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: |
September 30, 2009 |
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ITEM 1. SCHEDULE OF INVESTMENTS
LMP CAPITAL AND INCOME FUND INC.
SEPTEMBER 30, 2009
LMP Capital and Income Fund Inc. |
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Schedule of Investments (unaudited) |
September 30, 2009 |
Shares |
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|
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Security |
|
Value |
|
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COMMON STOCKS 56.7% |
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CONSUMER DISCRETIONARY 3.7% |
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Media 3.7% |
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680,000 |
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Reed Elsevier PLC |
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$ |
5,091,438 |
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143,210 |
|
|
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Thomson Corp. |
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4,807,560 |
|
|
230,923 |
|
|
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Time Warner Inc. |
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6,645,964 |
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|
|
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TOTAL CONSUMER DISCRETIONARY |
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16,544,962 |
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CONSUMER STAPLES 13.2% |
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Beverages 1.5% |
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115,360 |
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PepsiCo Inc. |
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6,767,018 |
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Food & Staples Retailing 1.7% |
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|
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155,850 |
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|
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Wal-Mart Stores Inc. |
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7,650,676 |
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Food Products 3.5% |
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|
|
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278,000 |
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|
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H.J. Heinz Co. |
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11,050,500 |
|
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177,440 |
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|
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Kraft Foods Inc., Class A Shares |
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4,661,349 |
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|
|
|
|
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Total Food Products |
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15,711,849 |
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Household Products 6.5% |
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|
|
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41,490 |
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|
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Colgate-Palmolive Co. |
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3,164,857 |
|
|
203,660 |
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|
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Kimberly-Clark Corp. |
|
12,011,867 |
|
|
236,500 |
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|
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Procter & Gamble Co. |
|
13,698,080 |
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|
|
|
|
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Total Household Products |
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28,874,804 |
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|
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TOTAL CONSUMER STAPLES |
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59,004,347 |
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ENERGY 7.9% |
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Oil, Gas & Consumable Fuels 7.9% |
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|
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156,510 |
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BP PLC, ADR |
|
8,331,027 |
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|
307,240 |
|
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Southern Union Co. |
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6,387,520 |
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442,820 |
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|
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Spectra Energy Corp. |
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8,387,011 |
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210,000 |
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|
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Total SA, ADR |
|
12,444,600 |
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|
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TOTAL ENERGY |
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35,550,158 |
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FINANCIALS 5.8% |
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Capital Markets 0.8% |
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|
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185,837 |
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Charles Schwab Corp. |
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3,558,779 |
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Insurance 3.8% |
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|
|
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149,360 |
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Chubb Corp. |
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7,529,237 |
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|
196,160 |
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Travelers Cos. Inc. |
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9,656,957 |
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Total Insurance |
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17,186,194 |
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Real Estate Investment Trusts (REITs) 0.2% |
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37,470 |
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Annaly Capital Management Inc. |
|
679,706 |
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Thrifts & Mortgage Finance 1.0% |
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|
|
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285,000 |
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Peoples United Financial Inc. |
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4,434,600 |
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TOTAL FINANCIALS |
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25,859,279 |
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HEALTH CARE 4.8% |
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Health Care Equipment & Supplies 0.8% |
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|
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104,190 |
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Medtronic Inc. |
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3,834,192 |
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Health Care Technology 0.2% |
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59,800 |
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HLTH Corp. * |
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873,678 |
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Pharmaceuticals 3.8% |
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175,000 |
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Johnson & Johnson |
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10,655,750 |
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123,670 |
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|
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Novartis AG, ADR |
|
6,230,495 |
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|
|
|
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Total Pharmaceuticals |
|
16,886,245 |
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|
|
|
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TOTAL HEALTH CARE |
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21,594,115 |
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See Notes to Schedule of Investments.
1
LMP Capital and Income Fund Inc. |
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Schedule of Investments (unaudited) (continued) |
September 30, 2009 |
Shares |
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Security |
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Value |
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INDUSTRIALS 7.9% |
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Aerospace & Defense 2.0% |
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|
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112,300 |
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L-3 Communications Holdings Inc. |
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$ |
9,019,936 |
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Commercial Services & Supplies 3.1% |
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|
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204,400 |
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Covanta Holding Corp. * |
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3,474,800 |
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|
350,510 |
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Waste Management Inc. |
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10,452,208 |
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|
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Total Commercial Services & Supplies |
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13,927,008 |
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Industrial Conglomerates 2.8% |
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|
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53,210 |
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3M Co. |
|
3,926,898 |
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138,260 |
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|
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United Technologies Corp. |
|
8,424,182 |
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|
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Total Industrial Conglomerates |
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12,351,080 |
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TOTAL INDUSTRIALS |
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35,298,024 |
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INFORMATION TECHNOLOGY 5.3% |
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Communications Equipment 0.4% |
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|
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41,500 |
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QUALCOMM Inc. |
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1,866,670 |
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IT Services 2.1% |
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|
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137,000 |
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Automatic Data Processing Inc. |
|
5,384,100 |
|
|
138,140 |
|
|
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Paychex Inc. |
|
4,012,967 |
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|
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Total IT Services |
|
9,397,067 |
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Software 2.8% |
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|
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275,800 |
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Microsoft Corp. |
|
7,140,462 |
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267,550 |
|
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Oracle Corp. |
|
5,575,742 |
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|
|
|
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Total Software |
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12,716,204 |
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TOTAL INFORMATION TECHNOLOGY |
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23,979,941 |
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MATERIALS 1.2% |
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Chemicals 1.2% |
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14,325 |
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Georgia Gulf Corp. * |
|
429,750 |
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|
64,810 |
|
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Monsanto Co. |
|
5,016,294 |
|
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|
|
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TOTAL MATERIALS |
|
5,446,044 |
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TELECOMMUNICATION SERVICES 3.5% |
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Diversified Telecommunication Services 3.5% |
|
|
|
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135,000 |
|
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AT&T Inc. |
|
3,646,350 |
|
|
340,000 |
|
|
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Verizon Communications Inc. |
|
10,291,800 |
|
|
163,026 |
|
|
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Windstream Corp. |
|
1,651,453 |
|
|
|
|
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TOTAL TELECOMMUNICATION SERVICES |
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15,589,603 |
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UTILITIES 3.4% |
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Electric Utilities 2.6% |
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|
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251,870 |
|
|
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Duke Energy Corp. |
|
3,964,434 |
|
|
76,990 |
|
|
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Exelon Corp. |
|
3,820,244 |
|
|
97,070 |
|
|
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Progress Energy Inc. |
|
3,791,554 |
|
|
|
|
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Total Electric Utilities |
|
11,576,232 |
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Multi-Utilities 0.8% |
|
|
|
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311,880 |
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|
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CenterPoint Energy Inc. |
|
3,876,668 |
|
|
|
|
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TOTAL UTILITIES |
|
15,452,900 |
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|
|
|
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TOTAL COMMON STOCKS |
|
254,319,373 |
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CONVERTIBLE PREFERRED STOCKS 1.6% |
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ENERGY 1.6% |
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Oil, Gas & Consumable Fuels 1.6% |
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|
|
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8,000 |
|
|
|
El Paso Corp., 4.990% (Cost - $6,350,770) |
|
7,392,000 |
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See Notes to Schedule of Investments.
2
LMP Capital and Income Fund Inc. |
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Schedule of Investments (unaudited) (continued) |
September 30, 2009 |
Shares |
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|
Security |
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Value |
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PREFERRED STOCKS 0.0% |
|
|
|
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FINANCIALS 0.0% |
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Thrifts & Mortgage Finance 0.0% |
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25,950 |
|
|
|
Federal Home Loan Mortgage Corp. (FHLMC), 8.375% (a)* |
|
$ |
46,969 |
|
|
300 |
|
|
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Federal National Mortgage Association (FNMA), 7.000% (a)* |
|
825 |
|
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17,650 |
|
|
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Federal National Mortgage Association (FNMA), 8.250% (a)* |
|
28,417 |
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|
|
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TOTAL PREFERRED STOCKS |
|
76,211 |
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|
|
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Face |
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ASSET-BACKED SECURITIES 1.0% |
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FINANCIALS 1.0% |
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Home Equity 0.9% |
|
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|
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$ |
391,539 |
|
|
|
Asset-Backed Funding Certificates, 2.421% due 1/25/34 (b) |
|
155,950 |
|
|
126,653 |
|
|
|
Countrywide Asset-Backed Certificates, 1.496% due 6/25/34 (b) |
|
8,629 |
|
||
670,421 |
|
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Credit-Based Asset Servicing & Securitization LLC, 5.704% due 12/25/36 |
|
391,676 |
|
||
73,417 |
|
|
|
Finance America Net Interest Margin Trust, 5.250% due 6/27/34 (c)(d)(f) |
|
37 |
|
||
147,556 |
|
|
|
Fremont Home Loan Trust, 1.896% due 2/25/34 (b) |
|
46,460 |
|
||
|
|
|
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GSAA Home Equity Trust: |
|
|
|
||
1,770,000 |
|
|
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0.546% due 3/25/37 (b) |
|
760,912 |
|
||
1,790,000 |
|
|
|
0.516% due 7/25/37 (b)(e) |
|
394,061 |
|
||
1,720,000 |
|
|
|
0.546% due 5/25/47 (b) |
|
774,442 |
|
||
269,256 |
|
|
|
GSAMP Trust, 1.396% due 11/25/34 (b)(e) |
|
18,862 |
|
||
134,656 |
|
|
|
Lehman XS Trust, 0.316% due 6/25/46 (b)(e) |
|
96,954 |
|
||
464,418 |
|
|
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MASTR Specialized Loan Trust, 0.739% due 5/25/37 (b)(c) |
|
162,546 |
|
||
1,125,160 |
|
|
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Option One Mortgage Loan Trust, 1.296% due 5/25/34 (b) |
|
678,817 |
|
||
588,592 |
|
|
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RAAC, 0.626% due 10/25/46 (b)(c) |
|
291,243 |
|
||
405,521 |
|
|
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Renaissance Home Equity Loan Trust, 2.146% due 3/25/34 (b) |
|
129,691 |
|
||
|
|
|
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Sail Net Interest Margin Notes: |
|
|
|
||
141,210 |
|
|
|
7.750% due 4/27/33 (c)(d)(f) |
|
15 |
|
||
71,380 |
|
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5.500% due 3/27/34 (c)(d)(f) |
|
7 |
|
||
386,591 |
|
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Structured Asset Securities Corp., 0.496% due 11/25/37 (b) |
|
348,699 |
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|
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Total Home Equity |
|
4,259,001 |
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Student Loan 0.1% |
|
|
|
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350,000 |
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Nelnet Student Loan Trust, 1.984% due 4/25/24 (b) |
|
359,266 |
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|
|
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TOTAL ASSET-BACKED SECURITIES |
|
4,618,267 |
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COLLATERALIZED MORTGAGE OBLIGATIONS 2.1% |
|
|
|
||||||
260,000 |
|
|
|
American Home Mortgage Investment Trust, 1.046% due 11/25/45 (b) |
|
1,468 |
|
||
1,202,746 |
|
|
|
BCAP LLC Trust, 0.436% due 10/25/36 (b) |
|
554,054 |
|
||
130,676 |
|
|
|
Bear Stearns ARM Trust, 5.764% due 2/25/36 (b)(e) |
|
83,275 |
|
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|
|
|
|
Countrywide Alternative Loan Trust: |
|
|
|
||
25,175 |
|
|
|
6.000% due 2/25/34 |
|
24,585 |
|
||
1,389,832 |
|
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|
0.456% due 7/20/46 (b) |
|
585,123 |
|
||
604,841 |
|
|
|
Countrywide Home Loans, 0.666% due 7/25/36 (b)(c) |
|
455,259 |
|
||
284,500 |
|
|
|
Federal Home Loan Mortgage
Corp. (FHLMC), PAC, |
|
286,344 |
|
||
202,440 |
|
|
|
GSMPS Mortgage Loan Trust, 0.596% due 1/25/35 (b)(c) |
|
123,597 |
|
||
744,192 |
|
|
|
Harborview Mortgage Loan Trust, 1.316% due 11/19/35 (b) |
|
10,799 |
|
||
|
|
|
|
JPMorgan Mortgage Trust: |
|
|
|
||
2,110,000 |
|
|
|
5.885% due 6/25/37 (b) |
|
1,397,741 |
|
||
1,060,000 |
|
|
|
6.000% due 8/25/37 |
|
377,069 |
|
||
737,793 |
|
|
|
MASTR ARM Trust, 3.470% due 9/25/33 (b) |
|
621,332 |
|
||
1,395,665 |
|
|
|
MASTR Reperforming Loan Trust, 4.697% due 5/25/36 (b)(c)(e) |
|
1,189,638 |
|
||
260,666 |
|
|
|
Merit Securities Corp., 1.746% due 9/28/32 (b)(c) |
|
187,024 |
|
||
|
|
|
|
MLCC Mortgage Investors Inc.: |
|
|
|
||
269,517 |
|
|
|
1.166% due 4/25/29 (b) |
|
105,303 |
|
||
See Notes to Schedule of Investments.
3
LMP Capital and Income Fund Inc. |
|
|
|
Schedule of Investments (unaudited) (continued) |
September 30, 2009 |
Face |
|
|
|
Security |
|
Value |
|
||
$ |
433,635 |
|
|
|
1.126% due 5/25/29 (b) |
|
$ |
163,275 |
|
974,493 |
|
|
|
RBS Greenwich Capital, Mortgage Pass-Through Certificates, 7.000% due 4/25/35 |
|
800,455 |
|
||
|
|
|
|
Structured ARM Loan Trust: |
|
|
|
||
1,585,577 |
|
|
|
5.291% due 5/25/35 (b) |
|
945,606 |
|
||
788,942 |
|
|
|
5.876% due 5/25/36 (b) |
|
591,819 |
|
||
|
|
|
|
Thornburg Mortgage Securities Trust: |
|
|
|
||
194,911 |
|
|
|
6.194% due 7/25/37 (b) |
|
158,998 |
|
||
195,660 |
|
|
|
6.206% due 7/25/37 (b) |
|
157,849 |
|
||
687,950 |
|
|
|
Washington Mutual Inc.
Pass-Through Certificates, |
|
254,977 |
|
||
733,057 |
|
|
|
Wells Fargo Alternative Loan Trust, 0.676% due 6/25/37 (b) |
|
362,240 |
|
||
|
|
|
|
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS |
|
9,437,830 |
|
||
CONVERTIBLE BOND & NOTE 1.3% |
|
|
|
||||||
INFORMATION TECHNOLOGY 1.3% |
|
|
|
||||||
Internet Software & Services 1.3% |
|
|
|
||||||
6,500,000 |
|
|
|
VeriSign Inc., 3.250% due 8/15/37 (Cost - $4,921,796) |
|
5,671,250 |
|
||
CORPORATE BONDS & NOTES 9.3% |
|
|
|
||||||
CONSUMER DISCRETIONARY 1.2% |
|
|
|
||||||
Hotels, Restaurants & Leisure 0.3% |
|
|
|
||||||
295,000 |
|
|
|
Choctaw Resort Development Enterprise, Senior Notes, |
|
196,175 |
|
||
5,000 |
|
|
|
El Pollo Loco Inc., Senior Secured Notes, 11.750% due 12/1/12 (c) |
|
5,294 |
|
||
660,000 |
|
|
|
Inn of the Mountain Gods Resort & Casino, Senior Notes, |
|
308,550 |
|
||
330,000 |
|
|
|
McDonalds Corp., Medium Term Notes, 5.350% due 3/1/18 |
|
360,662 |
|
||
|
|
|
|
MGM MIRAGE Inc., Senior Secured Notes: |
|
|
|
||
45,000 |
|
|
|
10.375% due 5/15/14 (c) |
|
48,262 |
|
||
105,000 |
|
|
|
11.125% due 11/15/17 (c) |
|
115,237 |
|
||
250,000 |
|
|
|
Sbarro Inc., Senior Notes, 10.375% due 2/1/15 |
|
198,750 |
|
||
|
|
|
|
Station Casinos Inc.: |
|
|
|
||
|
|
|
|
Senior Notes: |
|
|
|
||
60,000 |
|
|
|
6.000% due 4/1/12 (d)(f) |
|
18,000 |
|
||
530,000 |
|
|
|
7.750% due 8/15/16 (d)(f) |
|
161,650 |
|
||
100,000 |
|
|
|
Senior Subordinated Notes, 6.875% due 3/1/16 (d)(f) |
|
4,000 |
|
||
|
|
|
|
Total Hotels, Restaurants & Leisure |
|
1,416,580 |
|
||
Leisure Equipment & Products 0.0% |
|
|
|
||||||
60,000 |
|
|
|
WMG Acquisition Corp., Senior Secured Notes, 9.500% due 6/15/16 (c) |
|
63,600 |
|
||
Media 0.9% |
|
|
|
||||||
3,419,000 |
|
|
|
CCH I LLC/CCH I Capital Corp., Senior Secured Notes, |
|
649,610 |
|
||
325,000 |
|
|
|
CCH II LLC/CCH II CapitalCorp., Senior Notes, 10.250% due |
|
365,625 |
|
||
85,000 |
|
|
|
Charter Communications Holdings LLC/Charter Communications Holdings Capital Corp., Senior Discount Notes, 11.750% due 5/15/11 (d)(f) |
|
638 |
|
||
230,000 |
|
|
|
Charter Communications Inc., Senior Secured Notes, 12.875% due 9/15/14 (c)(d) |
|
250,125 |
|
||
1,320,000 |
|
|
|
Comcast Corp., 5.700% due 5/15/18 |
|
1,390,163 |
|
||
85,000 |
|
|
|
Dex Media West LLC/Dex Media Finance Co., Senior Notes, |
|
73,100 |
|
||
1,265,000 |
|
|
|
Idearc Inc., Senior Notes, 8.000% due 11/15/16 (f) |
|
63,250 |
|
||
20,000 |
|
|
|
News America Inc., Senior Notes, 6.650% due 11/15/37 |
|
20,901 |
|
||
450,000 |
|
|
|
R.H. Donnelley Corp., Senior Notes, 8.875% due 1/15/16 (f) |
|
28,125 |
|
||
|
|
|
|
Time Warner Cable Inc.: |
|
|
|
||
10,000 |
|
|
|
5.850% due 5/1/17 |
|
10,560 |
|
||
410,000 |
|
|
|
Senior Notes, 6.200% due 7/1/13 |
|
447,027 |
|
||
See Notes to Schedule of Investments.
4
LMP Capital and Income Fund Inc. |
|
|
|
Schedule of Investments (unaudited) (continued) |
September 30, 2009 |
Face |
|
|
|
Security |
|
Value |
|
||
Media 0.9% (continued) |
|
|
|
||||||
$ |
400,000 |
|
|
|
Time Warner Inc., Senior Subordinated Notes, 6.875% due 5/1/12 |
|
$ |
440,588 |
|
|
|
|
|
Total Media |
|
3,739,712 |
|
||
|
|
|
|
TOTAL CONSUMER DISCRETIONARY |
|
5,219,892 |
|
||
CONSUMER STAPLES 0.4% |
|
|
|
||||||
Food & Staples Retailing 0.2% |
|
|
|
||||||
415,489 |
|
|
|
CVS Pass-Through Trust, Secured Notes, 6.943% due 1/10/30 |
|
420,857 |
|
||
|
|
|
|
Kroger Co., Senior Notes: |
|
|
|
||
200,000 |
|
|
|
5.500% due 2/1/13 |
|
213,352 |
|
||
400,000 |
|
|
|
6.150% due 1/15/20 |
|
443,200 |
|
||
|
|
|
|
Total Food & Staples Retailing |
|
1,077,409 |
|
||
Food Products 0.1% |
|
|
|
||||||
261,000 |
|
|
|
Dole Food Co. Inc., Senior Notes, 8.875% due 3/15/11 |
|
262,631 |
|
||
Tobacco 0.1% |
|
|
|
||||||
580,000 |
|
|
|
Reynolds American Inc., 6.750% due 6/15/17 |
|
603,847 |
|
||
|
|
|
|
TOTAL CONSUMER STAPLES |
|
1,943,887 |
|
||
ENERGY 1.5% |
|
|
|
||||||
Energy Equipment & Services 0.1% |
|
|
|
||||||
460,000 |
|
|
|
Transocean Inc., Senior Notes, 5.250% due 3/15/13 |
|
486,741 |
|
||
Oil, Gas & Consumable Fuels 1.4% |
|
|
|
||||||
750,000 |
|
|
|
Amerada Hess Corp., Senior Notes, 6.650% due 8/15/11 |
|
805,184 |
|
||
|
|
|
|
Anadarko Petroleum Corp., Senior Notes: |
|
|
|
||
60,000 |
|
|
|
5.950% due 9/15/16 |
|
63,664 |
|
||
110,000 |
|
|
|
6.450% due 9/15/36 |
|
113,942 |
|
||
540,000 |
|
|
|
Apache Corp., Senior Notes, 5.625% due 1/15/17 |
|
588,883 |
|
||
330,000 |
|
|
|
ConocoPhillips Holding Co., Senior Notes, 6.950% due 4/15/29 |
|
388,373 |
|
||
750,000 |
|
|
|
Devon Financing Corp. ULC, Notes, 6.875% due 9/30/11 |
|
816,331 |
|
||
870,000 |
|
|
|
Energy Transfer Partners LP, Senior Notes, 6.700% due 7/1/18 |
|
932,532 |
|
||
|
|
|
|
Kerr-McGee Corp., Notes: |
|
|
|
||
300,000 |
|
|
|
6.875% due 9/15/11 |
|
322,237 |
|
||
140,000 |
|
|
|
6.950% due 7/1/24 |
|
150,242 |
|
||
340,000 |
|
|
|
Kinder Morgan Energy Partners LP, Senior Notes, 6.000% due 2/1/17 |
|
355,857 |
|
||
780,000 |
|
|
|
SemGroup LP, Senior Notes, 8.750% due 11/15/15 (c)(d)(f) |
|
54,600 |
|
||
|
|
|
|
Williams Cos. Inc.: |
|
|
|
||
100,000 |
|
|
|
Notes, 8.750% due 3/15/32 |
|
114,979 |
|
||
470,000 |
|
|
|
Senior Notes, 7.750% due 6/15/31 |
|
494,151 |
|
||
|
|
|
|
XTO Energy Inc., Senior Notes: |
|
|
|
||
170,000 |
|
|
|
7.500% due 4/15/12 |
|
188,591 |
|
||
350,000 |
|
|
|
5.650% due 4/1/16 |
|
366,302 |
|
||
300,000 |
|
|
|
5.500% due 6/15/18 |
|
310,128 |
|
||
|
|
|
|
Total Oil, Gas & Consumable Fuels |
|
6,065,996 |
|
||
|
|
|
|
TOTAL ENERGY |
|
6,552,737 |
|
||
FINANCIALS 3.5% |
|
|
|
||||||
Capital Markets 0.6% |
|
|
|
||||||
300,000 |
|
|
|
Bear Stearns Co. Inc., Senior Notes, 6.400% due 10/2/17 |
|
326,875 |
|
||
30,000 |
|
|
|
Goldman Sachs Capital II, Junior Subordinated Bonds, |
|
21,750 |
|
||
600,000 |
|
|
|
Goldman Sachs Group Inc., Senior Notes, 6.150% due 4/1/18 |
|
632,192 |
|
||
|
|
|
|
Merrill Lynch & Co. Inc.: |
|
|
|
||
520,000 |
|
|
|
Notes, 6.875% due 4/25/18 |
|
547,767 |
|
||
100,000 |
|
|
|
Senior Notes, 5.450% due 2/5/13 |
|
103,771 |
|
||
940,000 |
|
|
|
Morgan Stanley, Medium-Term Notes, 5.625% due 1/9/12 |
|
996,553 |
|
||
|
|
|
|
Total Capital Markets |
|
2,628,908 |
|
||
See Notes to Schedule of Investments.
5
LMP Capital and Income Fund Inc. |
|
|
|
|
|
Schedule of Investments (unaudited) (continued) |
|
September 30, 2009 |
Face |
|
|
|
Security |
|
Value |
|
||
Commercial Banks 1.0% |
|
|
|
||||||
$ |
20,000 |
|
|
|
BAC Capital Trust XIV, Junior Subordinated Notes, |
|
$ |
13,250 |
|
1,300,000 |
|
|
|
Resona Preferred Global Securities Cayman Ltd., Junior Subordinated, Bonds, 7.191% due 7/30/15 (b)(c)(g) |
|
1,080,186 |
|
||
490,000 |
|
|
|
Shinsei Finance Cayman Ltd., Junior Subordinated Bonds, |
|
257,534 |
|
||
700,000 |
|
|
|
SunTrust Capital, Trust Preferred Securities, 6.100% due 12/15/36 (b) |
|
488,466 |
|
||
690,000 |
|
|
|
Wachovia Bank N.A., Subordinated Notes, 6.000% due 11/15/17 |
|
725,115 |
|
||
1,520,000 |
|
|
|
Wachovia Corp., Medium Term Notes, 5.500% due 5/1/13 |
|
1,627,677 |
|
||
380,000 |
|
|
|
Wells Fargo Capital X, Capital Securities, 5.950% due 12/15/36 |
|
331,550 |
|
||
|
|
|
|
Total Commercial Banks |
|
4,523,778 |
|
||
Consumer Finance 0.5% |
|
|
|
||||||
610,000 |
|
|
|
American Express Co., Subordinated Debentures, 6.800% due 9/1/66 (b) |
|
527,650 |
|
||
300,000 |
|
|
|
Caterpillar Financial Services Corp., Medium-Term Notes, |
|
312,155 |
|
||
500,000 |
|
|
|
John Deere Capital Corp., Medium-Term Notes, 5.350% due 4/3/18 |
|
532,437 |
|
||
1,340,000 |
|
|
|
SLM Corp., Senior Notes, 8.450% due 6/15/18 |
|
1,070,164 |
|
||
|
|
|
|
Total Consumer Finance |
|
2,442,406 |
|
||
Diversified Financial Services 0.9% |
|
|
|
||||||
|
|
|
|
Bank of America Corp.: |
|
|
|
||
970,000 |
|
|
|
Senior Notes, 5.650% due 5/1/18 |
|
959,375 |
|
||
100,000 |
|
|
|
Subordinated Notes, 5.420% due 3/15/17 |
|
95,689 |
|
||
125,000 |
|
|
|
Capital One Bank, Notes, 5.750% due 9/15/10 |
|
128,187 |
|
||
550,000 |
|
|
|
Citigroup Inc., Notes, 6.875% due 3/5/38 |
|
553,387 |
|
||
|
|
|
|
General Electric Capital Corp.: |
|
|
|
||
850,000 |
|
|
|
Senior Notes, 5.625% due 5/1/18 |
|
847,345 |
|
||
20,000 |
|
|
|
Subordinated Debentures, 6.375% due 11/15/67 (b) |
|
16,575 |
|
||
1,320,000 |
|
|
|
JPMorgan Chase & Co., Subordinated Notes, 6.125% due 6/27/17 |
|
1,393,364 |
|
||
70,000 |
|
|
|
Leucadia National Corp., Senior Notes, 7.125% due 3/15/17 |
|
67,550 |
|
||
|
|
|
|
Total Diversified Financial Services |
|
4,061,472 |
|
||
Insurance 0.5% |
|
|
|
||||||
1,170,000 |
|
|
|
American International Group Inc., Medium-Term Notes, Senior Notes, 5.850% due 1/16/18 |
|
848,365 |
|
||
650,000 |
|
|
|
MetLife Inc., Junior Subordinated Debentures, 6.400% due 12/15/36 |
|
559,000 |
|
||
600,000 |
|
|
|
Pacific Life Global Funding, Notes, 5.150% due 4/15/13 (c) |
|
627,956 |
|
||
140,000 |
|
|
|
Travelers Cos. Inc., Junior Subordinated Debentures, |
|
123,267 |
|
||
|
|
|
|
Total Insurance |
|
2,158,588 |
|
||
Real Estate Management & Development 0.0% |
|
|
|
||||||
140,400 |
|
|
|
Ashton Woods USA LLC, Ashton Woods Finance Co., Senior Subordinated Notes, step bond to yield 23.322% due 6/30/15 (c)(d)(e) |
|
52,650 |
|
||
|
|
|
|
TOTAL FINANCIALS |
|
15,867,802 |
|
||
HEALTH CARE 0.5% |
|
|
|
||||||
Health Care Providers & Services 0.3% |
|
|
|
||||||
600,000 |
|
|
|
UnitedHealth Group Inc., Senior Notes, 5.250% due 3/15/11 |
|
623,812 |
|
||
38,000 |
|
|
|
US Oncology Holdings Inc., Senior Notes, 7.178% due 3/15/12 (b)(h) |
|
33,250 |
|
||
|
|
|
|
WellPoint Inc.: |
|
|
|
||
30,000 |
|
|
|
Notes, 5.875% due 6/15/17 |
|
31,714 |
|
||
720,000 |
|
|
|
Senior Notes, 5.000% due 1/15/11 |
|
742,294 |
|
||
|
|
|
|
Total Health Care Providers & Services |
|
1,431,070 |
|
||
Pharmaceuticals 0.2% |
|
|
|
||||||
320,000 |
|
|
|
Abbott Laboratories, Senior Notes, 5.600% due 11/30/17 |
|
353,311 |
|
||
445,000 |
|
|
|
Leiner Health Products Inc., Senior Subordinated Notes, |
|
2,225 |
|
||
See Notes to Schedule of Investments.
6
LMP Capital and Income Fund Inc. |
|
|
|
|
|
Schedule of Investments (unaudited) (continued) |
|
September 30, 2009 |
Face |
|
|
|
Security |
|
Value |
|
||
Pharmaceuticals 0.2% (continued) |
|
|
|
||||||
$ |
370,000 |
|
|
|
Wyeth, Notes, 5.950% due 4/1/37 |
|
$ |
408,900 |
|
|
|
|
|
Total Pharmaceuticals |
|
764,436 |
|
||
|
|
|
|
TOTAL HEALTH CARE |
|
2,195,506 |
|
||
INDUSTRIALS 0.1% |
|
|
|
||||||
Airlines 0.0% |
|
|
|
|
|
||||
85,882 |
|
|
|
Continental Airlines Inc., Pass-Through Certificates, 8.312% due 4/2/11 |
|
76,435 |
|
||
Building Products 0.0% |
|
|
|
||||||
1,790,000 |
|
|
|
NTK Holdings Inc., Senior Discount Notes, 10.750% due 3/1/14 (d)(f) |
|
58,175 |
|
||
Commercial Services & Supplies 0.1% |
|
|
|
||||||
225,000 |
|
|
|
Waste Management Inc., Senior Notes, 6.375% due 11/15/12 |
|
246,418 |
|
||
Road & Rail 0.0% |
|
|
|
||||||
50,000 |
|
|
|
Kansas City Southern de Mexico, Senior Notes, 7.625% due 12/1/13 |
|
48,750 |
|
||
|
|
|
|
TOTAL INDUSTRIALS |
|
429,778 |
|
||
MATERIALS 0.3% |
|
|
|
||||||
Chemicals 0.1% |
|
|
|
|
|||||
360,000 |
|
|
|
PPG Industries Inc., Senior Notes, 6.650% due 3/15/18 |
|
393,135 |
|
||
Metals & Mining 0.0% |
|
|
|
|
|
||||
156,000 |
|
|
|
Vale Overseas Ltd., Notes, 6.875% due 11/21/36 |
|
161,777 |
|
||
Paper & Forest Products 0.2% |
|
|
|
||||||
|
|
|
|
Appleton Papers Inc.: |
|
|
|
||
160,000 |
|
|
|
Senior Secured Notes, 11.250% due 12/15/15 (c) |
|
158,107 |
|
||
1,185,000 |
|
|
|
Senior Subordinated Notes, 9.750% due 6/15/14 (d) |
|
540,656 |
|
||
130,000 |
|
|
|
Weyerhaeuser Co., Senior Notes, 6.750% due 3/15/12 |
|
135,507 |
|
||
|
|
|
|
Total Paper & Forest Products |
|
834,270 |
|
||
|
|
|
|
TOTAL MATERIALS |
|
1,389,182 |
|
||
TELECOMMUNICATION SERVICES 1.6% |
|
|
|
||||||
Diversified Telecommunication Services 1.5% |
|
|
|
||||||
|
|
|
|
AT&T Inc.: |
|
|
|
||
630,000 |
|
|
|
Global Notes, 5.600% due 5/15/18 |
|
663,628 |
|
||
1,210,000 |
|
|
|
Senior Notes, 6.400% due 5/15/38 |
|
1,288,830 |
|
||
460,000 |
|
|
|
British Telecommunications PLC, Bonds, 9.625% due 12/15/30 |
|
590,814 |
|
||
600,000 |
|
|
|
Deutsche Telekom International Finance, Senior Notes, |
|
637,036 |
|
||
730,000 |
|
|
|
Embarq Corp., Senior Notes, 6.738% due 6/1/13 |
|
792,257 |
|
||
660,000 |
|
|
|
Hawaiian Telcom Communications Inc., Senior Subordinated Notes, 12.500% due 5/1/15 (d)(f) |
|
825 |
|
||
5,000 |
|
|
|
SBA Telecommunications Inc., Senior Notes, 8.250% due 8/15/19 (c) |
|
5,175 |
|
||
100,000 |
|
|
|
Telecom Italia Capital S.p.A., Senior Notes, 5.250% due 10/1/15 |
|
103,660 |
|
||
790,000 |
|
|
|
Telefonica Emisones SAU, Senior Notes, 6.221% due 7/3/17 |
|
873,441 |
|
||
|
|
|
|
Verizon Communications Inc., Senior Notes: |
|
|
|
||
660,000 |
|
|
|
5.500% due 2/15/18 |
|
693,138 |
|
||
730,000 |
|
|
|
6.400% due 2/15/38 |
|
782,646 |
|
||
|
|
|
|
Total Diversified Telecommunication Services |
|
6,431,450 |
|
||
Wireless Telecommunication Services 0.1% |
|
|
|
||||||
420,000 |
|
|
|
ALLTEL Communications Inc., Senior Notes, 10.375% due 12/1/17 (c)(h) |
|
510,580 |
|
||
|
|
|
|
TOTAL TELECOMMUNICATION SERVICES |
|
6,942,030 |
|
||
UTILITIES 0.2% |
|
|
|
|
|||||
Electric Utilities 0.2% |
|
|
|
|
|
||||
365,000 |
|
|
|
FirstEnergy Corp., Notes, 7.375% due 11/15/31 |
|
410,312 |
|
||
|
|
|
|
Pacific Gas & Electric Co.: |
|
|
|
||
320,000 |
|
|
|
Senior Notes, 5.625% due 11/30/17 |
|
351,789 |
|
||
230,000 |
|
|
|
Senior Unsubordinated Notes, 5.800% due 3/1/37 |
|
249,884 |
|
||
|
|
|
|
TOTAL UTILITIES |
|
1,011,985 |
|
||
|
|
|
|
TOTAL CORPORATE BONDS & NOTES |
|
41,552,799 |
|
||
See Notes to Schedule of Investments.
7
LMP Capital and Income Fund Inc. |
|
|
|
|
|
Schedule of Investments (unaudited) (continued) |
|
September 30, 2009 |
Face |
|
|
|
Security |
|
Value |
|
||
MORTGAGE-BACKED SECURITIES 9.8% |
|
|
|
||||||
FNMA 9.1% |
|
|
|
|
|
|
|
||
|
|
|
|
Federal National Mortgage Association (FNMA): |
|
|
|
||
$ |
900,000 |
|
|
|
4.000% due 11/12/09 (a) |
|
$ |
888,187 |
|
3,000,000 |
|
|
|
4.500% due 10/19/24-11/12/39 (a)(i) |
|
3,067,313 |
|
||
15,200,000 |
|
|
|
5.000% due 10/19/24-10/14/39 (a)(i) |
|
15,719,879 |
|
||
13,300,000 |
|
|
|
5.500% due 10/19/24-11/12/39 (a)(i) |
|
13,921,205 |
|
||
6,700,000 |
|
|
|
6.000% due 10/14/39 (a)(i) |
|
7,069,545 |
|
||
|
|
|
|
Total FNMA |
|
40,666,129 |
|
||
GNMA 0.7% |
|
|
|
|
|
||||
|
|
|
|
Government National Mortgage Association (GNMA): |
|
|
|
||
1,300,000 |
|
|
|
4.500% due 10/21/39 (i) |
|
1,319,500 |
|
||
2,000,000 |
|
|
|
5.000% due 10/21/39 (i) |
|
2,069,688 |
|
||
|
|
|
|
Total GNMA |
|
3,389,188 |
|
||
|
|
|
|
TOTAL MORTGAGE-BACKED SECURITIES |
|
44,055,317 |
|
||
U.S. GOVERNMENT & AGENCY OBLIGATIONS 4.5% |
|
|
|
||||||
U.S. Government Agencies 1.2% |
|
|
|
|
|||||
|
|
|
|
Federal Home Loan Bank (FHLB): |
|
|
|
||
3,000,000 |
|
|
|
1.050% due 2/23/10 |
|
3,009,156 |
|
||
|
|
|
|
Global Bonds: |
|
|
|
||
1,770,000 |
|
|
|
1.625% due 7/27/11 |
|
1,791,098 |
|
||
100,000 |
|
|
|
5.500% due 7/15/36 |
|
110,827 |
|
||
|
|
|
|
Federal National Mortgage Association (FNMA): |
|
|
|
||
510,000 |
|
|
|
Notes, 1.750% due 8/10/12 (a) |
|
512,680 |
|
||
110,000 |
|
|
|
Subordinated Notes, 5.250% due 8/1/12 (a) |
|
117,638 |
|
||
|
|
|
|
Total U.S. Government Agencies |
|
5,541,399 |
|
||
U.S. Government Obligations 3.3% |
|
|
|
||||||
|
|
|
|
U.S. Treasury Bonds: |
|
|
|
||
520,000 |
|
|
|
3.500% due 2/15/39 |
|
471,250 |
|
||
1,210,000 |
|
|
|
4.250% due 5/15/39 |
|
1,252,161 |
|
||
20,000 |
|
|
|
4.500% due 8/15/39 |
|
21,569 |
|
||
|
|
|
|
U.S. Treasury Notes: |
|
|
|
||
190,000 |
|
|
|
1.750% due 8/15/12 |
|
192,019 |
|
||
10,450,000 |
|
|
|
2.625% due 7/31/14 |
|
10,627,984 |
|
||
2,000,000 |
|
|
|
3.000% due 9/30/16 |
|
2,008,594 |
|
||
90,000 |
|
|
|
3.125% due 5/15/19 |
|
88,587 |
|
||
140,000 |
|
|
|
3.625% due 8/15/19 |
|
143,741 |
|
||
|
|
|
|
Total U.S. Government Obligations |
|
14,805,905 |
|
||
|
|
|
|
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS |
|
20,347,304 |
|
||
U.S. TREASURY INFLATION PROTECTED SECURITIES 0.5% |
|
|
|
||||||
|
|
|
|
U.S. Treasury Bonds, Inflation Indexed: |
|
|
|
||
488,281 |
|
|
|
2.000% due 1/15/26 |
|
488,281 |
|
||
982,486 |
|
|
|
2.375% due 1/15/27 (j) |
|
1,034,681 |
|
||
220,667 |
|
|
|
2.500% due 1/15/29 |
|
236,734 |
|
||
|
|
|
|
U.S. Treasury Notes, Inflation Indexed: |
|
|
|
||
91,402 |
|
|
|
2.000% due 7/15/14 |
|
95,116 |
|
||
315,806 |
|
|
|
1.625% due 1/15/15 |
|
322,123 |
|
||
|
|
|
|
TOTAL U.S. TREASURY INFLATION PROTECTED SECURITIES |
|
2,176,935 |
|
||
See Notes to Schedule of Investments.
8
LMP Capital and Income Fund Inc. |
|
|
|
|
|
Schedule of Investments (unaudited) (continued) |
|
September 30, 2009 |
Warrants |
|
|
|
Security |
|
Value |
|
||
WARRANTS 0.0% |
|
|
|
|
|
||||
215 |
|
|
|
Buffets Restaurant Holdings, Expires 4/28/14(d)(e)* (Cost - $0) |
|
$ |
0 |
|
|
Contracts |
|
|
|
|
|
|
|
||
PURCHASED OPTIONS 0.3% |
|
|
|
||||||
1,147 |
|
|
|
S&P 500 Index, Put @ $900.00, Expires 12/19/09 |
|
1,135,530 |
|
||
14 |
|
|
|
U.S. Treasury Notes 10-Year Futures, Put @ $116.50, Expires 11/20/09 |
|
9,406 |
|
||
|
|
|
|
TOTAL PURCHASED OPTIONS |
|
1,144,936 |
|
||
|
|
|
|
TOTAL INVESTMENTS BEFORE SHORT-TERM INVESTMENTS |
|
390,792,222 |
|
||
Face |
|
|
|
|
|
|
|
||
SHORT-TERM INVESTMENTS 12.9% |
|
|
|
||||||
U.S. Government Obligation 0.9% |
|
|
|
||||||
$ |
3,800,000 |
|
|
|
U.S. Treasury Bills, 0.267% due 11/12/09 (k) (Cost - $3,798,819) |
|
3,798,819 |
|
|
Repurchase Agreement 12.0% |
|
|
|
||||||
54,016,000 |
|
|
|
Morgan Stanley tri-party repurchase agreement dated 9/30/09, 0.030% due 10/1/09; Proceeds at maturity - $54,016,045; (Fully collateralized by various U.S. government agency obligations, 0.000% due 10/7/09 to 12/22/09; Market value - $55,372,963) (Cost - $54,016,000) |
|
54,016,000 |
|
||
|
|
|
|
TOTAL SHORT-TERM INVESTMENTS |
|
57,814,819 |
|
||
|
|
|
|
TOTAL INVESTMENTS 100.0% (Cost $465,944,423#) |
|
$ |
448,607,041 |
|
|
* |
Non-income producing security. |
(a) |
On September 7, 2008, the Federal Housing Finance Agency placed Fannie Mae (FNMA) and Freddie Mac (FHLMC) into conservatorship. |
(b) |
Variable rate security. Interest rate disclosed is that which is in effect at September 30, 2009. |
(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) |
Security is valued in good faith at fair value by or under the direction of the Board of Directors (See Note 1). |
(f) |
The coupon payment on these securities is currently in default as of September 30, 2009. |
(g) |
Security has no maturity date. The date shown represents the next call date. |
(h) |
Payment-in-kind security for which part of the income earned may be paid as additional principal. |
(i) |
This security is traded on a to-be-announced (TBA) basis (See Note 1). |
(j) |
All or a portion of this security is held at the broker as collateral for open futures contracts. |
(k) |
Rate shown represents yield-to-maturity. |
# |
Aggregate cost for federal income tax purposes is substantially the same. |
See Notes to Schedule of Investments.
9
LMP Capital and Income Fund Inc. |
|
|
|
|
|
Schedule of Investments (unaudited) (continued) |
|
September 30, 2009 |
Schedule of Written Options
Contracts |
|
Security |
|
Expiration |
|
Strike |
|
Value |
|
||
19 |
|
Eurodollar Midcurve 1-Year Futures, Put |
|
11/13/09 |
|
$ |
98.00 |
|
$ |
6,175 |
|
19 |
|
Eurodollar Midcurve 1-Year Futures, Put |
|
11/13/09 |
|
98.13 |
|
7,956 |
|
||
|
|
Total Written Options |
|
|
|
|
|
$ |
14,131 |
|
|
Abbreviations used in this schedule: |
||
ADR |
- |
American Depositary Receipt |
ARM |
- |
Adjustable Rate Mortgage |
GBP |
- |
British Pound |
GDP |
- |
Gross Domestic Product |
GSAMP |
- |
Goldman Sachs Alternative Mortgage Products |
MASTR |
- |
Mortgage Asset Securitization Transactions Inc. |
MLCC |
- |
Merrill Lynch Credit Corporation |
PAC |
- |
Planned Amortization Class |
See Notes to Schedule of Investments.
10
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 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. 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 the 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 Section 820 (formerly Statement of Financial Accounting Standards No. 157) (ASC Section 820). ASC Section 820 establishes a single definition of fair value, creates a three-tier hierarchy as a framework for measuring fair value based on inputs used to value the Funds investments, and requires additional disclosure about fair value. The hierarchy of inputs is summarized below.
· Level 1 quoted prices in active markets for identical investments
· Level 2 other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)
· Level 3 significant unobservable inputs (including the Funds own assumptions in determining the fair value of investments)
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The Fund uses valuation techniques to measure fair value that are consistent with the market approach, income approach and/or cost approach, depending on the type of the security and the particular circumstance.
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 |
|
$ |
254,319,373 |
|
|
|
|
|
$ |
254,319,373 |
|
||
Convertible preferred stocks |
|
|
|
$ |
7,392,000 |
|
|
|
7,392,000 |
|
|||
Preferred stocks |
|
76,211 |
|
|
|
|
|
76,211 |
|
||||
Asset-backed securities |
|
|
|
4,618,267 |
|
|
|
4,618,267 |
|
||||
Collateralized mortgage obligations |
|
|
|
9,437,830 |
|
|
|
9,437,830 |
|
||||
Convertible bonds & notes |
|
|
|
5,671,250 |
|
|
|
5,671,250 |
|
||||
Corporate bonds & notes |
|
|
|
41,500,149 |
|
$ |
52,650 |
|
41,552,799 |
|
|||
Mortgage-backed securities |
|
|
|
44,055,317 |
|
|
|
44,055,317 |
|
||||
U.S. government and agency obligations |
|
|
|
20,347,304 |
|
|
|
20,347,304 |
|
||||
U.S. treasury inflation protected securities |
|
|
|
2,176,935 |
|
|
|
2,176,935 |
|
||||
Warrants |
|
|
|
|
|
0 |
|
0 |
|
||||
Purchased options |
|
1,144,936 |
|
|
|
|
|
1,144,936 |
|
||||
Total long-term securities |
|
255,540,520 |
|
135,199,052 |
|
52,650 |
|
390,792,222 |
|
||||
Short-term investments |
|
|
|
57,814,819 |
|
|
|
57,814,819 |
|
||||
Total investments |
|
255,540,520 |
|
193,013,871 |
|
52,650 |
|
448,607,041 |
|
||||
Other financial instruments: |
|
|
|
|
|
|
|
|
|
||||
Futures contracts |
|
202,920 |
|
|
|
|
|
202,920 |
|
||||
Options written |
|
(14,131 |
) |
|
|
|
|
(14,131 |
) |
||||
Forward currency contracts |
|
|
|
(76,609 |
) |
|
|
(76,609 |
) |
||||
Total other financial instruments |
|
188,789 |
|
(76,609 |
) |
|
|
112,180 |
|
||||
Total |
|
$ |
255,729,309 |
|
$ |
192,937,262 |
|
$ |
52,650 |
|
$ |
448,719,221 |
|
See Schedule of Investments for additional detailed categorizations.
11
Notes to Schedule of Investments (unaudited) (continued)
Following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining fair value:
Investments in Securities |
|
Corporate |
|
Common |
|
Warrants |
|
Total |
|
||||
Balance as of December 31, 2008 |
|
$ |
70,716 |
|
$ |
1 |
|
$ |
0 |
|
$ |
70,717 |
|
Accrued premiums/discounts |
|
7,267 |
|
|
|
|
|
7,267 |
|
||||
Realized gain/(loss)1 |
|
62 |
|
(498,493 |
) |
|
|
(498,431 |
) |
||||
Change in unrealized appreciation (depreciation)2 |
|
6,796 |
|
498,493 |
|
|
|
505,289 |
|
||||
Net purchases (sales) |
|
44,244 |
|
(1 |
) |
|
|
44,243 |
|
||||
Net transfers in and/or out of Level 3 |
|
(76,435 |
) |
|
|
|
|
(76,435 |
) |
||||
Balance as of September 30, 2009 |
|
$ |
52,650 |
|
|
|
|
$ |
0 |
|
$ |
52,650 |
|
Net unrealized appreciation (depreciation) for investments in securities still held at September 30, 20092 |
|
$ |
(7,024 |
) |
|
|
|
$ |
0 |
|
$ |
(7,024 |
) |
1 This amount is included in net realized gain (loss) from investment.
2 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. 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 daily 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) 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 with a broker cash or cash equivalents in an amount equal to a certain percentage of the contract amount. This is known as the initial margin. 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,
12
Notes to Schedule of Investments (unaudited) (continued)
but is recorded as a net variation margin payable or receivable. Futures contracts are valued daily at the settlement price established by the board of trade or exchange on which they are traded. The daily changes in contract value are recorded as unrealized gains or losses and the Fund recognizes a realized gain or loss when the contract is closed.
Futures contracts involve, to varying degrees, risk of loss in excess of the amounts reflected in the financial statements. In addition, there is the risk that the Fund may not be able to enter into a closing transaction because of an illiquid secondary market.
(d) 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.
(e) 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 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 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 Fund accounts for mortgage dollar rolls as purchases and sales.
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.
(f) 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 at 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.
(g) Credit Default Swaps. The Fund may enter into credit default swap (CDS) contracts for investment purposes, to manage its credit risk or to add leverage. CDS agreements involve one party making a stream of payments to another party in exchange for the right to receive a specified return in the event of a default by a third party, typically corporate issuers or sovereign issuers of an emerging country, on a specified obligation or in the event of a write-down, principal shortfall, interest shortfall or default of all or part of the referenced entities comprising a credit index. The Fund may use a CDS to provide a measure of protection against defaults of the issuers (i.e., to reduce risk where a Fund has exposure to the sovereign issuer) or to take an active long or short position with respect to the likelihood of a particular issuers default. As a seller of protection, the Fund generally receives an upfront payment or a stream of payments throughout the term of the swap provided that there is no credit event. If the Fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement the maximum potential amount of future payments (undiscounted) that the Fund could be required to make under a credit default swap agreement, would be an amount equal to the notional amount of the agreement. These amounts of potential payments will be partially offset by any recovery of value from the respective referenced obligations. As a seller of protection, the Fund effectively adds leverage to its portfolio because, in addition to its total net assets, the Fund would be subject to investment exposure on the notional amount of the swap. As a buyer of protection, the Fund generally receives an amount up to the notional value of the swap if a credit event occurs.
Implied spreads are the theoretical price a lender receives for credit default protection. When spreads rise, market perceived credit risk rises and when spreads fall, market perceived credit risk falls. The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to enter into the agreement. Wider credit spreads and decreasing market values, when compared to the notional amount of the swap, represent a deterioration of the referenced entitys credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement. Credit spreads utilized in determining the period end market value of credit default swap agreements on corporate issues or sovereign issues of an emerging country are disclosed in the Notes to the Schedule of Investments and serve as an indicator of the current status of the payment/performance risk and represent the likelihood or risk of default for credit derivatives. For credit default swap agreements on asset-backed securities and credit indices, the quoted market prices and resulting values particularly in relation to the notional amount of the contract, as well as the annual payment rate serve as an indicator of the current status of the payment/performance risk.
Entering into a CDS agreement involves, to varying degrees, elements of credit, market and documentation risk. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparty to the agreement may default on its obligation to perform or disagree as to the meaning of the contractual terms in the agreement, and that there will be unfavorable changes in net interest rates.
(h) Interest Rate Swaps. The Fund may enter into interest rate swap contracts. Interest rate swaps are agreements between two parties to exchange cash flows based on a notional principal amount. The Fund may elect to pay a fixed rate and receive a floating rate, or, receive a fixed rate and pay a floating rate on a notional principal amount. The net interest received or paid on interest rate swap agreements is accrued daily as interest income. Interest rate swaps are marked to market daily based upon quotations from the market makers and the change, if any, is recorded as an unrealized gain or loss in the Statement of Operations. When a swap contract is terminated early, the Fund records a realized gain or loss equal to the difference between the original cost and the settlement amount of the closing transaction. The risks of interest rate swaps include changes in market conditions that will affect the value of the contract or changes in the present value of the future cash flow streams and the possible inability of the counterparty to fulfill its obligations under the agreement. The Funds maximum risk of loss from counterparty credit risk is the discounted net value of the cash flows to be received from the counterparty over the contracts remaining life, to the extent that that amount is positive. This risk is mitigated by the posting of collateral by the counterparty to the Fund to cover the Funds exposure to the counterparty.
(i) 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 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.
13
Notes to Schedule of Investments (unaudited) (continued)
(j) 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.
The Fund bear 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.
(k) 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. If the index measuring inflation falls, the principal value or interest rate of inflation-indexed bonds will be adjusted downward, and consequently the interest payable on these securities (calculated with respect to a smaller principal amount or lower interest rate) will be reduced. Inflation adjustments to the principal amount of inflation-indexed bonds are reflected as an increase or decrease to investment income. 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.
(l) 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-U.S. dollar denominated securities may also result in foreign currency losses caused by devaluations and exchange rate fluctuations.
(m) Security Transactions. Security transactions are accounted for on a trade date basis.
2. Investments
At September 30, 2009, the aggregate gross unrealized appreciation and depreciation of investments for federal income tax purposes were substantially as follows:
Gross unrealized appreciation |
|
$ |
16,685,808 |
|
Gross unrealized depreciation |
|
(34,023,190 |
) |
|
Net unrealized depreciation |
|
$ |
(17,337,382 |
) |
At September 30, 2009, the Fund had the following open futures contracts:
|
|
Number of |
|
Expiration |
|
Basis |
|
Market |
|
Unrealized |
|
|||
|
|
Contracts |
|
Date |
|
Value |
|
Value |
|
Gain (Loss) |
|
|||
Contracts to Buy: |
|
|
|
|
|
|
|
|
|
|
|
|||
90 Day Eurodollar |
|
8 |
|
3/10 |
|
$ |
1,979,711 |
|
$ |
1,987,500 |
|
$ |
7,789 |
|
90 Day Eurodollar |
|
10 |
|
6/10 |
|
2,469,795 |
|
2,475,750 |
|
5,955 |
|
|||
90 Day Eurodollar |
|
18 |
|
9/10 |
|
4,423,444 |
|
4,438,575 |
|
15,131 |
|
|||
90 Day Eurodollar |
|
17 |
|
12/10 |
|
4,172,705 |
|
4,175,412 |
|
2,707 |
|
|||
U.S. Treasury 10-Year Notes |
|
85 |
|
12/09 |
|
9,860,628 |
|
10,057,891 |
|
197,263 |
|
|||
U.S. Treasury 30-Year Bonds |
|
16 |
|
12/09 |
|
1,912,958 |
|
1,942,000 |
|
29,042 |
|
|||
|
|
|
|
|
|
|
|
|
|
257,887 |
|
|||
Contracts to Sell: |
|
|
|
|
|
|
|
|
|
|
|
|||
U.S. Treasury 5-Year Notes |
|
38 |
|
12/09 |
|
$ |
4,356,595 |
|
4,411,562 |
|
$ |
(54,967 |
) |
|
Net Unrealized Gain on Open Futures Contracts |
|
|
|
|
|
|
|
$ |
202,920 |
|
||||
At September 30, 2009, the Fund had the following open forward foreign currency contracts:
Foreign Currency |
|
Local |
|
Market |
|
Settlement |
|
Unrealized |
|
||
Contracts to Buy: |
|
|
|
|
|
|
|
|
|
||
British Pound |
|
650,000 |
|
$ |
1,039,068 |
|
11/19/09 |
|
$ |
(62,552 |
) |
British Pound |
|
110,000 |
|
175,842 |
|
11/19/09 |
|
(11,019 |
) |
||
Euro |
|
1,360,000 |
|
1,991,179 |
|
11/19/09 |
|
34,275 |
|
||
Euro |
|
1,451,255 |
|
2,124,786 |
|
11/19/09 |
|
34,964 |
|
||
Japanese Yen |
|
72,660,000 |
|
810,189 |
|
11/19/09 |
|
54,887 |
|
||
|
|
|
|
|
|
|
|
50,555 |
|
||
Contracts to Sell: |
|
|
|
|
|
|
|
|
|
||
British Pound |
|
808,000 |
|
1,291,642 |
|
11/19/09 |
|
41,558 |
|
||
Euro |
|
2,830,000 |
|
4,143,409 |
|
11/19/09 |
|
(126,224 |
) |
||
Japanese Yen |
|
72,350,000 |
|
806,732 |
|
11/19/09 |
|
(42,498 |
) |
||
|
|
|
|
|
|
|
|
(127,164 |
) |
||
Net Unrealized Loss on Open Forward Foreign Currency Contracts |
|
|
|
$ |
(76,609 |
) |
|||||
14
Notes to Schedule of Investments (unaudited) (continued)
At September 30, 2009, the Fund held TBA securities with a total cost of $42,922,852.
During the period ended September 30, 2009, written option transactions for the Fund were as follows:
|
|
Number of Contracts |
|
Premiums |
|
|
Written options, outstanding December 31, 2008 |
|
28 |
|
$ |
20,167 |
|
Options written |
|
33,316 |
|
16,058,695 |
|
|
Options closed |
|
(33,272 |
) |
(16,046,206 |
) |
|
Options exercised |
|
(14 |
) |
(16,037 |
) |
|
Options expired |
|
(20 |
) |
(2,967 |
) |
|
Written options, outstanding September 30, 2009 |
|
38 |
|
$ |
13,652 |
|
3. Derivative Instruments and Hedging Activities
Financial Accounting Standards Board Codification Section 815 (formerly Statement of Financial Accounting Standards No. 161) (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 September 30, 2009.
|
|
Futures Contracts |
|
Written |
|
Forward Foreign Currency |
|
|
|
||||
Primary Underlying |
|
Unrealized |
|
Unrealized |
|
Options, at |
|
Unrealized |
|
Unrealized |
|
Total |
|
Interest Rate Contracts |
|
257,887 |
|
(54,967 |
) |
(14,131 |
) |
|
|
|
|
188,789 |
|
Foreign Exchange Contracts |
|
|
|
|
|
|
|
165,684 |
|
(242,293 |
) |
(76,609 |
) |
Total |
|
257,887 |
|
(54,967 |
) |
(14,131 |
) |
165,684 |
|
(242,293 |
) |
112,180 |
|
The Fund had average market values of $7,554,175, $10,220,630, $41,338,858, $879,100 and $(5,915,922) in forward foreign currency contracts (to buy), forward foreign currency contracts (to sell), futures contracts (to buy), futures contracts (to sell), and written options, respectively, during the period ended September 30, 2009.
As of September 30, 2009 the Fund did not have any open interest rate swap contracts but had average notional balances of $323,700 during the period ended September 30, 2009.
As of September 30, 2009 the Fund did not have any open credit default swap contracts (to sell protection) and credit default swap contracts (to buy protection) but had average notional balances of $30,000 and $24,000, respectively during the period ended September 30, 2009.
15
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.
By |
/s/ R. Jay Gerken |
|
|
R. Jay Gerken |
|
|
Chief Executive Officer |
|
Date: November 24, 2009
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By |
/s/ R. Jay Gerken |
|
|
R. Jay Gerken |
|
|
Chief Executive Officer |
|
Date: November 24, 2009
By |
/s/ Kaprel Ozsolak |
|
|
Kaprel Ozsolak |
|
|
Chief Financial Officer |
|
Date: November 24, 2009