UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-Q
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY
Investment
Company Act file number
|
811-21467
|
|
|
LMP
Capital and Income Fund Inc.
|
(Exact name of registrant as specified in charter)
|
|
55 Water Street, New York, NY
|
|
10041
|
(Address of principal executive offices)
|
|
(Zip code)
|
|
Robert I. Frenkel, Esq.
Legg Mason & Co., LLC
100 First Stamford Place
Stamford, CT 06902
|
(Name and address of agent for service)
|
|
Registrants
telephone number, including area code:
|
1-888-777-0102
|
|
|
Date of
fiscal year end:
|
December 31
|
|
|
|
|
Date of
reporting period:
|
September
30, 2010
|
|
|
|
|
|
|
|
|
ITEM
1. SCHEDULE OF INVESTMENTS
LMP CAPITAL AND INCOME FUND INC.
FORM N-Q
SEPTEMBER 30, 2010
LMP CAPITAL AND INCOME FUND INC.
Schedule of investments (unaudited)
September 30, 2010
SECURITY
|
|
SHARES
|
|
VALUE
|
|
COMMON
STOCKS 69.8%
|
|
|
|
|
|
CONSUMER
DISCRETIONARY 6.4%
|
|
|
|
|
|
Hotels,
Restaurants & Leisure 2.1%
|
|
|
|
|
|
McDonalds Corp.
|
|
145,000
|
|
$
|
10,803,950
|
|
Media 2.6%
|
|
|
|
|
|
Charter Communications
Inc.
|
|
11,990
|
|
389,675
|
(a)
|
Reed Elsevier PLC
|
|
650,000
|
|
5,493,435
|
|
Thomson Corp.
|
|
200,000
|
|
7,506,000
|
|
Total Media
|
|
|
|
13,389,110
|
|
Specialty Retail 1.7%
|
|
|
|
|
|
Home Depot Inc.
|
|
270,000
|
|
8,553,600
|
|
TOTAL CONSUMER
DISCRETIONARY
|
|
|
|
32,746,660
|
|
CONSUMER
STAPLES 10.3%
|
|
|
|
|
|
Beverages 0.9%
|
|
|
|
|
|
PepsiCo Inc.
|
|
71,530
|
|
4,752,453
|
|
Food Products 3.9%
|
|
|
|
|
|
H.J. Heinz Co.
|
|
310,000
|
|
14,684,700
|
|
Kraft Foods Inc.,
Class A Shares
|
|
177,440
|
|
5,475,799
|
|
Total Food Products
|
|
|
|
20,160,499
|
|
Household Products
5.5%
|
|
|
|
|
|
Kimberly-Clark Corp.
|
|
210,000
|
|
13,660,500
|
|
Procter & Gamble
Co.
|
|
236,500
|
|
14,182,905
|
|
Total Household Products
|
|
|
|
27,843,405
|
|
TOTAL CONSUMER STAPLES
|
|
|
|
52,756,357
|
|
ENERGY
6.4%
|
|
|
|
|
|
Energy Equipment &
Services 0.4%
|
|
|
|
|
|
Diamond Offshore Drilling
Inc.
|
|
30,000
|
|
2,033,100
|
|
Oil, Gas &
Consumable Fuels 6.0%
|
|
|
|
|
|
Exxon Mobil Corp.
|
|
60,000
|
|
3,707,400
|
|
Spectra Energy Corp.
|
|
620,000
|
|
13,981,000
|
|
Total SA, ADR
|
|
255,000
|
|
13,158,000
|
|
Total Oil, Gas &
Consumable Fuels
|
|
|
|
30,846,400
|
|
TOTAL ENERGY
|
|
|
|
32,879,500
|
|
FINANCIALS
11.4%
|
|
|
|
|
|
Capital Markets 0.9%
|
|
|
|
|
|
BlackRock Inc.
|
|
26,980
|
|
4,593,345
|
|
Insurance 2.0%
|
|
|
|
|
|
Travelers Cos. Inc.
|
|
196,160
|
|
10,219,936
|
|
Real Estate Investment
Trusts (REITs) 3.8%
|
|
|
|
|
|
Annaly Capital Management
Inc.
|
|
750,000
|
|
13,200,000
|
|
Chimera Investment Corp.
|
|
1,550,000
|
|
6,122,500
|
|
Total Real Estate Investment
Trusts (REITs)
|
|
|
|
19,322,500
|
|
Thrifts &
Mortgage Finance 4.7%
|
|
|
|
|
|
First Niagara Financial
Group Inc.
|
|
590,000
|
|
6,873,500
|
|
New York Community Bancorp
Inc.
|
|
480,000
|
|
7,800,000
|
|
Peoples United Financial
Inc.
|
|
740,000
|
|
9,686,600
|
|
Total Thrifts &
Mortgage Finance
|
|
|
|
24,360,100
|
|
TOTAL FINANCIALS
|
|
|
|
58,495,881
|
|
HEALTH
CARE 5.7%
|
|
|
|
|
|
Pharmaceuticals 5.7%
|
|
|
|
|
|
Bristol-Myers Squibb Co.
|
|
285,000
|
|
7,726,350
|
|
GlaxoSmithKline PLC, ADR
|
|
149,000
|
|
5,888,480
|
|
Johnson & Johnson
|
|
220,000
|
|
13,631,200
|
|
Pfizer Inc.
|
|
100,000
|
|
1,717,000
|
|
TOTAL HEALTH CARE
|
|
|
|
28,963,030
|
|
INDUSTRIALS
8.3%
|
|
|
|
|
|
Aerospace &
Defense 2.2%
|
|
|
|
|
|
Honeywell International
Inc.
|
|
50,000
|
|
2,197,000
|
|
|
|
|
|
|
|
|
See
Notes to Schedule of Investments.
1
LMP
CAPITAL AND INCOME FUND INC.
Schedule of investments (unaudited) (contd)
September 30,
2010
SECURITY
|
|
SHARES
|
|
VALUE
|
|
Aerospace &
Defense continued
|
|
|
|
|
|
Lockheed Martin Corp.
|
|
128,000
|
|
$
|
9,123,840
|
|
Total Aerospace &
Defense
|
|
|
|
11,320,840
|
|
Building Products 0.0%
|
|
|
|
|
|
Ashton Woods USA LLC,
Class B Membership
|
|
43
|
|
19,352
|
(a)(b)
|
Commercial Services &
Supplies 2.5%
|
|
|
|
|
|
Waste Management Inc.
|
|
350,510
|
|
12,527,227
|
|
Industrial Conglomerates
2.3%
|
|
|
|
|
|
3M Co.
|
|
70,000
|
|
6,069,700
|
|
General Electric Co.
|
|
335,000
|
|
5,443,750
|
|
Total Industrial Conglomerates
|
|
|
|
11,513,450
|
|
Marine 1.3%
|
|
|
|
|
|
Alexander &
Baldwin Inc.
|
|
196,357
|
|
6,841,078
|
|
TOTAL INDUSTRIALS
|
|
|
|
42,221,947
|
|
INFORMATION TECHNOLOGY
4.6%
|
|
|
|
|
|
IT Services 2.4%
|
|
|
|
|
|
Automatic Data Processing
Inc.
|
|
137,000
|
|
5,758,110
|
|
Paychex Inc.
|
|
230,000
|
|
6,322,700
|
|
Total IT Services
|
|
|
|
12,080,810
|
|
Semiconductors &
Semiconductor Equipment 1.8%
|
|
|
|
|
|
Intel Corp.
|
|
255,000
|
|
4,903,650
|
|
Microchip Technology Inc.
|
|
140,000
|
|
4,403,000
|
|
Total Semiconductors &
Semiconductor Equipment
|
|
|
|
9,306,650
|
|
Software 0.4%
|
|
|
|
|
|
Microsoft Corp.
|
|
94,000
|
|
2,302,060
|
|
TOTAL INFORMATION
TECHNOLOGY
|
|
|
|
23,689,520
|
|
MATERIALS 3.0%
|
|
|
|
|
|
Chemicals 2.2%
|
|
|
|
|
|
E.I.
du Pont de Nemours & Co.
|
|
180,000
|
|
8,031,600
|
|
PPG Industries Inc.
|
|
45,000
|
|
3,276,000
|
|
Total Chemicals
|
|
|
|
11,307,600
|
|
Metals & Mining
0.8%
|
|
|
|
|
|
Nucor Corp.
|
|
100,000
|
|
3,820,000
|
|
TOTAL MATERIALS
|
|
|
|
15,127,600
|
|
TELECOMMUNICATION SERVICES
6.7%
|
|
|
|
|
|
Diversified
Telecommunication Services 6.7%
|
|
|
|
|
|
AT&T Inc.
|
|
420,000
|
|
12,012,000
|
|
Verizon Communications
Inc.
|
|
440,000
|
|
14,339,600
|
|
Windstream Corp.
|
|
663,026
|
|
8,148,590
|
|
TOTAL TELECOMMUNICATION
SERVICES
|
|
|
|
34,500,190
|
|
UTILITIES 7.0%
|
|
|
|
|
|
Electric Utilities
4.1%
|
|
|
|
|
|
American Electric Power
Co. Inc.
|
|
235,000
|
|
8,514,050
|
|
Duke Energy Corp.
|
|
251,870
|
|
4,460,618
|
|
Exelon Corp.
|
|
76,990
|
|
3,278,234
|
|
NextEra Energy Inc.
|
|
18,000
|
|
979,020
|
|
Southern Co.
|
|
94,980
|
|
3,537,055
|
|
Total Electric Utilities
|
|
|
|
20,768,977
|
|
Multi-Utilities 2.9%
|
|
|
|
|
|
CenterPoint Energy Inc.
|
|
730,000
|
|
11,475,600
|
|
National Grid PLC, ADR
|
|
81,270
|
|
3,473,480
|
|
Total Multi-Utilities
|
|
|
|
14,949,080
|
|
TOTAL UTILITIES
|
|
|
|
35,718,057
|
|
TOTAL COMMON STOCKS (Cost
$330,527,425)
|
|
|
|
357,098,742
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RATE
|
|
|
|
|
|
|
|
CONVERTIBLE
PREFERRED STOCKS 8.5%
|
|
|
|
|
|
ENERGY
2.4%
|
|
|
|
|
|
|
|
|
|
Apache Corp.
|
|
6.000%
|
|
|
|
37,000
|
|
2,146,000
|
|
|
|
|
|
|
|
|
|
|
|
|
See
Notes to Schedule of Investments.
2
LMP CAPITAL AND INCOME FUND INC.
Schedule of investments (unaudited) (contd)
September 30,
2010
SECURITY
|
|
RATE
|
|
|
|
SHARES
|
|
VALUE
|
|
El Paso Corp.
|
|
4.990%
|
|
|
|
9,000
|
|
$
|
10,363,500
|
|
TOTAL ENERGY
|
|
|
|
|
|
|
|
12,509,500
|
|
FINANCIALS
1.9%
|
|
|
|
|
|
|
|
|
|
Diversified Financial
Services 1.9%
|
|
|
|
|
|
|
|
|
|
CalEnergy Capital Trust
III
|
|
6.500%
|
|
|
|
194,000
|
|
9,515,700
|
|
UTILITIES
4.2%
|
|
|
|
|
|
|
|
|
|
Electric Utilities
4.2%
|
|
|
|
|
|
|
|
|
|
Great Plains Energy Inc.
|
|
12.000%
|
|
|
|
65,370
|
|
4,138,575
|
|
NextEra Energy Inc.
|
|
7.000%
|
|
|
|
270,000
|
|
13,372,560
|
|
NextEra Energy Inc.
|
|
8.375%
|
|
|
|
71,040
|
|
3,772,224
|
|
TOTAL UTILITIES
|
|
|
|
|
|
|
|
21,283,359
|
|
TOTAL
CONVERTIBLE PREFERRED STOCKS (Cost $39,399,125)
|
|
43,308,559
|
|
PREFERRED
STOCKS 0.0%
|
|
|
|
|
|
|
|
|
|
FINANCIALS
0.0%
|
|
|
|
|
|
|
|
|
|
Thrifts &
Mortgage Finance 0.0%
|
|
|
|
|
|
|
|
|
|
Federal Home Loan Mortgage
Corp. (FHLMC)
|
|
8.375%
|
|
|
|
25,950
|
|
11,158
|
*
|
Federal National Mortgage
Association (FNMA)
|
|
7.000%
|
|
|
|
300
|
|
237
|
*
|
Federal National Mortgage
Association (FNMA)
|
|
8.250%
|
|
|
|
17,650
|
|
7,678
|
*
|
TOTAL
PREFERRED STOCKS (Cost $1,105,960)
|
|
|
|
19,073
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MATURITY
DATE
|
|
FACE
AMOUNT
|
|
|
|
ASSET-BACKED
SECURITIES 0.7%
|
|
|
|
|
|
|
|
|
|
FINANCIALS
0.7%
|
|
|
|
|
|
|
|
|
|
Home Equity 0.6%
|
|
|
|
|
|
|
|
|
|
Asset-Backed Funding
Certificates, 2004-FF1 M2
|
|
2.431%
|
|
1/25/34
|
|
$
|
289,958
|
|
151,793
|
(c)
|
Countrywide Asset-Backed
Certificates, 2004-5 M4
|
|
1.506%
|
|
6/25/34
|
|
126,652
|
|
31,748
|
(c)
|
Credit-Based Asset
Servicing & Securitization LLC, 2006-CB2 AF4
|
|
5.704%
|
|
12/25/36
|
|
621,213
|
|
496,796
|
|
Finance America Net
Interest Margin Trust, 2004-1 A
|
|
5.250%
|
|
6/27/34
|
|
73,417
|
|
0
|
(b)(d)(e)
|
Fremont Home Loan Trust,
2004-1 M5
|
|
1.906%
|
|
2/25/34
|
|
129,515
|
|
56,747
|
(c)
|
GSAA Home Equity Trust,
2007-4 A3A
|
|
0.556%
|
|
3/25/37
|
|
1,593,826
|
|
861,875
|
(c)
|
GSAA Home Equity Trust,
2007-6 A4
|
|
0.556%
|
|
5/25/47
|
|
1,720,000
|
|
954,394
|
(c)
|
GSAMP Trust, 2004-OPT M3
|
|
1.406%
|
|
11/25/34
|
|
245,702
|
|
37,347
|
(a)(c)
|
MASTR Specialized Loan
Trust, 2007-2 A
|
|
0.606%
|
|
5/25/37
|
|
405,556
|
|
200,706
|
(c)(d)
|
RAAC Series, 2007-RP3 A
|
|
0.636%
|
|
10/25/46
|
|
470,696
|
|
281,694
|
(c)(d)
|
Renaissance Home Equity
Loan Trust, 2003-4 M3
|
|
2.156%
|
|
3/25/34
|
|
389,160
|
|
184,001
|
(c)
|
Sail Net Interest Margin
Notes, 2003-BC2A A
|
|
7.750%
|
|
4/27/33
|
|
141,210
|
|
1
|
(b)(d)(e)
|
Sail Net Interest Margin
Notes, 2004-2A A
|
|
5.500%
|
|
3/27/34
|
|
71,380
|
|
0
|
(b)(d)(e)
|
Total Home Equity
|
|
|
|
|
|
|
|
3,257,102
|
|
Student Loan 0.1%
|
|
|
|
|
|
|
|
|
|
Nelnet Student Loan Trust,
2008-4 A4
|
|
1.978%
|
|
4/25/24
|
|
350,000
|
|
361,458
|
(c)
|
TOTAL ASSET-BACKED
SECURITIES (Cost $5,017,923)
|
|
|
|
3,618,560
|
|
COLLATERALIZED
MORTGAGE OBLIGATIONS 1.2%
|
|
|
|
BCAP LLC Trust, 2006-AA1
A1
|
|
0.446%
|
|
10/25/36
|
|
1,079,514
|
|
589,824
|
(c)
|
Bear Stearns ARM Trust,
2005-12 24A1
|
|
5.596%
|
|
2/25/36
|
|
108,800
|
|
79,330
|
(c)
|
Countrywide Alternative
Loan Trust, 2006-0A9 2A1A
|
|
0.467%
|
|
7/20/46
|
|
1,296,115
|
|
598,024
|
(c)
|
JPMorgan Mortgage Trust,
2007-S3 1A74
|
|
6.000%
|
|
8/25/37
|
|
1,060,000
|
|
880,363
|
|
MASTR ARM Trust, 2003-3
3A4
|
|
2.494%
|
|
9/25/33
|
|
683,349
|
|
605,592
|
(c)
|
MASTR Reperforming Loan
Trust, 2006-2 2A1
|
|
3.840%
|
|
5/25/36
|
|
1,058,316
|
|
961,364
|
(c)(d)
|
Merit Securities Corp.,
11PA B2
|
|
1.756%
|
|
9/28/32
|
|
174,530
|
|
151,446
|
(c)(d)
|
MLCC Mortgage Investors
Inc., 2004-A B2
|
|
1.176%
|
|
4/25/29
|
|
246,989
|
|
93,216
|
(c)
|
MLCC Mortgage Investors
Inc., 2004-B B2
|
|
1.136%
|
|
5/25/29
|
|
401,040
|
|
147,110
|
(c)
|
RBS Greenwich Capital,
Mortgage Pass-Through Certificates, 2005-A 5A
|
|
7.000%
|
|
4/25/35
|
|
867,212
|
|
818,644
|
|
Structured ARM Loan Trust,
2006-4 4A1
|
|
5.612%
|
|
5/25/36
|
|
679,343
|
|
535,294
|
(c)
|
Thornburg Mortgage
Securities Trust, 2007-4 2A1
|
|
6.192%
|
|
7/25/37
|
|
152,787
|
|
145,685
|
(c)
|
Thornburg Mortgage
Securities Trust, 2007-4 3A1
|
|
6.139%
|
|
7/25/37
|
|
163,369
|
|
159,719
|
(c)
|
|
|
|
|
|
|
|
|
|
|
|
|
See
Notes to Schedule of Investments.
3
LMP
CAPITAL AND INCOME FUND INC.
Schedule of investments (unaudited) (contd)
September 30,
2010
SECURITY
|
|
RATE
|
|
MATURITY
DATE
|
|
FACE
AMOUNT
|
|
VALUE
|
|
Washington Mutual Inc.
Pass-Through Certificates, 2006-AR5 4A
|
|
1.360%
|
|
6/25/46
|
|
$
|
607,929
|
|
$
|
269,420
|
(c)
|
Wells Fargo Alternative
Loan Trust, 2007-PA2 2A1
|
|
0.686%
|
|
6/25/37
|
|
678,709
|
|
345,598
|
(c)
|
TOTAL COLLATERALIZED
MORTGAGE OBLIGATIONS (Cost $7,301,507)
|
|
6,380,629
|
|
CONVERTIBLE
BONDS & NOTES 1.4%
|
|
|
|
|
|
|
|
|
|
INFORMATION
TECHNOLOGY 1.4%
|
|
|
|
|
|
|
|
|
|
Internet
Software & Services 1.4%
|
|
|
|
|
|
|
|
|
|
VeriSign Inc., Junior
Subordinated Notes (Cost - $4,948,713)
|
|
3.250%
|
|
8/15/37
|
|
6,500,000
|
|
7,044,375
|
|
CORPORATE
BONDS & NOTES 9.5%
|
|
|
|
|
|
|
|
|
|
CONSUMER
DISCRETIONARY 0.3%
|
|
|
|
|
|
|
|
|
|
Hotels,
Restaurants & Leisure 0.1%
|
|
|
|
|
|
|
|
|
|
Choctaw Resort Development
Enterprise, Senior Notes
|
|
7.250%
|
|
11/15/19
|
|
295,000
|
|
205,025
|
(d)
|
Inn of the Mountain Gods
Resort & Casino, Senior Notes
|
|
12.000%
|
|
11/15/10
|
|
660,000
|
|
273,900
|
(b)(e)
|
MGM Resorts International,
Senior Secured Notes
|
|
10.375%
|
|
5/15/14
|
|
45,000
|
|
50,287
|
|
Total Hotels,
Restaurants & Leisure
|
|
|
|
|
|
|
|
529,212
|
|
Media 0.2%
|
|
|
|
|
|
|
|
|
|
CCH II LLC/CCH II Capital
Corp., Senior Notes
|
|
13.500%
|
|
11/30/16
|
|
234,181
|
|
279,261
|
|
Comcast Corp.
|
|
5.700%
|
|
5/15/18
|
|
300,000
|
|
343,926
|
|
News America Inc., Senior
Notes
|
|
6.650%
|
|
11/15/37
|
|
10,000
|
|
11,542
|
|
Time Warner Cable Inc.
|
|
5.850%
|
|
5/1/17
|
|
10,000
|
|
11,418
|
|
Time Warner Cable Inc.,
Senior Notes
|
|
6.200%
|
|
7/1/13
|
|
180,000
|
|
202,908
|
|
Total Media
|
|
|
|
|
|
|
|
849,055
|
|
TOTAL CONSUMER
DISCRETIONARY
|
|
|
|
|
|
|
|
1,378,267
|
|
CONSUMER
STAPLES 2.0%
|
|
|
|
|
|
|
|
|
|
Food & Staples
Retailing 2.0%
|
|
|
|
|
|
|
|
|
|
CVS Caremark Corp., Junior
Subordinated Bonds
|
|
6.302%
|
|
6/1/37
|
|
10,500,000
|
|
9,716,175
|
(c)
|
CVS Pass-Through Trust,
Secured Notes
|
|
6.943%
|
|
1/10/30
|
|
405,829
|
|
458,323
|
|
Kroger Co., Senior Notes
|
|
5.500%
|
|
2/1/13
|
|
60,000
|
|
65,524
|
|
Kroger Co., Senior Notes
|
|
6.150%
|
|
1/15/20
|
|
60,000
|
|
71,425
|
|
Total Food & Staples
Retailing
|
|
|
|
|
|
|
|
10,311,447
|
|
Tobacco 0.0%
|
|
|
|
|
|
|
|
|
|
Reynolds American Inc.,
Senior Notes
|
|
6.750%
|
|
6/15/17
|
|
110,000
|
|
123,888
|
|
TOTAL CONSUMER STAPLES
|
|
|
|
|
|
|
|
10,435,335
|
|
ENERGY
1.5%
|
|
|
|
|
|
|
|
|
|
Energy
Equipment & Services 0.0%
|
|
|
|
|
|
|
|
|
|
Transocean Inc., Senior
Notes
|
|
5.250%
|
|
3/15/13
|
|
110,000
|
|
115,755
|
|
Oil, Gas &
Consumable Fuels 1.5%
|
|
|
|
|
|
|
|
|
|
Apache Corp., Senior Notes
|
|
5.625%
|
|
1/15/17
|
|
80,000
|
|
92,623
|
|
ConocoPhillips Holding
Co., Senior Notes
|
|
6.950%
|
|
4/15/29
|
|
140,000
|
|
180,414
|
|
Devon Financing Corp. ULC,
Notes
|
|
6.875%
|
|
9/30/11
|
|
120,000
|
|
126,981
|
|
Energy Transfer Partners
LP, Senior Notes
|
|
6.700%
|
|
7/1/18
|
|
10,000
|
|
11,665
|
|
Kerr-McGee Corp., Notes
|
|
6.950%
|
|
7/1/24
|
|
80,000
|
|
87,467
|
|
Kinder Morgan Energy
Partners LP, Senior Notes
|
|
6.000%
|
|
2/1/17
|
|
170,000
|
|
192,017
|
|
Shell International
Finance BV, Senior Notes
|
|
4.375%
|
|
3/25/20
|
|
40,000
|
|
44,117
|
|
Southern Union Co., Junior
Subordinated Notes
|
|
7.200%
|
|
11/1/66
|
|
7,000,000
|
|
6,352,500
|
(c)
|
Williams Cos. Inc., Senior
Notes
|
|
7.750%
|
|
6/15/31
|
|
108,000
|
|
123,724
|
|
XTO Energy Inc., Senior
Notes
|
|
5.500%
|
|
6/15/18
|
|
180,000
|
|
215,973
|
|
Total Oil, Gas &
Consumable Fuels
|
|
|
|
|
|
|
|
7,427,481
|
|
TOTAL ENERGY
|
|
|
|
|
|
|
|
7,543,236
|
|
FINANCIALS
3.3%
|
|
|
|
|
|
|
|
|
|
Capital Markets 0.2%
|
|
|
|
|
|
|
|
|
|
Bear Stearns Co. Inc.,
Senior Notes
|
|
6.400%
|
|
10/2/17
|
|
180,000
|
|
209,960
|
|
Goldman Sachs Group Inc.,
Notes
|
|
5.250%
|
|
10/15/13
|
|
20,000
|
|
21,753
|
|
Goldman Sachs Group Inc.,
Senior Notes
|
|
5.300%
|
|
2/14/12
|
|
10,000
|
|
10,521
|
|
Goldman Sachs Group Inc.,
Senior Notes
|
|
6.150%
|
|
4/1/18
|
|
180,000
|
|
199,961
|
|
Merrill Lynch &
Co. Inc., Notes
|
|
6.875%
|
|
4/25/18
|
|
160,000
|
|
179,739
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
Notes to Schedule of Investments.
4
LMP CAPITAL AND INCOME FUND INC.
Schedule of investments (unaudited) (contd)
September 30,
2010
SECURITY
|
|
RATE
|
|
MATURITY
DATE
|
|
FACE
AMOUNT
|
|
VALUE
|
|
Capital Markets continued
|
|
|
|
|
|
|
|
|
|
Morgan Stanley,
Medium-Term Notes
|
|
5.625%
|
|
1/9/12
|
|
$
|
170,000
|
|
$
|
179,081
|
|
UBS AG Stamford CT, Senior
Notes
|
|
3.875%
|
|
1/15/15
|
|
260,000
|
|
271,635
|
|
Total Capital Markets
|
|
|
|
|
|
|
|
1,072,650
|
|
Commercial Banks 0.8%
|
|
|
|
|
|
|
|
|
|
BAC Capital Trust XIV,
Junior Subordinated Notes
|
|
5.630%
|
|
3/15/12
|
|
10,000
|
|
7,262
|
(c)(f)
|
Bank of Montreal, Secured
Bonds
|
|
2.850%
|
|
6/9/15
|
|
300,000
|
|
316,111
|
(d)
|
Bank of Tokyo-Mitsubishi
UFJ Ltd., Senior Notes
|
|
3.850%
|
|
1/22/15
|
|
100,000
|
|
107,871
|
(d)
|
Nordea Bank AB, Senior
Notes
|
|
4.875%
|
|
1/27/20
|
|
120,000
|
|
130,404
|
(d)
|
Resona Preferred Global
Securities Cayman Ltd., Junior Subordinated Bonds
|
|
7.191%
|
|
7/30/15
|
|
150,000
|
|
147,178
|
(c)(d)(f)
|
Santander US Debt SA
Unipersonal, Senior Notes
|
|
3.724%
|
|
1/20/15
|
|
100,000
|
|
101,552
|
(d)
|
SunTrust Capital, Trust
Preferred Securities
|
|
6.100%
|
|
12/15/36
|
|
20,000
|
|
18,658
|
(c)
|
Wachovia Bank N.A.,
Subordinated Notes
|
|
6.000%
|
|
11/15/17
|
|
250,000
|
|
286,166
|
|
Wells Fargo Capital X,
Capital Securities
|
|
5.950%
|
|
12/15/36
|
|
160,000
|
|
156,687
|
|
Wells Fargo Capital XV,
Junior Subordinated Notes
|
|
9.750%
|
|
9/26/13
|
|
2,500,000
|
|
2,762,500
|
(c)(f)
|
Total Commercial Banks
|
|
|
|
|
|
|
|
4,034,389
|
|
Consumer Finance 0.1%
|
|
|
|
|
|
|
|
|
|
American Express Co.,
Subordinated Debentures
|
|
6.800%
|
|
9/1/66
|
|
220,000
|
|
221,650
|
(c)
|
Caterpillar Financial
Services Corp., Medium-Term Notes
|
|
5.450%
|
|
4/15/18
|
|
110,000
|
|
127,721
|
|
John Deere Capital Corp.,
Medium-Term Notes
|
|
5.350%
|
|
4/3/18
|
|
100,000
|
|
116,080
|
|
SLM Corp., Medium-Term
Notes, Senior Notes
|
|
8.450%
|
|
6/15/18
|
|
140,000
|
|
141,607
|
|
Total Consumer Finance
|
|
|
|
|
|
|
|
607,058
|
|
Diversified Financial
Services 1.4%
|
|
|
|
|
|
|
|
|
|
Bank of America Corp.,
Senior Notes
|
|
5.650%
|
|
5/1/18
|
|
190,000
|
|
201,617
|
|
Citigroup Inc., Senior
Notes
|
|
6.875%
|
|
3/5/38
|
|
320,000
|
|
358,584
|
|
General Electric Capital
Corp., Senior Notes
|
|
5.625%
|
|
5/1/18
|
|
330,000
|
|
366,863
|
|
General Electric Capital
Corp., Subordinated Debentures
|
|
6.375%
|
|
11/15/67
|
|
10,000
|
|
10,037
|
(c)
|
JPMorgan Chase &
Co., Junior Subordinated Notes
|
|
7.900%
|
|
4/30/18
|
|
4,000,000
|
|
4,301,084
|
(c)(f)
|
JPMorgan Chase &
Co., Subordinated Notes
|
|
6.125%
|
|
6/27/17
|
|
110,000
|
|
124,674
|
|
PPL Capital Funding Inc.,
Junior Subordinated Notes
|
|
6.700%
|
|
3/30/67
|
|
2,000,000
|
|
1,902,440
|
(c)
|
Total Diversified Financial
Services
|
|
|
|
|
|
|
|
7,265,299
|
|
Insurance 0.8%
|
|
|
|
|
|
|
|
|
|
American International
Group Inc., Medium-Term Notes, Senior Notes
|
|
5.850%
|
|
1/16/18
|
|
550,000
|
|
572,000
|
|
MetLife Inc., Junior
Subordinated Debentures
|
|
6.400%
|
|
12/15/36
|
|
410,000
|
|
385,400
|
|
Teachers
Insurance & Annuity Association of America - College Retirement
Equity Fund, Notes
|
|
6.850%
|
|
12/16/39
|
|
10,000
|
|
12,349
|
(d)
|
Travelers Cos. Inc.,
Junior Subordinated Debentures
|
|
6.250%
|
|
3/15/37
|
|
3,290,000
|
|
3,162,506
|
(c)
|
Total Insurance
|
|
|
|
|
|
|
|
4,132,255
|
|
TOTAL FINANCIALS
|
|
|
|
|
|
|
|
17,111,651
|
|
HEALTH
CARE 0.1%
|
|
|
|
|
|
|
|
|
|
Health Care
Equipment & Supplies 0.0%
|
|
|
|
|
|
|
|
|
|
Medtronic Inc., Senior
Notes
|
|
4.450%
|
|
3/15/20
|
|
30,000
|
|
32,920
|
|
Health Care
Providers & Services 0.1%
|
|
|
|
|
|
|
|
|
|
UnitedHealth Group Inc.,
Senior Notes
|
|
5.250%
|
|
3/15/11
|
|
100,000
|
|
101,912
|
|
WellPoint Inc., Notes
|
|
5.875%
|
|
6/15/17
|
|
20,000
|
|
23,082
|
|
WellPoint Inc., Senior
Notes
|
|
5.000%
|
|
1/15/11
|
|
80,000
|
|
80,938
|
|
Total Health Care
Providers & Services
|
|
|
|
|
|
|
|
205,932
|
|
Pharmaceuticals 0.0%
|
|
|
|
|
|
|
|
|
|
Wyeth, Notes
|
|
5.950%
|
|
4/1/37
|
|
120,000
|
|
142,081
|
|
TOTAL HEALTH CARE
|
|
|
|
|
|
|
|
380,933
|
|
MATERIALS
0.1%
|
|
|
|
|
|
|
|
|
|
Chemicals 0.0%
|
|
|
|
|
|
|
|
|
|
PPG Industries Inc.,
Senior Notes
|
|
6.650%
|
|
3/15/18
|
|
120,000
|
|
145,611
|
|
Metals & Mining
0.0%
|
|
|
|
|
|
|
|
|
|
Vale Overseas Ltd., Notes
|
|
6.875%
|
|
11/21/36
|
|
156,000
|
|
178,613
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
Notes to Schedule of Investments.
5
LMP CAPITAL AND INCOME FUND INC.
Schedule of investments (unaudited) (contd)
September 30,
2010
SECURITY
|
|
RATE
|
|
MATURITY
DATE
|
|
FACE
AMOUNT
|
|
VALUE
|
|
Paper & Forest
Products 0.1%
|
|
|
|
|
|
|
|
|
|
Appleton Papers Inc.,
Senior Secured Notes
|
|
11.250%
|
|
12/15/15
|
|
$
|
408,000
|
|
$
|
303,960
|
(d)
|
TOTAL MATERIALS
|
|
|
|
|
|
|
|
628,184
|
|
TELECOMMUNICATION
SERVICES 0.2%
|
|
|
|
|
|
|
|
|
|
Diversified
Telecommunication Services 0.2%
|
|
|
|
|
|
AT&T Inc., Global
Notes
|
|
5.600%
|
|
5/15/18
|
|
80,000
|
|
93,630
|
|
AT&T Inc., Senior
Notes
|
|
6.400%
|
|
5/15/38
|
|
100,000
|
|
114,685
|
|
British Telecommunications
PLC, Bonds
|
|
9.625%
|
|
12/15/30
|
|
40,000
|
|
55,839
|
|
Deutsche Telekom
International Finance BV, Senior Notes
|
|
5.750%
|
|
3/23/16
|
|
100,000
|
|
115,503
|
|
Telecom Italia Capital, Senior Notes
|
|
5.250%
|
|
10/1/15
|
|
60,000
|
|
64,819
|
|
Telefonica Emisones SAU, Senior Notes
|
|
6.221%
|
|
7/3/17
|
|
130,000
|
|
151,997
|
|
Verizon Communications
Inc., Senior Notes
|
|
5.500%
|
|
2/15/18
|
|
120,000
|
|
138,292
|
|
Verizon Communications
Inc., Senior Notes
|
|
6.400%
|
|
2/15/38
|
|
120,000
|
|
139,270
|
|
TOTAL TELECOMMUNICATION
SERVICES
|
|
|
|
874,035
|
|
UTILITIES
2.0%
|
|
|
|
|
|
|
|
|
|
Electric Utilities
1.1%
|
|
|
|
|
|
|
|
|
|
FirstEnergy Corp., Notes
|
|
7.375%
|
|
11/15/31
|
|
125,000
|
|
136,194
|
|
FPL Group Capital Inc.,
Junior Subordinated Notes
|
|
6.350%
|
|
10/1/66
|
|
3,500,000
|
|
3,329,046
|
(c)
|
FPL Group Capital Inc.,
Junior Subordinated Notes
|
|
6.650%
|
|
6/15/67
|
|
2,000,000
|
|
1,922,540
|
(c)
|
Pacific Gas &
Electric Co., Senior Notes
|
|
5.800%
|
|
3/1/37
|
|
140,000
|
|
156,026
|
|
Total Electric Utilities
|
|
|
|
|
|
|
|
5,543,806
|
|
Multi-Utilities 0.9%
|
|
|
|
|
|
|
|
|
|
Dominion Resources Inc.,
Junior Subordinated Notes
|
|
6.300%
|
|
9/30/66
|
|
5,000,000
|
|
4,726,080
|
(c)
|
TOTAL UTILITIES
|
|
|
|
|
|
|
|
10,269,886
|
|
TOTAL CORPORATE
BONDS & NOTES (Cost $47,740,931)
|
|
48,621,527
|
|
MORTGAGE-BACKED
SECURITIES 2.4%
|
|
|
|
|
|
|
|
|
|
FHLMC 0.4%
|
|
|
|
|
|
|
|
|
|
Federal Home Loan Mortgage
Corp. (FHLMC)
|
|
4.500%
|
|
10/13/40
|
|
400,000
|
|
416,062
|
(g)
|
Federal Home Loan Mortgage
Corp. (FHLMC), Gold
|
|
5.500%
|
|
10/13/40
|
|
1,300,000
|
|
1,379,017
|
(g)
|
Total FHLMC
|
|
|
|
|
|
|
|
1,795,079
|
|
FNMA 1.1%
|
|
|
|
|
|
|
|
|
|
Federal National Mortgage
Association (FNMA)
|
|
5.000%
|
|
10/18/25-10/13/40
|
|
1,000,000
|
|
1,059,758
|
(g)
|
Federal National Mortgage
Association (FNMA)
|
|
3.500%
|
|
10/13/40-11/16/40
|
|
400,000
|
|
405,109
|
(g)
|
Federal National Mortgage
Association (FNMA)
|
|
4.000%
|
|
10/13/40
|
|
400,000
|
|
411,250
|
(g)
|
Federal National Mortgage
Association (FNMA)
|
|
5.500%
|
|
10/13/40
|
|
1,100,000
|
|
1,169,437
|
(g)
|
Federal National Mortgage
Association (FNMA)
|
|
6.000%
|
|
10/13/40
|
|
2,300,000
|
|
2,470,704
|
(g)
|
Total FNMA
|
|
|
|
|
|
|
|
5,516,258
|
|
GNMA 0.9%
|
|
|
|
|
|
|
|
|
|
Government National
Mortgage Association (GNMA)
|
|
5.000%
|
|
1/15/40-7/20/40
|
|
1,971,037
|
|
2,114,458
|
|
Government National
Mortgage Association (GNMA)
|
|
4.500%
|
|
10/20/40
|
|
1,600,000
|
|
1,685,251
|
(g)
|
Government National
Mortgage Association (GNMA)
|
|
5.000%
|
|
10/20/40
|
|
100,000
|
|
106,687
|
(g)
|
Government National
Mortgage Association (GNMA)
|
|
5.500%
|
|
10/20/40
|
|
100,000
|
|
107,406
|
(g)
|
Government National
Mortgage Association (GNMA)
|
|
3.500%
|
|
11/18/40
|
|
100,000
|
|
100,641
|
(g)
|
Government National
Mortgage Association (GNMA)
|
|
4.000%
|
|
11/18/40
|
|
700,000
|
|
721,223
|
(g)
|
Total GNMA
|
|
|
|
|
|
|
|
4,835,666
|
|
TOTAL MORTGAGE-BACKED
SECURITIES (Cost $12,089,984)
|
|
12,147,003
|
|
U.S.
GOVERNMENT & AGENCY OBLIGATIONS 2.3%
|
|
|
|
|
|
U.S. Government Agencies
0.5%
|
|
|
|
|
|
|
|
|
|
Federal Home Loan Bank
(FHLB), Global Bonds
|
|
1.625%
|
|
7/27/11
|
|
1,770,000
|
|
1,789,022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes
to Schedule of Investments.
6
LMP CAPITAL AND INCOME FUND INC.
Schedule of investments (unaudited) (contd)
September 30,
2010
SECURITY
|
|
RATE
|
|
MATURITY
DATE
|
|
FACE
AMOUNT
|
|
VALUE
|
|
U.S. Government Agencies
continued
|
|
|
|
|
|
|
|
|
|
Federal Home Loan Bank
(FHLB), Global Bonds
|
|
5.500%
|
|
7/15/36
|
|
$
|
100,000
|
|
$
|
122,790
|
|
Federal National Mortgage
Association (FNMA), Notes
|
|
1.750%
|
|
8/10/12
|
|
510,000
|
|
521,732
|
|
Total U.S. Government Agencies
|
|
|
|
|
|
|
|
2,433,544
|
|
U.S. Government
Obligations 1.8%
|
|
|
|
|
|
|
|
|
|
U.S. Treasury Bonds
|
|
4.375%
|
|
5/15/40
|
|
1,810,000
|
|
2,033,150
|
|
U.S. Treasury Bonds
|
|
3.875%
|
|
8/15/40
|
|
200,000
|
|
206,781
|
|
U.S. Treasury Notes
|
|
1.000%
|
|
12/31/11
|
|
130,000
|
|
131,117
|
|
U.S. Treasury Notes
|
|
1.250%
|
|
8/31/15
|
|
4,520,000
|
|
4,519,295
|
|
U.S. Treasury Notes
|
|
2.750%
|
|
5/31/17
|
|
200,000
|
|
211,609
|
|
U.S. Treasury Notes
|
|
3.500%
|
|
5/15/20
|
|
2,020,000
|
|
2,192,965
|
|
Total U.S. Government
Obligations
|
|
|
|
|
|
|
|
9,294,917
|
|
TOTAL U.S.
GOVERNMENT & AGENCY OBLIGATIONS (Cost $11,490,754)
|
|
11,728,461
|
|
U.S.
TREASURY INFLATION PROTECTED SECURITIES 0.1%
|
|
|
|
|
|
U.S. Treasury
Bonds, Inflation Indexed
|
|
2.000%
|
|
1/15/26
|
|
175,746
|
|
193,691
|
|
U.S. Treasury
Bonds, Inflation Indexed
|
|
2.375%
|
|
1/15/27
|
|
335,126
|
|
387,672
|
(h)
|
U.S. Treasury
Notes, Inflation Indexed
|
|
1.250%
|
|
7/15/20
|
|
219,923
|
|
231,074
|
|
TOTAL U.S. TREASURY
INFLATION PROTECTED SECURITIES (Cost $724,911)
|
|
812,437
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPIRATION
DATE
|
|
WARRANTS
|
|
|
|
WARRANTS
0.0%
|
|
|
|
|
|
|
|
|
|
Buffets Restaurant
Holdings
|
|
|
|
4/28/14
|
|
215
|
|
2
|
*(a)(b)
|
Charter Communications
Inc.
|
|
|
|
11/30/14
|
|
189
|
|
1,214
|
*
|
TOTAL WARRANTS (Cost
$378)
|
|
|
|
|
|
|
|
1,216
|
|
TOTAL INVESTMENTS BEFORE
SHORT-TERM INVESTMENTS (Cost $460,347,611)
|
|
490,780,582
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MATURITY
DATE
|
|
FACE
AMOUNT
|
|
|
|
SHORT-TERM
INVESTMENTS 4.1%
|
|
|
|
|
|
|
|
|
|
Repurchase Agreements
4.1%
|
|
|
|
|
|
|
|
|
|
Interest in $291,952,000
joint tri-party repurchase agreement dated 9/30/10 with Barclays Capital
Inc.; Proceeds at maturity - $18,258,101; (Fully collateralized by U.S.
government obligations, 6.500% due 11/15/26; Market value - $18,623,166)
|
|
0.200%
|
|
10/1/10
|
|
$
|
18,258,000
|
|
18,258,000
|
|
Morgan Stanley tri-party
repurchase agreement dated 9/30/10; Proceeds at maturity - $2,532,014; (Fully
collateralized by U.S. government agency obligations, 0.182% due 12/14/11;
Market value - $2,583,087)
|
|
0.200%
|
|
10/1/10
|
|
2,532,000
|
|
2,532,000
|
|
TOTAL SHORT-TERM
INVESTMENTS (Cost $20,790,000)
|
|
|
|
20,790,000
|
|
TOTAL INVESTMENTS 100.0%
(Cost $481,137,611#)
|
|
|
|
$
|
511,570,582
|
|
|
|
|
|
|
|
|
|
|
|
*
|
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)
|
Illiquid security.
|
(c)
|
Variable rate security.
Interest rate disclosed is that which is in effect at September 30,
2010.
|
(d)
|
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.
|
(e)
|
The coupon payment on
these securities is currently in default as of September 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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
Notes to Schedule of Investments.
7
Notes
to Schedule of Investments (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).
(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. Futures
contracts are valued daily at the settlement price established by the board of
trade or exchange on which they are traded. 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 futures contracts. 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. 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 1quoted prices in active markets for
identical investments
·
Level 2other significant observable inputs
(including quoted prices for similar investments, interest rates, prepayment
speeds, credit risk, etc.)
·
Level 3significant 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 security
and the particular circumstance. The market approach uses prices and other
relevant information generated by market transactions involving identical or
comparable securities. The income approach uses valuation techniques to
discount estimated future cash flows to present value.
8
Notes
to Schedule of Investments (unaudited) (continued)
The
following is a summary of the inputs used in valuing the Funds assets and
liabilities 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
|
|
$
|
32,356,985
|
|
$
|
389,675
|
|
|
|
$
|
32,746,660
|
|
Industrials
|
|
42,202,595
|
|
|
|
$
|
19,352
|
|
42,221,947
|
|
Other common stocks
|
|
282,130,135
|
|
|
|
|
|
282,130,135
|
|
Convertible preferred stocks
|
|
23,429,359
|
|
19,879,200
|
|
|
|
43,308,559
|
|
Preferred stocks
|
|
19,073
|
|
|
|
|
|
19,073
|
|
Asset-backed securities
|
|
|
|
3,581,213
|
|
37,347
|
|
3,618,560
|
|
Collateralized mortgage obligations
|
|
|
|
6,380,629
|
|
|
|
6,380,629
|
|
Convertible bonds & notes
|
|
|
|
7,044,375
|
|
|
|
7,044,375
|
|
Corporate bonds & notes
|
|
|
|
48,621,527
|
|
|
|
48,621,527
|
|
Mortgage-backed securities
|
|
|
|
12,147,003
|
|
|
|
12,147,003
|
|
U.S. government & agency obligations
|
|
|
|
11,728,461
|
|
|
|
11,728,461
|
|
U.S. treasury inflation protected securities
|
|
|
|
812,437
|
|
|
|
812,437
|
|
Warrants
|
|
1,214
|
|
|
|
2
|
|
1,216
|
|
Total long-term investments
|
|
$
|
380,139,361
|
|
$
|
110,584,520
|
|
$
|
56,701
|
|
$
|
490,780,582
|
|
Short-term investments
|
|
|
|
20,790,000
|
|
|
|
20,790,000
|
|
Total investments
|
|
$
|
380,139,361
|
|
$
|
131,374,520
|
|
$
|
56,701
|
|
$
|
511,570,582
|
|
Other financial instruments:
|
|
|
|
|
|
|
|
|
|
Futures contracts
|
|
$
|
(49,632
|
)
|
|
|
|
|
$
|
(49,632
|
)
|
Interest rate swaps
|
|
|
|
$
|
(1,462
|
)
|
|
|
(1,462
|
)
|
Total other financial instruments
|
|
$
|
(49,632
|
)
|
$
|
(1,462
|
)
|
|
|
$
|
(51,094
|
)
|
Total
|
|
$
|
380,089,729
|
|
$
|
131,373,058
|
|
$
|
56,701
|
|
$
|
511,519,488
|
|
See Schedule of Investments for additional detailed categorizations.
The
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
|
|
COMMON
STOCKS
|
|
WARRANTS
|
|
TOTAL
|
|
Balance
as of December 31, 2009
|
|
$
|
35
|
|
|
|
$
|
0
|
*
|
$
|
35
|
|
Accrued
premiums/discounts
|
|
|
|
|
|
|
|
|
|
Realized
gain(loss)
|
|
|
|
|
|
|
|
|
|
Change
in unrealized appreciation (depreciation)
(1)
|
|
(35
|
)
|
$
|
19,352
|
|
2
|
|
19,319
|
|
Net
purchases (sales)
|
|
|
|
|
|
|
|
|
|
Transfers
into Level 3
|
|
37,347
|
|
|
|
|
|
37,347
|
|
Transfers
out of Level 3
|
|
(0
|
)*
|
|
|
|
|
(0
|
)*
|
Balance
as of September 30, 2010
|
|
$
|
37,347
|
|
$
|
19,352
|
|
$
|
2
|
|
$
|
56,701
|
|
Net
change in unrealized appreciation (depreciation) for investments in
securities still held at September 30, 2010
(1)
|
|
|
|
|
$
|
19,352
|
|
$
|
2
|
|
$
|
19,354
|
|
* Value is less than $1.
(1)
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, the Fund acquires a debt security subject to an
obligation of the seller to repurchase, and of the Fund to resell, the security
at an agreed-upon price and time, thereby determining the yield during the 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
9
Notes to Schedule of Investments
(unaudited) (continued)
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.
Futures
contracts involve, to varying degrees, risk of loss. 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) Swap
Agreements.
The Fund may invest in swaps for the purpose of
managing its exposure to interest rate, credit or market risk, or for other
purposes. The use of swaps involves risks that are different from those
associated with ordinary portfolio transactions.
Swap
contracts are marked to market daily and changes in value are recorded as
unrealized appreciation (depreciation). Gains or losses are realized upon
termination of the swap agreement. Collateral, in the form of restricted cash
or securities, may be required to be held in segregated accounts with the Funds
custodian in compliance with the terms of the swap contracts. Securities posted
as collateral for swap contracts are identified in the Schedule of Investments.
Interest Rate Swaps.
The
Fund may enter into interest rate swap contracts. Interest rate swaps are
agreements between two parties to exchange cash flows based on a notional
principal amount. The Fund may elect to pay a fixed rate and receive a floating
rate, or, receive a fixed rate and pay a floating rate on a notional principal
amount. Interest rate swaps are marked to market daily based upon quotations
from market makers. When a swap contract is terminated early, the Fund records
a realized gain or loss equal to the difference between the original cost and
the settlement amount of the closing transaction.
The
risks of interest rate swaps include changes in market conditions that will
affect the value of the contract or changes in the present value of the future
cash flow streams and the possible inability of the counterparty to fulfill its
obligations under the agreement. The Funds maximum risk of loss from
counterparty credit risk is the discounted net value of the cash flows to be
received from the counterparty over the contracts remaining life, to the
extent that that amount is positive. This risk is mitigated by the posting of
collateral by the counterparty to the Fund to cover the Funds exposure to the
counterparty.
10
Notes to Schedule of Investments (unaudited) (continued)
(f) 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.
Repayment of the 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.
(g) 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.
(h) 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.
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.
(i) 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.
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.
(j) Credit
and Market Risk.
The Fund invests in high-yield and emerging market
instruments that are subject to certain credit and market risks. The yields of
high-yield and emerging market debt obligations reflect, among other things,
perceived credit and market risks. The Funds investment in securities rated
below investment grade typically involve risks not associated with higher rated
securities including, among others, greater risk related to timely and ultimate
payment of interest and principal, greater market price volatility and less
liquid secondary market trading. The consequences of political, social,
economic or diplomatic changes may have disruptive effects on the market prices
of investments held by the Fund. The Funds investment in non-U.S. dollar
denominated securities may also result in foreign currency losses caused by
devaluations and exchange rate fluctuations.
(k) Security
Transactions.
Security transactions are accounted for on a trade
date basis.
2. Investments
At
September 30, 2010, the aggregate gross unrealized appreciation and
depreciation of investments for federal income tax purposes were substantially
as follows:
Gross
unrealized appreciation
|
|
$
|
42,950,153
|
|
Gross
unrealized depreciation
|
|
(12,517,182
|
)
|
Net
unrealized appreciation
|
|
$
|
30,432,971
|
|
11
Notes to Schedule of Investments (unaudited) (continued)
At
September 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 10-Year Notes
|
|
95
|
|
12/10
|
|
$ 11,909,379
|
|
$ 11,974,453
|
|
$ 65,074
|
|
U.S.
Treasury 30-Year Bonds
|
|
13
|
|
12/10
|
|
1,734,261
|
|
1,738,344
|
|
4,083
|
|
U.S.
Treasury Bonds
|
|
2
|
|
12/10
|
|
287,148
|
|
282,563
|
|
(4,585
|
)
|
|
|
|
|
|
|
|
|
|
|
64,572
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contracts
to Sell:
|
|
|
|
|
|
|
|
|
|
|
|
90-Day
Eurodollar
|
|
6
|
|
12/10
|
|
1,490,306
|
|
1,494,600
|
|
(4,294
|
)
|
U.S.
Treasury 5-Year Notes
|
|
102
|
|
12/10
|
|
12,218,544
|
|
12,328,454
|
|
(109,910
|
)
|
|
|
|
|
|
|
|
|
|
|
(114,204
|
)
|
Net
unrealized loss on open futures contracts
|
|
|
|
|
|
|
|
$ (49,632
|
)
|
During
the period ended September 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
|
|
(15)
|
|
(8,154)
|
|
Options exercised
|
|
(12)
|
|
(5,611)
|
|
Options expired
|
|
(12)
|
|
(5,086)
|
|
Written options, outstanding September 30,
2010
|
|
|
|
|
|
At
September 30, 2010, the Fund had the following open swap contracts:
INTEREST RATE SWAPS
SWAP COUNTERPARTY
|
|
NOTIONAL
AMOUNT
|
|
TERMINATION
DATE
|
|
PAYMENTS
MADE BY THE
FUND
|
|
PAYMENTS
RECEIVED BY
THE FUND
|
|
UPFRONT
PREMIUMS
PAID
(RECEIVED)
|
|
UNREALIZED
(DEPRECIATION)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Barclays
Capital Inc.
|
|
$ 20,000
|
|
7/26/40
|
|
3.707%
semi-annually
|
|
3-Month
LIBOR
|
|
|
|
$ (1,462)
|
|
Percentage shown is an annual percentage rate.
At
September 30, 2010, the Fund held TBA securities with a total cost of $ 9,206,203.
3.
Derivative Instruments and Hedging Activities
Financial
Accounting Standards Board Codification Topic 815 requires enhanced disclosure
about an entitys derivative and hedging activities.
The
following is a summary of the Funds investments categorized by risk exposure
at September 30, 2010.
|
|
|
Futures Contracts
|
|
|
|
|
|
|
|
Primary Underlying
Risk Disclosure
|
|
|
Unrealized
Appreciation
|
|
|
Unrealized
Depreciation
|
|
|
Swap
Contracts, at
value
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Contracts
|
|
|
$
|
69,157
|
|
|
$
|
(118,789
|
)
|
|
$
|
(1,462
|
)
|
|
$
|
(51,094
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
Notes to Schedule of Investments
(unaudited) (continued)
During
the period ended September 30, 2010 the volume of derivative activity for
the Fund was as follows:
|
|
Average
Market Value
|
|
Purchased options
|
|
$
|
4,959
|
|
Written options
|
|
6,648
|
|
Forward foreign currency contracts (to sell)
|
|
176,325
|
|
Futures contracts (to buy)
|
|
7,847,042
|
|
Futures contracts (to sell)
|
|
11,878,664
|
|
|
|
Average
Notional Balance
|
|
Interest rate swap contracts
|
|
$
|
6,000
|
|
At September 30, 2010, there were no open
positions held in this derivative.
|
|
|
|
|
|
|
|
|
|
|
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.
13
ITEM 2.
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 quarter that
have materially affected, or are likely to materially affect the registrants
internal control over financial reporting.
ITEM 3.
EXHIBITS.
Certifications
pursuant to Rule 30a-2(a) under the Investment Company Act of 1940,
as amended, are attached hereto.
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, thereunto duly authorized.
LMP Capital
and Income Fund Inc.
By
|
/s/ R. Jay Gerken
|
|
R. Jay Gerken
|
|
Chief Executive Officer
|
|
|
|
Date:
|
November 23, 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
|
|
|
|
Date:
|
November 23, 2010
|
|
|
|
By
|
/s/ Kaprel Ozsolak
|
|
Kaprel Ozsolak
|
|
Chief Financial Officer
|
|
|
|
Date:
|
November 23, 2010
|
|
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