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Share Name | Share Symbol | Market | Type |
---|---|---|---|
LMP Capital and Income Fund Inc | NYSE:SCD | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.125 | 0.80% | 15.665 | 15.68 | 15.53 | 15.53 | 42,160 | 20:29:53 |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-Q
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY
LMP CAPITAL AND INCOME FUND INC.
JULY 31, 2007
ITEM 1. SCHEDULE OF INVESTMENTS
LMP Capital and Income Fund Inc.
Schedule of Investments (unaudited)
July 31, 2007
See Notes to Schedule of Investments.
1
LMP Capital and Income Fund Inc.
Schedule of Investments (unaudited) (continued)
July 31, 2007
See Notes to Schedule of Investments.
2
LMP Capital and Income Fund Inc.
Schedule of Investments (unaudited) (continued)
July 31, 2007
Face
|
|
|
|
|
|
|
ASSET-BACKED SECURITIES 0.7% |
|
|
|
|||
Home Equity 0.7% |
|
|
|
|||
$ |
750,000 |
|
Asset-Backed Funding Certificates, Series 2004-FF1, Class M2, 6.770% due 1/25/34 (c) |
|
725,784 |
|
|
|
Countrywide Asset-Backed Certificates: |
|
|
|
|
193,175 |
|
Series 2003-03, Class M4, 6.720% due 3/25/33 (c) |
|
188,466 |
|
|
410,000 |
|
Series 2004-05, Class M4, 6.570% due 6/25/34 (c) |
|
400,042 |
|
|
73,417 |
|
Finance America Net Interest Margin Trust, Series 2004-01, Class A, 5.250% due 6/27/34 (d) |
|
1 |
|
|
|
|
Fremont Home Loan Trust: |
|
|
|
|
197,643 |
|
Series 2004-01, Class M5, 6.420% due 2/25/34 (c) |
|
188,667 |
|
|
875,000 |
|
Series 2004-D, Class M5, 6.320% due 11/25/34 (c) |
|
868,834 |
|
|
1,005,000 |
|
GSAMP Trust, Series 2004-OPT, Class M3, 6.470% due 11/25/34 (c) |
|
980,517 |
|
|
2,951 |
|
Merrill Lynch Mortgage Investors Inc., Series 2005-WM1N, Class N1, 5.000% due 9/25/35 (d) |
|
2,751 |
|
|
1,500,000 |
|
Option One Mortgage Loan Trust, Series 2004-02, Class M2, 6.370% due 5/25/34 (c) |
|
1,500,072 |
|
|
549,183 |
|
Renaissance Home Equity Loan Trust, Series 2003-4, Class M3, 7.220% due 3/25/34 (c) |
|
534,749 |
|
|
|
|
Sail Net Interest Margin Notes: |
|
|
|
|
141,210 |
|
Series 2003-BC2A, Class A, 7.750% due 4/27/33 (d) |
|
10,583 |
|
|
71,380 |
|
Series 2004-2A, Class A, 5.500% due 3/27/34 (d) |
|
9,331 |
|
|
|
|
TOTAL
ASSET-BACKED SECURITIES
|
|
5,409,797 |
|
|
COLLATERALIZED MORTGAGE OBLIGATIONS 0.4% |
|
|
|
|||
260,000 |
|
American Home Mortgage Investment Trust, Series 2005-4, Class M3, 6.120% due 11/25/45 (c) |
|
257,844 |
|
|
|
|
Federal Home Loan Mortgage Corp. (FHLMC): |
|
|
|
|
76,206 |
|
Series 2764, Class DT, 6.000% due 3/15/34 (c) |
|
67,814 |
|
|
558,063 |
|
Series 2780, Class SL, PAC, 6.000% due 4/15/34 (c) |
|
544,458 |
|
|
747,021 |
|
Harborview Mortgage Loan Trust, Series 2005-10, Class B6, 6.390% due 11/19/35 (c) |
|
730,213 |
|
|
501,207 |
|
Merit Securities Corp., Series 11PA, Class B2, 6.820% due 9/28/32 (c)(d) |
|
464,113 |
|
|
|
|
MLCC Mortgage Investors Inc.: |
|
|
|
|
434,373 |
|
Series 2004-A, Class B2, 6.240% due 4/25/29 (c) |
|
434,431 |
|
|
732,307 |
|
Series 2004-B, Class B2, 6.200% due 5/25/29 (c) |
|
734,490 |
|
|
|
|
TOTAL
COLLATERALIZED MORTGAGE OBLIGATIONS
|
|
3,233,363 |
|
|
See Notes to Schedule of Investments.
3
LMP Capital and Income Fund Inc.
Schedule of Investments (unaudited) (continued)
July 31, 2007
See Notes to Schedule of Investments.
4
LMP Capital and Income Fund Inc.
Schedule of Investments (unaudited) (continued)
July 31, 2007
Face
|
|
Security |
|
Value |
|
||
Commercial Services & Supplies 0.2% (continued) |
|
|
|
||||
$ |
600,000 |
|
Interface Inc., Senior Subordinated Notes, 9.500% due 2/1/14 |
|
$ |
627,000 |
|
290,000 |
|
Rental Services Corp., Senior Bonds, 9.500% due 12/1/14 (d) |
|
284,200 |
|
||
225,000 |
|
Waste Management Inc., Senior Note, 6.375% due 11/15/12 |
|
232,505 |
|
||
|
|
Total Commercial Services & Supplies |
|
1,810,680 |
|
||
Consumer Finance 0.7% |
|
|
|
||||
300,000 |
|
Aiful Corp., Notes, 6.000% due 12/12/11 (d) |
|
301,260 |
|
||
|
|
Ford Motor Credit Co.: |
|
|
|
||
1,050,000 |
|
Notes, 7.000% due 10/1/13 |
|
946,021 |
|
||
|
|
Senior Notes: |
|
|
|
||
750,000 |
|
5.800% due 1/12/09 |
|
720,472 |
|
||
135,000 |
|
9.750% due 9/15/10 |
|
136,421 |
|
||
559,000 |
|
10.610% due 6/15/11 (c) |
|
579,968 |
|
||
170,000 |
|
8.000% due 12/15/16 |
|
156,925 |
|
||
|
|
General Motors Acceptance Corp., Notes: |
|
|
|
||
500,000 |
|
5.625% due 5/15/09 |
|
476,832 |
|
||
1,900,000 |
|
6.625% due 5/15/12 |
|
1,740,054 |
|
||
300,000 |
|
6.750% due 12/1/14 |
|
270,006 |
|
||
125,000 |
|
SLM Corp., Medium-Term Notes, Series A, 5.560% due 1/26/09 (c) |
|
123,217 |
|
||
|
|
Total Consumer Finance |
|
5,451,176 |
|
||
Containers & Packaging 0.2% |
|
|
|
||||
550,000 |
|
Graham Packaging Co. Inc., Senior Subordinated Notes, 9.875% due 10/15/14 |
|
519,750 |
|
||
535,000 |
|
Graphic Packaging International Corp., Senior Subordinated Notes, 9.500% due 8/15/13 |
|
537,675 |
|
||
195,000 |
|
Plastipak Holdings Inc., Senior Notes, 8.500% due 12/15/15 (d) |
|
197,925 |
|
||
|
|
Total Containers & Packaging |
|
1,255,350 |
|
||
Diversified Consumer Services 0.0% |
|
|
|
||||
|
|
Education Management LLC/Education Management Finance Corp.: |
|
|
|
||
20,000 |
|
Senior Notes, 8.750% due 6/1/14 |
|
20,000 |
|
||
210,000 |
|
Senior Subordinated Notes, 10.250% due 6/1/16 |
|
210,000 |
|
||
|
|
Total Diversified Consumer Services |
|
230,000 |
|
||
Diversified Financial Services 0.4% |
|
|
|
||||
150,000 |
|
AAC Group Holding Corp., Senior Discount Notes, step bond to yield 9.092% due 10/1/12 |
|
129,750 |
|
||
100,000 |
|
Aiful Corp., Notes, 5.000% due 8/10/10 (d) |
|
98,133 |
|
||
100,000 |
|
Bank of America Corp., Subordinated Notes, 5.420% due 3/15/17 |
|
95,434 |
|
||
610,000 |
|
Basell AF SCA, Senior Secured Subordinated Second Priority Notes, 8.375% due 8/15/15 (d) |
|
545,950 |
|
||
125,000 |
|
Capital One Bank, Notes, 5.750% due 9/15/10 |
|
125,566 |
|
||
110,493 |
|
Core Investment Grade Bond Trust I, Pass-Through Certificates, 4.642% due 11/30/07 |
|
110,146 |
|
||
125,000 |
|
Countrywide Home Loans Inc., Medium-Term Notes, Series M, 4.125% due 9/15/09 |
|
120,441 |
|
||
250,000 |
|
General Electric Capital Corp., Medium-Term Notes, Series A, 5.450% due 1/15/13 |
|
249,682 |
|
||
162,000 |
|
Global Cash Access LLC/Global Cash Finance Corp., Senior Subordinated Notes, 8.750% due 3/15/12 |
|
166,050 |
|
||
125,000 |
|
HSBC Finance Corp., Senior Subordinated Notes, 5.875% due 2/1/09 |
|
125,903 |
|
||
60,000 |
|
Milacron Escrow Corp., Senior Secured Notes, 11.500% due 5/15/11 |
|
56,400 |
|
||
|
|
Residential Capital Corp., Senior Notes: |
|
|
|
||
10,000 |
|
6.460% due 4/17/09 (c) |
|
9,635 |
|
||
40,000 |
|
6.460% due 5/22/09 (c) |
|
38,051 |
|
||
430,000 |
|
Residential Capital LLC, Senior Notes, 6.500% due 6/1/12 |
|
390,463 |
|
||
57,000 |
|
UCAR Finance Inc., Senior Notes, 10.250% due 2/15/12 |
|
59,850 |
|
||
See Notes to Schedule of Investments.
5
LMP Capital and Income Fund Inc.
Schedule of Investments (unaudited) (continued)
July 31, 2007
See Notes to Schedule of Investments.
6
LMP Capital and Income Fund Inc.
Schedule of Investments (unaudited) (continued)
July 31, 2007
See Notes to Schedule of Investments.
7
LMP Capital and Income Fund Inc.
Schedule of Investments (unaudited) (continued)
July 31, 2007
See Notes to Schedule of Investments.
8
LMP Capital and Income Fund Inc.
Schedule of Investments (unaudited) (continued)
July 31, 2007
See Notes to Schedule of Investments.
9
LMP Capital and Income Fund Inc.
Schedule of Investments (unaudited) (continued)
July 31, 2007
See Notes to Schedule of Investments.
10
LMP Capital and Income Fund Inc.
Schedule of Investments (unaudited) (continued)
July 31, 2007
Face
|
|
Security |
|
Value |
|
||||
Wireless Telecommunication Services 0.5% (continued) |
|
|
|
||||||
$ |
780,000 |
|
|
|
True Move Co., Ltd., 10.750% due 12/16/13 (d) |
|
$ |
826,800 |
|
|
|
|
|
Total Wireless Telecommunication Services |
|
3,964,400 |
|
||
|
|
|
|
TOTAL
CORPORATE BONDS & NOTES
|
|
72,796,705 |
|
||
MORTGAGE-BACKED SECURITIES 7.4% |
|
|
|
||||||
FHLMC 3.7% |
|
|
|
||||||
|
|
|
|
Federal Home Loan Mortgage Corp. (FHLMC): |
|
|
|
||
3,341,010 |
|
|
|
5.120% due 6/1/35 (c) |
|
3,318,675 |
|
||
|
|
|
|
Gold: |
|
|
|
||
764,748 |
|
|
|
7.000% due 6/1/17 |
|
788,494 |
|
||
25,734,065 |
|
|
|
6.000% due 7/1/21-2/1/36 |
|
25,741,662 |
|
||
348,639 |
|
|
|
8.500% due 9/1/25 |
|
373,769 |
|
||
745,292 |
|
|
|
6.500% due 8/1/29 |
|
762,224 |
|
||
|
|
|
|
TOTAL FHLMC |
|
30,984,824 |
|
||
FNMA 3.5% |
|
|
|
||||||
|
|
|
|
Federal National Mortgage Association (FNMA): |
|
|
|
||
822,695 |
|
|
|
8.000% due 12/1/12 |
|
838,854 |
|
||
396,520 |
|
|
|
5.500% due 1/1/14 |
|
394,586 |
|
||
1,759,348 |
|
|
|
7.000% due 3/15/15-6/1/32 |
|
1,833,109 |
|
||
608,077 |
|
|
|
4.207% due 12/1/34 (c) |
|
599,683 |
|
||
820,394 |
|
|
|
4.855% due 1/1/35 (c) |
|
817,318 |
|
||
1,035,953 |
|
|
|
5.052% due 3/1/35 (c) |
|
1,033,101 |
|
||
1,442,201 |
|
|
|
5.500% due 4/1/35 (c) |
|
1,396,670 |
|
||
1,593,457 |
|
|
|
5.689% due 4/1/35 (c) |
|
1,623,201 |
|
||
2,979,509 |
|
|
|
5.630% due 4/1/36 (c) |
|
3,000,924 |
|
||
5,268,612 |
|
|
|
5.608% due 5/1/36 (c) |
|
5,304,833 |
|
||
10,500,000 |
|
|
|
5.000% due 8/1/37 (g) |
|
9,848,674 |
|
||
2,800,000 |
|
|
|
6.000% due 8/1/37 (g) |
|
2,774,187 |
|
||
|
|
|
|
TOTAL FNMA |
|
29,465,140 |
|
||
GNMA 0.2% |
|
|
|
||||||
1,353,922 |
|
|
|
Government National Mortgage Association (GNMA), 5.500% due 8/15/21 |
|
1,342,945 |
|
||
|
|
|
|
TOTAL
MORTGAGE-BACKED SECURITIES
|
|
61,792,909 |
|
||
SOVEREIGN BOND 0.0% |
|
|
|
||||||
Argentina 0.0% |
|
|
|
||||||
69,931 |
|
ARS |
|
Republic
of Argentina, GDP Linked Securities, 0.649% due 12/15/35 (c)
|
|
2,401 |
|
||
U.S. GOVERNMENT & AGENCY OBLIGATIONS 0.4% |
|
|
|
||||||
U.S. Government Agencies 0.0% |
|
|
|
||||||
100,000 |
|
|
|
Federal Home Loan Bank (FHLB), Global Bonds, 5.500% due 7/15/36 |
|
99,210 |
|
||
140,000 |
|
|
|
Federal National Mortgage Association (FNMA), 6.625% due 9/15/09 |
|
144,737 |
|
||
|
|
|
|
Total U.S. Government Agencies |
|
243,947 |
|
||
U.S. Government Obligation 0.4% |
|
|
|
||||||
|
|
|
|
U.S. Treasury Bonds: |
|
|
|
||
40,000 |
|
|
|
4.500% due 2/15/36 |
|
37,412 |
|
||
3,090,000 |
|
|
|
4.750% due 2/15/37 |
|
3,008,891 |
|
||
|
|
|
|
Total U.S. Government Obligations |
|
3,046,303 |
|
||
|
|
|
|
TOTAL
U.S. GOVERNMENT & AGENCY OBLIGATIONS
|
|
3,290,250 |
|
||
See Notes to Schedule of Investments.
11
LMP Capital and Income Fund Inc.
Schedule of Investments (unaudited) (continued)
July 31, 2007
Face
|
|
Security |
|
Value |
|
||
U.S. TREASURY INFLATION PROTECTED SECURITIES 1.0% |
|
|
|
||||
$ |
2,732,044 |
|
U.S. Treasury Bonds, Inflation Indexed, 2.375% due 1/15/27 |
|
$ |
2,705,579 |
|
|
|
U.S. Treasury Notes, Inflation Indexed: |
|
|
|
||
98,771 |
|
0.875% due 4/15/10 |
|
94,134 |
|
||
3,142,410 |
|
2.375% due 4/15/11 |
|
3,124,737 |
|
||
2,783,592 |
|
2.375% due 1/15/17 |
|
2,761,846 |
|
||
|
|
TOTAL
U.S. TREASURY INFLATION PROTECTED SECURITIES
|
|
8,686,296 |
|
||
Contracts |
|
|
|
|
|
||
PURCHASED OPTIONS 1.0% |
|
|
|
||||
337 |
|
Eurodollar Futures, Call @ $94.00, expires 6/16/08 |
|
943,600 |
|
||
780 |
|
Intersil Corp., Put @ $30.00, expires 1/19/08 |
|
234,000 |
|
||
1,803 |
|
Johnson & Johnson, Call @ $60.00, expires 1/17/09 |
|
1,244,070 |
|
||
909 |
|
Johnson & Johnson, Call @ $65.00, expires 1/17/09 |
|
399,960 |
|
||
322 |
|
KLA-Tencor Corp., Put @ $60.00, expires 1/19/08 |
|
199,640 |
|
||
627 |
|
Marsh & McLennan Cos. Inc., Call @ $25.00, expires 1/19/08 |
|
263,340 |
|
||
742 |
|
S & P 500 Index, Put @ $1,425.00, expires 10/20/07 |
|
3,153,500 |
|
||
335 |
|
U.S. Treasury Notes 10 Year Futures, Call @ $103.00, expires 8/24/07 |
|
1,481,328 |
|
||
209 |
|
U.S. Treasury Notes 5 Year Futures, Call @ $102.00, expires 8/24/07 |
|
724,969 |
|
||
|
|
TOTAL
PURCHASED OPTIONS
|
|
8,644,407 |
|
||
|
|
TOTAL
INVESTMENTS BEFORE SHORT-TERM INVESTMENTS
|
|
774,011,258 |
|
||
Face
|
|
|
|
|
|
|
SHORT-TERM INVESTMENTS 7.5% |
|
|
|
|||
U.S. Government Agencies 3.7% |
|
|
|
|||
$ |
30,400,000 |
|
Federal Home Loan Bank (FHLB) Discount Notes, 5.091% due 8/1/07 (h)(i) |
|
30,400,000 |
|
100,000 |
|
Federal National Mortgage Association (FNMA), Discount Notes, 5.203% due 3/17/08 (h) |
|
96,861 |
|
|
|
|
Total U.S. Government Agencies |
|
30,496,861 |
|
|
Repurchase Agreements 3.8% |
|
|
|
|||
16,080,000 |
|
Morgan Stanley repurchase agreement dated 7/31/07, 5.230% due 8/1/07; Proceeds at maturity - $16,082,336; (Fully collateralized by U.S. government note, 0.000% due 4/25/08; Market value - $16,483,774) (i) |
|
16,080,000 |
|
|
16,084,000 |
|
Nomura Securities International Inc. repurchase agreement dated 7/31/07, 5.250% due 8/1/07; Proceeds at maturity - $16,086,346; (Fully collateralized by U.S. government note, 4.750% due 11/17/15; Market value -$16,406,183) (i) |
|
16,084,000 |
|
|
|
|
Total Repurchase Agreements |
|
32,164,000 |
|
|
|
|
TOTAL
SHORT-TERM INVESTMENTS
|
|
62,660,861 |
|
|
|
|
TOTAL
INVESTMENTS 100.0%
|
|
836,672,119 |
|
|
|
|
Face amount denominated in U.S. dollars, unless otherwise noted. |
* |
|
Non-income producing security. |
(a) |
|
Security is valued in good faith at fair value by or under the direction of the Board of Directors (See Note 1). |
(b) |
|
Illiquid security. |
(c) |
|
Variable rate security. Interest rate disclosed is that which is in effect at July 31, 2007. |
(d) |
|
Security is exempt from registration under Rule 144A of the Securities Act of 1933. This security may be resold in transactions that are exempt from registration, normally to qualified institutional buyers. This security has been deemed liquid pursuant to guidelines approved by the Board of Directors, unless otherwise noted. |
(e) |
|
Payment-in-kind security for which part of the income earned may be paid as additional principal. |
See Notes to Schedule of Investments.
12
LMP Capital and Income Fund Inc.
Schedule of Investments (unaudited) (continued)
July 31, 2007
(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) |
|
Rate shown represents yield-to-maturity. |
(i) |
|
All or a portion of this security is segregated for open futures contracts, extended settlements, and forward currency contracts. |
# |
|
Aggregate cost for federal income tax purposes is substantially the same. |
|
|
|
|
|
Abbreviations used in this schedule: |
|
|
ADR - American Depositary Receipt |
|
|
ARS - Argentine Peso |
|
|
GDP - Gross Domestic Product |
|
|
PAC - Planned Amortization Class |
See Notes to Schedule of Investments.
13
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 Boards 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 board 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 sale 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 bid and asked prices as of the close of business of that market. When prices are not readily available, or are determined not to reflect fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded, but before the Fund calculates its net asset value, the Fund may value these investments at fair value as determined in accordance with the procedures approved by the Funds Board of Directors. Short-term obligations with maturities of 60 days or less are valued at amortized cost, which approximates market value.
(b) Repurchase Agreements. When entering into repurchase agreements, it is the Funds policy that its custodian or a third party custodian take possession of the underlying collateral securities, the market value of which, at all times, at least equals the principal amount of the repurchase transaction, including accrued interest. To the extent that any repurchase transaction exceeds one business day, the value of the collateral is marked-to-market to ensure the adequacy of the collateral. If the seller defaults, and the market value of the collateral declines or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of the collateral by the Fund may be delayed or limited.
(c) Written Options. When the Fund writes an option, an amount equal to the premium received by the Fund is recorded as a liability, the value of which is marked-to-market daily to reflect the current market value of the option written. If the option expires, the Fund realizes a gain from investments equal to the amount of the premium received. When a written call option is exercised, the difference between the premium received plus the option exercise price and the Funds basis in the underlying security (in the case of a covered written call option), or the cost to purchase the underlying security (in the case of an uncovered written call option), including brokerage commission, is treated as a realized gain or loss. When a written put option is exercised, the amount of the premium received is added to the cost of the security purchased by the Fund from the exercise of the written put option to form the Funds basis in the underlying security purchased. The writer or buyer of an option traded on an exchange can liquidate the position before the exercise of the option by entering into a closing transaction. The cost of a closing transaction is deducted from the original premium received resulting in a realized gain or loss to the Fund.
The risk in writing a covered call option is that the Fund may forego the opportunity of profit if the market price of the underlying security increases and the option is exercised. The risk in writing a put option is that the Fund may incur a loss if the market price of the underlying security decreases and the option is exercised. The risk in writing a call option is that the Fund is exposed to the risk of loss if the market price of the underlying security increases. In addition, there is the risk that the Fund may not be able to enter into a closing transaction because of an illiquid secondary market.
(d) Financial Futures Contracts. The Fund may enter into financial futures contracts typically to hedge a portion of the portfolio. Upon entering into a financial futures contract, the Fund is required to deposit cash or securities as initial margin, equal to a certain percentage of the contract amount (initial margin deposit). Additional securities are also segregated up to the current market value of the financial futures contracts. Subsequent payments, known as variation margin, are made or received by the Fund each day, depending on the daily fluctuations in the value of the underlying financial instruments. The Fund recognizes an unrealized gain or loss equal to the daily variation margin. When the
14
Notes to Schedule of Investments (unaudited) (continued)
financial futures contracts are closed, a realized gain or loss is recognized equal to the difference between the proceeds from (or cost of) the closing transactions and the Funds basis in the contracts.
The risks associated with entering into financial futures contracts include the possibility that a change in the value of the contract may not correlate with the changes in the value of the underlying financial instruments. In addition, investing in financial futures contracts involves the risk that the Fund could lose more than the initial margin deposit and subsequent payments required for a futures transaction. Risks may also arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of their contracts.
(e) 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 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.
(f) 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.
(g) REIT Distributions. The character of distributions received from Real Estate Investment Trusts (REITs) held by the Fund is generally comprised of net investment income, capital gains, and return of capital. It is the policy of the Fund to estimate the character of distributions received from underlying REITs based on historical data provided by the REITs. After each calendar year end, REITs report the actual tax character of these distributions. Differences between the estimated and actual amounts reported by the REITs are reflected in the Funds records in the year in which they are reported by the REITs.
(h) 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.
(i) Credit and Market Risk. The Fund invests in high yield and emerging market instruments that are subject to certain credit and market risks. The yields of high yield and emerging market debt obligations reflect, among other things, perceived credit and market risks. The Funds investment in securities rated below investment grade typically involves risks not associated with higher rated securities including, among others, greater risk related to timely and ultimate payment of interest and principal, greater market price volatility and less liquid secondary market trading. The consequences of political, social, economic or diplomatic changes may have disruptive effects on the market prices of investments held by the Fund. The Funds investment in non-dollar denominated securities may also result in foreign currency losses caused by devaluations and exchange rate fluctuations.
(j) Security Transactions. Security transactions are accounted for on a trade date basis.
15
Notes to Schedule of Investments (unaudited) (continued)
2. Investments
At July 31, 2007, the aggregate gross unrealized appreciation and depreciation of investments for federal income tax purposes were substantially as follows:
Gross unrealized appreciation |
|
$ |
33,469,424 |
|
Gross unrealized depreciation |
|
(31,366,829 |
) |
|
Net unrealized appreciation |
|
$ |
2,102,595 |
|
During the period ended July 31, 2007, written option transactions for the Fund were as follows:
|
|
Number of
|
|
Premiums |
|
|
Options written, outstanding October 31, 2006 |
|
1,090 |
|
$ |
215,858 |
|
Options written |
|
2,956 |
|
1,341,798 |
|
|
Options closed |
|
(4,046 |
) |
(1,557,656 |
) |
|
Options written, outstanding July 31, 2007 |
|
|
|
|
|
|
At July 31, 2007, the Fund had open forward foreign currency contracts as described below. The unrealized gain on the open contracts reflected in the accompanying financial statements were as follows:
At July 31, 2007, the Fund had the following open futures contracts:
|
|
Number of
|
|
Expiration
|
|
Basis
|
|
Market
|
|
Unrealized
|
|
|||
Contracts to Buy: |
|
|
|
|
|
|
|
|
|
|
|
|||
Eurodollar |
|
2 |
|
3/08 |
|
$ |
474,672 |
|
$ |
475,300 |
|
$ |
628 |
|
Eurodollar |
|
2 |
|
6/08 |
|
476,048 |
|
475,725 |
|
(323 |
) |
|||
Fin Euro |
|
1 |
|
9/08 |
|
238,218 |
|
237,913 |
|
(305 |
) |
|||
Stearling Futures |
|
184 |
|
3/08 |
|
347,881 |
|
381,695 |
|
33,814 |
|
|||
U.S. Treasury 2 Year Notes |
|
62 |
|
9/07 |
|
12,664,513 |
|
12,706,125 |
|
41,612 |
|
|||
U.S. Treasury Bonds |
|
25 |
|
9/07 |
|
2,728,891 |
|
2,751,563 |
|
22,672 |
|
|||
|
|
|
|
|
|
|
|
|
|
$ |
98,098 |
|
||
Contracts to Sell: |
|
|
|
|
|
|
|
|
|
|
|
|||
U.S. Treasury 5 Year Notes |
|
16 |
|
9/07 |
|
$ |
1,657,795 |
|
$ |
1,687,500 |
|
$ |
(29,705 |
) |
U.S. Treasury 10 Year Notes |
|
21 |
|
9/07 |
|
2,230,160 |
|
2,255,859 |
|
(25,699 |
) |
|||
|
|
|
|
|
|
|
|
|
|
$ |
(55,404 |
) |
||
Net Unrealized Gain on Open Futures Contracts |
|
|
|
|
|
|
|
$ |
42,694 |
|
At July 31, 2007, the Fund held TBA securities with a total cost of $12,611,578.
16
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: September 26, 2007
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: September 26, 2007
By |
/s/ Kaprel Ozsolak |
|
|
Kaprel Ozsolak |
|
|
Chief Financial Officer |
Date: September 26, 2007
1 Year LMP Capital and Income Chart |
1 Month LMP Capital and Income Chart |
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