|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
Investments, at value (Cost — $135,553,098)
|
|
$
|
115,078,514
|
|
|
Cash
|
|
|
528,943
|
|
|
Receivable for securities sold
|
|
|
22,702,562
|
|
|
Interest receivable
|
|
|
487,645
|
|
|
Prepaid expenses
|
|
|
12,442
|
|
|
Total Assets
|
|
|
138,810,106
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
Loan payable (Note 5)
|
|
|
37,000,000
|
|
|
Payable for securities purchased
|
|
|
17,947,789
|
|
|
Distributions payable
|
|
|
651,877
|
|
|
Interest payable
|
|
|
87,547
|
|
|
Investment management fee payable
|
|
|
86,661
|
|
|
Directors’ fees payable
|
|
|
2,659
|
|
|
Accrued expenses
|
|
|
618,386
|
|
|
Total Liabilities
|
|
|
56,394,919
|
|
|
Total Net Assets
|
|
$
|
82,415,187
|
|
|
|
|
|
Net Assets:
|
|
|
|
|
|
Par value ($0.001 par value; 9,876,922 shares issued and outstanding; 150,000,000 shares authorized)
|
|
$
|
9,877
|
|
|
Paid-in capital in excess of par value
|
|
|
126,171,225
|
|
|
Total distributable earnings (loss)
|
|
|
(43,765,915)
|
|
|
Total Net Assets
|
|
$
|
82,415,187
|
|
|
|
|
|
Shares Outstanding
|
|
|
9,876,922
|
|
|
|
|
|
Net Asset Value
|
|
|
$8.34
|
|
See Notes to Financial
Statements.
|
|
|
|
|
14
|
|
Western Asset Corporate Loan Fund Inc. 2020 Semi-Annual Report
|
Statement of operations (unaudited)
For the
Six Months Ended March 31, 2020
|
|
|
|
|
|
|
|
|
|
Investment Income:
|
|
|
|
|
|
Interest
|
|
$
|
4,683,536
|
|
|
Dividends
|
|
|
54,264
|
|
|
Total Investment Income
|
|
|
4,737,800
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
Interest expense (Note 5)
|
|
|
642,436
|
|
|
Investment management fee (Note 2)
|
|
|
618,311
|
|
|
Transfer agent fees
|
|
|
399,164
|
|
|
Legal fees
|
|
|
190,978
|
|
|
Audit and tax fees
|
|
|
32,146
|
|
|
Directors’ fees
|
|
|
14,863
|
|
|
Fund accounting fees
|
|
|
9,483
|
|
|
Shareholder reports
|
|
|
8,903
|
|
|
Commitment fees (Note 5)
|
|
|
8,404
|
|
|
Stock exchange listing fees
|
|
|
6,254
|
|
|
Custody fees
|
|
|
4,723
|
|
|
Excise tax (Note 1)
|
|
|
3,000
|
|
|
Insurance
|
|
|
1,228
|
|
|
Miscellaneous expenses
|
|
|
66,855
|
|
|
Total Expenses
|
|
|
2,006,748
|
|
|
Less: Fee waivers and/or expense reimbursements (Note 2)
|
|
|
(39,015)
|
|
|
Net Expenses
|
|
|
1,967,733
|
|
|
Net Investment Income
|
|
|
2,770,067
|
|
|
|
|
|
Realized and Unrealized Loss on Investments (Notes 1 and 3):
|
|
|
|
|
|
Net Realized Loss From Investment Transactions
|
|
|
(6,680,026)
|
|
|
Change in Net Unrealized Appreciation (Depreciation) From
Investments
|
|
|
(17,366,065)
|
|
|
Net Loss on Investments
|
|
|
(24,046,091)
|
|
|
Decrease in Net Assets From Operations
|
|
$
|
(21,276,024)
|
|
See Notes to Financial
Statements.
|
|
|
|
|
Western Asset Corporate Loan Fund Inc. 2020 Semi-Annual Report
|
|
15
|
Statements of changes in net assets
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended March 31, 2020 (unaudited)
and the Year Ended September 30, 2019
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
Operations:
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
$
|
2,770,067
|
|
|
$
|
6,627,743
|
|
|
Net realized loss
|
|
|
(6,680,026)
|
|
|
|
(2,264,065)
|
|
|
Change in net unrealized appreciation (depreciation)
|
|
|
(17,366,065)
|
|
|
|
(1,591,589)
|
|
|
Increase (Decrease) in Net Assets From Operations
|
|
|
(21,276,024)
|
|
|
|
2,772,089
|
|
|
|
|
|
|
Distributions to Shareholders From (Note 1):
|
|
|
|
|
|
|
|
|
|
Total distributable earnings
|
|
|
(3,774,327)
|
|
|
|
(6,718,738)
|
|
|
Decrease in Net Assets From Distributions to
Shareholders
|
|
|
(3,774,327)
|
|
|
|
(6,718,738)
|
|
|
|
|
|
|
Fund Share Transactions:
|
|
|
|
|
|
|
|
|
|
Cost of shares repurchased (62,040 and 0 shares repurchased, respectively)
|
|
|
(616,522)
|
|
|
|
—
|
|
|
Decrease in Net Assets From Fund Share Transactions
|
|
|
(616,522)
|
|
|
|
—
|
|
|
Decrease in Net Assets
|
|
|
(25,666,873)
|
|
|
|
(3,946,649)
|
|
|
|
|
|
|
Net Assets:
|
|
|
|
|
|
|
|
|
|
Beginning of period
|
|
|
108,082,060
|
|
|
|
112,028,709
|
|
|
End of period
|
|
$
|
82,415,187
|
|
|
$
|
108,082,060
|
|
See Notes to Financial
Statements.
|
|
|
|
|
16
|
|
Western Asset Corporate Loan Fund Inc. 2020 Semi-Annual Report
|
Statement of cash flows
(unaudited)
For the Six Months Ended March 31, 2020
|
|
|
|
|
|
|
|
|
|
Increase (Decrease) in Cash:
|
|
|
|
|
|
Cash Provided (Used) by Operating Activities:
|
|
|
|
|
|
Net decrease in net assets resulting from operations
|
|
$
|
(21,276,024)
|
|
|
Adjustments to reconcile net decrease in net assets resulting from operations to net cash provided (used) by operating
activities:
|
|
|
|
|
|
Purchases of portfolio securities
|
|
|
(162,089,631)
|
|
|
Sales of portfolio securities
|
|
|
185,514,380
|
|
|
Net purchases, sales and maturities of short-term investments
|
|
|
5,672,588
|
|
|
Payment-in-kind
|
|
|
(17,340)
|
|
|
Net amortization of premium (accretion of discount)
|
|
|
(442,805)
|
|
|
Increase in receivable for securities sold
|
|
|
(13,160,242)
|
|
|
Increase in interest receivable
|
|
|
(97,860)
|
|
|
Increase in prepaid expenses
|
|
|
(5,019)
|
|
|
Increase in payable for securities purchased
|
|
|
374,983
|
|
|
Decrease in investment management fee payable
|
|
|
(11,605)
|
|
|
Decrease in Directors’ fees payable
|
|
|
(1,619)
|
|
|
Decrease in interest payable
|
|
|
(305,393)
|
|
|
Increase in accrued expenses
|
|
|
563,115
|
|
|
Net realized loss on investments
|
|
|
6,680,026
|
|
|
Change in net unrealized appreciation (depreciation) of investments
|
|
|
17,366,065
|
|
|
Net Cash Provided by Operating Activities*
|
|
|
18,763,619
|
|
|
|
|
|
Cash Flows From Financing Activities:
|
|
|
|
|
|
Distributions paid on common stock
|
|
|
(3,748,605)
|
|
|
Repayment of loan facility borrowings
|
|
|
(14,000,000)
|
|
|
Payment for shares repurchased
|
|
|
(616,522)
|
|
|
Net Cash Used in Financing Activities
|
|
|
(18,365,127)
|
|
|
Net Increase in Cash and Restricted Cash
|
|
|
398,492
|
|
|
Cash and restricted cash at beginning of period
|
|
|
130,451
|
|
|
Cash and restricted cash at end of period
|
|
$
|
528,943
|
|
|
* Included
in operating expenses is cash of $954,616 paid for interest and commitment fees on borrowings.
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.
|
|
|
|
|
March 31, 2020
|
|
|
Cash
|
|
$
|
528,943
|
|
|
Restricted cash
|
|
|
—
|
|
|
Total cash and restricted cash shown in the Statement of Cash Flows
|
|
$
|
528,943
|
|
See Notes to Financial
Statements.
|
|
|
|
|
Western Asset Corporate Loan Fund Inc. 2020 Semi-Annual Report
|
|
17
|
Financial highlights
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For a common share of capital stock outstanding
throughout each year ended September 30,
unless otherwise
noted:
|
|
|
|
|
20201,2
|
|
|
20191
|
|
|
20181
|
|
|
20171
|
|
|
20161
|
|
|
20151
|
|
|
|
|
|
|
|
|
|
|
Net asset value, beginning of period
|
|
|
$10.87
|
|
|
|
$11.27
|
|
|
|
$11.37
|
|
|
|
$11.53
|
|
|
|
$11.73
|
|
|
|
$12.63
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
0.28
|
|
|
|
0.67
|
|
|
|
0.64
|
|
|
|
0.71
|
|
|
|
0.71
|
|
|
|
0.80
|
|
|
Net realized and unrealized loss
|
|
|
(2.44)
|
|
|
|
(0.39)
|
|
|
|
(0.09)
|
|
|
|
(0.03)
|
|
|
|
(0.04)
|
|
|
|
(1.17)
|
|
|
Distributions paid to Auction Rate Cumulative Preferred Stockholders from net investment income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(0.00)
|
3
|
|
|
(0.00)
|
3
|
|
Total income (loss) from operations
|
|
|
(2.16)
|
|
|
|
0.28
|
|
|
|
0.55
|
|
|
|
0.68
|
|
|
|
0.67
|
|
|
|
(0.37)
|
|
|
|
|
|
|
|
|
|
|
Less distributions from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
(0.38)
|
4
|
|
|
(0.68)
|
|
|
|
(0.65)
|
|
|
|
(0.84)
|
|
|
|
(0.87)
|
|
|
|
(0.87)
|
|
|
Total distributions
|
|
|
(0.38)
|
|
|
|
(0.68)
|
|
|
|
(0.65)
|
|
|
|
(0.84)
|
|
|
|
(0.87)
|
|
|
|
(0.87)
|
|
|
Anti-dilutive impact of repurchase plan
|
|
|
0.01
|
5
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Net increase from tender and repurchase of Auction Rate Cumulative Preferred Shares
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.34
|
|
|
|
|
|
|
|
|
|
|
Net asset value, end of period
|
|
|
$8.34
|
|
|
|
$10.87
|
|
|
|
$11.27
|
|
|
|
$11.37
|
|
|
|
$11.53
|
|
|
|
$11.73
|
|
|
|
|
|
|
|
|
|
|
Market price, end of period
|
|
|
$7.10
|
|
|
|
$9.49
|
|
|
|
$9.94
|
|
|
|
$10.87
|
|
|
|
$10.70
|
|
|
|
$10.28
|
|
|
Total return, based on NAV6,7
|
|
|
(20.33)
|
%
|
|
|
2.59
|
%
|
|
|
4.96
|
%
|
|
|
5.94
|
%
|
|
|
6.36
|
%
|
|
|
(0.27)
|
%8
|
|
Total return, based on Market Price9
|
|
|
(22.01)
|
%
|
|
|
2.48
|
%
|
|
|
(2.64)
|
%
|
|
|
9.46
|
%
|
|
|
13.48
|
%
|
|
|
(3.74)
|
%
|
|
|
|
|
|
|
|
|
|
Net assets, end of period (000s)
|
|
|
$82,415
|
|
|
|
$108,082
|
|
|
|
$112,029
|
|
|
|
$113,004
|
|
|
|
$114,600
|
|
|
|
$116,525
|
|
|
|
|
|
|
|
|
|
|
Ratios to average net assets:10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross expenses
|
|
|
3.84
|
%11,12
|
|
|
2.91
|
%
|
|
|
2.61
|
%
|
|
|
2.21
|
%
|
|
|
2.37
|
%
|
|
|
1.95
|
%
|
|
Net expenses13
|
|
|
3.77
|
11,12
|
|
|
2.84
|
|
|
|
2.53
|
|
|
|
2.14
|
|
|
|
2.29
|
|
|
|
1.88
|
|
|
Net investment income
|
|
|
5.30
|
12
|
|
|
6.08
|
|
|
|
5.61
|
|
|
|
6.15
|
|
|
|
6.36
|
|
|
|
6.50
|
|
|
|
|
|
|
|
|
|
|
Portfolio turnover rate
|
|
|
107
|
%
|
|
|
122
|
%
|
|
|
91
|
%
|
|
|
72
|
%
|
|
|
45
|
%
|
|
|
45
|
%
|
See Notes to Financial Statements.
|
|
|
|
|
18
|
|
Western Asset Corporate Loan Fund Inc. 2020 Semi-Annual Report
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For a common share of capital stock outstanding throughout each year ended
September 30,
unless otherwise noted:
|
|
|
|
|
20201,2
|
|
|
20191
|
|
|
20181
|
|
|
20171
|
|
|
20161
|
|
|
20151
|
|
|
|
|
|
|
|
|
|
|
Supplemental data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan Outstanding, End of Period (000s)
|
|
|
$37,000
|
|
|
|
$51,000
|
|
|
|
$54,000
|
|
|
|
$53,000
|
|
|
|
$48,500
|
|
|
|
$56,000
|
|
|
Asset Coverage Ratio for Loan Outstanding14
|
|
|
323
|
%
|
|
|
312
|
%
|
|
|
307
|
%
|
|
|
313
|
%
|
|
|
336
|
%
|
|
|
310
|
%
|
|
Asset Coverage, per $1,000 Principal Amount of Loan Outstanding14
|
|
|
$3,227
|
|
|
|
$3,119
|
|
|
|
$3,075
|
|
|
|
$3,132
|
|
|
|
$3,363
|
|
|
|
$3,096
|
|
|
Weighted Average Loan (000s)
|
|
|
$50,027
|
|
|
|
$51,567
|
|
|
|
$53,890
|
|
|
|
$52,944
|
|
|
|
$50,790
|
|
|
|
$34,730
|
|
|
Weighted Average Interest Rate on Loan
|
|
|
2.57
|
%
|
|
|
3.17
|
%
|
|
|
2.46
|
%
|
|
|
1.67
|
%
|
|
|
1.41
|
%
|
|
|
1.18
|
%
|
|
Auction Rate Cumulative Preferred Stock at Liquidation Value, End of Period (000s)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
$875
|
|
|
Asset Coverage Ratio for Auction Rate Cumulative Preferred Stock
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
305
|
%15
|
|
Asset Coverage, per $25,000 Liquidation Value per Share of Auction Rate Cumulative Preferred Stock
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
$76,220
|
15
|
See Notes to Financial
Statements.
|
|
|
|
|
Western Asset Corporate Loan Fund Inc. 2020 Semi-Annual Report
|
|
19
|
Financial highlights (cont’d)
|
1
|
Per share amounts have been calculated using the average shares method.
|
|
2
|
For the six months ended March 31, 2020 (unaudited).
|
|
3
|
Amount represents less than $0.005 per share.
|
|
4
|
The actual source of the Fund’s current fiscal year distributions may be from net investment income, 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 $9.94 for 62,040 shares and $616,522 for the six months ended March 31, 2020.
|
|
6
|
Performance figures may reflect compensating balance arrangements, fee waivers and/or expense reimbursements. In the absence of compensating balance
arrangements, fee waivers and/or expense reimbursements, the total return would have been lower. Past performance is no guarantee of future results. Total returns for periods of less than one year are not annualized.
|
|
7
|
The total return calculation assumes that distributions are reinvested at NAV. Past performance is no guarantee of future results. Total returns for periods of
less than one year are not annualized.
|
|
8
|
The total return based on NAV reflects the impact of the tender and repurchase by the Fund of a portion of its Auction Rate Cumulative Preferred Shares at 90% of
the per share liquidation preference. Absent this transaction, the total return based on NAV would have been -3.25%.
|
|
9
|
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.
|
|
10
|
Calculated on the basis of average net assets of common stock shareholders. Ratios do not reflect the effect of dividend payments to auction rate cumulative
preferred stockholders.
|
|
11
|
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 2.67% and 2.59%, respectively.
|
|
13
|
Reflects fee waivers and/or expense reimbursements.
|
|
14
|
Represents value of net assets plus the loan outstanding and auction rate cumulative preferred stock, if any, at the end of the period divided by the loan
outstanding at the end of the period.
|
|
15
|
Represents value of net assets plus the loan outstanding and auction rate preferred stock at the end of the period divided by the loan and auction rate
cumulative preferred stock outstanding at the end of the period.
|
See Notes to Financial Statements.
|
|
|
|
|
20
|
|
Western Asset Corporate Loan Fund Inc. 2020 Semi-Annual Report
|
Notes to financial statements (unaudited)
1. Organization and significant accounting policies
Western Asset Corporate Loan Fund Inc. (the “Fund”) was incorporated in Maryland 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 Fund’s investment objective is to maximize current income consistent with
prudent efforts to preserve capital. The Fund invests primarily in floating- or variable-rate collateralized senior loans to corporations, partnerships or other business entities operating in various industries and geographic regions. On
October 31, 2019, the Board of Directors of the Fund approved amendments to the Fund’s bylaws. The amended and restated bylaws were subsequently filed on Form 8-K and are available on the Securities
and Exchange Commission’s website at www.sec.gov.
The following are significant accounting policies consistently followed by the Fund and are in
conformity with U.S. generally accepted accounting principles (“GAAP”). Estimates and assumptions are required to be made regarding assets, liabilities and changes in net assets resulting from operations when financial statements are
prepared. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ. Subsequent events have been evaluated through the date the financial statements were
issued.
(a) Investment valuation. The valuations for fixed income 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 use inputs that are observable such as issuer details, interest rates, yield curves, prepayment speeds, credit risks/spreads, default rates and quoted prices for similar securities. Investments in
open-end funds are valued at the closing net asset value per share of each fund on the day of valuation. 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. 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 Fund’s Board of Directors.
The Board of Directors is responsible for the valuation process and has delegated the supervision of the daily valuation process to the Legg Mason North Atlantic Fund Valuation Committee (the “Valuation
Committee”). The Valuation Committee, pursuant to the policies
|
|
|
|
|
Western Asset Corporate Loan Fund Inc. 2020 Semi-Annual Report
|
|
21
|
Notes to financial statements
(unaudited) (cont’d)
adopted by the Board of Directors, is responsible for making fair value determinations, evaluating the effectiveness of the Fund’s pricing policies, and
reporting to the Board of Directors. When determining the reliability of third party pricing information for investments owned by the Fund, the Valuation Committee, among other things, conducts due diligence reviews of pricing vendors, monitors the
daily change in prices and reviews transactions among market participants.
The Valuation Committee will consider pricing methodologies it deems relevant
and appropriate when making fair value determinations. Examples of possible methodologies include, but are not limited to, multiple of earnings; discount from market of a similar freely traded security; discounted cash-flow analysis; book value or a
multiple thereof; risk premium/yield analysis; yield to maturity; and/or fundamental investment analysis. The Valuation Committee will also consider factors it deems relevant and appropriate in light of the facts and circumstances. Examples of
possible factors include, but are not limited to, the type of security; the 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 of Directors, the fair value price is compared against the last available and next available market quotations. The Valuation Committee reviews the
results of such back testing monthly and fair valuation occurrences are reported to the Board of Directors quarterly.
The Fund uses valuation techniques
to measure fair value that are consistent with the market approach and/or income approach, depending on the type of security and the particular circumstance. The market approach uses prices and other relevant information generated by market
transactions involving identical or comparable securities. The income approach uses valuation techniques to discount estimated future cash flows to present value.
|
|
|
|
|
22
|
|
Western Asset Corporate Loan Fund Inc. 2020 Semi-Annual Report
|
GAAP establishes a disclosure hierarchy that categorizes the inputs to valuation techniques used to value assets and
liabilities at measurement date. These inputs are summarized in the three broad levels listed below:
|
•
|
|
Level 1 — quoted prices in active markets for identical investments
|
|
•
|
|
Level 2 — other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)
|
|
•
|
|
Level 3 — significant unobservable inputs (including the 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†:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Industry
|
|
|
—
|
|
|
$
|
175,790
|
|
|
$
|
1,143,805
|
|
|
$
|
1,319,595
|
|
|
Capital Goods
|
|
|
—
|
|
|
|
4,093,128
|
|
|
|
5,379,323
|
|
|
|
9,472,451
|
|
|
Consumer Cyclical
|
|
|
—
|
|
|
|
9,993,842
|
|
|
|
11,633,262
|
|
|
|
21,627,104
|
|
|
Consumer Non-Cyclical
|
|
|
—
|
|
|
|
16,000,013
|
|
|
|
11,580,549
|
|
|
|
27,580,562
|
|
|
Electric
|
|
|
—
|
|
|
|
380,550
|
|
|
|
472,300
|
|
|
|
852,850
|
|
|
Energy
|
|
|
—
|
|
|
|
541,183
|
|
|
|
872,773
|
|
|
|
1,413,956
|
|
|
Finance Companies
|
|
|
—
|
|
|
|
—
|
|
|
|
335,067
|
|
|
|
335,067
|
|
|
Financial Other
|
|
|
—
|
|
|
|
7,005,228
|
|
|
|
4,593,616
|
|
|
|
11,598,844
|
|
|
Industrial Other
|
|
|
—
|
|
|
|
215,126
|
|
|
|
381,532
|
|
|
|
596,658
|
|
|
Insurance
|
|
|
—
|
|
|
|
2,007,950
|
|
|
|
3,427,790
|
|
|
|
5,435,740
|
|
|
Technology
|
|
|
—
|
|
|
|
12,175,322
|
|
|
|
6,522,095
|
|
|
|
18,697,417
|
|
|
Other senior loans
|
|
|
—
|
|
|
|
4,624,058
|
|
|
|
—
|
|
|
|
4,624,058
|
|
|
Asset-Backed Securities
|
|
|
—
|
|
|
|
6,186,554
|
|
|
|
—
|
|
|
|
6,186,554
|
|
|
Corporate Bonds & Notes
|
|
|
—
|
|
|
|
1,835,673
|
|
|
|
—
|
|
|
|
1,835,673
|
|
|
Common Stocks:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer Discretionary
|
|
|
—
|
|
|
|
—
|
|
|
|
46,173
|
|
|
|
46,173
|
|
|
Energy
|
|
$
|
4,005
|
|
|
|
—
|
|
|
|
151
|
|
|
|
4,156
|
|
|
Total Long-Term Investments
|
|
|
4,005
|
|
|
|
65,234,417
|
|
|
|
46,388,436
|
|
|
|
111,626,858
|
|
|
Short-Term Investments†
|
|
|
3,451,656
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,451,656
|
|
|
Total Investments
|
|
$
|
3,455,661
|
|
|
$
|
65,234,417
|
|
|
$
|
46,388,436
|
|
|
$
|
115,078,514
|
|
|
†
|
See Schedule of Investments for additional detailed categorizations.
|
|
|
|
|
|
Western Asset Corporate Loan Fund Inc. 2020 Semi-Annual Report
|
|
23
|
Notes to financial statements
(unaudited) (cont’d)
The following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in Securities
|
|
Balance
as of
September 30,
2019
|
|
|
Accrued
premiums/
discounts
|
|
|
Realized
gain
(loss)1
|
|
|
Change in
unrealized
appreciation
(depreciation)2
|
|
|
Purchases
|
|
|
Senior Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Industry
|
|
$
|
2,303,341
|
|
|
$
|
1,103
|
|
|
$
|
(229,309)
|
|
|
$
|
(21,795)
|
|
|
$
|
1,241,300
|
|
|
Capital Goods
|
|
|
3,565,582
|
|
|
|
1,130
|
|
|
|
4,782
|
|
|
|
(678,654)
|
|
|
|
1,713,625
|
|
|
Communications
|
|
|
1,052,231
|
|
|
|
—
|
|
|
|
(68,250)
|
|
|
|
(2,231)
|
|
|
|
840,000
|
|
|
Consumer Cyclical
|
|
|
2,288,680
|
|
|
|
2,769
|
|
|
|
(36,032)
|
|
|
|
(409,210)
|
|
|
|
5,157,804
|
|
|
Consumer Non- Cyclical
|
|
|
10,513,211
|
|
|
|
15,098
|
|
|
|
(440,360)
|
|
|
|
(1,534,393)
|
|
|
|
7,819,985
|
|
|
Electric
|
|
|
490,121
|
|
|
|
(7,652)
|
|
|
|
(811)
|
|
|
|
(6,795)
|
|
|
|
17,340
|
|
|
Energy
|
|
|
2,026,853
|
|
|
|
1,996
|
|
|
|
(84,310)
|
|
|
|
(427,730)
|
|
|
|
—
|
|
|
Finance Companies
|
|
|
410,193
|
|
|
|
588
|
|
|
|
804
|
|
|
|
(24,810)
|
|
|
|
—
|
|
|
Financial Other
|
|
|
8,333,851
|
|
|
|
3,178
|
|
|
|
(161,719)
|
|
|
|
(584,787)
|
|
|
|
4,123,638
|
|
|
Industrial Other
|
|
|
—
|
|
|
|
23
|
|
|
|
(65)
|
|
|
|
(36,399)
|
|
|
|
428,521
|
|
|
Insurance
|
|
|
1,414,709
|
|
|
|
374
|
|
|
|
4,008
|
|
|
|
(213,764)
|
|
|
|
1,606,279
|
|
|
REITS
|
|
|
348,680
|
|
|
|
17
|
|
|
|
(968)
|
|
|
|
(1,223)
|
|
|
|
—
|
|
|
Technology
|
|
|
4,057,785
|
|
|
|
3,013
|
|
|
|
(71,897)
|
|
|
|
(530,416)
|
|
|
|
5,321,162
|
|
|
Common Stocks:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Communication Services
|
|
|
96,900
|
|
|
|
—
|
|
|
|
(350,509)
|
|
|
|
317,563
|
|
|
|
—
|
|
|
Consumer Discretionary
|
|
|
195,958
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(149,785)
|
|
|
|
—
|
|
|
Energy
|
|
|
7,711
|
|
|
|
—
|
|
|
|
(2,772)
|
|
|
|
(2,520)
|
|
|
|
—
|
|
|
Total
|
|
$
|
37,105,806
|
|
|
$
|
21,637
|
|
|
$
|
(1,437,408)
|
|
|
$
|
(4,306,949)
|
|
|
$
|
28,269,654
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in Securities
(cont’d)
|
|
Sales
|
|
|
Transfers
into
Level 33
|
|
|
Transfers
out of
Level 34
|
|
|
Balance
as of
March 31, 2020
|
|
|
Net change in
unrealized
appreciation
(depreciation)
for investments
in securities
still held at
March 31, 20202
|
|
|
Senior Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Industry
|
|
$
|
(2,914,484)
|
|
|
$
|
775,200
|
|
|
$
|
(11,551)
|
|
|
$
|
1,143,805
|
|
|
$
|
(38,647)
|
|
|
Capital Goods
|
|
|
(1,735,733)
|
|
|
|
3,547,341
|
|
|
|
(1,038,750)
|
|
|
|
5,379,323
|
|
|
|
(209,281)
|
|
|
Communications
|
|
|
(1,821,750)
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Consumer Cyclical
|
|
|
(1,853,376)
|
|
|
|
6,482,627
|
|
|
|
—
|
|
|
|
11,633,262
|
|
|
|
(413,452)
|
|
|
Consumer Non- Cyclical
|
|
|
(5,319,867)
|
|
|
|
2,390,848
|
|
|
|
(1,863,973)
|
|
|
|
11,580,549
|
|
|
|
(1,340,806)
|
|
|
|
|
|
|
24
|
|
Western Asset Corporate Loan Fund Inc. 2020 Semi-Annual Report
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in Securities
(cont’d)
|
|
Sales
|
|
|
Transfers
into
Level 33
|
|
|
Transfers
out of
Level 34
|
|
|
Balance
as of
March 31, 2020
|
|
|
Net change in
unrealized
appreciation
(depreciation)
for investments
in securities
still held at
March 31, 20202
|
|
|
Electric
|
|
$
|
(19,903)
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
472,300
|
|
|
$
|
(6,795)
|
|
|
Energy
|
|
|
(644,036)
|
|
|
|
—
|
|
|
|
—
|
|
|
|
872,773
|
|
|
|
(504,676)
|
|
|
Finance Companies
|
|
|
(51,708)
|
|
|
|
—
|
|
|
|
—
|
|
|
|
335,067
|
|
|
|
(24,810)
|
|
|
Financial Other
|
|
|
(7,120,545)
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,593,616
|
|
|
|
(580,653)
|
|
|
Industrial Other
|
|
|
(10,548)
|
|
|
|
—
|
|
|
|
—
|
|
|
|
381,532
|
|
|
|
(36,399)
|
|
|
Insurance
|
|
|
(1,609,116)
|
|
|
$
|
2,225,300
|
|
|
|
—
|
|
|
|
3,427,790
|
|
|
|
(210,158)
|
|
|
REITS
|
|
|
(346,506)
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Technology
|
|
|
(3,433,201)
|
|
|
|
2,065,571
|
|
|
$
|
(889,922)
|
|
|
|
6,522,095
|
|
|
|
(424,524)
|
|
|
Common Stocks:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Communication Services
|
|
|
(63,954)
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Consumer Discretionary
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
46,173
|
|
|
|
(149,785)
|
|
|
Energy
|
|
|
(2,268)
|
|
|
|
—
|
|
|
|
—
|
|
|
|
151
|
|
|
|
(126)
|
|
|
Total
|
|
$
|
(26,946,995)
|
|
|
$
|
17,486,887
|
|
|
$
|
(3,804,196)
|
|
|
$
|
46,388,436
|
|
|
$
|
(3,940,112)
|
|
|
1
|
This amount is included in net realized gain (loss) from investment transactions in the accompanying Statement of Operations.
|
|
2
|
This amount is included in the change in net unrealized appreciation (depreciation) in the accompanying Statement of Operations. Change in unrealized
appreciation (depreciation) includes net unrealized appreciation (depreciation) resulting from changes in investment values during the reporting period and the reversal of previously recorded unrealized appreciation (depreciation) when gains or
losses are realized.
|
|
3
|
Transferred into Level 3 as a result of the unavailability of a quoted price in an active market for an identical investment or the unavailability of other
significant observable inputs.
|
|
4
|
Transferred out of Level 3 as a result of the availability of a quoted price in an active market for an identical investment or the availability of other
significant observable inputs.
|
(b) Net asset value. The net
asset value (“NAV”) of the Fund’s common stock is determined no less frequently than the close of business on the Fund’s last business day of each week (generally Friday) and on the last business day of the month. It is
determined by dividing the value of the net assets available to common stock by the total number of shares of common stock outstanding. For the purpose of determining the NAV per share of the common stock, the value of the Fund’s net assets
shall be deemed to equal the value of the Fund’s assets less the Fund’s liabilities.
(c) Senior loans. Senior Loans generally are arranged through private negotiations between a
borrower and several financial institutions (“Lenders”) represented in each case
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|
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Western Asset Corporate Loan Fund Inc. 2020 Semi-Annual Report
|
|
25
|
Notes to financial statements
(unaudited) (cont’d)
by one or more such Lenders acting as agent of the Lenders. On behalf of the Lenders, the agent will be primarily responsible for negotiating the loan agreement
that establishes the relative terms and conditions of the Senior Loan and rights of the borrower and the Lenders. Also, an agent typically administers the terms of the loan agreement and is responsible for the monitoring of collateral and collection
of principal and interest and fee payments from the borrower and the apportionment of these payments to the credit of all investors which are parties to the loan agreement. The Fund may act as one of the group of Lenders in a Senior Loan, and
purchase assignments and participations in Senior Loans from third parties. Senior Loans are subject to credit risks, including the risk of nonpayment of scheduled interest or loan payments.
The Fund assumes the credit risk of the borrower, the lender that is selling the participation and any other persons interpositioned between the Fund and the borrower. In the event of the insolvency of the lender
selling the participation, the Fund may be treated as a general creditor of the lender and may not benefit from any off-set between the lender and the borrower.
(d) Unfunded loan commitments. The Fund may enter into certain credit agreements where all or
a portion of the total amount committed may be unfunded. The Fund is obligated to fund these commitments at the borrower’s discretion. The commitments are disclosed in the accompanying Schedule of Investments. At March 31, 2020, the Fund
had sufficient cash and/or securities to cover these commitments.
(e) Cash flow
information. The Fund invests in securities and distributes dividends from net investment income and net realized gains, which are paid in cash and may be reinvested at the discretion of shareholders. These activities are reported in the
Statement of Changes in Net Assets and additional information on cash receipts and cash payments are presented in the Statement of Cash Flows.
(f) Credit and market risk. Investments in securities that are collateralized by real estate mortgages are subject to certain credit and liquidity risks. When market conditions result in
an increase in default rates of the underlying mortgages and the foreclosure values of underlying real estate properties are materially below the outstanding amount of these underlying mortgages, collection of the full amount of accrued interest and
principal on these investments may be doubtful. Such market conditions may significantly impair the value and liquidity of these investments and may result in a lack of correlation between their credit ratings and values.
(g) Security transactions and investment income. Security transactions are accounted for on a
trade date basis. Trade date for senior and subordinated loans purchased in the “primary market” is considered the date on which the credit agreement is executed. Trade date for senior and subordinated loans purchased in the
“secondary market” is the date on which the transaction is entered into. Interest income (including interest income from
|
|
|
|
|
26
|
|
Western Asset Corporate Loan Fund Inc. 2020 Semi-Annual Report
|
payment-in-kind securities), adjusted for amortization of premium and accretion of discount, is recorded on the
accrual basis. Dividend income is recorded on the ex-dividend date for dividends received in cash and/or securities. Certain fees received from issuers of the underlying loans, such as consent, amendment and
upfront fees (collectively, “consent fees”) are generally recorded as a basis adjustment to the cost of loans held and accreted over the life of the loan. The cost of investments sold is determined by use of the specific identification
method.
(h) Distributions to shareholders. Distributions to common shareholders
from net investment income of the Fund, if any, are declared and paid on a monthly basis. The actual source of the Fund’s monthly distributions may be from net investment income, 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. Distributions to common shareholders of net realized gains, if any, are declared at least annually. Distributions to common shareholders of the Fund are
recorded on the ex-dividend date and are determined in accordance with income tax regulations, which may differ from GAAP.
(i) Compensating balance arrangements. The Fund has an arrangement with its custodian bank whereby a portion of the custodian’s fees is
paid indirectly by credits earned on the Fund’s cash on deposit with the bank.
(j)
Federal and other taxes. It is the Fund’s policy to comply with the federal income and excise tax requirements of the Internal Revenue Code of 1986 (the “Code”), as amended, applicable to regulated investment companies.
Accordingly, the Fund intends to distribute its taxable income and net realized gains, if any, to shareholders in accordance with timing requirements imposed by the Code. Therefore, no federal or state income tax provision is required in the
Fund’s financial statements.
However, due to the timing of when distributions are made by the Fund, the Fund may be subject to an excise tax of 4%
of the amount by which 98% of the Fund’s annual taxable income and 98.2% of net realized gains exceed the distributions from such taxable income and realized gains for the calendar year. The Fund paid $3,000 of federal excise taxes attributable
to calendar year 2019 in March 2020.
Management has analyzed the Fund’s tax positions taken on income tax returns for all open tax years and has
concluded that as of September 30, 2019, no provision for income tax is required in the Fund’s financial statements. The Fund’s federal and state income and federal excise tax returns for tax years for which the applicable statutes of
limitations have not expired are subject to examination by the Internal Revenue Service and state departments of revenue.
(k) 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.
|
|
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|
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Western Asset Corporate Loan Fund Inc. 2020 Semi-Annual Report
|
|
27
|
Notes to financial statements
(unaudited) (cont’d)
2. Investment management agreement and other transactions with affiliates
Legg Mason Partners Fund Advisor, LLC (“LMPFA”) is the Fund’s investment manager and Western Asset Management Company, LLC (“Western Asset”) is the Fund’s subadviser. LMPFA and Western
Asset are wholly-owned subsidiaries of Legg Mason, Inc. (“Legg Mason”).
LMPFA provides administrative and oversight services to the Fund. The
Fund pays an investment management fee, calculated daily and paid monthly, at an annual rate of 0.80% of the Fund’s average daily net assets plus assets attributable to Preferred Stock, if any, plus proceeds of any outstanding borrowings used
for leverage.
LMPFA delegates to Western Asset the day-to-day portfolio
management of the Fund. For its services, LMPFA pays Western Asset a fee monthly, at an annual rate equal to 70% of the net management fee it receives from the Fund.
LMPFA agreed to a waiver in the amount of 0.05% of the investment advisory fee that is paid to it by the Fund. The waiver will extend through November 30, 2020.
During periods in which the Fund utilizes financial leverage, the fees paid to LMPFA will be higher than if the Fund did not utilize leverage because the fees are
calculated as a percentage of the Fund’s assets, including those investments purchased with leverage.
During the six months ended March 31,
2020, fees waived and/or expenses reimbursed amounted to $39,015.
All officers and one Director of the Fund are employees of Legg Mason or its
affiliates and do not receive compensation from the Fund.
3. Investments
During the six months ended March 31, 2020, the aggregate cost of purchases and proceeds from sales of investments (excluding short-term investments) were as follows:
|
|
|
|
|
|
|
Purchases
|
|
|
$162,089,631
|
|
|
Sales
|
|
|
185,514,380
|
|
At March 31, 2020, the aggregate cost of investments and the aggregate gross unrealized appreciation and depreciation of
investments for federal income tax purposes were substantially as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
|
|
|
Gross
Unrealized
Appreciation
|
|
|
Gross
Unrealized
Depreciation
|
|
|
Net
Unrealized
Depreciation
|
|
|
Securities
|
|
$
|
135,553,098
|
|
|
$
|
33,281
|
|
|
$
|
(20,507,865)
|
|
|
$
|
(20,474,584)
|
|
4. Derivative instruments and hedging activities
During the six months ended March 31, 2020, the Fund did not invest in derivative instruments.
|
|
|
|
|
28
|
|
Western Asset Corporate Loan Fund Inc. 2020 Semi-Annual Report
|
5. Loan
The Fund has a revolving credit agreement with Toronto-Dominion Bank (“Credit Agreement”), which allows the Fund to borrow up to an aggregate amount of $60,000,000. The Credit Agreement terminates on
April 9, 2021. 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 $60,000,000. The interest on the loan is calculated at a variable rate based on LIBOR plus any applicable margin. Securities held by the Fund are subject to a lien, granted to Toronto-Dominion Bank, 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 borrowing under the agreement. Interest expense related to this loan for the six months ended March 31, 2020 was
$642,436. For the six months ended March 31, 2020, the Fund incurred commitment fees of $8,404. For the six months ended March 31, 2020, the Fund had an average daily loan balance outstanding of $50,027,322 and the weighted average
interest rate was 2.57%. At March 31, 2020, the Fund had $37,000,000 of borrowings outstanding per this credit agreement.
6.
Distributions subsequent to March 31, 2020
The following distributions have been declared by the Fund’s Board of Directors and are payable
subsequent to the period end of this report:
|
|
|
|
|
|
|
|
|
|
|
Record Date
|
|
Payable Date
|
|
|
Amount
|
|
|
3/24/2020
|
|
|
4/1/2020
|
|
|
$
|
0.0660
|
|
|
4/23/2020
|
|
|
5/1/2020
|
|
|
$
|
0.0660
|
|
|
5/21/2020
|
|
|
6/1/2020
|
|
|
$
|
0.0660
|
|
|
6/23/2020
|
|
|
7/1/2020
|
|
|
$
|
0.0660
|
|
|
7/24/2020
|
|
|
8/3/2020
|
|
|
$
|
0.0660
|
|
|
8/24/2020
|
|
|
9/1/2020
|
|
|
$
|
0.0660
|
|
7. Stock repurchase program
On November 16, 2015, the Fund announced that the Fund’s Board of Directors (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. The Board has directed management of the Fund to repurchase shares of common stock at such times and in such amounts as management reasonably believes
may enhance stockholder value. The Fund is under no obligation to purchase shares at any specific discount levels or in any specific amounts.
|
|
|
|
|
Western Asset Corporate Loan Fund Inc. 2020 Semi-Annual Report
|
|
29
|
Notes to financial statements
(unaudited) (cont’d)
During the six months ended March 31, 2020, the Fund repurchased and retired 0.62% of its common shares outstanding under the repurchase plan. The weighted
average discount per share on these repurchases was 8.51% for the year ended March 31, 2020. Shares repurchased and the corresponding dollar amount are included in the Statement of Changes in Net Assets. The anti-dilutive impact of these share
repurchases is included in the Financial Highlights.
Since the commencement of the stock repurchase program through March 31, 2020, the Fund
repurchased 62,040 shares or 0.62% of its common shares outstanding for a total amount of $616,522.
8. Deferred capital losses
As of September 30, 2019, the Fund had deferred capital losses of $15,484,620, which have no expiration date, that will be available to offset
future taxable capital gains.
9. Other matters
On February 18, 2020, Franklin Resources, Inc. (“Franklin Resources”) and Legg Mason announced that they have entered into a definitive agreement for Franklin Resources to acquire Legg Mason in an all-cash transaction. As part of this transaction, LMPFA and the subadviser(s), each currently a subsidiary of Legg Mason, would become a subsidiary of Franklin Resources. The transaction is subject to approval by
Legg Mason’s shareholders and customary closing conditions, including receipt of applicable regulatory approvals. Subject to such approvals and the satisfaction of the other conditions, the transaction is expected to be consummated later this
year.
Under the Investment Company Act of 1940, consummation of the transaction will result in the automatic termination of the Fund’s management
contract, and any related subadvisory contract(s), where applicable. Therefore, the Fund’s Board has approved new management and subadvisory contracts, where applicable, that will be presented to the shareholders of the Fund for their approval.
* * *
The outbreak of the respiratory illness COVID-19 (commonly referred to as “coronavirus”) has continued to rapidly spread around the world, causing considerable
uncertainty for the global economy and financial markets. The ultimate economic fallout from the pandemic, and the long-term impact on economies, markets, industries and individual issuers, are not known. The
COVID-19 pandemic could adversely affect the value and liquidity of the Fund’s investments and negatively impact the Fund’s performance. In addition, the outbreak of
COVID-19, and measures taken to mitigate its effects, could result in disruptions to the services provided to the Fund by its service providers.
|
|
|
|
|
30
|
|
Western Asset Corporate Loan Fund Inc. 2020 Semi-Annual Report
|
* * *
The Fund’s investments, payment obligations, and financing terms may be based on floating rates, such as the London Interbank Offered Rate, or “LIBOR,” which is the offered rate for short-term
Eurodollar deposits between major international banks. Plans are underway to phase out the use of LIBOR by the end of 2021. There remains uncertainty regarding the nature of any replacement rate and the impact of the transition from LIBOR on the
Fund’s transactions and the financial markets generally. As such, the potential effect of a transition away from LIBOR on the Fund or the Fund’s investments cannot yet be determined.
10. Subsequent events
On May 14, 2020, the Fund announced the modification of its
investment policy relating to investments in collateralized senior loans. Effective May 14, 2020, under normal market conditions, the Fund invests at least 80% of managed assets in collateralized senior loans. “Managed assets” means
net assets of the Fund plus the amount of any borrowings and assets attributable to any preferred stock that may be outstanding. Previously, the Fund, under normal market conditions, invested at least 80% of total assets in collateralized senior
loans.
* * *
On April 1, 2020, the Board of Directors of the Fund approved amendments to the Fund’s bylaws. The amended and restated bylaws were subsequently filed on Form 8-K
and are available on the Securities and Exchange Commission’s website at www.sec.gov.
|
|
|
|
|
Western Asset Corporate Loan Fund Inc. 2020 Semi-Annual Report
|
|
31
|
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 Western Asset Corporate Loan 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 contract (the “Management Agreement”) with the
Fund’s manager, Legg Mason Partners Fund Advisor, LLC (the “Manager”), and the sub-advisory agreement (the “Sub-Advisory Agreement”) with the
Manager’s affiliate, Western Asset Management Company, LLC (“Western Asset”). At a meeting (the “Contract Renewal Meeting”) held in-person on November 13 and 14, 2019, 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 a
variety of information (together with the information provided at the Contract Renewal Meeting, the “Contract Renewal Information”) about the Manager and Western Asset, 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 “Legg Mason Closed-end Funds”), certain portions of which are discussed below. A presentation made by the Manager and Western Asset 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 Legg Mason 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 Western Asset to the Fund. The Board’s evaluation took into account the information
received throughout the year and also reflected the knowledge and familiarity gained as members of the Boards of the Fund and other Legg Mason Closed-end Funds with respect to the services provided to the Fund
by the Manager and Western Asset.
At a meeting held by conference call on October 10, 2019, 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 concerning the Legg Mason Closed-end Funds, including the Fund, received to
date. No representatives of the Manager or Western Asset participated in this 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 Western Asset provides the Fund with certain 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 Western Asset.
|
|
|
|
|
32
|
|
Western Asset Corporate Loan Fund Inc.
|
Board Approval of Management Agreement and Sub-Advisory
Agreement
In its deliberations regarding the renewal of each of the Management Agreement and the
Sub-Advisory Agreement, the Board, including the Independent Directors, considered various factors, including those described below.
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 Western
Asset under the Management Agreement and the Sub-Advisory Agreement, respectively, during the past year. The Board also reviewed Contract Renewal Information regarding the Fund’s compliance policies and
procedures established pursuant to the 1940 Act.
The Board reviewed the qualifications, backgrounds and responsibilities of the Fund’s senior
personnel and the 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 Contract Renewal Information and the Board’s discussions with the Manager and Western Asset at the Contract Renewal Meeting, the general reputation and investment performance records of the Manager,
Western Asset, and their affiliates and the financial resources available to the corporate parent of the Manager and Western Asset, Legg Mason, Inc. (“Legg Mason”), to support their activities in respect of the Fund and the other Legg
Mason Closed-end Funds.
The Board considered the responsibilities of the Manager and Western Asset 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 Western Asset 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. Pursuant
to this provision of the Management Agreement, the Manager does not provide day-to-day portfolio management services to the Fund. Rather, portfolio management services
for the Fund are provided by Western Asset pursuant to the Sub-Advisory Agreement between the Manager and Western Asset.
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, likely purchased their shares of the Fund based upon the reputation and the investment style, philosophy and strategy of the Manager and Western Asset, as well as the resources available to the Manager
and Western Asset.
|
|
|
|
|
Western Asset Corporate Loan Fund Inc.
|
|
33
|
Board approval of management and subadvisory agreements (unaudited) (cont’d)
The Board concluded that, overall, the nature, extent, and quality of the management and other services provided to the Fund under the Management Agreement and the Sub-Advisory Agreement have been satisfactory under the circumstances.
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 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. The Performance Universe included the Fund and all leveraged closed-end loan participation funds, as classified by Broadridge, regardless of asset size. The Performance Universe consisted of thirty-eight funds, including the Fund, for the
1-year period ended June 30, 2019 and thirty-two funds, including the Fund, for each of the 3- and 5-year periods ended on such date. The Board noted that it had received and discussed with the Manager and Western Asset information throughout the year at periodic intervals comparing the Fund’s performance
against its benchmark and its peer funds as selected by Broadridge.
The Broadridge Performance Information comparing the Fund’s performance to that
of the Performance Universe based on net asset value per share showed, among other things, that among the funds in the Performance Universe the Fund’s performance was ranked in the third quintile for the
1-year period ended June 30, 2019. In these performance rankings, the first quintile represents funds with the best performance among the funds in the Performance Universe and the fifth quintile
represents funds with the poorest performance among the funds in the Performance Universe. The Fund’s performance was ranked in the fourth quintile of the funds in the Performance Universe for each of the
3- and 5-year periods ended June 30, 2019. The Fund’s performance was below the Performance Universe median for each of the
3- and 5-year periods ended June 30, 2019, but its performance was above the Performance Universe median for the 1-year
period ended on such date. In addition to the Fund’s performance relative to the Performance Universe, the Board considered the Fund’s performance in absolute terms and the Fund’s performance relative to its benchmark. On a net asset
value basis, the Fund underperformed its benchmark for each of the 1- and 5- year periods ended June 30, 2019 but outperformed its benchmark for the 3-year period ended on such date.
Based on the reviews and discussions of Fund performance and considering other
relevant factors, including an agreement by the Manager at the Contract Renewal Meeting to continue the current voluntary management fee waiver of 0.05% through November 30,
|
|
|
|
|
34
|
|
Western Asset Corporate Loan Fund Inc.
|
2020 (the “Fee Waiver”) and other factors 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 management fee (the “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 Western Asset 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 Western Asset. The Board noted that the Sub-Advisory Fee payable to Western Asset
under the Sub-Advisory Agreement is paid by the Manager, not the Fund, and accordingly, that the retention of Western Asset does not increase the fees or expenses otherwise incurred by the Fund’s
stockholders.
Additionally, the Board received and considered information and analyses prepared by Broadridge (the “Broadridge Expense
Information”) comparing the Management Fee and the Fund’s overall expenses with those of funds in an expense group (the “Expense Group”) selected and provided by Broadridge. The comparison was based upon the constituent
funds’ latest fiscal years. The Expense Group consisted of the Fund and seven other leveraged closed-end loan participation funds, as classified by Broadridge. The eight funds in the Expense Group had
average net common share assets ranging from the Fund’s $112.8 million to $340.9 million.
The Broadridge Expense Information, comparing
the Management Fee as well as the Fund’s actual total expenses to the Fund’s Expense Group, showed, among other things, that the Management Fee on a contractual basis was ranked fourth (first being lowest and, therefore, best in these
expense component rankings) among the eight funds in the Expense Group. The Management Fee on an actual basis (i.e., giving effect to any voluntary fee waivers implemented by the Manager with respect to the Fund and by the managers of the other
Expense Group funds) was ranked third among the funds in the Expense Group whether compared on the basis of common share assets only or on the basis of common share and leveraged assets. The Broadridge Expense Information further showed that the
Fund’s actual total expenses ranked second among the Expense Group funds whether compared on the basis of common share assets only or on the basis of common share and leveraged assets. Each of the Fund’s expense components was below the
Expense Group median for that expense component. The Board noted that the expense component comparisons reflected the impact of the Fee Waiver. The Board also noted that the small number of funds in the Expense Group made meaningful expense
comparisons difficult.
The Board also reviewed Contract Renewal Information regarding fees charged by the Manager to other U.S. clients investing
primarily in an asset class similar to that of the
|
|
|
|
|
Western Asset Corporate Loan Fund Inc.
|
|
35
|
Board approval of management and subadvisory agreements (unaudited) (cont’d)
Fund, including, where applicable, institutional and separate accounts. The Board was advised that the fees paid by such institutional, separate account and other
clients (collectively, “institutional clients”) generally are lower, and may be significantly lower, than the Management Fee. The Contract Renewal Information generally attributed the fee differential to differences in the scope of
services provided to the Fund and to institutional clients. Among other things, institutional clients have fewer compliance, administration and other needs than the Fund and 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. The Contract Renewal Information noted further that the Fund is provided with administrative services, office facilities, Fund officers (including the
Fund’s chief executive, chief financial and chief compliance officers), and that the Manager coordinates and oversees the provision of services to the Fund by other fund service providers. The Contract Renewal Information included information
regarding management fees paid by open-end mutual funds in the same complex (the “Legg Mason Open-end Funds”) and such information indicated that the
management fees paid by the Legg Mason Closed-end Funds generally were higher than those paid by the Legg Mason Open-end Funds. The Contract Renewal Information noted
that the Legg Mason Closed-end Funds typically incur expenses that usually are not incurred by the Legg Mason Open-end Funds such as those related to the annual
stockholder meeting, compliance with securities exchange listing requirements and the management and monitoring of leverage. The Board considered the fee comparisons in view of the different services provided in managing these other types of clients
and funds.
Taking all of the above into consideration, 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 Western Asset to the Fund under the
Management Agreement and the Sub-Advisory Agreement, respectively.
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 March 31, 2018 and March 31, 2019. The Board also received profitability information with respect to the Legg Mason 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. The profitability to Western Asset was not considered to be a material factor in the Board’s
considerations since Western Asset’s Sub-Advisory Fee is paid by the Manager, not the Fund. The profitability analysis presented to the Board as part of the Contract Renewal Information indicated that the
pre-tax profitability of the Fund to the Manager had decreased in fiscal year 2019 from the level in fiscal year 2018 and remained at a level that
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36
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Western Asset Corporate Loan Fund Inc.
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the Board did not consider to be excessive in view of judicial guidance and the nature, extent and overall quality of the investment advisory and other services provided to the Fund. The Board
noted that the Fee Waiver would serve to reduce the Fund’s profitability to the Manager while in effect.
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 with no current plans to seek additional assets beyond maintaining its dividend reinvestment plan, any significant growth in its assets
generally will occur through appreciation in the value of the Fund’s investment portfolio, rather than sales of additional shares in the Fund. The Board determined that the Management Fee structure, which incorporates no breakpoints reducing
the Management Fee at specified increased asset levels, was appropriate under the circumstances.
Other Benefits to the Manager and
Western Asset
The Board considered other benefits received by the Manager, Western Asset, and their affiliates as a result of their relationship
with the Fund and did not regard such benefits as excessive.
* * * * * *
In view of all of the foregoing and other relevant factors, the Board determined, under the circumstances, that continuation of the Management Agreement and the Sub-Advisory
Agreement would be consistent with the interests of the Fund and its stockholders and unanimously voted to continue each Agreement for an additional one-year period. No single factor reviewed by the Board was
identified by the Board as the principal factor in determining whether to approve continuation of the Management Agreement and the Sub-Advisory Agreement, and each Board member may have attributed different
weights to the various factors. The Independent Directors were advised by separate independent legal counsel throughout the process. Prior to the Contract Renewal Meeting, the Board received a memorandum prepared by the Manager discussing its
responsibilities in connection with its consideration of the continuation of the Management Agreement and the Sub-Advisory Agreement as part of the Contract Renewal Information and the Independent Directors
separately received a memorandum discussing such responsibilities from their independent legal counsel. Prior to voting, the Independent Directors also discussed the proposed continuation of the Management Agreement and the Sub-Advisory Agreement in private sessions with their independent legal counsel at which no representatives of the Manager or Western Asset were present.
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Western Asset Corporate Loan Fund Inc.
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37
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Additional shareholder information (unaudited)
Results of annual meeting of shareholders
The Annual Meeting of Shareholders of Western Asset Corporate Loan Fund Inc. was held on March 20, 2020 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
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Nominees
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For
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Against
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Abstain
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Daniel P. Cronin*
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3,334,103
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252,945
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69,535
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Eileen A. Kamerick*
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3,320,550
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268,636
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67,397
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Nisha Kumar*
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3,310,067
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280,616
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65,900
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Phillip Goldstein**
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2,857,282
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0
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485,297
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Andrew Dakos**
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2,857,282
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0
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485,297
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Rajeev Das**
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2,855,571
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0
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487,008
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*
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Board of Directors nominee
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**
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Bulldog Investors, LLC nominee
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At
March 31, 2020, in addition to Daniel P. Cronin, Eileen A. Kamerick and Nisha Kumar, the other Directors of the Fund were as follows:
Robert D.
Agdern
Carol L.Colman
Paolo M. Cucchi
William R. Hutchinson
Jane Trust
Ratification of Selection of Independent Registered Public Accountants
To ratify the selection of PricewaterhouseCoopers LLP (“PwC”) as independent registered public accountants of the Fund for the fiscal year ended September 30, 2020.
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For
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Against
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Abstain
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6,377,650
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87,586
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533,926
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Non-Binding Proposal regarding an Amendment to the Bylaws
A non-binding proposal put forth by an activist investment firm managed by Bulldog Investors, LLC, regarding an amendment to
the bylaws.
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For
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Against
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Abstain
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5,311,273
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1,134,562
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553,327
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38
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Western Asset Corporate Loan Fund Inc.
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Dividend reinvestment plan (unaudited)
Unless you elect to receive distributions in cash (i.e., opt-out), all dividends, including any capital gain dividends and
return of capital distributions, on your Common Stock will be automatically reinvested by Computershare Trust Company, N.A., as agent for the stockholders (the “Plan Agent”), in additional shares of Common Stock under the 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 462 South 4th Street, Suite 1600, Louisville, KY 40202 or by calling the Plan Agent at 1-888-888-0151. Such withdrawal will be effective immediately if notice is received by the Plan Agent not less than ten business days prior to any dividend or distribution record date; otherwise such
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.
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Western Asset Corporate Loan Fund Inc.
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39
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Dividend reinvestment plan
(unaudited) (cont’d)
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 462 South 4th Street, Suite 1600, Louisville, KY 40202 or by calling the Plan Agent at
1-888-888-0151.
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40
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Western Asset Corporate Loan Fund Inc.
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Western Asset
Corporate Loan Fund Inc.
Directors
Robert D. Agdern
Carol L. Colman
Daniel P. Cronin
Paolo M. Cucchi
William R. Hutchinson
Eileen A. Kamerick
Nisha Kumar
Jane Trust
Chairman
Officers
Jane Trust
President and Chief Executive Officer
Christopher Berarducci
Treasurer and Principal Financial Officer
Fred Jensen*
Chief Compliance Officer
Jenna Bailey
Identity Theft Prevention Officer
Robert I.
Frenkel
Secretary and Chief Legal Officer
Thomas
C. Mandia
Assistant Secretary
Jeanne M. Kelly
Senior Vice President
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*
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Effective April 17, 2020, Mr. Jensen became Chief Compliance Officer.
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Western Asset Corporate Loan Fund Inc.
620 Eighth Avenue
49th Floor
New York, NY 10018
Investment manager
Legg Mason Partners Fund Advisor, LLC
Subadviser
Western Asset Management Company, LLC
Custodian
The Bank of New York Mellon
Transfer agent
Computershare Inc.
462 South 4th Street, Suite 1600
Louisville, KY 40202
Independent registered public accounting firm
PricewaterhouseCoopers LLP
Baltimore, MD
Legal counsel
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, NY 10017
New York Stock Exchange Symbol
TLI
Legg Mason Funds Privacy and Security Notice
Your Privacy and the Security of Your Personal Information is Very Important to the Legg Mason Funds
This Privacy and Security Notice (the “Privacy Notice”) addresses the Legg Mason Funds’ privacy and data protection practices with respect to
nonpublic personal information the Funds receive. The Legg Mason Funds include any funds sold by the Funds’ distributor, Legg Mason Investor Services, LLC, as well as Legg Mason-sponsored closed-end
funds. The provisions of this Privacy Notice apply to your information both while you are a shareholder and after you are no longer invested with the Funds.
The Type of Nonpublic Personal Information the Funds Collect About You
The Funds collect and
maintain nonpublic personal information about you in connection with your shareholder account. Such information may include, but is not limited to:
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Personal information included on applications or other forms;
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Account balances, transactions, and mutual fund holdings and positions;
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Bank account information, legal documents, and identity verification documentation;
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Online account access user IDs, passwords, security challenge question responses; and
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Information received from consumer reporting agencies regarding credit history and creditworthiness (such as the amount of an individual’s total debt,
payment history, etc.).
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How the Funds Use Nonpublic Personal Information About You
The Funds do not sell or share your nonpublic personal information with third parties or with affiliates for their marketing purposes, or with other financial
institutions or affiliates for joint marketing purposes, unless you have authorized the Funds to do so. The Funds do not disclose any nonpublic personal information about you except as may be required to perform transactions or services you have
authorized or as permitted or required by law. The Funds may disclose information about you to:
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Employees, agents, and affiliates on a “need to know” basis to enable the Funds to conduct ordinary business or to comply with obligations to
government regulators;
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Service providers, including the Funds’ affiliates, who assist the Funds as part of the ordinary course of business (such as printing, mailing services, or
processing or servicing your account with us) or otherwise perform services on the Funds’ behalf, including companies that may perform statistical analysis, market research and marketing services solely for the Funds;
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Permit access to transfer, whether in the United States or countries outside of the United States to such Funds’ employees, agents and affiliates and
service providers as required to enable the Funds to conduct ordinary business, or to comply with obligations to government regulators;
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The Funds’ representatives such as legal counsel, accountants and auditors to enable the Funds to conduct ordinary business, or to comply with obligations
to government regulators;
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Fiduciaries or representatives acting on your behalf, such as an IRA custodian or trustee of a grantor trust.
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NOT PART OF THE
SEMI-ANNUAL REPORT
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Legg Mason Funds Privacy and Security Notice (cont’d)
Except as otherwise permitted by applicable law, companies acting on the Funds’
behalf, including those outside the United States, are contractually obligated to keep nonpublic personal information the Funds provide to them confidential and to use the information the Funds share only to provide the services the Funds ask them
to perform.
The Funds may disclose nonpublic personal information about you when necessary to enforce their rights or protect against fraud, or as
permitted or required by applicable law, such as in connection with a law enforcement or regulatory request, subpoena, or similar legal process. In the event of a corporate action or in the event a Fund service provider changes, the Funds may be
required to disclose your nonpublic personal information to third parties. While it is the Funds’ practice to obtain protections for disclosed information in these types of transactions, the Funds cannot guarantee their privacy policy will
remain unchanged.
Keeping You Informed of the Funds’ Privacy and Security Practices
The Funds will notify you annually of their privacy policy as required by federal law. While the Funds reserve the right to modify this policy at any time they
will notify you promptly if this privacy policy changes.
The Funds’ Security Practices
The Funds maintain appropriate physical, electronic and procedural safeguards designed to guard your nonpublic personal information. The Funds’ internal data
security policies restrict access to your nonpublic personal information to authorized employees, who may use your nonpublic personal information for Fund business purposes only.
Although the Funds strive to protect your nonpublic personal information, they cannot ensure or warrant the security of any information you provide or transmit to them, and you do so at your own risk. In the event
of a breach of the confidentiality or security of your nonpublic personal information, the Funds will attempt to notify you as necessary so you can take appropriate protective steps. If you have consented to the Funds using electronic communications
or electronic delivery of statements, they may notify you under such circumstances using the most current email address you have on record with them.
In
order for the Funds to provide effective service to you, keeping your account information accurate is very important. If you believe that your account information is incomplete, not accurate or not current, if you have questions about the
Funds’ privacy practices, or our use of your nonpublic personal information, write the Funds using the contact information on your account statements, email the Funds by clicking on the Contact Us section of the Funds’ website at
www.leggmason.com, or contact the Funds at 1-888-777-0102.
Revised April 2018
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NOT PART OF THE
SEMI-ANNUAL REPORT
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Western Asset Corporate Loan Fund Inc.
Western Asset Corporate Loan Fund Inc.
620 Eighth Avenue
49th Floor
New York, NY 10018
Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940, as amended, that from time to time the Fund may purchase, at market prices, shares of its stock.
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each
fiscal year as an exhibit to its reports on Form N-PORT. The 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.lmcef.com and (3) on the SEC’s website at www.sec.gov.
This report is transmitted to the shareholders of Western Asset Corporate Loan Fund Inc. for their information. This is not a prospectus, circular or representation intended for use in the purchase of shares of the
Fund or any securities mentioned in this report.
Computershare Inc.
462 South 4th Street, Suite 1600
Louisville, KY 40202
FD01642 5/20 SR20-3878