
(4.83
)%11
|
53.78
%12
|
15.15
% |
43.33
% |
64.18
% |
|
Total
return, based on Market
Price13
|
13.56
% |
(1.28
)% |
57.31
% |
22.27
% |
50.20
% |
82.70
% |
|
Net
assets applicable to
common
shareholders, end of
period
(millions)
|
$1,121
|
$978
|
$1,015
|
$495
|
$465
|
$350
|
|
Ratios
to average net assets: | ||||||
|
Management
fees |
1.23
%14
|
1.29
% |
1.34
% |
1.47
% |
1.44
% |
1.41
% |
|
Other
expenses15
|
1.41
14
|
1.93
|
2.57
|
3.24
|
1.70
|
1.68
|
|
Subtotal15
|
2.64
14
|
3.22
|
3.91
|
4.71
|
3.14
|
3.09
|
|
Income
tax expenses |
4.73
18
|
—
19
|
9.99
|
0.04
|
0.11
|
—
19
|
|
Total
gross expenses15
|
7.37
20
|
3.22
11
|
13.90
12
|
4.75
21
|
3.25
|
3.09
|
|
Total
net expenses15
|
7.37
20,22
|
3.12
11,22
|
13.81
12,22
|
4.68
21,22
|
3.18
22
|
3.03
22
|
|
Net
investment income (loss),
net
of income taxes |
(0.33
)20
|
(0.25
)11
|
(1.13
)12
|
(2.00
) |
(1.31
) |
(1.43
) |
|
Portfolio
turnover rate |
3
% |
14
% |
158
% |
91
% |
60
% |
37
% |
See
Notes to Financial Statements.
ClearBridge
Energy Midstream Opportunity Fund Inc. 2026 Semi-Annual Report
9
Financial
highlights (cont’d)
|
For
a common share of capital stock outstanding throughout each year ended November 30,
unless
otherwise noted: | ||||||
|
|
20261,2
|
20251
|
20241
|
20231
|
20221
|
20211
|
|
Supplemental
data: |
|
|
|
|
|
|
|
Loan
and Debt Issuance
Outstanding,
End of Period
(000s)
|
$198,506
|
$151,491
|
$227,518
|
$165,327
|
$152,302
|
$124,104
|
|
Asset
Coverage Ratio for Loan
and
Debt Issuance
Outstanding23
|
699
% |
791
% |
587
% |
431
% |
439
% |
417
% |
|
Asset
Coverage, per $1,000
Principal
Amount of Loan and
Debt
Issuance Outstanding23
|
$6,990
|
$7,909
|
$5,869
|
$4,311
|
$4,391
|
$4,170
|
|
Weighted
Average Loan and
Debt
Issuance (000s) |
$185,362
|
$189,422
|
$144,089
|
$158,676
|
$148,414
|
$95,983
|
|
Weighted
Average Interest Rate
on
Loan and Debt Issuance |
4.70
% |
5.10
% |
5.82
% |
5.67
% |
2.87
% |
2.48
% |
|
Mandatory
Redeemable
Preferred
Stock at Liquidation
Value,
End of Period (000s) |
$68,200
|
$68,200
|
$92,400
|
$51,900
|
$51,900
|
$43,100
|
|
Asset
Coverage Ratio for
Mandatory
Redeemable
Preferred
Stock25
|
520
% |
545
% |
417
% |
328
% |
328
% |
309
% |
|
Asset
Coverage, per $100,000
Liquidation
Value per Share of
Mandatory
Redeemable
Preferred
Stock25
|
—
|
—
|
—
|
$328,102
|
$327,511
|
$309,498
|
|
Asset
Coverage, per $35
Liquidation
Value per Share of
Mandatory
Redeemable
Preferred
Stock25
|
$182
|
$191
|
$146
|
—
|
—
|
—
|
|
Asset
Coverage, per $30
Liquidation
Value per Share of
Mandatory
Redeemable
Preferred
Stock25
|
—
|
—
|
—
|
$98
|
$98
|
—
|
See
Notes to Financial Statements.
10
ClearBridge
Energy Midstream Opportunity Fund Inc. 2026 Semi-Annual Report
|
For
a common share of capital stock outstanding throughout each year ended November 30,
unless
otherwise noted: | |||||
|
|
20201,3
|
20191,3
|
20181,3
|
20171,3
|
20161,3
|
|
Net
asset value, beginning of period |
$43.75
|
$51.35
|
$56.85
|
$69.20
|
$76.25
|
|
Income
(loss) from operations: | |||||
|
Net
investment income (loss) |
(1.07
) |
(0.70
) |
0.30
|
(1.00
) |
(2.00
) |
|
Net
realized and unrealized gain (loss) |
(23.54
) |
(2.30
) |
0.60
†
|
(4.95
) |
1.35
|
|
Total
income (loss) from operations |
(24.61)
|
(3.00)
|
0.90
|
(5.95)
|
(0.65)
|
|
Less
distributions to common shareholders
from:
|
|
|
|
|
|
|
Dividends
|
—
|
(1.70
) |
(1.60
) |
—
|
—
|
|
Return
of capital |
(2.13
) |
(2.90
) |
(4.80
) |
(6.40
) |
(6.40
) |
|
Total
distributions to common
shareholders
|
(2.13
) |
(4.60
) |
(6.40
) |
(6.40
) |
(6.40
) |
|
Anti-dilutive
impact of repurchase plan |
0.12
5
|
—
|
—
|
—
|
—
|
|
Dilutive impact of rights offering
|
—
|
—
|
—
|
—
|
—
|
|
Anti-dilutive
impact of tender offer |
—
|
—
|
—
|
—
|
—
|
|
Net
asset value, end of period |
$17.13
|
$43.75
|
$51.35
|
$56.85
|
$69.20
|
|
Market
price, end of period |
$12.70
|
$38.10
|
$46.15
|
$52.35
|
$64.15
|
|
Total
return, based on NAV9,10
|
(57.35
)% |
(6.57
)% |
0.67
% |
(9.34
)% |
0.68
% |
|
Total
return, based on Market Price13
|
(62.74
)% |
(8.15
)% |
(0.87
)% |
(9.54
)% |
(2.83
)% |
|
Net
assets applicable to common
shareholders,
end of period (millions)
|
$238
|
$628
|
$736
|
$355
|
$432
|
|
Ratios
to average net assets: | |||||
|
Management
fees |
1.52
% |
1.50
% |
1.49
% |
1.43
% |
1.43
% |
|
Other
expenses15
|
3.65
16
|
2.16
|
2.12
|
1.72
|
2.65
17
|
|
Subtotal15
|
5.17
16
|
3.66
|
3.61
|
3.15
|
4.08
17
|
|
Income
tax expenses |
1.32
|
—
19
|
—
19
|
—
19
|
0.10
|
|
Total
gross expenses15
|
6.49
16
|
3.66
|
3.61
|
3.15
|
4.18
17
|
|
Total
net expenses15
|
6.42
16,22
|
3.59
22
|
3.60
22
|
3.15
|
4.18
17
|
|
Net
investment income (loss), net of income
taxes
|
(4.71
)16
|
(1.37
) |
0.52
|
(1.45
) |
(3.12
)17
|
|
Portfolio
turnover rate |
19
% |
29
% |
14
% |
16
% |
23
% |
See
Notes to Financial Statements.
ClearBridge
Energy Midstream Opportunity Fund Inc. 2026 Semi-Annual Report
11
Financial
highlights (cont’d)
|
For
a common share of capital stock outstanding throughout each year ended November 30,
unless
otherwise noted: | |||||
|
|
20201,3
|
20191,3
|
20181,3
|
20171,3
|
20161,3
|
|
Supplemental
data: |
|
|
|
|
|
|
Loan
and Debt Issuance Outstanding, End of
Period
(000s) |
$55,104
|
$278,500
|
$343,000
|
$158,000
|
$147,000
|
|
Asset
Coverage Ratio for Loan and Debt
Issuance
Outstanding23
|
609
% |
343
% |
329
% |
339
% |
409
% |
|
Asset
Coverage, per $1,000 Principal Amount
of
Loan and Debt Issuance Outstanding23
|
$6,094
|
$3,426
|
$3,286
|
$3,390
|
$4,093
|
|
Weighted
Average Loan and Debt Issuance
(000s)
|
$122,617
|
$318,462
|
$163,197
|
$157,819
|
$137,883
|
|
Weighted
Average Interest Rate on Loan and
Debt
Issuance |
6.14
%24
|
3.83
% |
3.51
% |
3.32
% |
4.38
%24
|
|
Mandatory
Redeemable Preferred Stock at
Liquidation
Value, End of Period (000s) |
$43,100
|
$48,000
|
$48,000
|
$23,000
|
$23,000
|
|
Asset
Coverage Ratio for Mandatory
Redeemable
Preferred Stock25
|
342
% |
292
% |
288
% |
296
% |
354
% |
|
Asset
Coverage, per $100,000 Liquidation
Value
per Share of Mandatory Redeemable
Preferred
Stock25
|
$341,958
|
$292,258
|
$288,277
|
$295,913
|
$353,918
|
|
Asset
Coverage, per $35 Liquidation Value
per
Share of Mandatory Redeemable
Preferred
Stock25
|
—
|
—
|
—
|
—
|
—
|
|
Asset
Coverage, per $30 Liquidation Value
per
Share of Mandatory Redeemable
Preferred
Stock25
|
—
|
—
|
—
|
—
|
—
|
See
Notes to Financial Statements.
12
ClearBridge
Energy Midstream Opportunity Fund Inc. 2026 Semi-Annual Report
|
†
|
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, 2026 (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 Fund’s 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 $28.70 for 130,000 shares and $3,730,554 for
the
year ended November 30, 2023, $25.30 for 284,640 shares and $7,201,095 for the year ended November 30, 2022,
$17.25
for 665,383 shares and $11,481,173 for the year ended November 30, 2021 and $9.32 for 579,300 shares and
$5,398,982
for the year ended November 30, 2020. |
|
6
|
The
rights offering was completed at a price of $42.11 for 1,824,401 shares and $76,825,526 for the year ended
November
30, 2025. |
|
7
|
Amount
represents less than $0.005 or greater than $(0.005) per share. |
|
8
|
The
tender offer was completed at a price of $44.45 for 6,393,645 shares and $284,197,520 for the year ended
November
30, 2024. |
|
9
|
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. |
|
10
|
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. |
|
11
|
Ratios
and total return for the year ended November 30, 2025, include certain non-recurring fees incurred by the Fund
during
the period. Without these items, the gross and net expense ratios and the net investment loss ratio would have
been
3.17%, 3.07% and (0.19)%, respectively, and total return based on NAV would have been (4.77)%. |
|
12
|
Ratios
and total return for the year ended November 30, 2024, include certain non-recurring fees incurred by the Fund
during
the period. Without these items, the gross and net expense ratios and the net investment loss ratio would have
been
13.69%, 13.60% and (0.98)%, respectively, and total return based on NAV would have been 53.92%. |
|
13
|
The
total return calculation assumes that distributions are reinvested in accordance with the Fund’s dividend
reinvestment
plan. Past performance is no guarantee of future results. Total returns for periods of less than one year
are
not annualized. |
|
14
|
Annualized.
|
|
15
|
Includes
expenses related to borrowings of 1.27%, 1.65%, 2.12%, 2.72%, 1.47%, 1.39%, 3.36%, 2.03%, 1.84%,
1.54%
and 2.39%, for the six months ended May 31, 2026, and years ended November 30, 2025, 2024, 2023, 2022,
2021,
2020, 2019, 2018, 2017 and 2016, respectively. |
|
16
|
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. |
|
17
|
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. |
|
18
|
Not
annualized. |
|
19
|
For
the years ended November 30, 2025, 2021, 2019, 2018 and 2017, the net income tax benefit was 1.10%, 0.19%,
0.88%,
3.08% and 4.20%, respectively. The net income tax benefit is not reflected in the Fund’s expense ratios. |
|
20
|
Annualized,
except for income tax expenses. |
|
21
|
Included
in the expense ratios are certain non-recurring legal and transfer agent fees that were incurred by the Fund
during
the period. Without these fees, the gross and net expense ratios would have been 4.57% and 4.49%,
respectively.
|
|
22
|
Reflects
fee waivers and/or expense reimbursements. |
|
23
|
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. |
|
24
|
Includes
prepayment penalties recognized during the period. |
|
25
|
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.
ClearBridge
Energy Midstream Opportunity Fund Inc. 2026 Semi-Annual Report
13
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 (the “Board”) authorized 98,051,421 shares of $0.001 par value
common stock. The Fund’s 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 Fund follows the accounting
and reporting guidance in Financial Accounting Standards Board
(“FASB”)
Accounting Standards Codification Topic 946, Financial Services –
Investment Companies
(“ASC
946”).
The following are significant accounting policies consistently
followed by the Fund and are in conformity with U.S. generally accepted accounting
principles (“GAAP”), including, but not limited to, ASC 946. 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
14
ClearBridge
Energy Midstream Opportunity Fund Inc. 2026 Semi-Annual Report
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 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 Board.
Pursuant to policies adopted by
the Board, the Fund’s manager has been designated as the valuation
designee and is responsible for the oversight of the daily valuation process. The Fund’s
manager is assisted by the Global Fund Valuation Committee (the “Valuation
Committee”).
The Valuation Committee is responsible for making fair value determinations, evaluating
the effectiveness of the Fund’s pricing policies, and reporting to the Fund’s manager
and the Board. 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 issuer’s 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,
the fair value price is compared against the last available and next available market
ClearBridge
Energy Midstream Opportunity Fund Inc. 2026 Semi-Annual Report
15
Notes
to financial statements (unaudited) (cont’d)
quotations.
The Valuation Committee reviews the results of such back testing monthly and fair
valuation occurrences are reported to the Board 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 — unadjusted 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 Fund’s 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 Fund’s 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†: |
|
|
|
|
|
Common
Stocks |
$771,224,737
|
—
|
—
|
$771,224,737
|
|
Master
Limited Partnerships |
674,413,024
|
—
|
—
|
674,413,024
|
|
Total
Long-Term Investments |
1,445,637,761
|
—
|
—
|
1,445,637,761
|
|
Short-Term
Investments† |
38,451,818
|
—
|
—
|
38,451,818
|
|
Total
Investments |
$1,484,089,579
|
—
|
—
|
$1,484,089,579
|
|
†
|
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 (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 Fund’s 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
16
ClearBridge
Energy Midstream Opportunity Fund Inc. 2026 Semi-Annual Report
value (i.e.,
$35 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
currency translation. Investment
securities and other assets and liabilities denominated
in foreign currencies are translated into U.S. dollar amounts based upon prevailing
exchange rates on the date of valuation. Purchases and sales of investment securities
and income and expense items denominated in foreign currencies are translated into
U.S. dollar amounts based upon prevailing exchange rates on the respective dates of such
transactions.
The Fund does not isolate that
portion of the results of operations resulting from fluctuations
in foreign exchange rates on investments from the fluctuations arising from changes
in market prices of securities held. Such fluctuations are included with the net realized
and unrealized gain or loss on investments.
Net realized foreign exchange gains
or losses arise from sales of foreign currencies, including
gains and losses on forward foreign currency contracts, currency gains or losses
ClearBridge
Energy Midstream Opportunity Fund Inc. 2026 Semi-Annual Report
17
Notes
to financial statements (unaudited) (cont’d)
realized between
the trade and settlement dates on securities transactions, and the difference
between the amounts of dividends, interest, and foreign withholding taxes recorded
on the Fund’s books and the U.S. dollar equivalent of the amounts actually received
or paid. Net unrealized foreign exchange gains and losses arise from changes in the
values of assets and liabilities, other than investments in securities, on the date of valuation,
resulting from changes in exchange rates.
Foreign security and currency transactions
may involve certain considerations and risks not typically
associated with those of U.S. dollar denominated transactions as a result of, among
other factors, the possibility of lower levels of governmental supervision and regulation
of foreign securities markets and the possibility of political or economic instability.
(e) Foreign
investment risks. The
Fund’s 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 may 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.
(f) 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.
(g) 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)
is recorded on the accrual basis. Amortization of premiums and accretion of discounts
on debt securities are recorded to interest income over the lives of the respective securities,
except for premiums on certain callable debt securities, which are amortized to the
earliest call date. 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.
18
ClearBridge
Energy Midstream Opportunity Fund Inc. 2026 Semi-Annual Report
(h) Return
of capital estimates. Distributions
received from the Fund’s 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, 2026, the Fund estimated that approximately 68% of the MLP
distributions received would be treated as a return of capital. The Fund recorded as return
of capital the amount of $25,936,081 of dividends and distributions received from its investments.
Additionally, the Fund updated the
return of capital estimates from the year ended November
30, 2025 based on actual amounts subsequently reported to the Fund. This resulted
in a decrease of $430,358 in net dividends and distributions received from investments.
(i) 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 Fund’s Statement of Operations.
(j) Distributions
to shareholders. Distributions
to common shareholders are declared quarterly and paid
on a monthly basis, and are recorded on the ex-dividend date. The estimated
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 Fund’s operating results during the period. The Fund anticipates that
100% of its current period distributions 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 Fund’s 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 distributions
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.
ClearBridge
Energy Midstream Opportunity Fund Inc. 2026 Semi-Annual Report
19
Notes
to financial statements (unaudited) (cont’d)
The tax character
of the distributions for common and MRPS shareholders was 19% and 100%
dividend income, respectively, for the year ended November 30, 2025.
(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 MLP’s 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 Fund’s 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.
Under the applicable foreign tax
laws, a withholding tax may be imposed on interest, dividends
and capital gains at various rates. In some cases, the Fund may be entitled to reclaim
all or a portion of such taxes, and such reclaim amounts, if any, are reflected as a dividend
receivable in the Statement of Assets and Liabilities and dividend income in the Statement
of Operations. In many cases, however, the Fund may not receive such amounts for
an extended period of time, depending on the country of investment.
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 FASB, Accounting Standards Codification Topic 740, Income Taxes (“ASC 740”)
that it is more likely than not that some 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 Fund’s 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.
A 1% non-deductible excise tax is
imposed on the aggregate fair market value of stock repurchased
by the Fund during a taxable year, subject to certain adjustments. The excise tax
is applicable for repurchases after December 31, 2022 and applies to both common stock
(open market and tender offers) and MRPS redemptions.
20
ClearBridge
Energy Midstream Opportunity Fund Inc. 2026 Semi-Annual Report
During the current
period, the Fund recorded a receivable of $2,857,557 for a refund of stock repurchase
excise tax. Based on final Treasury regulations issued in late 2025, the Fund concluded
that no excise tax was due for the year ended November 30, 2024 and filed an amended
return requesting a refund of the amount previously remitted.
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 Fund’s 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 2021 through 2025 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 current
period, the following reclassifications have been made:
|
|
Total
Distributable
Earnings
(Loss),
Net
of
Income
Taxes |
Paid-in
Capital
in
Excess of
Par
Value |
|
(a)
|
$(12,464)
|
$12,464
|
(a)
Reclassifications
are due to the expiration of a capital loss carryforward.
2. Investment
management agreement and other transactions with affiliates
Franklin Templeton Fund Adviser,
LLC (“FTFA”) is
the Fund’s investment manager and ClearBridge Investments,
LLC (“ClearBridge”) is the Fund’s subadviser. FTFA and ClearBridge are
indirect, wholly-owned subsidiaries of Franklin Resources, Inc. (“Franklin Resources”).
Under the investment management
agreement, the Fund pays FTFA an annual fee, paid monthly,
in an amount equal to 1.00% of the Fund’s average daily Managed Assets.
FTFA provides administrative and
certain oversight services to the Fund. FTFA delegates to the
subadviser the day-to-day portfolio management of the Fund. For its services, FTFA 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. 2026 Semi-Annual Report
21
Notes
to financial statements (unaudited) (cont’d)
During periods
in which the Fund utilizes financial leverage, the fees paid to FTFA will be higher
than if the Fund did not utilize leverage because the fees are calculated as a percentage
of the Fund’s assets, including those investments purchased with leverage.
An investment management fee waiver
of 0.05% was implemented in connection with the reorganization
effective September 9, 2024 for a one-year period or for as long as necessary to
ensure the Fund only bears one half of the merger-related expenses, which continued through
December 8, 2025.
During the six months
ended May 31, 2026, fees waived and/or expenses reimbursed amounted
to $13,402.
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, 2026, the aggregate cost of purchases and proceeds from
sales of investments (excluding short-term investments) were as follows:
|
Purchases
|
$57,630,849
|
|
Sales
|
45,541,901
|
4. Derivative
instruments and hedging activities
During the six months
ended May 31, 2026, 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 $250,000,000 effective
December 10, 2025 ($305,000,000 prior to December 10, 2025). The Credit Agreement
is subject to a scheduled commitment termination date of December 9, 2026 (previously,
December 10, 2025). 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 the current commitment amount. The interest on the loan is calculated
at a variable rate based on adjusted Term SOFR 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 Fund’s Credit Agreement
contains customary covenants that, among other things, may limit the Fund’s 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 Fund’s ability to utilize
22
ClearBridge
Energy Midstream Opportunity Fund Inc. 2026 Semi-Annual Report
borrowing under
the agreement. For the six months
ended May 31, 2026, the Fund incurred commitment fees
and interest expense of $106,576 and $4,083,191, respectively, related to the
Credit Agreement. For the six months
ended May 31, 2026, based on the number of days during
the reporting period that the Fund had a loan balance outstanding, the average daily
loan balance was $168,395,604 and the weighted average interest rate was 4.80%. At May
31, 2026, the Fund had $184,000,000 of borrowings outstanding per the Credit Agreement.
6. Senior
secured notes
At May 31, 2026, the Fund had $14,506,206
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, 2026 was $318,838. 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 April 30, 2026, Series L Senior
Notes in the amount of $2,984,588 matured.
The
table below summarizes the key terms of each series of Senior Notes at May 31, 2026.
|
Security
|
Amount
|
Rate
|
Maturity
|
Estimated
Fair
Value |
|
Senior
secured notes: | ||||
|
Series
E |
$950,483
|
3.76%
|
August
26, 2026 |
$938,642
|
|
Series
J |
2,363,520
|
3.76%
|
August
26, 2026 |
2,334,074
|
|
Series
N |
4,663,418
|
3.56%
|
June
11, 2027 |
4,592,098
|
|
Series
O |
6,528,785
|
3.76%
|
June
11, 2030 |
6,120,635
|
|
|
$14,506,206
|
|
|
$13,985,449
|
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, 2026, the Fund had 1,948,579
shares of fixed rate MRPS outstanding with an aggregate
liquidation value of $68,200,265. 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.
During the six months ended May
31, 2026, the Fund accrued $54,445 of excise tax applicable
to MRPS series mandatory redemptions that are scheduled for fiscal year 2026.
ClearBridge
Energy Midstream Opportunity Fund Inc. 2026 Semi-Annual Report
23
Notes
to financial statements (unaudited) (cont’d)
The table below
summarizes the key terms of each series of the MRPS at May 31, 2026.
|
Series
|
Term
Redemption
Date
|
Rate
|
Shares
|
Liquidation
Preference
Per
Share |
Aggregate
Liquidation
Value
|
Estimated
Fair
Value |
|
Series
J |
7/23/2026
|
4.55%
|
200,001
|
$35
|
$7,000,035
|
$6,932,533
|
|
Series
L |
11/17/2032
|
7.28%
|
485,719
|
35
|
17,000,165
|
17,759,769
|
|
Series
M |
11/17/2029
|
7.12%
|
314,286
|
35
|
11,000,010
|
11,344,315
|
|
Series
P |
6/11/2027
|
4.26%
|
234,286
|
35
|
8,200,010
|
8,090,716
|
|
Series
Q |
11/17/2029
|
7.12%
|
428,572
|
35
|
15,000,020
|
15,469,528
|
|
Series
R |
11/17/2032
|
7.28%
|
285,715
|
35
|
10,000,025
|
10,446,848
|
|
|
|
|
|
|
$68,200,265
|
$70,043,709
|
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
a nationally recognized statistical ratings organization (“NRSRO”)
then providing a rating, the applicable dividend rate
will increase by 0.5% to 4.0% according to a predetermined schedule.
The MRPS rank senior to the Fund’s
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, if applicable, is in default of specified rating agency requirements, the MRPS are
subject to mandatory redemption and penalties 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, if applicable, rating agency requirements.
The holders of each series of the
MRPS have one vote for every $35 of liquidation preference
held, i.e., one vote per share. Holders of MRPS vote together with the holders of common
stock of the Fund as a single class, except on matters affecting only the holders of 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.
24
ClearBridge
Energy Midstream Opportunity Fund Inc. 2026 Semi-Annual Report
8. Distributions
to common shareholders subsequent
to May 31, 2026
The following distributions to common
shareholders have been declared by the Board and are payable
subsequent to the period end of this report:
|
Record
Date |
Payable
Date |
Amount
|
|
6/23/2026
|
6/30/2026
|
$0.3600
|
|
7/24/2026
|
7/31/2026
|
$0.3600
|
|
8/24/2026
|
8/31/2026
|
$0.3600
|
9. Stock
repurchase program
On November 16, 2015, the Fund announced
that the Board had authorized the Fund to repurchase in
the open market up to approximately 10% of the Fund’s outstanding common stock
when the Fund’s shares are trading at a discount to net asset value. On July 29, 2022, the
Fund announced that the Board had authorized the amendment of the Fund’s repurchase program
under which the Fund may continue to repurchase in the open market up to an additional
10% of the Fund’s outstanding common stock when the Fund’s shares are trading at
a discount to net asset value. The Board has directed management of the Fund to continue
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, 2026, and the year ended November 30, 2025, the Fund
did not repurchase any shares under this repurchase program.
Since the commencement of the stock repurchase program through May 31, 2026, the Fund repurchased 1,659,323 shares or 10.85% of its common shares outstanding for a total amount of $27,811,805.
Since the commencement of the stock repurchase program through May 31, 2026, the Fund repurchased 1,659,323 shares or 10.85% of its common shares outstanding for a total amount of $27,811,805.
10. Capital
shares
The Fund filed a registration statement
with the Securities and Exchange Commission (“SEC”),
effective August 14, 2025, authorizing the Fund to offer and sell shares of common stock
having an aggregate offering price of up to $400,000,000 (“Shelf Registration”). On February
9, 2026, the Fund entered into a distribution agreement (“Distribution Agreement”) with
Franklin Distributors, LLC (“Distributor”), an affiliate of FTFA, to provide for distribution of
the Fund’s shares of common stock. The Distributor entered into a sub-placement agreement,
dated February 9, 2026 (“Sub-Placement Agent Agreement”), with UBS Securities
LLC with respect to the Fund relating to common stock offered by a prospectus supplement
filed by the Fund with the SEC on February 9, 2026. Under this equity shelf offering
program, the Fund, subject to market conditions, may raise additional equity capital from
time to time in varying amounts and offering methods at a net price at or above the Fund’s
then-current net asset value per common share. Costs incurred by the Fund in connection
with the offering are recorded as a prepaid expense. These costs are amortized on
a pro-rata basis as shares are sold and are presented as a reduction to the net proceeds
ClearBridge
Energy Midstream Opportunity Fund Inc. 2026 Semi-Annual Report
25
Notes
to financial statements (unaudited) (cont’d)
from the sale
of shares on the Statement of Changes in Net Assets, if applicable. Any deferred
charges remaining at the end of the life of the shelf offering period will be expensed.
For the fiscal period ended May 31, 2026, there were no shares sold under the Sub-Placement
Agent Agreement.
11. Rights
offering
On September 2, 2025, the Fund announced
that the Board had approved a transferable rights offering
(the “Offer”) to common stockholders to purchase additional shares of common
stock of the Fund. Each stockholder was entitled to receive one transferable right (the
“Right”) for each share of common stock held on September 12, 2025 (the “Record Date”).
Three Rights were required to purchase one additional share of common stock; however,
stockholders who held fewer than three shares of common stock on the Record Date
were entitled to subscribe for one additional share of common stock. Fractional shares were
not issued upon the exercise of the Rights. The Offer expired at 5:00 PM Eastern Time on
October 10, 2025 (the “Expiration Date”). The final subscription price per share of common
stock (the “Subscription Price”) was determined based upon a formula equal to 92.5%
of the average of the last reported sales price per share of the Fund’s common stock on
the NYSE on the Expiration Date and each of the four preceding trading days (the “Formula
Price”). If, however, the Formula Price was less than 90% of the net asset value per
share of common stock at the close of trading on the NYSE on the Expiration Date, then the
Subscription Price was 90% of the Fund’s net asset value per share of common stock at the
close of trading on the NYSE on that day. The Subscription Price per share of common stock
was $42.11, which was 90% of the Fund’s net asset value per share of common stock at
the close of trading on the NYSE on the Expiration Date. The Offer resulted in the issuance
of 1,824,401 shares of common stock and gross proceeds of $76,825,526. The Fund
received the gross proceeds of the Rights offering less fees and expenses totaling $100,857. The
shares of common stock subscribed were issued on October 17, 2025.
For the six months ended May 31,
2026, the Fund incurred net offering costs of $263,274.
12. Income
taxes
The Fund’s current and deferred
income tax provisions for the respective categories on the Statement
of Operations are as follows:
|
|
Net
Investment
Loss
|
Net
Realized
Gain
|
Change
in Net
Unrealized
Appreciation
|
Total
|
|
Current
tax expense (benefit) |
$190,378
|
—
|
—
|
$190,378
|
|
Deferred
tax expense (benefit) |
(662,922)
|
$1,234,472
|
$50,413,487
|
50,985,037
|
|
Total
tax expense (benefit) |
$(472,544)
|
$1,234,472
|
$50,413,487
|
$51,175,415
|
26
ClearBridge
Energy Midstream Opportunity Fund Inc. 2026 Semi-Annual Report
The Fund’s
federal and state income tax provisions consist of the following:
|
|
Federal
|
State
|
Total
|
|
Current
tax expense (benefit) |
$190,378
|
—
|
$190,378
|
|
Deferred
tax expense (benefit) |
49,126,857
|
$1,858,180
|
50,985,037
|
|
Total
tax expense (benefit) |
$49,317,235
|
$1,858,180
|
$51,175,415
|
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 0.8%. 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%
|
$49,239,704
|
|
State
taxes, net of federal tax benefit |
0.80%
|
1,875,798
|
|
Non-deductible distributions on MRPS,
dividends received deduction and other, net
(federal
and state) |
0.03%
|
62,630
|
|
Expiration
of capital loss carryforward |
0.00%
|
(2,717)
|
|
Total
tax expense (benefit) |
21.83%
|
$51,175,415
|
Components of the Fund’s net
deferred tax asset (liability) as of May 31, 2026 are as follows:
|
Deferred
tax assets |
|
|
Net
operating loss carryforward |
$11,526,042
|
|
Wash
sale loss deferrals |
1,381,469
|
|
Other
deferred tax assets |
557,698
|
|
Deferred
tax liabilities |
|
|
Unrealized
gains on investment securities |
(94,525,220)
|
|
Basis
reduction resulting from differences in the book vs. taxable income received from
MLPs
|
(28,092,008)
|
|
Net
deferred tax asset (liability) before valuation allowance |
(109,152,019)
|
|
Less:
Valuation allowance |
(177,458)
|
|
Total
net deferred tax asset (liability) |
$(109,329,477)
|
At May 31, 2026, the Fund had federal
and state net operating loss carryforwards of $44,214,072
and $49,977,069 (net of state apportionment), respectively (deferred tax asset of
$11,526,042). 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 carryforward is dependent, in part, on generating sufficient taxable income in each
respective jurisdiction prior to expiration of the loss carryforward. If not utilized, the
ClearBridge
Energy Midstream Opportunity Fund Inc. 2026 Semi-Annual Report
27
Notes
to financial statements (unaudited) (cont’d)
state net operating
loss carryforwards either expire in tax years between 2026 and 2045 or have
an indefinite carryforward. The federal net operating loss carryforward does not have an
expiration.
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. This also resulted
in the reduction of expiration of capital loss carryforwards available from previous years
of $12,464.
Although the Fund currently has
a net deferred tax liability, management periodically reviews
the recoverability of its deferred tax assets based on the weight of available evidence.
Note 1(k) describes the assessment required under ASC 740 to determine whether
a valuation allowance for deferred tax assets is necessary using a more likely than not
standard of realizability. Based on that assessment, management has determined that a valuation
allowance on select state net operating loss carryforward deferred tax assets is appropriate
at this time. The valuation allowance recorded as of May 31, 2026 is based on estimates
of information currently available. If management determines a change in valuation
allowance is required under ASC 740 once estimated information becomes available,
it could have a material impact on the Fund’s net asset value and results of operations
in the period it is recorded.
At May 31, 2026, the cost basis
of investments for Federal income tax purposes was $914,555,004.
At May 31, 2026, gross unrealized appreciation and depreciation of investments
for Federal income tax purposes were as follows:
|
Gross
unrealized appreciation |
$569,534,575
|
|
Gross
unrealized depreciation |
—
|
|
Net
unrealized appreciation (depreciation) before tax |
$569,534,575
|
|
Net
unrealized appreciation (depreciation) after tax |
$445,376,038
|
13. Operating
segments
The Fund operates as a single operating
segment, which is an investment portfolio. A management
group assigned to the Fund within the Fund’s investment manager serves as the
Chief Operating Decision Maker (“CODM”) and is responsible for evaluating the Fund’s operating
results and allocating resources in accordance with the Fund’s investment strategy.
Internal reporting provided to the CODM aligns with the accounting policies and measurement
principles used in the financial statements.
For information regarding segment
assets, segment profit or loss, and significant expenses, refer
to the Statement of Assets and Liabilities and the Statement of Operations, along with the
related Notes to Financial Statements. The Fund’s Schedule of Investments provides details
of the Fund’s investments that generate returns such as interest, dividends, and
28
ClearBridge
Energy Midstream Opportunity Fund Inc. 2026 Semi-Annual Report
realized and
unrealized gains or losses. Performance metrics, including portfolio turnover and
expense ratios, are disclosed in the Financial Highlights.
14. Regulatory
update
On July 4, 2025, President Trump
signed the One Big Beautiful Bill Act (“the
Act”) into law. Among other provisions, the Act
makes permanent several taxpayer-favorable provisions originally
enacted under the 2017 Tax Cuts and Jobs Act, including 100% bonus depreciation
and modifications to the business interest expense limitation. The Act also introduces
a new 1% floor on the deductibility of charitable contributions and expands the scope
of qualifying income-generating activities for MLPs. These provisions have various effective
dates. Management is currently evaluating the potential impact of the Act on the Fund’s
financial position and results of operations.
ClearBridge
Energy Midstream Opportunity Fund Inc. 2026 Semi-Annual Report
29
Board
approval of management and
subadvisory agreements (unaudited)
Background
The Investment Company Act of 1940,
as amended (the “1940 Act”), requires that the Board of
Directors (the “Board”) of ClearBridge Energy Midstream Opportunity Fund Inc. (the “Fund”),
including a majority of its members who are not considered to be “interested persons”
under the 1940 Act (the “Independent Directors”) voting separately, approve on an annual
basis the continuation of the investment management agreement (the “Management
Agreement”) between the Fund and the Fund’s manager, Franklin Templeton Fund
Adviser, LLC (the “Manager”), and the sub-advisory agreement (the “Sub-Advisory Agreement”)
between the Manager and ClearBridge Investments, LLC (the “Sub-Adviser”), an
affiliate of the Manager, with respect to the Fund.
At an in-person meeting (the “Contract
Renewal Meeting”) held on May 12-13, 2026, the Board,
including the Independent Directors, considered and approved the continuation of each
of the Management Agreement and the Sub-Advisory Agreement for an additional one-year
period. To assist in its consideration of the renewal of each of the Management Agreement
and the Sub-Advisory Agreement, the Board received and considered extensive information
(together with the information provided at the Contract Renewal Meeting, the “Contract
Renewal Information”) about the Manager and the Sub-Adviser, as well as the management
and sub-advisory arrangements for the Fund and the other closed-end funds in the
same complex under the Board’s purview (the “Franklin Templeton Closed-end Funds”), certain
portions of which are discussed below.
A presentation made by the Manager
and the Sub-Adviser to the Board at the Contract Renewal
Meeting in connection with the Board’s evaluation of each of the Management Agreement
and the Sub-Advisory Agreement encompassed the Fund and other Franklin Templeton
Closed-end Funds. In addition to the Contract Renewal Information, the Board received
performance and other information throughout the year related to the respective services
rendered by the Manager and the Sub-Adviser to the Fund. The Board’s evaluation took
into account the information received throughout the year and also reflected the knowledge
and experience gained as members of the Boards of the Fund and other Franklin Templeton
Closed-end Funds with respect to the services provided to the Fund by the Manager
and the Sub-Adviser. The information received and considered by the Board (including
its various committees) in conjunction with both the Contract Renewal Meeting and
throughout the year was both written and oral. The contractual arrangements discussed below
are the product of multiple years of review and negotiation and information received and
considered by the Board during each of those years.
At an in-person meeting held on
April 24, 2026, the Independent Directors, in preparation for
the Contract Renewal Meeting, met in a private session with their independent legal counsel
to review the Contract Renewal Information regarding the Franklin Templeton Closed-end
Funds, including the Fund, received to date. No representatives of the Manager
30
ClearBridge
Energy Midstream Opportunity Fund Inc.
or the Sub-Adviser
participated in this meeting. Following the April 24, 2026 meeting, the Independent
Directors submitted certain questions and requests for additional information to
Fund management. The Independent Directors also met in private sessions with their independent
legal counsel to consider the Contract Renewal Information and Fund management’s
responses to the Independent Directors’ questions and requests for additional
information in advance of and during the Contract Renewal Meeting. The discussion
below reflects all of these reviews.
The Manager provides the Fund with
investment advisory and administrative services pursuant
to the Management Agreement and the Sub-Adviser provides the Fund with investment
sub-advisory services pursuant to the Sub-Advisory Agreement. The discussion below
covers both the advisory and administrative functions being rendered by the Manager,
each such function being encompassed by the Management Agreement, and the investment
sub-advisory functions being rendered by the Sub-Adviser pursuant to the Sub-Advisory
Agreement.
Board Approval of Management Agreement and Sub-Advisory
Agreement
The Independent Directors were advised
by separate independent legal counsel throughout the process.
Prior to voting, the Independent Directors received a memorandum discussing the
legal standards for their consideration of the proposed continuation of the Management Agreement
and the Sub-Advisory Agreement. The Independent Directors considered the Management
Agreement and Sub-Advisory Agreement separately during the course of their review.
In doing so, they noted the respective roles of the Manager and the Sub-Adviser in providing
services to the Fund.
In approving the continuation of
the Management Agreement and Sub-Advisory Agreement, the
Board, including the Independent Directors, considered a variety of factors, including those
factors discussed below. No single factor reviewed by the Board was identified by the Board
as the principal factor in determining whether to approve the continuation of the Management
Agreement and the Sub-Advisory Agreement. Each Director may have attributed
different weight to the various factors in evaluating the Management Agreement and
the Sub-Advisory Agreement.
After considering all relevant factors
and information, the Board, exercising its reasonable business
judgment, determined that the continuation of the Management Agreement and Sub-Advisory
Agreement was in the best interests of the Fund’s stockholders and approved the
continuation of each such agreement for an additional one-year period.
Nature, Extent and Quality of the Services under
the Management Agreement and Sub-Advisory Agreement
The Board received and considered
Contract Renewal Information regarding the nature, extent,
and quality of services provided to the Fund by the Manager and the Sub-Adviser
ClearBridge
Energy Midstream Opportunity Fund Inc.
31
Board
approval of management and
subadvisory agreements (unaudited) (cont’d)
under the Management
Agreement and the Sub-Advisory Agreement, respectively, during the
past year. The Board noted information received at regular meetings throughout the year related
to the services provided by the Manager in its management of the Fund’s affairs and the
Manager’s role in coordinating the activities of the Sub-Adviser and the Fund’s other service
providers. The Board observed that the scope of services provided by the Manager and
the Sub-Adviser, and of the undertakings required of the Manager and Sub-Adviser in connection
with those services, including maintaining and monitoring their respective compliance
programs as well as the Fund’s compliance programs, had expanded over time as
a result of regulatory, market and other developments. The Board also noted that on a regular
basis it received and reviewed information from the Manager and the Sub-Adviser regarding
the Fund’s compliance policies and procedures established pursuant to Rule 38a-1 under
the 1940 Act. The Board also considered the risks borne by the Manager, the Sub-Adviser
and their respective affiliates on behalf of the Fund, including entrepreneurial, operational,
reputational, litigation and regulatory risks, as well as the Manager’s and the Sub-Adviser’s
risk management processes.
The Board reviewed the qualifications,
backgrounds, and responsibilities of the Manager’s senior
personnel and the Sub-Adviser’s portfolio management team primarily responsible for
the day-to-day portfolio management of the Fund. The Board also considered, based on its
knowledge of the Manager and its affiliates, the financial resources of Franklin Resources,
Inc., the parent organization of the Manager and the Sub-Adviser. The Board recognized
the importance of having a fund manager with significant resources.
The Board considered the division
of responsibilities between the Manager and the Sub-Adviser
under the Management Agreement and the Sub-Advisory Agreement, respectively, including
the Manager’s coordination and oversight of the services provided to the Fund by the
Sub-Adviser and other fund service providers. The Management Agreement permits the Manager
to delegate certain of its responsibilities, including its investment advisory duties thereunder,
provided that the Manager, in each case, will supervise the activities of the delegee.
In reaching its determinations regarding
continuation of the Management Agreement and the Sub-Advisory
Agreement, the Board took into account that Fund stockholders, in pursuing
their investment goals and objectives, may have purchased their shares of the Fund
based upon the reputation and the investment style, philosophy and strategy of the Manager
and the Sub-Adviser, as well as the resources available to the Manager and the Sub-Adviser.
The Board concluded that, overall,
the nature, extent, and quality of the management and other
services provided (and expected to be provided) to the Fund, under the Management Agreement
and the Sub-Advisory Agreement were satisfactory.
32
ClearBridge
Energy Midstream Opportunity Fund Inc.
Fund Performance
The Board received and considered
information regarding Fund performance, including information
and analyses (the “Broadridge Performance Information”) for the Fund, as well as
for a group of comparable funds (the “Performance Universe”) selected by Broadridge Financial
Solutions, Inc. (“Broadridge”), an independent third-party provider of investment company
data. The Board was provided with a description of the methodology Broadridge used
to determine the similarity of the Fund with the funds included in the Performance Universe.
It was noted that while the Board found the Broadridge Performance Information generally
useful, they recognized its limitations, including that the data may vary depending on
the end date selected, and that the results of the performance comparisons may vary depending
on the selection of the peer group and its composition over time. The Board also noted
that Board members had received and discussed with the Manager and the Sub-Adviser
information throughout the year at periodic intervals comparing the Fund’s performance
against its benchmark and against the Fund’s peers. In addition, the Board considered
the Fund’s performance in view of overall financial market conditions.
The Broadridge Performance Information
comparing the Fund’s performance to that of its Performance
Universe, consisting of the Fund and all leveraged closed-end energy MLP funds
classified by Broadridge, showed, among other data, that based on net asset value per
share, the Fund’s performance was above the median for the 3- and 5-year periods ended
December 31, 2025, and was below the median for the 1- and 10-year periods ended December
31, 2025. The Board noted the explanations from the Manager and the Sub-Adviser
regarding the Fund’s relative performance versus the Performance Universe for the various
periods.
Based on the reviews and discussions
of Fund performance and considering other relevant factors,
including those noted above, the Board concluded, under the circumstances, that continuation
of the Management Agreement and the Sub-Advisory Agreement for an additional
one-year period would be consistent with the interests of the Fund and its stockholders.
Management and Sub-Advisory Fees and Expense Ratios
The Board reviewed and considered
the contractual management fee (the “Contractual Management
Fee”) and the actual management fee (the “Actual Management Fee”) payable
by the Fund to the Manager under the Management Agreement and the sub-advisory
fee (the “Sub-Advisory Fee”) payable by the Manager to the Sub-Adviser under the Sub-Advisory
Agreement in view of the nature, extent and overall quality of the management,
investment advisory and other services provided by the Manager and the Sub-Adviser,
respectively. The Board noted that the Sub-Advisory Fee is paid by the Manager,
not the Fund, and, accordingly, that the retention of the Sub-Adviser does not increase
the fees or expenses otherwise incurred by the Fund’s stockholders.
ClearBridge
Energy Midstream Opportunity Fund Inc.
33
Board
approval of management and
subadvisory agreements (unaudited) (cont’d)
In addition,
the Board received and considered information and analyses prepared by Broadridge
(the “Broadridge Expense Information”) comparing the Contractual Management Fee
and the Actual Management Fee and the Fund’s actual total expenses with those of funds
in an expense group, as well as a broader group of funds (the “Expense Universe”), each
selected and provided by Broadridge. The comparison was based upon the constituent funds’
latest fiscal years. It was noted that while the Board found the Broadridge Expense Information
generally useful, they recognized its limitations, including that the data may vary
depending on the selection of the peer group.
The Broadridge Expense Information
showed that the Fund’s Contractual Management Fee was
equal to the Expense Universe median. The Broadridge Expense Information also showed
that the Fund’s Actual Management Fee was below the Expense Universe median based
on both common share assets and total managed assets, which includes common share
and leveraged assets. The Broadridge Expense Information also showed that the Fund’s
actual total expenses were below the Expense Universe median based on both common
share assets and total managed assets. The Board took into account management’s
discussion of the Fund’s expenses.
The Board also reviewed Contract
Renewal Information regarding fees charged by the Manager
and/or the Sub-Adviser to other U.S. clients investing primarily in an asset class similar
to that of the Fund, including, where applicable, institutional and separate accounts. The
Manager reviewed with the Board the differences in services provided to these different
types of accounts, noting that the Fund is provided with certain administrative services,
office facilities, and Fund officers, and that the Fund is subject not only to heightened
regulatory requirements relative to institutional clients but also to requirements for
listing on the New York Stock Exchange, and that the Manager coordinates and oversees
the provision of services to the Fund by other fund service providers. The Board considered
the fee comparisons in view of the different services provided in managing these
other types of clients and funds.
The Board considered the overall
management fee, the fees of the Sub-Adviser and the amount
of the management fee retained by the Manager after payment of the Sub-Advisory Fee
in each case in view of the services rendered for those amounts. The Board also received
an analysis of complex-wide management fees provided by the Manager, which, among
other things, set out a framework of fees based on asset classes.
Taking all of the above into consideration,
as well as the factors identified below, the Board determined
that the management fee and the Sub-Advisory Fee were reasonable in view of the
nature, extent and overall quality of the management, investment advisory and other services
provided by the Manager and the Sub-Adviser to the Fund under the Management Agreement
and the Sub-Advisory Agreement, respectively.
34
ClearBridge
Energy Midstream Opportunity Fund Inc.
Manager Profitability
The Board, as part of the Contract
Renewal Information, received an analysis of the profitability
to the Manager and its affiliates in providing services to the Fund for the Manager’s
fiscal years ended September 30, 2025 and September 30, 2024. The Board also received
profitability information with respect to the Franklin Templeton fund complex as a whole.
In addition, the Board received Contract Renewal Information with respect to the Manager’s
revenue and cost allocation methodologies used in preparing such profitability data.
It was noted that the allocation methodologies had been reviewed by an outside consultant.
In response to the Board’s request, the Manager provided and the Board reviewed
information comparing the profitability of Franklin Resources, Inc. with that of publicly
traded peer fund management companies. The profitability to the Sub-Adviser was not
considered to be a material factor in the Board’s considerations since the Sub-Advisory Fee
is paid by the Manager, not the Fund, although the Board noted the affiliation of the Manager
with the Sub-Adviser. The profitability of the Manager and its affiliates was considered
by the Board to be reasonable in view of the nature, extent and quality of services
provided to the Fund.
Economies of Scale
The Board received and discussed
Contract Renewal Information concerning whether the Manager
realizes economies of scale if the Fund’s assets grow. The Board noted that because
the Fund is a closed-end fund, it has limited ability to increase its assets. The Board
determined that the management fee structure was appropriate under the circumstances.
For similar reasons as stated above with respect to the Sub-Adviser’s profitability
and the costs of the Sub-Adviser’s provision of services, the Board did not consider
the potential for economies of scale in the Sub-Adviser’s management of the Fund to
be a material factor in the Board’s consideration of the Sub-Advisory Agreement.
Other Benefits to the Manager and the Sub-Adviser
The Board considered other benefits
received by the Manager, the Sub-Adviser and their affiliates
as a result of their relationship with the Fund, including the opportunity to offer additional
products and services to the Fund’s stockholders. In view of the costs of providing investment
management and other services to the Fund and the ongoing commitment of the Manager
and the Sub-Adviser to the Fund, the Board considered that the ancillary benefits received
by the Manager and its affiliates, including the Sub-Adviser, were reasonable.
ClearBridge
Energy Midstream Opportunity Fund Inc.
35
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 April 17, 2026, 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
|
Preferred
Shares,
ABSTAIN
|
|
Robert
D. Agdern |
15,183,492
|
1,504,528
|
146,581
|
—
|
—
|
—
|
|
Eileen
A. Kamerick |
—
|
—
|
—
|
1,142,862
|
0
|
0
|
|
Peter
Mason |
16,469,311
|
213,585
|
151,705
|
—
|
—
|
—
|
At the Meeting, Ms. Kamerick and
Messrs. Agdern and Mason were each duly elected by the
shareholders to serve as Class III Directors of the Fund until the 2029 Annual Meeting of Shareholders,
or until their successors have been duly elected and qualified or until their resignation
or are otherwise removed.
At May 31, 2026, in addition to
Ms. Kamerick and Messrs. Agdern and Mason, the other Directors
of the Fund were as follows:
Carol
L. Colman, CFA
Anthony Grillo
Nisha Kumar
Hillary A. Sale
Jane Trust, CFA
Anthony Grillo
Nisha Kumar
Hillary A. Sale
Jane Trust, CFA
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 ending November 30, 2026.
|
FOR
|
AGAINST
|
ABSTAIN
|
BROKER
NON-VOTES |
|
14,893,305
|
1,844,085
|
97,211
|
N/A
|
36
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 stock- holders
(the “Plan Agent”), in additional shares of Common Stock under the Fund’s 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 P.O.
Box 43006, Providence, RI 02940-3078 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; otherwise such
ClearBridge
Energy Midstream Opportunity Fund Inc.
37
Dividend
reinvestment plan (unaudited) (cont’d)
withdrawal will
be effective as soon as practicable after the Plan Agent’s 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 Fund’s 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 P.O. Box 43006, Providence, RI 02940-3078 or by calling the
Plan Agent at 1-888-888-0151.
38
ClearBridge
Energy Midstream Opportunity Fund Inc.
(This
page intentionally left blank.)
(This
page intentionally left blank.)
ClearBridge
Energy Midstream
Opportunity Fund Inc.
Directors
Robert D. Agdern
Carol L. Colman
Anthony Grillo
Eileen A. Kamerick
Chair
Nisha Kumar
Peter Mason
Hillary A. Sale
Jane Trust
Officers
Jane
Trust
President and Chief Executive
Officer
President and Chief Executive
Officer
Christopher
Berarducci
Treasurer and Principal Financial
Officer
Treasurer and Principal Financial
Officer
Fred
Jensen
Chief Compliance Officer
Chief Compliance Officer
Marc
A. De Oliveira
Secretary and Chief Legal Officer
Secretary and Chief Legal Officer
Thomas
C. Mandia
Senior Vice President
Senior Vice President
Jeanne
M. Kelly
Senior Vice President
Senior Vice President
ClearBridge Energy Midstream
Opportunity Fund Inc.
One
Madison Avenue
17th Floor
New York, NY 10010
17th Floor
New York, NY 10010
Investment manager
Franklin Templeton Fund Adviser,
LLC
Subadviser
ClearBridge Investments, LLC
Custodian
The Bank of New York Mellon
Transfer agent
Computershare
Inc.
P.O. Box 43006
Providence, RI 02940-3078
P.O. Box 43006
Providence, RI 02940-3078
Independent
registered
public accounting firm
public accounting firm
PricewaterhouseCoopers
LLP
Baltimore, MD
Baltimore, MD
Legal counsel
Simpson
Thacher & Bartlett LLP
900 G Street NW
Washington, DC 20001
900 G Street NW
Washington, DC 20001
New
York Stock
Exchange Symbol
Exchange Symbol
EMO
ClearBridge Energy Midstream
Opportunity Fund Inc.
ClearBridge
Energy Midstream Opportunity Fund Inc.
One Madison Avenue
17th Floor
New York, NY 10010
One Madison Avenue
17th Floor
New York, NY 10010
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 Fund’s Forms
N-PORT are available on the SEC’s 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.franklintempleton.com
and (3) on the SEC’s website at www.sec.gov.
Quarterly performance, semi-annual
and annual reports, current net asset value and other
information regarding the Fund may be found on Franklin Templeton’s website,
which can be accessed at www.franklintempleton.com. Any reference
to Franklin Templeton’s website in this report is intended to allow investors
public access to information regarding the Fund and does not, and is
not intended to, incorporate Franklin Templeton’s website in this report.
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.
P.O. Box 43006
Providence, RI 02940-3078
P.O. Box 43006
Providence, RI 02940-3078
90813-S 7/26
(b) Not applicable
| ITEM 2. | CODE OF ETHICS. |
Not applicable.
| ITEM 3. | AUDIT COMMITTEE FINANCIAL EXPERT. |
Not applicable.
| ITEM 4. | PRINCIPAL ACCOUNTANT FEES AND SERVICES. |
Not applicable.
| ITEM 5. | AUDIT COMMITTEE OF LISTED REGISTRANTS. |
Not applicable.
| ITEM 6. | SCHEDULE OF INVESTMENTS. |
| (a) | Please see schedule of investments contained in the Financial Statements and Financial Highlights included under Item 1 of this Form N-CSR. |
| (b) | Not applicable. |
| ITEM 7. | FINANCIAL STATEMENTS AND FINANCIAL HIGHLIGHTS FOR OPEN-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable.
| ITEM 8. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS FOR OPEN-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable.
| ITEM 9. | PROXY DISCLOSURES FOR OPEN-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable.
| ITEM 10. | REMUNERATION PAID TO DIRECTORS, OFFICERS, AND OTHERS OF OPEN-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable.
| ITEM 11. | STATEMENT REGARDING BASIS FOR APPROVAL OF INVESTMENT ADVISORY CONTRACT. |
The information is disclosed as part of the Financial Statements included in Item 1 of this Form N-CSR, as applicable.
| ITEM 12. | DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable.
| ITEM 13. | PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable.
| ITEM 14. | PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. |
Not applicable.
| ITEM 15. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. |
There have been no changes to the procedures by which shareholders may recommend nominees to the Registrant’s Board of Trustees that would require disclosure herein.
| ITEM 16. | CONTROLS AND PROCEDURES. |
| (a) | The Registrants acknowledge the Staff’s comment. In future filings on Form N-CSR, the certifications required by Rule 30a-2 and Item 19(a)(3) will include the designations “principal executive officer” and “principal financial officer” in the signature blocks, reflecting the capacity in which each signatory executes the certification, in conformity with the language of the Rule and Form N-CSR. The Registrants may also include each signatory’s actual title with respect to the Funds alongside the required designation. |
| (b) | There were no changes in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the period covered by this report that have materially affected or are likely to materially affect the Registrant’s internal control over financial reporting. |
| ITEM 17. | DISCLOSURE OF SECURITIES LENDING ACTIVITIES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable.
| ITEM 18. | RECOVERY OF ERRONEOUSLY AWARDED COMPENSATION. |
| (a) | Not applicable. |
| (b) | Not applicable. |
| ITEM 19. | EXHIBITS. |
(a) (1) Not applicable.
Exhibit 99.CODE ETH
(a) (3) Certifications pursuant to section 302 of the Sarbanes-Oxley Act of 2002 attached hereto.
Exhibit 99.CERT
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 attached hereto.
Exhibit 99.906CERT
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this Report to be signed on its behalf by the undersigned, there unto duly authorized.
Clearbridge Energy Midstream Opportunity Fund Inc.
| By: | /s/ Jane Trust | |
| Jane Trust | ||
| Chief Executive Officer | ||
| Date: | July 30, 2026 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| By: | /s/ Jane Trust | |
| Jane Trust | ||
| Chief Executive Officer | ||
| Date: | July 30, 2026 |
| By: | /s/ Christopher Berarducci | |
| Christopher Berarducci | ||
| Principal Financial Officer | ||
| Date: | July 30, 2026 |