UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED
SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number
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811-21467
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LMP Capital and Income Fund Inc.
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(Exact name of registrant as
specified in charter)
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55 Water Street, New York, NY
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10041
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(Address of principal executive
offices)
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(Zip code)
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Robert I. Frenkel, Esq.
Legg Mason & Co., LLC
100 First Stamford Place
Stamford, CT 06902
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(Name and address of agent for
service)
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Registrants telephone number, including
area code:
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(888)777-0102
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Date of fiscal year end:
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December 31
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Date of reporting period:
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June 30,
2010
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ITEM
1. REPORT TO STOCKHOLDERS.
The
Semi-Annual
Report to Stockholders
is filed herewith.
June 30,
2010
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Semi-Annual
Report
LMP Capital
and Income Fund Inc.
(SCD)
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INVESTMENT PRODUCTS: NOT
FDIC INSURED
·
NO BANK
GUARANTEE
·
MAY LOSE VALUE
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II
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LMP
Capital and Income Fund Inc.
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Fund
objective
The
Funds investment objective is total return with an emphasis on income.
Whats inside
Letter
from the chairman
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II
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Investment
commentary
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III
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Fund
at a glance
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1
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Schedule
of investments
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2
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Statement
of assets and liabilities
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11
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Statement
of operations
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12
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Statements
of changes in net assets
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13
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Statement
of cash flows
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14
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Financial
highlights
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15
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Notes
to financial statements
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16
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Additional
shareholder information
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25
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Dividend
reinvestment plan
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26
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Letter
from the chairman
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Dear
Shareholder,
We
are pleased to provide the semi-annual report of LMP Capital and Income Fund
Inc. for the six-month reporting period ended June 30, 2010.
Please
read on for Fund performance information and a detailed look at prevailing
economic and market conditions during the Funds reporting period. Important
information with regard to recent regulatory developments that may affect the
Fund is contained in the Notes to Financial Statements included in this report.
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.leggmason.com/cef. 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,
R.
Jay Gerken, CFA
Chairman,
President and Chief Executive Officer
July 30,
2010
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LMP Capital and Income Fund Inc.
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III
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Investment
commentary
Economic
review
While
the overall U.S. economy continued to expand over the six months ended June 30,
2010, several economic data points weakened toward the end of the reporting
period. This, in combination with sovereign debt woes in Europe, caused investor
sentiment to turn negative and had significant implications for the financial
markets.
Looking
back, the U.S. Department of Commerce reported that U.S. gross domestic product
(GDP)
i
contracted four consecutive quarters,
beginning in the third quarter of 2008 through the second quarter of 2009.
Economic conditions then began to improve in the third quarter of 2009, as GDP
growth was 1.6%. A variety of factors helped the economy to regain its footing,
including the governments $787 billion stimulus program. Economic growth then
accelerated during the fourth quarter of 2009, as GDP growth was 5.0%. A slower
drawdown in business inventories and renewed consumer spending were
contributing factors spurring the economys higher growth rate. While the recovery
continued during the first half of 2010, it did so at a more modest pace, as
GDP growth was 3.7% during the first quarter of 2010 and an estimated 2.4%
during the second quarter. The slower pace of growth in the second quarter was
due, in part, to slower consumer spending, which rose an annualized 1.6% during
the quarter, versus a 1.9% gain over the first three months of the year.
Even
before GDP growth turned positive, there were signs that the economy was on the
mend. The manufacturing sector, as measured by the Institute for Supply
Managements PMI
ii
, rose to 52.8
in August 2009, the first time it surpassed 50 since January 2008 (a
reading below 50 indicates a contraction, whereas a reading above 50 indicates
an expansion). While June 2010s PMI reading of 56.2 was lower than Mays
reading of 59.7, manufacturing has now expanded eleven consecutive months
according to PMI data. The manufacturing sectors growth remained fairly
broad-based with thirteen of the eighteen industries tracked by the Institute
for Supply Management expanding during June.
After
experiencing sharp job losses in 2009, the U.S. Department of Labor reported
that over one million new positions were added during the first five months of
2010. Included in that total, however, were 700,000 temporary government jobs
tied to the 2010 Census. In June, 225,000 of these temporary positions were
eliminated, offsetting private sector growth and resulting in a net loss of
125,000 jobs for the month. However, the unemployment rate fell to 9.5% in
June, versus 9.7% and 9.9% in May and April, respectively.
There
was mixed news in the housing market during the period. According to the
National Association of Realtors, existing home sales increased 7.0% and 8.0%
in March and April, respectively, after sales had fallen for the period
from December 2009 through February 2010. The rebound was largely
attributed to people rushing to take advantage of the governments $8,000 tax
credit for first-time home buyers that expired at the end of April. However,
with the end of the tax credit, existing home sales then declined 2.2% and 5.1%
in May and June, respectively. In addition, the inventory of unsold homes
increased 2.5% to 3.99 million in June. Looking at home prices, the
S&P/Case-Shiller Home Price Index
iii
indicated that month-to-month U.S. home prices
rose 1.3% in May. This marked the second straight monthly increase following
six consecutive months of declining prices.
Financial
market overview
During
the first half of the reporting period, the financial markets were largely
characterized by healthy investor risk appetite and solid results by the stock
market and the fixed-income spread sectors (non-Treasuries). However, the
market experienced a sharp sell-off during the second half of the reporting period,
during which risk aversion returned and investors flocked to the relative
safety of U.S. Treasury securities.
Given
certain pockets of weakness in the economy, including elevated unemployment in
the U.S., the Federal Reserve Board (Fed)
iv
remained
cautious. At its meeting in June 2010, the Fed said it will maintain the
target range for the federal funds rate
v
at 0 to 1/4
percent and continues to anticipate that economic conditions, including low
rates of resource utilization, subdued inflation trends, and stable inflation
expectations, are likely to warrant exceptionally low levels of the federal
funds rate for an extended period.
However,
the Fed took several steps in reversing its accommodative monetary stance. On February 18,
2010, the Fed raised the discount rate, the interest rate it charges banks for
temporary loans, from 1/2 to 3/4 percent. The Fed also concluded its $1.25
trillion mortgage securities
IV
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LMP
Capital and Income Fund Inc.
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Investment
commentary (contd)
purchase
program at the end of the first quarter of 2010. However, the Fed left the door
open for future stimulus measures if needed. In the minutes of its June meeting
that were released on July 14
th
(after the
reporting period ended), the Fed said, In addition to continuing to develop
and test instruments to exit from the period of unusually accommodative
monetary policy, the Committee would need to consider whether further policy
stimulus might become appropriate if the outlook were to worsen appreciably.
Equity
market review
After
a solid start, the equity market, as measured by the S&P 500 Index
vi
(the Index), fell sharply in May and
June. This sell-off dragged the Index down into negative territory for the six
months ended June 30, 2010. Looking back, after a brief setback in January 2010,
the Index rose during the next three months of 2010 advancing a total of
11.05%. There were a number of factors contributing to the stock markets
ascent, including improving economic conditions, rising corporate profits and
strong investor demand.
However,
robust investor appetite was replaced with heightened risk aversion in May and
June. This was due to the escalating sovereign debt crisis in Europe,
uncertainties regarding new financial reforms in the U.S. and some
worse-than-expected economic data. After reaching a nineteen-month high on April 23,
2010, the market fell into correction territory in May, as it plunged more
than 10%. This marked the first correction since November 2007. All told,
the Index returned -6.65% over the six months ended June 30, 2010. While
the Index on June 30, 2010 was more than 50% higher than its twelve-year
low on March 9, 2009, it declined approximately 15% from its high on April 23,
2010.
Fixed-income
market review
Continuing
the trend that began in the second quarter of 2009, nearly every spread sector
outperformed equal-duration
vii
Treasuries during the first half
of the reporting period. Over that time, investor confidence was high given the
encouraging economic backdrop, continued low interest rates and benign
inflation. However, a flight to quality occurred toward the end of April and
during the month of May. This was due to the situation in Europe, pending
financial regulations and pockets of weakness in the economy. Most spread
sectors then produced positive absolute returns in June, as investor demand for
these securities began to again increase.
Both
short- and long-term Treasury yields fluctuated during the period but generally
moved lower. When the period began, two- and ten-year Treasury yields were
1.14% and 3.85%, respectively. Two- and ten-year Treasury yields initially
rose, reaching as high as 1.18% and 4.01%, respectively, in early April. Yields
then largely declined amid the investor flight to quality. On June 30,
2010, two- and ten-year Treasury yields reached their lows for the reporting
period: 0.61% and 2.97%, respectively. Over the six-month reporting period, the
yield curve
viii
flattened, with longer-term Treasury yields
declining more than their shorter-term counterparts.
For
the six months ended June 30, 2010, the Barclays Capital U.S. Aggregate
Index
ix
returned 5.33%. In contrast, the high-yield
bond market, as measured by the Barclays Capital U.S. High Yield 2% Issuer
Cap Index
x
, returned
4.45%, and emerging market debt, as measured by the JPMorgan Emerging Markets
Bond Index Global (EMBI Global)
xi
, returned 5.37% over the same time frame.
Performance
review
For
the six months ended June 30, 2010, LMP Capital and Income Fund Inc.
returned -4.06% based on its net asset value (NAV)
xii
and
-5.06% based on its New York Stock Exchange (NYSE) market price per share.
The Funds unmanaged benchmarks, the Barclays Capital U.S. Aggregate Index and
the S&P 500 Index, returned 5.33% and -6.65%, respectively, over the same
time frame. The Lipper Income and Preferred Stock Closed-End Funds Category
Average
xiii
returned 2.91% for the same period. Please
note that Lipper performance returns are based on each funds NAV.
During
this six-month period, the Fund made distributions to shareholders totaling
$0.26 per share, which may have included a return of capital. The performance
table on the next page shows the Funds six-month total return based on
its NAV and market price as of June 30, 2010.
Past performance is no guarantee of future results.
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LMP Capital and Income Fund Inc.
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V
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Performance Snapshot
as of June 30, 2010
(unaudited)
Price Per Share
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6-Month
Total Return*
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$11.69 (NAV)
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-4.06%
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$9.59 (Market Price)
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-5.06%
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All figures represent past performance and are not a
guarantee of future results.
* Total returns are based on changes in NAV or market price,
respectively. Total returns assume the reinvestment of all distributions,
including returns of capital, if any, in additional shares. Performance figures
for periods shorter than one year represent cumulative figures and are not
annualized.
Looking
for additional information?
The
Fund is traded under the symbol SCD and its closing market price is available
in most newspapers under the NYSE listings. The daily NAV is available on-line
under the symbol XSCDX on most financial websites.
Barrons
and the
Wall
Street Journals
Monday edition both carry closed-end fund tables
that provide additional information. In addition, the Fund issues a quarterly
press release that can be found on most major financial websites as well as
www.leggmason.com/cef.
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 Funds current NAV, market price and
other information.
As
always, thank you for your confidence in our stewardship of your assets.
Sincerely,
R.
Jay Gerken, CFA
Chairman,
President and Chief Executive Officer
July 30,
2010
RISKS:
Stock and
bond prices are subject to fluctuation. As interests rates rise, bond prices
fall, reducing the value of the fixed-income securities held by the Fund.
Investing in foreign securities is subject to certain risks not associated with
domestic investing, such as currency fluctuations and changes in political and
economic conditions. These risks are magnified in emerging or developing
markets. High-yield bonds involve greater credit and liquidity risks than
investment grade bonds. The Fund may use derivatives, such as options and
futures, which can be illiquid, may disproportionately increase losses, and
have a potentially large impact on Fund performance. Leverage may magnify gains
and increase losses in the Funds portfolio.
All
investments are subject to risk including the possible loss of principal. All
index performance reflects no deduction for fees, expenses or taxes. Please
note that an investor cannot invest directly in an index.
The
information provided is not intended to be a forecast of future events, a
guarantee of future results or investment advice. Views expressed may differ
from those of the firm as a whole.
i
Gross domestic
product (GDP) is the market value of all final goods and services produced
within a country in a given period of time.
ii
The Institute
for Supply Managements PMI is based on a survey of purchasing executives who
buy the raw materials for manufacturing at more than 350 companies. It offers
an early reading on the health of the manufacturing sector.
iii
The
S&P/Case-Shiller Home Price Index measures the residential housing market,
tracking changes in the value of the residential real estate market in twenty
metropolitan regions across the United States.
iv
The Federal
Reserve Board (Fed) is responsible for the formulation of policies designed
to promote economic growth, full employment, stable prices and a sustainable
pattern of international trade and payments.
v
The federal
funds rate is the rate charged by one depository institution on an overnight
sale of immediately available funds (balances at the Federal Reserve) to
another depository institution; the rate may vary from depository institution
to depository institution and from day to day.
vi
The S&P 500
Index is an unmanaged index of 500 stocks and is generally representative of
the performance of larger companies in the U.S.
vii
Duration is the
measure of the price sensitivity of a fixed-income security to an interest rate
change of 100 basis points. Calculation is based on the weighted average of the
present values for all cash flows.
viii
The yield curve
is the graphical depiction of the relationship between the yield on bonds of
the same credit quality but different maturities.
ix
The Barclays
Capital U.S. Aggregate Index is a broad-based bond index comprised of
government, corporate, mortgage- and asset-backed issues, rated investment
grade or higher, and having at least one year to maturity.
x
The Barclays
Capital U.S. High Yield 2% Issuer Cap Index is an index of the 2% Issuer Cap
component of the Barclays Capital U.S. Corporate High Yield Index, which covers
the U.S. dollar-denominated, non-investment grade, fixed-rate, taxable
corporate bond market.
xi
The JPMorgan
Emerging Markets Bond Index Global (EMBI Global) tracks total returns for
U.S. dollar-denominated debt instruments issued by emerging market sovereign
and quasi-sovereign entities: Brady bonds, loans, Eurobonds and local market
instruments.
xii
Net asset value
(NAV) is calculated by subtracting total liabilities and outstanding
preferred stock (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 Funds
market price as determined by supply of and demand for the Funds shares.
xiii
Lipper, Inc.,
a wholly-owned subsidiary of Reuters, provides independent insight on global
collective investments. Returns are based on the six-month period ended June 30,
2010, including the reinvestment of all distributions, including returns of
capital, if any, calculated among the 25 funds in the Funds Lipper category.
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LMP Capital and Income Fund Inc. 2010 Semi-Annual
Report
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1
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Fund at
a glance
(unaudited)
Investment breakdown
(%) as a percent of total
investments
The bar graph above
represents the composition of the Funds investments as of June 30, 2010
and December 31, 2009. The Fund is actively managed. As a result, the
composition of the Funds investments is subject to change at any time.
2
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LMP Capital and Income
Fund Inc. 2010 Semi-Annual Report
|
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Schedule
of investments (unaudited)
June 30,
2010
LMP Capital and Income Fund Inc.
Security
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Shares
|
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Value
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Common Stocks 72.6%
|
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|
|
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Consumer Discretionary 7.0%
|
|
|
|
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Hotels,
Restaurants & Leisure 2.7%
|
|
|
|
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McDonalds Corp.
|
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171,380
|
|
$
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11,288,800
|
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Media 3.0%
|
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|
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Charter Communications Inc.
|
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11,990
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423,247
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(a)
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Reed Elsevier PLC
|
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650,000
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4,798,502
|
(a)
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Thomson Corp.
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200,000
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7,166,000
|
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Total Media
|
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12,387,749
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Specialty
Retail 1.3%
|
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Home Depot Inc.
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197,210
|
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5,535,685
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Total Consumer Discretionary
|
|
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29,212,234
|
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Consumer Staples 14.4%
|
|
|
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Beverages
1.7%
|
|
|
|
|
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PepsiCo Inc.
|
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115,360
|
|
7,031,192
|
|
Food &
Staples Retailing 1.8%
|
|
|
|
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Wal-Mart Stores Inc.
|
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155,850
|
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7,491,709
|
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Food Products
4.4%
|
|
|
|
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H.J. Heinz Co.
|
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310,000
|
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13,398,200
|
|
Kraft Foods Inc., Class A Shares
|
|
177,440
|
|
4,968,320
|
|
Total Food
Products
|
|
|
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18,366,520
|
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Household
Products 6.5%
|
|
|
|
|
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Kimberly-Clark Corp.
|
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210,000
|
|
12,732,300
|
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Procter & Gamble Co.
|
|
236,500
|
|
14,185,270
|
|
Total Household
Products
|
|
|
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26,917,570
|
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Total Consumer Staples
|
|
|
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59,806,991
|
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Energy 6.5%
|
|
|
|
|
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Energy
Equipment & Services 0.5%
|
|
|
|
|
|
Diamond Offshore Drilling Inc.
|
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30,000
|
|
1,865,700
|
|
Oil,
Gas & Consumable Fuels 6.0%
|
|
|
|
|
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Exxon Mobil Corp.
|
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120,000
|
|
6,848,400
|
|
Spectra Energy Corp.
|
|
442,820
|
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8,887,397
|
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Total SA, ADR
|
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210,000
|
|
9,374,400
|
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Total Oil,
Gas & Consumable Fuels
|
|
|
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25,110,197
|
|
Total Energy
|
|
|
|
26,975,897
|
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Financials 10.1%
|
|
|
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Capital Markets
0.8%
|
|
|
|
|
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BlackRock Inc., Class A Shares
|
|
22,000
|
|
3,154,800
|
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Insurance
3.8%
|
|
|
|
|
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Chubb Corp.
|
|
124,360
|
|
6,219,244
|
|
Travelers Cos. Inc.
|
|
196,160
|
|
9,660,880
|
|
Total Insurance
|
|
|
|
15,880,124
|
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Real Estate Investment
Trusts (REITs) 3.0%
|
|
|
|
|
|
Annaly Capital Management Inc.
|
|
406,000
|
|
6,962,900
|
|
Chimera Investment Corp.
|
|
1,550,000
|
|
5,595,500
|
|
Total Real
Estate Investment Trusts (REITs)
|
|
|
|
12,558,400
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
|
|
LMP
Capital and Income Fund Inc. 2010 Semi-Annual Report
|
|
3
|
LMP Capital and Income Fund Inc.
Security
|
|
Shares
|
|
Value
|
|
Thrifts &
Mortgage Finance 2.5%
|
|
|
|
|
|
New York Community Bancorp Inc.
|
|
240,000
|
|
$
|
3,664,800
|
|
Peoples United Financial Inc.
|
|
482,230
|
|
6,510,105
|
|
Total
Thrifts & Mortgage Finance
|
|
|
|
10,174,905
|
|
Total Financials
|
|
|
|
41,768,229
|
|
Health Care 5.4%
|
|
|
|
|
|
Pharmaceuticals
5.4%
|
|
|
|
|
|
Bristol-Myers Squibb Co.
|
|
220,000
|
|
5,486,800
|
|
GlaxoSmithKline PLC, ADR
|
|
149,000
|
|
5,067,490
|
|
Johnson & Johnson
|
|
175,000
|
|
10,335,500
|
|
Pfizer Inc.
|
|
100,000
|
|
1,426,000
|
|
Total Health Care
|
|
|
|
22,315,790
|
|
Industrials 9.4%
|
|
|
|
|
|
Aerospace &
Defense 2.3%
|
|
|
|
|
|
Honeywell International Inc.
|
|
50,000
|
|
1,951,500
|
|
Lockheed Martin Corp.
|
|
100,000
|
|
7,450,000
|
|
Total
Aerospace & Defense
|
|
|
|
9,401,500
|
|
Commercial
Services & Supplies 2.6%
|
|
|
|
|
|
Waste Management Inc.
|
|
350,510
|
|
10,967,458
|
|
Industrial
Conglomerates 3.3%
|
|
|
|
|
|
3M Co.
|
|
70,000
|
|
5,529,300
|
|
General Electric Co.
|
|
200,000
|
|
2,884,000
|
|
United Technologies Corp.
|
|
80,000
|
|
5,192,800
|
|
Total
Industrial Conglomerates
|
|
|
|
13,606,100
|
|
Marine 1.2%
|
|
|
|
|
|
Alexander & Baldwin Inc.
|
|
170,071
|
|
5,064,714
|
|
Total Industrials
|
|
|
|
39,039,772
|
|
Information Technology 6.4%
|
|
|
|
|
|
IT Services
3.3%
|
|
|
|
|
|
Automatic Data Processing Inc.
|
|
137,000
|
|
5,515,620
|
|
International Business Machines Corp.
|
|
37,280
|
|
4,603,334
|
|
Paychex Inc.
|
|
138,140
|
|
3,587,496
|
|
Total IT
Services
|
|
|
|
13,706,450
|
|
Semiconductors &
Semiconductor Equipment 2.6%
|
|
|
|
|
|
Intel Corp.
|
|
210,000
|
|
4,084,500
|
|
Microchip Technology Inc.
|
|
140,000
|
|
3,883,600
|
|
Xilinx Inc.
|
|
115,000
|
|
2,904,900
|
|
Total
Semiconductors & Semiconductor Equipment
|
|
|
|
10,873,000
|
|
Software 0.5%
|
|
|
|
|
|
Microsoft Corp.
|
|
94,000
|
|
2,162,940
|
|
Total Information Technology
|
|
|
|
26,742,390
|
|
Materials 2.0%
|
|
|
|
|
|
Chemicals
2.0%
|
|
|
|
|
|
E.I. du Pont de Nemours & Co.
|
|
163,000
|
|
5,638,170
|
|
PPG Industries Inc.
|
|
45,000
|
|
2,718,450
|
|
Total Materials
|
|
|
|
8,356,620
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
4
|
|
LMP Capital and Income
Fund Inc. 2010 Semi-Annual Report
|
|
|
Schedule
of investments (unaudited) (contd)
June 30,
2010
LMP Capital and Income Fund Inc.
Security
|
|
Shares
|
|
Value
|
|
Telecommunication Services 4.3%
|
|
|
|
|
|
Diversified
Telecommunication Services 4.3%
|
|
|
|
|
|
AT&T Inc.
|
|
278,000
|
|
$
|
6,724,820
|
|
Verizon Communications Inc.
|
|
340,000
|
|
9,526,800
|
|
Windstream Corp.
|
|
163,026
|
|
1,721,555
|
|
Total Telecommunication Services
|
|
|
|
17,973,175
|
|
Utilities 7.1%
|
|
|
|
|
|
Electric
Utilities 5.3%
|
|
|
|
|
|
American Electric Power Co. Inc.
|
|
235,000
|
|
7,590,500
|
|
Duke Energy Corp.
|
|
251,870
|
|
4,029,920
|
|
Exelon Corp.
|
|
76,990
|
|
2,923,311
|
|
NextEra Energy Inc.
|
|
82,670
|
|
4,030,989
|
|
Progress Energy Inc.
|
|
90,000
|
|
3,529,800
|
|
Total Electric
Utilities
|
|
|
|
22,104,520
|
|
Multi-Utilities
1.8%
|
|
|
|
|
|
CenterPoint Energy Inc.
|
|
562,000
|
|
7,395,920
|
|
Total Utilities
|
|
|
|
29,500,440
|
|
Total Common Stocks (Cost
$304,602,644)
|
|
|
|
301,691,538
|
|
|
|
|
|
|
|
|
|
|
Rate
|
|
|
|
|
|
|
|
Convertible Preferred Stocks
5.3%
|
|
|
|
|
|
|
|
|
|
Energy 1.9%
|
|
|
|
|
|
|
|
|
|
Oil, Gas and
Consumable Fuels 1.9%
|
|
|
|
|
|
|
|
|
|
El Paso Corp.
|
|
4.990
|
%
|
|
|
8,000
|
|
7,702,000
|
|
Financials 1.6%
|
|
|
|
|
|
|
|
|
|
Diversified
Financial Services 1.6%
|
|
|
|
|
|
|
|
|
|
CalEnergy Capital Trust III
|
|
6.500
|
%
|
|
|
150,000
|
|
6,787,500
|
|
Utilities 1.8%
|
|
|
|
|
|
|
|
|
|
Electric
Utilities 1.8%
|
|
|
|
|
|
|
|
|
|
Great Plains Energy Inc.
|
|
12.000
|
%
|
|
|
65,370
|
|
3,905,857
|
|
NextEra Energy Inc.
|
|
8.375
|
%
|
|
|
71,160
|
|
3,511,746
|
|
Total Utilities
|
|
|
|
|
|
|
|
7,417,603
|
|
Total Convertible Preferred
Stocks (Cost $20,975,621)
|
|
|
|
|
|
|
|
21,907,103
|
|
Preferred Stocks 0.0%
|
|
|
|
|
|
|
|
|
|
Financials 0.0%
|
|
|
|
|
|
|
|
|
|
Thrifts &
Mortgage Finance 0.0%
|
|
|
|
|
|
|
|
|
|
Federal Home Loan Mortgage Corp. (FHLMC)
|
|
8.375
|
%
|
|
|
25,950
|
|
8,823
|
*
|
Federal National Mortgage Association (FNMA)
|
|
7.000
|
%
|
|
|
300
|
|
180
|
*
|
Federal National Mortgage Association (FNMA)
|
|
8.250
|
%
|
|
|
17,650
|
|
6,001
|
*
|
Total Preferred Stocks (Cost
$1,105,960)
|
|
|
|
|
|
|
|
15,004
|
|
|
|
|
|
Maturity
Date
|
|
Face
Amount
|
|
|
|
Asset-Backed Securities 0.9%
|
|
|
|
|
|
|
|
|
|
Financials 0.9%
|
|
|
|
|
|
|
|
|
|
Home Equity
0.8%
|
|
|
|
|
|
|
|
|
|
Asset-Backed Funding Certificates, 2004-FF1 M2
|
|
2.522
|
%
|
1/25/34
|
|
$
|
289,958
|
|
131,032
|
(b)
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
|
|
LMP
Capital and Income Fund Inc. 2010 Semi-Annual Report
|
|
5
|
LMP Capital and Income Fund Inc.
Security
|
|
Rate
|
|
Maturity
Date
|
|
Face
Amount
|
|
Value
|
|
Home Equity
continued
|
|
|
|
|
|
|
|
|
|
Countrywide Asset-Backed Certificates, 2004-5 M4
|
|
1.597
|
%
|
6/25/34
|
|
$
|
126,653
|
|
$
|
31,694
|
(b)
|
Credit-Based Asset Servicing & Securitization LLC, 2006-CB2
AF4
|
|
5.704
|
%
|
12/25/36
|
|
631,421
|
|
497,058
|
|
Finance America Net Interest Margin Trust, 2004-1
A
|
|
5.250
|
%
|
6/27/34
|
|
73,417
|
|
0
|
(c)(d)(e)
|
Fremont Home Loan Trust, 2004-1 M5
|
|
1.997
|
%
|
2/25/34
|
|
133,077
|
|
50,305
|
(b)
|
GSAA Home Equity Trust, 2007-4 A3A
|
|
0.647
|
%
|
3/25/37
|
|
1,652,755
|
|
865,913
|
(b)
|
GSAA Home Equity Trust, 2007-6 A4
|
|
0.647
|
%
|
5/25/47
|
|
1,720,000
|
|
967,275
|
(b)
|
GSAMP Trust, 2004-OPT M3
|
|
1.497
|
%
|
11/25/34
|
|
249,441
|
|
29,933
|
(a)(b)
|
MASTR Specialized Loan Trust, 2007-2 A
|
|
0.697
|
%
|
5/25/37
|
|
414,578
|
|
281,913
|
(b)(c)
|
RAAC Series, 2007-RP3 A
|
|
0.727
|
%
|
10/25/46
|
|
489,143
|
|
285,074
|
(b)(c)
|
Renaissance Home Equity Loan Trust, 2003-4 M3
|
|
2.247
|
%
|
3/25/34
|
|
389,160
|
|
167,295
|
(b)
|
Sail Net Interest Margin Notes, 2003-BC2A A
|
|
7.750
|
%
|
4/27/33
|
|
141,210
|
|
1
|
(c)(d)(e)
|
Sail Net Interest Margin Notes, 2004-2A A
|
|
5.500
|
%
|
3/27/34
|
|
71,380
|
|
1
|
(c)(d)(e)
|
Structured Asset Securities Corp., 2007-BC4 A3
|
|
0.513
|
%
|
11/25/37
|
|
317,235
|
|
296,283
|
(b)
|
Total Home
Equity
|
|
|
|
|
|
|
|
3,603,777
|
|
Student Loan
0.1%
|
|
|
|
|
|
|
|
|
|
Nelnet Student Loan Trust, 2008-4 A4
|
|
1.796
|
%
|
4/25/24
|
|
350,000
|
|
361,261
|
(b)
|
Total Asset-Backed Securities
(Cost $5,378,842)
|
|
|
|
|
|
|
|
3,965,038
|
|
Collateralized Mortgage
Obligations 1.5%
|
|
|
|
|
|
|
|
|
|
BCAP LLC Trust, 2006-AA1 A1
|
|
0.537
|
%
|
10/25/36
|
|
1,121,821
|
|
596,823
|
(b)
|
Bear Stearns ARM Trust, 2005-12 24A1
|
|
5.599
|
%
|
2/25/36
|
|
115,692
|
|
89,197
|
(b)
|
Countrywide Alternative Loan Trust, 2006-0A9 2A1A
|
|
0.558
|
%
|
7/20/46
|
|
1,335,462
|
|
521,201
|
(b)
|
Federal Home Loan Mortgage Corp. (FHLMC), PAC,
2780 SL
|
|
6.000
|
%
|
4/15/34
|
|
113,577
|
|
114,423
|
(b)
|
Harborview Mortgage Loan Trust, 2005-10 B6
|
|
1.418
|
%
|
11/19/35
|
|
726,284
|
|
2,320
|
(b)
|
JPMorgan Mortgage Trust, 2007-S3 1A74
|
|
6.000
|
%
|
8/25/37
|
|
1,060,000
|
|
807,989
|
|
MASTR ARM Trust, 2003-3 3A4
|
|
2.768
|
%
|
9/25/33
|
|
689,111
|
|
587,597
|
(b)
|
MASTR Reperforming Loan Trust, 2006-2 2A1
|
|
4.044
|
%
|
5/25/36
|
|
1,104,006
|
|
1,001,661
|
(b)(c)
|
Merit Securities Corp., 11PA B2
|
|
1.847
|
%
|
9/28/32
|
|
188,757
|
|
159,743
|
(b)(c)
|
MLCC Mortgage Investors Inc., 2004-A B2
|
|
1.267
|
%
|
4/25/29
|
|
254,756
|
|
96,898
|
(b)
|
MLCC Mortgage Investors Inc., 2004-B B2
|
|
1.227
|
%
|
5/25/29
|
|
406,680
|
|
150,860
|
(b)
|
RBS Greenwich Capital, Mortgage Pass-Through Certificates, 2005-A 5A
|
|
7.000
|
%
|
4/25/35
|
|
881,391
|
|
815,374
|
|
Structured ARM Loan Trust, 2006-4 4A1
|
|
6.108
|
%
|
5/25/36
|
|
710,718
|
|
542,472
|
(b)
|
Thornburg Mortgage Securities Trust, 2007-4 2A1
|
|
6.201
|
%
|
7/25/37
|
|
164,497
|
|
156,987
|
(b)
|
Thornburg Mortgage Securities Trust, 2007-4 3A1
|
|
6.205
|
%
|
7/25/37
|
|
170,768
|
|
166,022
|
(b)
|
Washington Mutual Inc. Pass-Through Certificates,
2006-AR5 4A
|
|
1.431
|
%
|
6/25/46
|
|
619,617
|
|
261,559
|
(b)
|
Wells Fargo Alternative Loan Trust, 2007-PA2 2A1
|
|
0.770
|
%
|
6/25/37
|
|
688,181
|
|
335,200
|
(b)
|
Total Collateralized Mortgage
Obligations (Cost $8,326,694)
|
|
|
|
|
|
|
|
6,406,326
|
|
Convertible Bonds &
Notes 1.4%
|
|
|
|
|
|
|
|
|
|
Information Technology 1.4%
|
|
|
|
|
|
|
|
|
|
Internet
Software & Services 1.4%
|
|
|
|
|
|
|
|
|
|
VeriSign Inc.
(Cost $4,941,805)
|
|
3.250
|
%
|
8/15/37
|
|
6,500,000
|
|
5,906,875
|
|
Corporate Bonds & Notes
7.2%
|
|
|
|
|
|
|
|
|
|
Consumer Discretionary 0.4%
|
|
|
|
|
|
|
|
|
|
Hotels,
Restaurants & Leisure 0.1%
|
|
|
|
|
|
|
|
|
|
Choctaw Resort Development Enterprise, Senior Notes
|
|
7.250
|
%
|
11/15/19
|
|
295,000
|
|
205,025
|
(c)
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
6
|
|
LMP Capital and Income
Fund Inc. 2010 Semi-Annual Report
|
|
|
Schedule
of investments (unaudited) (contd)
June 30,
2010
LMP Capital and Income Fund Inc.
Security
|
|
Rate
|
|
Maturity
Date
|
|
Face
Amount
|
|
Value
|
|
Hotels,
Restaurants & Leisure continued
|
|
|
|
|
|
|
|
|
|
Inn of the Mountain Gods Resort & Casino,
Senior Notes
|
|
12.000
|
%
|
11/15/10
|
|
$
|
660,000
|
|
$
|
323,400
|
(d)(e)
|
MGM Resorts International, Senior Secured Notes
|
|
10.375
|
%
|
5/15/14
|
|
45,000
|
|
49,162
|
|
Total Hotels,
Restaurants & Leisure
|
|
|
|
|
|
|
|
577,587
|
|
Media 0.3%
|
|
|
|
|
|
|
|
|
|
CCH II LLC/CCH II Capital Corp., Senior Notes
|
|
13.500
|
%
|
11/30/16
|
|
234,181
|
|
273,992
|
|
Comcast Corp.
|
|
5.700
|
%
|
5/15/18
|
|
510,000
|
|
561,512
|
|
News America Inc., Senior Notes
|
|
6.650
|
%
|
11/15/37
|
|
20,000
|
|
22,521
|
|
Time Warner Cable Inc.
|
|
5.850
|
%
|
5/1/17
|
|
10,000
|
|
10,995
|
|
Time Warner Cable Inc., Senior Notes
|
|
6.200
|
%
|
7/1/13
|
|
300,000
|
|
335,763
|
|
Total Media
|
|
|
|
|
|
|
|
1,204,783
|
|
Total Consumer Discretionary
|
|
|
|
|
|
|
|
1,782,370
|
|
Consumer Staples 1.5%
|
|
|
|
|
|
|
|
|
|
Food &
Staples Retailing 1.5%
|
|
|
|
|
|
|
|
|
|
CVS Caremark Corp., Subordinated Bonds
|
|
6.302
|
%
|
6/1/37
|
|
6,000,000
|
|
5,372,298
|
(b)
|
CVS Pass-Through Trust, Secured Notes
|
|
6.943
|
%
|
1/10/30
|
|
408,307
|
|
451,551
|
|
Kroger Co., Senior Notes
|
|
5.500
|
%
|
2/1/13
|
|
110,000
|
|
119,861
|
|
Kroger Co., Senior Notes
|
|
6.150
|
%
|
1/15/20
|
|
100,000
|
|
115,730
|
|
Total
Food & Staples Retailing
|
|
|
|
|
|
|
|
6,059,440
|
|
Tobacco 0.0%
|
|
|
|
|
|
|
|
|
|
Reynolds American Inc.
|
|
6.750
|
%
|
6/15/17
|
|
180,000
|
|
195,282
|
|
Total Consumer Staples
|
|
|
|
|
|
|
|
6,254,722
|
|
Energy 1.6%
|
|
|
|
|
|
|
|
|
|
Energy
Equipment & Services 0.1%
|
|
|
|
|
|
|
|
|
|
Transocean Inc., Senior Notes
|
|
5.250
|
%
|
3/15/13
|
|
190,000
|
|
178,839
|
|
Oil,
Gas & Consumable Fuels 1.5%
|
|
|
|
|
|
|
|
|
|
Apache Corp., Senior Notes
|
|
5.625
|
%
|
1/15/17
|
|
140,000
|
|
157,926
|
|
ConocoPhillips Holding Co., Senior Notes
|
|
6.950
|
%
|
4/15/29
|
|
230,000
|
|
283,063
|
|
Devon Financing Corp. ULC, Notes
|
|
6.875
|
%
|
9/30/11
|
|
200,000
|
|
213,597
|
|
Energy Transfer Partners LP, Senior Notes
|
|
6.700
|
%
|
7/1/18
|
|
240,000
|
|
258,490
|
|
Kerr-McGee Corp., Notes
|
|
6.950
|
%
|
7/1/24
|
|
140,000
|
|
127,483
|
|
Kinder Morgan Energy Partners LP, Senior Notes
|
|
6.000
|
%
|
2/1/17
|
|
290,000
|
|
316,337
|
|
Shell International Finance BV, Senior Notes
|
|
4.375
|
%
|
3/25/20
|
|
60,000
|
|
62,146
|
|
Southern Union Co., Junior Subordinated Notes
|
|
7.200
|
%
|
11/1/66
|
|
5,000,000
|
|
4,456,250
|
(b)
|
Williams Cos. Inc., Senior Notes
|
|
7.750
|
%
|
6/15/31
|
|
178,000
|
|
191,745
|
|
XTO Energy Inc., Senior Notes
|
|
5.500
|
%
|
6/15/18
|
|
300,000
|
|
343,615
|
|
Total Oil,
Gas & Consumable Fuels
|
|
|
|
|
|
|
|
6,410,652
|
|
Total Energy
|
|
|
|
|
|
|
|
6,589,491
|
|
Financials 2.9%
|
|
|
|
|
|
|
|
|
|
Capital Markets
0.4%
|
|
|
|
|
|
|
|
|
|
Bear Stearns Co. Inc., Senior Notes
|
|
6.400
|
%
|
10/2/17
|
|
300,000
|
|
333,712
|
|
Goldman Sachs Capital II, Junior Subordinated
Bonds
|
|
5.793
|
%
|
6/1/12
|
|
30,000
|
|
22,800
|
(b)(f)
|
Goldman Sachs Group Inc., Notes
|
|
6.600
|
%
|
1/15/12
|
|
10,000
|
|
10,580
|
|
Goldman Sachs Group Inc., Notes
|
|
5.250
|
%
|
10/15/13
|
|
20,000
|
|
21,098
|
|
Goldman Sachs Group Inc., Senior Notes
|
|
5.300
|
%
|
2/14/12
|
|
10,000
|
|
10,412
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
|
|
LMP
Capital and Income Fund Inc. 2010 Semi-Annual Report
|
|
7
|
LMP Capital and Income Fund Inc.
Security
|
|
Rate
|
|
Maturity
Date
|
|
Face
Amount
|
|
Value
|
|
Capital Markets
continued
|
|
|
|
|
|
|
|
|
|
Goldman Sachs Group Inc., Senior Notes
|
|
6.150
|
%
|
4/1/18
|
|
$
|
300,000
|
|
$
|
314,738
|
|
Merrill Lynch & Co. Inc., Notes
|
|
6.875
|
%
|
4/25/18
|
|
280,000
|
|
299,151
|
|
Morgan Stanley, Medium-Term Notes
|
|
5.625
|
%
|
1/9/12
|
|
290,000
|
|
301,869
|
|
UBS AG Stamford CT, Senior Notes
|
|
3.875
|
%
|
1/15/15
|
|
260,000
|
|
258,979
|
|
Total Capital
Markets
|
|
|
|
|
|
|
|
1,573,339
|
|
Commercial Banks
0.5%
|
|
|
|
|
|
|
|
|
|
BAC Capital Trust XIV, Junior Subordinated Notes
|
|
5.630
|
%
|
3/15/12
|
|
20,000
|
|
13,650
|
(b)(f)
|
Bank of Montreal, Secured Bonds
|
|
2.850
|
%
|
6/9/15
|
|
300,000
|
|
305,253
|
(c)
|
Bank of Tokyo-Mitsubishi UFJ Ltd., Senior Notes
|
|
3.850
|
%
|
1/22/15
|
|
100,000
|
|
104,146
|
(c)
|
Nordea Bank AB, Senior Notes
|
|
4.875
|
%
|
1/27/20
|
|
200,000
|
|
205,800
|
(c)
|
Resona Preferred Global Securities Cayman Ltd., Junior Subordinated
Bonds
|
|
7.191
|
%
|
7/30/15
|
|
260,000
|
|
239,497
|
(b)(c)(f)
|
Santander US Debt SA Unipersonal, Senior Notes
|
|
3.724
|
%
|
1/20/15
|
|
100,000
|
|
96,169
|
(c)
|
SunTrust Capital, Trust Preferred Securities
|
|
6.100
|
%
|
12/15/36
|
|
420,000
|
|
320,622
|
(b)
|
Wachovia Bank N.A., Subordinated Notes
|
|
6.000
|
%
|
11/15/17
|
|
380,000
|
|
414,696
|
|
Wells Fargo Capital X, Capital Securities
|
|
5.950
|
%
|
12/15/36
|
|
280,000
|
|
249,735
|
|
Total
Commercial Banks
|
|
|
|
|
|
|
|
1,949,568
|
|
Consumer
Finance 0.3%
|
|
|
|
|
|
|
|
|
|
American Express Co., Subordinated Debentures
|
|
6.800
|
%
|
9/1/66
|
|
380,000
|
|
364,800
|
(b)
|
Caterpillar Financial Services Corp., Medium-Term
Notes
|
|
5.450
|
%
|
4/15/18
|
|
190,000
|
|
212,372
|
|
John Deere Capital Corp., Medium-Term Notes
|
|
5.350
|
%
|
4/3/18
|
|
170,000
|
|
190,078
|
|
SLM Corp., Medium-Term Senior Notes
|
|
8.450
|
%
|
6/15/18
|
|
450,000
|
|
415,845
|
|
Total Consumer
Finance
|
|
|
|
|
|
|
|
1,183,095
|
|
Diversified
Financial Services 1.4%
|
|
|
|
|
|
|
|
|
|
Bank of America Corp., Senior Notes
|
|
5.650
|
%
|
5/1/18
|
|
330,000
|
|
338,720
|
|
Capital One Bank, Notes
|
|
5.750
|
%
|
9/15/10
|
|
125,000
|
|
125,992
|
|
Citigroup Inc., Senior Notes
|
|
6.875
|
%
|
3/5/38
|
|
550,000
|
|
578,814
|
|
General Electric Capital Corp., Senior Notes
|
|
5.625
|
%
|
5/1/18
|
|
560,000
|
|
596,063
|
|
General Electric Capital Corp., Subordinated
Debentures
|
|
6.375
|
%
|
11/15/67
|
|
20,000
|
|
18,725
|
(b)
|
JPMorgan Chase & Co., Junior Subordinated
Notes
|
|
7.900
|
%
|
4/30/18
|
|
4,000,000
|
|
4,136,396
|
(b)(f)
|
JPMorgan Chase & Co., Subordinated Notes
|
|
6.125
|
%
|
6/27/17
|
|
190,000
|
|
208,163
|
|
Total
Diversified Financial Services
|
|
|
|
|
|
|
|
6,002,873
|
|
Insurance
0.3%
|
|
|
|
|
|
|
|
|
|
American International Group Inc., Medium-Term Senior Notes
|
|
5.850
|
%
|
1/16/18
|
|
550,000
|
|
494,313
|
|
MetLife Inc., Junior Subordinated Debentures
|
|
6.400
|
%
|
12/15/36
|
|
350,000
|
|
309,750
|
|
Teachers Insurance & Annuity Association of America
College Retirement Equity Fund, Notes
|
|
6.850
|
%
|
12/16/39
|
|
20,000
|
|
23,375
|
(c)
|
Travelers Cos. Inc., Junior Subordinated
Debentures
|
|
6.250
|
%
|
3/15/37
|
|
395,000
|
|
371,151
|
(b)
|
Total Insurance
|
|
|
|
|
|
|
|
1,198,589
|
|
Total Financials
|
|
|
|
|
|
|
|
11,907,464
|
|
Health Care 0.2%
|
|
|
|
|
|
|
|
|
|
Health Care
Equipment & Supplies 0.0%
|
|
|
|
|
|
|
|
|
|
Medtronic Inc., Senior Notes
|
|
4.450
|
%
|
3/15/20
|
|
50,000
|
|
53,386
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
8
|
|
LMP Capital and Income
Fund Inc. 2010 Semi-Annual Report
|
|
|
Schedule
of investments (unaudited) (contd)
June 30,
2010
LMP Capital and Income Fund Inc.
Security
|
|
Rate
|
|
Maturity
Date
|
|
Face
Amount
|
|
Value
|
|
Health Care
Providers & Services 0.1%
|
|
|
|
|
|
|
|
|
|
UnitedHealth Group Inc., Senior Notes
|
|
5.250
|
%
|
3/15/11
|
|
$
|
170,000
|
|
$
|
174,464
|
|
WellPoint Inc., Notes
|
|
5.875
|
%
|
6/15/17
|
|
30,000
|
|
33,470
|
|
WellPoint Inc., Senior Notes
|
|
5.000
|
%
|
1/15/11
|
|
140,000
|
|
142,751
|
|
Total Health
Care Providers & Services
|
|
|
|
|
|
|
|
350,685
|
|
Pharmaceuticals
0.1%
|
|
|
|
|
|
|
|
|
|
Wyeth, Notes
|
|
5.950
|
%
|
4/1/37
|
|
200,000
|
|
227,351
|
|
Total Health Care
|
|
|
|
|
|
|
|
631,422
|
|
Materials 0.2%
|
|
|
|
|
|
|
|
|
|
Chemicals
0.1%
|
|
|
|
|
|
|
|
|
|
PPG Industries Inc., Senior Notes
|
|
6.650
|
%
|
3/15/18
|
|
200,000
|
|
237,683
|
|
Metals &
Mining 0.0%
|
|
|
|
|
|
|
|
|
|
Vale Overseas Ltd., Notes
|
|
6.875
|
%
|
11/21/36
|
|
156,000
|
|
163,022
|
|
Paper &
Forest Products 0.1%
|
|
|
|
|
|
|
|
|
|
Appleton Papers Inc., Senior Secured Notes
|
|
11.250
|
%
|
12/15/15
|
|
408,000
|
|
348,840
|
(c)
|
Total Materials
|
|
|
|
|
|
|
|
749,545
|
|
Telecommunication Services 0.3%
|
|
|
|
|
|
|
|
|
|
Diversified
Telecommunication Services 0.3%
|
|
|
|
|
|
|
|
|
|
AT&T Inc., Global Notes
|
|
5.600
|
%
|
5/15/18
|
|
140,000
|
|
155,988
|
|
AT&T Inc., Senior Notes
|
|
6.400
|
%
|
5/15/38
|
|
170,000
|
|
187,542
|
|
British Telecommunications PLC, Bonds
|
|
9.625
|
%
|
12/15/30
|
|
70,000
|
|
85,638
|
|
Deutsche Telekom
International Finance BV, Senior Notes
|
|
5.750
|
%
|
3/23/16
|
|
180,000
|
|
197,187
|
|
Telecom Italia
Capital S.p.A., Senior Notes
|
|
5.250
|
%
|
10/1/15
|
|
100,000
|
|
101,039
|
|
Telefonica Emisones
SAU, Senior Notes
|
|
6.221
|
%
|
7/3/17
|
|
220,000
|
|
239,635
|
|
Verizon Communications Inc., Senior Notes
|
|
5.500
|
%
|
2/15/18
|
|
200,000
|
|
219,806
|
|
Verizon Communications Inc., Senior Notes
|
|
6.400
|
%
|
2/15/38
|
|
200,000
|
|
221,162
|
|
Total Telecommunication Services
|
|
|
|
|
|
|
|
1,407,997
|
|
Utilities 0.1%
|
|
|
|
|
|
|
|
|
|
Electric
Utilities 0.1%
|
|
|
|
|
|
|
|
|
|
FirstEnergy Corp., Notes
|
|
7.375
|
%
|
11/15/31
|
|
205,000
|
|
216,744
|
|
Pacific Gas & Electric Co., Senior Notes
|
|
5.800
|
%
|
3/1/37
|
|
230,000
|
|
250,854
|
|
Total Utilities
|
|
|
|
|
|
|
|
467,598
|
|
Total Corporate Bonds &
Notes (Cost $29,408,380)
|
|
|
|
|
|
|
|
29,790,609
|
|
Mortgage-Backed Securities 2.6%
|
|
|
|
|
|
|
|
|
|
FHLMC 0.4%
|
|
|
|
|
|
|
|
|
|
Federal Home Loan Mortgage Corp. (FHLMC)
|
|
4.500
|
%
|
8/12/40
|
|
400,000
|
|
413,000
|
(g)
|
Federal Home Loan Mortgage Corp. (FHLMC), Gold
|
|
5.500
|
%
|
8/12/40
|
|
800,000
|
|
856,000
|
(g)
|
Federal Home Loan Mortgage Corp. (FHLMC), Gold
|
|
6.000
|
%
|
8/12/40
|
|
200,000
|
|
216,469
|
(g)
|
Total FHLMC
|
|
|
|
|
|
|
|
1,485,469
|
|
FNMA 0.9%
|
|
|
|
|
|
|
|
|
|
Federal National Mortgage Association (FNMA)
|
|
4.500
|
%
|
7/19/25 - 8/12/40
|
|
2,100,000
|
|
2,190,016
|
(g)
|
Federal National Mortgage Association (FNMA)
|
|
5.000
|
%
|
7/19/25
|
|
900,000
|
|
960,329
|
(g)
|
Federal National Mortgage Association (FNMA)
|
|
4.000
|
%
|
8/12/40
|
|
400,000
|
|
403,937
|
(g)
|
Total FNMA
|
|
|
|
|
|
|
|
3,554,282
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
|
|
LMP
Capital and Income Fund Inc. 2010 Semi-Annual Report
|
|
9
|
LMP Capital and Income Fund Inc.
Security
|
|
Rate
|
|
Maturity
Date
|
|
Face
Amount
|
|
Value
|
|
GNMA 1.3%
|
|
|
|
|
|
|
|
|
|
Government National Mortgage Association (GNMA)
|
|
5.000
|
%
|
1/15/40
|
|
$
|
1,688,535
|
|
$
|
1,803,620
|
|
Government National Mortgage Association (GNMA)
|
|
4.000
|
%
|
7/21/40
|
|
100,000
|
|
101,516
|
(g)
|
Government National Mortgage Association (GNMA)
|
|
4.500
|
%
|
7/21/40
|
|
2,300,000
|
|
2,393,504
|
(g)
|
Government National Mortgage Association (GNMA)
|
|
5.000
|
%
|
7/21/40 - 9/21/40
|
|
700,000
|
|
740,752
|
(g)
|
Government National Mortgage Association (GNMA)
|
|
5.500
|
%
|
7/21/40
|
|
500,000
|
|
540,235
|
(g)
|
Total GNMA
|
|
|
|
|
|
|
|
5,579,627
|
|
Total Mortgage-Backed Securities
(Cost $10,528,386)
|
|
|
|
|
|
|
|
10,619,378
|
|
U.S. Government & Agency
Obligations 4.3%
|
|
|
|
|
|
|
|
|
|
U.S. Government
Agencies 0.6%
|
|
|
|
|
|
|
|
|
|
Federal Home Loan Bank (FHLB), Global Bonds
|
|
1.625
|
%
|
7/27/11
|
|
1,770,000
|
|
1,791,732
|
|
Federal Home Loan Bank (FHLB), Global Bonds
|
|
5.500
|
%
|
7/15/36
|
|
100,000
|
|
113,990
|
|
Federal National Mortgage Association (FNMA),
Notes
|
|
1.750
|
%
|
8/10/12
|
|
510,000
|
|
520,211
|
|
Federal National Mortgage Association (FNMA), Subordinated Notes
|
|
5.250
|
%
|
8/1/12
|
|
110,000
|
|
118,780
|
|
Total U.S.
Government Agencies
|
|
|
|
|
|
|
|
2,544,713
|
|
U.S. Government
Obligations 3.7%
|
|
|
|
|
|
|
|
|
|
U.S. Treasury Bonds
|
|
3.500
|
%
|
2/15/39
|
|
750,000
|
|
696,797
|
|
U.S. Treasury Bonds
|
|
4.500
|
%
|
8/15/39
|
|
830,000
|
|
914,297
|
|
U.S. Treasury Bonds
|
|
4.375
|
%
|
11/15/39
|
|
470,000
|
|
507,454
|
|
U.S. Treasury Bonds
|
|
4.625
|
%
|
2/15/40
|
|
2,070,000
|
|
2,327,133
|
|
U.S. Treasury Notes
|
|
1.000
|
%
|
12/31/11
|
|
130,000
|
|
130,970
|
|
U.S. Treasury Notes
|
|
2.250
|
%
|
1/31/15
|
|
6,940,000
|
|
7,114,041
|
|
U.S. Treasury Notes
|
|
2.500
|
%
|
3/31/15
|
|
200,000
|
|
207,281
|
|
U.S. Treasury Notes
|
|
3.125
|
%
|
1/31/17
|
|
210,000
|
|
219,664
|
|
U.S. Treasury Notes
|
|
3.125
|
%
|
5/15/19
|
|
90,000
|
|
91,892
|
|
U.S. Treasury Notes
|
|
3.625
|
%
|
8/15/19
|
|
140,000
|
|
148,061
|
|
U.S. Treasury Notes
|
|
3.375
|
%
|
11/15/19
|
|
2,915,000
|
|
3,019,532
|
|
U.S. Treasury Notes
|
|
3.625
|
%
|
2/15/20
|
|
70,000
|
|
73,970
|
|
Total U.S.
Government Obligations
|
|
|
|
|
|
|
|
15,451,092
|
|
Total U.S. Government &
Agency Obligations (Cost $17,162,550)
|
|
|
|
|
|
17,995,805
|
|
U.S. Treasury Inflation Protected
Securities 0.1%
|
|
|
|
|
|
|
|
|
|
U.S. Treasury Bonds, Inflation Indexed
|
|
2.000
|
%
|
1/15/26
|
|
175,734
|
|
186,319
|
|
U.S. Treasury Bonds, Inflation Indexed
|
|
2.375
|
%
|
1/15/27
|
|
335,107
|
|
372,126
|
(h)
|
Total U.S. Treasury Inflation
Protected Securities (Cost $505,800)
|
|
|
|
|
|
558,445
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expiration
Date
|
|
Contracts
|
|
|
|
Purchased Options 0.0%
|
|
|
|
|
|
|
|
|
|
U.S. Treasury 10-Year Notes Futures, Call @
$119.50
|
|
|
|
8/27/10
|
|
3
|
|
10,313
|
|
U.S. Treasury 10-Year Notes Futures, Put @ $117.00
|
|
|
|
8/27/10
|
|
12
|
|
1,500
|
|
Total Purchased Options (Cost
$10,346)
|
|
|
|
|
|
|
|
11,813
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
10
|
|
LMP Capital and Income
Fund Inc. 2010 Semi-Annual Report
|
|
|
Schedule
of investments (unaudited) (contd)
June 30,
2010
LMP Capital and Income Fund Inc.
Security
|
|
|
|
Expiration
Date
|
|
Warrants
|
|
Value
|
|
Warrants 0.0%
|
|
|
|
|
|
|
|
|
|
Buffets Restaurant Holdings
|
|
|
|
4/28/14
|
|
215
|
|
$
|
2
|
*
(a)(d)
|
Charter Communications Inc.
|
|
|
|
11/30/14
|
|
189
|
|
756
|
*
|
Total Warrants (Cost $378)
|
|
|
|
|
|
|
|
758
|
|
Total Investments Before
Short-Term Investment (Cost $402,947,406)
|
|
|
|
398,868,692
|
|
|
|
|
|
|
|
|
|
Rate
|
|
Maturity
Date
|
|
Face
Amount
|
|
|
|
Short-Term Investment 4.1%
|
|
|
|
|
|
|
|
|
|
Repurchase
Agreement 4.1%
|
|
|
|
|
|
|
|
|
|
Morgan Stanley tri-party repurchase agreement dated 6/30/10; Proceeds
at maturity $16,925,009; (Fully collateralized by U.S. government agency
obligations, 3.625% due 12/17/10; Market value $17,374,403) (Cost
$16,925,000)
|
|
0.020
|
%
|
7/1/10
|
|
$16,925,000
|
|
16,925,000
|
|
Total Investments 100.0% (Cost
$419,872,406#)
|
|
|
|
|
|
|
|
$
|
415,793,692
|
|
*
|
Non-income
producing security.
|
(a)
|
Security
is valued in good faith at fair value in accordance with procedures approved
by the Board of Directors (See Note 1).
|
(b)
|
Variable
rate security. Interest rate disclosed is that which is in effect at
June 30, 2010.
|
(c)
|
Security
is exempt from registration under Rule 144A of the Securities Act of
1933. This security may be resold in transactions that are exempt from
registration, normally to qualified institutional buyers. This security has
been deemed liquid pursuant to guidelines approved by the Board of Directors,
unless otherwise noted.
|
(d)
|
Illiquid
security.
|
(e)
|
The
coupon payment on these securities is currently in default as of
June 30, 2010.
|
(f)
|
Security
has no maturity date. The date shown represents the next call date.
|
(g)
|
This
security is traded on a to-be-announced (TBA) basis (See Note 1).
|
(h)
|
All
or a portion of this security is held at the broker as collateral for open
futures contracts.
|
#
|
Aggregate
cost for federal income tax purposes is substantially the same.
|
|
|
|
Abbreviations used in this schedule:
|
|
ADR
American Depositary Receipt
|
|
ARM
Adjustable Rate Mortgage
|
|
PAC
Planned Amortization Class
|
Schedule of Written Options
Security
|
|
Expiration
Date
|
|
Strike
Price
|
|
Contracts
|
|
Value
|
|
|
Eurodollar Futures, Call
|
|
9/13/10
|
|
$ 99.25
|
|
|
7
|
|
$2,931
|
|
|
Eurodollar Futures, Put
|
|
9/13/10
|
|
98.75
|
|
|
7
|
|
525
|
|
|
U.S. Treasury 10-Year Notes Futures, Call
|
|
8/27/10
|
|
124.50
|
|
|
6
|
|
3,750
|
|
|
Total Written Options (Premiums
received $11,085)
|
|
|
|
|
|
|
|
|
$7,206
|
|
|
See Notes to Financial Statements.
|
|
LMP
Capital and Income Fund Inc. 2010 Semi-Annual Report
|
|
11
|
Statement
of assets and liabilities (unaudited)
June 30,
2010
Assets:
|
|
|
|
Investments, at value (Cost $419,872,406)
|
|
$
|
415,793,692
|
|
Foreign currency, at value (Cost $167)
|
|
144
|
|
Receivable for securities sold
|
|
11,320,509
|
|
Dividends and interest receivable
|
|
1,884,472
|
|
Receivable from broker variation margin on open
futures contracts
|
|
24,002
|
|
Prepaid expenses
|
|
12,488
|
|
Total Assets
|
|
429,035,307
|
|
|
|
|
|
Liabilities:
|
|
|
|
Loan payable (Note 5)
|
|
60,000,000
|
|
Payable for securities purchased
|
|
17,462,449
|
|
Due to custodian
|
|
583,082
|
|
Investment management fee payable
|
|
300,885
|
|
Interest payable (Note 5)
|
|
225,462
|
|
Directors fees payable
|
|
19,704
|
|
Written options, at value (premium received
$11,085)
|
|
7,206
|
|
Accrued expenses
|
|
182,651
|
|
Total
Liabilities
|
|
78,781,439
|
|
Total Net Assets
|
|
$
|
350,253,868
|
|
|
|
|
|
Net Assets:
|
|
|
|
Par value ($0.001 par value; 29,964,106 shares
issued and outstanding; 100,000,000 shares authorized)
|
|
$
|
29,964
|
|
Paid-in capital in excess of par value
|
|
559,713,252
|
|
Undistributed net investment income
|
|
1,075,844
|
|
Accumulated net realized loss on investments, futures contracts,
written options and foreign currency transactions
|
|
(206,458,636)
|
|
Net unrealized depreciation on investments,
futures contracts, written options and foreign currencies
|
|
(4,106,556)
|
|
Total Net Assets
|
|
$
|
350,253,868
|
|
|
|
|
|
Shares Outstanding
|
|
29,964,106
|
|
|
|
|
|
Net Asset Value
|
|
$11.69
|
|
See Notes to Financial Statements.
12
|
|
LMP Capital and Income
Fund Inc. 2010 Semi-Annual Report
|
|
|
Statement
of operations (unaudited)
For
the Six Months Ended June 30, 2010
Investment Income:
|
|
|
|
Dividends
|
|
$ 7,918,955
|
|
Interest
|
|
1,769,531
|
|
Less: Foreign taxes withheld
|
|
(101,836)
|
|
Total
Investment Income
|
|
9,586,650
|
|
|
|
|
|
Expenses:
|
|
|
|
Investment management fee (Note 2)
|
|
1,870,449
|
|
Interest expense (Note 5)
|
|
474,181
|
|
Legal fees
|
|
63,536
|
|
Transfer agent fees
|
|
51,085
|
|
Commitment fees (Note 5)
|
|
49,020
|
|
Directors fees
|
|
47,186
|
|
Audit and tax
|
|
35,613
|
|
Shareholder reports
|
|
27,607
|
|
Stock exchange listing fees
|
|
12,000
|
|
Custody fees
|
|
7,810
|
|
Insurance
|
|
4,525
|
|
Miscellaneous expenses
|
|
7,196
|
|
Total Expenses
|
|
2,650,208
|
|
Net Investment Income
|
|
6,936,442
|
|
|
|
|
|
Realized and Unrealized Gain (Loss) on Investments, Futures
Contracts, Written Options and Foreign
Currency Transactions (Notes 1, 3 and 4):
|
|
|
|
Net Realized Gain (Loss) From:
|
|
|
|
Investment transactions
|
|
(481,866)
|
|
Futures contracts
|
|
155,845
|
|
Written options
|
|
6,378
|
|
Foreign currency transactions
|
|
(2,917)
|
|
Net Realized
Loss
|
|
(322,560)
|
|
Change in Net Unrealized Appreciation/Depreciation
From:
|
|
|
|
Investments
|
|
(21,444,424)
|
|
Futures contracts
|
|
(16,545)
|
|
Written options
|
|
3,618
|
|
Foreign currencies
|
|
(134)
|
|
Change in Net
Unrealized Appreciation/Depreciation
|
|
(21,457,485)
|
|
Net Loss on Investments, Futures
Contracts, Written Options and Foreign Currency Transactions
|
|
(21,780,045)
|
|
Decrease in Net Assets From Operations
|
|
$(14,843,603)
|
|
See Notes to Financial Statements.
|
|
LMP
Capital and Income Fund Inc. 2010 Semi-Annual Report
|
|
13
|
Statements
of changes in net assets
For the Six Months Ended
June 30, 2010 (unaudited)
and the Year Ended December 31, 2009
|
|
2010
|
|
2009
|
|
|
|
|
|
|
|
Operations:
|
|
|
|
|
|
Net investment income
|
|
$
|
6,936,442
|
|
$
|
12,763,868
|
|
Net realized loss
|
|
(322,560)
|
|
(122,053,655)
|
|
Change in net unrealized appreciation/depreciation
|
|
(21,457,485)
|
|
196,086,880
|
|
Increase
(Decrease) in Net Assets From Operations
|
|
(14,843,603
)
|
|
86,797,093
|
|
|
|
|
|
|
|
Distributions to Shareholders
From (Note 1):
|
|
|
|
|
|
Net investment income
|
|
(7,790,667)
|
|
(15,581,335)
|
|
Decrease in Net
Assets From Distributions to Shareholders
|
|
(7,790,667
)
|
|
(15,581,335
)
|
|
Increase
(Decrease) in Net Assets
|
|
(22,634,270
)
|
|
71,215,758
|
|
|
|
|
|
|
|
Net Assets:
|
|
|
|
|
|
Beginning of period
|
|
372,888,138
|
|
301,672,380
|
|
End of period*
|
|
$
|
350,253,868
|
|
$
|
372,888,138
|
|
* Includes undistributed net investment income of:
|
|
$1,075,844
|
|
$1,930,069
|
|
See Notes to Financial Statements.
14
|
|
LMP Capital and Income
Fund Inc. 2010 Semi-Annual Report
|
|
|
Statement
of cash flows (unaudited)
For
the Six Months Ended June 30, 2010
Cash Flows Provided (Used) by
Operating Activities:
|
|
|
|
Dividends and interest received
|
|
$
|
9,463,403
|
|
Operating expenses paid
|
|
(2,224,810)
|
|
Interest paid
|
|
(436,532)
|
|
Net sales and maturities of short-term investments
|
|
20,670,654
|
|
Realized gain on futures contracts
|
|
155,845
|
|
Realized gain on options
|
|
3,042
|
|
Realized loss on foreign currency transactions
|
|
(2,917)
|
|
Net change in unrealized depreciation on futures
contracts
|
|
(16,545)
|
|
Net change in unrealized depreciation on foreign
currencies
|
|
(134)
|
|
Purchases of long-term investments
|
|
(251,826,095)
|
|
Proceeds from disposition of long-term investments
|
|
231,436,072
|
|
Premium for written options
|
|
11,085
|
|
Change in receivable /payable to broker
variation margin
|
|
(27,030)
|
|
Net Cash
Provided By Operating Activities
|
|
7,206,038
|
|
|
|
|
|
Cash Flows Provided (Used) by
Financing Activities:
|
|
|
|
Cash distributions paid on Common Stock
|
|
(7,790,667)
|
|
Due to custodian
|
|
583,082
|
|
Net Cash Used
By Financing Activities
|
|
(7,207,585)
|
|
Net Decrease in Cash
|
|
(1,547)
|
|
Cash, Beginning of year
|
|
1,691
|
|
Cash, End of year
|
|
$
|
144
|
|
|
|
|
|
Reconciliation of Decrease in Net Assets from Operations to
Net Cash Flows Provided (Used) by Operating Activities:
|
|
|
|
Decrease in Net Assets From
Operations
|
|
$
|
(14,843,603)
|
|
Accretion of discount on investments
|
|
(100,867)
|
|
Amortization of premium on investments
|
|
47,827
|
|
Decrease in investments, at value
|
|
31,411,058
|
|
Decrease in payable for securities purchased
|
|
(7,720,896)
|
|
Increase in dividends and interest receivable
|
|
(70,207)
|
|
Increase in premium for written options
|
|
3,168
|
|
Increase in receivable for securities sold
|
|
(1,482,278)
|
|
Change in receivable/payable to broker variation
margin
|
|
(27,030)
|
|
Increase in prepaid expenses
|
|
(7,162)
|
|
Increase in interest payable
|
|
37,649
|
|
Decrease in accrued expenses
|
|
(41,621)
|
|
Total
Adjustments
|
|
22,049,641
|
|
Net Cash Flows Provided by
Operating Activities
|
|
$
|
7,206,038
|
|
See Notes to Financial Statements.
|
|
LMP
Capital and Income Fund Inc. 2010 Semi-Annual Report
|
|
15
|
Financial
highlights
For a share of capital stock outstanding throughout
each year ended December 31, unless otherwise noted:
|
|
2010
1
|
|
2009
|
|
2008
2,3
|
|
2008
2,4
|
|
2007
2,4
|
|
2006
2,4
|
|
2005
2,4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value, beginning of
period
|
|
$12.44
|
|
$10.07
|
|
$11.20
|
|
$22.95
|
|
$21.15
|
|
$19.69
|
|
$18.64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
0.23
|
|
0.43
|
|
0.11
|
|
0.31
|
|
0.13
|
|
0.48
|
|
0.69
|
|
Net realized and unrealized gain (loss)
|
|
(0.72)
|
|
2.46
|
|
(0.96)
|
|
(8.85)
|
|
3.22
|
|
2.18
|
|
1.52
|
|
Total income (loss) from
operations
|
|
(0.49)
|
|
2.89
|
|
(0.85)
|
|
(8.54)
|
|
3.35
|
|
2.66
|
|
2.21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain from repurchase of treasury stock
|
|
|
|
|
|
|
|
|
|
|
|
|
0.04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less distributions from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
(0.26)
|
|
(0.52)
|
|
(0.28)
|
|
(0.20)
|
|
(0.01)
|
|
(0.55)
|
|
(0.98)
|
|
Net realized gains
|
|
|
|
|
|
|
|
(3.01)
|
|
(1.54)
|
|
(0.65)
|
|
(0.22)
|
|
Total
distributions
|
|
(0.26)
|
|
(0.52)
|
|
(0.28)
|
|
(3.21)
|
|
(1.55)
|
|
(1.20)
|
|
(1.20)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value, end of period
|
|
$11.69
|
|
$12.44
|
|
$10.07
|
|
$11.20
|
|
$22.95
|
|
$21.15
|
|
$19.69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market price, end of period
|
|
$9.59
|
|
$10.35
|
|
$7.73
|
|
$9.07
|
|
$19.88
|
|
$18.19
|
|
$17.19
|
|
Total return,
based on NAV
5,6
|
|
(4.06)
|
%
|
29.52
|
%
|
(7.43)
|
%
|
(42.09)
|
%
|
16.32
|
%
|
13.89
|
%
|
12.34
|
%
|
Total return,
based on Market Price
6
|
|
(5.06)
|
%
|
42.02
|
%
|
(11.44)
|
%
|
(44.95)
|
%
|
18.22
|
%
|
13.24
|
%
|
6.85
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets, end of period (000s)
|
|
$350,254
|
|
$372,888
|
|
$301,672
|
|
$335,588
|
|
$687,760
|
|
$633,888
|
|
$637,654
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios to average net assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross expenses
|
|
1.43
|
%
7
|
1.59
|
%
|
3.10
|
%
7
|
2.72
|
%
|
3.03
|
%
8
|
3.13
|
%
|
2.45
|
%
|
Gross expenses, excluding interest expense
|
|
1.18
|
7
|
1.31
|
|
1.70
|
7
|
1.46
|
|
1.42
|
8
|
1.33
|
|
1.23
|
|
Net expenses
9,10
|
|
1.43
|
7
|
1.59
|
|
3.10
|
7
|
2.72
|
|
3.03
|
8,11
|
3.13
|
11
|
2.45
|
|
Net expenses, excluding interest expense
9,10
|
|
1.18
|
7
|
1.31
|
|
1.70
|
7
|
1.46
|
|
1.42
|
8,11
|
1.33
|
11
|
1.23
|
|
Net investment income
|
|
3.75
|
7
|
3.90
|
|
6.74
|
7
|
1.73
|
|
0.60
|
|
2.33
|
|
3.55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio turnover rate
|
|
24
|
%
12
|
135
|
%
12
|
8
|
%
|
169
|
%
12
|
180
|
%
|
193
|
%
|
64
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans Outstanding, End of Period (000s)
|
|
$60,000
|
|
$60,000
|
|
$100,000
|
|
$145,000
|
|
$170,000
|
|
$220,000
|
|
$220,000
|
|
Asset Coverage for Loan Outstanding
|
|
684
|
%
|
721
|
%
|
402
|
%
|
331
|
%
|
505
|
%
|
388
|
%
|
390
|
%
|
Weighted Average Loan (000s)
|
|
$60,000
|
|
$66,192
|
|
$123,361
|
|
$168,497
|
|
$181,370
|
|
$220,000
|
|
$220,000
|
|
Weighted Average Interest Rate on Loans
|
|
1.57
|
%
|
1.44
|
%
|
3.35
|
%
|
3.89
|
%
|
5.67
|
%
|
5.26
|
%
|
3.54
|
%
|
1
|
|
For
the six months ended June 30, 2010 (unaudited).
|
2
|
|
Per
share amounts have been calculated using the average shares method.
|
3
|
|
For
the period November 1, 2008 through December 31, 2008.
|
4
|
|
For
the year ended October 31.
|
5
|
|
Performance
figures may reflect fee waivers and/or expense reimbursements. In the absence
of fee waivers and/or expense reimbursements, the total return would have
been lower.
|
6
|
|
The
total return calculation assumes that distributions are reinvested in accordance
with the Funds dividend reinvestment plan. Past performance is no guarantee
of future results. Total returns for periods of less than one year are not
annualized.
|
7
|
|
Annualized.
|
8
|
|
Included
in the expense ratios are certain non-recurring restructuring (and
reorganization, if applicable) fees that were incurred by the Fund during the
period. Without these fees, the gross and net expense ratios would not have
changed.
|
9
|
|
Ratio
includes commitment fees incurred on the line of credit.
|
10
|
|
The
impact of compensating balance arrangements, if any, was less than 0.01%.
|
11
|
|
Reflects
fee waivers and/or expense reimbursements.
|
12
|
|
Excluding
mortgage dollar roll transactions. If mortgage dollar roll transactions had
been included, the portfolio turnover rate would have been 59% for the six
months ended June 30, 2010, 185% for the year ended December 31,
2009 and 177% for the year ended October 31, 2008.
|
See Notes to Financial Statements.
16
|
|
LMP Capital and Income
Fund Inc. 2010 Semi-Annual Report
|
|
|
Notes
to financial statements (unaudited)
1.
Organization and significant accounting policies
LMP
Capital and Income Fund Inc. (the Fund) was incorporated in Maryland on November 12,
2003 and is registered as a non-diversified, closed-end management investment
company under the Investment Company Act of 1940, as amended (the 1940 Act).
The Board of Directors authorized 100 million shares of $0.001 par value common
stock. The Funds investment objective is total return with an emphasis on
income. The Fund pursues its investment objective by investing at least 80% of
its assets in a broad range of equity and fixed income securities of both U.S.
and foreign issuers.
The
following are significant accounting policies consistently followed by the Fund
and are in conformity with U.S. generally accepted accounting principles (GAAP).
Estimates and assumptions are required to be made regarding assets, liabilities
and changes in net assets resulting from operations when financial statements
are prepared. Changes in the economic environment, financial markets and any
other parameters used in determining these estimates could cause actual results
to differ. Subsequent events have been evaluated through the date the financial
statements were issued.
(a) Investment valuation.
Equity securities for which
market quotations are available are valued at the last reported sales price or
official closing price on the primary market or exchange on which they trade.
Debt securities are valued at the mean between the last quoted bid and asked
prices provided by an independent pricing service, which are based on
transactions in debt obligations, quotations from bond dealers, market
transactions in comparable securities and various other relationships between
securities. Publicly traded foreign government debt securities are typically
traded internationally in the over-the-counter market, and are valued at the
mean between the last quoted bid and asked prices as of the close of business
of that market. Futures contracts are valued daily at the settlement price
established by the board of trade or exchange on which they are traded. When
prices are not readily available, or are determined not to reflect fair value,
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 at fair value as determined in accordance with procedures
approved by the Funds Board of Directors. Fair valuing of securities may be
also determined with the assistance of a pricing service using calculations
based on indices of domestic securities and the appropriate indicators, such as
prices of relevant American depository receipts (ADRs) and future contracts.
Short-term obligations with maturities of 60 days or less are valued at
amortized cost, which approximates fair value.
The
Fund has adopted Financial Accounting Standards Board Codification Topic 820 (ASC
Topic 820). ASC Topic 820 establishes a single definition of fair value,
creates a three-tier hierarchy as a framework for measuring fair value based on
inputs used to value the Funds investments, and requires additional disclosure
about fair value. The hierarchy of inputs is summarized below.
·
|
|
Level
1 quoted prices in active markets for identical investments
|
·
|
|
Level
2 other significant observable inputs (including quoted prices for similar
investments, interest rates, prepayment speeds, credit risk, etc.)
|
·
|
|
Level
3 significant unobservable inputs (including the Funds own assumptions in
determining the fair value of investments)
|
The
inputs or methodology used for valuing securities are not necessarily an
indication of the risk associated with investing in those securities.
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 the
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
convert future amounts of cash flow to a single present amount.
|
|
LMP
Capital and Income Fund Inc. 2010 Semi-Annual Report
|
|
17
|
The
following is a summary of the inputs used in valuing the Funds assets carried
at fair value:
Description
|
|
Quoted Prices
(Level 1)
|
|
Other Significant
Observable Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Total
|
|
Long-term investments:
|
|
|
|
|
|
|
|
|
|
Common stocks:
|
|
|
|
|
|
|
|
|
|
Consumer discretionary
|
|
$
23,990,485
|
|
|
$
5,221,749
|
|
|
|
|
|
$
29,212,234
|
|
|
Other common stocks
|
|
272,479,304
|
|
|
|
|
|
|
|
|
272,479,304
|
|
|
Convertible preferred stocks:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy
|
|
|
|
|
7,702,000
|
|
|
|
|
|
7,702,000
|
|
|
Financials
|
|
|
|
|
6,787,500
|
|
|
|
|
|
6,787,500
|
|
|
Utilities
|
|
7,417,603
|
|
|
|
|
|
|
|
|
7,417,603
|
|
|
Preferred stocks
|
|
15,004
|
|
|
|
|
|
|
|
|
15,004
|
|
|
Asset-backed securities
|
|
|
|
|
3,935,105
|
|
|
$29,933
|
|
|
3,965,038
|
|
|
Collateralized mortgage obligations
|
|
|
|
|
6,406,326
|
|
|
|
|
|
6,406,326
|
|
|
Convertible bonds & notes
|
|
|
|
|
5,906,875
|
|
|
|
|
|
5,906,875
|
|
|
Corporate bonds & notes
|
|
|
|
|
29,790,609
|
|
|
|
|
|
29,790,609
|
|
|
Mortgage-backed securities
|
|
|
|
|
10,619,378
|
|
|
|
|
|
10,619,378
|
|
|
U.S. government & agency obligations
|
|
|
|
|
17,995,805
|
|
|
|
|
|
17,995,805
|
|
|
U.S. Treasury inflation protected securities
|
|
|
|
|
558,445
|
|
|
|
|
|
558,445
|
|
|
Purchased options
|
|
11,813
|
|
|
|
|
|
|
|
|
11,813
|
|
|
Warrants
|
|
756
|
|
|
|
|
|
2
|
|
|
758
|
|
|
Total long-term investments
|
|
$303,914,965
|
|
|
$
94,923,792
|
|
|
$29,935
|
|
|
$398,868,692
|
|
|
Short-term investments
|
|
|
|
|
16,925,000
|
|
|
|
|
|
16,925,000
|
|
|
Total investments
|
|
$303,914,965
|
|
|
$111,848,792
|
|
|
$29,935
|
|
|
$415,793,692
|
|
|
Other financial instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Futures contracts
|
|
(31,570
|
)
|
|
|
|
|
|
|
|
(31,570
|
)
|
|
Written options
|
|
(7,206
|
)
|
|
|
|
|
|
|
|
(7,206
|
)
|
|
Total other financial
instruments
|
|
$ (38,776
|
)
|
|
|
|
|
|
|
|
$
(38,776
|
)
|
|
Total
|
|
$303,876,189
|
|
|
$111,848,792
|
|
|
$29,935
|
|
|
$415,754,916
|
|
|
See
Schedule of Investments for additional detailed categorizations.
Following
is a reconciliation of investments in which significant unobservable inputs
(Level 3) were used in determining fair value:
Investments in Securities
|
|
Asset-Backed
Securities
|
|
Warrants
|
|
Total
|
|
Balance as of December 31, 2009
|
|
$
35
|
|
|
$ 0
|
*
|
|
$ 35
|
|
|
Accrued premiums/discounts
|
|
|
|
|
|
|
|
|
|
|
Realized gain/(loss)
1
|
|
|
|
|
|
|
|
|
|
|
Change in unrealized appreciation (depreciation)
2
|
|
|
|
|
2
|
|
|
2
|
|
|
Net purchases (sales)
|
|
|
|
|
|
|
|
|
|
|
Transfers in to Level 3
|
|
29,933
|
|
|
|
|
|
29,933
|
|
|
Transfers out of Level 3
|
|
(35
|
)
|
|
|
|
|
(35
|
)
|
|
Balance as of June 30, 2010
|
|
$29,933
|
|
|
$ 2
|
|
|
$29,935
|
|
|
Net change in unrealized appreciation (depreciation) for
investments in securities still held at June 30, 2010
2
|
|
|
|
|
$ 2
|
|
|
$ 2
|
|
|
*
|
|
Value
less than $1.
|
1
|
|
This
amount is included in the net realized gain (loss) from investment
transactions in the accompanying
|
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.
|
(b) Repurchase agreements.
The Fund may
enter into repurchase agreements with institutions that its investment adviser has
determined are creditworthy. Each repurchase agreement is recorded at cost.
Under the terms of a typical repurchase agreement, a fund takes possession of
an underlying
18
|
|
LMP Capital and Income
Fund Inc. 2010 Semi-Annual Report
|
|
|
Notes
to financial statements (unaudited) (contd)
debt
obligation subject to an obligation of the seller to repurchase, and of the
fund to resell, the obligation at an agreed-upon price and time, thereby
determining the yield during a funds holding period. When entering into
repurchase agreements, it is the Funds policy that its custodian or a third
party custodian, acting on the Funds behalf, take possession of the underlying
collateral securities, the market value of which, at all times, at least equals
the principal amount of the repurchase transaction, including accrued interest.
To the extent that any repurchase transaction maturity exceeds one business
day, the value of the collateral is marked to market and measured against the
value of the agreement in an effort to ensure the adequacy of the collateral.
If the counterparty defaults, the Fund generally has the right to use the collateral
to satisfy the terms of the repurchase transaction. However, if the market
value of the collateral declines during the period in which the Fund seeks to
assert its rights or if bankruptcy proceedings are commenced with respect to
the seller of the security, realization of the collateral by the Fund may be
delayed or limited.
(c) Written options.
When the Fund writes an
option, an amount equal to the premium received by the Fund is recorded as a
liability, the value of which is marked to market daily to reflect the current
market value of the option written. If the option expires, the premium received
is recorded as a realized gain. When a written call option is exercised, the
difference between the premium received plus the option exercise price and the
Funds basis in the underlying security (in the case of a covered written call
option), or the cost to purchase the underlying security (in the case of an
uncovered written call option), including brokerage commission, is recognized
as a realized gain or loss. When a written put option is exercised, the amount
of the premium received is subtracted from the cost of the security purchased
by the Fund from the exercise of the written put option to form the Funds
basis in the underlying security purchased. The writer or buyer of an option
traded on an exchange can liquidate the position before the exercise of the
option by entering into a closing transaction. The cost of a closing
transaction is deducted from the original premium received resulting in a realized
gain or loss to the Fund.
The
risk in writing a covered call option is that the Fund may forego the
opportunity of profit if the market price of the underlying security increases
and the option is exercised. The risk in writing a put option is that the Fund
may incur a loss if the market price of the underlying security decreases and
the option is exercised. The risk in writing a call option is that the Fund is
exposed to the risk of loss if the market price of the underlying security
increases. In addition, there is the risk that the Fund may not be able to
enter into a closing transaction because of an illiquid secondary market.
(d) Futures contracts.
The Fund may use futures
contracts to gain exposure to, or hedge against, changes in the value of equities,
interest rates or foreign currencies. A futures contract represents a
commitment for the future purchase or sale of an asset at a specified price on
a specified date.
Upon
entering into a futures contract, the Fund is required to deposit cash or cash
equivalents with a broker in an amount equal to a certain percentage of the
contract amount. This is known as the initial margin and subsequent payments
(variation margin) are made or received by the Fund each day, depending on
the daily fluctuation in the value of the contract. For certain futures,
including foreign denominated futures, variation margin is not settled daily,
but is recorded as a net variation margin payable or receivable. Futures
contracts are valued daily at the settlement price established by the board of
trade or exchange on which they are traded. The daily changes in contract value
are recorded as unrealized gains or losses in the Statement of Operations and
the Fund recognizes a realized gain or loss when the contract is closed.
Futures
contracts involve, to varying degrees, risk of loss in excess of the amounts
reflected in the financial statements. In addition, there is the risk that the
Fund may not be able to enter into a closing transaction because of an illiquid
secondary market.
(e) Inflation-indexed bonds.
Inflation-indexed bonds are fixed-income securities whose principal value or
interest rate is periodically adjusted according to the rate of inflation. As
the index measuring inflation changes, the principal value or interest rate of
inflation-indexed bonds will be adjusted accordingly. Inflation adjustments to
the principal amount of inflation-indexed bonds are reflected as an increase or
decrease to investment income on the Statement of Operations. Repayment of the
|
|
LMP
Capital and Income Fund Inc. 2010 Semi-Annual Report
|
|
19
|
original
bond principal upon maturity (as adjusted for inflation) is guaranteed in the
case of U.S. Treasury inflation-indexed bonds. For bonds that do not provide a
similar guarantee, the adjusted principal value of the bond repaid at maturity
may be less than the original principal.
(f) Forward foreign currency contracts.
The Fund may
enter into a forward foreign currency contract to hedge against foreign
currency exchange rate risk on its non-U.S. dollar denominated securities or to
facilitate settlement of a foreign currency denominated portfolio transaction.
A forward foreign currency contract is an agreement between two parties to buy
and sell a currency at a set price with delivery and settlement at a future
date. The contract is marked-to-market daily and the change in value is
recorded by the Fund as an unrealized gain or loss. When a forward foreign
currency contract is closed, through either delivery or offset by entering into
another forward foreign currency contract, the Fund recognizes a realized gain
or loss equal to the difference between the value of the contract at the time
it was opened and the value of the contract at the time it is closed.
Forward
foreign currency contracts involve elements of market risk in excess of the
amounts reflected on the Statement of Assets and Liabilities. The Fund bears
the risk of an unfavorable change in the foreign exchange rate underlying the forward
foreign currency contract. Risks may also arise upon entering into these
contracts from the potential inability of the counterparties to meet the terms
of their contracts.
(g) 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 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 Funds 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.
(h) Securities traded on a to-be-announced basis.
The Fund may
trade securities on a to-be-announced (TBA) basis. In a TBA transaction, the
Fund commits to purchasing or selling securities which have not yet been issued
by the issuer and for which specific information, such as the face amount,
maturity date and underlying pool of investments in U.S. government agency
mortgage pass-through securities, is not announced. Securities purchased on a
TBA basis are not settled until they are delivered to the Fund. Beginning on
the date the Fund enters into a TBA transaction, cash, U.S. government
securities or other liquid high-grade debt obligations are segregated in an
amount equal in value to the purchase price of the TBA security. These
securities are subject to market fluctuations and their current value is
determined in the same manner as for other securities.
(i) Mortgage dollar rolls.
The Fund may
enter into mortgage dollar rolls in which the Fund sells mortgage-backed
securities for delivery in the current month, realizing a gain or loss, and
simultaneously contracts to repurchase substantially similar (same type, coupon
and maturity) securities to settle on a specified future date.
20
|
|
LMP Capital and Income
Fund Inc. 2010 Semi-Annual Report
|
|
|
Notes
to financial statements (unaudited) (contd)
The
Fund executes its mortgage dollar rolls entirely in the TBA market, whereby the
Fund makes a forward commitment to purchase a security and, instead of
accepting delivery, the position is offset by a sale of the security with a
simultaneous agreement to repurchase at a future date. The Fund accounts for
mortgage dollar rolls as purchases and sales.
The
risk of entering into mortgage dollar rolls is that the market value of the
securities the Fund is obligated to repurchase under the agreement may decline
below the repurchase price. In the event the buyer of securities under a
mortgage dollar roll files for bankruptcy or becomes insolvent, the Funds use
of the proceeds of the mortgage dollar roll may be restricted pending a determination
by the counterparty, or its trustee or receiver, whether to enforce the Funds
obligation to repurchase the securities.
(j) Security transactions and investment income.
Security
transactions are accounted for on a trade date basis. Interest income, adjusted
for amortization of premium and accretion of discount, is recorded on the
accrual basis. Dividend income is recorded on the ex-dividend date. 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.
(k) Distributions to shareholders.
Distributions
from net investment income for the Fund, if any, are declared and paid on a
quarterly basis. Distributions of net realized gains, if any, are declared at
least annually. Pursuant to its Managed Distribution Policy, the Fund intends
to make regular quarterly distributions to shareholders at a fixed rate per
common share, which may be adjusted from time to time by the Funds Board of
Directors. Under the Funds Managed Distribution Policy, if, for any quarterly
distribution, the value of the Funds net investment income and net realized
capital gain is less than the amount of the distribution, the difference will
be distributed from the Funds assets (and constitute a return of capital).
The Board of Directors may terminate or suspend the Managed Distribution Policy
at any time, including when certain events would make part of the return of
capital taxable to shareholders. Any such termination or suspension could have
an adverse effect on the market price for Funds shares. Distributions are
recorded on the ex-dividend date and are determined in accordance with income
tax regulations, which may differ from GAAP.
(l) REIT distributions.
The character of
distributions received from Real Estate Investment Trusts (REITs) held by the
Fund is generally comprised of net investment income, capital gains, and return
of capital. It is the policy of the Fund to estimate the character of
distributions received from underlying REITs based on historical data provided
by the REITs. After each calendar year end, REITs report the actual tax
character of these distributions. Differences between the estimated and actual
amounts reported by the REITs are reflected in the Funds records in the year
in which they are reported by the REITs by adjusting related investment cost
basis, capital gains and income, as necessary.
(m) Cash flow information.
The Fund
invests in securities and distributes dividends from net investment income, net
realized gains and return of capital, if any, 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.
(n) Compensating balance arrangements.
The Fund has
an arrangement with its custodian bank whereby a portion of the custodians
fees is paid indirectly by credits earned on the Funds cash on deposit with
the bank. Interest expense, if any, paid to the custodian related to cash
overdrafts is included in interest expense in the Statement of Operations.
(o) Federal and other taxes.
It is the Funds
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
|
|
LMP
Capital and Income Fund Inc. 2010 Semi-Annual Report
|
|
21
|
realized
gains, if any, to shareholders in accordance with timing requirements imposed
by the Code. Therefore, no federal income tax provision is required in the Funds
financial statements.
Management
has analyzed the Funds tax positions taken on federal income tax returns for
all open tax years and has concluded that as of June 30, 2010, no provision
for income tax is required in the Funds financial statements. The Funds
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 Internal Revenue Service and state departments of revenue.
Under
the applicable foreign tax laws, a withholding tax may be imposed on interest,
dividends and capital gains at various rates.
(p) 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.
2.
Investment management agreement and other transactions with affiliates
Legg
Mason Partners Fund Advisor, LLC (LMPFA) is the Funds investment manager.
ClearBridge Advisors, LLC (ClearBridge), Western Asset Management Company (Western
Asset) and Western Asset Management Company Limited (Western Asset Limited)
are the Funds subadvisers. LMPFA, ClearBridge, Western Asset and Western Asset
Limited are wholly-owned subsidiaries of Legg Mason, Inc. (Legg Mason).
LMPFA
provides administrative and certain oversight services to the Fund. The Fund
pays LMPFA an investment management fee, calculated daily and paid monthly, at
an annual rate of 0.85% of the Funds average daily net assets plus the
proceeds of any outstanding borrowings used for leverage.
LMPFA
delegates to the subadvisers the day-to-day portfolio management of the Fund.
ClearBridge provides investment advisory services to the Fund by both
determining the allocation of the Funds assets between equity and fixed-income
investments and performing the day-to-day management of the Funds investments
in equity securities. Western Asset provides advisory services to the Fund by
performing the day-to-day management of the Funds fixed-income investments.
For its services, LMPFA pays the subadvisers 70% of the net management fee it
receives from the Fund. This fee will be divided on a pro rata basis, based on
assets allocated to each subadviser, from time to time.
Western
Asset Limited provides certain advisory services to the Fund relating to
currency transactions and investments in non-U.S. dollar denominated
securities. Western Asset Limited does not receive any compensation from the
Fund. In turn, Western Asset pays Western Asset Limited a subadvisory fee of
0.30% on the assets managed by Western Asset Limited.
During
periods in which the Fund is utilizing leverage, the fees which are payable to
LMPFA as a percentage of the Funds net assets will be higher then if the Fund
did not utilize leverage because the fees are calculated as a percentage of the
Funds net assets, including those investments purchased with leverage.
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 June 30, 2010, the aggregate cost of purchases and
proceeds from sales of investments (excluding short-term investments) and U.S
Government & Agency Obligations were as follows:
|
|
Investments
|
|
U.S.
Government & Agency Obligations
|
|
Purchases
|
|
$58,138,563
|
|
|
$185,966,636
|
|
|
Sales
|
|
43,310,787
|
|
|
189,693,025
|
|
|
22
|
|
LMP Capital and Income
Fund Inc. 2010 Semi-Annual Report
|
|
|
Notes
to financial statements (unaudited) (contd)
At
June 30, 2010, the aggregate gross unrealized appreciation and
depreciation of investments for federal income tax purposes were substantially
as follows:
Gross unrealized appreciation
|
|
$ 19,751,231
|
|
|
Gross unrealized depreciation
|
|
(23,829,945
|
)
|
|
Net unrealized depreciation
|
|
$
(4,078,714
|
)
|
|
At
June 30, 2010, the Fund had the following open futures contracts:
|
|
Number
of
Contracts
|
|
Expiration
Date
|
|
Basis
Value
|
|
Market
Value
|
|
Unrealized
Gain/(Loss)
|
|
Contracts to Buy:
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury Bonds
|
|
24
|
|
9/10
|
|
$ 3,186,578
|
|
$ 3,259,500
|
|
$
72,922
|
|
|
U.S. Treasury 10-Year Notes
|
|
12
|
|
9/10
|
|
1,437,844
|
|
1,470,563
|
|
32,719
|
|
|
|
|
|
|
|
|
|
|
|
|
105,641
|
|
|
Contracts to Sell:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury 5-Year Notes
|
|
96
|
|
9/10
|
|
11,224,539
|
|
11,361,750
|
|
(137,211
|
)
|
|
Net unrealized loss on open
futures contracts
|
|
|
|
|
|
|
|
|
|
$ (31,570
|
)
|
|
During
the six months ended June 30, 2010, written option transactions for the
Fund were as follows:
|
|
Number
of Contracts
|
|
Premiums
|
|
Written options, outstanding December 31,
2009
|
|
14
|
|
|
$
7,917
|
|
|
|
Options written
|
|
25
|
|
|
10,934
|
|
|
|
Options closed
|
|
(9
|
)
|
|
(4,986
|
)
|
|
|
Options exercised
|
|
(5
|
)
|
|
(2,484
|
)
|
|
|
Options expired
|
|
(5
|
)
|
|
(296
|
)
|
|
|
Written options, outstanding
June 30, 2010
|
|
20
|
|
|
$11,085
|
|
|
|
4.
Derivative instruments and hedging activities
Financial
Accounting Standards Board Codification Topic 815 requires enhanced disclosure
about an entitys derivative and hedging activities.
Below
is a table, grouped by derivative type that provides information about the fair
value and the location of derivatives within the Statement of Assets and
Liabilities at June 30, 2010.
|
|
Interest Rate
Contracts Risk
|
|
Purchased options
2
|
|
$
11,813
|
|
Futures contracts
3
|
|
105,641
|
|
Total
|
|
$117,454
|
|
|
|
Interest Rate
Contracts Risk
|
|
Written options
|
|
$
7,206
|
|
Futures contracts
3
|
|
137,211
|
|
Total
|
|
$144,417
|
|
1
|
|
Generally,
the balance sheet location for asset derivatives is receivables/net
unrealized appreciation(depreciation) and for liability derivatives is
payables/net unrealized appreciation(depreciation).
|
2
|
|
Market
value of purchased options is reported in Investments of value in the
Statement of Assets and Liabilities.
|
3
|
|
Includes
cumulative appreciation/depreciation of futures contracts as reported in the
footnotes. Only variation margin is reported within the receivables and/or
payables of the Statement of Assets and Liabilities.
|
|
|
LMP
Capital and Income Fund Inc. 2010 Semi-Annual Report
|
|
23
|
The following tables provide information about the effect of
derivatives and hedging activities on the Funds Statement of Operations for
the six months ended June 30, 2010. The first table provides additional detail
about the amounts and sources of gains/(losses) realized on derivatives during
the period. The second table provides additional information about the changes
in unrealized appreciation/(depreciation) resulting from the Funds derivatives
and hedging activities during the period.
AMOUNT OF
REALIZED GAIN OR (LOSS) ON DERIVATIVES RECOGNIZED
|
|
Interest Rate
Contracts Risk
|
|
Foreign
Exchange
Contracts Risk
|
|
Total
|
|
Purchased options
|
|
$
(3,336
|
)
|
|
|
|
|
$
(3,336
|
)
|
|
Written options
|
|
6,378
|
|
|
|
|
|
6,378
|
|
|
Futures contracts
|
|
155,845
|
|
|
|
|
|
155,845
|
|
|
Forward foreign currency contracts
|
|
|
|
|
$(10,671
|
)
|
|
(10,671
|
)
|
|
Total
|
|
$158,887
|
|
|
$(10,671
|
)
|
|
$148,216
|
|
|
CHANGE IN
UNREALIZED APPRECIATION/DEPRECIATION ON DERIVATIVES RECOGNIZED
|
|
Interest
Rate
Contracts Risk
|
|
Purchased options
|
|
$
1,467
|
|
|
Written options
|
|
3,618
|
|
|
Futures contracts
|
|
(16,545
|
)
|
|
Total
|
|
$(11,460
|
)
|
|
During
the six months ended June 30, 2010, the volume of derivative activity for
the Fund was as follows:
|
|
Average
Market Value
|
|
Purchased options
|
|
$ 5,203
|
|
|
Written options
|
|
7,522
|
|
|
Futures contracts (to buy)
|
|
7,723,803
|
|
|
Futures contracts (to sell)
|
|
10,845,733
|
|
|
Forward foreign currency contracts (to sell)
|
|
251,892
|
|
|
At
June 30, 2010, there were no open positions held in these derivatives.
The
Fund has several credit related contingent features that if triggered would
allow its derivatives counterparties to close out and demand payment or
additional collateral to cover their exposure from the Fund. Credit related
contingent features are established between the Fund and its derivatives
counterparties to reduce the risk that the Fund will not fulfill its payment
obligations to its counterparties. These triggering features include, but are
not limited to, a percentage decrease in the Funds net assets and/or a
percentage decrease in the Funds Net Asset Value or NAV. The contingent
features are established within the Funds International Swap and Derivatives
Association, Inc. master agreements which govern positions in swaps,
over-the-counter options, and forward currency exchange contracts for each
individual counterparty.
5. Line
of Credit
The
Fund has a 364-day revolving credit agreement with a financial institution,
which allows the Fund to borrow up to an aggregate amount of $125,000,000. This
agreement was amended on December 16, 2009 and will terminate on December 15,
2010. The Fund pays a quarterly facility fee at an annual rate of 0.15%, on the
unutilized portion of the loan. For the period January 1, 2009 to December 16,
2009 the Fund paid a quarterly facility fee at an annual rate of 0.20% on the
unutilized portion of the loan. The interest on the loan is calculated at a
variable rate based on the LIBOR, Fed Funds or Prime Rates plus any applicable
margin. Interest expense related to the loan for the six
24
|
|
LMP Capital and Income
Fund Inc. 2010 Semi-Annual Report
|
|
|
Notes
to financial statements (unaudited) (contd)
months
ended June 30, 2010 was $474,181. For the six months ended June 30,
2010, the Fund incurred a commitment fee in the amount of $49,020. For the six
months ended June 30, 2010 the Fund had an average daily loan balance
outstanding of $60 million and the weighted average interest rate was 1.57%. At
June 30, 2010 the Fund had $60,000,000 of borrowings outstanding per this
credit agreement.
6.
Capital shares
On
November 20, 2006, the Funds Board of Directors authorized the Fund to
repurchase from time to time in the open market up to 1,000,000 shares of the
Funds common stock (the Program). The Board of Directors directed the
management of the Fund to repurchase shares of the Funds common stock at such
times and in such amounts as management believes will enhance shareholder
value, subject to review by the Funds Board of Directors. During the period
ended June 30, 2010, no shares of common stock have been repurchased under
this program.
This
is the fourth repurchase program authorized by the Funds Board of Directors
since the Funds inception in 2004. Pursuant to the Funds previous three
repurchase programs of up to 1,000,000 shares each, the Fund has repurchased
3,000,000 shares of common stock.
7.
Distributions subsequent to June 30, 2010
On
August 12, 2010 the Funds Board of Directors declared a quarterly
distribution of $0.13 per share payable on September 24, 2010 to
shareholders of record on September 17, 2010.
8.
Capital loss carryforward
As
of December 31, 2009, the Fund had a net capital loss carryforward of
approximately $200,458,531, of which $51,940,897 expires in 2015, $26,544,566
expires in 2016 and $121,973,068 expires in 2017. These amounts will be
available to offset any future taxable capital gains.
|
|
LMP
Capital and Income Fund Inc.
|
|
25
|
Additional
shareholder information (unaudited)
Results
of annual meeting of shareholders
The
Annual Meeting of Shareholders of LMP Capital and Income Fund Inc. was held on April 30,
2010, for the purpose of considering and voting upon the election of Directors.
The following table provides information concerning the matter voted upon at
the meeting:
Election
of directors
Nominees
|
|
Common
Shares Voted
for Election
|
|
Common
Shares
Withheld
|
|
Leslie H. Gelb
|
|
23,198,897
|
|
3,697,120
|
|
R. Jay Gerken
|
|
23,245,128
|
|
3,650,889
|
|
William R. Hutchinson
|
|
23,237,143
|
|
3,658,874
|
|
At
June 30, 2010, in addition to Leslie H. Gelb, R. Jay Gerken and William R.
Hutchinson the other Directors of the Fund were as follows:
Carol
L. Colman
Daniel
P. Cronin
Paolo
M. Cucchi
Riordan
Roett
Jeswald
W. Salacuse
26
|
|
LMP Capital and Income
Fund Inc.
|
|
|
Dividend
reinvestment plan (unaudited)
Unless
you elect to receive distributions in cash, all distributions, on your Common
Shares will be automatically reinvested by American Stock Transfer &
Trust Company, as agent for the Common Shareholders (the Plan Agent), in
additional Common Shares under the 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 American Stock Transfer & Trust Company as
dividend paying agent.
If
you participate in the Plan, the number of Common Shares you will receive will
be determined as follows:
(1) If
the market price of the Common Shares on the record date (or, if the record
date is not a New York Stock Exchange trading day, the immediately preceding
trading day) for determining shareholders eligible to receive the relevant
distribution (the determination date) is equal to or exceeds the net asset
value per share of the Common Shares, the Fund will issue new Common Shares at
a price equal to the greater of (a) the net asset value per share at the
close of trading on the Exchange on the determination date or (b) 95% of
the market price per share of the Common Shares on the determination date.
(2) If
the net asset value per share of the Common Shares exceeds the market price of
the Common Shares on the determination date, the Plan Agent will receive the
distribution in cash and will buy Common Shares in the open market, on the
Exchange or elsewhere, for your account as soon as practicable commencing on
the trading day following the determination date and terminating no later than
the earlier of (a) 30 days after the distribution payment date, or (b) the
record date for the next succeeding distribution to be made to the Common
Shareholders; except when necessary to comply with applicable provisions of the
federal securities laws. If during this period: (i) the market price rises
so that it equals or exceeds the net asset value per share of the Common Shares
at the close of trading on the Exchange on the determination 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 Shares in the
open market and the Fund shall issue the remaining Common Shares at a price per
share equal to the greater of (a) the net asset value per share at the
close of trading on the Exchange on the determination date or (b) 95% of
the then current market price per share.
The
Plan Agent maintains all participants accounts in the Plan and gives written
confirmation of all transactions in the accounts, including information you may
need for tax records. Common Shares in your account will be held by the Plan
Agent in non-certified form. Any proxy you receive will include all Common Shares
you have received under the Plan.
You
may withdraw from the Plan by notifying the Plan Agent in writing at 59 Maiden
Lane, New York, New York 10038. 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 Agents investment of the most
recently declared dividend or distribution on the Common Shares. The Plan may be
terminated by the Fund upon notice in writing mailed to Common Shareholders at
least 30 days prior to the record date for the payment of any dividend or
distribution by the Fund for which the termination is to be effective. Upon any
termination, you will be sent a certificate or certificates for the full Common
Shares held for you under the Plan and cash for any fractional Common Shares.
You may elect to notify the Plan Agent in advance of such termination to have
the Plan Agent sell part or all of your shares on your behalf. The Plan Agent
is authorized to deduct brokerage charges actually incurred for this
transaction from the proceeds.
There
is no service charge for reinvestment of your dividends or distributions in
Common Shares. However, all participants will pay a pro rata share of brokerage
commissions incurred by the Plan
|
|
LMP
Capital and Income Fund Inc.
|
|
27
|
Agent
when it makes open market purchases. Because all dividends and distributions will
be automatically reinvested in additional Common Shares, this allows you to add
to your investment through dollar cost averaging, which may lower the average
cost of your Common Shares over time.
Automatically
reinvesting dividends and distributions does not mean that you do not have to
pay income taxes due upon receiving dividends and distributions.
The
Fund reserves the right to amend or terminate the Plan if, in the judgment of
the Board of Directors, the change is warranted. There is no direct service
charge to participants in the Plan; however, the Fund reserves the right to
amend the Plan to include a service charge payable by the participants.
Additional information about the Plan and your account may be obtained from the
Plan Agent at 1-877-366-6441.
LMP
Capital and Income Fund Inc.
Directors
Carol L. Colman
Daniel P. Cronin
Paolo M. Cucchi
Leslie H. Gelb
R. Jay Gerken, CFA
Chairman
William R. Hutchinson
Riordan Roett
Jeswald W. Salacuse
Officers
R. Jay Gerken, CFA
President and Chief Executive Officer
Kaprel Ozsolak
Chief Financial Officer
Ted P. Becker
Chief Compliance Officer
John Chiota
Identity Theft Prevention Officer
Robert I. Frenkel
Secretary and Chief Legal Officer
Thomas C. Mandia
Assistant Secretary
Steven Frank
Treasurer
Jeanne M. Kelly
Senior Vice President
|
|
LMP Capital and Income Fund
Inc.
55 Water Street
New York, NY 10041
Investment manager
Legg Mason Partners Fund
Advisor, LLC
Subadvisers
ClearBridge Advisors,
LLC
Western Asset Management
Company
Western Asset Management
Company Limited
Custodian
State Street Bank and
Trust Company
1 Lincoln Street
Boston, MA 02111
Transfer agent
American Stock
Transfer & Trust Company
59 Maiden Lane
New York, NY 10038
|
|
Independent registered public
accounting firm
KPMG LLP
345 Park Avenue
New York, NY 10154
Legal counsel
Simpson
Thacher & Bartlett LLP
425 Lexington Avenue
New York, NY 10017
New York Stock Exchange Symbol
SCD
|
Privacy
policy
We
are committed to keeping nonpublic personal information about you secure and
confidential. This notice is intended to help you understand how we fulfill
this commitment. From time to time, we may collect a variety of personal
information about you, including:
·
Information
we receive from you on applications and forms, via the telephone, and through
our websites;
·
Information
about your transactions with us, our affiliates, or others (such as your
purchases, sales, or account balances); and
·
Information
we receive from consumer reporting agencies.
We
do not disclose nonpublic personal information about our customers or former
customers, except to our affiliates (such as broker-dealers or investment
advisers with the Legg Mason family of companies) or as is otherwise permitted
by applicable law or regulation. For example, we may share this information
with others in order to process your transactions or service an account. We may
also provide this information to companies that perform marketing services on
our behalf, such as printing and mailing, or to other financial institutions
with whom we have joint marketing agreements. When we enter into such
agreements, we will require these companies to protect the confidentiality of
this information and to use it only to perform the services for which we hired
them.
With
respect to our internal security procedures, we maintain physical, electronic,
and procedural safeguards to protect your nonpublic personal information, and
we restrict access to this information.
If
you decide at some point either to close your account(s) or become an
inactive customer, we will continue to adhere to our privacy policies and
practices with respect to your nonpublic personal information.
NOT PART OF THE SEMI-ANNUAL REPORT
|
LMP
Capital and Income Fund Inc.
LMP
Capital and Income Fund Inc.
55 Water Street
New York, NY 10041
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 common stock in the open market.
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 on Form N-Q. The Funds Forms N-Q are available on the SECs website
at www.sec.gov. The Funds Forms N-Q may be reviewed and copied at the SECs
Public Reference Room in Washington D.C., and information on the operation
of the Public Reference Room may be obtained by calling 1-800-SEC-0330. To
obtain information on Form N-Q from the Fund, shareholders can call 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) on the Funds website at
www.leggmason.com/cef and (3) on the SECs website at www.sec.gov.
This
report is transmitted to the shareholders of LMP Capital and Income 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.
American
Stock
Transfer & Trust Company
59 Maiden Lane
New York, NY 10038
FD04219 8/10 SR10-1172
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.
Included
herein under Item 1.
ITEM 7.
DISCLOSURE OF
PROXY VOITNG POLIIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT
COMPANIES.
Not
applicable.
ITEM 8.
PORTFOLIO
MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not
applicable.
ITEM 9.
PURCHASES OF
EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED
PURCHASERS.
Not
applicable.
ITEM 10.
SUBMISSION OF
MATTERS TO A VOTE OF SECURITY HOLDERS.
Not
applicable.
ITEM 11.
CONTROLS AND
PROCEDURES.
(a)
The registrants
principal executive officer and principal financial officer have concluded that
the registrants disclosure controls and procedures (as defined in Rule 30a-
3(c) under the Investment Company Act of 1940, as amended (the 1940
Act)) are effective as of a date within 90 days of the filing date of this
report that includes the disclosure required by this paragraph, based on their
evaluation of the disclosure controls and procedures required by Rule 30a-3(b) under
the 1940 Act and 15d-15(b) under the Securities Exchange Act of 1934.
(b)
There were no
changes in the registrants internal control over financial reporting (as
defined in Rule 30a-3(d) under the 1940 Act) that occurred during the
registrants last fiscal half-year (the registrants second fiscal half-year in
the case of an annual report) that have materially affected,
or
are likely to materially affect the registrants internal control over
financial reporting.
ITEM
12.
EXHIBITS.
(a) (1) Not applicable.
Exhibit 99.CODE ETH
(a) (2)
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.
LMP Capital and Income Fund Inc.
By:
|
/s/
R. Jay Gerken
|
|
|
R.
Jay Gerken
|
|
|
Chief
Executive Officer
|
|
|
LMP Capital and Income Fund Inc.
|
|
|
|
|
Date:
|
August 31,
2010
|
|
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/
R. Jay Gerken
|
|
|
(R.
Jay Gerken)
|
|
|
Chief
Executive Officer
|
|
|
LMP Capital and Income Fund Inc.
|
|
|
|
|
Date:
|
August 31,
2010
|
|
By:
|
/s/
Kaprel Ozsolak
|
|
|
(Kaprel
Ozsolak)
|
|
|
Chief
Financial Officer
|
|
|
LMP Capital and Income Fund Inc.
|
|
|
|
|
Date:
|
August 31,
2010
|
|
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