|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
Investments, at value (Cost — $215,694,536)
|
|
$
|
265,593,529
|
|
|
Foreign currency, at value (Cost — $2)
|
|
|
2
|
|
|
Cash
|
|
|
15,540
|
|
|
Receivable for securities sold
|
|
|
1,030,695
|
|
|
Dividends and interest receivable
|
|
|
588,582
|
|
|
Prepaid expenses
|
|
|
10,454
|
|
|
Total Assets
|
|
|
267,238,802
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
Loan payable (Note 5)
|
|
|
55,000,000
|
|
|
Investment management fee payable
|
|
|
182,300
|
|
|
Interest expense payable
|
|
|
15,087
|
|
|
Directors’ fees payable
|
|
|
4,995
|
|
|
Accrued expenses
|
|
|
83,089
|
|
|
Total Liabilities
|
|
|
55,285,471
|
|
|
Total Net Assets
|
|
$
|
211,953,331
|
|
|
|
|
|
Net Assets:
|
|
|
|
|
|
Par value ($0.001 par value; 17,983,330 shares issued and outstanding; 100,000,000 shares authorized)
|
|
$
|
17,983
|
|
|
Paid-in capital in excess of par value
|
|
|
206,538,041
|
|
|
Total distributable earnings (loss)
|
|
|
5,397,307
|
|
|
Total Net Assets
|
|
$
|
211,953,331
|
|
|
|
|
|
Shares Outstanding
|
|
|
17,983,330
|
|
|
|
|
|
Net Asset Value
|
|
|
$11.79
|
|
See Notes to Financial
Statements.
|
|
|
|
|
LMP Capital and Income Fund Inc. 2020 Semi-Annual Report
|
|
7
|
Statement of operations (unaudited)
For the
Six Months Ended May 31, 2020
|
|
|
|
|
|
|
|
|
|
Investment Income:
|
|
|
|
|
|
Dividends
|
|
$
|
8,369,693
|
|
|
Interest
|
|
|
25,554
|
|
|
Less: Foreign taxes withheld
|
|
|
(7,829)
|
|
|
Total Investment Income
|
|
|
8,387,418
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
Investment management fee (Note 2)
|
|
|
1,322,643
|
|
|
Interest expense (Note 5)
|
|
|
681,887
|
|
|
Audit and tax fees
|
|
|
47,352
|
|
|
Directors’ fees
|
|
|
45,967
|
|
|
Transfer agent fees
|
|
|
29,200
|
|
|
Legal fees
|
|
|
26,382
|
|
|
Fund accounting fees
|
|
|
17,698
|
|
|
Shareholder reports
|
|
|
9,761
|
|
|
Stock exchange listing fees
|
|
|
6,255
|
|
|
Insurance
|
|
|
2,247
|
|
|
Custody fees
|
|
|
1,908
|
|
|
Franchise taxes
|
|
|
1,675
|
|
|
Miscellaneous expenses
|
|
|
5,656
|
|
|
Total Expenses
|
|
|
2,198,631
|
|
|
Less: Fee waivers and/or expense reimbursements (Note 2)
|
|
|
(6,681)
|
|
|
Net Expenses
|
|
|
2,191,950
|
|
|
Net Investment Income
|
|
|
6,195,468
|
|
|
|
|
Realized and Unrealized Loss on Investments and Foreign Currency Transactions
(Notes 1 and 3):
|
|
|
|
|
|
Net Realized Loss From:
|
|
|
|
|
|
Investment transactions
|
|
|
(32,849,148)
|
|
|
Foreign currency transactions
|
|
|
(2,026)
|
|
|
Net Realized Loss
|
|
|
(32,851,174)
|
|
|
Change in Net Unrealized Appreciation (Depreciation) From
Investments
|
|
|
(30,777,353)
|
|
|
Net Loss on Investments and Foreign Currency Transactions
|
|
|
(63,628,527)
|
|
|
Decrease in Net Assets From Operations
|
|
$
|
(57,433,059)
|
|
See Notes to Financial
Statements.
|
|
|
|
|
8
|
|
LMP Capital and Income Fund Inc. 2020 Semi-Annual Report
|
Statements of changes in net assets
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended May 31,
2020 (unaudited)
and the Year Ended November 30, 2019
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
Operations:
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
$
|
6,195,468
|
|
|
$
|
7,826,476
|
|
|
Net realized gain (loss)
|
|
|
(32,851,174)
|
|
|
|
6,686,013
|
|
|
Change in net unrealized appreciation (depreciation)
|
|
|
(30,777,353)
|
|
|
|
32,273,020
|
|
|
Increase (Decrease) in Net Assets From Operations
|
|
|
(57,433,059)
|
|
|
|
46,785,509
|
|
|
|
|
|
|
Distributions to Shareholders From (Note 1):
|
|
|
|
|
|
|
|
|
|
Total distributable earnings
|
|
|
(11,149,665)
|
|
|
|
(8,070,466)
|
|
|
Return of capital
|
|
|
—
|
|
|
|
(14,228,863)
|
|
|
Decrease in Net Assets From Distributions to
Shareholders
|
|
|
(11,149,665)
|
|
|
|
(22,299,329)
|
|
|
|
|
|
|
Capital Contribution:
|
|
|
|
|
|
|
|
|
|
Capital contribution
|
|
|
15,262
|
|
|
|
—
|
|
|
Increase (Decrease) in Net Assets
|
|
|
(68,567,462)
|
|
|
|
24,486,180
|
|
|
|
|
|
|
Net Assets:
|
|
|
|
|
|
|
|
|
|
Beginning of period
|
|
|
280,520,793
|
|
|
|
256,034,613
|
|
|
End of period
|
|
$
|
211,953,331
|
|
|
$
|
280,520,793
|
|
See Notes to Financial
Statements.
|
|
|
|
|
LMP Capital and Income Fund Inc. 2020 Semi-Annual Report
|
|
9
|
Statement of cash flows (unaudited)
For the
Six Months Ended May 31, 2020
|
|
|
|
|
|
|
|
|
|
Increase (Decrease) in Cash:
|
|
|
|
|
|
Cash Provided (Used) by Operating Activities:
|
|
|
|
|
|
Net decrease in net assets resulting from operations
|
|
$
|
(57,433,059)
|
|
|
Adjustments to reconcile net decrease in net assets resulting from operations to net cash provided (used) by operating
activities:
|
|
|
|
|
|
Purchases of portfolio securities
|
|
|
(58,128,534)
|
|
|
Sales of portfolio securities
|
|
|
80,841,224
|
|
|
Net purchases, sales and maturities of short-term investments
|
|
|
6,674,237
|
|
|
Return of capital
|
|
|
3,412,148
|
|
|
Securities litigation proceeds
|
|
|
38,391
|
|
|
Increase in receivable for securities sold
|
|
|
(1,030,695)
|
|
|
Decrease in interest and dividends receivable
|
|
|
285,006
|
|
|
Increase in prepaid expenses
|
|
|
(3,998)
|
|
|
Decrease in investment management fee payable
|
|
|
(54,432)
|
|
|
Decrease in Directors’ fees payable
|
|
|
(21)
|
|
|
Decrease in interest expense payable
|
|
|
(43,997)
|
|
|
Decrease in accrued expenses
|
|
|
(64,395)
|
|
|
Net realized loss on investments
|
|
|
32,849,148
|
|
|
Change in net unrealized appreciation (depreciation) of investments
|
|
|
30,777,353
|
|
|
Net Cash Provided by Operating Activities*
|
|
|
38,118,376
|
|
|
|
|
|
Cash Flows From Financing Activities:
|
|
|
|
|
|
Distributions paid on common stock
|
|
|
(11,149,665)
|
|
|
Decrease in loan facility borrowings
|
|
|
(27,000,000)
|
|
|
Capital contribution
|
|
|
15,262
|
|
|
Net Cash Used in Financing Activities
|
|
|
(38,134,403)
|
|
|
Net Decrease in Cash and Restricted Cash
|
|
|
(16,027)
|
|
|
Cash and restricted cash at beginning of period
|
|
|
31,569
|
|
|
Cash and restricted cash at end of period
|
|
$
|
15,542
|
|
|
*
|
Included in operating expenses is cash of $725,884 paid for interest on borrowings.
|
|
|
The following table provides a reconciliation of cash and restricted cash reported within the Statement of Assets and Liabilities that sums to the total
of such amounts shown on the Statement of Cash Flows.
|
|
|
|
|
|
|
|
|
|
May 31, 2020
|
|
|
Cash
|
|
$
|
15,542
|
|
|
Restricted cash
|
|
|
—
|
|
|
Total cash and restricted cash shown in the Statement of Cash Flows
|
|
$
|
15,542
|
|
See Notes to Financial
Statements.
|
|
|
|
|
10
|
|
LMP Capital and Income Fund Inc. 2020 Semi-Annual Report
|
Financial highlights
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For a share of capital stock outstanding throughout each year ended November 30,
unless
otherwise noted:
|
|
|
|
|
20201,2
|
|
|
20191
|
|
|
20181
|
|
|
20171
|
|
|
20161
|
|
|
20151
|
|
|
|
|
|
|
|
|
|
|
Net asset value, beginning of period
|
|
|
$15.60
|
|
|
|
$14.24
|
|
|
|
$15.34
|
|
|
|
$15.33
|
|
|
|
$15.31
|
|
|
|
$19.37
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
0.34
|
|
|
|
0.44
|
|
|
|
0.53
|
|
|
|
0.47
|
|
|
|
0.50
|
|
|
|
0.58
|
|
|
Net realized and unrealized gain (loss)
|
|
|
(3.53)
|
|
|
|
2.16
|
|
|
|
(0.39)
|
|
|
|
0.78
|
|
|
|
0.76
|
|
|
|
(3.52)
|
|
|
Total income (loss) from operations
|
|
|
(3.19)
|
|
|
|
2.60
|
|
|
|
0.14
|
|
|
|
1.25
|
|
|
|
1.26
|
|
|
|
(2.94)
|
|
|
|
|
|
|
|
|
|
|
Less distributions from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
(0.62)
|
3
|
|
|
(0.45)
|
|
|
|
(0.54)
|
|
|
|
(0.57)
|
|
|
|
(0.46)
|
|
|
|
(1.12)
|
|
|
Return of capital
|
|
|
—
|
|
|
|
(0.79)
|
|
|
|
(0.70)
|
|
|
|
(0.67)
|
|
|
|
(0.78)
|
|
|
|
—
|
|
|
Total distributions
|
|
|
(0.62)
|
|
|
|
(1.24)
|
|
|
|
(1.24)
|
|
|
|
(1.24)
|
|
|
|
(1.24)
|
|
|
|
(1.12)
|
|
|
|
|
|
|
|
|
|
|
Net asset value, end of period
|
|
|
$11.79
|
|
|
|
$15.60
|
|
|
|
$14.24
|
|
|
|
$15.34
|
|
|
|
$15.33
|
|
|
|
$15.31
|
|
|
|
|
|
|
|
|
|
|
Market price, end of period
|
|
|
$10.43
|
|
|
|
$14.62
|
|
|
|
$12.42
|
|
|
|
$13.76
|
|
|
|
$13.11
|
|
|
|
$12.80
|
|
|
Total return, based on NAV4,5
|
|
|
(19.70)
|
%
|
|
|
19.45
|
%
|
|
|
0.99
|
%
|
|
|
8.40
|
%
|
|
|
8.84
|
%
|
|
|
(15.80)
|
%
|
|
Total return, based on Market Price6
|
|
|
(24.41)
|
%
|
|
|
29.56
|
%
|
|
|
(1.04)
|
%
|
|
|
14.47
|
%
|
|
|
12.88
|
%
|
|
|
(20.38)
|
%
|
|
|
|
|
|
|
|
|
|
Net assets, end of period (millions)
|
|
|
$212
|
|
|
|
$281
|
|
|
|
$256
|
|
|
|
$276
|
|
|
|
$276
|
|
|
|
$275
|
|
|
|
|
|
|
|
|
|
|
Ratios to average net assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross expenses
|
|
|
1.83
|
%7
|
|
|
2.18
|
%
|
|
|
2.18
|
%
|
|
|
1.80
|
%
|
|
|
1.54
|
%
|
|
|
1.35
|
%
|
|
Net expenses
|
|
|
1.83
|
7,8
|
|
|
2.11
|
8
|
|
|
2.18
|
|
|
|
1.80
|
|
|
|
1.54
|
|
|
|
1.35
|
|
|
Net investment income
|
|
|
5.16
|
7
|
|
|
2.98
|
|
|
|
3.62
|
|
|
|
3.00
|
|
|
|
3.38
|
|
|
|
3.27
|
|
|
|
|
|
|
|
|
|
|
Portfolio turnover rate
|
|
|
19
|
%
|
|
|
36
|
%
|
|
|
26
|
%
|
|
|
37
|
%
|
|
|
29
|
%
|
|
|
30
|
%
|
|
|
|
|
|
|
|
|
|
Supplemental data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan Outstanding, End of Period (000s)
|
|
|
$55,000
|
|
|
|
$82,000
|
|
|
|
$90,000
|
|
|
|
$90,000
|
|
|
|
$82,500
|
|
|
|
$75,000
|
|
|
Asset Coverage Ratio for Loan Outstanding9
|
|
|
485
|
%
|
|
|
442
|
%
|
|
|
384
|
%
|
|
|
407
|
%
|
|
|
434
|
%
|
|
|
467
|
%
|
|
Asset Coverage, per $1,000 Principal Amount of Loan Outstanding9
|
|
|
$4,854
|
|
|
|
$4,421
|
|
|
|
$3,845
|
|
|
|
$4,065
|
|
|
|
$4,343
|
|
|
|
$4,672
|
|
|
Weighted Average Loan (000s)
|
|
|
$70,945
|
|
|
|
$82,548
|
|
|
|
$90,000
|
|
|
|
$88,849
|
|
|
|
$75,307
|
|
|
|
$69,096
|
|
|
Weighted Average Interest Rate on Loan
|
|
|
1.92
|
%
|
|
|
2.98
|
%
|
|
|
2.63
|
%
|
|
|
1.72
|
%
|
|
|
1.13
|
%
|
|
|
0.90
|
%
|
See Notes to Financial
Statements.
|
|
|
|
|
LMP Capital and Income Fund Inc. 2020 Semi-Annual Report
|
|
11
|
Financial highlights (cont’d)
|
1
|
Per share amounts have been calculated using the average shares method.
|
|
2
|
For the six months ended May 31, 2020 (unaudited).
|
|
3
|
The actual source of the Fund’s current fiscal year distributions may be from net investment income, return of capital or a combination of both.
Shareholders will be informed of the tax characteristics of the distributions after the close of the fiscal year.
|
|
4
|
Performance figures may reflect compensating balance arrangements, fee waivers and/or expense reimbursements. In the absence of compensating balance
arrangements, fee waivers and/or expense reimbursements, the total return would have been lower. Past performance is no guarantee of future results. Total returns for periods of less than one year are not annualized.
|
|
5
|
The total return calculation assumes that distributions are reinvested at NAV. Past performance is no guarantee of future results. Total returns for periods of
less than one year are not annualized.
|
|
6
|
The total return calculation assumes that distributions are reinvested in accordance with the Fund’s dividend reinvestment plan. Past performance is no
guarantee of future results. Total returns for periods of less than one year are not annualized.
|
|
8
|
Reflects fee waivers and/or expense reimbursements.
|
|
9
|
Represents value of net assets plus the loan outstanding at the end of the period divided by the loan outstanding at the end of the period.
|
See Notes to Financial
Statements.
|
|
|
|
|
12
|
|
LMP Capital and Income Fund Inc. 2020 Semi-Annual Report
|
Notes to financial statements (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 Fund’s investment objective is total return with an emphasis on income.
The Fund may invest in a broad range of equity and fixed income
securities of both U.S. and foreign issuers. The Fund will vary its allocation between equity and fixed income securities depending on the investment manager’s view of economic, market or political conditions, fiscal and monetary policy and
security valuation. On April 1, 2020, the Board of Directors of the Fund approved amendments to the Fund’s bylaws. The amended and restated bylaws were subsequently filed on Form 8-K and are
available on the Securities and Exchange Commission’s website at www.sec.gov.
The following are significant accounting policies consistently
followed by the Fund and are in conformity with U.S. generally accepted accounting principles (“GAAP”). Estimates and assumptions are required to be made regarding assets, liabilities and changes in net assets resulting from operations
when financial statements are prepared. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ. Subsequent events have been evaluated through the date
the financial statements were issued.
(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. The valuations for fixed income securities (which may include, but are not limited
to, corporate, government, municipal, mortgage-backed, collateralized mortgage obligations and asset-backed securities) and certain derivative instruments are typically the prices supplied by independent third party pricing services, which may use
market prices or broker/dealer quotations or a variety of valuation techniques and methodologies. The independent third party pricing services use inputs that are observable such as issuer details, interest rates, yield curves, prepayment speeds,
credit risks/spreads, default rates and quoted prices for similar securities. Investments in open-end funds are valued at the closing net asset value per share of each fund on the day of valuation. When the
Fund holds securities or other assets that are denominated in a foreign currency, the Fund will normally use the currency exchange rates as of 4:00 p.m. (Eastern Time). If independent third party pricing services are unable to supply prices for a
portfolio investment, or if the prices supplied are deemed by the manager to be unreliable, the market price may be determined by the manager using quotations from one or more broker/dealers or at the transaction price if the security has recently
been purchased and no value has yet been obtained from a pricing service or pricing broker. When reliable prices are not readily available, 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 as determined in accordance with procedures approved by the Fund’s Board of Directors.
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LMP Capital and Income Fund Inc. 2020 Semi-Annual Report
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13
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Notes to financial statements
(unaudited) (cont’d)
The Board of Directors is responsible for the valuation process and has delegated the supervision of the daily valuation process to the Legg Mason North Atlantic Fund Valuation Committee (the “Valuation
Committee”). The Valuation Committee, pursuant to the policies adopted by the Board of Directors, is responsible for making fair value determinations, evaluating the effectiveness of the Fund’s pricing policies, and reporting to the Board
of Directors. When determining the reliability of third party pricing information for investments owned by the Fund, the Valuation Committee, among other things, conducts due diligence reviews of pricing vendors, monitors the daily change in prices
and reviews transactions among market participants.
The Valuation Committee will consider pricing methodologies it deems relevant and appropriate when
making fair value determinations. Examples of possible methodologies include, but are not limited to, multiple of earnings; discount from market of a similar freely traded security; discounted cash-flow analysis; book value or a multiple thereof;
risk premium/yield analysis; yield to maturity; and/or fundamental investment analysis. The Valuation Committee will also consider factors it deems relevant and appropriate in light of the facts and circumstances. Examples of possible factors
include, but are not limited to, the type of security; the issuer’s financial statements; the purchase price of the security; the discount from market value of unrestricted securities of the same class at the time of purchase; analysts’
research and observations from financial institutions; information regarding any transactions or offers with respect to the security; the existence of merger proposals or tender offers affecting the security; the price and extent of public trading
in similar securities of the issuer or comparable companies; and the existence of a shelf registration for restricted securities.
For each portfolio
security that has been fair valued pursuant to the policies adopted by the Board of Directors, the fair value price is compared against the last available and next available market quotations. The Valuation Committee reviews the results of such back
testing monthly and fair valuation occurrences are reported to the Board of Directors quarterly.
The Fund uses valuation techniques to measure fair
value that are consistent with the market approach and/or income approach, depending on the type of security and the particular circumstance. The market approach uses prices and other relevant information generated by market transactions involving
identical or comparable securities. The income approach uses valuation techniques to discount estimated future cash flows to present value.
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14
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LMP Capital and Income Fund Inc. 2020 Semi-Annual Report
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GAAP establishes a disclosure hierarchy that categorizes the inputs to valuation techniques used to value assets and
liabilities at measurement date. These inputs are summarized in the three broad levels listed below:
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•
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Level 1 — quoted prices in active markets for identical investments
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•
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Level 2 — other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)
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•
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Level 3 — significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)
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The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those
securities.
The following is a summary of the inputs used in valuing the Fund’s assets carried at fair value:
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ASSETS
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Description
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Quoted Prices
(Level 1)
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Other Significant
Observable Inputs
(Level 2)
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Significant
Unobservable
Inputs
(Level 3)
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Total
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Long-Term Investments†:
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Common Stocks
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$
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155,608,152
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—
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—
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$
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155,608,152
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Master Limited Partnerships
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57,008,151
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—
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—
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57,008,151
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Convertible Preferred Stocks
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44,344,402
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—
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—
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44,344,402
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Investments in Underlying Funds
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8,356,557
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—
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—
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8,356,557
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Total Long-Term Investments
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265,317,262
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—
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—
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265,317,262
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Short-Term Investments†
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276,267
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—
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—
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276,267
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Total Investments
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$
|
265,593,529
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|
|
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—
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—
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$
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265,593,529
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†
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See Schedule of Investments for additional detailed categorizations.
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(b) Business development companies. The Fund may invest in securities of closed-end investment
companies that have elected to be treated as a business development company under the 1940 Act. A business development company operates similar to an exchange-traded fund and represents a portfolio of securities. The Fund may purchase a business
development company to gain exposure to the securities in the underlying portfolio. The risks of owning a business development company generally reflect the risks of owning the underlying securities. Business development companies have expenses that
reduce their value.
(c) Master limited partnerships. The Fund may invest without
limit in the securities of both energy and non-energy Master Limited Partnerships (“MLPs”), so long as no more than 25% of the Fund’s total assets are invested in MLPs that are treated for U.S.
federal tax
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LMP Capital and Income Fund Inc. 2020 Semi-Annual Report
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15
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Notes to financial statements
(unaudited) (cont’d)
purposes as qualified publicly traded partnerships. This 25% limitation applies generally to MLPs that focus on commodity and energy-related industries. Entities commonly referred to as “MLPs” are
generally organized under state law as limited partnerships or limited liability companies. To be treated as a partnership for U.S. federal income tax purposes, an MLP whose units are traded on a securities exchange must receive at least 90% of its
income from qualifying sources such as interest, dividends, real estate rents, gain from the sale or disposition of real property, income and gain from mineral or natural resources activities, income and gain from the transportation or storage of
certain fuels, and, in certain circumstances, income and gain from commodities or futures, forwards and options with respect to commodities. Mineral or natural resources activities include exploration, development, production, processing, mining,
refining, marketing and transportation (including pipelines) of oil and gas, minerals, geothermal energy, fertilizer, timber or industrial source carbon dioxide. An MLP consists of a general partner and limited partners (or in the case of MLPs
organized as limited liability companies, a managing member and members). The general partner or managing member typically controls the operations and management of the MLP and has an ownership stake in the partnership. The limited partners or
members, through their ownership of limited partner or member interests, provide capital to the entity, are intended to have no role in the operation and management of the entity and receive cash distributions. The MLPs themselves generally do not
pay U.S. federal income taxes. Thus, unlike investors in corporate securities, direct MLP investors are generally not subject to double taxation (i.e., corporate level tax and tax on corporate dividends). Currently, most MLPs operate in the energy
and/or natural resources sector.
The Fund, and entities in which the Fund invests, may be subject to audit by the Internal Revenue Service or other
applicable tax authorities. The Fund’s taxable income or tax liability for prior taxable years could be adjusted if there is an audit of the Fund, or of any entity that is treated as a partnership for tax purposes in which the Fund holds an
equity interest. The Fund may be required to pay a fund-level tax as a result of such an adjustment or may pay a “deficiency dividend” to its current shareholders in order to avoid a fund-level tax associated with the adjustment. The Fund
could also be required to pay interest and penalties in connection with such an adjustment.
(d) Cash flow information. The Fund invests in securities and distributes dividends from net investment income and net realized gains, which are paid in cash and may be reinvested at the discretion of shareholders. These activities are
reported in the Statements of Changes in Net Assets and additional information on cash receipts and cash payments are presented in the Statement of Cash Flows.
(e) 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.
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16
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LMP Capital and Income Fund Inc. 2020 Semi-Annual Report
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The Fund does not isolate that portion of the results of operations resulting from fluctuations in foreign exchange
rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.
Net realized foreign exchange gains or losses arise from sales of foreign currencies, including gains and losses on forward foreign currency contracts, currency
gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent
of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the values of assets and liabilities, other than investments in securities, on the date of valuation, resulting from changes in exchange
rates.
Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of U.S. dollar
denominated transactions as a result of, 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.
(f) Foreign investment risks. The Fund’s investments in foreign securities may involve
risks not present in domestic investments. Since securities may be denominated in foreign currencies, may require settlement in foreign currencies or pay interest or dividends in foreign currencies, changes in the relationship of these foreign
currencies to the U.S. dollar can significantly affect the value of the investments and earnings of the Fund. Foreign investments may also subject the Fund to foreign government exchange restrictions, expropriation, taxation or other political,
social or economic developments, all of which affect the market and/or credit risk of the investments.
(g) Security transactions and
investment income. Security transactions are accounted for on a trade date basis. Interest income (including interest income from
payment-in-kind securities), adjusted for amortization of premium and accretion of discount, is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date for dividends received in cash and/or securities. Foreign dividend income is recorded on the ex-dividend date or as soon as practicable after the Fund
determines the existence of a dividend declaration after exercising reasonable due diligence. The cost of investments sold is determined by use of the specific identification method. To the extent any issuer defaults or a credit event occurs that
impacts the issuer, the Fund may halt any additional interest income accruals and consider the realizability of interest accrued up to the date of default or credit event.
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17
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LMP Capital and Income Fund Inc. 2020 Semi-Annual Report
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Notes to financial statements
(unaudited) (cont’d)
(h) Return of capital estimates. Distributions received from the Fund’s investments in MLPs generally are comprised of income and return
of capital and distributions received from the Fund’s investments in Real Estate Investment Trusts (“REITs”) generally are comprised of income, realized capital gains and return of capital. The Fund records investment income, realized
capital gains and return of capital based on estimates made at the time such distributions are received. Such estimates are based on historical information available from each MLP or REIT and other industry sources. These estimates may subsequently
be revised based on information received from the MLPs and REITs after their tax reporting periods are concluded.
(i) Partnership
accounting policy. The Fund records its pro rata share of the income (loss) and capital gains (losses), to the extent of distributions it has received, allocated from the underlying partnerships
and accordingly adjusts the cost basis of the underlying partnerships for return of capital. These amounts are included in the Fund’s Statement of Operations.
(j) Distributions to shareholders. Distributions from net investment income by the Fund, if any, are declared and paid on a quarterly basis.
The actual source of the Fund’s current fiscal year distributions may be from net investment income, return of capital or a combination of both. Shareholders will be informed of the tax characteristics of the distributions after the close of
the fiscal year. The Fund intends to distribute all of its net investment income earned each quarter and any cash received during the quarter from its investments in MLPs and REITs. The Fund intends to distribute the cash received from MLPs and
REITs even if all or a portion of that cash may represent a return of capital to the Fund. The Fund may distribute additional amounts if required under the income tax regulations. Distributions of net realized gains, if any, are declared at least
annually. Pursuant to its Managed Distribution Policy, the Fund intends to make regular quarterly distributions to shareholders at a fixed rate per common share, which rate may be adjusted from time to time by the Fund’s Board of Directors.
Under the Fund’s Managed Distribution Policy, if, for any quarterly distribution, the value of the Fund’s net investment income and net realized capital gain is less than the amount of the distribution, the difference will be distributed
from the Fund’s net assets (and may constitute a “return of capital”). The Board of Directors may modify, terminate or suspend the Managed Distribution Policy at any time, including when certain events would make part of the return of
capital taxable to shareholders. Any such modification, termination or suspension could have an adverse effect on the market price of the Fund’s shares. Distributions to shareholders of the Fund are recorded on the ex-dividend date and are determined in accordance with income tax regulations, which may differ from GAAP.
(k) Compensating balance arrangements. The Fund has an arrangement with its custodian bank whereby a portion of the custodian’s fees is
paid indirectly by credits earned on the Fund’s cash on deposit with the bank.
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18
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LMP Capital and Income Fund Inc. 2020 Semi-Annual Report
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(l) Federal and other taxes. It is the
Fund’s policy to comply with the federal income and excise tax requirements of the Internal Revenue Code of 1986 (the “Code”), as amended, applicable to regulated investment companies. Accordingly, the Fund intends to distribute its
taxable income and net realized gains, if any, to shareholders in accordance with timing requirements imposed by the Code. Therefore, no federal or state income tax provision is required in the Fund’s financial statements.
The Fund may invest up to 25% of its total assets in MLPs, which generally are treated for federal income tax purposes as qualified publicly traded partnerships. As
a limited partner in the MLPs, the Fund reports its allocable share of the MLP’s taxable income in computing its own taxable income. The distributions paid by the MLPs generally do not constitute income for tax purposes. Each MLP may allocate
losses to the Fund which are generally not deductible in computing the Fund’s taxable income until such time as that particular MLP either generates income to offset those losses or the Fund disposes of units in that MLP. This may result in the
Fund’s taxable income being substantially different than its book income in any given year. As a result, the Fund may have insufficient taxable income to support its distributions paid resulting in a return of capital to shareholders. A return
of capital distribution is generally not treated as taxable income to shareholders and instead reduces a shareholder’s basis in their shares of the Fund.
Management has analyzed the Fund’s tax positions taken on income tax returns for all open tax years and has concluded that as of November 30, 2019, no provision for income tax is required in the
Fund’s financial statements. The Fund’s federal and state income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and
state departments of revenue.
Under the applicable foreign tax laws, a withholding tax may be imposed on interest, dividends and capital gains at
various rates.
(m) Reclassification. GAAP requires that certain components of net
assets be reclassified to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset value per share.
2. Investment management agreement and other transactions with affiliates
Legg Mason Partners
Fund Advisor, LLC (“LMPFA”) is the Fund’s investment manager. ClearBridge Investments, LLC (“ClearBridge”), Western Asset Management Company, LLC (“Western Asset”) and Western Asset Management Company Limited
(“Western Asset Limited”) are the Fund’s subadvisers. LMPFA, ClearBridge, Western Asset and Western Asset Limited are wholly-owned subsidiaries of Legg Mason, Inc. (“Legg Mason”).
LMPFA provides administrative and certain oversight services to the Fund. The Fund pays an investment management fee, calculated daily and paid monthly, at an
annual rate of 0.85% of the Fund’s average daily net assets plus the proceeds of any outstanding borrowings used for leverage and any proceeds from the issuance of preferred stock.
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LMP Capital and Income Fund Inc. 2020 Semi-Annual Report
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19
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Notes to financial statements
(unaudited) (cont’d)
LMPFA delegates to the subadvisers the day-to-day portfolio management of the Fund. ClearBridge provides investment advisory services
to the Fund by both determining the allocation of the Fund’s assets between equity and fixed income investments and performing the day-to-day management of the
Fund’s investments in equity securities. Western Asset provides advisory services to the Fund by performing the day-to-day management of the Fund’s fixed
income investments. For its services, LMPFA pays the subadvisers monthly 70% of the net management fee it receives from the Fund. This fee will be divided on a pro rata basis, based on assets allocated to each subadviser.
Western Asset Limited provides certain advisory services to the Fund relating to currency transactions and investments in
non-U.S. dollar denominated securities. Western Asset Limited does not receive any compensation from the Fund. In turn, Western Asset pays Western Asset Limited monthly a subadvisory fee of 0.30% on the assets
managed by Western Asset Limited.
During periods in which the Fund utilizes financial leverage, the fees paid to LMPFA will be higher than if the Fund
did not utilize leverage because the fees are calculated as a percentage of the Fund’s assets, including those investments purchased with leverage.
During the six months ended May 31, 2020, fees waived and/or expenses reimbursed amounted to $6,681.
All officers and one Director of the Fund are employees of Legg Mason or its affiliates and do not receive compensation from the Fund.
3. Investments
During the six months ended May 31, 2020, the aggregate cost of purchases
and proceeds from sales of investments (excluding short-term investments) were as follows:
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Purchases
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$
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58,128,534
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Sales
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80,841,224
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At May 31, 2020, the aggregate cost of investments and the aggregate gross unrealized appreciation and depreciation of
investments for federal income tax purposes were substantially as follows:
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Cost
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Gross
Unrealized
Appreciation
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Gross
Unrealized
Depreciation
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Net
Unrealized
Appreciation
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Securities
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$
|
215,694,536
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$
|
68,098,639
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$
|
(18,199,646)
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|
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$
|
49,898,993
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|
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20
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LMP Capital and Income Fund Inc. 2020 Semi-Annual Report
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4. Derivative instruments and hedging activities
During the six months ended May 31, 2020, the Fund did not invest in derivative instruments.
5. Loan
The Fund has a revolving credit agreement with Pershing LLC, which permits the Fund to
borrow up to an aggregate amount of $110,000,000, subject to the approval of Pershing LLC, and renews daily for a 180-day term unless notice to the contrary is given to the Fund. The interest on the loan is
calculated at a variable rate based on the one-month LIBOR, plus any applicable margin. To the extent of the borrowing outstanding, the Fund is required to maintain collateral in a special custody account at
the Fund’s custodian on the behalf of Pershing, LLC. The Fund’s credit agreement contains customary covenants that, among other things, may limit the Fund’s ability to pay distributions in certain circumstances, incur additional debt,
change its fundamental investment policies and engage in certain transactions, including mergers and consolidations, and require asset coverage ratios in addition to those required by the 1940 Act. In addition, the credit agreement may be subject to
early termination under certain conditions and may contain other provisions that could limit the Fund’s ability to utilize borrowing under the agreement. Interest expense related to the loan for the six months ended May 31, 2020 was
$681,887. For the six months ended May 31, 2020, the Fund had an average daily loan balance outstanding of $70,945,355 and the weighted average interest rate was 1.92%. At May 31, 2020, the Fund had $55,000,000 of borrowings outstanding
per this credit agreement.
6. Distributions subsequent to May 31, 2020
The following distribution has been declared by the Fund’s Board of Directors and is payable subsequent to the period end of this report:
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Record Date
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Payable Date
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Amount
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6/23/2020
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|
|
7/1/2020
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|
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$
|
0.3100
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|
7. Stock repurchase program
On November 16, 2015, the Fund announced that the Fund’s Board of Directors (the “Board”) had authorized the Fund to repurchase in the open market up to approximately 10% of the Fund’s
outstanding common stock when the Fund’s shares are trading at a discount to net asset value. The Board has directed management of the Fund to repurchase shares of common stock at such times and in such amounts as management reasonably believes
may enhance stockholder value. The Fund is under no obligation to purchase shares at any specific discount levels or in any specific amounts. During the six months ended May 31, 2020, the Fund did not repurchase any shares.
8. Deferred capital losses
As of
November 30, 2019, the Fund had deferred capital losses of $6,441,381, which have no expiration date, that will be available to offset future taxable capital gains.
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LMP Capital and Income Fund Inc. 2020 Semi-Annual Report
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21
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Notes to financial statements
(unaudited) (cont’d)
9. Other matters
On February 18, 2020, Franklin Resources, Inc. (“Franklin
Resources”) and Legg Mason announced that they have entered into a definitive agreement for Franklin Resources to acquire Legg Mason in an all-cash transaction. As part of this transaction, LMPFA and the
subadviser(s), each currently a subsidiary of Legg Mason, would become a subsidiary of Franklin Resources. The transaction is subject to approval by Legg Mason’s shareholders and customary closing conditions, including receipt of applicable
regulatory approvals. Subject to such approvals and the satisfaction of the other conditions, the transaction is expected to be consummated later this year.
Under the Investment Company Act of 1940, consummation of the transaction will result in the automatic termination of the Fund’s management contract, and any related subadvisory contract(s), where applicable.
Therefore, the Fund’s Board has approved new management and subadvisory contracts that have been presented to the shareholders of the Fund for their approval.
* * *
The outbreak of the respiratory illness
COVID-19 (commonly referred to as “coronavirus”) has continued to rapidly spread around the world, causing considerable uncertainty for the global economy and financial markets. The ultimate economic
fallout from the pandemic, and the long-term impact on economies, markets, industries and individual issuers, are not known. The COVID-19 pandemic could adversely affect the value and liquidity of the
Fund’s investments and negatively impact the Fund’s performance. In addition, the outbreak of COVID-19, and measures taken to mitigate its effects, could result in disruptions to the services
provided to the Fund by its service providers.
* * *
The London Interbank Offered Rate, or “LIBOR,” the offered rate for short-term Eurodollar deposits between major international banks, is used extensively
in the United States and globally as a reference rate in various financing and commercial transactions. Plans are underway to phase out the use of LIBOR by the end of 2021. There remains uncertainty regarding the nature of any replacement rate and
the impact of the transition from LIBOR on the financial markets generally, transactions that use LIBOR as a reference rate and financial institutions that engage in such transactions, including issuers of securities in which the Fund invests. As
such, the potential effect of a transition away from LIBOR on the Fund or the Fund’s investments cannot yet be determined.
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22
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LMP Capital and Income Fund Inc. 2020 Semi-Annual Report
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Board approval of new management and new subadvisory agreements (unaudited)
Background
On March 9, 2020, during a
telephonic meeting of the Boards of Directors (each, a “Board” and each Board member, a “Director” or a “Board Member”) of the closed-end funds under the Board’s purview
(each, a “Fund” and together, the “Funds”), Board Members discussed with management of Legg Mason, Inc. (“Legg Mason”) and certain representatives of Franklin Resources, Inc. and its subsidiaries (together,
“Franklin Templeton”) the acquisition of Legg Mason by Franklin Templeton (the “Transaction”) and Franklin Templeton’s plans and intentions regarding the Funds and Legg Mason’s asset management business, including the
preservation and continued investment autonomy of the investment advisory businesses conducted by Legg Mason’s separate investment advisory subsidiaries and the combination of Legg Mason’s and Franklin Templeton’s distribution
resources. The Board of each Fund was advised that the Transaction, if completed, would constitute a change of control under the Investment Company Act of 1940, as amended (the “1940 Act”), that would result in the termination of the
current management agreement between each Fund and Legg Mason Partners Fund Advisor, LLC (the “Manager”) (the “Current Management Agreements”) and the current subadvisory agreements with each Fund’s subadviser or subadvisers
(each, a “Subadviser” and together, the “Subadvisers”) (the “Current Subadvisory Agreements”).
At
meetings held on April 1, 2020 the Board of each Fund, including a majority of the Board Members who are not “interested persons” of the Fund or the Manager as defined in the 1940 Act (the “Independent Board Members”),
approved the new management agreement between each Fund and the Manager (each, a “New Management Agreement”) and each new subadvisory agreement between each Fund’s Manager and its Subadviser or Subadvisers relating to the Fund (each,
a “New Subadvisory Agreement”). 1 (The New Management Agreement for
a Fund and the New Subadvisory Agreement or Agreements for the Fund are referred to, collectively, as the “New Agreements,” the Current Management Agreement for a Fund and the Current Subadvisory Agreement or Agreements for the Fund are
referred to, collectively, as the “Current Agreements,” and the Manager and the Subadviser or Subadvisers for a Fund are referred to, collectively, as the “Advisers.”)
At these meetings, which included meetings of the full Board of each Fund and separate meetings of the Independent Board Members, the Board considered, among other things, whether it would be in the best interests
of each Fund and its respective shareholders to approve the New Agreements, and the anticipated impacts of the Transaction on the Funds and their shareholders. To assist the Board of each Fund in its consideration of the New
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1
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This meeting was held telephonically in reliance on an exemptive order issued by the Securities and Exchange Commission on March 13, 2020. Reliance on the
exemptive order is necessary and appropriate due to circumstances related to current or potential effects of COVID-19. All Board Members participating in the telephonic meeting were able to hear each other
simultaneously during the meeting. Reliance on the exemptive order requires Board Members, including a majority of the Independent Board Members, to ratify actions taken pursuant to the exemptive order by vote cast at the next in-person meeting.
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LMP Capital and Income Fund Inc.
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23
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Board approval of new management and new subadvisory agreements (unaudited) (cont’d)
Agreements, Franklin Templeton provided materials and information about Franklin Templeton, including its financial condition and asset management capabilities and
organization, Legg Mason provided materials and information about Legg Mason, including performance and expense comparison data and profitability information by Fund and with respect to the Legg Mason fund complex as a whole, and Franklin Templeton
and Legg Mason provided materials and information about the proposed Transaction between Legg Mason and Franklin Templeton.
Before and during the
April 1, 2020 meetings, the Board of each Fund sought certain information as it deemed necessary and appropriate. In connection with their consideration of the New Agreements, the Independent Board Members worked with their independent legal
counsel to prepare requests for additional information that were submitted to Franklin Templeton and Legg Mason. The requests for information of the Board of each Fund sought information relevant to the Board’s consideration of the New
Agreements and other anticipated impacts of the Transaction on the Funds and their shareholders. Franklin Templeton and Legg Mason provided documents and information in response to these requests for information. Following their review of this
information, the Independent Board Members requested additional information from Franklin Templeton and Legg Mason. Franklin Templeton and Legg Mason provided further information in response to these requests, which the Board of each Fund reviewed.
Senior management representatives from Franklin Templeton and Legg Mason participated in a portion of each of these meetings and addressed various questions raised by the Board of each Fund.
At the April 1, 2020 meeting of the Board of each Fund, representatives of Legg Mason and Franklin Templeton made presentations to, and responded to questions from, the Board. After the presentations and after
reviewing the written materials provided, the Independent Board Members met in executive session with their counsel to consider the New Agreements.
Board Approval of New Management Agreements and New Subadvisory Agreements
Each Fund’s
Board’s evaluation of the New Agreements reflected the information provided specifically in connection with their review of the New Agreements, as well as, where relevant, information that was previously furnished to the Board in connection
with the most recent renewal of the Current Agreements at in-person meetings held on November 14, 2019 and at other Board meetings throughout the prior year.
Among other things, the Board Members considered:
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(i)
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the reputation, experience, financial strength and resources of Franklin Templeton and its investment advisory subsidiaries;
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24
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LMP Capital and Income Fund Inc.
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(ii)
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that Franklin Templeton has informed the Board of each Fund that it intends to maintain the investment autonomy of the Legg Mason investment advisory
subsidiaries;
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(iii)
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that Franklin Templeton and Legg Mason have informed the Board of each Fund that, following the Transaction, there is not expected to be any diminution
in the nature, quality and extent of services provided to the Funds and their shareholders by the Advisers, including compliance and other non-advisory services, and have represented that there are not
expected to be any changes in the portfolio management personnel managing the Funds as a result of the Transaction;
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(iv)
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that Franklin Templeton and Legg Mason have informed the Board of each Fund regarding transition plans, including Legg Mason’s provision of
retention incentives for certain Legg Mason corporate personnel until the Transaction closes, and Franklin Templeton’s provision of long-term retention mechanisms for certain personnel following the closing;
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(v)
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that there are not expected to be any changes to any Fund’s custodian or other service providers as a result of the Transaction;
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(vi)
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that Franklin Templeton has informed the Board of each Fund that it has no present intention to alter currently effective expense waivers and
reimbursements after their expiration, and, while it reserves the right to do so in the future, it would consult with the applicable Fund’s Board before making any changes;
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(vii)
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that Franklin Templeton does not expect to propose any changes to the investment objective(s) of any Fund or any changes to the principal investment
strategies of any Fund as a result of the Transaction;
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(viii)
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the potential benefits to Fund shareholders from being part of a combined fund family with Franklin Templeton-sponsored funds and access to a broader
array of investment opportunities;
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(ix)
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that Franklin Templeton and Legg Mason will each derive benefits from the Transaction and that, as a result, they have a financial interest in the
matters that were being considered;
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(x)
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the fact that each Fund’s contractual management fee rates will remain the same and will not increase by virtue of the New Agreements;
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(xi)
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the terms and conditions of the New Agreements, including that each New Agreement is identical to its corresponding Current Agreement except for their
respective dates of execution, effectiveness and termination;
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LMP Capital and Income Fund Inc.
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25
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Board approval of new management and new subadvisory agreements (unaudited) (cont’d)
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(xii)
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the support expressed by the current senior management team at Legg Mason for the Transaction and Legg Mason’s recommendation that the Board of
each Fund approve the New Agreements;
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(xiii)
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that the Current Agreements, except in the case of newer Funds, are the product of multiple years of review and negotiation and information received and
considered by the applicable Fund’s Board in the exercise of their business judgment during those years, and that within the past six-months the Board of each Fund had performed a full review of and
approved the Current Agreements as required by the 1940 Act and had determined in the exercise of the Board Members’ business judgment that each applicable Adviser had the capabilities, resources and personnel necessary to provide the services
provided to each Fund, and that the management and subadvisory fees paid by or in respect of the Fund, taking into account any applicable agreed-upon fee reductions, represented reasonable compensation to the applicable Adviser in light of the
services provided, the costs to the Adviser of providing those services, the fees and other expenses paid by similar funds, and such other matters as the Board Members considered relevant in the exercise of their business judgment, and represented
an appropriate sharing between Fund shareholders and the Advisers of any economies of scale in the management of the Fund at current and anticipated asset levels;
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(xiv)
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that the Current Agreements were considered and approved as recently as November 2019, except in the case of one Fund, which is currently in the initial
term of its agreement;
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(xv)
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that the Funds will not bear the costs of obtaining shareholder approval of the New Agreements, including proxy solicitation costs, legal fees and the
costs of printing and mailing the proxy statement, regardless of whether the Transaction is consummated; and
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(xvi)
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that under the a definitive agreement between Legg Mason and Franklin Templeton (the “Transaction Agreement”), Franklin Templeton has
acknowledged that Legg Mason had entered into the Transaction Agreement in reliance upon the benefits and protections provided by Section 15(f) of the 1940 Act, and that, in furtherance of the foregoing, Franklin Templeton agreed to use
reasonable best efforts to conduct its business so that (a) for a period of not less than three years after the closing of the Transaction no more than 25% of the members of the Board of any Fund shall be “interested persons” (as
defined in the 1940 Act) of any investment adviser for a Fund, and (b) for a period of not less than two years after the closing, neither Franklin Templeton nor any of its affiliates shall impose an “unfair burden” (within the meaning
of the 1940 Act, including any interpretations or no-action letters of the Securities and Exchange Commission) on any Fund as a result of the transactions contemplated by the Transaction Agreement or any
express or implied terms, conditions or understandings applicable thereto.
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26
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LMP Capital and Income Fund Inc.
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Certain of these considerations are discussed in more detail below.
In their deliberations, the Board Members considered information received in connection with the most recent approval or continuation of each Current Agreement in
addition to information provided by Franklin Templeton and Legg Mason in connection with their evaluation of the terms and conditions of the New Agreements. In connection with the most recent approval or continuation of each Current Agreement, and
in connection with their review of each New Agreement, the Board Members did not identify any particular information that was all-important or controlling, and each Board Member may have attributed different
weights to the various factors. The Board Members evaluated all information available to them on a Fund-by-Fund basis with respect to their consideration of the Current
Agreements and the New Agreements, and their determinations were made separately in respect of each Fund.
The information provided and presentations
made to the Board of each Fund encompassed each Fund and all other Funds for which the Board has responsibility. The discussion below covers both the advisory and the administrative functions rendered by the Manager for each Fund, both of which
functions are encompassed by the New Management Agreement for the Fund, as well as the advisory functions rendered by the Subadviser(s) pursuant to the New Subadvisory Agreement(s) for the Fund. The Independent Board Members of each Fund considered
the New Management Agreement and the New Subadvisory Agreement(s) separately in the course of their review. In doing so, they considered the respective roles and compensation of the Manager and the Subadviser(s) in providing services to the Fund.
The Independent Board Members were advised by separate independent legal counsel throughout the process. Prior to voting, the Independent Board Members
of each Fund received a memorandum from their independent legal counsel discussing the legal standards for their consideration of the New Agreements for the Fund. The Independent Board Members of each Fund, including LMP Capital and Income Fund Inc.
(the “LMP Fund”), reviewed the proposed approval of the New Agreements for the Fund on multiple occasions with their independent legal counsel in private sessions at which no representatives of Franklin Templeton, Legg Mason, or the
Manager or Subadviser(s) for the Fund were present.
Nature, Extent and Quality of the Services under the New Agreements
The Board of each Fund received and considered information regarding the nature, extent and quality of services provided to the Fund by the Manager
and the Subadviser(s) under the Current Agreements. In evaluating the nature, quality and extent of the services to be provided by the Advisers under the New Agreements, the Board Members considered,
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LMP Capital and Income Fund Inc.
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27
|
Board approval of new management and new subadvisory agreements (unaudited) (cont’d)
among other things, the expected impact, if any, of the Transaction on the operations, facilities, organization and personnel of each Adviser, and that Franklin
Templeton and Legg Mason have advised the Board of each Fund that, following the Transaction, there is not expected to be any diminution in the nature, quality and extent of services provided to the Funds and their shareholders by the Advisers,
including compliance and other non-advisory services, and that there are not expected to be any changes in portfolio management personnel as a result of the Transaction. In this regard, the Board of each Fund
took into account that Franklin Templeton and Legg Mason have informed the Board regarding Legg Mason’s provision of retention incentives for certain Legg Mason corporate personnel until the Transaction closes, and Franklin Templeton’s
provision of long-term retention mechanisms for certain personnel following the closing. The Board of each Fund has received information at regular meetings throughout the past year related to the services rendered by the Manager in its management
of the Fund’s affairs and the Manager’s role in coordinating the activities of the Fund’s other service providers. Each Fund’s Board’s evaluation of the services provided by the Manager and the Subadviser(s) took into
account the Board Members’ knowledge gained as Board Members of other Funds in the Legg Mason fund complex, including knowledge gained regarding the scope and quality of the investment management and other capabilities of the Manager and the
Subadviser(s), and the quality of the Manager’s administrative and other services. The Board of each Fund observed that the scope of services provided by the Manager and the Subadviser(s), and the undertakings required of the Manager and
Subadviser(s) in connection with those services, including maintaining and monitoring their own and the Fund’s compliance programs, liquidity management programs and cybersecurity programs, had expanded over time as a result of regulatory,
market and other developments. The Board of each Fund has received and reviewed on a regular basis information from the Manager and the Subadviser(s) regarding the Fund’s compliance policies and procedures established pursuant to Rule 38a-1 under the 1940 Act, and took that information into account in its evaluation of the New Agreements. The Board of each Fund also considered the risks associated with the Fund borne by the Advisers and their
affiliates (such as entrepreneurial, operational, reputational, litigation and regulatory risk), as well as the risk management processes of the Manager and Subadviser(s).
The Board of each Fund considered information provided by Franklin Templeton regarding its business and operating structure, scale of operation, leadership and reputation, distribution capabilities, and financial
condition (pre- and post-closing).
The Board of each Fund also reviewed the qualifications, backgrounds and
responsibilities of the senior personnel of the Manager and the Subadviser(s) and the team of investment professionals primarily responsible for the day-to-day portfolio
management of the Fund. The Board of each Fund noted in particular that following the Transaction, Franklin Templeton is expected to have resources that will provide it with substantial capacity to
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28
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LMP Capital and Income Fund Inc.
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invest across the business. The Board of each Fund also considered the financial resources of Legg Mason and Franklin Templeton and the importance of having a Fund manager with, or with access
to, significant organizational and financial resources.
The Board also considered the benefits to each Fund of being part of a larger combined
organization with greater financial resources following the Transaction, particularly during periods of market disruptions and volatility. In addition, the Board also considered Franklin Templeton’s significant experience in dealing with issues
unique to the management of closed-end funds.
The Board of each Fund also considered the policies and practices
of the Manager and the Subadvisers regarding the selection of brokers and dealers and the execution of portfolio transactions for the Fund.
The Board of
each Fund received performance information for the Fund, as well as for a group of funds (the “Performance Universe”) selected by Broadridge Financial Solutions, Inc. (“Broadridge”), an independent provider of investment company
data, based on classifications provided by Thomson Reuters Lipper (“Lipper”). The Board of each Fund was provided with a description of the methodology used to determine the similarity of the Fund with the funds included in the Performance
Universe. It was noted that while the Board of each Fund has found the Broadridge data generally useful they recognized its limitations, including that the data may vary depending on the end date selected and that the results of the performance
comparisons may vary depending on the selection of the peer group and its composition over time. It was also noted that the Board of each Fund has received and discussed with management information throughout the year at periodic intervals comparing
the Fund’s performance against its benchmark and against the Fund’s peers. In addition, the Board of each Fund considered the Fund’s performance in light of overall financial market conditions. Where a Fund’s performance was
below the median during one or more specified periods, the Fund’s Board noted the explanations from the Advisers concerning the Fund’s relative performance versus the peer group for the various periods
Based on their review of the materials provided and the assurances they had received from Franklin Templeton and Legg Mason, the Board Members of each Fund
determined that the Transaction was not expected to affect adversely the nature, extent and quality of services provided by each Adviser and that the Transaction was not expected to have an adverse effect on the ability of the Advisers to provide
those services, and the Board of each Fund, including the LMP Fund, concluded that, overall, the nature, extent and quality of services expected to be provided, including performance, under the New Agreements for the Fund were sufficient for
approval.
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LMP Capital and Income Fund Inc.
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29
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Board approval of new management and new subadvisory agreements (unaudited) (cont’d)
Management Fees and Expense Ratios
The Board
of each Fund considered that it had reviewed the Fund’s management fee and total expense ratio at the November 2019 contract renewal meeting. The Board of each Fund considered that the New Management Agreement does not change any Fund’s
management fee rate or the computation method for calculating such fees, and that there is no present intention to alter expense waiver and reimbursement arrangements that are currently in effect. The Board of each Fund noted that by their terms
none of the current expense waiver and reimbursement arrangements would expire before December 2020 and that Franklin Templeton had indicated that it would consult with the applicable Fund’s Board before making any changes to the Fund’s
current expense waiver and reimbursement arrangements.
The Board of each Fund reviewed and considered the contractual management fee and the actual
management fees paid by the Fund to the Manager in light of the nature, extent and quality of the management and subadvisory services to be provided by the Manager and the Subadviser(s). The Board of each Fund also noted that the compensation paid
to the Subadviser(s) is the responsibility and expense of the Manager, or in some cases another Subadviser, and not the Fund. In addition, the Board of each Fund received and considered information provided by Broadridge comparing the contractual
management fee and the actual management fee for the Fund, as well as the total actual expenses for the Fund, with those of funds in both the relevant expense group and a broader group of funds, each selected by Broadridge based on classifications
provided by Lipper. It was noted that, while the Board of each Fund has found the Broadridge data generally useful, it recognized its limitations, including that the data may vary depending on the selection of the peer group. The Board of each Fund
also considered the overall management fee, the fees of each Subadviser and the portion of the management fee retained by the Manager after payment of the subadvisory fees, in each case in light of the services rendered for those amounts. The Board
of each Fund also received an analysis of Legg Mason complex-wide management fees for Funds with a similar strategy provided by the Manager, which, among other things, set out a framework of fees based on asset classes.
The Board of each Fund reviewed information regarding fees charged by the Manager and/or the Subadviser(s) to other U.S. clients investing primarily in an asset
class similar to that of the Fund, including, where applicable, separate accounts. The Manager reviewed with the Board of each Fund the differences in services provided to these different types of accounts, including that the Fund is provided with
certain administrative services, office facilities, and Fund officers (including the Fund’s chief executive, chief financial and chief compliance officers), and that the Manager coordinates and oversees the provision of services to the Fund by
other Fund service providers. The Board of each Fund considered the fee comparisons in light of the differences in management of these different types of accounts and the differences in associated risks borne by the Advisers.
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30
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LMP Capital and Income Fund Inc.
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In evaluating the costs of the services to be provided by the Advisers under the New Agreements, the Board Members
considered, among other things, whether management fees or other expenses would change as a result of the Transaction. Based on their review of the materials provided and the assurances they had received from Franklin Templeton and Legg Mason, the
Board Members determined that the Transaction would not increase the total fees payable by any Fund for management services.
Taking all of the above
into consideration, as well as the factors identified below, the Board of each Fund, including the LMP Fund, determined that the management fee and the subadvisory fees for the Fund were reasonable in light of the nature, extent and quality of the
services to be provided to the Fund under the New Agreements.
Profitability and Economies of Scale
The Board of each Fund received and considered an analysis of the profitability of the Manager and its affiliates in providing services to the Fund. The Board of
each Fund also received profitability information with respect to the Legg Mason fund complex as a whole. In addition, the Board of each Fund received information with respect to the Manager’s allocation methodologies used in preparing this
profitability data. It was noted that the allocation methodologies had been previously reviewed by an outside consultant. The profitability of the Manager and its affiliates was considered by each Fund’s Board not to be excessive in light of
the nature, extent and quality of the services provided to the Fund, including the LMP Fund.
The Board of each Fund received and considered information
concerning whether the Advisers realize economies of scale as the Fund’s assets grow. In conjunction with their most recent or prior deliberations concerning the Current Agreements, the Board Members have noted that advisory or management fee
reductions had been implemented for certain Funds, as well as expense limitations, and that after taking those reductions and expense limitations into account, the Board Members had determined that the total fees for management services, and
administrative services for the applicable Funds, were reasonable in light of the services provided to the Funds, including the LMP Fund, and that any economies of scale were being shared appropriately.
The Board Members noted that Franklin Templeton and Legg Mason expected to realize cost savings from the Transaction based on synergies of operations, primarily at
the holding company distribution level, as well as to benefit from possible growth of the Funds resulting from enhanced distribution capabilities. The Board of each Fund took into account that cost synergies were not the primary driver of the
Transaction. However, they noted that other factors could also affect profitability and potential economies of scale, and that it was not possible to predict with any degree of certainty how the Transaction would affect the Advisers’
profitability from their relationship with the Funds, nor to quantify at this time any possible future economies of scale. The Board Members noted they will have the opportunity to periodically re-examine such
profitability and any economies of scale going forward.
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LMP Capital and Income Fund Inc.
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31
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Board approval of new management and new subadvisory agreements (unaudited) (cont’d)
Other Benefits to the Advisers
The Board of
each Fund considered other benefits received by the Manager, the Subadviser(s) and their affiliates as a result of their relationship with the Fund, including the opportunity to offer additional products and services to Fund shareholders. In light
of the costs of providing investment management and other services to the Funds and the ongoing commitment of the Manager and the Subadviser(s) to the Funds, the Board of each Fund considered that the ancillary benefits that the Manager, the
Subadviser(s) and their affiliates received as a result of their relationship with the Fund, including the LMP Fund, were reasonable. In evaluating the fall-out benefits to be received by the Advisers under
the New Agreements, the Board Members considered whether the Transaction would have an impact on the fall-out benefits received by virtue of the Current Agreements.
The Board of each Fund considered that Franklin Templeton may derive reputational and other benefits from its ability to use the Legg Mason investment
affiliates’ names in connection with operating and marketing the Funds. The Board of each Fund considered that the Transaction, if completed, would significantly increase Franklin Templeton’s assets under management and expand Franklin
Templeton’s investment capabilities.
Conclusion
After consideration of the factors described above as well as other factors, and in the exercise of their business judgment, the Board Members, including the Independent Board Members, concluded that the New
Agreements, including the fees payable thereunder, were fair and reasonable to each Fund and that entering into the New Agreements for each Fund, including the LMP Fund, was in the best interests of the Fund’s shareholders, and they voted to
approve the New Agreements for each Fund and to recommend that the Fund’s shareholders approve the New Agreements.
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32
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LMP Capital and Income Fund Inc.
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Additional shareholder information (unaudited)
Results of annual meeting of shareholders
The Annual Meeting of Shareholders of LMP Capital and Income Fund Inc. was held on March 20, 2020 for the purpose of considering and voting upon the proposals
presented at the Meeting. The following table provides information concerning the matters voted upon at the Meeting:
Election of
directors
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Nominees
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For
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Against
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Robert D. Agdern
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16,125,707
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586,414
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Eileen A. Kamerick
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16,194,961
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517,160
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At May 31, 2020, in addition to Robert D. Agdern and Eileen A. Kamerick, the other Directors of the Fund were as follows:
Carol L.Colman
Daniel P. Cronin
Paolo M. Cucchi
William R. Hutchinson
Nisha Kumar
Jane Trust
Ratification of Selection of Independent Registered Public Accountants
To ratify the selection of PricewaterhouseCoopers LLP (“PwC”) as independent registered public accountants of the Fund for the fiscal year ended
November 30, 2020.
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For
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Against
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Abstain
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16,371,538
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162,988
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177,595
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LMP Capital and Income Fund Inc.
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33
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Dividend reinvestment plan (unaudited)
Unless you elect to receive distributions in cash (i.e., opt-out), all dividends, including any capital gain dividends and
return of capital distributions, on your Common Stock will be automatically reinvested by Computershare Trust Company, N.A., as agent for the stockholders (the “Plan Agent”), in additional shares of Common Stock under the Fund’s
Dividend Reinvestment Plan (the “Plan”). You may elect not to participate in the Plan by contacting the Plan Agent. If you do not participate, you will receive all cash distributions paid by check mailed directly to you by Computershare
Trust Company, N.A., as dividend paying agent.
If you participate in the Plan, the number of shares of Common Stock you will receive will be determined
as follows:
(1) If the market price of the Common Stock (plus $0.03 per share commission) on the payment date (or, if the payment date
is not a NYSE trading day, the immediately preceding trading day) is equal to or exceeds the net asset value per share of the Common Stock at the close of trading on the NYSE on the payment date, the Fund will issue new Common Stock at a price equal
to the greater of (a) the net asset value per share at the close of trading on the NYSE on the payment date or (b) 95% of the market price per share of the Common Stock on the payment date.
(2) If the net asset value per share of the Common Stock exceeds the market price of the Common Stock (plus $0.03 per share commission) at the close
of trading on the NYSE on the payment date, the Plan Agent will receive the dividend or distribution in cash and will buy Common Stock in the open market, on the NYSE or elsewhere, for your account as soon as practicable commencing on the trading
day following the payment date and terminating no later than the earlier of (a) 30 days after the dividend or distribution payment date, or (b) the payment date for the next succeeding dividend or distribution to be made to the stockholders;
except when necessary to comply with applicable provisions of the federal securities laws. If during this period: (i) the market price (plus $0.03 per share commission) rises so that it equals or exceeds the net asset value per share of the
Common Stock at the close of trading on the NYSE on the payment date before the Plan Agent has completed the open market purchases or (ii) if the Plan Agent is unable to invest the full amount eligible to be reinvested in open market purchases,
the Plan Agent will cease purchasing Common Stock in the open market and the Fund shall issue the remaining Common Stock at a price per share equal to the greater of (a) the net asset value per share at the close of trading on the NYSE on the
day prior to the issuance of shares for reinvestment or (b) 95% of the then current market price per share.
Common Stock in your account will be held by
the Plan Agent in non-certificated form. Any proxy you receive will include all shares of Common Stock you have received under the Plan. You may withdraw from the Plan (i.e.,
opt-out) by notifying the Plan Agent in writing at 462 South 4th Street, Suite 1600, Louisville, KY 40202 or by calling the Plan Agent at 1-888-888-0151. Such withdrawal will be effective immediately if notice is received by the Plan Agent not less than ten business days prior to any dividend or distribution record date; otherwise such
withdrawal will be effective as soon as practicable after the Plan Agent’s investment of the most recently declared dividend or distribution on the Common Stock.
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34
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LMP Capital and Income Fund Inc.
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Plan participants who sell their shares will be charged a service charge (currently $5.00 per transaction) and the
Plan Agent is authorized to deduct brokerage charges actually incurred from the proceeds (currently $0.05 per share commission). There is no service charge for reinvestment of your dividends or distributions in Common Stock. However, all
participants will pay a pro rata share of brokerage commissions incurred by the Plan Agent when it makes open market purchases. Because all dividends and distributions will be automatically reinvested in additional shares of Common Stock, this
allows you to add to your investment through dollar cost averaging, which may lower the average cost of your Common Stock over time. Dollar cost averaging is a technique for lowering the average cost per share over time if the Fund’s net asset
value declines. While dollar cost averaging has definite advantages, it cannot assure profit or protect against loss in declining markets.
Automatically
reinvesting dividends and distributions does not mean that you do not have to pay income taxes due upon receiving dividends and distributions. Investors will be subject to income tax on amounts reinvested under the Plan.
The Fund reserves the right to amend or terminate the Plan if, in the judgment of the Board of Directors, the change is warranted. The Plan may be terminated,
amended or supplemented by the Fund upon notice in writing mailed to stockholders at least 30 days prior to the record date for the payment of any dividend or distribution by the Fund for which the termination or amendment is to be effective. Upon
any termination, you will be sent cash for any fractional share of Common Stock in your account. You may elect to notify the Plan Agent in advance of such termination to have the Plan Agent sell part or all of your Common Stock on your behalf.
Additional information about the Plan and your account may be obtained from the Plan Agent at 462 South 4th Street, Suite 1600, Louisville, KY 40202 or by calling the Plan Agent at 1-888-888-0151.
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LMP Capital and Income Fund Inc.
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35
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LMP
Capital and Income Fund Inc.
Directors
Robert D. Agdern
Carol L. Colman
Daniel P. Cronin
Paolo M. Cucchi
William R. Hutchinson
Eileen A. Kamerick
Nisha Kumar
Jane Trust
Chairman
Officers
Jane Trust
President and Chief Executive Officer
Christopher Berarducci
Treasurer and Principal Financial Officer
Fred
Jensen*
Chief Compliance Officer
Jenna Bailey
Identity Theft Prevention Officer
Robert I.
Frenkel
Secretary and Chief Legal Officer
Thomas
C. Mandia
Assistant Secretary
Jeanne M. Kelly
Senior Vice President
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*
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Effective April 17, 2020, Mr. Jensen became Chief Compliance Officer.
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LMP Capital and Income Fund Inc.
620 Eighth Avenue
49th Floor
New York, NY 10018
Investment manager
Legg Mason Partners Fund
Advisor, LLC
Subadvisers
ClearBridge Investments, LLC
Western Asset Management Company, LLC
Western Asset Management Company Limited
Custodian
The Bank of New York Mellon
Transfer agent
Computershare
Inc.
462 South 4th Street, Suite 1600
Louisville, KY 40202
Independent registered
public accounting firm
PricewaterhouseCoopers LLP
Baltimore, MD
Legal counsel
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, NY 10017
New York Stock
Exchange Symbol
SCD
Legg Mason Funds Privacy and Security Notice
Your Privacy and the Security of Your Personal Information is Very Important to the Legg Mason Funds
This Privacy and Security Notice (the “Privacy Notice”) addresses the Legg Mason Funds’ privacy and data protection practices with respect to
nonpublic personal information the Funds receive. The Legg Mason Funds include any funds sold by the Funds’ distributor, Legg Mason Investor Services, LLC, as well as Legg Mason-sponsored closed-end
funds. The provisions of this Privacy Notice apply to your information both while you are a shareholder and after you are no longer invested with the Funds.
The Type of Nonpublic Personal Information the Funds Collect About You
The Funds collect and
maintain nonpublic personal information about you in connection with your shareholder account. Such information may include, but is not limited to:
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Personal information included on applications or other forms;
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Account balances, transactions, and mutual fund holdings and positions;
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Bank account information, legal documents, and identity verification documentation;
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Online account access user IDs, passwords, security challenge question responses; and
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Information received from consumer reporting agencies regarding credit history and creditworthiness (such as the amount of an individual’s total debt,
payment history, etc.).
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How the Funds Use Nonpublic Personal Information About You
The Funds do not sell or share your nonpublic personal information with third parties or with affiliates for their marketing purposes, or with other financial
institutions or affiliates for joint marketing purposes, unless you have authorized the Funds to do so. The Funds do not disclose any nonpublic personal information about you except as may be required to perform transactions or services you have
authorized or as permitted or required by law. The Funds may disclose information about you to:
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Employees, agents, and affiliates on a “need to know” basis to enable the Funds to conduct ordinary business or to comply with obligations to
government regulators;
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Service providers, including the Funds’ affiliates, who assist the Funds as part of the ordinary course of business (such as printing, mailing services, or
processing or servicing your account with us) or otherwise perform services on the Funds’ behalf, including companies that may perform statistical analysis, market research and marketing services solely for the Funds;
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Permit access to transfer, whether in the United States or countries outside of the United States to such Funds’ employees, agents and affiliates and
service providers as required to enable the Funds to conduct ordinary business, or to comply with obligations to government regulators;
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The Funds’ representatives such as legal counsel, accountants and auditors to enable the Funds to conduct ordinary business, or to comply with obligations
to government regulators;
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Fiduciaries or representatives acting on your behalf, such as an IRA custodian or trustee of a grantor trust.
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NOT PART OF THE
SEMI-ANNUAL REPORT
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Legg Mason Funds Privacy and Security Notice (cont’d)
Except as otherwise permitted by applicable law, companies acting on the Funds’
behalf, including those outside the United States, are contractually obligated to keep nonpublic personal information the Funds provide to them confidential and to use the information the Funds share only to provide the services the Funds ask them
to perform.
The Funds may disclose nonpublic personal information about you when necessary to enforce their rights or protect against fraud, or as
permitted or required by applicable law, such as in connection with a law enforcement or regulatory request, subpoena, or similar legal process. In the event of a corporate action or in the event a Fund service provider changes, the Funds may be
required to disclose your nonpublic personal information to third parties. While it is the Funds’ practice to obtain protections for disclosed information in these types of transactions, the Funds cannot guarantee their privacy policy will
remain unchanged.
Keeping You Informed of the Funds’ Privacy and Security Practices
The Funds will notify you annually of their privacy policy as required by federal law. While the Funds reserve the right to modify this policy at any time they
will notify you promptly if this privacy policy changes.
The Funds’ Security Practices
The Funds maintain appropriate physical, electronic and procedural safeguards designed to guard your nonpublic personal information. The Funds’ internal data
security policies restrict access to your nonpublic personal information to authorized employees, who may use your nonpublic personal information for Fund business purposes only.
Although the Funds strive to protect your nonpublic personal information, they cannot ensure or warrant the security of any information you provide or transmit to them, and you do so at your own risk. In the event
of a breach of the confidentiality or security of your nonpublic personal information, the Funds will attempt to notify you as necessary so you can take appropriate protective steps. If you have consented to the Funds using electronic communications
or electronic delivery of statements, they may notify you under such circumstances using the most current email address you have on record with them.
In
order for the Funds to provide effective service to you, keeping your account information accurate is very important. If you believe that your account information is incomplete, not accurate or not current, if you have questions about the
Funds’ privacy practices, or our use of your nonpublic personal information, write the Funds using the contact information on your account statements, email the Funds by clicking on the Contact Us section of the Funds’ website at
www.leggmason.com, or contact the Funds at 1-888-777-0102.
Revised April 2018
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NOT PART OF THE
SEMI-ANNUAL REPORT
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LMP Capital and Income Fund Inc.
LMP Capital and Income Fund Inc.
620 Eighth Avenue
49th Floor
New York, NY 10018
Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of
1940, as amended, that from time to time the Fund may purchase, at market prices, shares of its stock.
The Fund files its complete schedule of portfolio
holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The Fund’s Forms N-PORT are available on the SEC’s website at www.sec.gov. To obtain information on Form N-PORT, shareholders can call the Fund at 1-888-777-0102.
Information on how the Fund voted proxies relating to
portfolio securities during the prior 12-month period ended June 30th of each year and a description of the policies and procedures that the Fund uses to determine how to vote proxies related to portfolio
transactions are available (1) without charge, upon request, by calling 1-888-777-0102, (2) at www.lmcef.com and (3) on
the SEC’s website at www.sec.gov.
This report is transmitted to the shareholders of LMP Capital and Income Fund Inc. for their information. This is
not a prospectus, circular or representation intended for use in the purchase of shares of the Fund or any securities mentioned in this report.
Computershare Inc.
462 South 4th Street, Suite 1600
Louisville, KY 40202
FD04219 7/20 SR20-3921