UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-Q
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY
Investment Company Act file number |
811-21467 |
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LMP Capital and Income Fund Inc. |
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(Exact name of registrant as specified in charter) |
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55 Water Street, New York, NY |
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10041 |
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(Address of principal executive offices) |
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(Zip code) |
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Robert I. Frenkel, Esq. Legg Mason & Co., LLC 100 First Stamford Place Stamford, CT 06902 |
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(Name and address of agent for service) |
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Registrants telephone number, including area code: |
1-888-777-0102 |
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Date of fiscal year end: |
December 31 |
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Date of reporting period: |
March 31, 2010 |
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ITEM 1. SCHEDULE OF INVESTMENTS
LMP CAPITAL AND INCOME FUND INC.
FORM N-Q
MARCH 31, 2010
Schedule of investments (unaudited)
March 31, 2010
LMP CAPITAL AND INCOME FUND INC.
SECURITY |
|
SHARES |
|
VALUE |
|
|
COMMON STOCKS 70.5% |
|
|
|
|
|
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CONSUMER DISCRETIONARY 7.4% |
|
|
|
|
|
|
Hotels, Restaurants & Leisure 2.8% |
|
|
|
|
|
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McDonalds Corp. |
|
185,000 |
|
$ |
12,343,200 |
|
Media 3.2% |
|
|
|
|
|
|
Charter Communications Inc. |
|
11,990 |
|
413,655 |
(a) |
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Reed Elsevier PLC |
|
680,000 |
|
5,422,631 |
|
|
Thomson Corp. |
|
238,000 |
|
8,639,400 |
|
|
Total Media |
|
|
|
14,475,686 |
|
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Specialty Retail 1.4% |
|
|
|
|
|
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Home Depot Inc. |
|
197,210 |
|
6,379,744 |
|
|
TOTAL CONSUMER DISCRETIONARY |
|
|
|
33,198,630 |
|
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CONSUMER STAPLES 14.3% |
|
|
|
|
|
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Beverages 1.7% |
|
|
|
|
|
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PepsiCo Inc. |
|
115,360 |
|
7,632,218 |
|
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Food & Staples Retailing 1.9% |
|
|
|
|
|
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Wal-Mart Stores Inc. |
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155,850 |
|
8,665,260 |
|
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Food Products 4.4% |
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|
|
|
|
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H.J. Heinz Co. |
|
310,000 |
|
14,139,100 |
|
|
Kraft Foods Inc., Class A Shares |
|
177,440 |
|
5,365,785 |
|
|
Total Food Products |
|
|
|
19,504,885 |
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Household Products 6.3% |
|
|
|
|
|
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Kimberly-Clark Corp. |
|
210,000 |
|
13,204,800 |
|
|
Procter & Gamble Co. |
|
236,500 |
|
14,963,355 |
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Total Household Products |
|
|
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28,168,155 |
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TOTAL CONSUMER STAPLES |
|
|
|
63,970,518 |
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ENERGY 8.3% |
|
|
|
|
|
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Energy Equipment & Services 0.8% |
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|
|
|
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Diamond Offshore Drilling Inc. |
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40,000 |
|
3,552,400 |
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|
Oil, Gas & Consumable Fuels 7.5% |
|
|
|
|
|
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BP PLC, ADR |
|
200,000 |
|
11,414,000 |
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Spectra Energy Corp. |
|
442,820 |
|
9,976,735 |
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Total SA, ADR |
|
210,000 |
|
12,184,200 |
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|
Total Oil, Gas & Consumable Fuels |
|
|
|
33,574,935 |
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TOTAL ENERGY |
|
|
|
37,127,335 |
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FINANCIALS 8.8% |
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|
|
|
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Insurance 4.1% |
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|
|
|
|
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Chubb Corp. |
|
149,360 |
|
7,744,316 |
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Travelers Cos. Inc. |
|
196,160 |
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10,580,870 |
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Total Insurance |
|
|
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18,325,186 |
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Real Estate Investment Trusts (REITs) 2.4% |
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|
|
|
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Annaly Capital Management Inc. |
|
406,000 |
|
6,975,080 |
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Chimera Investment Corp. |
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1,000,000 |
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3,890,000 |
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Total Real Estate Investment Trusts (REITs) |
|
|
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10,865,080 |
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Thrifts & Mortgage Finance 2.3% |
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|
|
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New York Community Bancorp Inc. |
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300,000 |
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4,962,000 |
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Peoples United Financial Inc. |
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333,000 |
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5,208,120 |
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Total Thrifts & Mortgage Finance |
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|
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10,170,120 |
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TOTAL FINANCIALS |
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|
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39,360,386 |
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HEALTH CARE 6.5% |
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Pharmaceuticals 6.5% |
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Bristol-Myers Squibb Co. |
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220,000 |
|
5,874,000 |
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GlaxoSmithKline PLC, ADR |
|
88,000 |
|
3,389,760 |
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Johnson & Johnson |
|
175,000 |
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11,410,000 |
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Novartis AG, ADR |
|
123,670 |
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6,690,547 |
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Pfizer Inc. |
|
100,000 |
|
1,715,000 |
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TOTAL HEALTH CARE |
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|
|
29,079,307 |
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See Notes to Financial Statements.
Schedule of investments (unaudited) (continued)
March 31, 2010
LMP CAPITAL AND INCOME FUND INC.
SECURITY |
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SHARES |
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VALUE |
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INDUSTRIALS 8.2% |
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Aerospace & Defense 2.4% |
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Honeywell International Inc. |
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50,000 |
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$ |
2,263,500 |
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Lockheed Martin Corp. |
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100,000 |
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8,322,000 |
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Total Aerospace & Defense |
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|
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10,585,500 |
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Commercial Services & Supplies 2.7% |
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Waste Management Inc. |
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350,510 |
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12,068,059 |
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Industrial Conglomerates 2.3% |
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3M Co. |
|
53,210 |
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4,446,760 |
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United Technologies Corp. |
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80,000 |
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5,888,800 |
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Total Industrial Conglomerates |
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|
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10,335,560 |
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Marine 0.8% |
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Alexander & Baldwin Inc. |
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115,661 |
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3,822,596 |
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TOTAL INDUSTRIALS |
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|
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36,811,715 |
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INFORMATION TECHNOLOGY 3.8% |
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IT Services 2.3% |
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Automatic Data Processing Inc. |
|
137,000 |
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6,092,390 |
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Paychex Inc. |
|
138,140 |
|
4,240,898 |
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Total IT Services |
|
|
|
10,333,288 |
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Semiconductors & Semiconductor Equipment 0.9% |
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Microchip Technology Inc. |
|
140,000 |
|
3,942,400 |
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Software 0.6% |
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Microsoft Corp. |
|
94,000 |
|
2,751,380 |
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TOTAL INFORMATION TECHNOLOGY |
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|
|
17,027,068 |
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MATERIALS 1.8% |
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|
|
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Chemicals 1.8% |
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|
|
|
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E.I. du Pont de Nemours & Co. |
|
163,000 |
|
6,070,120 |
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PPG Industries Inc. |
|
30,000 |
|
1,962,000 |
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TOTAL MATERIALS |
|
|
|
8,032,120 |
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TELECOMMUNICATION SERVICES 4.4% |
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|
|
|
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Diversified Telecommunication Services 4.4% |
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|
|
|
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AT&T Inc. |
|
278,000 |
|
7,183,520 |
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Verizon Communications Inc. |
|
340,000 |
|
10,546,800 |
|
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Windstream Corp. |
|
163,026 |
|
1,775,353 |
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TOTAL TELECOMMUNICATION SERVICES |
|
|
|
19,505,673 |
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UTILITIES 7.0% |
|
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Electric Utilities 5.2% |
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|
|
|
|
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American Electric Power Co. Inc. |
|
235,000 |
|
8,032,300 |
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Duke Energy Corp. |
|
251,870 |
|
4,110,518 |
|
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Exelon Corp. |
|
76,990 |
|
3,372,932 |
|
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FPL Group Inc. |
|
82,670 |
|
3,995,441 |
|
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Progress Energy Inc. |
|
90,000 |
|
3,542,400 |
|
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Total Electric Utilities |
|
|
|
23,053,591 |
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Multi-Utilities 1.8% |
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|
|
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CenterPoint Energy Inc. |
|
562,000 |
|
8,070,320 |
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TOTAL UTILITIES |
|
|
|
31,123,911 |
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TOTAL COMMON STOCKS (Cost $287,817,477) |
|
|
|
315,236,663 |
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RATE |
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CONVERTIBLE PREFERRED STOCKS 4.1% |
|
|
|
|
|
|
|
|
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ENERGY 1.8% |
|
|
|
|
|
|
|
|
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El Paso Corp. |
|
4.990% |
|
|
|
8,000 |
|
7,842,000 |
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FINANCIALS 1.5% |
|
|
|
|
|
|
|
|
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Diversified Financial Services 1.5% |
|
|
|
|
|
|
|
|
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CalEnergy Capital Trust III |
|
6.500% |
|
|
|
150,000 |
|
6,825,000 |
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UTILITIES 0.8% |
|
|
|
|
|
|
|
|
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Electric Utilities 0.8% |
|
|
|
|
|
|
|
|
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FPL Group Inc. |
|
8.375% |
|
|
|
71,160 |
|
3,588,599 |
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TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $16,717,657) |
|
|
|
18,255,599 |
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See Notes to Schedule of Investments.
Schedule of investments (unaudited) (continued)
March 31, 2010
LMP CAPITAL AND INCOME FUND INC.
SECURITY |
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RATE |
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|
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SHARES |
|
VALUE |
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PREFERRED STOCKS 0.9% |
|
|
|
|
|
|
|
|
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FINANCIALS 0.0% |
|
|
|
|
|
|
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Thrifts & Mortgage Finance 0.0% |
|
|
|
|
|
|
|
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Federal Home Loan Mortgage Corp. (FHLMC) |
|
8.375% |
|
|
|
25,950 |
|
$ |
32,956 |
* |
|
Federal National Mortgage Association (FNMA) |
|
7.000% |
|
|
|
300 |
|
503 |
* |
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Federal National Mortgage Association (FNMA) |
|
8.250% |
|
|
|
17,650 |
|
22,415 |
* |
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TOTAL FINANCIALS |
|
|
|
|
|
|
|
55,874 |
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UTILITIES 0.9% |
|
|
|
|
|
|
|
|
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Electric Utilities 0.9% |
|
|
|
|
|
|
|
|
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Great Plains Energy Inc. |
|
12.000% |
|
|
|
65,370 |
|
4,151,649 |
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TOTAL PREFERRED STOCKS (Cost $5,363,924) |
|
|
|
|
|
4,207,523 |
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MATURITY |
|
FACE |
|
|
|
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ASSET-BACKED SECURITIES 0.9% |
|
|
|
|
|
|
|
|
|
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FINANCIALS 0.9% |
|
|
|
|
|
|
|
|
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Home Equity 0.8% |
|
|
|
|
|
|
|
|
|
|
Asset-Backed Funding Certificates, 2004-FF1 M2 |
|
2.421% |
|
1/25/34 |
|
$ |
296,473 |
|
120,546 |
(b) |
Countrywide Asset-Backed Certificates, 2004-5 M4 |
|
1.496% |
|
6/25/34 |
|
126,653 |
|
29,168 |
(b) |
|
Credit-Based Asset Servicing & Securitization LLC, 2006-CB2 AF4 |
|
5.704% |
|
12/25/36 |
|
640,660 |
|
460,162 |
|
|
Finance America Net Interest Margin Trust, 2004-1 A |
|
5.250% |
|
6/27/34 |
|
73,417 |
|
35 |
(a)(c)(d)(e) |
|
Fremont Home Loan Trust, 2004-1 M5 |
|
1.896% |
|
2/25/34 |
|
135,730 |
|
51,901 |
(b) |
|
GSAA Home Equity Trust, 2007-4 A3A |
|
0.546% |
|
3/25/37 |
|
1,752,149 |
|
872,030 |
(b) |
|
GSAA Home Equity Trust, 2007-6 A4 |
|
0.546% |
|
5/25/47 |
|
1,720,000 |
|
987,235 |
(b) |
|
GSAMP Trust, 2004-OPT M3 |
|
1.396% |
|
11/25/34 |
|
254,867 |
|
22,938 |
(a)(b) |
|
MASTR Specialized Loan Trust, 2007-2 A |
|
0.596% |
|
5/25/37 |
|
422,747 |
|
249,421 |
(b)(c) |
|
RAAC Series, 2007-RP3 A |
|
0.626% |
|
10/25/46 |
|
518,109 |
|
302,204 |
(b)(c) |
|
Renaissance Home Equity Loan Trust, 2003-4 M3 |
|
2.146% |
|
3/25/34 |
|
389,160 |
|
154,771 |
(b) |
|
Sail Net Interest Margin Notes, 2003-BC2A A |
|
7.750% |
|
4/27/33 |
|
141,210 |
|
1 |
(c)(d)(e) |
|
Sail Net Interest Margin Notes, 2004-2A A |
|
5.500% |
|
3/27/34 |
|
71,380 |
|
0 |
(c)(d)(e) |
|
Structured Asset Securities Corp., 2007-BC4 A3 |
|
0.496% |
|
11/25/37 |
|
337,069 |
|
313,600 |
(b) |
|
Total Home Equity |
|
|
|
|
|
|
|
3,564,012 |
|
|
Student Loan 0.1% |
|
|
|
|
|
|
|
|
|
|
Nelnet Student Loan Trust, 2008-4 A4 |
|
1.729% |
|
4/25/24 |
|
350,000 |
|
368,672 |
(b) |
|
TOTAL ASSET-BACKED SECURITIES (Cost $5,496,275) |
|
|
|
3,932,684 |
|
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COLLATERALIZED MORTGAGE OBLIGATIONS 1.4% |
|
|
|
|
|
|||||
BCAP LLC Trust, 2006-AA1 A1 |
|
0.436% |
|
10/25/36 |
|
1,150,823 |
|
617,388 |
(b) |
|
Bear Stearns ARM Trust, 2005-12 24A1 |
|
5.743% |
|
2/25/36 |
|
120,686 |
|
90,764 |
(b) |
|
Countrywide Alternative Loan Trust, 2006-0A9 2A1A |
|
0.450% |
|
7/20/46 |
|
1,361,632 |
|
538,605 |
(b) |
|
Federal Home Loan Mortgage Corp. (FHLMC), PAC, 2780 SL |
|
6.000% |
|
4/15/34 |
|
167,704 |
|
168,883 |
(b) |
|
Harborview Mortgage Loan Trust, 2005-10 B6 |
|
1.307% |
|
11/19/35 |
|
741,244 |
|
6,559 |
(b) |
|
JPMorgan Mortgage Trust, 2007-S3 1A74 |
|
6.000% |
|
8/25/37 |
|
1,060,000 |
|
718,995 |
|
|
MASTR ARM Trust, 2003-3 3A4 |
|
2.922% |
|
9/25/33 |
|
694,795 |
|
588,477 |
(b) |
|
MASTR Reperforming Loan Trust, 2006-2 2A1 |
|
4.510% |
|
5/25/36 |
|
1,223,316 |
|
1,022,082 |
(b)(c) |
|
Merit Securities Corp., 11PA B2 |
|
1.747% |
|
9/28/32 |
|
201,917 |
|
167,189 |
(b)(c) |
|
MLCC Mortgage Investors Inc., 2004-A B2 |
|
1.166% |
|
4/25/29 |
|
262,757 |
|
105,767 |
(b) |
|
MLCC Mortgage Investors Inc., 2004-B B2 |
|
1.126% |
|
5/25/29 |
|
418,516 |
|
161,927 |
(b) |
|
RBS Greenwich Capital, Mortgage Pass-Through Certificates, 2005-A 5A |
|
7.000% |
|
4/25/35 |
|
900,775 |
|
756,794 |
|
|
Structured ARM Loan Trust, 2006-4 4A1 |
|
5.862% |
|
5/25/36 |
|
756,236 |
|
570,812 |
(b) |
|
Thornburg Mortgage Securities Trust, 2007-4 2A1 |
|
6.201% |
|
7/25/37 |
|
172,899 |
|
154,166 |
(b) |
|
Thornburg Mortgage Securities Trust, 2007-4 3A1 |
|
6.192% |
|
7/25/37 |
|
178,929 |
|
153,127 |
(b) |
|
Washington Mutual Inc. Pass-Through Certificates, 2006-AR5 4A |
|
1.461% |
|
6/25/46 |
|
637,648 |
|
269,404 |
(b) |
|
See Notes to Schedule of Investments.
Schedule of investments (unaudited) (continued)
March 31, 2010
LMP CAPITAL AND INCOME FUND INC.
SECURITY |
|
RATE |
|
MATURITY |
|
FACE |
|
VALUE |
|
||
Wells Fargo Alternative Loan Trust, 2007-PA2 2A1 |
|
0.676% |
|
6/25/37 |
|
$ |
699,661 |
|
$ |
344,821 |
(b) |
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $8,655,225) |
|
6,435,760 |
|
||||||||
CONVERTIBLE BONDS & NOTES 1.3% |
|
|
|
|
|
|
|
|
|
||
INFORMATION TECHNOLOGY 1.3% |
|
|
|
|
|
|
|
|
|
||
Internet Software & Services 1.3% |
|
|
|
|
|
|
|
|
|
||
VeriSign Inc. (Cost - $4,935,000) |
|
3.250% |
|
8/15/37 |
|
6,500,000 |
|
5,906,875 |
|
||
CORPORATE BONDS & NOTES 6.6% |
|
|
|
|
|
|
|
|
|
||
CONSUMER DISCRETIONARY 0.4% |
|
|
|
|
|
|
|
|
|
||
Hotels, Restaurants & Leisure 0.1% |
|
|
|
|
|
|
|
|
|
||
Choctaw Resort Development Enterprise, Senior Notes |
|
7.250% |
|
11/15/19 |
|
295,000 |
|
202,075 |
(c) |
||
Inn of the Mountain Gods Resort & Casino, Senior Notes |
|
12.000% |
|
11/15/10 |
|
660,000 |
|
320,100 |
(d)(e) |
||
MGM MIRAGE Inc., Senior Secured Notes |
|
10.375% |
|
5/15/14 |
|
45,000 |
|
49,838 |
(c) |
||
Total Hotels, Restaurants & Leisure |
|
|
|
|
|
|
|
572,013 |
|
||
Media 0.3% |
|
|
|
|
|
|
|
|
|
||
CCH II LLC/CCH II Capital Corp., Senior Notes |
|
13.500% |
|
11/30/16 |
|
234,181 |
|
280,432 |
(c) |
||
Comcast Corp. |
|
5.700% |
|
5/15/18 |
|
510,000 |
|
541,627 |
|
||
News America Inc., Senior Notes |
|
6.650% |
|
11/15/37 |
|
20,000 |
|
21,102 |
|
||
Time Warner Cable Inc. |
|
5.850% |
|
5/1/17 |
|
10,000 |
|
10,723 |
|
||
Time Warner Cable Inc., Senior Notes |
|
6.200% |
|
7/1/13 |
|
300,000 |
|
331,293 |
|
||
Total Media |
|
|
|
|
|
|
|
1,185,177 |
|
||
TOTAL CONSUMER DISCRETIONARY |
|
|
|
|
|
|
|
1,757,190 |
|
||
CONSUMER STAPLES 1.2% |
|
|
|
|
|
|
|
|
|
||
Food & Staples Retailing 1.2% |
|
|
|
|
|
|
|
|
|
||
CVS Caremark Corp., Subordinated Bonds |
|
6.302% |
|
6/1/37 |
|
5,000,000 |
|
4,727,325 |
(b) |
||
CVS Pass-Through Trust, Secured Notes |
|
6.943% |
|
1/10/30 |
|
410,743 |
|
436,723 |
|
||
Kroger Co., Senior Notes |
|
5.500% |
|
2/1/13 |
|
110,000 |
|
118,863 |
|
||
Kroger Co., Senior Notes |
|
6.150% |
|
1/15/20 |
|
100,000 |
|
108,757 |
|
||
Total Food & Staples Retailing |
|
|
|
|
|
|
|
5,391,668 |
|
||
Tobacco 0.0% |
|
|
|
|
|
|
|
|
|
||
Reynolds American Inc. |
|
6.750% |
|
6/15/17 |
|
180,000 |
|
193,071 |
|
||
TOTAL CONSUMER STAPLES |
|
|
|
|
|
|
|
5,584,739 |
|
||
ENERGY 1.6% |
|
|
|
|
|
|
|
|
|
||
Energy Equipment & Services 0.1% |
|
|
|
|
|
|
|
|
|
||
Transocean Inc., Senior Notes |
|
5.250% |
|
3/15/13 |
|
190,000 |
|
205,266 |
|
||
Oil, Gas & Consumable Fuels 1.5% |
|
|
|
|
|
|
|
|
|
||
Apache Corp., Senior Notes |
|
5.625% |
|
1/15/17 |
|
140,000 |
|
154,008 |
|
||
ConocoPhillips Holding Co., Senior Notes |
|
6.950% |
|
4/15/29 |
|
230,000 |
|
264,728 |
|
||
Devon Financing Corp. ULC, Notes |
|
6.875% |
|
9/30/11 |
|
200,000 |
|
215,879 |
|
||
Energy Transfer Partners LP, Senior Notes |
|
6.700% |
|
7/1/18 |
|
240,000 |
|
262,583 |
|
||
Kerr-McGee Corp., Notes |
|
6.875% |
|
9/15/11 |
|
220,000 |
|
237,111 |
|
||
Kerr-McGee Corp., Notes |
|
6.950% |
|
7/1/24 |
|
140,000 |
|
156,091 |
|
||
Kinder Morgan Energy Partners LP, Senior Notes |
|
6.000% |
|
2/1/17 |
|
290,000 |
|
311,882 |
|
||
Shell International Finance BV, Senior Notes |
|
4.375% |
|
3/25/20 |
|
60,000 |
|
59,602 |
|
||
Southern Union Co., Junior Subordinated Notes |
|
7.200% |
|
11/1/66 |
|
5,000,000 |
|
4,662,500 |
(b) |
||
Williams Cos. Inc., Senior Notes |
|
7.750% |
|
6/15/31 |
|
178,000 |
|
200,232 |
|
||
XTO Energy Inc., Senior Notes |
|
5.500% |
|
6/15/18 |
|
300,000 |
|
326,234 |
|
||
Total Oil, Gas & Consumable Fuels |
|
|
|
|
|
|
|
6,850,850 |
|
||
TOTAL ENERGY |
|
|
|
|
|
|
|
7,056,116 |
|
||
FINANCIALS 2.7% |
|
|
|
|
|
|
|
|
|
||
Capital Markets 0.3% |
|
|
|
|
|
|
|
|
|
||
Bear Stearns Co. Inc., Senior Notes |
|
6.400% |
|
10/2/17 |
|
300,000 |
|
331,913 |
|
||
Goldman Sachs Capital II, Junior Subordinated Bonds |
|
5.793% |
|
6/1/12 |
|
30,000 |
|
25,575 |
(b)(f) |
||
Goldman Sachs Group Inc., Senior Notes |
|
6.150% |
|
4/1/18 |
|
300,000 |
|
317,926 |
|
||
Merrill Lynch & Co. Inc., Notes |
|
6.875% |
|
4/25/18 |
|
280,000 |
|
302,216 |
|
||
Morgan Stanley, Medium-Term Notes |
|
5.625% |
|
1/9/12 |
|
290,000 |
|
307,288 |
|
||
UBS AG Stamford CT, Senior Notes |
|
3.875% |
|
1/15/15 |
|
|
260,000 |
|
|
256,775 |
|
Total Capital Markets |
|
|
|
|
|
|
|
1,541,693 |
|
See Notes to Schedule of Investments.
Schedule of investments (unaudited) (continued)
March 31, 2010
LMP CAPITAL AND INCOME FUND INC.
SECURITY |
|
RATE |
|
MATURITY |
|
FACE |
|
VALUE |
|
||
Commercial Banks 0.4% |
|
|
|
|
|
|
|
|
|
||
BAC Capital Trust XIV, Junior Subordinated Notes |
|
5.630% |
|
3/15/12 |
|
$ |
20,000 |
|
$ |
15,200 |
(b)(f) |
Bank of Tokyo-Mitsubishi UFJ Ltd., Senior Notes |
|
3.850% |
|
1/22/15 |
|
100,000 |
|
101,154 |
(c) |
||
Nordea Bank AB, Senior Notes |
|
4.875% |
|
1/27/20 |
|
200,000 |
|
198,709 |
(c) |
||
Resona Preferred Global Securities Cayman Ltd., Junior Subordinated, Bonds |
|
7.191% |
|
7/30/15 |
|
260,000 |
|
243,968 |
(b)(c)(f) |
||
Santander US Debt SA Unipersonal, Senior Notes |
|
3.724% |
|
1/20/15 |
|
100,000 |
|
99,731 |
(c) |
||
Shinsei Finance Cayman Ltd., Junior Subordinated Bonds |
|
6.418% |
|
7/20/16 |
|
490,000 |
|
340,197 |
(b)(c)(f) |
||
SunTrust Capital, Trust Preferred Securities |
|
6.100% |
|
12/15/36 |
|
420,000 |
|
346,684 |
(b) |
||
Wachovia Bank N.A., Subordinated Notes |
|
6.000% |
|
11/15/17 |
|
380,000 |
|
412,513 |
|
||
Wells Fargo Capital X, Capital Securities |
|
5.950% |
|
12/15/36 |
|
280,000 |
|
258,114 |
|
||
Total Commercial Banks |
|
|
|
|
|
|
|
2,016,270 |
|
||
Consumer Finance 0.3% |
|
|
|
|
|
|
|
|
|
||
American Express Co., Subordinated Debentures |
|
6.800% |
|
9/1/66 |
|
380,000 |
|
373,350 |
(b) |
||
Caterpillar Financial Services Corp., Medium-Term Notes |
|
5.450% |
|
4/15/18 |
|
190,000 |
|
201,334 |
|
||
John Deere Capital Corp., Medium-Term Notes |
|
5.350% |
|
4/3/18 |
|
170,000 |
|
181,189 |
|
||
SLM Corp., Medium-Term Notes, Senior Notes |
|
8.450% |
|
6/15/18 |
|
450,000 |
|
455,778 |
|
||
Total Consumer Finance |
|
|
|
|
|
|
|
1,211,651 |
|
||
Diversified Financial Services 1.4% |
|
|
|
|
|
|
|
|
|
||
Bank of America Corp., Senior Notes |
|
5.650% |
|
5/1/18 |
|
330,000 |
|
334,388 |
|
||
Capital One Bank, Notes |
|
5.750% |
|
9/15/10 |
|
125,000 |
|
127,507 |
|
||
Citigroup Inc., Senior Notes |
|
6.875% |
|
3/5/38 |
|
550,000 |
|
557,502 |
|
||
General Electric Capital Corp., Senior Notes |
|
5.625% |
|
5/1/18 |
|
560,000 |
|
586,155 |
|
||
General Electric Capital Corp., Subordinated Debentures |
|
6.375% |
|
11/15/67 |
|
20,000 |
|
18,900 |
(b) |
||
JPMorgan Chase & Co., Junior Subordinated Notes |
|
7.900% |
|
4/30/18 |
|
4,000,000 |
|
4,278,816 |
(b)(f) |
||
JPMorgan Chase & Co., Subordinated Notes |
|
6.125% |
|
6/27/17 |
|
190,000 |
|
204,828 |
|
||
Total Diversified Financial Services |
|
|
|
|
|
|
|
6,108,096 |
|
||
Insurance 0.3% |
|
|
|
|
|
|
|
|
|
||
American International Group Inc., Medium-Term Notes, Senior Notes |
|
5.850% |
|
1/16/18 |
|
550,000 |
|
511,819 |
|
||
MetLife Inc., Junior Subordinated Debentures |
|
6.400% |
|
12/15/36 |
|
350,000 |
|
318,500 |
|
||
Teachers Insurance & Annuity Association of America - College Retirement Equity Fund, Notes |
|
6.850% |
|
12/16/39 |
|
20,000 |
|
21,767 |
(c) |
||
Travelers Cos. Inc., Junior Subordinated Debentures |
|
6.250% |
|
3/15/37 |
|
395,000 |
|
389,360 |
(b) |
||
Total Insurance |
|
|
|
|
|
|
|
1,241,446 |
|
||
TOTAL FINANCIALS |
|
|
|
|
|
|
|
12,119,156 |
|
||
HEALTH CARE 0.1% |
|
|
|
|
|
|
|
|
|
||
Health Care Equipment & Supplies 0.0% |
|
|
|
|
|
|
|
||||
Medtronic Inc., Senior Notes |
|
4.450% |
|
3/15/20 |
|
50,000 |
|
49,860 |
|
||
Health Care Providers & Services 0.1% |
|
|
|
|
|
|
|
||||
UnitedHealth Group Inc., Senior Notes |
|
5.250% |
|
3/15/11 |
|
170,000 |
|
176,570 |
|
||
WellPoint Inc., Notes |
|
5.875% |
|
6/15/17 |
|
30,000 |
|
32,258 |
|
||
WellPoint Inc., Senior Notes |
|
5.000% |
|
1/15/11 |
|
140,000 |
|
144,136 |
|
||
Total Health Care Providers & Services |
|
|
|
|
|
|
|
352,964 |
|
||
Pharmaceuticals 0.0% |
|
|
|
|
|
|
|
|
|
||
Wyeth, Notes |
|
5.950% |
|
4/1/37 |
|
200,000 |
|
210,112 |
|
||
TOTAL HEALTH CARE |
|
|
|
|
|
|
|
612,936 |
|
||
MATERIALS 0.2% |
|
|
|
|
|
|
|
|
|
||
Chemicals 0.1% |
|
|
|
|
|
|
|
|
|
||
PPG Industries Inc., Senior Notes |
|
6.650% |
|
3/15/18 |
|
200,000 |
|
222,982 |
|
||
Metals & Mining 0.0% |
|
|
|
|
|
|
|
|
|
||
Vale Overseas Ltd., Notes |
|
6.875% |
|
11/21/36 |
|
156,000 |
|
161,780 |
|
||
See Notes to Schedule of Investments.
Schedule of investments (unaudited) (continued)
March 31, 2010
LMP CAPITAL AND INCOME FUND INC.
SECURITY |
|
RATE |
|
MATURITY |
|
FACE |
|
VALUE |
|
||
Paper & Forest Products 0.1% |
|
|
|
|
|
|
|
|
|
||
Appleton Papers Inc., Senior Secured Notes |
|
11.250% |
|
12/15/15 |
|
$ |
408,000 |
|
$ |
377,400 |
(c) |
TOTAL MATERIALS |
|
|
|
|
|
|
|
762,162 |
|
||
TELECOMMUNICATION SERVICES 0.3% |
|
|
|
|
|
|
|
|
|
||
Diversified Telecommunication Services 0.3% |
|
|
|
|
|
|
|
||||
AT&T Inc., Global Notes |
|
5.600% |
|
5/15/18 |
|
140,000 |
|
149,789 |
|
||
AT&T Inc., Senior Notes |
|
6.400% |
|
5/15/38 |
|
170,000 |
|
175,360 |
|
||
British Telecommunications PLC, Bonds |
|
9.625% |
|
12/15/30 |
|
70,000 |
|
88,370 |
|
||
Deutsche Telekom International Finance BV, Senior Notes |
|
5.750% |
|
3/23/16 |
|
180,000 |
|
193,746 |
|
||
Telecom Italia Capital S.p.A., Senior Notes |
|
5.250% |
|
10/1/15 |
|
100,000 |
|
102,510 |
|
||
Telefonica Emisones SAU, Senior Notes |
|
6.221% |
|
7/3/17 |
|
220,000 |
|
241,621 |
|
||
Verizon Communications Inc., Senior Notes |
|
5.500% |
|
2/15/18 |
|
200,000 |
|
212,315 |
|
||
Verizon Communications Inc., Senior Notes |
|
6.400% |
|
2/15/38 |
|
200,000 |
|
208,192 |
|
||
TOTAL TELECOMMUNICATION SERVICES |
|
|
|
|
|
|
|
1,371,903 |
|
||
UTILITIES 0.1% |
|
|
|
|
|
|
|
|
|
||
Electric Utilities 0.1% |
|
|
|
|
|
|
|
|
|
||
FirstEnergy Corp., Notes |
|
7.375% |
|
11/15/31 |
|
205,000 |
|
212,731 |
|
||
Pacific Gas & Electric Co., Senior Notes |
|
5.800% |
|
3/1/37 |
|
230,000 |
|
228,992 |
|
||
TOTAL UTILITIES |
|
|
|
|
|
|
|
441,723 |
|
||
TOTAL CORPORATE BONDS & NOTES (Cost $28,833,216) |
|
|
29,705,925 |
|
|||||||
MORTGAGE-BACKED SECURITIES 2.4% |
|
|
|
|
|
|
|
|
|
||
FNMA 1.8% |
|
|
|
|
|
|
|
|
|
||
Federal National Mortgage Association (FNMA) |
|
4.500% |
|
4/19/25-4/13/40 |
|
2,300,000 |
|
2,323,250 |
(g) |
||
Federal National Mortgage Association (FNMA) |
|
5.000% |
|
4/19/25-4/13/40 |
|
3,100,000 |
|
3,219,141 |
(g) |
||
Federal National Mortgage Association (FNMA) |
|
4.000% |
|
4/13/40 |
|
300,000 |
|
290,906 |
(g) |
||
Federal National Mortgage Association (FNMA) |
|
5.500% |
|
4/13/40 |
|
900,000 |
|
948,657 |
(g) |
||
Federal National Mortgage Association (FNMA) |
|
6.000% |
|
4/13/40 |
|
700,000 |
|
743,641 |
(g) |
||
Federal National Mortgage Association (FNMA) |
|
6.500% |
|
4/13/40 |
|
700,000 |
|
758,734 |
(g) |
||
Total FNMA |
|
|
|
|
|
|
|
8,284,329 |
|
||
GNMA 0.6% |
|
|
|
|
|
|
|
|
|
||
Government National Mortgage Association (GNMA) |
|
5.000% |
|
1/15/40 |
|
1,695,899 |
|
1,766,941 |
|
||
Government National Mortgage Association (GNMA) |
|
4.500% |
|
4/20/40 |
|
500,000 |
|
506,015 |
(g) |
||
Government National Mortgage Association (GNMA) |
|
6.500% |
|
4/20/40 |
|
300,000 |
|
323,086 |
(g) |
||
Total GNMA |
|
|
|
|
|
|
|
2,596,042 |
|
||
TOTAL MORTGAGE-BACKED SECURITIES (Cost $10,880,395) |
|
|
|
10,880,371 |
|
||||||
U.S. GOVERNMENT & AGENCY OBLIGATIONS 3.7% |
|
|
|
|
|
|
|||||
U.S. Government Agencies 0.6% |
|
|
|
|
|
|
|
|
|
||
Federal Home Loan Bank (FHLB), Global Bonds |
|
1.625% |
|
7/27/11 |
|
1,770,000 |
|
1,790,203 |
|
||
Federal Home Loan Bank (FHLB), Global Bonds |
|
5.500% |
|
7/15/36 |
|
100,000 |
|
103,274 |
|
||
Federal National Mortgage Association (FNMA), Notes |
|
1.750% |
|
8/10/12 |
|
510,000 |
|
513,704 |
|
||
Federal National Mortgage Association (FNMA), Subordinated Notes |
|
5.250% |
|
8/1/12 |
|
110,000 |
|
118,502 |
|
||
Total U.S. Government Agencies |
|
|
|
|
|
|
|
2,525,683 |
|
||
U.S. Government Obligations 3.1% |
|
|
|
|
|
|
|
|
|
||
U.S. Treasury Bonds |
|
3.500% |
|
2/15/39 |
|
750,000 |
|
607,149 |
|
||
U.S. Treasury Bonds |
|
4.500% |
|
8/15/39 |
|
830,000 |
|
801,728 |
|
||
U.S. Treasury Bonds |
|
4.375% |
|
11/15/39 |
|
470,000 |
|
444,591 |
|
||
U.S. Treasury Bonds |
|
4.625% |
|
2/15/40 |
|
1,440,000 |
|
1,419,751 |
|
||
U.S. Treasury Notes |
|
1.000% |
|
12/31/11 |
|
130,000 |
|
130,300 |
|
||
U.S. Treasury Notes |
|
2.625% |
|
12/31/14 |
|
6,880,000 |
|
6,931,607 |
|
||
U.S. Treasury Notes |
|
2.250% |
|
1/31/15 |
|
100,000 |
|
98,945 |
|
||
U.S. Treasury Notes |
|
2.500% |
|
3/31/15 |
|
200,000 |
|
199,501 |
|
||
U.S. Treasury Notes |
|
3.250% |
|
3/31/17 |
|
200,000 |
|
199,812 |
|
||
See Notes to Schedule of Investments.
Schedule of investments (unaudited) (continued)
March 31, 2010
LMP CAPITAL AND INCOME FUND INC.
SECURITY |
|
RATE |
|
MATURITY |
|
FACE |
|
VALUE |
|
|||||
U.S. Government Obligations continued |
|
|
|
|
|
|
|
|
|
|
|
|||
U.S. Treasury Notes |
|
3.125% |
|
5/15/19 |
|
$ |
90,000 |
|
$ |
85,746 |
|
|||
U.S. Treasury Notes |
|
3.625% |
|
8/15/19 |
|
140,000 |
|
138,338 |
|
|||||
U.S. Treasury Notes |
|
3.375% |
|
11/15/19 |
|
2,915,000 |
|
2,813,660 |
|
|||||
Total U.S. Government Obligations |
|
|
|
|
|
|
|
13,871,128 |
|
|||||
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS (Cost $16,533,880) |
|
16,396,811 |
|
|||||||||||
U.S. TREASURY INFLATION PROTECTED SECURITIES 0.3% |
|
|
|
|
|
|||||||||
U.S. Treasury Bonds, Inflation Indexed |
|
2.000% |
|
1/15/26 |
|
174,661 |
|
174,102 |
|
|||||
U.S. Treasury Bonds, Inflation Indexed |
|
2.375% |
|
1/15/27 |
|
988,420 |
|
1,031,972 |
(h) |
|||||
TOTAL U.S. TREASURY INFLATION PROTECTED SECURITIES (Cost $1,129,818) |
|
1,206,074 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
EXPIRATION |
|
CONTRACTS |
|
|
|
|||||
PURCHASED OPTIONS 0.0% |
|
|
|
|
|
|
|
|
|
|||||
U.S. Treasury 10-Year Notes Futures, Call @ $119.00 (Cost - $4,983) |
|
|
|
5/21/10 |
|
14 |
|
2,406 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
WARRANTS |
|
|
|
|||||
WARRANTS 0.0% |
|
|
|
|
|
|
|
|
|
|||||
Buffets Restaurant Holdings |
|
|
|
4/28/14 |
|
215 |
|
2 |
*(a)(d) |
|||||
Charter Communications Inc. |
|
|
|
11/30/14 |
|
189 |
|
1,134 |
* |
|||||
TOTAL WARRANTS (Cost $378) |
|
|
|
|
|
|
|
1,136 |
|
|||||
TOTAL INVESTMENTS BEFORE SHORT-TERM INVESTMENTS (Cost $386,368,228) |
|
412,167,827 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
MATURITY |
|
|
|
|
|
|||||
SHORT-TERM INVESTMENTS 7.9% |
|
|
|
|
|
|
|
|
|
|||||
Repurchase Agreements 7.9% |
|
|
|
|
|
|
|
|
|
|||||
Interest in $499,967,000 joint tri-party repurchase agreement dated 3/31/10 with RBS Securities Inc.; Proceeds at maturity - $20,066,006; (Fully collateralized by various U.S. government agency obligations, 0.000% to 5.920% due 4/5/10 to 4/23/29; Market value - $20,467,344) |
|
0.010% |
|
4/1/10 |
|
|
20,066,000 |
|
20,066,000 |
|
||||
Morgan Stanley tri-party repurchase agreement dated 3/31/10; Proceeds at maturity - $15,204,004; (Fully collateralized by various U.S. government agency obligations, 0.000% to 5.400% due 4/22/10 to 7/26/10; Market value - $15,938,837) |
|
0.010% |
|
4/1/10 |
|
15,204,000 |
|
15,204,000 |
|
|||||
TOTAL SHORT-TERM INVESTMENTS (Cost $35,270,000) |
|
|
|
35,270,000 |
|
|||||||||
TOTAL INVESTMENTS 100.0% (Cost $421,638,228#) |
|
|
|
$ |
447,437,827 |
|
||||||||
* |
|
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) |
|
Variable rate security. Interest rate disclosed is that which is in effect at March 31, 2010. |
||||||||||||
(c) |
|
Security is exempt from registration under Rule 144A of the Securities Act of 1933. This security may be resold in transactions that are exempt from registration, normally to qualified institutional buyers. This security has been deemed liquid pursuant to guidelines approved by the Board of Directors, unless otherwise noted. |
||||||||||||
(d) |
|
Illiquid security. |
||||||||||||
(e) |
|
The coupon payment on these securities is currently in default as of March 31, 2010. |
||||||||||||
(f) |
|
Security has no maturity date. The date shown represents the next call date. |
||||||||||||
(g) |
|
This security is traded on a to-be-announced (TBA) basis (See Note 1). |
||||||||||||
(h) |
|
All or a portion of this security is held at the broker as collateral for open futures contracts. |
||||||||||||
# |
|
Aggregate cost for federal income tax purposes is substantially the same. |
||||||||||||
|
|
|
||||||||||||
|
|
Abbreviations used in this schedule: |
||||||||||||
|
|
ADR |
- American Depositary Receipt |
|||||||||||
|
|
ARM |
- Adjustable Rate Mortgage |
|||||||||||
|
|
PAC |
- Planned Amortization Class |
|||||||||||
See Notes to Schedule of Investments.
Schedule of investments (unaudited) (continued)
March 31, 2010
LMP CAPITAL AND INCOME FUND INC.
SCHEDULE OF WRITTEN OPTIONS |
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
||
SECURITY |
|
EXPIRATION |
|
STRIKE |
|
CONTRACTS |
|
VALUE |
|
||
Eurodollar Futures, Call |
|
9/13/10 |
|
$ |
99.25 |
|
7 |
|
$ |
4,944 |
|
Eurodollar Futures, Put |
|
9/13/10 |
|
98.75 |
|
7 |
|
350 |
|
||
TOTAL WRITTEN OPTIONS |
|
|
|
|
|
|
|
$ |
5,294 |
|
|
See Notes to Schedule of Investments.
Notes to Schedule of Investments (unaudited)
1. Organization and Significant Accounting Policies
LMP Capital and Income Fund Inc. (the Fund) was incorporated in Maryland on November 12, 2003 and is registered as a non-diversified, closed-end management investment company under the Investment Company Act of 1940, as amended (the 1940 Act). The Board of Directors authorized 100 million shares of $0.001 par value common stock. The Funds investment objective is total return with an emphasis on income. The Fund pursues its investment objective by investing at least 80% of its assets in a broad range of equity and fixed income securities of both U.S. and foreign issuers.
The following are significant accounting policies consistently followed by the Fund and are in conformity with U.S. generally accepted accounting principles (GAAP).
(a) Investment valuation. Equity securities for which market quotations are available are valued at the last reported sales price or official closing price on the primary market or exchange on which they trade. Debt securities are valued at the mean between the last quoted bid and asked prices provided by an independent pricing service, which are based on transactions in debt obligations, quotations from bond dealers, market transactions in comparable securities and various other relationships between securities. Futures contracts are valued daily at the settlement price established by the board of trade or exchange on which they are traded. When prices are not readily available, or are determined not to reflect fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded, but before the Fund calculates its net asset value, the Fund values these securities at fair value as determined in accordance with procedures approved by the Funds Board of Directors. Fair valuing of securities may also be determined with the assistance of a pricing service using calculations based on indices of domestic securities and other appropriate indicators such as prices of relevant American depository receipts (ADRs) and futures contracts. Short-term obligations with maturities of 60 days or less are valued at amortized cost, which approximates fair value.
The Fund has adopted Financial Accounting Standards Board Codification Topic 820 (ASC Topic 820). ASC Topic 820 establishes a single definition of fair value, creates a three-tier hierarchy as a framework for measuring fair value based on inputs used to value the Funds investments, and requires additional disclosure about fair value. The hierarchy of inputs is summarized below.
· Level 1quoted prices in active markets for identical investments
· Level 2other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)
· Level 3significant unobservable inputs (including the Funds own assumptions in determining the fair value of investments)
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The Fund uses valuation techniques to measure fair value that are consistent with the market approach and/or income approach, depending on the type of the security and the particular circumstance. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable securities. The income approach uses valuation techniques to convert future amounts to a single present amount.
The following is a summary of the inputs used in valuing the Funds assets carried at fair value:
DESCRIPTION |
|
QUOTED |
|
OTHER |
|
SIGNIFICANT |
|
TOTAL |
|
||||
Long-term investments: |
|
|
|
|
|
|
|
|
|
||||
Common stocks: |
|
|
|
|
|
|
|
|
|
||||
Consumer discretionary |
|
$ |
32,784,975 |
|
$ |
413,655 |
|
|
|
$ |
33,198,630 |
|
|
Other common stocks |
|
282,038,033 |
|
|
|
|
|
282,038,033 |
|
||||
Convertible preferred stocks |
|
|
|
18,255,599 |
|
|
|
18,255,599 |
|
||||
Preferred stocks |
|
4,207,523 |
|
|
|
|
|
4,207,523 |
|
||||
Asset-backed securities |
|
|
|
3,909,711 |
|
$ |
22,973 |
|
3,932,684 |
|
|||
Collateralized mortgage obligations |
|
|
|
6,435,760 |
|
|
|
6,435,760 |
|
||||
Convertible bonds & notes |
|
|
|
5,906,875 |
|
|
|
5,906,875 |
|
||||
Corporate bonds & notes |
|
|
|
29,705,925 |
|
|
|
29,705,925 |
|
||||
Mortgage-backed securities |
|
|
|
10,880,371 |
|
|
|
10,880,371 |
|
||||
U.S. government & agency obligations |
|
|
|
16,396,811 |
|
|
|
16,396,811 |
|
||||
U.S. treasury inflation protected securities |
|
|
|
1,206,074 |
|
|
|
1,206,074 |
|
||||
Purchased options |
|
2,406 |
|
|
|
|
|
2,406 |
|
||||
Warrants |
|
|
|
1,134 |
|
2 |
|
1,136 |
|
||||
Total long-term investments |
|
$ |
319,032,937 |
|
$ |
93,111,915 |
|
$ |
22,975 |
|
$ |
412,167,827 |
|
Short-term investment |
|
|
|
35,270,000 |
|
|
|
35,270,000 |
|
||||
Total investments |
|
$ |
319,032,937 |
|
$ |
128,381,915 |
|
$ |
22,975 |
|
$ |
447,437,827 |
|
Other financial instruments: |
|
|
|
|
|
|
|
|
|
||||
Futures contracts |
|
$ |
31,910 |
|
|
|
|
|
$ |
31,910 |
|
||
Written options |
|
(5,294 |
) |
|
|
|
|
(5,294 |
) |
||||
Total other financial instruments |
|
$ |
26,616 |
|
|
|
|
|
$ |
26,616 |
|
||
Total |
|
$ |
319,059,553 |
|
$ |
128,381,915 |
|
$ |
22,975 |
|
$ |
447,464,443 |
|
Notes to Schedule of Investments (unaudited) (continued)
See Schedule of Investments for additional detailed categorizations.
Following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining fair value:
INVESTMENTS IN SECURITIES |
|
ASSET- |
|
WARRANTS |
|
TOTAL |
|
|||
Balance as of December 31, 2009 |
|
$ |
35 |
|
$ |
0 |
|
$ |
35 |
|
Accrued premiums/discounts |
|
|
|
|
|
|
|
|||
Realized gain/(loss) |
|
|
|
|
|
|
|
|||
Change in unrealized appreciation (depreciation)(1) |
|
|
|
2 |
|
2 |
|
|||
Net purchases (sales) |
|
|
|
|
|
|
|
|||
Transfers into Level 3 |
|
22,938 |
|
|
|
22,938 |
|
|||
Transfers out of Level 3 |
|
|
|
|
|
|
|
|||
Balance as of March 31, 2010 |
|
$ |
22,973 |
|
$ |
2 |
|
$ |
22,975 |
|
Net
change in unrealized appreciation |
|
$ |
|
|
2 |
|
$ |
2 |
|
(1) Change in unrealized appreciation (depreciation) includes net unrealized appreciation (depreciation) resulting from changes in investment values during the reporting period and the reversal of previously recorded unrealized appreciation (depreciation) when gains or losses are realized.
(b) Repurchase agreements. The Fund may enter into repurchase agreements with institutions that its investment adviser has determined are creditworthy. Each repurchase agreement is recorded at cost. Under the terms of a typical repurchase agreement, a fund takes possession of an underlying debt obligation subject to an obligation of the seller to repurchase, and of the fund to resell, the obligation at an agreed-upon price and time, thereby determining the yield during a funds holding period. When entering into repurchase agreements, it is the Funds policy that its custodian or a third party custodian, acting on the Funds behalf, take possession of the underlying collateral securities, the market value of which, at all times, at least equals the principal amount of the repurchase transaction, including accrued interest. To the extent that any repurchase transaction maturity exceeds one business day, the value of the collateral is marked to market and measured against the value of the agreement to ensure the adequacy of the collateral. If the counterparty defaults, the Fund generally has the right to use the collateral to satisfy the terms of the repurchase transaction. However, if the market value of the collateral declines during the period in which the Fund seeks to assert
Notes to Schedule of Investments (unaudited) (continued)
its rights or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of the collateral by the Fund may be delayed or limited.
(c) Written Options. When the Fund writes an option, an amount equal to the premium received by the Fund is recorded as a liability, the value of which is marked to market daily to reflect the current market value of the option written. If the option expires, the premium received is recorded as a realized gain. When a written call option is exercised, the difference between the premium received plus the option exercise price and the Funds basis in the underlying security (in the case of a covered written call option), or the cost to purchase the underlying security (in the case of an uncovered written call option), including brokerage commission, is recognized as a realized gain or loss. When a written put option is exercised, the amount of the premium received is subtracted from the cost of the security purchased by the Fund from the exercise of the written put option to form the Funds basis in the underlying security purchased. The writer or buyer of an option traded on an exchange can liquidate the position before the exercise of the option by entering into a closing transaction. The cost of a closing transaction is deducted from the original premium received resulting in a realized gain or loss to the Fund.
The risk in writing a covered call option is that the Fund may forego the opportunity of profit if the market price of the underlying security increases and the option is exercised. The risk in writing a put option is that the Fund may incur a loss if the market price of the underlying security decreases and the option is exercised. The risk in writing a call option is that the Fund is exposed to the risk of loss if the market price of the underlying security increases. In addition, there is the risk that the Fund may not be able to enter into a closing transaction because of an illiquid secondary market.
(d) Futures Contracts. The Fund may use futures contracts to gain exposure to, or hedge against, changes in the value of equities, interest rates or foreign currencies. A futures contract represents a commitment for the future purchase or sale of an asset at a specified price on a specified date.
Upon entering into a futures contract, the Fund is required to deposit cash or cash equivalents with a broker in an amount equal to a certain percentage of the contract amount. This is known as the initial margin and subsequent payments (variation margin) are made or received by the Fund each day, depending on the daily fluctuation in the value of the contract. For certain futures, including foreign denominated futures, variation margin is not settled daily, but is recorded as a net variation margin payable or receivable. Futures contracts are valued daily at the settlement price established by the board of trade or exchange on which they are traded.
Futures contracts involve, to varying degrees, risk of loss. In addition, there is the risk that the Fund may not be able to enter into a closing transaction because of an illiquid secondary market.
(e) Inflation-Indexed Bonds. Inflation-indexed bonds are fixed-income securities whose principal value or interest rate is periodically adjusted according to the rate of inflation. As the index measuring inflation changes, the principal value or interest rate of inflation-indexed bonds will be adjusted accordingly. Repayment of the original bond principal upon maturity (as adjusted for inflation) is guaranteed in the case of U.S. Treasury inflation-indexed bonds. For bonds that do not provide a similar guarantee, the adjusted principal value of the bond repaid at maturity may be less than the original principal.
(f) Forward Foreign Currency Contracts. The Fund may enter into a forward foreign currency contract to hedge against foreign currency exchange rate risk on its non-U.S. dollar denominated securities or to facilitate settlement of a foreign currency denominated portfolio transaction. A forward foreign currency contract is an agreement between two parties to buy and sell a currency at a set price with delivery and settlement at a future date. The contract is marked to market daily and the change in value is recorded by the Fund as an unrealized gain or loss. When a forward foreign currency contract is closed, through either delivery or offset by entering into another forward foreign currency contract, the Fund recognizes a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value of the contract at the time it is closed.
When entering into a Forward foreign currency contract, 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) Securities Traded on a To-Be-Announced Basis. The Fund may trade securities on a to-be-announced (TBA) basis. In a TBA transaction, the Fund commits to purchasing or selling securities which have not yet been issued by the issuer and for which specific information, such as the face amount, maturity date and underlying pool of investments in U.S. government agency mortgage pass-through securities, is not announced. Securities purchased on a TBA basis are not settled until they are delivered to the Fund. Beginning on the date the Fund enters into a TBA transaction, cash, U.S. government securities or other liquid high-grade debt obligations are segregated in an amount equal in value to the
Notes to Schedule of Investments (unaudited) (continued)
purchase price of the TBA security. These securities are subject to market fluctuations and their current value is determined in the same manner as for other securities.
(h) Mortgage Dollar Rolls. The Fund may enter into mortgage dollar rolls in which the Fund sells mortgage-backed securities for delivery in the current month, realizing a gain or loss, and simultaneously contracts to repurchase substantially similar (same type, coupon and maturity) securities to settle on a specified future date.
The Fund executes its mortgage dollar rolls entirely in the TBA market, whereby the Fund makes a forward commitment to purchase a security and, instead of accepting delivery, the position is offset by a sale of the security with a simultaneous agreement to repurchase at a future date. The Fund accounts for mortgage dollar rolls as purchases and sales.
The risk of entering into mortgage dollar rolls is that the market value of the securities the Fund is obligated to repurchase under the agreement may decline below the repurchase price. In the event the buyer of securities under a mortgage dollar roll files for bankruptcy or becomes insolvent, the Funds use of the proceeds of the mortgage dollar roll may be restricted pending a determination by the counterparty, or its trustee or receiver, whether to enforce the Funds obligation to repurchase the securities.
(i) Foreign Currency Translation. Investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts based upon prevailing exchange rates on the date of valuation. Purchases and sales of investment securities and income and expense items denominated in foreign currencies are translated into U.S. dollar amounts based upon prevailing exchange rates on the respective dates of such transactions.
Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of U.S. dollar denominated transactions as a result of, among other factors, the possibility of lower levels of governmental supervision and regulation of foreign securities markets and the possibility of political or economic instability.
(j) Credit and market risk. The Fund invests in high-yield and emerging market instruments that are subject to certain credit and market risks. The yields of high-yield and emerging market debt obligations reflect, among other things, perceived credit and market risks. The Funds investment in securities rated below investment grade typically involve risks not associated with higher rated securities including, among others, greater risk related to timely and ultimate payment of interest and principal, greater market price volatility and less liquid secondary market trading. The consequences of political, social, economic or diplomatic changes may have disruptive effects on the market prices of investments held by the Fund. The Funds investment in non-U.S. dollar denominated securities may also result in foreign currency losses caused by devaluations and exchange rate fluctuations.
(k) Security Transactions. Security transactions are accounted for on a trade date basis.
2. Investments
At March 31, 2010, the aggregate gross unrealized appreciation and depreciation of investments for federal income tax purposes were substantially as follows:
Gross unrealized appreciation |
|
$ |
35,856,049 |
|
Gross unrealized depreciation |
|
(10,056,450 |
) |
|
Net unrealized appreciation |
|
$ |
25,799,599 |
|
At March 31, 2010, the Fund had the following open futures contracts:
|
|
Number of |
|
Expiration |
|
Basis |
|
Market |
|
Unrealized |
|
|||
|
|
Contracts |
|
Date |
|
Value |
|
Value |
|
Gain |
|
|||
Contracts to Buy: |
|
|
|
|
|
|
|
|
|
|
|
|||
U.S. Treasury Bonds |
|
18 |
|
6/10 |
|
$ |
2,151,637 |
|
$ |
2,159,438 |
|
$ |
7,801 |
|
U.S. Treasury 10-Year Notes |
|
26 |
|
6/10 |
|
3,021,288 |
|
3,022,500 |
|
1,212 |
|
|||
U.S. Treasury 30-Year Bonds |
|
2 |
|
6/10 |
|
229,811 |
|
232,250 |
|
2,439 |
|
|||
|
|
|
|
|
|
|
|
|
|
11,452 |
|
|||
Contracts to Sell: |
|
|
|
|
|
|
|
|
|
|
|
|||
U.S. Treasury 5-Year Notes |
|
90 |
|
6/10 |
|
$ |
10,356,395 |
|
$ |
10,335,937 |
|
20,458 |
|
|
Net Unrealized Gain on Open Futures Contracts |
|
|
|
|
|
|
|
|
|
$ |
31,910 |
|
Notes to Schedule of Investments (unaudited) (continued)
During the period ended March 31, 2010, written option transactions for the Fund were as follows:
|
|
Number of |
|
Premiums |
|
|
Written options, outstanding December 31, 2009 |
|
14 |
|
$ |
7,917 |
|
Options written |
|
5 |
|
2,484 |
|
|
Options closed |
|
|
|
|
|
|
Options exercised |
|
(5 |
) |
(2,484 |
) |
|
Options expired |
|
|
|
|
|
|
Written options, outstanding March 31, 2010 |
|
14 |
|
$ |
7,917 |
|
At March 31, 2010, the Fund held TBA securities with a total cost of $9,114,039.
3. Derivative Instruments and Hedging Activities
Financial Accounting Standards Board Codification Topic 815 (ASC Topic 815) requires enhanced disclosure about an entitys derivative and hedging activities.
The following is a summary of the Funds derivative instruments categorized by risk exposure at March 31, 2010.
|
|
Futures Contracts |
|
|
|
|
|
|
|
||||||
Primary Underlying Risk Disclosure |
|
Unrealized |
|
Unrealized |
|
Written |
|
Purchased |
|
Total |
|
||||
Interest Rate Contracts |
|
$ |
31,910 |
|
|
|
$ |
5,294 |
|
$ |
2,406 |
|
$ |
39,610 |
|
Other Contracts |
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
31,910 |
|
|
|
$ |
5,294 |
|
$ |
2,406 |
|
$ |
39,610 |
|
During the period ended March 31, 2010, the volume of derivative activity for the Fund was as follows:
|
|
Average market |
|
|
Purchased options |
|
$ |
602 |
|
Written options |
|
7,847 |
|
|
Forward foreign currency contracts (to sell) |
|
440,811 |
|
|
Futures contracts (to buy) |
|
9,823,046 |
|
|
Futures contracts (to sell) |
|
10,907,643 |
|
|
At March 31, 2010, there were no open positions held in this derivative.
The Fund has several credit related contingent features that if triggered would allow its derivatives counterparties to close out and demand payment or additional collateral to cover their exposure from the Fund. Credit related contingent features are established between the Fund and its derivatives counterparties to reduce the risk that the Fund will not fulfill its payment obligations to its counterparties. These triggering features include, but are not limited to, a percentage decrease in the Funds net assets and or percentage decrease in the Funds Net Asset Value or NAV. The contingent features are established within the Funds International Swap and Derivatives Association, Inc. master agreements which govern positions in swaps, over-the-counter options, and forward currency exchange contracts for each individual counterparty.
ITEM 2. CONTROLS AND PROCEDURES.
(a) The registrants principal executive officer and principal financial officer have concluded that the registrants disclosure controls and procedures (as defined in Rule 30a- 3(c) under the Investment Company Act of 1940, as amended (the 1940 Act)) are effective as of a date within 90 days of the filing date of this report that includes the disclosure required by this paragraph, based on their evaluation of the disclosure controls and procedures required by Rule 30a-3(b) under the 1940 Act and 15d-15(b) under the Securities Exchange Act of 1934.
(b) There were no changes in the registrants internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the registrants last fiscal quarter that have materially affected, or are likely to materially affect the registrants internal control over financial reporting.
ITEM 3. EXHIBITS.
Certifications pursuant to Rule 30a-2(a) under the Investment Company Act of 1940, as amended, are
attached hereto.
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
LMP Capital and Income Fund Inc. |
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By |
/s/ R. Jay Gerken |
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R. Jay Gerken |
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Chief Executive Officer |
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Date: |
May 26, 2010 |
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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. |
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By |
/s/ R. Jay Gerken |
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R. Jay Gerken |
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Chief Executive Officer |
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Date: |
May 26, 2010 |
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By |
/s/ Kaprel Ozsolak |
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Kaprel Ozsolak |
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Chief Financial Officer |
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Date: |
May 26, 2010 |
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