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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125 Broad
Street, New York, NY
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10004
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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
300 First
Stamford Place, 4
th
Floor
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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(800) 451-2010
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Date of fiscal year end:
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October 31
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Date of reporting period:
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October 31, 2007
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ITEM
1. REPORT TO STOCKHOLDERS.
The Annual Report to
Stockholders is filed herewith.
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LMP
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Capital
and Income Fund Inc.
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(SCD)
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ANNUAL REPORT
OCTOBER
31, 2007
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INVESTMENT PRODUCTS: NOT
FDIC INSURED
NO BANK GUARANTEE
MAY LOSE VALUE
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LMP
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Capital
and Income Fund Inc.
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Annual Report
October 31, 2007
Whats
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Letter from the Chairman
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Inside
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Fund Overview
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1
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Fund at a Glance
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6
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Schedule of Investments
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7
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Statement of Assets and Liabilities
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24
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Statement of Operations
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25
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Statements of Changes in Net Assets
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26
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Statement of Cash Flows
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27
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Financial Highlights
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28
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Notes to Financial Statements
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29
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Fund Objective
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The
Funds investment
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Report of Independent Registered Public Accounting Firm
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39
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objective
is total return
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with
an emphasis on
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Additional Information
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40
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income.
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Annual Chief Executive
Officer and Chief Financial Officer Certification
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44
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Important Tax Information
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45
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Dividend Reinvestment Plan
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46
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R. JAY GERKEN, CFA
Chairman, President
and Chief Executive Officer
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Letter from the Chairman
Dear
Shareholder,
Despite
continued weakness in the housing market and a credit crunch that began in
the summer of 2007, the U.S. economy proved to be resilient during the
12-month reporting period ended October 31, 2007. After expanding 2.1% in the
fourth quarter of 2006, U.S. gross domestic product (GDP)
i
growth was a tepid 0.6% in the first quarter of 2007, according to the U.S.
Commerce Department. This was the lowest growth rate since the fourth quarter
of 2002. The economy then rebounded, as second quarter 2007 GDP growth was a
solid 3.8%. Given the modest increase earlier in the year, this higher growth
rate was not unexpected. The preliminary estimate for third quarter GDP
growth was 4.9%. A surge in inventory-building and robust exports supported
the economy during the third calendar quarter.
Ongoing issues related to the housing and subprime
mortgage markets and an abrupt tightening in the credit markets prompted the
Federal Reserve Board (Fed)
ii
to
take several actions during the reporting period. The Fed initially responded
by lowering the discount rate the rate the Fed uses for loans it makes
directly to banks from 6.25% to 5.75% in mid-August 2007. Then, at its
meeting on September 18, the Fed reduced the federal funds rate
iii
from 5.25% to 4.75% and the discount rate to 5.25%. This marked the first
reduction in the federal funds rate since June 2003. The Fed again lowered
rates at the end of October, as it cut both the discount rate and federal
funds rate another 0.25% to 5.00% and 4.50%, respectively. In its statement
accompanying the October meeting, the Fed stated: Economic growth was solid
in the third quarter, and
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LMP Capital and Income Fund Inc.
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strains
in financial markets have eased somewhat on balance. However, the pace of
economic expansion will likely slow in the near term, partly reflecting the
intensification of the housing correction. The Fed went on to say: The
Committee judges that, after this action, the upside risks to inflation
roughly balance the downside risks to growth.
Despite periods of extreme volatility, the U.S.
stock market overall produced strong results during the 12-month reporting
period. After rising in six of the first seven months of the period, the
market reversed course in June and July 2007. Earlier in the fiscal year,
U.S. stock prices rose on the back of solid corporate profits, an active merger
and acquisition (M&A) environment and hopes that the Fed would lower the
federal funds rate in 2007. U.S. equity prices then faltered in June and July
2007 due to troubles in the housing market and expectations that the Fed
would not lower short-term interest rates in the foreseeable future. U.S.
stock prices then began to rally in late August 2007, as the Fed lowered the
discount rate and indicated that it had not ruled out reducing the federal
funds rate. The markets ascent continued in September and October, when the
Fed lowered the federal funds rate twice. All told, the S&P 500 Index
iv
returned 14.55% during the 12 months ended October 31, 2007.
During the 12-month reporting period, both short-
and long-term Treasury yields experienced periods of significant volatility.
Yields fluctuated early in the period, given mixed economic data and shifting
expectations regarding the Feds future monetary policy. After falling during
the first three months of 2007, yields then moved steadily higher during much
of the second quarter. This was due, in part, to inflationary fears, a solid
job market and expectations that the Fed would not be cutting short-term
rates in the foreseeable future. During the remainder of the reporting
period, the U.S. fixed-income markets were extremely volatile, which
negatively impacted market liquidity conditions. Initially, the concern on
the part of market participants was limited to the subprime segment of the
mortgage-backed market.
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II
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LMP Capital and Income
Fund Inc.
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These
concerns broadened, however, to include a wide range of financial
institutions and markets. As a result, other fixed-income instruments also
experienced increased price volatility. This turmoil triggered a significant
flight to quality, causing Treasury yields to move sharply lower (and their
prices higher), while riskier segments of the market saw their yields move
higher (and their prices lower). Overall, during the 12 months ended October
31, 2007, two-year Treasury yields fell from 4.71% to 3.94%. Over the same
period, 10-year Treasury yields fell from 4.61% to 4.48%. Looking at the
12-month period as a whole, the overall bond market, as measured by the
Lehman Brothers U.S. Aggregate Index
v
, returned 5.38%.
Please read on for a more
detailed look at prevailing economic and market conditions during the Funds
fiscal year and to learn how those conditions have affected Fund performance.
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Information About Your Fund
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, thank you for
your confidence in our stewardship of your assets. We look forward to helping
you meet your financial goals.
Sincerely,
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R.
Jay Gerken, CFA
Chairman, President and Chief Executive Officer
November 30, 2007
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LMP Capital and Income Fund Inc.
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III
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All index performance reflects no deduction for fees,
expenses or taxes. Please note that an investor cannot invest directly in an
index.
i
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Gross domestic product (GDP) is the market value
of all final goods and services produced within a country in a given period
of time.
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ii
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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.
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iii
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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.
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iv
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The S&P 500 Index is an unmanaged index of 500
stocks that is generally representative of the performance of larger
companies in the U.S.
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v
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The Lehman Brothers 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.
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IV
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LMP Capital and Income
Fund Inc.
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Fund Overview
Q. What were the overall market conditions during the
Funds reporting period?
A.
Despite a number of concerns over the course of the reporting period,
the U.S. stock market posted solid gains across most segments for the 12 months
ended October 31, 2007. After showing strength at the start of the period, the
broad U.S. equity market sold off sharply in late February and early March of
2007. Investors were concerned over increased volatility in international
markets, signs of deterioration in the U.S. subprime mortgage markets, and
rising oil prices due to geopolitical developments in the Middle East and
increasing demand from developing markets. Despite these challenges, the U.S.
equity market rebounded sharply at the end of March and continued to make gains
through the spring and the start of the summer.
The latter half of the reporting period saw the U.S.
equities market reach several new milestones. The Dow Jones Industrial Average
(DJIA)
i
reached a record high on July
19, 2007, closing above 14,000 for the first time in history, but then fell
over 1,000 points during the following four weeks as widening concerns tied to
collateralized debt obligations and a slumping housing market fed increasing
bond and stock market volatility. Adding to the markets anxieties were record
high oil prices and the decline of the U.S. dollar, which set record lows
against the Euro.
Following reassurance from Federal Reserve Board (Fed)
ii
Chairman Ben Bernanke and Fed actions to
inject liquidity in the markets, including a 50 basis point reduction in the
discount rate
iii
on August 17, 2007 and a 50
basis point cut in the federal funds rate
iv
on September 18, 2007, stocks, in general,
recovered and continued upward to register gains in September and October, with
the DJIA setting another record high on October 9, 2007. At the close of the
reporting period on October 31, 2007, the Fed cut the federal funds rate by
another 25 basis points, prompting a brief but sharp rally that helped most
major U.S. equity market indexes capture respectable gains for the fiscal year.
During the fiscal year, the bond market experienced
periods of increased volatility. Changing perceptions regarding the economy,
inflation and future Fed monetary policy caused bond prices to fluctuate. Two-
and 10-year Treasury yields began the reporting period at 4.71% and 4.61%,
respectively. This inversion of the yield curve
v
, when shorter-term yields eclipse their
longer-term counterparts, has often been a precursor to weaker economic growth.
However, after tepid gross domestic product (GDP)
vi
growth
in the first quarter of 2007, the economy rebounded, inflationary pressures
increased and both short- and long-term Treasury yields moved sharply higher.
By mid-June, two- and 10-year Treasuries were yielding 5.10% and 5.26%,
respectively, and market sentiment was that the Feds next move would be to
raise interest rates.
After their June peaks, Treasury yields then moved
sharply lower, as concerns regarding the subprime mortgage market and a severe
credit crunch triggered a massive flight to
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LMP
Capital and Income Fund Inc. 2007 Annual Report
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1
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quality.
During this time, investors were drawn to the relative safety of Treasuries,
causing their prices to rise. At the same time, increased risk aversion caused
other segments of the bond market to falter. As conditions in the credit market
worsened in August, central banks around the world took action by injecting
approximately $500 billion of liquidity into the financial system.
Additionally, the Fed aggressively lowered the discount rate and the federal
funds rate toward the end of the reporting period. These actions appeared to
lessen the credit crunch and supported the overall bond market. By October, the
volatility in the bond market was less extreme and, at the end of the fiscal
year, two- and 10-year Treasury yields were 3.94% and 4.48%, respectively.
Performance Review
For
the 12 months ended October 31, 2007, LMP Capital and Income Fund Inc. returned
16.32% based on its net asset value
(NAV)
vii
and 18.22% based on its New York
Stock Exchange (NYSE) market price per share. In comparison, the Funds
unmanaged benchmarks, the Lehman Brothers U.S. Aggregate Index
viii
and the S&P 500 Index
ix
, returned 5.38% and 14.55%, respectively,
for the same period. The Funds Lipper Income and Preferred Stock Closed-End
Funds Category Average
x
increased 0.70% over the same time frame.
Please note that Lipper performance returns are based on each funds NAV.
During the 12-month period of this report, the Fund
made distributions to shareholders totaling $1.55 per share. The performance
table below shows the Funds 12-month total return based on its NAV and market
price as of October 31, 2007.
Past performance
is no guarantee of future results.
Performance Snapshot as of October 31, 2007
(unaudited)
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Price Per Share
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12-Month
Total Return
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$
22.95 (NAV)
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16.32
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%
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$
19.88 (Market Price)
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18.22
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%
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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 in additional shares.
2
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LMP Capital and Income Fund
Inc. 2007 Annual Report
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Q.
What were the most significant factors affecting Fund
performance? What were the leading contributors to performance?
A.
Pursuant
to the Funds investment objective it has the ability to allocate assets across
a board range of equity and fixed-income investments. The Fund having made an
allocation of its assets, over the reporting period, in a higher proportion to
equities rather than fixed income was a significant contributor to the Funds
performance. In the equity portion of the Fund, stock selection in the Consumer
Discretionary, Information Technology, Financials and Industrials sectors
significantly enhanced the Funds results, relative to the S&P 500 Index,
during the reporting period. In terms of sector allocation, overweight
positions in the Energy and Information Technology sectors and an underweight
position in the Health Care sector made significant contributions to
performance during the period. Individual stocks that made a significant
positive contribution to performance included
Las Vegas Sands Corp.
in the Consumer Discretionary sector,
National Fuel Gas Co.
in the Utilities
sector,
EMC Corp.
in the
Information Technology sector,
General
Electric Co.
in the Industrials sector and
Altria Group Inc.
in the Consumer Staples
sector.
In
the fixed-income portion of the Fund, duration
xi
was managed
tactically during the reporting period and was adjusted given changing market
conditions. Overall, this contributed to performance, especially in the second
half of the fiscal year. During that time, the portfolios duration rose and
this helped the Fund to benefit from the summer rally in the Treasury market.
In terms of yield curve positioning, we structured the portfolio in
anticipation of a steepening of the curve. This enhanced the Funds performance
during the financial turmoil that occurred in the summer. Over that time, the
market priced in interest rate cuts by the Fed. This caused the curve to
steepen, as yields on short-dated securities fell much more than those from
their longer-dated counterparts. In addition, an allocation to U.S. Treasury
Inflation-Protected Securities (TIPS)
xii
was a modest contributor to
performance as the market prepared for Fed interest rate cuts and the potential
for inflationary pressures.
What were the leading detractors from performance?
A.
In the equity portion of the Fund, stock selection in the Energy and Health
Care sectors negatively impacted relative performance during the period. In
addition, underweights in the Materials and Telecommunication Services sectors
and an overweight to the Financials sector detracted from results. Individual
holdings that had a negative impact on the Funds performance included
Warner Music Group Corp.
in the Consumer
Discretionary sector,
Fidelity National
Financial Inc. Class A Shares, Marsh & McLennan Cos.
and
UBS AG,
all in the Financials sector, as
well as
Kraft Foods Inc.
in the
Consumer Staples sector.
In
the fixed-income portion of the Fund, a large overweight to mortgages
significantly detracted from performance as volatility and spreads both spiked
in the wake of the subprime mortgage crisis. Elsewhere, issue selection within
the Corporate Bond sector detracted from results.
The
Fund reduced the amount of leverage it employed over the course of the
reporting period, thereby reducing the amount of potential risk. However, due
to the Funds positive
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LMP
Capital and Income Fund Inc. 2007 Annual Report
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3
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performance over the period,
maintaining a higher rate of leverage would have led to further positive
performance.
Q. Were there any significant changes to the Fund
during the reporting period?
A.
During the reporting period, in the equity portion of the Fund, the Funds
portfolio shifted from an underweight position to an overweight position in the
Energy, Industrials and Telecommunication Services sectors, and switched from
an overweight to an underweight in the Financials sector. In terms of
individual stocks, significant positions that were closed during the period
included
McDonalds Corp., WellPoint Inc.,
Microsoft Corp., ACE Ltd., First American Corp., Chubb Corp., Capital One
Financial Corp., Fidelity National Information Services Inc., Agilent
Technologies Inc.
and
Honeywell
International Inc.
Significant new additions to the portfolio during
the period included
Invesco PLC ADR,
Liberty Media Holding Corp. (Capital Group, Series A Shares), EMC Corp., Crown
Castle International Corp., SBA Communications Corp. (Class A), Crosstex Energy
Inc., United Technologies Corp., VeriSign Inc., Halliburton Co.
and
Covanta Holding Corp.
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/individualinvestors.
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 6:00 p.m. Eastern Time, for the Funds current
NAV, market price and other information.
Thank you for your investment in LMP Capital and
Income Fund Inc. As always, we appreciate that you have chosen us to manage
your assets and we remain focused on achieving the Funds investment goals.
Sincerely,
Robert
Gendelman
Portfolio Manager
ClearBridge
Advisors, LLC (Equity Portion)
Western
Asset Management Company (Fixed-Income Portion)
November 20, 2007
4
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LMP Capital and Income
Fund Inc. 2007 Annual Report
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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.
Portfolio
holdings and breakdowns are as of October 31, 2007 and are subject to change
and may not be representative of the Funds current or future investments. The
Funds top ten holdings (as a percentage of net assets) as of this date were:
American Express Co. (3.2%), Invesco PLC, ADR (3.1%), UBS AG (3.1%), Altria
Group Inc. (3.1%), Liberty Media Holding Corp. (3.1%), Federal Home Loan
Mortgage Corp. (FHLMC) (3.0%), EMC Corp. (2.9%), General Electric Co. (2.8%),
Crown Castle International Corp. (2.8%) and Crosstex Energy Inc. (2.6%). Please
refer to pages 7 through 23 for a list and percentage breakdown of the Funds
holdings.
The
mention of sector breakdowns is for informational purposes only and should not
be construed as a recommendation to purchase or sell any securities. The
information provided regarding such sectors is not a sufficient basis upon
which to make an investment decision. Investors seeking financial advice
regarding the appropriateness of investing in any securities or investment
strategies discussed should consult their financial professional. The Funds
top five sector holdings (as a percentage of net assets) as of October 31, 2007
were: Industrials (22.6%), Financials (18.8%), Energy (16.7%), Consumer
Discretionary (15.1%) and Information Technology (13.9%). The Funds portfolio
composition is subject to change at any time.
RISKS:
Stock and bond prices are subject to fluctuation. As interest rates rise, bond
prices fall, reducing the value of the Funds share price. High-yield bonds are
rated below investment grade and involve greater credit and liquidity risk than
higher-rated securities. 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. The Fund is subject to
certain risks of overseas investing not associated with domestic investing,
including currency fluctuations and changes in political and economic
conditions.
All
index performance reflects no deduction for fees, expenses or taxes. Please
note that an investor cannot invest directly in an index.
i
The Dow Jones Industrial Average (DJIA) is a
widely followed measurement of the stock market. The average is comprised of 30
stocks that represent leading companies in major industries. These stocks,
widely held by both individual and institutional investors, are considered to
be all blue-chip companies.
ii
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.
iii
The discount rate is the interest rate charged
by the U.S. Federal Reserve Bank on short-term loans (usually overnight or
weekend) to banks.
iv
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.
v
The yield curve is the graphical depiction of
the relationship between the yield on bonds of the same credit quality but
different maturities.
vi
Gross domestic product (GDP) is the market
value of all final goods and services produced within a country in a given
period of time.
vii
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 at the Funds market price as determined by supply of and
demand for the Funds shares.
viii
The Lehman Brothers 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.
ix
The S&P 500 Index is an unmanaged index of
500 stocks that is generally representative of the performance of larger
companies in the U.S.
x
Lipper, Inc. is a major independent mutual-fund tracking organization.
Returns are based on the 12-month period ended October 31, 2007, including the
reinvestment of all distributions, including returns of capital, if any,
calculated among the 29 funds in the Funds Lipper category.
xi
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.
xii
U.S. Treasury Inflation-Protected Securities (TIPS) are
inflation-indexed securities issued by the U.S. Treasury in 5-year, 10-year and
20-year maturities. The principal is adjusted to the Consumer Price Index, the
commonly used measure of inflation. The coupon rate is constant, but generates
a different amount of interest when multiplied by the inflation-adjusted
principal.
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LMP
Capital and Income Fund Inc. 2007 Annual Report
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5
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Fund at a Glance (unaudited)
Investment Breakdown
As a Percent of Total Investments
6
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LMP Capital and Income
Fund Inc. 2007 Annual Report
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Schedule of Investments (October 31, 2007)
LMP CAPITAL AND INCOME FUND INC.
Shares
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Security
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Value
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COMMON STOCKS 73.0%
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CONSUMER DISCRETIONARY 9.5%
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Household Durables 0.0%
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1,226,577
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Home Interiors & Gifts Inc. (a)(b)*
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$
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12,266
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Media 6.7%
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208,660
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E.W. Scripps Co., Class A Shares
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9,391,787
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100,900
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Lamar Advertising Co., Class A Shares
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5,394,114
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167,970
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Liberty Media Holding Corp., Capital Group, Series
A Shares *
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20,992,890
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854,500
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Time Warner Inc.
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15,603,170
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768,600
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Warner Music Group Corp.
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7,824,348
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Total Media
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59,206,309
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Multiline Retail 1.2%
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164,000
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Target Corp.
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10,063,040
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Specialty Retail 1.6%
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280,410
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Ross Stores Inc.
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7,576,678
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215,200
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TJX Cos. Inc.
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6,225,736
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Total Specialty Retail
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13,802,414
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TOTAL CONSUMER DISCRETIONARY
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83,084,029
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CONSUMER STAPLES 2.4%
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Tobacco 2.4%
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288,300
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Altria Group Inc.
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21,025,719
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ENERGY 12.1%
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Energy Equipment & Services
5.2%
|
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72,600
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Diamond Offshore Drilling Inc.
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8,220,498
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402,600
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Halliburton Co.
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15,870,492
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139,370
|
|
SEACOR Holdings Inc. *
|
|
12,773,261
|
|
73,800
|
|
Transocean Inc. *
|
|
8,809,506
|
|
|
|
Total Energy Equipment &
Services
|
|
45,673,757
|
|
Oil, Gas & Consumable Fuels
6.9%
|
|
|
|
124,750
|
|
Anadarko Petroleum Corp.
|
|
7,362,745
|
|
487,565
|
|
Crosstex Energy Inc.
|
|
17,976,521
|
|
50,820
|
|
Devon Energy Corp.
|
|
4,746,588
|
|
205,100
|
|
Newfield Exploration Co. *
|
|
11,042,584
|
|
109,000
|
|
Southwestern Energy Co. *
|
|
5,638,570
|
|
176,560
|
|
Total SA, ADR
|
|
14,232,502
|
|
|
|
Total Oil, Gas & Consumable
Fuels
|
|
60,999,510
|
|
|
|
TOTAL ENERGY
|
|
106,673,267
|
|
|
|
|
|
|
|
|
See Notes to Financial
Statements.
|
LMP
Capital and Income Fund Inc. 2007 Annual Report
|
7
|
Schedule of Investments (October 31, 2007) (continued)
Shares
|
|
Security
|
|
Value
|
|
FINANCIALS 12.5%
|
|
|
|
Capital Markets 6.2%
|
|
|
|
35,600
|
|
Goldman Sachs Group Inc.
|
|
$
|
8,825,952
|
|
703,110
|
|
Invesco PLC, ADR
|
|
21,557,353
|
|
144,790
|
|
Pzena Investment Management Inc., Class A *
|
|
2,806,030
|
|
396,100
|
|
UBS AG
|
|
21,266,609
|
|
|
|
Total Capital Markets
|
|
54,455,944
|
|
Consumer Finance 2.5%
|
|
|
|
356,200
|
|
American Express Co.
|
|
21,710,390
|
|
Insurance 3.8%
|
|
|
|
113,100
|
|
AFLAC Inc.
|
|
7,100,418
|
|
192,520
|
|
American International Group Inc.
|
|
12,151,862
|
|
939,510
|
|
Fidelity National Financial Inc., Class A Shares
|
|
14,459,059
|
|
|
|
Total Insurance
|
|
33,711,339
|
|
|
|
TOTAL FINANCIALS
|
|
109,877,673
|
|
HEALTH CARE 5.6%
|
|
|
|
Health Care Equipment &
Supplies 1.5%
|
|
|
|
271,900
|
|
Medtronic Inc.
|
|
12,898,936
|
|
Health Care Providers &
Services 2.5%
|
|
|
|
229,530
|
|
Quest Diagnostics Inc.
|
|
12,206,405
|
|
199,900
|
|
UnitedHealth Group Inc.
|
|
9,825,085
|
|
|
|
Total Health Care Providers &
Services
|
|
22,031,490
|
|
Pharmaceuticals 1.6%
|
|
|
|
218,000
|
|
Johnson & Johnson
|
|
14,207,060
|
|
|
|
TOTAL HEALTH CARE
|
|
49,137,486
|
|
INDUSTRIALS 12.5%
|
|
|
|
Aerospace & Defense 3.3%
|
|
|
|
118,710
|
|
L-3 Communications Holdings Inc.
|
|
13,015,364
|
|
213,000
|
|
United Technologies Corp.
|
|
16,313,670
|
|
|
|
Total Aerospace & Defense
|
|
29,329,034
|
|
Building Products 1.4%
|
|
|
|
569,900
|
|
Assa Abloy AB
|
|
11,994,124
|
|
Commercial Services & Supplies
2.7%
|
|
|
|
538,100
|
|
Covanta Holding Corp. *
|
|
14,587,891
|
|
214,600
|
|
Monster Worldwide Inc. *
|
|
8,708,468
|
|
|
|
Total Commercial Services & Supplies
|
|
23,296,359
|
|
Industrial Conglomerates 2.2%
|
|
|
|
475,300
|
|
General Electric Co.
|
|
19,563,348
|
|
Machinery 1.7%
|
|
|
|
313,300
|
|
Dover Corp.
|
|
14,411,800
|
|
|
|
|
|
|
|
|
See Notes to Financial
Statements.
8
|
LMP Capital and Income
Fund Inc. 2007 Annual Report
|
|
Schedule of Investments (October 31, 2007) (continued)
Shares
|
|
Security
|
|
Value
|
|
Road & Rail 1.2%
|
|
|
|
55,600
|
|
Burlington Northern Santa Fe Corp.
|
|
$
|
4,845,540
|
|
133,600
|
|
CSX Corp.
|
|
5,981,272
|
|
|
|
Total Road & Rail
|
|
10,826,812
|
|
|
|
TOTAL INDUSTRIALS
|
|
109,421,477
|
|
INFORMATION TECHNOLOGY 10.6%
|
|
|
|
Communications Equipment 3.9%
|
|
|
|
451,900
|
|
Cisco Systems Inc. *
|
|
14,939,814
|
|
266,580
|
|
Corning Inc.
|
|
6,469,897
|
|
298,100
|
|
QUALCOMM Inc.
|
|
12,737,813
|
|
|
|
Total Communications Equipment
|
|
34,147,524
|
|
Computers & Peripherals 2.2%
|
|
|
|
779,500
|
|
EMC Corp. *
|
|
19,791,505
|
|
Internet Software & Services
3.0%
|
|
|
|
84,270
|
|
Equinix Inc. *
|
|
9,830,938
|
|
479,900
|
|
VeriSign Inc. *
|
|
16,359,791
|
|
|
|
Total Internet Software &
Services
|
|
26,190,729
|
|
Software 1.5%
|
|
|
|
584,500
|
|
Oracle Corp. *
|
|
12,958,365
|
|
|
|
TOTAL INFORMATION TECHNOLOGY
|
|
93,088,123
|
|
TELECOMMUNICATION SERVICES 4.1%
|
|
|
|
Wireless Telecommunication
Services 4.1%
|
|
|
|
467,950
|
|
Crown Castle International Corp. *
|
|
19,218,707
|
|
482,400
|
|
SBA Communications Corp., Class A *
|
|
17,173,440
|
|
|
|
TOTAL TELECOMMUNICATION SERVICES
|
|
36,392,147
|
|
UTILITIES 3.7%
|
|
|
|
Electric Utilities 1.1%
|
|
|
|
166,700
|
|
Allegheny Energy Inc. *
|
|
10,112,022
|
|
Gas Utilities 1.5%
|
|
|
|
267,460
|
|
National Fuel Gas Co.
|
|
12,969,135
|
|
Independent Power Producers &
Energy Traders 1.1%
|
|
|
|
207,000
|
|
NRG Energy Inc. *
|
|
9,451,620
|
|
|
|
TOTAL UTILITIES
|
|
32,532,777
|
|
|
|
TOTAL COMMON STOCKS
|
|
|
|
|
|
(Cost $605,893,101)
|
|
641,232,698
|
|
|
|
|
|
|
|
|
See Notes to Financial
Statements.
|
LMP
Capital and Income Fund Inc. 2007 Annual Report
|
9
|
Schedule of Investments (October 31, 2007) (continued)
Shares
|
|
Security
|
|
Value
|
|
PREFERRED STOCKS 0.0%
|
|
|
|
FINANCIALS 0.0%
|
|
|
|
Thrifts & Mortgage Finance
0.0%
|
|
|
|
300
|
|
Federal National Mortgage Association (FNMA),
7.000% (Cost $15,960)
|
|
$15,872
|
|
|
|
|
|
|
|
Face
Amount
|
|
|
|
|
|
ASSET-BACKED SECURITIES 0.5%
|
|
|
|
Home Equity 0.5%
|
|
|
|
$750,000
|
|
Asset-Backed Funding Certificates, 6.323% due
1/25/34 (c)
|
|
654,282
|
|
410,000
|
|
Countrywide Asset-Backed Certificates, 6.381% due
6/25/34 (c)
|
|
383,471
|
|
73,417
|
|
Finance America Net Interest Margin Trust, 5.250%
due 6/27/34 (d)
|
|
66
|
|
186,805
|
|
Fremont Home Loan Trust, 5.973% due 2/25/34 (c)
|
|
164,043
|
|
1,005,000
|
|
GSAMP Trust, 6.023% due 11/25/34 (c)
|
|
904,513
|
|
2,951
|
|
Merrill Lynch Mortgage Investors Inc., 5.000% due
9/25/35 (d)
|
|
2,852
|
|
1,500,000
|
|
Option One Mortgage Loan Trust, 5.923% due 5/25/34
(c)
|
|
1,398,134
|
|
520,783
|
|
Renaissance Home Equity Loan Trust, 6.773% due
3/25/34 (c)
|
|
473,624
|
|
|
|
Sail Net Interest Margin Notes:
|
|
|
|
141,210
|
|
7.750% due 4/27/33 (d)
|
|
16
|
|
71,380
|
|
5.500% due 3/27/34 (d)
|
|
5,443
|
|
|
|
TOTAL ASSET-BACKED SECURITIES
|
|
|
|
|
|
(Cost $4,670,551)
|
|
3,986,444
|
|
COLLATERALIZED MORTGAGE
OBLIGATIONS 0.4%
|
|
|
|
260,000
|
|
American Home Mortgage Investment Trust, 5.673% due
11/25/45 (c)
|
|
254,346
|
|
172,490
|
|
Bear Stearns ARM Trust, 5.782% due 2/25/36 (c)
|
|
170,644
|
|
|
|
Federal Home Loan Mortgage Corp. (FHLMC):
|
|
|
|
65,097
|
|
6.000% due 3/15/34 (c)
|
|
59,079
|
|
549,289
|
|
PAC, 6.000% due 4/15/34 (c)
|
|
535,394
|
|
746,886
|
|
Harborview Mortgage Loan Trust, 6.091% due 11/19/35
(c)
|
|
597,276
|
|
451,505
|
|
Merit Securities Corp., 6.319% due 9/28/32 (c)(d)
|
|
415,273
|
|
|
|
MLCC Mortgage Investors Inc.:
|
|
|
|
387,528
|
|
5.793% due 4/25/29 (c)
|
|
386,836
|
|
653,239
|
|
5.753% due 5/25/29 (c)
|
|
653,659
|
|
|
|
Thornburg Mortgage Securities Trust:
|
|
|
|
257,169
|
|
6.220% due 7/25/37 (c)
|
|
255,883
|
|
277,634
|
|
6.231% due 7/25/37 (c)
|
|
279,673
|
|
|
|
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS
|
|
|
|
|
|
(Cost $3,772,020)
|
|
3,608,063
|
|
COLLATERALIZED SENIOR LOANS 0.7%
|
|
|
|
Aerospace & Defense 0.1%
|
|
|
|
|
|
Dubai Aerospace Enterprise, Term Loan:
|
|
|
|
334,528
|
|
7.998% due 7/31/09 (c)
|
|
334,319
|
|
665,472
|
|
9.033% due 7/31/14
|
|
665,888
|
|
|
|
Total Aerospace & Defense
|
|
1,000,207
|
|
See Notes to Financial
Statements.
10
|
LMP Capital and Income
Fund Inc. 2007 Annual Report
|
|
Schedule of Investments (October 31, 2007) (continued)
Face
Amount
|
|
Security
|
|
Value
|
|
Airlines 0.1%
|
|
|
|
$
|
250,000
|
|
Delta Airlines Inc., Term Loan, 8.082% due 4/30/14
|
|
$
|
248,170
|
|
250,000
|
|
United Airlines Inc., Term Loan B, 7.032% due
1/12/14
|
|
240,139
|
|
|
|
Total Airlines
|
|
488,309
|
|
Commercial Banks 0.1%
|
|
|
|
570,000
|
|
First Data Corp., 7.960% due 10/15/14 (c)
|
|
550,465
|
|
Commercial Services & Supplies
0.0%
|
|
|
|
250,000
|
|
US Investigations Services Inc., Term Loan B, 0.000%
due 2/21/15
|
|
243,125
|
|
Diversified Consumer Services
0.0%
|
|
|
|
250,000
|
|
Thomson Learning Hold, Term Loan B, 7.950% due
7/5/14 (c)
|
|
242,361
|
|
Diversified Telecommunication
Services 0.0%
|
|
|
|
250,000
|
|
Insight Midwest, Term Loan B, 7.000% due 4/10/14 (c)
|
|
245,191
|
|
Electric Utilities 0.1%
|
|
|
|
500,000
|
|
TPF Generation Holdings LLC, Term Loan B, 0.000%
due 10/10/14
|
|
500,155
|
|
Health Care Equipment &
Supplies 0.1%
|
|
|
|
|
|
Bausch & Lomb Inc.:
|
|
|
|
200,000
|
|
Term Loan, 8.143% due 4/11/15 (c)
|
|
200,562
|
|
50,000
|
|
Term Loan B, 0.000% due 4/11/15
|
|
50,141
|
|
|
|
Total Health Care Equipment &
Supplies
|
|
250,703
|
|
Health Care Providers &
Services 0.1%
|
|
|
|
|
|
Community Health Systems Inc.:
|
|
|
|
15,468
|
|
Term Loan, 0.000% due 7/2/14
|
|
15,129
|
|
234,532
|
|
Term Loan B, 7.756% due 7/2/14 (c)
|
|
229,402
|
|
249,372
|
|
HCA Inc., Term Loan B, 7.448% due 11/1/13 (c)
|
|
244,054
|
|
|
|
Total Health Care Providers &
Services
|
|
488,585
|
|
Hotels, Restaurants & Leisure
0.0%
|
|
|
|
250,000
|
|
Aramark Corp., Term Loan, 0.000% due 1/31/14
|
|
244,406
|
|
Media 0.1%
|
|
|
|
250,000
|
|
Charter Communications, Term Loan B, 7.350% due
3/15/14
|
|
240,667
|
|
250,000
|
|
CMP Susquehanna Corp., 0.000% due 6/7/13
|
|
242,500
|
|
249,375
|
|
LodgeNet Entertainment Corp., Term Loan B, 7.200%
due 4/4/14
|
|
245,245
|
|
250,000
|
|
Regal Cinemas, Term Loan B, 0.000% due 10/19/10
|
|
244,815
|
|
|
|
Total Media
|
|
973,227
|
|
Multiline Retail 0.0%
|
|
|
|
250,000
|
|
Neiman Marcus Group Inc., Term Loan B, 7.448% due
3/13/13 (c)
|
|
246,448
|
|
Road & Rail 0.0%
|
|
|
|
250,000
|
|
UPC, Term Loan N, 7.100% due 3/30/14
|
|
242,305
|
|
Specialty Retail 0.0%
|
|
|
|
250,000
|
|
Michaels Stores, Inc. Term Loan B, 7.619% due
10/31/13 (c)
|
|
240,057
|
|
|
|
|
|
|
|
|
|
See Notes to Financial
Statements.
|
LMP
Capital and Income Fund Inc. 2007 Annual Report
|
11
|
Schedule of Investments (October 31, 2007) (continued)
Face
Amount
|
|
Security
|
|
Value
|
|
Wireless Telecommunication
Services 0.0%
|
|
|
|
$
|
250,000
|
|
Telesat Ganada, Term Loan B, 7.901% due 10/15/14
|
|
$
|
247,969
|
|
|
|
TOTAL COLLATERALIZED SENIOR LOANS
|
|
|
|
|
|
(Cost $6,199,182)
|
|
6,203,513
|
|
CORPORATE BONDS & NOTES 9.5%
|
|
|
|
Aerospace & Defense 0.1%
|
|
|
|
275,000
|
|
Alliant Techsystems Inc., Senior Subordinated
Notes, 6.750% due 4/1/16
|
|
275,000
|
|
250,000
|
|
Hawker Beechcraft Acquisition Co., Senior Notes,
8.875% due 4/1/15 (d)(e)
|
|
252,500
|
|
|
|
Total Aerospace & Defense
|
|
527,500
|
|
Airlines 0.1%
|
|
|
|
|
|
Continental Airlines Inc.:
|
|
|
|
170,000
|
|
Notes, 8.750% due 12/1/11
|
|
168,300
|
|
|
|
Pass-Through Certificates:
|
|
|
|
122,925
|
|
8.312% due 4/2/11
|
|
122,437
|
|
380,000
|
|
7.339% due 4/19/14
|
|
359,765
|
|
460,000
|
|
DAE Aviation Holdings Inc., Senior Notes, 11.250%
due 8/1/15 (d)
|
|
485,300
|
|
|
|
Total Airlines
|
|
1,135,802
|
|
Auto Components 0.2%
|
|
|
|
280,000
|
|
Allison Transmission Inc., 11.250% due 11/1/15
(d)(e)
|
|
277,550
|
|
295,000
|
|
Keystone Automotive Operations Inc., Senior
Subordinated Notes, 9.750% due 11/1/13
|
|
241,162
|
|
1,075,000
|
|
Visteon Corp., Senior Notes, 8.250% due 8/1/10
|
|
1,005,125
|
|
|
|
Total Auto Components
|
|
1,523,837
|
|
Automobiles 0.2%
|
|
|
|
110,000
|
|
Ford Motor Co., Debentures, 8.875% due 1/15/22
|
|
95,425
|
|
|
|
General Motors Corp., Senior Debentures:
|
|
|
|
630,000
|
|
8.250% due 7/15/23
|
|
571,725
|
|
1,300,000
|
|
8.375% due 7/15/33
|
|
1,189,500
|
|
|
|
Total Automobiles
|
|
1,856,650
|
|
Building Products 0.1%
|
|
|
|
540,000
|
|
Associated Materials Inc., Senior Subordinated Notes,
9.750% due 4/15/12
|
|
553,500
|
|
490,000
|
|
NTK Holdings Inc., Senior Discount Notes, step bond
to yield 11.186% due 3/1/14
|
|
323,400
|
|
|
|
Total Building Products
|
|
876,900
|
|
Capital Markets 0.2%
|
|
|
|
|
|
E*TRADE Financial Corp., Senior Notes:
|
|
|
|
160,000
|
|
7.375% due 9/15/13
|
|
150,400
|
|
65,000
|
|
7.875% due 12/1/15
|
|
62,075
|
|
1,200,000
|
|
Kaupthing Bank HF, Subordinated Notes, 7.125% due
5/19/16 (d)
|
|
1,190,969
|
|
20,000
|
|
Lehman Brothers Holdings Capital Trust VII,
Medium-Term Notes,
5.857% due 11/29/49 (c)
|
|
18,686
|
|
|
|
|
|
|
|
|
|
See Notes to Financial
Statements.
12
|
LMP Capital and Income
Fund Inc. 2007 Annual Report
|
|
Schedule of Investments (October 31, 2007) (continued)
Face
Amount
|
|
Security
|
|
Value
|
|
Capital Markets 0.2% (continued)
|
|
|
|
$
|
130,000
|
|
Lehman Brothers Holdings Inc., Senior Notes,
Medium-Term Notes,
6.200% due 9/26/14
|
|
$
|
131,025
|
|
|
|
Total Capital Markets
|
|
1,553,155
|
|
Chemicals 0.1%
|
|
|
|
572,000
|
|
Equistar Chemicals LP, Senior Notes, 10.625% due
5/1/11
|
|
600,600
|
|
570,000
|
|
Georgia Gulf Corp., Senior Notes, 9.500% due
10/15/14
|
|
495,900
|
|
110,000
|
|
Huntsman International LLC, Senior Subordinated
Notes, 7.875% due 11/15/14
|
|
118,800
|
|
6,000
|
|
PPG Industries Inc., Notes, 6.500% due 11/1/07
|
|
6,000
|
|
|
|
Total Chemicals
|
|
1,221,300
|
|
Commercial Banks 0.3%
|
|
|
|
54,545
|
|
Fifth Third Bank, Notes, 2.870% due 8/10/09
|
|
52,823
|
|
290,000
|
|
Glitnir Banki HF, Notes, 6.375% due 9/25/12 (d)
|
|
292,371
|
|
100,000
|
|
HBOS Capital Funding LP, Tier 1 Notes, Perpetual
Bonds,
6.071% due 6/30/49 (c)(d)
|
|
96,171
|
|
1,300,000
|
|
Resona Preferred Global Securities Cayman Ltd.,
Bonds,
7.191% due 7/30/15 (c)(d)(f)
|
|
1,307,362
|
|
1,400,000
|
|
Shinsei Finance Cayman Ltd., Junior Subordinated
Bonds,
6.418% due 7/20/14 (c)(d)(f)
|
|
1,306,129
|
|
|
|
Total Commercial Banks
|
|
3,054,856
|
|
Commercial Services & Supplies
0.3%
|
|
|
|
180,000
|
|
Allied Security Escrow Corp., Senior Subordinated
Notes, 11.375% due 7/15/11
|
|
172,800
|
|
75,000
|
|
Allied Waste North America Inc., Senior Notes,
7.250% due 3/15/15
|
|
75,938
|
|
405,000
|
|
DynCorp International LLC/DIV Capital Corp., Senior
Subordinated Notes,
9.500% due 2/15/13
|
|
430,312
|
|
600,000
|
|
Interface Inc., Senior Subordinated Notes, 9.500%
due 2/1/14
|
|
636,000
|
|
290,000
|
|
Rental Services Corp., 9.500% due 12/1/14
|
|
280,212
|
|
790,000
|
|
US Investigations Services Inc., 10.500% due
11/1/15 (d)
|
|
756,425
|
|
225,000
|
|
Waste Management Inc., Senior Note, 6.375% due
11/15/12
|
|
234,279
|
|
|
|
Total Commercial Services &
Supplies
|
|
2,585,966
|
|
Consumer Finance 1.0%
|
|
|
|
|
|
Aiful Corp., Notes:
|
|
|
|
300,000
|
|
6.000% due 12/12/11 (d)
|
|
286,491
|
|
100,000
|
|
5.000% due 8/10/10 (d)
|
|
94,721
|
|
|
|
Ford Motor Credit Co.:
|
|
|
|
1,050,000
|
|
Notes, 7.000% due 10/1/13
|
|
943,603
|
|
|
|
Senior Notes:
|
|
|
|
750,000
|
|
5.800% due 1/12/09
|
|
723,767
|
|
135,000
|
|
9.750% due 9/15/10
|
|
134,516
|
|
559,000
|
|
10.944% due 6/15/11 (c)
|
|
559,316
|
|
1,600,000
|
|
9.875% due 8/10/11
|
|
1,598,811
|
|
170,000
|
|
8.000% due 12/15/16
|
|
157,631
|
|
|
|
General Motors Acceptance Corp., Notes:
|
|
|
|
500,000
|
|
5.625% due 5/15/09
|
|
476,512
|
|
320,000
|
|
7.750% due 1/19/10
|
|
309,901
|
|
|
|
|
|
|
|
|
|
See Notes to Financial
Statements.
|
LMP
Capital and Income Fund Inc. 2007 Annual Report
|
13
|
Schedule of Investments (October 31, 2007) (continued)
Face
Amount
|
|
Security
|
|
Value
|
|
Consumer Finance 1.0%
(continued)
|
|
|
|
$
|
1,580,000
|
|
6.875% due 9/15/11
|
|
$
|
1,457,343
|
|
1,900,000
|
|
6.625% due 5/15/12
|
|
1,707,298
|
|
300,000
|
|
6.750% due 12/1/14
|
|
266,188
|
|
125,000
|
|
SLM Corp., Medium-Term Notes, 5.284% due 1/26/09
(c)
|
|
121,864
|
|
|
|
Total Consumer Finance
|
|
8,837,962
|
|
Containers & Packaging 0.1%
|
|
|
|
285,000
|
|
Graham Packaging Co. Inc., Senior Subordinated
Notes, 9.875% due 10/15/14
|
|
283,575
|
|
535,000
|
|
Graphic Packaging International Corp., Senior
Subordinated Notes,
9.500% due 8/15/13
|
|
564,425
|
|
195,000
|
|
Plastipak Holdings Inc., Senior Notes, 8.500% due
12/15/15 (d)
|
|
201,825
|
|
|
|
Total Containers & Packaging
|
|
1,049,825
|
|
Diversified Consumer Services
0.0%
|
|
|
|
|
|
Education Management LLC/Education Management
Finance Corp.:
|
|
|
|
20,000
|
|
Senior Notes, 8.750% due 6/1/14
|
|
20,750
|
|
210,000
|
|
Senior Subordinated Notes, 10.250% due 6/1/16
|
|
221,550
|
|
|
|
Total Diversified Consumer
Services
|
|
242,300
|
|
Diversified Financial Services
0.4%
|
|
|
|
150,000
|
|
AAC Group Holding Corp., Senior Discount Notes,
step bond to yield
9.092% due 10/1/12
|
|
133,500
|
|
100,000
|
|
Bank of America Corp., Subordinated Notes, 5.420%
due 3/15/17
|
|
97,298
|
|
610,000
|
|
Basell AF SCA, Senior Secured Subordinated Second
Priority Notes,
8.375% due 8/15/15 (d)
|
|
549,000
|
|
125,000
|
|
Capital One Bank, Notes, 5.750% due 9/15/10
|
|
126,276
|
|
110,493
|
|
Core Investment Grade Bond Trust I, Pass-Through
Certificates,
4.642% due 11/30/07 (c)
|
|
110,300
|
|
125,000
|
|
Countrywide Home Loans Inc., Medium-Term Notes,
4.125% due 9/15/09
|
|
109,297
|
|
250,000
|
|
General Electric Capital Corp., Medium-Term Notes,
5.450% due 1/15/13
|
|
253,088
|
|
200,000
|
|
Glen Meadow Pass-Through Certificates, 6.505% due
2/12/67 (c)(d)
|
|
192,416
|
|
125,000
|
|
HSBC Finance Corp., Senior Subordinated Notes,
5.875% due 2/1/09
|
|
126,271
|
|
210,000
|
|
Leucadia National Corp., Senior Notes, 8.125% due
9/15/15
|
|
212,887
|
|
|
|
Residential Capital LLC, Senior Notes:
|
|
|
|
10,000
|
|
7.314% due 4/17/09 (c)
|
|
7,813
|
|
40,000
|
|
7.595% due 5/22/09 (c)
|
|
31,250
|
|
430,000
|
|
7.500% due 6/1/12 (c)
|
|
314,178
|
|
46,000
|
|
UCAR Finance Inc., Senior Notes, 10.250% due
2/15/12
|
|
48,300
|
|
60,000
|
|
Vangent Inc., Senior Subordinated Notes, 9.625% due
2/15/15 (d)
|
|
55,800
|
|
620,000
|
|
Vanguard Health Holdings Co. I LLC, Senior Discount
Notes, step bond to yield
10.257% due 10/1/15
|
|
486,700
|
|
260,000
|
|
Vanguard Health Holdings Co. II LLC, Senior Subordinated
Notes, 9.000% due 10/1/14
|
|
254,800
|
|
|
|
Total Diversified Financial
Services
|
|
3,109,174
|
|
Diversified Telecommunication
Services 0.6%
|
|
|
|
600,000
|
|
Deutsche Telekom International Finance, Senior
Notes, 5.750% due 3/23/16
|
|
602,569
|
|
|
|
|
|
|
|
|
|
See Notes to Financial
Statements.
14
|
LMP Capital and Income
Fund Inc. 2007 Annual Report
|
|
Schedule of Investments (October 31, 2007) (continued)
Face
Amount
|
|
Security
|
|
Value
|
|
Diversified Telecommunication
Services 0.6% (continued)
|
|
|
|
$
|
170,000
|
|
Hawaiian Telcom Communications Inc., Senior
Subordinated Notes,
12.500% due 5/1/15
|
|
$
|
185,300
|
|
|
|
Intelsat Bermuda Ltd.:
|
|
|
|
180,000
|
|
9.250% due 6/15/16
|
|
187,650
|
|
680,000
|
|
Senior Notes, 11.250% due 6/15/16
|
|
734,400
|
|
|
|
Level 3 Financing Inc.:
|
|
|
|
295,000
|
|
9.250% due 11/1/14
|
|
279,512
|
|
30,000
|
|
9.150% due 2/15/15 (c)
|
|
27,225
|
|
250,000
|
|
Nordic Telephone Co. Holdings, Senior Secured
Bonds, 8.875% due 5/1/16 (d)
|
|
265,625
|
|
140,000
|
|
PAETEC Holding Corp., Senior Note, 9.500% due 7/15/15
(d)
|
|
144,200
|
|
740,000
|
|
Qwest Communications International Inc., Senior
Notes, 7.500% due 2/15/14
|
|
752,950
|
|
100,000
|
|
Telecom Italia Capital S.p.A., Senior Notes, 5.250%
due 10/1/15
|
|
96,521
|
|
450,000
|
|
Verizon Florida Inc., Senior Notes, 6.125% due 1/15/13
|
|
465,448
|
|
|
|
Virgin Media Finance PLC, Senior Notes:
|
|
|
|
450,000
|
|
8.750% due 4/15/14
|
|
466,875
|
|
220,000
|
|
9.125% due 8/15/16
|
|
233,200
|
|
660,000
|
|
Windstream Corp., Senior Notes, 8.625% due 8/1/16
|
|
709,500
|
|
|
|
Total Diversified
Telecommunication Services
|
|
5,150,975
|
|
Electric Utilities 0.1%
|
|
|
|
325,000
|
|
FirstEnergy Corp., Notes, 7.375% due 11/15/31
|
|
355,843
|
|
100,000
|
|
Orion Power Holdings Inc., Senior Notes, 12.000%
due 5/1/10
|
|
111,000
|
|
230,000
|
|
Pacific Gas & Electric Co., Senior
Unsubordinated Notes, 5.800% due 3/1/37
|
|
222,037
|
|
|
|
Total Electric Utilities
|
|
688,880
|
|
Electronic Equipment &
Instruments 0.1%
|
|
|
|
1,065,000
|
|
NXP BV/NXP Funding LLC, Senior Notes, 9.500% due
10/15/15
|
|
1,009,087
|
|
Energy Equipment & Services
0.1%
|
|
|
|
725,000
|
|
Complete Production Services Inc., Senior Notes,
8.000% due 12/15/16
|
|
706,875
|
|
55,000
|
|
Pride International Inc., Senior Notes, 7.375% due
7/15/14
|
|
56,650
|
|
10,000
|
|
Southern Natural Gas Co., Senior Notes, 8.000% due
3/1/32
|
|
11,456
|
|
|
|
Total Energy Equipment &
Services
|
|
774,981
|
|
Food & Staples Retailing
0.0%
|
|
|
|
150,000
|
|
Safeway Inc., Senior Notes, 6.500% due 11/15/08
|
|
151,914
|
|
Food Products 0.1%
|
|
|
|
|
|
Dole Food Co. Inc., Senior Notes:
|
|
|
|
125,000
|
|
7.250% due 6/15/10
|
|
119,375
|
|
261,000
|
|
8.875% due 3/15/11
|
|
258,064
|
|
|
|
Total Food Products
|
|
377,439
|
|
Health Care Providers &
Services 0.3%
|
|
|
|
460,000
|
|
Community Health Systems Inc., Senior Notes, 8.875%
due 7/15/15 (d)
|
|
468,050
|
|
|
|
HCA Inc.:
|
|
|
|
295,000
|
|
Notes, 6.375% due 1/15/15
|
|
253,331
|
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
|
LMP
Capital and Income Fund Inc. 2007 Annual Report
|
15
|
Schedule of Investments (October 31, 2007) (continued)
Face
Amount
|
|
Security
|
|
Value
|
|
Health Care Providers &
Services 0.3% (continued)
|
|
|
|
$
|
345,000
|
|
Senior Notes, 6.500% due 2/15/16
|
|
$
|
296,269
|
|
|
|
Senior Secured Notes:
|
|
|
|
215,000
|
|
9.250% due 11/15/16 (d)
|
|
226,825
|
|
285,000
|
|
9.625% due 11/15/16 (d)(e)
|
|
302,100
|
|
425,000
|
|
IASIS Healthcare LLC/IASIS Capital Corp., Senior
Subordinated Notes,
8.750% due 6/15/14
|
|
431,375
|
|
|
|
Tenet Healthcare Corp., Senior Notes:
|
|
|
|
180,000
|
|
6.375% due 12/1/11
|
|
158,400
|
|
650,000
|
|
7.375% due 2/1/13
|
|
555,750
|
|
1,000
|
|
9.875% due 7/1/14
|
|
915
|
|
150,000
|
|
UnitedHealth Group Inc., Senior Notes, 3.300% due
1/30/08
|
|
149,483
|
|
|
|
Total Health Care Providers &
Services
|
|
2,842,498
|
|
Hotels, Restaurants & Leisure
0.8%
|
|
|
|
1,000,000
|
|
Boyd Gaming Corp., Senior Subordinated Notes,
6.750% due 4/15/14
|
|
986,250
|
|
265,000
|
|
Buffets Inc., Senior Notes, 12.500% due 11/1/14
|
|
172,913
|
|
315,000
|
|
Choctaw Resort Development Enterprise, Senior
Notes, 7.250% due 11/15/19 (d)
|
|
308,700
|
|
550,000
|
|
Dennys Holdings Inc., Senior Notes, 10.000% due
10/1/12
|
|
567,875
|
|
100,000
|
|
El Pollo Loco Inc., Senior Notes, 11.750% due
11/15/13
|
|
101,000
|
|
450,000
|
|
Herbst Gaming Inc., Senior Subordinated Notes,
7.000% due 11/15/14
|
|
366,750
|
|
660,000
|
|
Inn of the Mountain Gods Resort & Casino,
Senior Notes, 12.000% due 11/15/10
|
|
699,600
|
|
|
|
MGM MIRAGE Inc.:
|
|
|
|
380,000
|
|
Notes, 6.750% due 9/1/12
|
|
376,200
|
|
|
|
Senior Notes:
|
|
|
|
575,000
|
|
5.875% due 2/27/14
|
|
536,187
|
|
320,000
|
|
7.625% due 1/15/17
|
|
321,600
|
|
203,000
|
|
Senior Subordinated Notes, 9.375% due 2/15/10
|
|
214,165
|
|
500,000
|
|
Pinnacle Entertainment Inc., Senior Subordinated
Notes, 8.250% due 3/15/12
|
|
517,500
|
|
625,000
|
|
Seneca Gaming Corp., Senior Notes, 7.250% due
5/1/12
|
|
632,812
|
|
|
|
Station Casinos Inc.:
|
|
|
|
|
|
Senior Notes:
|
|
|
|
60,000
|
|
6.000% due 4/1/12
|
|
55,950
|
|
250,000
|
|
7.750% due 8/15/16
|
|
245,937
|
|
105,000
|
|
Senior Subordinated Notes, 6.875% due 3/1/16
|
|
87,413
|
|
500,000
|
|
Turning Stone Casino Resort Enterprise, Senior
Notes, 9.125% due 12/15/10 (d)
|
|
512,500
|
|
|
|
Total Hotels, Restaurants &
Leisure
|
|
6,703,352
|
|
Household Durables 0.1%
|
|
|
|
335,000
|
|
K Hovnanian Enterprises Inc., Senior Notes, 8.625%
due 1/15/17
|
|
281,400
|
|
325,000
|
|
Norcraft Cos. LP/Norcraft Finance Corp., Senior
Subordinated Notes,
9.000% due 11/1/11
|
|
334,750
|
|
700,000
|
|
Norcraft Holdings LP/Norcraft Capital Corp., Senior
Discount Notes, step bond to yield
9.608% due 9/1/12
|
|
626,500
|
|
|
|
Total Household Durables
|
|
1,242,650
|
|
Independent Power Producers &
Energy Traders 0.7%
|
|
|
|
|
|
AES Corp.:
|
|
|
|
720,000
|
|
7.750% due 10/15/17 (d)
|
|
724,500
|
|
|
|
|
|
|
|
|
|
See Notes to Financial
Statements.
16
|
LMP Capital and Income
Fund Inc. 2007 Annual Report
|
|
Schedule of Investments (October 31,
2007) (continued)
Face
Amount
|
|
Security
|
|
Value
|
|
Independent
Power Producers & Energy Traders 0.7% (continued)
|
|
|
|
$
|
660,000
|
|
8.000% due 10/15/17 (d)
|
|
$
|
669,075
|
|
1,100,000
|
|
Senior Notes, 7.750% due
3/1/14
|
|
1,105,500
|
|
|
|
Energy Future Holdings:
|
|
|
|
270,000
|
|
10.875% due 11/1/17 (d)
|
|
274,387
|
|
1,490,000
|
|
11.250% due 11/1/17 (d)(e)
|
|
1,516,075
|
|
152,070
|
|
Mirant Mid Atlantic LLC,
Pass-Through Certificates, 9.125% due 6/30/17
|
|
167,467
|
|
|
|
NRG Energy Inc., Senior
Notes:
|
|
|
|
250,000
|
|
7.250% due 2/1/14
|
|
250,625
|
|
1,025,000
|
|
7.375% due 2/1/16
|
|
1,025,000
|
|
380,000
|
|
TXU Corp., Senior Notes,
5.550% due 11/15/14
|
|
298,302
|
|
|
|
Total Independent Power Producers & Energy
Traders
|
|
6,030,931
|
|
Insurance
0.0%
|
|
|
|
120,000
|
|
Travelers Cos. Inc., Junior
Subordinated Debentures, 6.250% due 3/15/37 (c)
|
|
116,731
|
|
IT
Services 0.1%
|
|
|
|
|
|
Ceridian Corp.:
|
|
|
|
110,000
|
|
11.250% due 11/15/15 (d)
|
|
109,175
|
|
170,000
|
|
12.250% due 11/15/15 (d)(e)
|
|
168,725
|
|
|
|
SunGard Data Systems Inc.:
|
|
|
|
400,000
|
|
Senior Notes, 9.125% due
8/15/13
|
|
410,000
|
|
270,000
|
|
Senior Subordinated Notes,
10.250% due 8/15/15
|
|
282,825
|
|
|
|
Total IT Services
|
|
970,725
|
|
Media
0.7%
|
|
|
|
|
|
Affinion Group Inc.:
|
|
|
|
355,000
|
|
Senior Notes, 10.125% due
10/15/13
|
|
371,862
|
|
100,000
|
|
Senior Subordinated Notes,
11.500% due 10/15/15
|
|
104,750
|
|
|
|
CCH I Holdings LLC/CCH I
Holdings Capital Corp.:
|
|
|
|
205,000
|
|
Senior Accreting Notes,
12.125% due 1/15/15
|
|
181,425
|
|
380,000
|
|
Senior Notes, 11.750% due
5/15/14
|
|
333,450
|
|
569,000
|
|
CCH I LLC/CCH Capital Corp.,
Senior Secured Notes, 11.000% due 10/1/15
|
|
554,775
|
|
|
|
CCH II LLC/CCH II Capital
Corp., Senior Notes:
|
|
|
|
480,000
|
|
10.250% due 9/15/10
|
|
492,000
|
|
65,000
|
|
10.250% due 10/1/13
|
|
67,275
|
|
105,000
|
|
Charter Communications
Holdings LLC/Charter Communications Holdings Capital Corp., Senior Discount
Notes, 11.750% due 5/15/11
|
|
99,225
|
|
240,000
|
|
CMP Susquehanna Corp.,
9.875% due 5/15/14
|
|
221,700
|
|
810,000
|
|
Comcast Corp., Notes,
6.500% due 1/15/17
|
|
848,469
|
|
700,000
|
|
Idearc Inc., Senior Notes,
8.000% due 11/15/16
|
|
705,250
|
|
180,000
|
|
Lamar Media Corp., Senior
Subordinated Notes, 6.625% due 8/15/15
|
|
173,700
|
|
|
|
R.H. Donnelley Corp.:
|
|
|
|
655,000
|
|
Senior Discount Notes,
6.875% due 1/15/13
|
|
618,975
|
|
450,000
|
|
Senior Notes, 8.875% due
1/15/16
|
|
452,250
|
|
810,000
|
|
Time Warner Inc., Senior
Notes, 6.875% due 5/1/12
|
|
854,521
|
|
260,000
|
|
TL Acquisitions Inc.,
Senior Notes, 10.500% due 1/15/15 (d)
|
|
260,000
|
|
|
|
Total Media
|
|
6,339,627
|
|
|
|
|
|
|
|
|
|
See Notes to Financial
Statements.
|
LMP
Capital and Income Fund Inc. 2007 Annual Report
|
17
|
Schedule of Investments (October 31,
2007) (continued)
Face
Amount
|
|
Security
|
|
Value
|
|
Metals &
Mining 0.3%
|
|
|
|
$
|
960,000
|
|
Freeport-McMoRan
Copper & Gold Inc., Senior Notes, 8.375% due 4/1/17
|
|
$
|
1,053,600
|
|
650,000
|
|
Metals USA Inc., Senior
Secured Notes, 11.125% due 12/1/15
|
|
697,125
|
|
205,000
|
|
Noranda Aluminum Holding
Corp., Senior Notes, 11.146% due 11/15/14 (c)(d)(e)
|
|
193,725
|
|
100,000
|
|
Novelis Inc., Senior Notes,
7.250% due 2/15/15
|
|
96,500
|
|
350,000
|
|
Ryerson Inc., 12.000% due
11/1/15 (d)
|
|
361,375
|
|
100,000
|
|
Steel Dynamics Inc., 7.375%
due 11/1/12 (d)
|
|
100,500
|
|
200,000
|
|
Tube City IMS Corp., 9.750%
due 2/1/15
|
|
197,500
|
|
156,000
|
|
Vale Overseas Ltd., Notes,
6.875% due 11/21/36
|
|
162,949
|
|
|
|
Total Metals & Mining
|
|
2,863,274
|
|
Multi-Utilities
0.0%
|
|
|
|
125,000
|
|
Keyspan Gas East Corp.,
Medium-Term Notes, 6.900% due 1/15/08
|
|
125,426
|
|
Multiline
Retail 0.1%
|
|
|
|
|
|
Dollar General Corp.:
|
|
|
|
215,000
|
|
Senior Notes, 10.625% due
7/15/15 (d)
|
|
207,475
|
|
345,000
|
|
Senior Subordinated Notes,
11.875% due 7/15/17 (d)(e)
|
|
306,188
|
|
535,000
|
|
Neiman Marcus Group Inc.,
Senior Subordinated Notes, 10.375% due 10/15/15
|
|
584,487
|
|
|
|
Total Multiline Retail
|
|
1,098,150
|
|
Office
Electronics 0.0%
|
|
|
|
290,000
|
|
Xerox Corp., Senior Notes,
6.750% due 2/1/17
|
|
303,253
|
|
Oil, Gas &
Consumable Fuels 0.9%
|
|
|
|
|
|
Anadarko Petroleum Corp.,
Senior Notes:
|
|
|
|
60,000
|
|
5.950% due 9/15/16
|
|
60,426
|
|
1,240,000
|
|
6.450% due 9/15/36
|
|
1,258,664
|
|
440,000
|
|
Belden & Blake
Corp., Secured Notes, 8.750% due 7/15/12
|
|
451,000
|
|
775,000
|
|
Chesapeake Energy Corp.,
Senior Notes, 6.375% due 6/15/15
|
|
755,625
|
|
85,000
|
|
Compagnie Generale de
Geophysique SA, Senior Notes, 7.500% due 5/15/15
|
|
87,125
|
|
330,000
|
|
ConocoPhillips Holding Co.,
Senior Notes, 6.950% due 4/15/29
|
|
376,878
|
|
|
|
El Paso Corp., Medium-Term
Notes:
|
|
|
|
180,000
|
|
7.800% due 8/1/31
|
|
180,712
|
|
1,050,000
|
|
7.750% due 1/15/32
|
|
1,057,578
|
|
450,000
|
|
EXCO Resources Inc., Senior
Notes, 7.250% due 1/15/11
|
|
446,625
|
|
260,000
|
|
International Coal Group
Inc., Senior Notes, 10.250% due 7/15/14
|
|
253,500
|
|
|
|
Kerr-McGee Corp.:
|
|
|
|
140,000
|
|
6.950% due 7/1/24
|
|
149,362
|
|
300,000
|
|
Notes, 6.875% due 9/15/11
|
|
316,120
|
|
605,000
|
|
OPTI Canada Inc., Senior
Secured Notes, 8.250% due 12/15/14 (d)
|
|
609,538
|
|
160,000
|
|
Petroplus Finance Ltd.,
Senior Note, 7.000% due 5/1/17 (d)
|
|
151,200
|
|
290,000
|
|
SemGroup LP, Senior Notes,
8.750% due 11/15/15 (d)
|
|
279,850
|
|
260,000
|
|
Stone Energy Corp., Senior
Subordinated Notes, 8.250% due 12/15/11
|
|
260,000
|
|
|
|
Williams Cos. Inc.:
|
|
|
|
100,000
|
|
Notes, 8.750% due 3/15/32
|
|
117,000
|
|
470,000
|
|
Senior Notes, 7.750% due
6/15/31
|
|
505,250
|
|
170,000
|
|
XTO Energy Inc., Senior
Notes, 7.500% due 4/15/12
|
|
185,437
|
|
|
|
Total Oil, Gas & Consumable Fuels
|
|
7,501,890
|
|
|
|
|
|
|
|
|
|
See Notes to Financial
Statements.
18
|
LMP Capital and Income
Fund Inc. 2007 Annual Report
|
|
Schedule of Investments (October 31,
2007) (continued)
Face
Amount
|
|
Security
|
|
Value
|
|
Paper &
Forest Products 0.2%
|
|
|
|
|
|
Abitibi-Consolidated Co. of
Canada:
|
|
|
|
$
|
40,000
|
|
Notes, 7.750% due 6/15/11
|
|
$
|
33,400
|
|
|
|
Senior Notes:
|
|
|
|
140,000
|
|
6.000% due 6/20/13
|
|
103,600
|
|
220,000
|
|
8.375% due 4/1/15
|
|
171,600
|
|
160,000
|
|
Abitibi-Consolidated Inc.,
Debentures, 7.400% due 4/1/18
|
|
113,600
|
|
545,000
|
|
Appleton Papers Inc.,
Senior Subordinated Notes, 9.750% due 6/15/14
|
|
545,000
|
|
|
|
NewPage Corp.:
|
|
|
|
435,000
|
|
Senior Secured Notes,
11.606% due 5/1/12 (c)
|
|
470,887
|
|
200,000
|
|
Senior Subordinated Notes,
12.000% due 5/1/13
|
|
217,000
|
|
155,000
|
|
Verso Paper Holdings LLC,
9.125% due 8/1/14
|
|
160,813
|
|
150,000
|
|
Weyerhaeuser Co., Notes,
6.750% due 3/15/12
|
|
156,308
|
|
|
|
Total Paper & Forest Products
|
|
1,972,208
|
|
Pharmaceuticals
0.1%
|
|
|
|
445,000
|
|
Leiner Health Products
Inc., Senior Subordinated Notes, 11.000% due 6/1/12
|
|
374,913
|
|
Real
Estate Investment Trusts (REITs) 0.0%
|
|
|
|
75,000
|
|
iStar Financial Inc.,
Senior Notes, 4.875% due 1/15/09
|
|
73,478
|
|
50,000
|
|
Simon Property Group LP,
Notes, 6.375% due 11/15/07
|
|
50,010
|
|
85,000
|
|
Ventas Realty LP/Ventas
Capital Corp., Senior Notes, 6.500% due 6/1/16
|
|
84,363
|
|
|
|
Total Real Estate Investment Trusts (REITs)
|
|
207,851
|
|
Real
Estate Management & Development 0.1%
|
|
|
|
270,000
|
|
Ashton Woods USA LLC/Ashton
Woods Finance Co., Senior Subordinated Notes,
9.500% due 10/1/15
|
|
202,500
|
|
520,000
|
|
Realogy Corp., Senior Subordinated
Notes, 12.375% due 4/15/15 (d)
|
|
380,900
|
|
|
|
Total Real Estate Management & Development
|
|
583,400
|
|
Road &
Rail 0.2%
|
|
|
|
1,005,000
|
|
Hertz Corp., Senior
Subordinated Notes, 10.500% due 1/1/16
|
|
1,085,400
|
|
50,000
|
|
Kansas City Southern de
Mexico, Senior Notes, 7.625% due 12/1/13 (d)
|
|
51,125
|
|
430,000
|
|
Kansas City Southern
Railway, Senior Notes, 7.500% due 6/15/09
|
|
437,525
|
|
|
|
Total Road & Rail
|
|
1,574,050
|
|
Semiconductors
& Semiconductor Equipment 0.0%
|
|
|
|
195,000
|
|
Freescale Semiconductor
Inc., 8.875% due 12/15/14
|
|
185,494
|
|
Specialty
Retail 0.1%
|
|
|
|
235,000
|
|
Blockbuster Inc., Senior
Subordinated Notes, 9.000% due 9/1/12
|
|
212,675
|
|
165,000
|
|
Eye Care Centers of
America, Senior Subordinated Notes, 10.750% due 2/15/15
|
|
175,312
|
|
|
|
Total Specialty Retail
|
|
387,987
|
|
Textiles,
Apparel & Luxury Goods 0.1%
|
|
|
|
390,000
|
|
Levi Strauss &
Co., Senior Notes, 9.750% due 1/15/15
|
|
409,012
|
|
180,000
|
|
Oxford Industries Inc.,
Senior Notes, 8.875% due 6/1/11
|
|
180,900
|
|
|
|
Total Textiles, Apparel & Luxury Goods
|
|
589,912
|
|
|
|
|
|
|
|
|
|
See Notes to Financial
Statements.
|
LMP
Capital and Income Fund Inc. 2007 Annual Report
|
19
|
Schedule of Investments (October 31,
2007) (continued)
Face
Amount
|
|
Security
|
|
Value
|
|
Tobacco
0.0%
|
|
|
|
|
|
Alliance One International
Inc.:
|
|
|
|
$
|
150,000
|
|
8.500% due 5/15/12
|
|
$
|
150,000
|
|
90,000
|
|
Senior Notes, 11.000% due
5/15/12
|
|
96,750
|
|
|
|
Total Tobacco
|
|
246,750
|
|
Trading
Companies & Distributors 0.1%
|
|
|
|
355,000
|
|
Ashtead Capital Inc.,
Notes, 9.000% due 8/15/16 (d)
|
|
346,125
|
|
360,000
|
|
H&E Equipment Services
Inc., Senior Notes, 8.375% due 7/15/16
|
|
351,000
|
|
450,000
|
|
Penhall International
Corp., Senior Secured Notes, 12.000% due 8/1/14 (d)
|
|
462,375
|
|
|
|
Total Trading Companies & Distributors
|
|
1,159,500
|
|
Transportation
Infrastructure 0.0%
|
|
|
|
|
|
Saint Acquisition Corp.:
|
|
|
|
435,000
|
|
Secured Notes, 12.500% due
5/15/17 (d)
|
|
279,488
|
|
130,000
|
|
Senior Secured Notes,
13.308% due 5/15/15 (c)(d)
|
|
83,525
|
|
|
|
Total Transportation Infrastructure
|
|
363,013
|
|
Wireless
Telecommunication Services 0.5%
|
|
|
|
65,000
|
|
MetroPCS Wireless Inc.,
Senior Notes, 9.250% due 11/1/14 (d)
|
|
64,837
|
|
1,270,000
|
|
New Cingular Wireless
Services Inc., Notes, 8.125% due 5/1/12
|
|
1,417,714
|
|
|
|
Rural Cellular Corp.:
|
|
|
|
245,000
|
|
Senior Notes, 9.875% due 2/1/10
|
|
256,637
|
|
110,000
|
|
Senior Secured Notes,
8.250% due 3/15/12
|
|
115,225
|
|
1,190,000
|
|
Sprint Capital Corp.,
Senior Notes, 8.375% due 3/15/12
|
|
1,300,856
|
|
780,000
|
|
True Move Co., Ltd.,
10.750% due 12/16/13 (d)
|
|
805,350
|
|
|
|
Total Wireless Telecommunication Services
|
|
3,960,619
|
|
|
|
TOTAL CORPORATE BONDS & NOTES
(Cost $84,659,085)
|
|
83,472,707
|
|
MORTGAGE-BACKED
SECURITIES 6.9%
|
|
|
|
FHLMC
3.4%
|
|
|
|
|
|
Federal Home Loan Mortgage
Corp. (FHLMC):
|
|
|
|
3,280,401
|
|
5.120% due 6/1/35 (c)
|
|
3,274,148
|
|
100,000
|
|
6.126% due 9/1/37 (c)
|
|
101,687
|
|
|
|
Gold:
|
|
|
|
676,442
|
|
7.000% due 6/1/17
|
|
701,167
|
|
20,186,257
|
|
6.000% due 7/1/21-2/1/34
(g)
|
|
20,465,073
|
|
324,657
|
|
8.500% due 9/1/25
|
|
348,759
|
|
732,075
|
|
6.500% due 8/1/29
|
|
755,956
|
|
4,508,840
|
|
6.000% due 2/1/36
|
|
4,539,466
|
|
|
|
Total FHLMC
|
|
30,186,256
|
|
|
|
|
|
|
|
|
|
See Notes to Financial
Statements.
20
|
LMP Capital and Income
Fund Inc. 2007 Annual Report
|
|
Schedule of Investments (October 31,
2007) (continued)
Face
Amount
|
|
Security
|
|
Value
|
|
FNMA
3.3%
|
|
|
|
|
|
Federal National Mortgage
Association (FNMA):
|
|
|
|
$
|
718,206
|
|
8.000% due 12/1/12
|
|
$
|
734,628
|
|
1,760,975
|
|
5.500% due 1/1/14-4/1/35
|
|
1,744,736
|
|
1,670,507
|
|
7.000% due 3/15/15-6/1/32
|
|
1,752,168
|
|
583,991
|
|
4.204% due 12/1/34 (c)
|
|
575,813
|
|
800,831
|
|
4.855% due 1/1/35 (c)
|
|
803,593
|
|
1,035,782
|
|
5.051% due 3/1/35 (c)
|
|
1,037,663
|
|
1,372,909
|
|
5.874% due 4/1/35 (c)
|
|
1,400,013
|
|
2,908,435
|
|
5.636% due 4/1/36 (c)
|
|
2,922,977
|
|
4,838,023
|
|
5.588% due 5/1/36 (c)
|
|
4,861,246
|
|
10,500,000
|
|
5.000% due 11/13/37-12/12/37
(h)
|
|
10,075,862
|
|
2,800,000
|
|
6.000% due 11/13/37 (h)
|
|
2,820,563
|
|
|
|
Total FNMA
|
|
28,729,262
|
|
GNMA
0.2%
|
|
|
|
1,285,504
|
|
Government National
Mortgage Association (GNMA), 5.500% due 8/15/21
|
|
1,290,494
|
|
|
|
TOTAL MORTGAGE-BACKED SECURITIES
(Cost $60,114,011)
|
|
60,206,012
|
|
|
|
|
|
|
|
Face
Amount
|
|
|
|
|
|
SOVEREIGN
BOND 0.0%
|
|
|
|
Argentina
0.0%
|
|
|
|
69,931
|
ARS
|
Republic of Argentina, GDP
Linked Securities,
0.649% due 12/15/35 (c) (Cost - $560)
|
|
2,433
|
|
U.S.
GOVERNMENT & AGENCY OBLIGATIONS 1.1%
|
|
|
|
U.S.
Government Agency 0.0%
|
|
|
|
100,000
|
|
Federal Home Loan Bank
(FHLB), Global Bonds, 5.500% due 7/15/36
|
|
104,362
|
|
U.S.
Government Obligations 1.1%
|
|
|
|
|
|
U.S. Treasury Bonds:
|
|
|
|
3,090,000
|
|
4.750% due 2/15/37
|
|
3,089,277
|
|
40,000
|
|
5.000% due 5/15/37
|
|
41,603
|
|
|
|
U.S. Treasury Notes:
|
|
|
|
45,000
|
|
4.250% due 9/30/12
|
|
45,204
|
|
6,200,000
|
|
4.750% due 8/15/17 (g)
|
|
6,338,533
|
|
|
|
Total U.S. Government Obligations
|
|
9,514,617
|
|
|
|
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS
(Cost $9,485,983)
|
|
9,618,979
|
|
|
|
|
|
|
|
|
|
See Notes to Financial
Statements.
|
LMP
Capital and Income Fund Inc. 2007 Annual Report
|
21
|
Schedule of Investments (October 31,
2007) (continued)
Face
Amount
|
|
Security
|
|
Value
|
|
U.S.
TREASURY INFLATION PROTECTED SECURITIES 0.9%
|
|
|
|
1,948,722
|
|
U.S. Treasury Bonds,
Inflation Indexed, 2.375% due 1/15/27
|
|
$
|
1,999,572
|
|
|
|
U.S. Treasury Notes,
Inflation Indexed:
|
|
|
|
98,781
|
|
0.875% due 4/15/10
|
|
96,544
|
|
3,048,434
|
|
2.375% due 4/15/11 (g)
|
|
3,096,782
|
|
2,783,889
|
|
2.375% due 1/15/17
|
|
2,844,135
|
|
|
|
TOTAL U.S. TREASURY INFLATION PROTECTED SECURITIES
(Cost $7,690,198)
|
|
8,037,033
|
|
|
|
|
|
|
|
Contracts
|
|
|
|
|
|
PURCHASED
OPTIONS 0.7%
|
|
|
|
337
|
|
Eurodollar Futures, Call @
$94.00, expires 6/16/08
|
|
1,364,850
|
|
|
|
Johnson & Johnson:
|
|
|
|
1,803
|
|
Call @ $60.00, expires
1/17/09
|
|
1,442,400
|
|
909
|
|
Call @ $65.00, expires
1/17/09
|
|
519,948
|
|
627
|
|
Marsh & McLennan
Cos. Inc., Call @ $25.00, expires 1/19/08
|
|
115,995
|
|
1,260
|
|
S & P 500 Index,
Put @ $1,480.00, expires 12/22/07
|
|
2,419,200
|
|
184
|
|
Sterling Futures, Call @
$93.00, expires 3/19/08
|
|
0
|
|
347
|
|
Target Corp., Call @
$55.00, expires 1/17/09
|
|
454,570
|
|
175
|
|
U.S. Treasury Notes 10 Year
Futures, Put @ $106.00, expires 11/22/07
|
|
2,735
|
|
|
|
TOTAL PURCHASED OPTIONS
(Cost $8,647,339)
|
|
6,319,698
|
|
|
|
TOTAL INVESTMENTS BEFORE
SHORT-TERM INVESTMENTS
(Cost
$791,147,990)
|
|
822,703,452
|
|
|
|
|
|
|
|
Face
Amount
|
|
|
|
|
|
SHORT-TERM INVESTMENTS 6.3%
|
|
|
|
U.S. Government Agencies 4.4%
|
|
|
|
$
|
39,000,000
|
|
Federal Home Loan Bank (FHLB), Discount Notes, 0.000% due 11/1/07 (g)
|
|
39,000,000
|
|
100,000
|
|
Federal National Mortgage Association (FNMA), Discount Notes, 5.178%
due 3/17/08
|
|
98,400
|
|
|
|
Total U.S. Government Agencies
(Cost $39,098,093)
|
|
39,098,400
|
|
Repurchase Agreements 1.9%
|
|
|
|
2,327,000
|
|
Interest
in $839,650,000 joint tri-party repurchase agreement dated 10/31/07 with
Greenwich Capital Markets Inc., 4.780% due 11/1/07; Proceeds at maturity
$2,327,309; (Fully collateralized by various U.S. government agency
obligations, 2.750% to 5.500% due 11/15/07 to 7/17/09; Market value $2,373,553)
|
|
2,327,000
|
|
|
|
|
|
|
|
|
|
See Notes to Financial
Statements.
22
|
LMP Capital and Income
Fund Inc. 2007 Annual Report
|
|
Schedule of Investments (October 31,
2007) (continued)
Face
Amount
|
|
Security
|
|
Value
|
|
Repurchase
Agreements 1.9% (continued)
|
|
|
|
$
|
13,966,000
|
|
Morgan Stanley repurchase
agreement dated 10/31/07, 4.800% due 11/1/07; Proceeds at maturity
$13,967,862; (Fully collateralized by U.S. government agency obligation,
0.00% due 12/7/07; Market value $14,320,268) (g)
|
|
$
|
13,966,000
|
|
|
|
Total Repurchase Agreements
(Cost $16,293,000)
|
|
16,293,000
|
|
|
|
TOTAL SHORT-TERM INVESTMENTS
(Cost $55,391,093)
|
|
55,391,400
|
|
|
|
TOTAL INVESTMENTS 100.0%
(Cost $846,539,083#)
|
|
$
|
878,094,852
|
|
|
|
|
|
|
|
|
|
|
|
Face amount
denominated in U.S. dollars, unless otherwise noted.
|
*
|
|
Non-income
producing security.
|
(a)
|
|
Security is
valued in good faith at fair value by or under the direction of the Board of
Directors (See Note 1).
|
(b)
|
|
Illiquid
security.
|
(c)
|
|
Variable
rate security. Interest rate disclosed is that which is in effect at
October 31, 2007.
|
(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)
|
|
Payment-in-kind
security for which part of the income earned may be paid as additional
principal.
|
(f)
|
|
Security has
no maturity date. The date shown represents the next call date.
|
(g)
|
|
All or a
portion of this security is segregated for open futures contracts, written
options, foreign currency contracts and Securities traded on a
to-be-announced (TBA) basis.
|
(h)
|
|
This
security is traded on a TBA basis (See Note 1).
|
#
|
|
Aggregate
cost for federal income tax purposes is $848,751,082.
|
|
|
|
|
|
Abbreviations
used in this schedule:
|
|
|
ADR
|
|
American Depositary Receipt
|
|
|
ARM
|
|
Adjustable Rate Mortgage
|
|
|
ARS
|
|
Argentine Peso
|
|
|
GDP
|
|
Gross Domestic Product
|
|
|
PAC
|
|
Planned Amortization Class
|
Schedule of Options Written
Contracts
|
|
Security
|
|
Expiration
Date
|
|
Strike
Price
|
|
Value
|
|
10
|
|
Eurodollar
Futures, Put
(Premiums received $9,169)
|
|
2/22/08
|
|
$
|
107.00
|
|
$
|
2,969
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Financial
Statements.
|
LMP
Capital and Income Fund Inc. 2007 Annual Report
|
23
|
Statement of Assets and Liabilities
(October 31, 2007)
ASSETS:
|
|
|
|
Investments, at value (Cost $846,539,083)
|
|
$
|
878,094,852
|
|
Foreign currency, at value (Cost
$1,685,800)
|
|
1,905,565
|
|
Cash
|
|
51,562
|
|
Receivable for securities sold
|
|
19,014,955
|
|
Dividends and interest receivable
|
|
2,539,246
|
|
Receivable for open forward currency
contracts
|
|
107,934
|
|
Receivable from broker variation margin
|
|
15,180
|
|
Principal paydown receivable
|
|
1,004
|
|
Prepaid expenses
|
|
16,186
|
|
Total Assets
|
|
901,746,484
|
|
LIABILITIES:
|
|
|
|
Loan payable (Note 4)
|
|
170,000,000
|
|
Payable for securities purchased
|
|
41,445,041
|
|
Interest payable
|
|
743,984
|
|
Excise tax payable
|
|
714,895
|
|
Investment management fee payable
|
|
617,502
|
|
Payable for open forward currency contracts
|
|
240,994
|
|
Directors fees payable
|
|
16,678
|
|
Options written, at value (premium received
$9,169)
|
|
2,969
|
|
Accrued expenses
|
|
204,301
|
|
Total Liabilities
|
|
213,986,364
|
|
Total Net Assets
|
|
$
|
687,760,120
|
|
|
|
|
|
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
|
|
560,319,797
|
|
Undistributed net investment income
|
|
5,727,873
|
|
Accumulated net realized gain on
investments, futures contracts, options written, foreign currency
transactions and short sales
|
|
89,463,586
|
|
Net unrealized appreciation on investments,
futures contracts, options written and foreign currencies
|
|
32,218,900
|
|
Total Net Assets
|
|
$
|
687,760,120
|
|
|
|
|
|
Shares Outstanding
|
|
29,964,106
|
|
Net Asset Value
|
|
$22.95
|
|
See Notes
to Financial Statements.
24
|
LMP Capital
and Income Fund Inc. 2007 Annual Report
|
|
Statement of Operations (For the
year ended October 31, 2007)
INVESTMENT INCOME:
|
|
|
|
Interest
|
|
$
|
14,968,078
|
|
Dividends
|
|
9,492,911
|
|
Less: Foreign taxes withheld
|
|
(313,944
|
)
|
Total Investment Income
|
|
24,147,045
|
|
EXPENSES:
|
|
|
|
Interest expense (Note 4)
|
|
10,274,950
|
|
Investment management fee (Note 2)
|
|
7,187,892
|
|
Excise tax (Note 1)
|
|
1,613,180
|
|
Commitment fees (Note 4)
|
|
427,235
|
|
Shareholder reports
|
|
294,959
|
|
Directors fees
|
|
117,251
|
|
Audit and tax
|
|
70,371
|
|
Legal fees
|
|
56,594
|
|
Stock exchange listing fees
|
|
25,926
|
|
Custody fees
|
|
21,437
|
|
Transfer agent fees
|
|
17,881
|
|
Insurance
|
|
9,762
|
|
Miscellaneous expenses
|
|
17,485
|
|
Total Expenses
|
|
20,134,923
|
|
Less: Fee waivers and/or expense
reimbursements (Note 2)
|
|
(2,388
|
)
|
Net Expenses
|
|
20,132,535
|
|
Net Investment Income
|
|
4,014,510
|
|
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
FUTURES CONTRACTS, OPTIONS
WRITTEN, FOREIGN CURRENCY
TRANSACTIONS AND SHORT SALES (NOTES 1 AND 3):
|
|
|
|
Net Realized Gain (Loss) From:
|
|
|
|
Investment transactions
|
|
92,134,903
|
|
Futures contracts
|
|
2,332,647
|
|
Options written
|
|
2,116,705
|
|
Foreign currency transactions
|
|
(87,221
|
)
|
Short sales
|
|
(383,689
|
)
|
Net Realized Gain
|
|
96,113,345
|
|
Change in Net Unrealized
Appreciation/Depreciation From:
|
|
|
|
Investments
|
|
(385,174
|
)
|
Futures contracts
|
|
455,273
|
|
Options written
|
|
19,242
|
|
Foreign currencies
|
|
99,185
|
|
Change in Net Unrealized
Appreciation/Depreciation
|
|
188,526
|
|
Net Gain on Investments, Futures Contracts,
Options Written,
Foreign Currency Transactions and Short Sales
|
|
96,301,871
|
|
Increase in Net Assets From Operations
|
|
$
|
100,316,381
|
|
See Notes
to Financial Statements.
|
LMP Capital and Income Fund Inc. 2007 Annual Report
|
25
|
Statements of Changes in Net Assets
(For the years ended October 31,)
|
|
2007
|
|
2006
|
|
OPERATIONS:
|
|
|
|
|
|
Net investment income
|
|
$
|
4,014,510
|
|
$
|
14,932,146
|
|
Net realized gain
|
|
96,113,345
|
|
63,622,130
|
|
Change in net unrealized
appreciation/depreciation
|
|
188,526
|
|
(2,901,844
|
)
|
Increase in Net Assets From Operations
|
|
100,316,381
|
|
75,652,432
|
|
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE
1):
|
|
|
|
|
|
Net investment income
|
|
(248,702
|
)
|
(17,048,795
|
)
|
Net realized gains
|
|
(46,195,662
|
)
|
(20,449,892
|
)
|
Decrease in Net Assets From Distributions
to Shareholders
|
|
(46,444,364
|
)
|
(37,498,687
|
)
|
FUND SHARE TRANSACTIONS:
|
|
|
|
|
|
Net increase in net assets due to an
adjustment of initial offering costs
|
|
|
|
442,559
|
|
Cost of shares repurchased (2,418,600
shares repurchased)
|
|
|
|
(42,362,520
|
)
|
Decrease in Net Assets From Fund Share
Transactions
|
|
|
|
(41,919,961
|
)
|
Increase (Decrease) in Net Assets
|
|
53,872,017
|
|
(3,766,216
|
)
|
NET ASSETS:
|
|
|
|
|
|
Beginning of year
|
|
633,888,103
|
|
637,654,319
|
|
End of year*
|
|
$
|
687,760,120
|
|
$
|
633,888,103
|
|
|
|
|
|
|
|
* Includes undistributed
net investment income of:
|
|
$
|
5,727,873
|
|
$
|
6,922
|
|
|
Upon the initial public offering of the Fund, the Fund estimated
$1,318,000 of offering costs. The actual offering cost amounted to $875,441
at the end of the offering period.
|
|
|
|
|
|
|
|
|
|
See Notes
to Financial Statements.
26
|
LMP Capital
and Income Fund Inc. 2007 Annual Report
|
|
Statement of Cash Flows (For the
year ended October 31, 2007)
CASH
FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES:
|
|
|
|
Interest and
dividends received
|
|
$
|
22,909,288
|
|
Operating
expenses paid
|
|
(8,695,197
|
)
|
Net
purchases of short-term investments
|
|
39,550,232
|
|
Realized
loss on foreign currency transactions
|
|
(87,221
|
)
|
Realized
loss on options
|
|
(3,415,191
|
)
|
Realized
gain on futures contracts
|
|
2,332,647
|
|
Net change
in unrealized appreciation on futures contracts
|
|
455,273
|
|
Net change
in unrealized appreciation on foreign currencies
|
|
236,757
|
|
Purchases of
long-term investments
|
|
(1,357,723,842
|
)
|
Proceeds
from disposition of long-term investments
|
|
1,411,929,473
|
|
Premium for
written swaps
|
|
9,169
|
|
Change in
payable to broker variation margin
|
|
(34,063
|
)
|
Change in
payable for open forward currency contracts
|
|
126,138
|
|
Interest
paid
|
|
(10,896,971
|
)
|
Net Cash
Provided By Operating Activities
|
|
96,696,492
|
|
CASH
FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES:
|
|
|
|
Cash
distributions paid on Common Stock
|
|
(46,444,364
|
)
|
Proceeds
from loan
|
|
(50,000,000
|
)
|
Net Cash
Flows Used By Financing Activities
|
|
(96,444,364
|
)
|
Net
Increase in Cash
|
|
252,128
|
|
Cash,
Beginning of year
|
|
1,704,999
|
|
Cash,
End of year
|
|
$
|
1,957,127
|
|
RECONCILIATION
OF INCREASE IN NET ASSETS FROM OPERATIONS TO
NET CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES:
|
|
|
|
Increase
in Net Assets From Operations
|
|
$
|
100,316,381
|
|
Accretion of
discount on investments
|
|
(1,714,157
|
)
|
Amortization
of premium on investments
|
|
266,025
|
|
Increase in
investments, at value
|
|
(25,489,658
|
)
|
Increase in
payable for securities purchased
|
|
26,583,679
|
|
Decrease in
interest and dividends receivable
|
|
210,375
|
|
Decrease in
premium for written options
|
|
(206,689
|
)
|
Increase in
receivable for securities sold
|
|
(3,901,906
|
)
|
Increase in
payable for open forward currency contracts
|
|
126,138
|
|
Decrease in
payable to broker variation margin
|
|
(34,063
|
)
|
Increase in
prepaid expenses
|
|
(2,514
|
)
|
Decrease in
interest payable
|
|
(194,786
|
)
|
Increase in
accrued expenses
|
|
737,667
|
|
Total
Adjustments
|
|
(3,619,889
|
)
|
Net Cash
Flows Provided By Operating Activities
|
|
$
|
96,696,492
|
|
See Notes
to Financial Statements.
LMP Capital and Income
Fund Inc. 2007 Annual Report
|
27
|
Financial Highlights
For a share of capital stock
outstanding throughout each year ended October 31:
|
|
|
2007
|
|
2006
(1)
|
|
2005
(1)
|
|
2004
(1)(2)
|
|
|
|
Net
Asset Value, Beginning of Year
|
|
$21.15
|
|
$19.69
|
|
$18.64
|
|
$19.06
|
(3)
|
|
|
Income
(Loss) From Operations:
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income
|
|
0.13
|
|
0.48
|
|
0.69
|
|
0.37
|
|
|
|
Net realized
and unrealized gain (loss)
|
|
3.22
|
|
2.18
|
|
1.52
|
|
(0.19
|
)
|
|
|
Total Income
From Operations
|
|
3.35
|
|
2.66
|
|
2.21
|
|
0.18
|
|
|
|
Gain From
Repurchase of Treasury Stock
|
|
|
|
|
|
0.04
|
|
|
|
|
|
Less
Distributions From:
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income
|
|
(0.01
|
)
|
(0.55
|
)
|
(0.98
|
)
|
(0.40
|
)
|
|
|
Net realized
gains
|
|
(1.54
|
)
|
(0.65
|
)
|
(0.22
|
)
|
|
|
|
|
Return of
capital
|
|
|
|
|
|
|
|
(0.20
|
)
|
|
|
Total
Distributions
|
|
(1.55
|
)
|
(1.20
|
)
|
(1.20
|
)
|
(0.60
|
)
|
|
|
Net
Asset Value, End of Year
|
|
$22.95
|
|
$21.15
|
|
$19.69
|
|
$18.64
|
|
|
|
Market
Price, End of Year
|
|
$19.88
|
|
$18.19
|
|
$17.19
|
|
$17.24
|
|
|
|
Total
Return, Based on NAV
(4)(5)
|
|
16.32
|
%
|
13.89
|
%
|
12.34
|
%
(6)
|
1.06
|
%
|
|
|
Total
Return, Based on Market Price
(5)
|
|
18.22
|
%
|
13.24
|
%
|
6.85
|
%
(6)
|
(10.74
|
)%
|
|
|
Net
Assets, End of Year (000s)
|
|
$687,760
|
|
$633,888
|
|
$637,654
|
|
$614,324
|
|
|
|
Ratios
to Average Net Assets:
|
|
|
|
|
|
|
|
|
|
|
|
Gross
expenses
|
|
3.03
|
%
(7)
|
3.13
|
%
(8)
|
2.45
|
%
|
1.54
|
%
(9)
|
|
|
Gross
expenses, excluding interest expense
|
|
1.42
|
(7)
|
1.33
|
(8)
|
1.23
|
|
1.15
|
(9)
|
|
|
Net expenses
|
|
3.03
|
(7)(8)
|
3.13
|
(8)
|
2.45
|
|
1.54
|
(9)
|
|
|
Net
expenses, excluding interest expense
|
|
1.42
|
(7)(8)
|
1.33
|
(8)
|
1.23
|
|
1.15
|
(9)
|
|
|
Net
investment income
|
|
0.60
|
|
2.33
|
|
3.55
|
|
2.97
|
(9)
|
|
|
Portfolio
Turnover Rate
|
|
180
|
%
|
193
|
%
|
64
|
%
|
39
|
%
|
|
|
Supplemental
Data:
|
|
|
|
|
|
|
|
|
|
|
|
Loans
Outstanding, End of Year (000s)
|
|
$170,000
|
|
$220,000
|
|
$220,000
|
|
$220,000
|
|
|
|
Asset
Coverage for Loan Outstanding
|
|
505
|
%
|
388
|
%
|
390
|
%
|
379
|
%
|
|
|
Weighted
Average Loan (000s)
|
|
$181,370
|
|
$220,000
|
|
$220,000
|
|
$105,783
|
|
|
|
Weighted
Average Interest Rate on Loans
|
|
5.67
|
%
|
5.26
|
%
|
3.54
|
%
|
2.22
|
%
|
|
(1)
|
|
Per share amounts have been calculated using the average shares
method.
|
(2)
|
|
For the period February 24, 2004 (inception
date) through October 31, 2004.
|
(3)
|
|
Initial public offering price of $20.00 per share
less offering costs and sales load totaling $0.94 per share.
|
(4)
|
|
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. Past performance is
no guarantee of future results. Total returns for periods of less than one
year are not annualized.
|
(5)
|
|
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.
|
(6)
|
|
The prior investment manager fully reimbursed the
Fund for losses incurred resulting from an investment transaction error.
Without this reimbursement, total return would not have changed.
|
(7)
|
|
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.
|
(8)
|
|
Reflects fee waivers and/or expense reimbursements.
|
(9)
|
|
Annualized.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes
to Financial Statements.
28
|
LMP Capital and Income Fund Inc. 2007 Annual
Report
|
Notes to Financial Statements
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.
(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
that 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. 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 may value these securities at
fair value as determined in accordance with the 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.
(b) Repurchase
Agreements.
When
entering into repurchase agreements, it is the Funds policy that its custodian
or a third party custodian 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 exceeds one business day, the value
of the collateral is marked-to-market to ensure the adequacy of the collateral.
If the seller defaults, and the market value of the collateral declines 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) Short
Sales.
A short sale
is a transaction in which the Fund sells a security it does not own (but has
borrowed) in anticipation of a decline in the market price of that security. To
complete a short sale, the Fund may arrange through a broker to borrow the
security to be delivered to the buyer. The proceeds received by the Fund for
the short sale are retained by the broker until the Fund replaces the borrowed
security. In borrowing the security to be delivered to the buyer, the Fund
becomes obligated to replace the security borrowed at the market price at the
time of replacement, whatever that price may be. A
LMP Capital and Income Fund
Inc. 2007 Annual Report
|
29
|
Notes to Financial Statements (continued)
gain, limited to the price at which the Fund sold
the security short, or a loss, unlimited in size, will be recognized upon the
termination of a short sale.
Dividends declared on short
positions existing on the record date are recorded on the ex-dividend date as
an expense.
(d) 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 Fund realizes a gain from investments equal to the amount of the premium
received. 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 treated as a realized gain or loss.
When a written put option is exercised, the amount of the premium received is
added to 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.
(e) Financial
Futures Contracts.
The Fund may enter into financial futures contracts typically, but not
necessarily, to hedge a portion of the portfolio. Upon entering into a
financial futures contract, the Fund is required to deposit cash or securities
as initial margin, equal to a certain percentage of the contract amount
(initial margin deposit). Additional securities are also segregated up to the
current market value of the financial futures contracts. Subsequent payments,
known as variation margin, are made or received by the Fund each day,
depending on the daily fluctuations in the value of the underlying financial
instruments. The Fund recognizes an unrealized gain or loss equal to the daily
variation margin. When the financial futures contracts are closed, a realized
gain or loss is recognized equal to the difference between the proceeds from
(or cost of) the closing transactions and the Funds basis in the contracts.
The risks associated with
entering into financial futures contracts include the possibility that a change
in the value of the contract may not correlate with the changes in the
value of the underlying financial instruments. In addition, investing in
financial futures contracts involves the risk that the Fund could lose more
than the initial margin deposit and subsequent payments required for a futures
transaction. Risks may also arise upon entering into these contracts from
the potential inability of the counterparties to meet the terms of their
contracts.
30
|
LMP Capital and Income Fund Inc. 2007 Annual
Report
|
Notes to Financial Statements (continued)
(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 records 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 was closed.
Forward foreign currency
contracts involve elements of market risk in excess of the amounts reflected in
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) Mortgage
Dollar Rolls.
The
Fund may enter into 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. During the roll
period, the Fund forgoes interest paid on the securities. The Fund is
compensated by the interest earned on the cash proceeds of the initial sale and
by the lower repurchase price at the specified future date. The Fund maintains
a segregated account, the dollar value of which is at least equal to its obligations
with respect to dollar rolls.
The Fund executes its
mortgage dollar rolls entirely in the to-be-announced (TBA) market, where 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 risk of entering into a
mortgage dollar roll 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 proceeds of the dollar
roll may be restricted pending a determination by the other party, or its
trustee or receiver, whether to enforce the Funds obligation to repurchase the
securities.
(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
is not known, such as the face amount and maturity date and the underlying pool
of investments in U.S. government agency mortgage pass-through securities.
Securities purchased on a TBA basis are not settled until they are delivered to
the Fund, normally 15 to 45 days after purchase. 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.
LMP Capital and Income
Fund Inc. 2007 Annual Report
|
31
|
Notes to Financial Statements (continued)
(i) 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 involves 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-dollar denominated securities may also result in
foreign currency losses caused by devaluations and exchange rate fluctuations.
(j) Cash
Flow Information.
The
Fund invests in securities and distributes dividends from net investment income
and net realized gains, which are paid in cash and may be reinvested at
the discretion of shareholders. These activities are reported in the Statement
of Changes in Net Assets and additional information on cash receipts and cash
payments are presented in the Statement of Cash Flows.
(k)
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 practical 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 on an expected
interest payment, the Funds policy is to generally halt any additional
interest income accruals and consider the realizability of interest accrued up
to the date of default.
(l) 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 changes 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 fair values of assets and
liabilities, other than investments in securities, at 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,
32
|
LMP Capital and Income Fund Inc. 2007 Annual
Report
|
Notes to Financial Statements (continued)
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.
(m)
Distributions to Shareholders.
Pursuant to its Managed Distribution Policy, the Fund intends to make
regular monthly distributions to shareholders at a fixed rate per common share,
the rate may be adjusted from time to time by the Funds Board of
Directors. Under the Funds Managed Distribution Policy, if, for any monthly
distribution, the value of the Funds net investment income and net realized
capital gain are 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.
(n) 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, as amended, applicable to
regulated investment companies. Accordingly, the Fund intends to distribute
substantially all of its taxable income and net realized gains on investments,
if any, to shareholders each year. Therefore, no federal income tax provision
is required in the Funds financial statements. However due to the timing of
when distributions are made, the Fund may be subject to an excise tax of
4% of the amount by which 98% of the Funds annual taxable income exceeds the
distributions from such taxable income for the year. Under the applicable
foreign tax laws, a withholding tax may be imposed on interest, dividends
and capital gains at various rates.
(o)
Reclassification.
GAAP requires that certain components of net assets be adjusted to reflect
permanent differences between financial and tax reporting. These
reclassifications have no effect on net assets or net asset values per share.
During the current year, the following reclassifications have been made:
Undistributed
Net Investment
Income
|
|
Accumulated Net
Realized Gain
|
|
Paid-in Capital
|
|
(a)
|
$1,613,180
|
|
|
|
|
|
$(1,613,180)
|
|
|
(b)
|
341,963
|
|
|
$(341,963)
|
|
|
|
|
|
(a)
|
|
Reclassifications are primarily due to a
non-deductible excise tax paid by the Fund.
|
(b)
|
|
Reclassifications are primarily due to
foreign currency transactions treated as ordinary income for tax purposes,
differences between book and tax amortization of premium on fixed income
securities, income from mortgage backed securities treated as capital gains
for tax purposes, and book/tax differences in the treatment of distributions
from real estate investment trusts.
|
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).
LMP Capital and Income
Fund Inc. 2007 Annual Report
|
33
|
Notes to Financial Statements (continued)
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 ClearBridge 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 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 but is paid by
Western Asset for its services to the Fund.
During periods in which the
Fund is utilizing leverage, the fees which are payable to the manager as a
percentage of the Funds net assets will be higher than 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.
During the year ended October 31,
2007, the Fund was reimbursed for expenses amounting to $2,388 for a portion of
non-recurring payments due to retiring Directors.
Certain 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 year ended October 31, 2007, the
aggregate cost of purchases and proceeds from sales of investments and U.S
Government & Agency Obligations (excluding short-term investments)
were as follows:
|
|
Investments
|
|
U.S.
Government &
Agency Obligations
|
|
Purchases
|
|
$ 1,282,392,933
|
|
|
$ 101,682,041
|
|
|
Sales
|
|
1,332,853,756
|
|
|
82,783,938
|
|
|
At October 31, 2007,
the aggregate gross unrealized appreciation and depreciation of investments for
federal income tax purposes were as follows:
Gross unrealized appreciation
|
|
$
|
60,986,119
|
|
Gross unrealized depreciation
|
|
(31,642,349
|
)
|
Net unrealized appreciation
|
|
$
|
29,343,770
|
|
34
|
LMP Capital and Income Fund Inc. 2007 Annual
Report
|
Notes to Financial Statements (continued)
During the year ended October 31,
2007, written option transactions for the Fund were as follows:
|
|
Number of
Contracts
|
|
Premiums
|
|
Options
written, Outstanding October 31, 2006
|
|
1,090
|
|
|
$
|
215,858
|
|
|
Options
written
|
|
4,733
|
|
|
5,044,997
|
|
|
Options
closed
|
|
(5,813)
|
|
|
(5,251,686)
|
|
|
Options
expired
|
|
|
|
|
|
|
|
Options
Written, Outstanding October 31, 2007
|
|
10
|
|
|
$
|
9,169
|
|
|
At October 31, 2007,
the Fund had the following open forward foreign currency contracts as described
below:
Foreign Currency
|
|
Local
Currency
|
|
Market
Value
|
|
Settlement
Date
|
|
Unrealized
Gain (Loss)
|
|
Contracts
to Buy:
|
|
|
|
|
|
|
|
|
|
|
|
|
Euro
|
|
2,830,000
|
|
|
$
|
4,094,787
|
|
|
11/7/07
|
|
$
|
66,848
|
|
|
Japanese Yen
|
|
72,660,000
|
|
|
630,787
|
|
|
11/7/07
|
|
9,761
|
|
|
Japanese Yen
|
|
72,660,000
|
|
|
637,651
|
|
|
2/12/08
|
|
(7,412)
|
|
|
Pound
Sterling
|
|
808,000
|
|
|
1,678,122
|
|
|
11/7/07
|
|
23,903
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
93,100
|
|
|
Contracts
to Sell:
|
|
|
|
|
|
|
|
|
|
|
|
|
Euro
|
|
2,830,000
|
|
|
4,094,787
|
|
|
11/7/07
|
|
(113,260)
|
|
|
Euro
|
|
2,830,000
|
|
|
4,098,659
|
|
|
2/12/08
|
|
(66,900)
|
|
|
Japanese Yen
|
|
72,660,000
|
|
|
630,787
|
|
|
11/7/07
|
|
7,422
|
|
|
Pound
Sterling
|
|
808,000
|
|
|
1,678,122
|
|
|
11/7/07
|
|
(29,802)
|
|
|
Pound
Sterling
|
|
808,000
|
|
|
1,672,586
|
|
|
2/12/08
|
|
(23,620)
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(226,160)
|
|
|
Net
Unrealized Loss on Open Forward Foreign Currency Contracts
|
|
|
|
|
|
|
|
|
|
$
|
(133,060)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At October 31, 2007,
the Fund had the following open futures contracts:
|
|
Number of
Contracts
|
|
Expiration
Date
|
|
Basis
Value
|
|
Market
Value
|
|
Unrealized
Gain
|
|
Contracts to Buy:
|
|
|
|
|
|
|
|
|
|
|
|
Eurodollar Futures
|
|
3
|
|
|
3/08
|
|
|
$
|
713,490
|
|
$
|
716,288
|
|
$
|
2,798
|
|
|
Eurodollar Futures
|
|
2
|
|
|
6/08
|
|
|
476,047
|
|
478,100
|
|
2,053
|
|
|
Germany Federal Republic
10 year
|
|
27
|
|
|
12/07
|
|
|
4,416,113
|
|
4,426,928
|
|
10,815
|
|
|
U.S. Treasury Bonds
|
|
54
|
|
|
12/07
|
|
|
5,999,411
|
|
6,080,063
|
|
80,652
|
|
|
U.S. 2 Year Treasury Notes
|
|
62
|
|
|
12/07
|
|
|
12,772,998
|
|
12,840,781
|
|
67,783
|
|
|
U.S. 5 Year Treasury Notes
|
|
192
|
|
|
12/07
|
|
|
20,408,679
|
|
20,610,000
|
|
201,321
|
|
|
U.S. 10 Year Treasury
Notes
|
|
15
|
|
|
12/07
|
|
|
1,629,684
|
|
1,650,234
|
|
20,550
|
|
|
Net Unrealized Gain on
Open Futures Contracts
|
|
|
|
|
|
|
|
|
|
|
|
$
|
385,972
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At October 31, 2007,
the Fund held TBAs with a total cost of $12,859,266.
LMP Capital and Income
Fund Inc. 2007 Annual Report
|
35
|
Notes to Financial Statements (continued)
The average monthly balance
of mortgage dollar rolls outstanding for the Fund for the year ended October 31,
2007 was approximately $12,692,441.
4. Loan
At October 31, 2007, the Fund had a
$325,000,000 credit line available pursuant to a revolving credit and security
agreement, dated as of December 21, 2006 (the Agreement), with CHARTA,
LLC and Citibank N.A. (Citibank). Citibank acts as administrative agent and
secondary lender. As of October 31, 2007, the Fund had a $170,000,000 loan
outstanding pursuant to the Agreement. The loan generally bears interest at a
variable rate based on the weighted average interest rates of the underlying
commercial paper or LIBOR plus any applicable margin. In addition, the Fund
pays a commitment fee on the total credit line available whether used or
unused, at an annual rate of 0.10%. Securities held by the Fund are subject to
a lien, granted to the lenders, to the extent of the borrowings outstanding and
any additional expenses. For the year ended October 31, 2007, the Fund
incurred interest expense on this loan in the amount of $10,702,185.
5. Distributions Subsequent to October 31,
2007
On August 16, 2007, the Board of Directors (Board)
of the Fund declared a distribution in the amount of $0.1400 per share payable
on November 30, 2007 to shareholders of record on November 23, 2007.
On November 19, 2007, the Board declared a distribution in the amount of
$1.67 per share, payable on December 28, 2007 to shareholders of record on
December 21, 2007. Additionally, the Board declared two distributions in
the amount of $0.14 per share, payable on January 25, 2008 and February 29,
2008 to shareholders of record on January 18, 2008 and February 22,
2008, respectively. The Board of Directors also approved to retain a portion of
the Capital Gains to be distributed and paid during the fiscal year ended 2008.
However, due to the timing of these distributions, the Fund will be subject to
excise tax of approximately $1,300,000 or $0.04 per share.
6. Capital Shares
On November 20, 2006, the Funds Board
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 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. This is the fourth
repurchase program authorized by the 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. The second and third repurchase programs were authorized and
announced in February 2006 and June 2006, respectively.
36
|
LMP Capital and Income Fund Inc. 2007 Annual
Report
|
Notes to Financial Statements (continued)
7. Income Tax Information and
Distributions to Shareholders
The tax character of distributions paid during the
fiscal years ended October 31, were as follows:
|
|
2007
|
|
2006
|
|
Distributions Paid From:
|
|
|
|
|
|
Ordinary Income
|
|
$
5,876,530
|
|
|
$
17,048,795
|
|
|
Net long-term capital
gains
|
|
40,567,834
|
|
|
20,449,892
|
|
|
Total Taxable
Distributions
|
|
$46,444,364
|
|
|
$
37,498,687
|
|
|
As of October 31, 2007,
the components of accumulated earnings on a tax basis were as follows:
Undistributed
ordinary income net
|
|
$
|
86,981,841
|
|
Undistributed
long-term capital gains net
|
|
8,753,625
|
|
Total
Undistributed Earnings
|
|
$
|
95,735,466
|
|
Other
book/tax temporary differences
(a)
|
|
1,667,992
|
|
Unrealized
appreciation/(depreciation)
(b)
|
|
30,006,901
|
|
Total
Accumulated Earnings/(Losses) net
|
|
$
|
127,410,359
|
|
(a)
|
|
Other book/tax temporary differences are
attributable primarily to the tax deferral of losses on straddles, the
realization for tax purposes of unrealized gains/(losses) on certain futures
and foreign currency contracts, differences between book/tax accrual of
interest income on securities in default and differences in the book/tax
treatment of various items.
|
(b)
|
|
The difference between book-basis and tax-basis
unrealized appreciation/(depreciation) is attributable primarily to the tax
deferral of losses on wash sales and the difference between book and tax
amortization methods for premiums on fixed income securities.
|
8. Other Matters
As previously disclosed, on September 16, 2005,
the staff of the Securities and Exchange Commission (SEC) informed Smith
Barney Fund Management LLC (SBFM) and Salomon Brothers Asset Management Inc.
(SBAM), that the staff was considering recommending administrative
proceedings against SBFM and SBAM for alleged violations of Section 19(a) and
34(b) of the 1940 Act (and related Rule 19a-1). On September 27,
2007, SBFM and SBAM, without admitting or denying any findings therein,
consented to the entry of an order by the SEC relating to the disclosure by certain
other closed-end funds of the sources of distributions paid by the funds
between 2001 and 2004. Each of SBFM and SBAM agreed to pay a fine of $450,000,
for which they were indemnified by Citigroup, Inc., their former parent.
It is not expected that this matter will adversely impact the Fund or its
current investment adviser.
9. Recent Accounting Pronouncements
During June 2006, the Financial Accounting
Standards Board (FASB) issued FASB Interpretation 48 (FIN 48 or the Interpretation),
Accounting for Uncertainty in Income Taxes
an interpretation of FASB Statement 109
. FIN 48 supplements FASB
Statement 109,
Accounting for Income Taxes
,
by defining the confidence level that a tax position must meet in order to be
recognized in the financial statements. FIN 48
LMP Capital and Income
Fund Inc. 2007 Annual Report
|
37
|
Notes to Financial Statements (continued)
prescribes a comprehensive model for how a fund
should recognize, measure, present, and disclose in its financial statements
uncertain tax positions that the fund has taken or expects to take on a tax
return. FIN 48 requires that the tax effects of a position be recognized only
if it is more likely than not to be sustained based solely on its technical
merits. Management must be able to conclude that the tax law, regulations, case
law, and other objective information regarding the technical merits
sufficiently support the positions sustainability with a likelihood of more
than 50 percent. FIN 48 is effective for fiscal periods beginning after December 15,
2006, which for this Fund was November 1, 2007. At adoption, the financial
statements must be adjusted to reflect only those tax positions that are more
likely than not to be sustained as of the adoption date. Management of the Fund
has determined that adopting FIN 48 will not have a material impact on the Funds
financial statements.
***
On September 20, 2006, FASB released Statement
of Financial Accounting Standards No. 157,
Fair Value Measurements
(FAS 157). FAS 157 establishes an
authoritative definition of fair value, sets out a framework for measuring fair
value, and requires additional disclosures about fair value measurements. The
application of FAS 157 is required for fiscal years beginning after November 15,
2007 and interim periods within those fiscal years. At this time, management is
evaluating the implications of FAS 157, and its impact on the financial
statements has not yet been determined.
38
|
LMP Capital and Income Fund Inc. 2007 Annual
Report
|
Report of Independent Registered Public Accounting Firm
The Board of Directors and
Shareholders
LMP Capital and Income Fund Inc.:
We have audited the accompanying statement of assets
and liabilities, including the schedule of investments, of LMP Capital and
Income Fund Inc. as of October 31, 2007, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the years in the two-year period then ended, the statement of cash
flows for the year then ended, and the financial highlights for each of the
years in the three-year period then ended. These financial statements and
financial highlights are the responsibility of the Funds management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits. The financial highlights for the
period February 24, 2004 (commencement of operations) through October 31,
2004 were audited by other independent registered public accountants whose
report thereon, dated December 21, 2004, expressed an unqualified opinion
on those financial highlights.
We conducted our audits in accordance with the
standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of October 31,
2007, by correspondence with the custodian and brokers or by other appropriate
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and
financial highlights referred to above present fairly, in all material
respects, the financial position of LMP Capital and Income Fund Inc. as of October 31,
2007, and the results of its operations for the year then ended, the changes in
its net assets for each of the years in the two-year period then ended, its
cash flows for the year then ended, and the financial highlights for each of
the years in the three-year period then ended, in conformity with U.S. generally
accepted accounting principles.
|
|
|
|
New York, New York
|
|
December 27, 2007
|
|
LMP Capital and Income
Fund Inc. 2007 Annual Report
|
39
|
Additional Information (unaudited)
Information about Directors and
Officers
The business and affairs of LMP Capital and Income
Fund Inc. (the Fund) are managed under the direction of the Board of
Directors. Information pertaining to the Directors and Officers of the Fund is
set forth below.
Name, Address and Birth Year
|
|
Position(s)
Held with
Fund
(1)
|
|
Term of
Office
(1)
and
Length of
Time Served
|
|
Principal
Occupation(s)
During Past
Five Years
|
|
Number of
Portfolios
in Fund
Complex
Overseen by
Director
(including
the Fund)
|
|
Other
Board
Memberships
Held by
Director
|
|
Non-Interested Directors:
|
|
|
|
|
|
|
|
|
|
|
|
Carol L. Colman
c/o Chairman of the Fund
620 Eighth Avenue
New York, NY 10018
Birth Year: 1946
|
|
Director and
Member of the
Nominating and
Audit
Committees,
Class I
|
|
Since 2003
|
|
President, Colman
Consulting Co.
|
|
22
|
|
None
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel P. Cronin
c/o Chairman of the Fund
620 Eighth Avenue
New York, NY 10018
Birth Year: 1946
|
|
Director and
Member of the
Nominating and
Audit
Committees,
Class I
|
|
Since 2003
|
|
Formerly Associate
General Counsel,
Pfizer Inc.
|
|
22
|
|
None
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paolo M. Cucchi
Drew University
108 Brothers College
Madison, NJ 07940
Birth Year: 1941
|
|
Director and
Member of the
Nominating and
Audit
Committees,
Class I
|
|
Since 2007
|
|
Vice President and Dean
of College of Liberal
Arts at Drew University
|
|
22
|
|
None
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leslie H. Gelb
c/o Chairman of the Fund
620 Eighth Avenue
New York, NY 10018
Birth Year: 1937
|
|
Director and
Member of the
Nominating and
Audit
Committees,
Class II
|
|
Since 2003
|
|
President, Emeritus and
Senior Board Fellow, The
Council on Foreign
Relations; Formerly,
Columnist, Deputy
Editorial Page Editor
and Editor, Op-Ed Page,
The New York Times
|
|
21
|
|
Director of
two registered
investment
companies
advised by
Blackstone
Asia Advisors
LLC
(Blackstone
Advisors)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William R. Hutchinson
535 N. Michigan Avenue
Suite 1012
Chicago, IL 60611
Birth Year: 1942
|
|
Director and
Member of the
Nominating and
Audit
Committees,
Class II
|
|
Since 2003
|
|
President, W.R.
Hutchinson & Associates
Inc.; Formerly Group
Vice President, Mergers
and Acquisitions, BP
Amoco p.l.c.
|
|
22
|
|
Associated
Banc-Corp.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr. Riordan Roett
The Johns Hopkins University
1740 Massachusetts Ave., NW
Washington, DC 20036
Birth Year: 1938
|
|
Director and
Member of the
Nominating and
Audit
Committees,
Class III
|
|
Since 2003
|
|
Professor and Director,
Latin America Studies
Program, Paul H. Nitze
School of Avanced
International Studies, The
Johns Hopkins University
|
|
20
|
|
None
|
|
40
|
LMP Capital and Income Fund Inc.
|
Additional Information (unaudited) (continued)
Name, Address and Birth Year
|
|
Position(s)
Held with
Fund
(1)
|
|
Term of
Office
(1)
and
Length of
Time Served
|
|
Principal
Occupation(s)
During Past
Five Years
|
|
Number of
Portfolios
in Fund
Complex
Overseen by
Director
(including
the Fund)
|
|
Other
Board
Memberships
Held by
Director
|
|
Jeswald W. Salacuse
c/o Chairman of the Fund
620 Eighth Avenue
New York, NY 10018
Birth Year: 1938
|
|
Director and
Member of the
Nominating and
Audit
Committees,
Class III
|
|
Since 2003
|
|
Henry J. Braker Professor
of Commercial Law and
formerly Dean, The
Fletcher School of
Law and Diplomacy,
Tufts University
|
|
20
|
|
Director of
two registered
investment
companies
advised by
Blackstone
Advisors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interested Directors:
|
|
|
|
|
|
|
|
|
|
|
|
R. Jay Gerken, CFA
(2)
Legg Mason & Co.,
LLC (Legg Mason)
620 Eighth Avenue
New York, NY 10018
Birth Year: 1951
|
|
Director,
Chairman,
President and
Chief Executive
Officer, Class II
|
|
Since 2003
|
|
Managing Director, Legg
Mason; Chairman of the
Board and
Trustee/Director of 154
funds associated with
Legg Mason Partners
Fund Advisor, LLC.
(LMPFA) and its
affiliates; President, LMPFA (since 2006); Chairman, President and Chief Executive
Officer of
certain mutual funds
associated with Legg Mason & Co. or its affiliates; formerly, Chairman,
President and Chief Executive Officer, Travelers Investment
Advisers Inc. (2002 to 2005)
|
|
137
|
|
Trustee,
Consulting
Group Capital
Markets
Funds (from
2002 to
2006).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Officers:
|
|
|
|
|
|
|
|
|
|
|
|
Kaprel Ozsolak
Legg Mason
125 Broad Street,
New York, NY 10004
Birth Year: 1965
|
|
Chief Financial
Officer and
Treasurer
|
|
Since 2007
|
|
Director of Legg Mason;
Chief Financial Officer
and Treasurer of certain
mutual funds associated
with Legg Mason;
Formerly, Controller of
certain mutual funds
associated with certain
predecessor firms of
Legg Mason (from 2002
to 2004)
|
|
N/A
|
|
N/A
|
|
LMP Capital and Income
Fund Inc.
|
41
|
Additional Information (unaudited) (continued)
Name, Address and Birth Year
|
|
Position(s)
Held with
Fund
(1)
|
|
Term of
Office
(1)
and
Length of
Time Served
|
|
Principal
Occupation(s)
During Past
Five Years
|
|
Number of
Portfolios
in Fund
Complex
Overseen by
Director
(including
the Fund)
|
|
Other
Board
Memberships
Held by
Director
|
|
Ted P. Becker
Legg Mason
620 Eighth Avenue
New York, NY 10018
Birth Year: 1951
|
|
Chief
Compliance
Officer
|
|
Since 2006
|
|
Director of Global
Compliance at Legg
Mason (since 2006);
Managing Director of
Compliance at Legg
Mason, (since 2005);
Chief Compliance
Officer with certain
mutual funds associated
with Legg Mason (since
2006); Managing
Director of Compliance
at Legg Mason or its
predecessors (from
2002 to 2005). Prior to
2002, Managing
Director Internal
Audit & Risk Review at
Citigroup Inc.
|
|
N/A
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert I. Frenkel
Legg Mason
300 First Stamford Place
Stamford, CT 06902
Birth Year: 1954
|
|
Secretary and
Chief Legal
Officer
|
|
Since 2003
|
|
Managing Director and
General Counsel of
Global Mutual Funds for
Legg Mason and its
predecessor (since
1994); Secretary and
Chief Legal Officer of
mutual funds associated
with Legg Mason (since
2003); formerly,
Secretary of CFM (from
2001 to 2004)
|
|
N/A
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas C. Mandia
Legg Mason
300 First Stamford Place
Stamford, CT 06902
Birth Year: 1962
|
|
Assistant
Secretary
|
|
Since 2006
|
|
Managing Director and
Deputy General Counsel
of Legg Mason (since
2005); Managing
Director and Deputy
General Counsel for
CAM (since 1992);
Assistant Secretary of
certain mutual funds
associated with Legg
Mason
|
|
N/A
|
|
N/A
|
|
42
|
LMP Capital and Income Fund Inc.
|
Additional Information (unaudited) (continued)
Name, Address and Birth Year
|
|
Position(s)
Held with
Fund
(1)
|
|
Term of
Office
(1)
and
Length of
Time Served
|
|
Principal
Occupation(s)
During Past
Five Years
|
|
Number of
Portfolios
in Fund
Complex
Overseen by
Director
(including
the Fund)
|
|
Other
Board
Memberships
Held by
Director
|
|
Albert Laskaj
Legg Mason
125 Broad Street,
New York, NY 10004
Birth Year: 1977
|
|
Controller
|
|
Since 2007
|
|
Controller of certain
funds associated with
Legg Mason (since
2007); Formerly, Assistant
Controller of certain
mutual funds associated
with Legg Mason (from
2005 to 2007); Formerly,
Accounting Manager of
certain mutual funds
associated with certain
predecessor firms of Legg
Mason (from 2003 to
2005); Prior to 2003,
Senior Analyst of certain
mutual fund associated
with certain predecessor
firms of Legg Mason
|
|
N/A
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven Frank
Legg Mason
125 Broad Street
New York, NY 10004
Birth Year: 1967
|
|
Controller
|
|
Since 2007
|
|
Vice President of Legg
Mason (since 2002);
Controller of certain
funds associated with
Legg Mason or its predecessors
(since 2005);
Formerly, Assistant
Controller of certain
mutual funds associated
with Legg Mason predecessors
(from 2001 to
2005)
|
|
N/A
|
|
N/A
|
|
(1)
The Funds Board of Directors is divided into three classes: Class I,
Class II and Class III. The terms of office of the Class I, II
and III Directors expire at the Annual Meetings of Stockholders in the year
2009, year 2010 and year 2008, respectively, or thereafter in each case when
their respective successors are duly elected and qualified. The Funds
executive officers are chosen each year at the first meeting of the Funds
Board of Directors following the Annual Meeting of Stockholders, to hold office
until the meeting of the Board following the next Annual Meeting of
Stockholders and until their successors are duly elected and qualified.
(2)
Mr. Gerken is an interested person of the Fund as defined in the
1940 Act, as amended, because Mr. Gerken is an officer of LMPFA and
certain of its affiliates.
LMP Capital and Income
Fund Inc.
|
43
|
Annual Chief Executive Officer and Chief Financial Officer
Certification (unaudited)
The Funds CEO has submitted to the NYSE the
required annual certification and the Fund also has included the Certifications
of the Funds CEO and CFO required by Section 302 of the Sarbanes-Oxley
Act in the Funds Form N-CSR filed with the SEC for the period of this
report.
44
|
LMP Capital and Income Fund Inc.
|
Important Tax Information (unaudited)
The following information is provided with respect
to the distributions paid during the taxable year ended October 31, 2007:
Record Date:
|
|
11/17/2006
|
|
12/22/2006
|
|
01/19/2007
|
|
02/16/2007
|
|
03/23/2007
|
|
04/20/2007
|
|
Payable
Date:
|
|
11/24/2006
|
|
12/29/2006
|
|
01/26/2007
|
|
02/23/2007
|
|
03/30/2007
|
|
04/27/2007
|
|
Ordinary
Income:
Qualified Dividend Income for Individuals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
Qualifying for the Dividends Received Deduction for Corporations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-Term
Capital Gain Dividend
|
|
$0.100000
|
|
$0.250000
|
|
$0.100000
|
|
$0.100000
|
|
$0.100000
|
|
$0.100000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Record Date:
|
|
05/18/2007
|
|
06/22/2007
|
|
07/20/2007
|
|
08/24/2007
|
|
09/21/2007
|
|
10/19/2007
|
|
Payable
Date:
|
|
05/25/2007
|
|
06/29/2007
|
|
07/27/2007
|
|
08/31/2007
|
|
09/28/2007
|
|
10/26/2007
|
|
Ordinary
Income:
Qualified Dividend Income for Individuals
|
|
|
|
|
|
|
|
|
|
$0.006446
|
|
$0.011901
|
|
Dividends
Qualifying for the Dividends Received Deduction for Corporations
|
|
|
|
|
|
|
|
|
|
$0.005749
|
|
$0.010614
|
|
Long-Term
Capital Gain Dividend
|
|
$0.100000
|
|
$0.140000
|
|
$0.140000
|
|
$0.140000
|
|
$0.071100
|
|
$0.012800
|
|
Please
retain this information for your records.
LMP Capital and Income
Fund Inc.
|
45
|
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
46
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LMP Capital and Income Fund Inc.
|
Dividend Reinvestment Plan (unaudited) (continued)
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 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
1-888-888-0151.
LMP Capital and Income
Fund Inc.
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47
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left blank.)
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LMP
Capital and Income Fund Inc.
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DIRECTORS
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LMP CAPITAL AND
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Carol L. Colman
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INCOME FUND INC.
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Daniel P. Cronin
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125 Broad Street
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Paolo M. Cucchi
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10th Floor, MF-2
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Leslie H. Gelb
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New York, New York 10004
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R. Jay Gerken, CFA
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Chairman
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INVESTMENT MANAGER
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William R. Hutchinson
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Legg Mason Partners Fund
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Dr. Riordan Roett
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Advisor, LLC
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Jeswald W. Salacuse
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SUBADVISERS
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OFFICERS
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ClearBridge Advisors, LLC
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R. Jay Gerken, CFA
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Western Asset Management
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President and
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Company
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Chief Executive Officer
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Western Asset Management
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Company Limited
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Kaprel Ozsolak
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Chief Financial Officer
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CUSTODIAN
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and Treasurer
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State Street Bank and Trust
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Company
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Ted P. Becker
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225 Franklin Street
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Chief Compliance Officer
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Boston, Massachusetts 02110
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Robert I. Frenkel
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DIVIDEND DISBURSING
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Secretary and Chief Legal Officer
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AND TRANSFER AGENT
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American Stock Transfer &
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Thomas C. Mandia
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Trust Company
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Assistant Secretary
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59 Maiden Lane
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New York, New York 10038
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Albert Laskaj
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Controller
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INDEPENDENT
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REGISTERED PUBLIC
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Steven Frank
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ACCOUNTING FIRM
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Controller
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KPMG LLP
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345 Park Avenue
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New York, New York 10154
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LEGAL COUNSEL
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Simpson Thacher & Bartlett LLP
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425 Lexington Avenue
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New York, New York 10017
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NEW YORK STOCK
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EXCHANGE SYMBOL
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SCD
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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.
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LMP
Capital and Income Fund Inc.
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LMP Capital and Income Fund Inc.
125 Broad Street
10th Floor, MF-2
New York, NY 10004
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American Stock Transfer
& Trust Company
59 Maiden Lane
New York, New York 10038
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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.
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©2007
Legg Mason
Investor Services, LLC
Member FINRA, SIPC
FD03548 12/07 SR07-476
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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 Shareholder Services at 1-800-451-2010.
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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 1-800-451-2010. (2) on
the Funds website at www.leggmason.com/individualinvestors and (3) on
the SECs website at www.sec.gov.
|
ITEM
2.
|
CODE
OF ETHICS.
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The
registrant has adopted a code of ethics that applies to the registrants
principal executive officer, principal financial officer, principal
accounting officer or controller.
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ITEM
3.
|
AUDIT
COMMITTEE FINANCIAL EXPERT.
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The
Board of Directors of the registrant has determined that William R.
Hutchinson, the chairman of the Boards Audit Committee, possesses the
attributes identified in Instruction 2(b) of Item 3 to Form N-CSR
to qualify as an audit committee financial expert, and has designated Mr. Hutchinson
as the audit committee financial expert.
Mr. Hutchinson is an independent Director pursuant to paragraph
(a)(2) of Item 3 to Form N-CSR.
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ITEM
4.
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PRINCIPAL
ACCOUNTANT FEES AND SERVICES.
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a)
Audit Fees
. The aggregate fees billed in the last two fiscal years
ending October 31, 2006 and October 31, 2007 (the Reporting Periods) for
professional services rendered by the Registrants principal accountant (the Auditor)
for the audit of the Registrants annual financial statements, or services
that are normally provided by the Auditor in connection with the statutory
and regulatory filings or engagements for the Reporting Periods, were $53,500
in 2006 and $56,500in 2007.
b)
Audit-Related Fees
. The aggregate fees billed in the Reporting Period
for assurance and related services by the Auditor that are reasonably related
to the performance of the Registrants financial statements were $255 in 2006
and $13,500 in 2007. In 2006, these services consisted of procedures
performed in connection with billing for time incurred in connection with
KPMG work paper review and in 2007 the procedures performed in connection
with the Agreed upon Procedures for the calculations pursuant to the
revolving credit and Security Agreement as of January 25, 2007 for the Legg
Mason Partners Capital and Income Fund.
In
addition, there were no Audit-Related Fees billed in the Reporting Period for
assurance and related services by the Auditor to the Registrants investment
adviser (not including any sub-adviser whose role is primarily portfolio
management and is subcontracted with or overseen by another investment
adviser), and any entity controlling, controlled by or under common control
with the investment adviser that provides ongoing services to the Legg Mason
Partners Capital and Income Fund (service affiliates), that were reasonably
related to the performance of the annual audit of the service affiliates.
Accordingly, there were no such fees that required pre-approval by the Audit
Committee for the Reporting Periods (prior to July 6, 2003 services provided
by the Auditor were not required to be pre-approved).
(c)
Tax Fees
. The aggregate fees billed in the Reporting Periods for
professional services rendered by PWC or KPMG for tax compliance, tax advice
and tax planning (Tax Services) were $5,485 in 2006 and $5,150 in 2007.
These services consisted of (i) review or preparation of U.S. federal, state,
local and excise tax returns; (ii) U.S. federal, state and local tax
planning, advice and assistance regarding statutory, regulatory or
administrative developments, and (iii) tax advice regarding tax qualification
matters and/or treatment of various financial instruments held or proposed to
be acquired or held.
There
were no fees billed for tax services by the Auditors to service affiliates
during the Reporting Periods that required pre-approval by the Audit
Committee.
d)
All Other Fees
. There were no other fees billed in the Reporting
Periods for products and services provided by the Auditor, other than the
services reported in paragraphs (a) through (c) of this Item for the Legg
Mason Partners Capital and Income Fund.
All
Other Fees. There were no other non-audit services rendered by the Auditor to
Legg Mason Partners Fund Advisor, LLC (LMPFA), and any entity controlling,
controlled by or under common control with LMPFA that provided ongoing
services to Legg Mason Partners Capital and Income Fund requiring
pre-approval by the Audit Committee in the Reporting Period.
(e)
Audit Committees preapproval policies and procedures described in
paragraph (c) (7) of Rule 2-01 of
Regulation S-X.
(1)
The Charter for the Audit Committee (the Committee) of the Board of each
registered investment company (the Fund) advised LMPFA or one of their
affiliates (each, an Adviser) requires that the Committee shall approve (a)
all audit and permissible non-audit services to be provided to the Fund and
(b) all permissible non-audit services to be provided by the Funds
independent auditors to the Adviser and any Covered Service Providers if the
engagement relates directly to the operations and financial reporting of the
Fund. The Committee July implement
policies and procedures by which such services are approved other than by the
full Committee.
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|
The
Committee shall not approve non-audit services that the Committee believes
July impair the independence of the auditors.
As of the date of the approval of this Audit Committee Charter,
permissible non-audit services include any professional services (including
tax services), that are not prohibited services as described below, provided
to the Fund by the independent auditors, other than those provided to the
Fund in connection with an audit or a review of the financial statements of
the Fund. Permissible non-audit
services July not include: (i) bookkeeping or other services related to the
accounting records or financial statements of the Fund; (ii) financial
information systems design and implementation; (iii) appraisal or valuation
services, fairness opinions or contribution-in-kind reports; (iv) actuarial
services; (v) internal audit outsourcing services; (vi) management functions
or human resources; (vii) broker or dealer, investment adviser or investment
banking services; (viii) legal services and expert services unrelated to the
audit; and (ix) any other service the Public Company Accounting Oversight
Board determines, by regulation, is impermissible.
Pre-approval
by the Committee of any permissible non-audit services is not required so long
as: (i) the aggregate amount of all such permissible non-audit services
provided to the Fund, the Adviser and any service providers controlling,
controlled by or under common control with the Adviser that provide ongoing
services to the Fund (Covered Service Providers) constitutes not more than
5% of the total amount of revenues paid to the independent auditors during
the fiscal year in which the permissible non-audit services are provided to
(a) the Fund, (b) the Adviser and (c) any entity controlling, controlled by
or under common control with the Adviser that provides ongoing services to
the Fund during the fiscal year in which the services are provided that would
have to be approved by the Committee; (ii) the permissible non-audit services
were not recognized by the Fund at the time of the engagement to be non-audit
services; and (iii) such services are promptly brought to the attention of
the Committee and approved by the Committee (or its delegate(s)) prior to the
completion of the audit.
(2)
For the Legg Mason Partners Capital and Income Fund, the percentage of fees
that were approved by the audit committee, with respect to: Audit-Related
Fees were 100% and 0% for 2006 and 2007; Tax Fees were 100% and 0% for 2006
and 2007; and Other Fees were 100% and 0% for 2006 and 2007.
(f)
N/A
(g)
Non-audit fees billed by the Auditor for services rendered to Legg Mason
Partners Capital and Income Fund and LMPFA and any entity controlling,
controlled by, or under common control with LMPFA that provides ongoing services
to Legg Mason Partners Capital and Income Fund during the reporting period
were $0 in 2007.
(h)
Yes. Legg Mason Partners Capital and
Income Funds Audit Committee has considered whether the provision of
non-audit services that were rendered to Service Affiliates, which were not
pre-approved (not requiring pre-approval), is compatible with maintaining the
Accountants independence. All
services provided by the Auditor to the Legg Mason Partners Capital and
Income Fund or to Service Affiliates, which were required to be pre-approved,
were pre-approved as required.
|
ITEM
5.
|
AUDIT
COMMITTEE OF LISTED REGISTRANTS.
|
|
|
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a)
Registrant has a separately-designated standing Audit Committee established
in accordance with
Section 3(a)58(A) of the
Exchange Act
. The Audit Committee consists of the following Board
members:
|
|
|
|
|
William
R. Hutchinson
|
|
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Paolo M. Cucchi
|
|
|
Daniel P. Cronin
|
|
|
Carol L. Colman
|
|
|
Leslie H. Gelb
|
|
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Dr. Riordan Roett
|
|
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Jeswald W. Salacuse
|
|
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b) Not applicable
|
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ITEM
6.
|
SCHEDULE OF INVESTMENTS.
|
|
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Included herein under Item 1.
|
|
|
ITEM
7.
|
PROXY VOTING
|
|
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Proxy Voting Guidelines and Procedures
|
Legg Mason Partners Fund Advisor, LLC (LMPFA)
delegates the responsibility for voting proxies for the fund to the subadviser
through its contracts with the subadviser. The subadviser will use its own
proxy voting policies and procedures to vote proxies. Accordingly, LMPFA does
not expect to have proxy-voting responsibility for the fund. Should LMPFA
become responsible for voting proxies for any reason, such as the inability of
the subadviser to provide investment advisory services, LMPFA shall utilize the
proxy voting guidelines established by the most recent subadviser to vote
proxies until a new subadviser is retained.
The subadvisers Proxy Voting Policies and Procedures
govern in determining how proxies relating to the funds portfolio securities
are voted and are provided below.
Information regarding how each fund voted proxies (if any)
relating to portfolio securities during the most
recent 12-month period ended June 30 is available without charge (1) by
calling
888-425-6432, (2) on the funds website at http://www.leggmason.com/individualinvestors and (3) on the SECs website at http://www.sec.gov.
PROXY VOTING GUIDELINES &
PROCEDURES SUMMARY
Concerning ClearBridge Advisors
Proxy Voting Policies and Procedures
The
following is a brief overview of the Proxy Voting Policies and Procedures (the Policies)
that ClearBridge has adopted to seek to ensure that ClearBridge votes proxies
relating to equity securities in the best interest of clients.
ClearBridge
votes proxies for each client account with respect to which it has been
authorized to vote proxies. In voting proxies, ClearBridge is guided by general
fiduciary principles and seeks to act prudently and solely in the best interest
of clients. ClearBridge attempts to consider all factors that could affect the
value of the investment and will vote proxies in the manner that it believes
will be consistent with efforts to maximize shareholder values. ClearBridge may
utilize an external service provider to provide it with information and/or a
recommendation with regard to proxy votes. However, the ClearBridge adviser
(business unit) continues to retain responsibility for the proxy vote.
In the case of a proxy
issue for which there is a stated position in the Policies, ClearBridge
generally votes in accordance with such stated position. In the case of a proxy
issue for which there is a list of factors set forth in the Policies that
ClearBridge considers in voting on such issue, ClearBridge votes on a
case-by-case basis in accordance with the general principles set forth above
and considering such enumerated factors. In the case of a proxy issue for which
there is no stated position or list of factors that ClearBridge considers in
voting on such issue, ClearBridge votes on a case-by-case basis in accordance
with the general principles set forth above. Issues for which there is a stated
position set forth in the Policies or for which there is a list of factors set
forth in the Policies that ClearBridge considers in voting on such issues fall
into a variety of categories, including election of directors, ratification of
auditors, proxy and tender offer defenses, capital structure issues, executive
and director compensation, mergers and corporate restructurings, and social and
environmental issues. The stated position on an issue set forth in the Policies
can always be superseded, subject to the duty to act solely in the best interest
of the beneficial owners of accounts, by the investment management
professionals responsible for the account whose shares are being voted. Issues
applicable to a particular industry may cause ClearBridge to abandon a policy
that would have otherwise applied to issuers generally. As a result of the
independent investment advisory services provided by distinct ClearBridge
business units, there may be occasions when different business units or
different portfolio managers within the same business unit vote differently on
the same issue. A ClearBridge business unit or investment team (e.g.
ClearBridges Social Awareness Investment team) may adopt proxy voting policies
that supplement these policies and procedures. In addition, in the case of
Taft-Hartley clients, ClearBridge will comply with a client direction to vote
proxies in accordance with Institutional Shareholder Services (ISS) PVS Voting
Guidelines, which ISS represents to be fully consistent with AFL-CIO
guidelines.
In furtherance of
ClearBridges goal to vote proxies in the best interest of clients, ClearBridge
follows procedures designed to identify and address material conflicts that may
arise between ClearBridges interests and those of its clients before voting
proxies on behalf of such clients. To seek to identify conflicts of interest,
ClearBridge periodically notifies ClearBridge employees in writing that they
are under an obligation (i) to be aware of the potential for conflicts of
interest on the part of ClearBridge with respect to voting proxies on behalf of
client accounts both as a result of their personal relationships and due to
special circumstances that may arise during the conduct of ClearBridges
business, and (ii) to bring conflicts of interest of which they become
aware to the attention of ClearBridges compliance personnel. ClearBridge also
maintains and considers a list of significant ClearBridge relationships that
could present a conflict of interest for ClearBridge in voting proxies.
ClearBridge is also sensitive to the fact that a significant, publicized
relationship between an issuer and a non-ClearBridge Legg Mason affiliate might
appear to the public to influence the manner in which ClearBridge decides to
vote a proxy with respect to such issuer. Absent special circumstances or a
significant, publicized non-ClearBridge Legg Mason affiliate relationship that
ClearBridge for prudential reasons treats as a potential conflict of interest
because such relationship might appear to the public to influence the manner in
which ClearBridge decides to vote a proxy, ClearBridge generally takes the
position that relationships between a non-ClearBridge Legg Mason affiliate and
an issuer (e.g. investment management relationship between an issuer and a
non-ClearBridge Legg Mason affiliate) do not present a conflict of interest for
ClearBridge in voting proxies with respect to such issuer. Such position is
based on the fact that ClearBridge is operated as an
independent business unit
from other Legg Mason business units as well as on the existence of information
barriers between ClearBridge and certain other Legg Mason business units.
ClearBridge maintains a
Proxy Voting Committee to review and address conflicts of interest brought to
its attention by ClearBridge compliance personnel. A proxy issue that will be
voted in accordance with a stated ClearBridge position on such issue or in
accordance with the recommendation of an independent third party is not brought
to the attention of the Proxy Voting Committee for a conflict of interest
review because ClearBridges position is that to the extent a conflict of
interest issue exists, it is resolved by voting in accordance with a
pre-determined policy or in accordance with the recommendation of an
independent third party. With respect to a conflict of interest brought to its
attention, the Proxy Voting Committee first determines whether such conflict of
interest is material. A conflict of interest is considered material to the
extent that it is determined that such conflict is likely to influence, or
appear to influence; ClearBridges decision-making in voting proxies. If it is
determined by the Proxy Voting Committee that a conflict of interest is not
material, ClearBridge may vote proxies notwithstanding the existence of the
conflict.
If it is determined by
the Proxy Voting Committee that a conflict of interest is material, the Proxy
Voting Committee is responsible for determining an appropriate method to
resolve such conflict of interest before the proxy affected by the conflict of
interest is voted. Such determination is based on the particular facts and
circumstances, including the importance of the proxy issue and the nature of
the conflict of interest.
Western
Asset Management Company and Western Asset Management
Company Limited (together, Western Asset or the Firm) Proxy Voting
Policy
Background
An investment adviser is
required to adopt and implement policies and procedures that we believe are
reasonably designed to ensure that proxies are voted in the best interest of
clients, in accordance with fiduciary duties and SEC Rule 206(4)-6 under
the Investment Advisers Act of 1940 (Advisers Act). The authority to vote the
proxies of our clients is established through investment management agreements
or comparable documents. In addition to SEC requirements governing advisers,
long-standing fiduciary standards and responsibilities have been established
for ERISA accounts. Unless a manager of ERISA assets has been expressly
precluded from voting proxies, the Department of Labor has determined that the
responsibility for these votes lies with the investment manager.
Policy
As a fixed income only
manager, the occasion to vote proxies is very rare. However, the Firm has
adopted and implemented policies and procedures that we believe are reasonably
designed to ensure that proxies are voted in the best interest of clients, in
accordance with our fiduciary duties and SEC Rule 206(4)-6 under the
Investment Advisers Act of 1940 (Advisers Act). In addition to SEC
requirements governing advisers, our proxy voting policies reflect the
long-standing fiduciary standards and responsibilities for ERISA accounts.
Unless a manager of ERISA assets has been expressly precluded from voting
proxies, the Department of Labor has determined that the responsibility for
these votes lies with the Investment Manager.
While
the guidelines included in the procedures are intended to provide a benchmark
for voting standards, each vote is ultimately cast on a case-by-case basis,
taking into consideration the Firms contractual obligations to our clients and
all other relevant facts and circumstances at the time of the vote (such that
these guidelines may be overridden to the extent the Firm deems appropriate).
In
exercising its voting authority, Western Asset will not consult or enter into
agreements with officers, directors or employees of Legg Mason Inc. or any of
its affiliates (other than Western Asset Management Company Limited) regarding
the voting of any securities owned by its clients.
Procedure
Responsibility and Oversight
The
Western Asset Legal and Compliance Department (Compliance Department) is
responsible for administering and overseeing the proxy voting process. The
gathering of proxies is coordinated through the Corporate Actions area of
Investment Support (Corporate Actions). Research analysts and portfolio
managers are responsible for determining appropriate voting positions on each
proxy utilizing any applicable guidelines contained in these procedures.
Client Authority
At
account start-up, or upon amendment of an IMA, the applicable client IMA are
similarly reviewed. If an agreement is silent on proxy voting, but contains an
overall delegation of discretionary authority or if the account represents
assets of an ERISA plan, Western Asset will assume responsibility for proxy
voting. The Client Account Transition Team maintains a matrix of proxy voting
authority.
Proxy Gathering
Registered
owners of record, client custodians, client banks and trustees (Proxy
Recipients) that receive proxy materials on behalf of clients should forward
them to Corporate Actions. Proxy Recipients for new clients (or, if Western
Asset becomes aware that the applicable Proxy Recipient for an existing client
has changed, the Proxy Recipient for the existing client) are notified at
start-up of appropriate routing to Corporate Actions of proxy materials
received and reminded of their responsibility to forward all proxy materials on
a timely basis. If Western Asset personnel other than Corporate Actions receive
proxy materials, they should promptly forward the materials to Corporate
Actions.
Proxy Voting
Once
proxy materials are received by Corporate Actions, they are forwarded to the
Legal and Compliance Department for coordination and the following actions:
a.
Proxies are reviewed to determine accounts impacted.
b.
Impacted accounts are checked to confirm Western Asset voting authority.
c.
Legal and Compliance Department staff reviews proxy issues to determine any
material conflicts of interest. (See conflicts of interest section of these
procedures for further information on determining material conflicts of
interest.)
d. If
a material conflict of interest exists, (i) to the extent reasonably
practicable and permitted by applicable law, the client is promptly notified, the
conflict is disclosed and Western Asset obtains the clients proxy voting
instructions, and (ii) to the extent that it is not reasonably practicable
or permitted by applicable law to notify the client and obtain such
instructions (e.g., the client is a mutual fund or other commingled vehicle or
is an ERISA plan client), Western Asset seeks voting instructions from an
independent third party.
e.
Legal and Compliance Department staff provides proxy material to the
appropriate research analyst or portfolio manager to obtain their recommended
vote. Research analysts and portfolio managers determine votes on a
case-by-case basis taking into account the voting guidelines contained in these
procedures. For avoidance of doubt, depending on the best interest of each
individual client, Western Asset may vote the same proxy differently for
different clients. The analysts or portfolio managers basis for their
decision is documented and maintained by the Legal and Compliance Department.
f. Legal and Compliance
Department staff votes the proxy pursuant to the instructions received in (d) or
(e) and returns the voted proxy as indicated in the proxy materials.
Timing
Western
Asset personnel act in such a manner to ensure that, absent special
circumstances, the proxy gathering and proxy voting steps noted above can be
completed before the applicable deadline for returning proxy votes.
Recordkeeping
Western
Asset maintains records of proxies voted pursuant to Section 204-2 of the
Advisers Act and ERISA DOL Bulletin 94-2. These records include:
a. A
copy of Western Assets policies and procedures.
b.
Copies of proxy statements received regarding client securities.
c. A
copy of any document created by Western Asset that was material to making a
decision how to vote proxies.
d.
Each written client request for proxy voting records and Western Assets
written response to both verbal and written client requests.
e. A
proxy log including:
1. Issuer name;
2. Exchange ticker symbol
of the issuers shares to be voted;
3. Council on Uniform
Securities Identification Procedures (CUSIP) number for the shares to be
voted;
4. A brief identification
of the matter voted on;
5. Whether the matter was
proposed by the issuer or by a shareholder of the issuer;
6. Whether a vote was
cast on the matter;
7. A record of how the
vote was cast; and
8. Whether the vote was
cast for or against the recommendation of the issuers management team.
Records
are maintained in an easily accessible place for five years, the first two in Western
Assets offices.
Disclosure
Western
Assets proxy policies are described in the firms Part II of Form ADV.
Clients will be provided a copy of these policies and procedures upon request.
In addition, upon request, clients may receive reports on how their proxies
have been voted.
Conflicts of Interest
All
proxies are reviewed by the Legal and Compliance Department for material
conflicts of interest. Issues to be reviewed include, but are not limited to:
1.
Whether Western (or, to the extent required to be considered by applicable law,
its affiliates) manages assets for the company or an employee group of the
company or otherwise has an interest in the company;
2.
Whether Western or an officer or director of Western or the applicable
portfolio manager or analyst responsible for recommending the proxy vote
(together, Voting Persons) is a close relative of or has a personal or
business relationship with an executive, director or person who is a candidate
for director of the company or is a participant in a proxy contest; and
3.
Whether there is any other business or personal relationship where a Voting
Person has a personal interest in the outcome of the matter before
shareholders.
Voting
Guidelines
Western
Assets substantive voting decisions turn on the particular facts and
circumstances of each proxy vote and are evaluated by the designated research
analyst or portfolio manager. The examples outlined below are meant as
guidelines to aid in the decision making process.
Guidelines
are grouped according to the types of proposals generally presented to
shareholders. Part I deals with proposals which have been approved and are
recommended by a companys board of directors; Part II deals with
proposals submitted by shareholders for inclusion in proxy statements; Part III
addresses issues relating to voting shares of investment companies; and Part IV
addresses unique considerations pertaining to foreign issuers.
I. Board Approved Proposals
The
vast majority of matters presented to shareholders for a vote involve proposals
made by a company itself that have been approved and recommended by its board
of directors. In view of the enhanced corporate governance practices currently
being implemented in public companies, Western Asset generally votes in support
of decisions reached by independent boards of directors. More specific
guidelines related to certain board-approved proposals are as follows:
1.
Matters relating to the Board of Directors
Western Asset votes proxies for the election of the
companys nominees for directors and for board-approved proposals on other
matters relating to the board of directors with the following exceptions:
a. Votes are withheld for
the entire board of directors if the board does not have a majority of
independent directors or the board does not have nominating, audit and
compensation committees composed solely of independent directors.
b. Votes are withheld for
any nominee for director who is considered an independent director by the
company and who has received compensation from the company other than for
service as a director.
c. Votes are withheld for
any nominee for director who attends less than 75% of board and committee
meetings without valid reasons for absences.
d. Votes are cast on a
case-by-case basis in contested elections of directors.
2.
Matters relating to Executive Compensation
Western Asset generally favors compensation programs
that relate executive compensation to a companys long-term performance. Votes
are cast on a case-by-case basis on board-approved proposals relating to
executive compensation, except as follows:
a. Except where the firm
is otherwise withholding votes for the entire board of directors, Western Asset
votes for stock option plans that will result in a minimal annual dilution.
b. Western Asset votes
against stock option plans or proposals that permit replacing or repricing of
underwater options.
c. Western Asset votes
against stock option plans that permit issuance of options with an exercise
price below the stocks current market price.
d. Except where the firm
is otherwise withholding votes for the entire board of directors, Western Asset
votes for employee stock purchase plans that limit the discount for shares
purchased under the plan to no more than 15% of their market value, have an
offering period of 27 months or less and result in dilution of 10% or less.
3.
Matters relating to Capitalization
The management of a companys capital structure
involves a number of important issues, including cash flows, financing needs
and market conditions that are unique to the circumstances of each company. As
a result, Western Asset votes on a case-by-case basis on board-approved
proposals involving changes to a companys capitalization except where Western
Asset is otherwise withholding votes for the entire board of directors.
a. Western Asset votes
for proposals relating to the authorization of additional common stock.
b. Western Asset votes
for proposals to effect stock splits (excluding reverse stock splits).
c. Western Asset votes
for proposals authorizing share repurchase programs.
4.
Matters relating to Acquisitions, Mergers, Reorganizations and Other
Transactions
Western Asset votes these issues on a case-by-case
basis on board-approved transactions.
5.
Matters relating to Anti-Takeover Measures
Western Asset votes against board-approved proposals
to adopt anti-takeover measures except as follows:
a. Western Asset votes on
a case-by-case basis on proposals to ratify or approve shareholder rights
plans.
b. Western Asset votes on
a case-by-case basis on proposals to adopt fair price provisions.
6.
Other Business Matters
Western Asset votes for board-approved proposals
approving such routine business matters such as changing the companys name,
ratifying the appointment of auditors and procedural matters relating to the
shareholder meeting.
a. Western Asset votes on
a case-by-case basis on proposals to amend a companys charter or bylaws.
b. Western Asset votes
against authorization to transact other unidentified, substantive business at
the meeting.
II. Shareholder Proposals
SEC
regulations permit shareholders to submit proposals for inclusion in a companys
proxy statement. These proposals generally seek to change some aspect of a
companys corporate governance structure or to change some aspect of its
business operations. Western Asset votes in accordance with the recommendation
of the companys board of directors on all shareholder proposals, except as
follows:
1.
Western Asset votes for shareholder proposals to require shareholder approval
of shareholder rights plans.
2.
Western Asset votes for shareholder proposals that are consistent with Western
Assets proxy voting guidelines for board-approved proposals.
3.
Western Asset votes on a case-by-case basis on other shareholder proposals
where the firm is otherwise withholding votes for the entire board of
directors.
III. Voting Shares of Investment
Companies
Western
Asset may utilize shares of open or closed-end investment companies to
implement its investment strategies. Shareholder votes for investment companies
that fall within the categories listed in Parts I and II above are voted in
accordance with those guidelines.
1.
Western Asset votes on a case-by-case basis on proposals relating to changes in
the investment objectives of an investment company taking into account the
original intent of the fund and the role the fund plays in the clients
portfolios.
2.
Western Asset votes on a case-by-case basis all proposals that would result in
increases in expenses (
e.g.
,
proposals to adopt 12b-1 plans, alter investment advisory arrangements or
approve fund mergers) taking into account comparable expenses for similar funds
and the services to be provided.
IV. Voting Shares of Foreign Issuers
In the
event Western Asset is required to vote on securities held in non-U.S. issuers
i.e. issuers that are incorporated under the laws of a foreign jurisdiction and
that are not listed on a U.S. securities exchange or the NASDAQ stock
market, the following guidelines are used, which are premised on the existence
of a sound corporate governance and disclosure framework. These guidelines,
however, may not be appropriate under some circumstances for foreign issuers
and therefore apply only where applicable.
1.
Western Asset votes for shareholder proposals calling for a majority of the
directors to be independent of management.
2.
Western Asset votes for shareholder proposals seeking to increase the
independence of board nominating, audit and compensation committees.
3.
Western Asset votes for shareholder proposals that implement corporate
governance standards similar to those established under U.S. federal law and
the listing requirements of U.S. stock exchanges, and that do not otherwise
violate the laws of the jurisdiction under which the company is incorporated.
4.
Western Asset votes on a case-by-case basis on proposals relating to (1) the
issuance of common stock in excess of 20% of a companys outstanding common
stock where shareholders do not have preemptive rights, or (2) the
issuance of common stock in excess of 100% of a companys outstanding common
stock where shareholders have preemptive rights.
ITEM
8.
|
PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT
INVESTMENT COMPANIES.
|
(a)(1):
NAME AND ADDRESS
ADDRESS
|
|
LENGTH OF
TIME SERVED
|
|
PRINCIPAL
OCCUPATION(S) DURING
PAST 5 YEARS
|
|
|
|
|
|
S.
Kenneth Leech
Western Asset
385 East Colorado
Blvd. Pasadena, CA
91101
|
|
Since
2006
|
|
Co-portfolio
manager of the fund; employee of SBAM since 2006 and Chief Investment Officer
of Western Asset since 1998.
|
|
|
|
|
|
Stephen
A. Walsh
Western Asset
385 East Colorado
Blvd. Pasadena, CA
91101
|
|
Since
2006
|
|
Co-portfolio
manager of the fund; employee of SBAM since 2006 and Deputy Chief Investment
Officer of Western Asset since 2000.
|
Keith
J. Gardner
Western Asset
385 East Colorado
Blvd. Pasadena, CA
91101
|
|
Since
2007
|
|
Co-portfolio
manager of the fund; portfolio manager and research analyst at Western Asset
since 1994.
|
|
|
|
|
|
Detlev
Schlichter
Western Asset
385 East Colorado
Blvd. Pasadena, CA
91101
|
|
Since
2007
|
|
Co-portfolio manager of the fund;
portfolio manager at Western Asset since 2001.
|
|
|
|
|
|
Jeffrey D. Van
Schaick
Western Asset
385 East Colorado
Blvd. Pasadena, CA
91101
|
|
Since 2007
|
|
Co-portfolio manager of the
fund; portfolio manager/research analyst with Western Asset and has been
employed as portfolio manager/research analyst with Western Asset for at
least the past five years.
|
|
|
|
|
|
Robert
Gendelman
Clearbridge
Advisors
620 Eighth Avenue
New York, NY
10018
|
|
Since
2006
|
|
Portfolio
manager of the fund; employee of Clearbridge Advisors since 2006; Senior
Portfolio manager 2003-2006 at Cobble Creek Partners LLC; General Partner and
Portfolio Manager at Neuberger Berman 1994-2003.
|
(a)(2): DATA TO BE PROVIDED BY FINANCIAL CONTROL
The following tables set forth certain additional information with respect to the funds portfolio managers for the fund. Unless noted otherwise, all information is provided as of October 31, 2007.
Other Accounts Managed by Portfolio Managers
The table below identifies the number of accounts (other than the fund) for which the funds portfolio managers have day-to-day management responsibilities and the total assets in such accounts, within each of the following categories: registered investment companies, other pooled investment vehicles, and other accounts. For each category, the number of accounts and total assets in the accounts where fees are based on performance is also indicated.
|
|
Registered
|
|
Other Pooled
|
|
|
Portfolio
|
|
Investment
|
|
Investment
|
|
Other
|
Manager(s)
|
|
Companies
|
|
Vehicles
|
|
Accounts
|
|
|
|
|
|
|
|
S. Kenneth Leech
|
|
112 registered investment companies with $116.9 billion in total assets under management
|
|
239 Other pooled investment vehicles with $221.2 billion in assets under management
|
|
1,060 Other accounts with $303.2 billion in total assets under management*
|
Stephen A. Walsh
|
|
112 registered investment companies with $116.9 billion in total assets under management
|
|
239 Other pooled investment vehicles with $221.2 billion in assets under management
|
|
1,060 Other accounts with $303.2 billion in total assets under management*
|
|
|
|
|
|
|
|
Keith J. Gardner
|
|
6 registered investment companies with $1.1 billion in total assets under management
|
|
6 Other pooled investment vehicles with $1.4 billion in assets under management
|
|
1 Other account with $15 million in total assets under management**
|
|
|
|
|
|
|
|
Detlev Schlichter
|
|
2
registered investment companies with $210.8 million in total assets under management
|
|
26 Other pooled investment vehicles with $4.8 billion in assets under management
|
|
67 Other accounts with $26.9 billion in total assets under management***
|
|
|
|
|
|
|
|
Jeffrey Van Schaick
|
|
14
registered investment Companies with $8.1 billion in total assets Under management
|
|
6 Other pooled investment vehicles with $5.2b in assets under management
|
|
12 Other accounts with $982 million in total assets under management
|
|
|
|
|
|
|
|
Robert Gendelman
|
|
2
registered investment Companies with $3.18 billion in total assets Under management
|
|
1 Other pooled investment vehicles with $0.01 billion in assets under management
|
|
0 Other accounts with $0 in assets under management
|
*
|
Includes 93 accounts
managed, totaling $33.7 billion, for which advisory fee is performance based.
|
**
|
Includes 1 account
managed, totaling $15 million, for which advisory fee is performance based.
|
***
|
Includes 20 accounts
managed, totaling $7.7 billion, for which advisory fee is performance based.
|
The numbers above reflect the overall number of portfolios
managed by employees of Western Asset Management Company (Western Asset). Mr. Leech and Mr. Walsh are
involved in the management of all the Firms portfolios, but they are not
solely responsible for particular portfolios.
Western Assets investment discipline emphasizes a team approach that
combines the efforts of groups of specialists working in different market
sectors. They are responsible for overseeing implementation of Western Assets
overall investment ideas and coordinating the work of the various sector teams.
This structure ensures that client portfolios benefit from a consensus that
draws on the expertise of all team members.
(a)(3):
Portfolio Manager Compensation (Western Asset)
With respect to the compensation of the portfolio managers, the
Advisers compensation system assigns each employee a total compensation target
and a respective cap, which are derived from annual market surveys that
benchmark each role with their job function and peer universe. This method is designed to reward employees
with total compensation reflective of the external market value of their
skills, experience, and ability to produce desired results.
Standard compensation includes competitive base salaries, generous
employee benefits, and a retirement plan.
In addition,
employees are eligible for bonuses.
These are structured to closely align the interests of employees with
those of the Advisers, and are determined by the professionals job function
and performance as measured by a formal review process. All bonuses are completely
discretionary. One of the principal
factors considered is a portfolio managers investment performance versus
appropriate peer groups and benchmarks.
Because portfolio managers are generally responsible for multiple
accounts (including the Portfolio) with similar investment strategies, they are
compensated on the performance of the aggregate group of similar accounts,
rather than a specific account. A
smaller portion of a bonus payment is derived from factors that include client
service, business development, length of service
to the Adviser,
management or supervisory responsibilities, contributions to developing
business strategy and overall contributions to the Advisers business.
Finally, in order to attract and retain top talent, all
professionals are eligible for additional incentives in recognition of
outstanding performance. These are
determined based upon the factors described above and include Legg Mason, Inc.
stock options and long-term incentives that vest over a set period of time past
the award date.
Portfolio
Manager Compensation (ClearBridge Advisors)
ClearBridge
investment professionals receive base salary, other employee benefits and are
eligible to receive incentive compensation. Base salary is fixed and typically
determined based on market factors and the skill and experience of individual
investment personnel.
ClearBridge
has incentive and deferred compensation plans (the Plans) for its investment
professionals, including the funds portfolio manager(s) and research
analysts. The Plans are designed to align the objectives of ClearBridge
investment professionals with those of fund shareholders and other ClearBridge
clients. Additionally, the deferred plans are designed to retain its investment
professionals and reward long-term performance.
Incentive
Compensation
Investment performance is the key component in
determining the final incentive award for all of ClearBridges investment
professionals. A portfolio managers
initial incentive award is based on the investment professionals ongoing
contribution to ClearBridges investment and business results and externally
measured competitive pay practices for the portfolio managers
position/experience within the firm.
This award is then adjusted upward or downward (up to +/-50%) based on
investment performance during the most recent year over a rolling 1, 3, and 5
year time period. Product performance is
ranked among a peer group of non-ClearBridge investment managers and the
products pre-tax investment performance against the applicable product benchmark
(e.g. a securities index and, with respect to a fund, the benchmark set forth
in the funds prospectus to which the funds average annual total returns are
compared).
The peer group of
non-ClearBridge investment managers is defined by product style/type, vehicle
type and geography and selected by independent vendors that track and provide
(for a fee paid by ClearBridge) relevant peer group performance and ranking
data (e.g. primarily Lipper or Callan).
The 1, 3, and 5 year
performance versus benchmark and peer group approximate effective weightings
are 35% for trailing 1 year performance, 50% for trailing 3 year performance,
and 15% for trailing 5 year performance.
Lastly, the incentive
award for an investment professional may also be adjusted by the ClearBridge
Chief Investment Officer(s) based on other qualitative factors such as
contribution to the firm and the development of investment staff.
For ClearBridges
centralized research professionals, there is an incentive compensation plan
based on annual performance on a combined scorecard containing a portfolio
manager questionnaire survey and stock picking performance. The analysts stock picks are tracked on a
formal basis through Factset and make up a portion of the analysts overall
scorecard performance. These stock picks
are measured versus their respective sector indices.
Deferred Award
Up to
20% of an investment professionals annual incentive compensation is subject to
deferral. For portfolio managers, 25% of this deferral is invested in their
primary managed product while another 25% is invested in an elected proprietary
ClearBridge sub-advised fund. Therefore, portfolio managers may potentially
have 50% of their deferred award amount tracking the performance of their
primary managed product. Every portfolio
manager selects their primary product for the elective component. Legg Mason then makes a company investment in
the Legg Mason
Partners funds equal to
the deferral amounts by fund. This
investment is a company asset held on the Legg Mason balance sheet and paid out
to the employees upon vesting over a four year deferral period. The remaining 50% of the deferral is received
in the form of Legg Mason restricted stock shares.
For centralized research
analysts, 50% of this deferral tracks the performance of up to two elected
proprietary funds. Legg Mason then makes
an investment at the company level into each of the funds in the deferral
program based on the aggregate dollars deferred by each individual in that plan
year (similar to the above description).
The remaining 50% of the deferral is received in the form of Legg Mason
restricted stock shares.
Potential
Conflicts of Interest (Western Asset)
Potential conflicts of interest may arise in connection with the
management of multiple accounts (including accounts managed in a personal
capacity). These could include potential conflicts of interest related to
the knowledge and timing of a Portfolios trades, investment opportunities and
broker selection. Portfolio managers may be privy to the size, timing and
possible market impact of a Portfolios trades.
It is possible that an investment opportunity may be suitable for
both a Portfolio and other accounts managed by a portfolio manager, but may not
be available in sufficient quantities for both the Portfolio and the other
accounts to participate fully. Similarly, there may be limited
opportunity to sell an investment held by a Portfolio and another
account. A conflict may arise where the portfolio manager may have an
incentive to treat an account preferentially as compared to a Portfolio because
the account pays a performance-based fee or the portfolio manager, the Advisers
or an affiliate has an interest in the account. The Advisers have adopted
procedures for allocation of portfolio transactions and investment
opportunities across multiple client accounts on a fair and equitable basis
over time. All eligible accounts that can participate in a trade share
the same price on a pro-rata allocation basis in an attempt to mitigate any
conflict of interest. Trades are allocated among similarly managed
accounts to maintain consistency of portfolio strategy, taking into account
cash availability, investment restrictions and guidelines, and portfolio
composition versus strategy.
With respect to securities transactions for the Portfolios, the
Advisers determine which broker or dealer to use to execute each order,
consistent with their duty to seek best execution of the transaction.
However, with respect to certain other accounts (such as pooled investment
vehicles that are not registered investment companies and other accounts
managed for organizations and individuals), the Advisers may be limited by the
client with respect to the selection of brokers or dealers or may be instructed
to direct trades through a particular broker or dealer. In these cases,
trades for a Portfolio in a particular security may be placed separately from,
rather than aggregated with, such other accounts. Having separate
transactions with respect to a security may temporarily affect the market price
of the security or the execution of the transaction, or both, to the possible
detriment of a Portfolio or the other account(s) involved.
Additionally, the management of multiple Portfolios and/or other accounts may result
in a portfolio manager devoting unequal time and attention to the management of
each Portfolio and/or other account.
It is theoretically possible that portfolio managers could use
information to the advantage of other accounts they manage and to the possible
detriment of a Portfolio. For example, a portfolio manager could short
sell a security for an account immediately prior to a Portfolios sale of that
security. To address this conflict, the Advisers have adopted procedures
for reviewing and comparing selected trades of alternative investment accounts
(which may make directional trades such as short sales) with long only accounts
(which include the Portfolios) for timing and pattern related issues.
Trading decisions for alternative investment and long only accounts may not be
identical even though the same Portfolio Manager may manage both types of
accounts. Whether the Adviser allocates a particular investment
opportunity to only alternative investment accounts or to alternative investment
and long only accounts will depend on the investment strategy being
implemented. If, under the circumstances, an investment opportunity is
appropriate for both its alternative investment and long only accounts, then it
will be allocated to both on a pro-rata basis.
A portfolio
manager may also face other potential conflicts of interest in managing a
Portfolio, and the description above is not a complete description of every
conflict of interest that could be deemed to exist in managing both a Portfolio
and the other accounts listed above.
Potential
Conflicts of Interest (ClearBridge Advisors)
Potential
conflicts of interest may arise when a Funds portfolio manager has day-to-day
management responsibilities with respect to one or more other funds or other
accounts, as is the case for the portfolio manager listed in the table above.
The
investment adviser and the fund(s) have adopted compliance policies and
procedures that are designed to address various conflicts of interest that may
arise for the investment adviser and the individuals that it employs. For example, ClearBridge seeks to minimize
the effects of competing interests for the time and attention of portfolio
managers by assigning portfolio managers to manage funds and accounts that
share a similar investment style.
ClearBridge has also adopted trade allocation procedures that are
designed to facilitate the fair allocation of limited investment opportunities
among multiple funds and accounts. There
is no guarantee, however, that the policies and procedures adopted by
ClearBridge and the fund(s) will be able to detect and/or prevent every
situation in which an actual or potential conflict may appear.
These
potential conflicts include:
Allocation of Limited Time and Attention
.
A portfolio manager who is responsible for managing multiple funds
and/or accounts may devote unequal time and attention to the management of
those funds and/or accounts. As a
result, the portfolio manager may not be able to formulate as complete a
strategy or identify equally attractive investment opportunities for each of
those accounts as might be the case if he or she were to devote substantially
more attention to the management of a single fund. The effects of this potential conflict may be
more pronounced where funds and/or accounts overseen by a particular portfolio
manager have different investment strategies.
Allocation of Limited Investment Opportunities
.
If a portfolio manager identifies a limited investment opportunity that
may be suitable for multiple funds and/or accounts, the opportunity may be
allocated among these several funds or accounts, which may limit a funds
ability to take full advantage of the investment opportunity.
Pursuit of Differing Strategies
.
At times, a portfolio manager may determine that an investment
opportunity may be appropriate for only some of the funds and/or accounts for
which he or she exercises investment responsibility, or may decide that certain
of the funds and/or accounts should take differing positions with respect to a
particular security. In these cases, the
portfolio manager may place separate transactions for one or more funds or
accounts which may affect the market price of the security or the execution of
the transaction, or both, to the detriment or benefit of one or more other
funds and/or accounts.
Variation in Compensation
. A conflict of
interest may arise where the financial or other benefits available to the
portfolio manager differ among the funds and/or accounts that he or she
manages. If the structure of the
investment advisers management fee and/or the portfolio managers compensation
differs among funds and/or accounts (such as where certain funds or accounts
pay higher management fees or performance-based management fees), the portfolio
manager might be motivated to help certain funds and/or accounts over
others. The portfolio manager might be
motivated to favor funds and/or accounts in which he or she has an interest or
in which the investment advisor and/or its affiliates have interests. Similarly, the desire to maintain or raise
assets under management or to enhance the portfolio managers performance
record or to derive other rewards, financial or otherwise, could influence the
portfolio manager to lend preferential treatment to those funds and/or accounts
that could most significantly benefit the portfolio manager.
Selection of Broker/Dealers.
Portfolio
managers may be able to select or influence the selection of the brokers and
dealers that are used to execute securities transactions for the funds and/or
accounts that they supervise. In
addition to executing trades, some brokers and dealers provide brokerage and
research services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934), which may result in the payment of higher
brokerage fees than might otherwise be available. These services may be more beneficial to
certain funds or accounts than to others.
Although the payment of brokerage commissions is subject to the
requirement that the sub-adviser determines in good faith that the commissions
are reasonable in relation to the value of the brokerage and research services
provided to the fund, a decision as to the selection of brokers and dealers
could yield disproportionate costs and benefits among the funds and/or accounts
managed. For this reason, the
sub-adviser has formed a brokerage committee that reviews, among other things,
the allocation of brokerage to broker/dealers, best execution and soft dollar
usage.
Related Business Opportunities
.
The investment adviser or its affiliates may provide more services (such
as distribution or recordkeeping) for some types of funds or accounts than for
others. In such cases, a portfolio
manager may benefit, either directly or indirectly, by devoting
disproportionate attention to the management of fund and/or accounts that
provide greater overall returns to the investment manager and its affiliates.
(a)(4):
Portfolio Manager Securities Ownership
The
table below identifies the dollar range of securities beneficially owned by
each portfolio managers as of October 31, 2007.
Portfolio Manager(s)
|
|
Dollar Range of
Portfolio Securities
Beneficially Owned
|
|
|
|
|
|
S. Kenneth Leech
|
|
A
|
|
Stephen A. Walsh
|
|
A
|
|
Keith J. Gardner
|
|
A
|
|
Detlev
Schlichter
|
|
A
|
|
Jeffrey D. Van
Schaick
|
|
A
|
|
Robert Gendelman
|
|
F
|
|
Dollar Range ownership is
as follows:
A: none
B: $1 - $10,000
C: 10,001 - $50,000
D: $50,001 - $100,000
E: $100,001 - $500,000
F: $500,001 - $1 million
G: over $1 million
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) Code
of Ethics attached hereto.
|
|
|
|
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 of
|
|
LMP Capital and Income Fund Inc.
|
|
|
Date:
|
January 4,
2008
|
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 of
|
|
LMP Capital and Income Fund Inc.
|
|
|
Date:
|
January 4,
2008
|
By:
|
/s/
Kaprel Ozsolak
|
|
|
(Kaprel
Ozsolak)
|
|
Chief
Financial Officer of
|
|
LMP Capital and Income Fund Inc.
|
|
|
Date:
|
January 4,
2008
|
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