LMP Capital & Income Fund Inc. ("SCD") Announces New Rate for December 2010 Quarterly Distribution & Sets Managed Distributio...
21 October 2010 - 11:30PM
Business Wire
LMP Capital and Income Fund Inc., which is listed on the New
York Stock Exchange under the symbol "SCD," today announced a new,
higher quarterly distribution rate of $0.1500 per common share
payable December 30, 2010. The Board of Directors of the Fund also
approved the new quarterly distribution rate of $0.1500 per share
for calendar year 2011.
The December distribution schedule appears below:
Month Ex-Date Record Date
Payable Date Amount December 12/21/2010 12/23/2010
12/30/2010 $0.1500
The Fund had previously paid a quarterly distribution of $0.1300
per share; the December 2010 distribution represents an increase of
15.4% over the prior 2010 distribution rate.
During 2010, the Fund’s managers continued along the path they
began in 2009: reducing the Fund’s exposure to fixed income and
increasing the Fund’s exposure to high quality, relatively high
yielding equities. Consistent with this continued shift, the
managers who are responsible for making allocation decisions
between investments in fixed income and equity securities continue
to believe that equities are more attractive than fixed income at
this point in time, given the low interest rate environment and
relatively high level of equity dividend yields. Additionally, the
Fund’s managers took advantage of the Fund’s low borrowing costs
and the pullback in equity markets over the summer to
opportunistically increase the Fund’s debt leverage to $100
million, which is equivalent to a leverage ratio of approximately
20%.
The Fund’s managers also continued to place an emphasis on
companies which, in their opinion, possess sound or improving
balance sheets and strong free cash flows, coupled with attractive
business models. The Fund's managers believe that these
high-quality, dividend-paying companies can be attractive
candidates for long-term investment. During 2010, many of the
Fund’s equity holdings raised their dividends, increasing the
income earned by the Fund.
During 2010, many areas in the fixed income market saw the
emergence of record low yields. The Fund’s managers capitalized on
the strong performance in the fixed income market by further
reducing the fixed income portion of the portfolio. The proceeds of
these sales were redeployed in equities with the aforementioned
characteristics. The Fund's managers will continue to assess the
fixed income markets and may increase the allocation to this sector
when they believe better opportunities present themselves.
These portfolio actions resulted in the Fund earning
significantly more income, which formed the basis of the increase
in the distribution rate. As they have in 2009 and 2010, the Fund's
distributions in 2011 are likely to continue to rely heavily on net
investment income generated by the portfolio. Short-term and
long-term capital gains and returns of capital are not likely to be
a significant factor in the composition of the distributions.
In addition to the beneficial effect that these portfolio
actions have had on the income stream generated by the portfolio,
they have also driven strong performance from a total return
perspective. The Fund returned 7.1% based on net asset value and
14.4% based on market price for the nine-month period ending
September 30, 2010.
Under the terms of the Fund's managed distribution policy, the
Fund seeks to maintain a consistent quarterly distribution level
that may be paid in part or in full from net investment income and
realized capital gains, or a combination thereof. Shareholders
should note, however, that if the Fund's aggregate net investment
income and net realized capital gains are less than the amount of
the quarterly distribution level, the difference will be
distributed from the Fund's assets and will constitute a return of
the shareholder's capital. A return of capital is not taxable as a
dividend; rather it reduces a shareholder's tax basis in his or her
shares of the Fund. The Board of Directors may reduce the Fund's
quarterly distribution rate in the future or terminate or suspend
the managed distribution policy at any time. Any such reduction in
the quarterly distribution rate, termination or suspension could
have an adverse effect on the market price.
Based on the Fund's accounting records as of the date of this
press release, the Fund estimates that approximately 100% of the
cumulative fiscal year-to-date distributions through December 2010
are sourced from net investment income. The estimated components of
each distribution will be provided to shareholders of record in a
separate notice.
Please note that neither this press release nor the separate
notice should be used for tax reporting purposes and that each is
being provided to announce the amount and estimated source of the
Fund's distributions that have been declared by the Board of
Directors. In early 2011, after definitive information is
available, the Fund will send shareholders a Form 1099-DIV, if
applicable, specifying how the distributions paid by the Fund
during the prior calendar year should be characterized for purposes
of reporting the distributions on a shareholder's tax return (e.g.,
ordinary income, long-term capital gain or return of capital).
LMP Capital and Income Fund Inc. is a non-diversified,
closed-end management investment company. Legg Mason Partners Fund
Advisor, LLC, a wholly-owned subsidiary of Legg Mason, Inc., serves
as the Fund's investment manager. The Fund is sub-advised by
ClearBridge Advisors, LLC and Western Asset Management Company,
affiliates of the investment manager.
Contact the Fund at 1-888-777-0102 for additional information,
or consult the Fund's web site at www.leggmason.com/cef.
Data and commentary provided in this press release are for
informational purposes only. Legg Mason and its affiliates do not
engage in selling shares of the Fund.
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