|
|
|
|
|
|
|
Assets:
|
|
|
|
|
Investments, at value (Cost $226,307,069)
|
|
$
|
343,210,778
|
|
Foreign currency, at value (Cost $2)
|
|
|
2
|
|
Cash
|
|
|
77,500
|
|
Dividends and interest receivable
|
|
|
918,624
|
|
Receivable for securities sold
|
|
|
347,602
|
|
Prepaid expenses
|
|
|
2,102
|
|
Total Assets
|
|
|
344,556,608
|
|
|
|
Liabilities:
|
|
|
|
|
Loan payable (Note 5)
|
|
|
61,000,000
|
|
Payable for securities purchased
|
|
|
1,471,317
|
|
Investment management fee payable
|
|
|
247,089
|
|
Interest expense payable
|
|
|
15,307
|
|
Directors fees payable
|
|
|
8,644
|
|
Accrued expenses
|
|
|
47,600
|
|
Total Liabilities
|
|
|
62,789,957
|
|
Total Net Assets
|
|
$
|
281,766,651
|
|
|
|
Net Assets:
|
|
|
|
|
Par value ($0.001 par value; 17,686,708 shares issued and outstanding; 100,000,000 shares
authorized)
|
|
$
|
17,687
|
|
Paid-in capital in excess of par value
|
|
|
186,190,673
|
|
Total distributable earnings (loss)
|
|
|
95,558,291
|
|
Total Net Assets
|
|
$
|
281,766,651
|
|
|
|
Shares Outstanding
|
|
|
17,686,708
|
|
|
|
Net Asset Value
|
|
|
$15.93
|
|
See Notes to Financial
Statements.
|
|
|
LMP Capital and Income Fund Inc. 2021 Annual Report
|
|
17
|
Statement of operations
For the Year Ended November 30, 2021
|
|
|
|
|
|
|
Investment Income:
|
|
|
|
|
Dividends
|
|
$
|
12,340,778
|
|
Interest
|
|
|
287,955
|
|
Less: Foreign taxes withheld
|
|
|
(42,951)
|
|
Total Investment
Income
|
|
|
12,585,782
|
|
|
|
Expenses:
|
|
|
|
|
Investment management fee (Note 2)
|
|
|
2,774,692
|
|
Interest expense (Note 5)
|
|
|
462,971
|
|
Directors fees
|
|
|
90,563
|
|
Audit and tax fees
|
|
|
67,004
|
|
Transfer agent fees
|
|
|
63,824
|
|
Legal fees
|
|
|
45,782
|
|
Fund accounting fees
|
|
|
34,904
|
|
Stock exchange listing fees
|
|
|
12,498
|
|
Shareholder reports
|
|
|
11,754
|
|
Insurance
|
|
|
3,434
|
|
Custody fees
|
|
|
1,659
|
|
Miscellaneous expenses
|
|
|
8,361
|
|
Total Expenses
|
|
|
3,577,446
|
|
Net Investment Income
|
|
|
9,008,336
|
|
|
|
Realized and Unrealized Gain (Loss) on Investments and Foreign Currency Transactions (Notes 1 and 3):
|
|
|
|
|
Net Realized Gain From:
|
|
|
|
|
Investment transactions
|
|
|
9,779,737
|
|
Foreign currency transactions
|
|
|
67
|
|
Net Realized Gain
|
|
|
9,779,804
|
|
Change in Net Unrealized Appreciation (Depreciation) From:
|
|
|
|
|
Investments
|
|
|
49,878,450
|
|
Foreign currencies
|
|
|
(357)
|
|
Change in Net Unrealized Appreciation
(Depreciation)
|
|
|
49,878,093
|
|
Net Gain on Investments and Foreign Currency Transactions
|
|
|
59,657,897
|
|
Increase in Net Assets From Operations
|
|
$
|
68,666,233
|
|
See Notes to Financial
Statements.
|
|
|
18
|
|
LMP Capital and Income Fund Inc. 2021 Annual Report
|
Statements of changes in net assets
|
|
|
|
|
|
|
|
|
For the Years Ended November 30,
|
|
2021
|
|
|
2020
|
|
|
|
|
Operations:
|
|
|
|
|
|
|
|
|
Net investment income
|
|
$
|
9,008,336
|
|
|
$
|
10,060,664
|
|
Net realized gain (loss)
|
|
|
9,779,804
|
|
|
|
(18,772,619)
|
|
Change in net unrealized appreciation (depreciation)
|
|
|
49,878,093
|
|
|
|
(13,651,087)
|
|
Increase (Decrease) in Net Assets From
Operations
|
|
|
68,666,233
|
|
|
|
(22,363,042)
|
|
|
|
|
Distributions to Shareholders From (Note 1):
|
|
|
|
|
|
|
|
|
Total distributable earnings
|
|
|
(9,314,359)
|
|
|
|
(8,187,233)
|
|
Return of capital
|
|
|
(9,261,692)
|
|
|
|
(14,112,096)
|
|
Decrease in Net Assets From Distributions
to Shareholders
|
|
|
(18,576,051)
|
|
|
|
(22,299,329)
|
|
|
|
|
Fund Share Transactions:
|
|
|
|
|
|
|
|
|
Cost of shares repurchased (296,622 and 0 shares repurchased, respectively) (Note
7)
|
|
|
(4,197,215)
|
|
|
|
|
|
Decrease in Net Assets From Fund Share
Transactions
|
|
|
(4,197,215)
|
|
|
|
|
|
|
|
|
Capital Contributions:
|
|
|
|
|
|
|
|
|
Capital contributions
|
|
|
|
|
|
|
15,262
|
|
Increase (Decrease) in Net Assets
|
|
|
45,892,967
|
|
|
|
(44,647,109)
|
|
|
|
|
Net Assets:
|
|
|
|
|
|
|
|
|
Beginning of year
|
|
|
235,873,684
|
|
|
|
280,520,793
|
|
End of year
|
|
$
|
281,766,651
|
|
|
$
|
235,873,684
|
|
See Notes to Financial
Statements.
|
|
|
LMP Capital and Income Fund Inc. 2021 Annual Report
|
|
19
|
Statement of cash flows
For the Year Ended November 30, 2021
|
|
|
|
|
|
|
Increase (Decrease) in Cash:
|
|
|
|
|
Cash Flows from Operating Activities:
|
|
|
|
|
Net increase in net assets resulting from operations
|
|
$
|
68,666,233
|
|
Adjustments to reconcile net increase in net assets resulting from operations to net cash
provided (used) by operating activities:
|
|
|
|
|
Purchases of portfolio securities
|
|
|
(104,192,361)
|
|
Sales of portfolio securities
|
|
|
111,452,509
|
|
Net purchases, sales and maturities of short-term investments
|
|
|
(11,100,363)
|
|
Net amortization of premium (accretion of discount)
|
|
|
68,400
|
|
Return of capital
|
|
|
6,422,306
|
|
Securities litigation proceeds
|
|
|
3,613
|
|
Decrease in receivable for securities sold
|
|
|
3,080,150
|
|
Decrease in interest and dividends receivable
|
|
|
636,134
|
|
Decrease in prepaid expenses
|
|
|
1,534
|
|
Increase in payable for securities purchased
|
|
|
1,358,532
|
|
Increase in investment management fee payable
|
|
|
50,026
|
|
Increase in Directors fees payable
|
|
|
908
|
|
Increase in interest expense payable
|
|
|
1,869
|
|
Decrease in accrued expenses
|
|
|
(23,337)
|
|
Net realized gain on investments
|
|
|
(9,779,737)
|
|
Change in net unrealized appreciation (depreciation) of investments
|
|
|
(49,878,450)
|
|
Net Cash Provided in Operating
Activities*
|
|
|
16,767,966
|
|
|
|
Cash Flows from Financing Activities:
|
|
|
|
|
Distributions paid on common stock
|
|
|
(18,576,051)
|
|
Proceeds from loan facility borrowings
|
|
|
6,000,000
|
|
Payment for Fund shares repurchased
|
|
|
(4,197,215)
|
|
Net Cash Used by Financing
Activities
|
|
|
(16,773,266)
|
|
Net Decrease in Cash and Restricted
Cash
|
|
|
(5,300)
|
|
Cash and restricted cash at beginning of year
|
|
|
82,802
|
|
Cash and restricted cash at end of year
|
|
$
|
77,502
|
|
*
|
Included in operating expenses is cash of $461,102 paid for interest on borrowings.
|
|
The following table provides a reconciliation of cash (including foreign currency) 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.
|
|
|
|
|
|
|
|
|
November 30, 2021
|
|
Cash
|
|
|
$ 77,502
|
|
Restricted cash
|
|
|
|
|
Total cash and restricted cash shown in the Statement of Cash Flows
|
|
|
$ 77,502
|
|
See Notes to Financial
Statements.
|
|
|
20
|
|
LMP Capital and Income Fund Inc. 2021 Annual Report
|
Financial highlights
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For a share of capital stock outstanding throughout each year ended November 30:
|
|
|
|
20211
|
|
|
20201
|
|
|
20191
|
|
|
20181
|
|
|
20171
|
|
|
|
|
|
|
|
Net asset value, beginning of year
|
|
|
$13.12
|
|
|
|
$15.60
|
|
|
|
$14.24
|
|
|
|
$15.34
|
|
|
|
$15.33
|
|
|
|
|
|
|
|
Income (loss) from operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
0.50
|
|
|
|
0.56
|
|
|
|
0.44
|
|
|
|
0.53
|
|
|
|
0.47
|
|
Net realized and unrealized gain (loss)
|
|
|
3.33
|
|
|
|
(1.80)
|
|
|
|
2.16
|
|
|
|
(0.39)
|
|
|
|
0.78
|
|
Total income (loss) from
operations
|
|
|
3.83
|
|
|
|
(1.24)
|
|
|
|
2.60
|
|
|
|
0.14
|
|
|
|
1.25
|
|
|
|
|
|
|
|
Less distributions from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
(0.52)
|
|
|
|
(0.46)
|
|
|
|
(0.45)
|
|
|
|
(0.54)
|
|
|
|
(0.57)
|
|
Return of capital
|
|
|
(0.52)
|
|
|
|
(0.78)
|
|
|
|
(0.79)
|
|
|
|
(0.70)
|
|
|
|
(0.67)
|
|
Total
distributions
|
|
|
(1.04)
|
|
|
|
(1.24)
|
|
|
|
(1.24)
|
|
|
|
(1.24)
|
|
|
|
(1.24)
|
|
Anti-dilutive impact of repurchase plan
|
|
|
0.02
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital contributions
|
|
|
|
|
|
|
0.00
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value, end of year
|
|
|
$15.93
|
|
|
|
$13.12
|
|
|
|
$15.60
|
|
|
|
$14.24
|
|
|
|
$15.34
|
|
|
|
|
|
|
|
Market price, end of year
|
|
|
$14.27
|
|
|
|
$11.33
|
|
|
|
$14.62
|
|
|
|
$12.42
|
|
|
|
$13.76
|
|
Total return, based on NAV4,5
|
|
|
30.38
|
%
|
|
|
(5.82)
|
%6
|
|
|
19.45
|
%
|
|
|
0.99
|
%
|
|
|
8.40
|
%
|
Total return, based on Market Price7
|
|
|
36.28
|
%
|
|
|
(12.83)
|
%
|
|
|
29.56
|
%
|
|
|
(1.04)
|
%
|
|
|
14.47
|
%
|
|
|
|
|
|
|
Net assets, end of year (millions)
|
|
|
$282
|
|
|
|
$236
|
|
|
|
$281
|
|
|
|
$256
|
|
|
|
$276
|
|
|
|
|
|
|
|
Ratios to average net assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross expenses
|
|
|
1.33
|
%
|
|
|
1.65
|
%
|
|
|
2.18
|
%
|
|
|
2.18
|
%
|
|
|
1.80
|
%
|
Net expenses
|
|
|
1.33
|
|
|
|
1.65
|
8
|
|
|
2.11
|
8
|
|
|
2.18
|
|
|
|
1.80
|
|
Net investment income
|
|
|
3.35
|
|
|
|
4.40
|
|
|
|
2.98
|
|
|
|
3.62
|
|
|
|
3.00
|
|
|
|
|
|
|
|
Portfolio turnover rate
|
|
|
33
|
%
|
|
|
52
|
%
|
|
|
36
|
%
|
|
|
26
|
%
|
|
|
37
|
%
|
|
|
|
|
|
|
Supplemental data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan Outstanding, End of Year (000s)
|
|
|
$61,000
|
|
|
|
$55,000
|
|
|
|
$82,000
|
|
|
|
$90,000
|
|
|
|
$90,000
|
|
Asset Coverage Ratio for Loan
Outstanding9
|
|
|
562
|
%
|
|
|
529
|
%
|
|
|
442
|
%
|
|
|
384
|
%
|
|
|
407
|
%
|
Asset Coverage, per $1,000 Principal Amount of Loan Outstanding9
|
|
|
$5,619
|
|
|
|
$5,289
|
|
|
|
$4,421
|
|
|
|
$3,845
|
|
|
|
$4,065
|
|
Weighted Average Loan (000s)
|
|
|
$57,663
|
|
|
|
$62,973
|
|
|
|
$82,548
|
|
|
|
$90,000
|
|
|
|
$88,849
|
|
Weighted Average Interest Rate on Loan
|
|
|
0.79
|
%
|
|
|
1.44
|
%
|
|
|
2.98
|
%
|
|
|
2.63
|
%
|
|
|
1.72
|
%
|
See Notes to Financial
Statements.
|
|
|
LMP Capital and Income Fund Inc. 2021 Annual Report
|
|
21
|
Financial highlights (contd)
1
|
Per share amounts have been calculated using the average shares method.
|
2
|
The repurchase plan was completed at an average repurchase price of $14.15 for 296,622 shares and $4,197,215 for the year
ended November 30, 2021.
|
3
|
Amount represents less than $0.005 per share.
|
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.
|
5
|
The total return calculation assumes that distributions are reinvested at NAV. Past performance is no guarantee of future
results.
|
6
|
Includes the effect of a capital contribution. Absent the capital contribution, the total return would have been
unchanged.
|
7
|
The total return calculation assumes that distributions are reinvested in accordance with the Funds dividend
reinvestment plan. Past performance is no guarantee of future results.
|
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.
|
|
|
22
|
|
LMP Capital and Income Fund Inc. 2021 Annual Report
|
Notes to financial statements
1. Organization and significant accounting policies
LMP Capital and Income Fund Inc. (the Fund) was incorporated in Maryland on November 12, 2003 and is registered as a non-diversified, closed-end management
investment company under the Investment Company Act of 1940, as amended (the 1940 Act). The Board of Directors authorized 100 million shares of $0.001 par value common stock. The Funds investment objective is total return with
an emphasis on income.
Under normal market conditions, the Fund seeks to maximize total return by investing at least 80% of its Managed Assets 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 ClearBridges view of economic, market or political conditions, fiscal and monetary
policy and security valuation.
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 typically 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 Funds Board of Directors.
|
|
|
LMP Capital and Income Fund Inc. 2021 Annual Report
|
|
23
|
Notes to financial statements (contd)
The Board of Directors is
responsible for the valuation process and has delegated the supervision of the daily valuation process to the Global Fund Valuation Committee (known as Legg Mason North Atlantic Fund Valuation Committee prior to March 1, 2021) (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 Funds 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 issuers 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.
|
|
|
24
|
|
LMP Capital and Income Fund Inc. 2021 Annual Report
|
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:
|
|
Level 1 quoted prices in active markets for identical investments
|
|
|
Level 2 other significant observable inputs (including quoted prices for similar investments, interest rates,
prepayment speeds, credit risk, etc.)
|
|
|
Level 3 significant unobservable inputs (including the Funds own assumptions in determining the fair value of
investments)
|
The inputs or 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 Funds assets carried at fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
Description
|
|
Quoted Prices
(Level 1)
|
|
|
Other Significant
Observable Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
Total
|
|
Long-Term Investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stocks
|
|
$
|
187,320,779
|
|
|
|
|
|
|
|
|
|
|
$
|
187,320,779
|
|
Master Limited Partnerships
|
|
|
75,190,736
|
|
|
|
|
|
|
|
|
|
|
|
75,190,736
|
|
Convertible Preferred Stocks:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Communication Services
|
|
|
3,511,020
|
|
|
$
|
3,725,838
|
|
|
|
|
|
|
|
7,236,858
|
|
Consumer Discretionary
|
|
|
4,702,480
|
|
|
|
1,876,979
|
|
|
|
|
|
|
|
6,579,459
|
|
Other Convertible Preferred Stocks
|
|
|
35,881,216
|
|
|
|
|
|
|
|
|
|
|
|
35,881,216
|
|
Investments in Underlying Funds
|
|
|
11,243,705
|
|
|
|
|
|
|
|
|
|
|
|
11,243,705
|
|
Convertible Bonds & Notes
|
|
|
|
|
|
|
6,990,375
|
|
|
|
|
|
|
|
6,990,375
|
|
Preferred Stocks
|
|
|
1,506,890
|
|
|
|
|
|
|
|
|
|
|
|
1,506,890
|
|
Total Long-Term Investments
|
|
|
319,356,826
|
|
|
|
12,593,192
|
|
|
|
|
|
|
|
331,950,018
|
|
Short-Term Investments
|
|
|
11,260,760
|
|
|
|
|
|
|
|
|
|
|
|
11,260,760
|
|
Total Investments
|
|
$
|
330,617,586
|
|
|
$
|
12,593,192
|
|
|
|
|
|
|
$
|
343,210,778
|
|
|
See Schedule of Investments for additional detailed categorizations.
|
(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. 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.
|
|
|
LMP Capital and Income Fund Inc. 2021 Annual Report
|
|
25
|
Notes to financial statements (contd)
(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 Funds total assets are invested in MLPs that are treated for U.S. federal tax 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 Funds 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 is presented in the Statement of Cash Flows.
|
|
|
26
|
|
LMP Capital and Income Fund Inc. 2021 Annual Report
|
(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.
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 Funds 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 Funds 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 may 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.
|
|
|
LMP Capital and Income Fund Inc. 2021 Annual Report
|
|
27
|
Notes to financial statements (contd)
(h) Return of capital estimates. Distributions received from the Funds investments in MLPs generally are comprised of income and return of capital and
distributions received from the Funds 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 Funds 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 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 Funds Board of Directors. Under the Funds Managed
Distribution Policy, if, for any quarterly distribution, the value of the Funds net investment income and net realized capital gain is less than the amount of the distribution, the difference will be distributed from the Funds 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 Funds 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 custodians fees is paid indirectly by credits earned on the Funds cash on deposit with the bank.
|
|
|
28
|
|
LMP Capital and Income Fund Inc. 2021 Annual Report
|
(l) Federal and other taxes. It is the Funds 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 Funds
financial statements.
The Fund may invest without limit in the securities of MLPs, so long as no more than 25% of its total assets are invested in MLPs that
are treated as qualified publicly traded partnerships for U.S. federal income tax purposes. As a limited partner in the MLPs, the Fund reports its allocable share of the MLPs 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 Funds 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 Funds 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 shareholders basis in their
shares of the Fund.
Management has analyzed the Funds tax positions taken on income tax returns for all open tax years and has concluded that as of
November 30, 2021, no provision for income tax is required in the Funds financial statements. The Funds 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.
During the current year, the following reclassifications have been made:
|
|
|
|
|
|
|
|
|
|
|
Total Distributable
Earnings (Loss)
|
|
|
Paid-in
Capital
|
|
(a)
|
|
$
|
(6,177,231)
|
|
|
$
|
6,177,231
|
|
(a)
|
Reclassifications are due to differences between actual and estimated information for the prior year related to the
Funds investments in REITs and MLPs.
|
2. Investment management agreement and other transactions with affiliates
Legg Mason Partners Fund Advisor, LLC (LMPFA) is the Funds investment manager. ClearBridge Investments, LLC (ClearBridge),
Western Asset Management Company, LLC (Western Asset) and Western Asset Management Company Limited (Western Asset London) are the Funds subadvisers. LMPFA, ClearBridge, Western Asset and Western Asset London are
indirect, wholly-owned subsidiaries of Franklin Resources, Inc. (Franklin Resources).
|
|
|
LMP Capital and Income Fund Inc. 2021 Annual Report
|
|
29
|
Notes to financial statements (contd)
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 Funds average daily net assets plus the proceeds of any outstanding
borrowings used for leverage and any proceeds from the issuance of preferred stock (Managed Assets).
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 Funds assets between equity and fixed income investments and performing the day-to-day management of the
Funds investments in equity securities. Western Asset provides advisory services to the Fund by performing the day-to-day management of the Funds 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 London
provides certain advisory services to the Fund relating to currency transactions and investments in non-U.S. dollar denominated securities. Western Asset London does not receive any compensation from the Fund. In turn, Western Asset pays Western
Asset London monthly a subadvisory fee of 0.30% on the assets managed by Western Asset London.
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 Funds assets, including those investments purchased with leverage.
All officers and one Director of the Fund are employees of Franklin Resources or its affiliates and do not receive compensation from the Fund.
3. Investments
During the year ended
November 30, 2021, the aggregate cost of purchases and proceeds from sales of investments (excluding short-term investments) were as follows:
|
|
|
|
|
Purchases
|
|
|
$104,192,361
|
|
Sales
|
|
|
111,452,509
|
|
|
|
|
30
|
|
LMP Capital and Income Fund Inc. 2021 Annual Report
|
At November 30, 2021, the aggregate cost of investments and the aggregate gross unrealized
appreciation and depreciation of investments for federal income tax purposes were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
|
|
|
Gross
Unrealized
Appreciation
|
|
|
Gross
Unrealized
Depreciation
|
|
|
Net
Unrealized
Appreciation
|
|
Securities
|
|
$
|
215,563,928
|
|
|
$
|
135,909,582
|
|
|
$
|
(8,262,732)
|
|
|
$
|
127,646,850
|
|
4. Derivative instruments and hedging activities
During the year ended November 30, 2021, the Fund did not invest in derivative instruments.
5. Loan
The Fund has a revolving credit
agreement with Pershing LLC (Credit Agreement), which permits the Fund to borrow up to an aggregate amount of $110,000,000, subject to approval by Pershing LLC, and renews daily for a 180-day term unless notice to the contrary is given
to the Fund. On November 12, 2021, the Fund received notice from Pershing LLC that the Credit Agreement will terminate effective May 11, 2022, absent subsequent notice to the contrary. On May 27, 2021, the Fund amended its credit
agreement with Pershing LLC. Under the amendment, effective June 20, 2021, the Fund pays interest on borrowings calculated based on the Overnight Bank Funding Rate plus applicable margin. The Overnight Bank Funding Rate means the Overnight Bank
Funding Rate as reported by the New York Federal Reserve in the FR2420 Report of Selected Money Market Rates or any successor report or website. Prior to June 20, 2021, the interest on the loan was 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 Funds custodian on the behalf of Pershing, LLC. The Funds Credit
Agreement contains customary covenants that, among other things, may limit the Funds 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 Funds ability to utilize borrowing under the agreement. Interest expense related to the loan for the year ended November 30, 2021 was $462,971. For the year ended November 30, 2021, the Fund had an average daily loan
balance outstanding of $57,663,014 and the weighted average interest rate was 0.79%. At November 30, 2021, the Fund had $61,000,000 of borrowings outstanding per this Credit Agreement.
|
|
|
LMP Capital and Income Fund Inc. 2021 Annual Report
|
|
31
|
Notes to financial statements (contd)
6.
Distributions subsequent to November 30, 2021
The following distribution has been declared by the Funds Board of Directors and is payable
subsequent to the period end of this report:
|
|
|
|
|
|
|
|
|
Record Date
|
|
Payable Date
|
|
|
Amount
|
|
12/23/2021
|
|
|
12/31/2021
|
|
|
$
|
0.2600
|
|
7. Stock repurchase program
On November 16, 2015, the Fund announced that the Funds Board of Directors (the Board) had authorized the Fund to repurchase in the open market up
to approximately 10% of the Funds outstanding common stock when the Funds 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 year ended November 30, 2021, the Fund repurchased and retired 1.65% of its common shares outstanding under the repurchase plan. The weighted average
discount per share on these repurchases was 8.41% for the year ended November 30, 2021. Shares repurchased and the corresponding dollar amount are included in the Statement of Changes in Net Assets. The anti-dilutive impact of these share
repurchases is included in the Financial Highlights.
Since the commencement of the stock repurchase program through November 30, 2021, the Fund repurchased
296,622 shares or 1.65% of its common shares outstanding for a total amount of $4,197,215.
8. Income tax information and distributions to
shareholders
The tax character of distributions paid during the fiscal years ended November 30, was as follows:
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
|
2020
|
|
Distributions paid from:
|
|
|
|
|
|
|
|
|
Ordinary income
|
|
$
|
9,314,359
|
|
|
$
|
8,187,233
|
|
Tax return of capital
|
|
|
9,261,692
|
|
|
|
14,112,096
|
|
Total distributions paid
|
|
$
|
18,576,051
|
|
|
$
|
22,299,329
|
|
As of November 30, 2021, the components of distributable earnings (loss) on a tax basis were as follows:
|
|
|
|
|
Deferred capital losses*
|
|
$
|
(14,139,682)
|
|
Other book/tax temporary differences(a)
|
|
|
(17,948,521)
|
|
Unrealized appreciation (depreciation)(b)
|
|
|
127,646,494
|
|
Total distributable earnings (loss) net
|
|
$
|
95,558,291
|
|
|
|
|
32
|
|
LMP Capital and Income Fund Inc. 2021 Annual Report
|
*
|
These capital losses have been deferred in the current year as either short-term or long-term losses. The losses will be
deemed to occur on the first day of the next taxable year in the same character as they were originally deferred and will be available to offset future taxable capital gains.
|
(a)
|
Other book/tax temporary differences are attributable to book/tax differences in the treatment of certain passive activity
losses from partnership investments and book/tax differences in the timing of the deductibility of various expenses.
|
(b)
|
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable to the tax deferral
of losses on wash sales and the difference between the book and tax cost basis in partnership investments.
|
9. Recent
accounting pronouncement
In March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2020-04,
Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting. In January 2021, the FASB issued ASU No. 2021-01, with further amendments to Topic 848. The amendments in the ASUs
provide optional temporary accounting recognition and financial reporting relief from the effect of certain types of contract modifications due to the planned discontinuation of the LIBOR and other interbank-offered based reference rates as of the
end of 2021 and 2023. The ASUs are effective for certain reference rate-related contract modifications that occur during the period March 12, 2020 through December 31, 2022. Management has reviewed the requirements and believes the
adoption of these ASUs will not have a material impact on the financial statements.
10. Other matters
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 Funds investments and negatively impact the Funds 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. On March 5, 2021, the ICE Benchmark Administration, the administrator of LIBOR, stated that it will cease the publication of (i) the
overnight and one-, three-, six- and twelve-month USD LIBOR settings immediately following the LIBOR publication on Friday, June 30, 2023 and (ii) all other LIBOR settings, including the one-week and two-month USD LIBOR settings,
immediately following the LIBOR publication on Friday, December 31, 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
|
|
|
LMP Capital and Income Fund Inc. 2021 Annual Report
|
|
33
|
Notes to financial statements (contd)
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 Funds investments cannot yet be determined.
|
|
|
34
|
|
LMP Capital and Income Fund Inc. 2021 Annual Report
|
Report of independent registered public accounting firm
To the Board of Directors and Shareholders of LMP Capital and Income Fund Inc.
Information about Directors and Officers
The
business and affairs of LMP Capital and Income Fund Inc. (the Fund) are conducted by management under the supervision and subject to the direction of its Board of Directors. The business address of each Director is c/o Jane Trust, Legg
Mason, 100 International Drive, 11th Floor, Baltimore, Maryland 21202. Information pertaining to the Directors and officers of the Fund is set forth below.
The
Funds annual proxy statement includes additional information about Directors and is available, without charge, upon request by calling the Fund at 1-888-777-0102.
|
|
|
Independent Directors
|
|
|
Robert D. Agdern
|
|
|
|
|
Year of birth
|
|
1950
|
Position(s) held with Fund1
|
|
Director and Member of Nominating, Audit, Compensation and Pricing and Valuation Committees, and Compliance Liaison, Class III
|
Term of office1 and length of time served
|
|
Since 2015
|
Principal occupation(s) during the past five years
|
|
Member of the Advisory Committee of the Dispute Resolution Research Center at the Kellogg Graduate School of Business, Northwestern University (2002 to 2016); formerly, Deputy General
Counsel responsible for western hemisphere matters for BP PLC (1999 to 2001); Associate General Counsel at Amoco Corporation responsible for corporate, chemical, and refining and marketing matters and special assignments (1993 to 1998) (Amoco merged
with British Petroleum in 1998 forming BP PLC)
|
Number of portfolios in fund complex overseen by Director (including the Fund)
|
|
20
|
Other board memberships held by Director during the past five years
|
|
None
|
|
|
Carol L. Colman
|
|
|
|
|
Year of birth
|
|
1946
|
Position(s) held with Fund1
|
|
Director and Member of Nominating, Audit and Compensation Committees, and Chair of Pricing and Valuation Committee, Class I
|
Term of office1 and length of time served
|
|
Since 2003
|
Principal occupation(s) during the past five years
|
|
President, Colman Consulting Company (consulting)
|
Number of portfolios in fund complex overseen by Director (including the Fund)
|
|
20
|
Other board memberships held by Director during the past five years
|
|
None
|
|
|
|
36
|
|
LMP Capital and Income Fund Inc.
|
|
|
|
Independent Directors (contd)
|
|
|
|
|
Daniel P. Cronin
|
|
|
|
|
Year of birth
|
|
1946
|
Position(s) held with Fund1
|
|
Director and Member of Audit, Compensation and Pricing and Valuation Committees, and Chair of Nominating Committee, Class I
|
Term of office1 and length of time served
|
|
Since 2003
|
Principal occupation(s) during the past five years
|
|
Retired; formerly, Associate General Counsel, Pfizer Inc. (prior to and including 2004)
|
Number of portfolios in fund complex overseen by Director (including the Fund)
|
|
20
|
Other board memberships held by Director during the past five years
|
|
None
|
|
|
Paolo M. Cucchi
|
|
|
|
|
Year of birth
|
|
1941
|
Position(s) held with Fund1
|
|
Director and Member of Nominating, Audit, and Pricing and Valuation Committees, and Chair of Compensation Committee, Class I
|
Term of office1 and length of time served
|
|
Since 2007
|
Principal occupation(s) during the past five years
|
|
Emeritus Professor of French and Italian (since 2014) and formerly, Vice President and Dean of The College of Liberal Arts (1984 to 2009) and Professor of French and Italian (2009 to 2014)
at Drew University
|
Number of portfolios in fund complex overseen by Director (including the Fund)
|
|
20
|
Other board memberships held by Director during the past five years
|
|
None
|
|
|
William R. Hutchinson
|
|
|
|
|
Year of birth
|
|
1942
|
Position(s) held with Fund1
|
|
Lead Independent Director and Member of Nominating, Audit, Compensation and Pricing and Valuation Committees, Class II
|
Term of office1 and length of time served
|
|
Since 2003
|
Principal occupation(s) during the past five years
|
|
President, W.R. Hutchinson & Associates Inc. (consulting) (since 2001)
|
Number of portfolios in fund complex overseen by Director (including the Fund)
|
|
20
|
Other board memberships held by Director during the past five years
|
|
Director (1994 to 2021) and Non-Executive Chairman of the Board (December 2009 to April 2020), Associated Banc-Corp. (financial services company)
|
|
|
|
LMP Capital and Income Fund Inc.
|
|
37
|
Additional information
(unaudited) (contd)
Information about Directors and Officers
|
|
|
Independent Directors (contd)
|
|
|
|
|
Eileen A. Kamerick
|
|
|
|
|
Year of birth
|
|
1958
|
Position(s) held with Fund1
|
|
Director and Member of Nominating, Compensation and Pricing and Valuation Committees, and Chair of Audit Committee, Class III
|
Term of office1 and length of time served
|
|
Since 2013
|
Principal occupation(s) during the past five years
|
|
Chief Executive Officer, The Governance Partners, LLC (consulting firm) (since 2015); National Association of Corporate Directors Board Leadership Fellow (since 2016, with Directorship
Certification since 2019) and financial expert; Adjunct Professor, Georgetown University Law Center (since 2021); Adjunct Professor, The University of Chicago Law School (since 2018); Adjunct Professor, Washington University in St. Louis and
University of Iowa law schools (since 2007); formerly, Chief Financial Officer, Press Ganey Associates (health care informatics company) (2012 to 2014); Managing Director and Chief Financial Officer, Houlihan Lokey (international investment bank)
and President, Houlihan Lokey Foundation (2010 to 2012)
|
Number of portfolios in fund complex overseen by Director (including the Fund)
|
|
20
|
|
|
Other board memberships held by Director during the past five years
|
|
Director of ACV Auctions Inc. (since 2021); Trustee of AIG Funds and Anchor Series Trust (2018 to 2021); Director of Hochschild Mining plc (precious metals company) (since 2016); Director
of Associated Banc-Corp (financial services company) (since 2007)
|
|
|
Nisha Kumar
|
|
|
|
|
Year of birth
|
|
1970
|
Position(s) held with Fund1
|
|
Director and Member of Nominating, Audit, Compensation and Pricing and Valuation Committees, and Coordinator of Alternative Investments, Class II
|
Term of office1 and length of time served
|
|
Since 2019
|
Principal occupation(s) during the past five years
|
|
Managing Director and the Chief Financial Officer and Chief Compliance Officer of Greenbriar Equity Group, LP (since 2011); formerly, Chief Financial Officer and Chief Administrative
Officer of Rent the Runway, Inc. (2011); Executive Vice President and Chief Financial Officer of AOL LLC, a subsidiary of Time Warner Inc. (2007 to 2009), Member of the Council of Foreign Relations
|
Number of portfolios in fund complex overseen by Director (including the Fund)
|
|
20
|
|
|
Other board memberships held by Director during the past five years
|
|
Director of The India Fund, Inc. (since 2016); formerly, Director of Aberdeen Income Credit Strategies Fund (2017-2018); and Director of The Asia Tigers Fund, Inc. (2016 to 2018)
|
|
|
|
38
|
|
LMP Capital and Income Fund Inc.
|
|
|
|
Interested Director and Officer
|
|
|
|
|
Jane Trust, CFA2
|
|
|
|
|
Year of birth
|
|
1962
|
Position(s) held with Fund1
|
|
Director, Chairman, President and Chief Executive Officer, Class II
|
Term of office1 and length of time served
|
|
Since 2015
|
Principal occupation(s) during the past five years
|
|
Senior Vice President, Fund Board Management, Franklin Templeton (since 2020); Officer and/or Trustee/Director of 132 funds associated with LMPFA or its affiliates (since 2015); President
and Chief Executive Officer of LMPFA (since 2015); formerly, Senior Managing Director (2018 to 2020) and Managing Director (2016 to 2018) of Legg Mason & Co., LLC (Legg Mason & Co.); Senior Vice President of LMPFA
(2015)
|
Number of portfolios in fund complex overseen by Director (including the Fund)
|
|
130
|
|
|
Other board memberships held by Director during the past five years
|
|
None
|
|
|
|
Additional Officers
|
|
|
|
|
Fred Jensen
Franklin Templeton
620 Eighth Avenue, 47th Floor, New York, NY
10018
|
|
|
|
|
Year of birth
|
|
1963
|
Position(s) held with Fund1
|
|
Chief Compliance Officer
|
Term of office1 and length of time served
|
|
Since 2020
|
|
|
Principal occupation(s) during the past five years
|
|
Director - Global Compliance of Franklin Templeton (since 2020); Managing Director of Legg Mason & Co. (2006 to 2020); Director of Compliance, Legg Mason Office of the Chief Compliance
Officer (2006 to 2020); formerly, Chief Compliance Officer of Legg Mason Global Asset Allocation (prior to 2014); Chief Compliance Officer of Legg Mason Private Portfolio Group (prior to 2013); formerly, Chief Compliance Officer of The Reserve Funds
(investment adviser, funds and broker-dealer) (2004) and Ambac Financial Group (investment adviser, funds and broker - dealer) (2000 to 2003)
|
|
|
Jenna Bailey
Franklin Templeton
100 First Stamford Place, 5th Floor, Stamford, CT
06902
|
|
|
|
|
Year of birth
|
|
1978
|
Position(s) held with Fund1
|
|
Identity Theft Prevention Officer
|
Term of office1 and length of time served
|
|
Since 2015
|
|
|
Principal occupation(s) during the past five years
|
|
Senior Compliance Analyst of Franklin Templeton (since 2020); Identity Theft Prevention Officer of certain funds associated with Legg Mason & Co. or its affiliates (since 2015);
formerly, Compliance Officer of Legg Mason & Co. (2013 to 2020); Assistant Vice President of Legg Mason & Co. (2011 to 2020)
|
|
|
|
LMP Capital and Income Fund Inc.
|
|
39
|
Additional information
(unaudited) (contd)
Information about Directors and Officers
|
|
|
Additional Officers (contd)
|
|
|
|
|
George P. Hoyt
Franklin Templeton
100 First Stamford Place, 6th Floor, Stamford, CT
06902
|
|
|
|
|
Year of birth
|
|
1965
|
Position(s) held with Fund1
|
|
Secretary and Chief Legal Officer
|
Term of office1 and length of time served
|
|
Since 2020
|
|
|
Principal occupation(s) during the past five years
|
|
Associate General Counsel of Franklin Templeton (since 2020); Secretary and Chief Legal Officer of certain mutual funds associated with Legg Mason & Co. or its affiliates (since 2020);
formerly, Managing Director (2016 to 2020) and Associate General Counsel for Legg Mason & Co. and Assistant Secretary of certain mutual funds associated with Legg Mason & Co. or its affiliates (2006 to 2020)
|
|
|
Thomas C. Mandia
Franklin Templeton
100 First Stamford Place, 6th Floor, Stamford, CT
06902
|
|
|
|
|
Year of birth
|
|
1962
|
Position(s) held with Fund1
|
|
Assistant Secretary
|
Term of office1 and length of time served
|
|
Since 2006
|
|
|
Principal occupation(s) during the past five years
|
|
Senior Associate General Counsel of Franklin Templeton (since 2020); Secretary of LMPFA (since 2006); Assistant Secretary of certain funds associated with Legg Mason & Co. or its
affiliates (since 2006); Secretary of LM Asset Services, LLC (LMAS) (since 2002) and Legg Mason Fund Asset Management, Inc. (LMFAM) (since 2013) (formerly registered investment advisers); formerly, Managing Director and
Deputy General Counsel of Legg Mason & Co. (2005 to 2020)
|
|
|
Christopher Berarducci
Franklin Templeton
620 Eighth Avenue, 47th Floor, New York, NY 10018
|
|
|
|
|
Year of birth
|
|
1974
|
Position(s) held with Fund1
|
|
Treasurer and Principal Financial Officer
|
Term of office1 and length of time served
|
|
Since 2019
|
|
|
Principal occupation(s) during the past five years
|
|
Vice President, Fund Administration and Reporting, Franklin Templeton (since 2020); Treasurer (since 2010) and Principal Financial Officer (since 2019) of certain funds associated with Legg
Mason & Co. or its affiliates; formerly, Managing Director (2020), Director (2015 to 2020), and Vice President (2011 to 2015) of Legg Mason & Co.
|
|
|
|
40
|
|
LMP Capital and Income Fund Inc.
|
|
|
|
Additional Officers (contd)
|
|
|
|
|
Jeanne M. Kelly
Franklin Templeton
620 Eighth Avenue, 47th Floor, New York, NY
10018
|
|
|
|
|
Year of birth
|
|
1951
|
Position(s) held with Fund1
|
|
Senior Vice President
|
Term of office1 and length of time served
|
|
Since 2009
|
|
|
Principal occupation(s) during the past five years
|
|
U.S. Fund Board Team Manager, Franklin Templeton (since 2020); Senior Vice President of certain funds associated with Legg Mason & Co. or its affiliates (since 2007); Senior Vice
President of LMPFA (since 2006); President and Chief Executive Officer of LMAS and LMFAM (since 2015); formerly, Managing Director of Legg Mason & Co. (2005 to 2020); Senior Vice President of LMFAM (2013 to 2015)
|
|
Directors who are not interested persons of the Fund within the meaning of Section 2(a)(19) of the Investment
Company Act of 1940, as amended (the 1940 Act).
|
1
|
The Funds Board of Directors is divided into three classes: Class I, Class II and Class III. The terms of office of
the Class I, II and III Directors expire at the Annual Meetings of Stockholders in the year 2024, year 2022 and year 2023, respectively, or thereafter in each case when their respective successors are duly elected and qualified. The Funds
executive officers are chosen each year, to hold office until their successors are duly elected and qualified.
|
2
|
Ms. Trust is an interested person of the Fund as defined in the 1940 Act because Ms. Trust is an
officer of LMPFA and certain of its affiliates.
|
|
|
|
LMP Capital and Income Fund Inc.
|
|
41
|
Annual chief executive officer and principal financial officer
certifications (unaudited)
The Funds Chief Executive Officer (CEO) has submitted to the NYSE the required
annual certification and the Fund also has included the Certifications of the Funds CEO and Principal Financial Officer required by Section 302 of the Sarbanes-Oxley Act in the Funds Form N-CSR filed with the SEC for the period of
this report.
|
|
|
42
|
|
LMP Capital and Income Fund Inc.
|
Other shareholder communications regarding accounting matters (unaudited)
The Funds Audit Committee has established guidelines and procedures regarding the receipt, retention and treatment of complaints regarding accounting, internal
accounting controls or auditing matters (collectively, Accounting Matters). Persons with complaints or concerns regarding Accounting Matters may submit their complaints to the Chief Compliance Officer (CCO). Persons who are
uncomfortable submitting complaints to the CCO, including complaints involving the CCO, may submit complaints directly to the Funds Audit Committee Chair. Complaints may be submitted on an anonymous basis.
The CCO may be contacted at:
Legg Mason & Co., LLC
Compliance Department
620 Eighth Avenue, 47th Floor
New York, New York 10018
Complaints may also be submitted by telephone at
1-800-742-5274. Complaints submitted through this number will be received by the CCO.
|
|
|
LMP Capital and Income Fund Inc.
|
|
43
|
Summary of information regarding the Fund (unaudited)
Investment Objective
The Funds investment
objective is total return with an emphasis on income.
Principal Investment Policies and Strategies
Under normal market conditions, the Fund seeks to maximize total return by investing at least 80% of its Managed Assets in a broad range of equity and fixed income
securities of both U.S. and foreign issuers. The Funds investment approach is designed to offer the potential for total return performance similar to that of the S&P 500 Index over the long term. The Fund will vary its allocation between
equity and fixed income securities depending on ClearBridges view of economic, market and political conditions, fiscal and monetary policy and security valuation. The investment manager has delegated to ClearBridge, one of the Funds
subadvisers, the Funds allocation between equity and fixed income securities, as well as the Funds equity investments in general. A portfolio management team at Western Asset, the Funds other subadviser, manages the fixed income
portion of the Fund. Depending on ClearBridges view of these factors, which may vary from time to time, ClearBridge may allocate substantially all of the investments in the portfolio to equity securities or fixed income securities.
The Funds investments in equity securities will include, among other securities, common stock traded on an exchange or in the over-the-counter market, preferred
stocks, warrants, rights, convertible securities, depositary receipts, trust certificates, real estate investment trusts, limited partnership interests, equity-linked debt securities and shares of other investment companies. The Funds
investments in fixed income securities will include, among other securities, corporate bonds, mortgage and asset backed securities, U.S. government obligations, investment grade and high yield debt, including emerging market debt and high yield
sovereign debt, and loans. The Fund may invest without limit in both energy and non-energy master limited partnerships (MLPs), so long as no more than 25% of the Funds total assets are invested in MLPs that are treated as qualified
publicly traded partnerships.
As noted above, the Fund may depart from its principal investment strategy in response to adverse economic, market or political
conditions by taking temporary defensive positions in any non-corporate issuer, including high-quality, short-term debt securities or cash. If the Fund takes a temporary defensive position, it may be unable to achieve its investment objective.
The Fund may invest up to 15% of its Managed Assets in illiquid securities, which are securities that cannot be sold within seven days in the ordinary course of business
at approximately the value at which the Fund has valued the securities.
|
|
|
44
|
|
LMP Capital and Income Fund Inc.
|
With respect to the Funds fixed income portion of the Fund, the Fund usually will attempt to
maintain a portfolio with a weighted average credit quality rated between Ba3 and A2 by Moodys Investor Services, Inc. (Moodys) or between BB- and A by Standard & Poors Ratings Services (S&P). As
applicable, Western Asset determines the Funds average credit quality by calculating on a daily basis the weighted average of the credit ratings of the Funds investments. Securities are rated by different agencies and if a security
receives different ratings from these agencies, the Fund will treat the securities as being rated in the highest rating category. Credit rating criteria are applied at the time the Fund purchases a security.
The average portfolio duration of the fixed income securities held by the Fund will normally be within one and seven years, including the effect of leverage, based on
Western Assets forecast for interest rates.
The Fund may also use reverse repurchase agreements as part of its investment strategy.
The Fund may engage in currency transactions with counterparties to hedge the value of portfolio securities denominated in particular currencies against fluctuations in
relative value or to generate income or gain. Currency transactions include currency forward contracts, exchange-listed currency futures contracts and options thereon, exchange listed and over-the-counter options on currencies and currency swaps.
The Fund may use a variety of derivative instruments as part of its investment strategies or for hedging or risk management purposes. Examples of derivative
instruments that the Fund may use include options contracts, futures contracts, options on futures contracts, credit default swaps and swap agreements. As part of its strategies, the Fund may purchase and sell futures contracts, purchase and sell
(or write) exchange-listed and over-the-counter put and call options on securities, financial indices and futures contracts, enter into interest rate and currency transactions and enter into other similar transactions which may be developed in the
future to the extent the applicable subadviser determines that they are consistent with the Funds investment objective and policies and applicable regulatory requirements (collectively, derivative transactions). The Fund may use
any or all of these techniques at any time, and the use of any particular derivative transaction will depend on market conditions.
Principal Risk Factors
The Fund is a
non-diversified, closed-end management investment company designed primarily as a long-term investment and not as a trading vehicle. The Fund is not intended to be a complete investment program and, due to the uncertainty inherent in all
investments, there can be no assurance that the Fund will achieve its investment objective. The Funds Common Shares at any point in time may be worth less than you invested, even after taking into account the reinvestment of Fund dividends and
distributions.
|
|
|
LMP Capital and Income Fund Inc.
|
|
45
|
Summary of information regarding the Fund (unaudited) (contd)
Investment Risk and Market Risk. An investment in the Fund is subject to investment risk, including the possible loss of the entire amount that you invest. Your
investment in the Common Stock represents an indirect investment in the securities owned by the Fund, most of which could be purchased directly. The value of the Funds portfolio securities may move up or down, sometimes rapidly and
unpredictably. At any point in time, your Common Stock may be worth less than your original investment, even after taking into account the reinvestment of Fund dividends and distributions.
Equity Securities and Related Market Risk. The stock markets are volatile and the market prices of the Funds equity securities may decline generally. Equity
securities may have greater price volatility than other asset classes, such as fixed income securities, and may fluctuate in price based on actual or perceived changes in a companys financial condition and overall market and economic
conditions and perceptions. If the market prices of the equity securities owned by the Fund fall, the value of your investment in the Fund will decline. If the Fund holds equity securities in a company that becomes insolvent, the Funds
interests in the company will be subordinated to the interests of debtholders and general creditors of the company, and the Fund may lose its entire investment.
Information Technology Sector Risks. Information technology companies face intense competition, both domestically and internationally, which may have an adverse
effect on profit margins. Like other technology companies, information technology companies may have limited product lines, markets, financial resources or personnel. The products of information technology companies may face obsolescence due to
rapid technological developments, frequent new product introduction, unpredictable changes in growth rates and competition for the services of qualified personnel. Companies in the information technology sector are heavily dependent on patent and
intellectual property rights. The loss, or impairment of, or inability to enforce, these rights may adversely affect the profitability of these companies.
Risks
of Investing in MLP Units. An investment in MLP units involves risks that differ from a similar investment in equity securities, such as common stock, of a corporation. Holders of MLP units have the rights typically afforded to limited partners
in a limited partnership. As compared to common stockholders of a corporation, holders of MLP units have more limited control and limited rights to vote on matters affecting the partnership. Holders of MLP units are also exposed to the risk that
they will be required to repay amounts to the MLP that are wrongfully distributed to them. Additionally, conflicts of interest may exist among common unit holders, subordinated unit holders and the general partner or managing member of an MLP; for
example, a conflict may arise as a result of incentive distribution payments, and the general partner does not generally have any duty to the limited partners beyond a good faith standard. For example, over the last few years there have
been several simplification transactions in which the incentive distribution rights were eliminated by either (i) a purchase of the outstanding MLP units by the general partner or (ii) by the purchase of the incentive
distribution rights by the MLP. These simplification transactions present a conflict of interest between the general partner and the MLP and may be structured in a way that is unfavorable to the MLP. There are also certain tax risks associated with
an investment in MLP units (described below).
|
|
|
46
|
|
LMP Capital and Income Fund Inc.
|
Tax Risks of Investing in Equity Securities of MLPs. Partnerships do not pay United States
federal income tax at the partnership level. Rather, each partner of a partnership, in computing its United States federal income tax liability, will include its allocable share of the partnerships income, gains, losses, deductions and
expenses. A change in current tax law, a change in the business of a given MLP, or a change in the types of income earned by a given MLP, could result in an MLP being treated as a corporation for United States federal income tax purposes, which
would result in such MLP being required to pay United States federal income tax on its taxable income. The classification of an MLP as a corporation for United States federal income tax purposes would have the effect of reducing the amount of cash
available for distribution by the MLP and causing any such distributions received by the Fund to be taxed as dividend income to the extent of the MLPs current or accumulated earnings and profits. Thus, if any of the MLPs owned by the Fund were
treated as corporations for United States federal income tax purposes, the after-tax return to the Fund with respect to its investment in such MLPs could be materially reduced, which could cause a substantial decline in the value of the Funds
shares of Common Stock.
Energy Sector Risks. MLPs and midstream entities operating in the energy sector are subject to many operating risks, including:
equipment failure causing outages; structural, maintenance, impairment and safety problems; transmission or transportation constraints, inoperability or inefficiencies; dependence on a specified fuel source; changes in electricity and fuel usage;
availability of competitively priced alternative energy sources; changes in generation efficiency and market heat rates; lack of sufficient capital to maintain facilities; significant capital expenditures to keep older assets operating efficiently;
seasonality; changes in supply and demand for energy; catastrophic and/or weather-related events such as spills, leaks, well blowouts, uncontrollable flows, ruptures, fires, explosions, floods, earthquakes, hurricanes, discharges of toxic gases and
similar occurrences; storage, handling, disposal and decommissioning costs; and environmental compliance. Breakdown or failure of an energy companys assets may prevent it from performing under applicable sales agreements, which in certain
situations, could result in termination of the agreement or incurring a liability for liquidated damages. As a result of the above risks and other potential hazards associated with energy companies, certain companies may become exposed to
significant liabilities for which they may not have adequate insurance coverage. Any of the aforementioned risks could have a material adverse effect on the business, financial condition, results of operations and cash flows of energy companies.
|
|
|
LMP Capital and Income Fund Inc.
|
|
47
|
Summary of information regarding the Fund (unaudited) (contd)
A downturn in the energy sector of the economy, adverse political, legislative or regulatory developments, material declines in energy-related commodity prices (such as
those experienced over the last few years) or other events could have a larger impact on the Fund than on an investment company that does not concentrate in the sector. At times, the performance of securities of companies in the sector may lag the
performance of other sectors or the broader market as a whole. In addition, there are several specific risks associated with investments in the energy sector, including the following:
Distribution Risk For Equity Income Securities. In selecting equity income securities in which the Fund will invest, ClearBridge will consider the issuers
history of making regular periodic distributions (i.e., dividends) to its equity holders. An issuers history of paying dividends, however, does not guarantee that the issuer will continue to pay dividends in the future. The dividend income
stream associated with equity income securities generally is not guaranteed and is subordinate to payment obligations of the issuer on its debt and other liabilities. Accordingly, in the event the issuer does not realize sufficient income in a
particular period both to service its liabilities and to pay dividends on its equity securities, it may forgo paying dividends on its equity securities. In addition, because in most instances issuers are not obligated to make periodic distributions
to the holders of their equity securities, such distributions or dividends generally may be discontinued at the issuers discretion.
Convertible Securities
Risk. A convertible security is a bond, debenture, note, preferred stock or other security that may be converted into or exchanged for a prescribed amount of common stock or other equity security of the same or a different issuer within a
particular period of time at a specified price or formula. Before conversion, convertible securities have characteristics similar to nonconvertible income securities in that they ordinarily provide a stable stream of income with generally higher
yields than those of common stocks of the same or similar issuers, but lower yields than comparable nonconvertible securities. The value of a convertible security is influenced by changes in interest rates, with investment value declining as
interest rates increase and increasing as interest rates decline. The credit standing of the issuer and other factors also may have an effect on the convertible securitys investment value. Convertible securities rank senior to common stock in
a corporations capital structure but are usually subordinated to comparable nonconvertible securities. Convertible securities may be subject to redemption at the option of the issuer at a price established in the convertible securitys
governing instrument.
Preferred Stock Risk. In addition to equity securities risk and credit risk, investment in preferred stocks involves certain other
risks. Certain preferred stocks contain provisions that allow an issuer under certain conditions to skip or defer distributions. If the Fund owns a preferred stock of an issuer that is deferring its distribution, the Fund may be required to report
income for tax purposes despite the fact that it is not receiving current income on this position. Preferred stocks often are subject to legal provisions that allow for redemption in the event of certain tax or legal changes or at the issuers
call. In the event of
|
|
|
48
|
|
LMP Capital and Income Fund Inc.
|
redemption, the Fund may not be able to reinvest the proceeds at comparable rates of return.
Preferred stocks are subordinated to bonds and other debt securities in an issuers capital structure in terms of priority for corporate income and liquidation payments, and therefore will be subject to greater credit risk than those debt
securities. Preferred stocks may trade less frequently and in a limited volume and may be subject to more abrupt or erratic price movements than many other securities, such as common stocks, corporate debt securities and U.S. Government securities.
Interest Rate Risk. The market price of the Funds investments will change in response to changes in interest rates and other factors. During periods of
declining interest rates, the market price of fixed income securities generally rises. Conversely, during periods of rising interest rates, the market price of such securities generally declines. The magnitude of these fluctuations in the market
price of fixed income securities is generally greater for securities with longer maturities. Additionally, such risk may be greater during the current period of historically low interest rates. Fluctuations in the market price of the Funds
securities will not affect interest income derived from securities already owned by the Fund, but will be reflected in the Funds net asset value. The Fund may utilize certain strategies, including investments in structured notes or interest
rate swap or cap transactions, for the purpose of reducing the interest rate sensitivity of the portfolio and decreasing the Funds exposure to interest rate risk, although there is no assurance that it will do so or that such strategies will
be successful.
Leverage Risk. The Fund is authorized to use leverage (including loans from financial institutions, the use of mortgage dollar roll
transactions and reverse repurchase agreements and through the issuance of preferred shares) in amounts of up to approximately 33 1/3% of its total assets less all liabilities and indebtedness not represented by senior securities immediately after
such borrowing and/or issuance. The value of your investment may be more volatile if the fund borrows or uses instruments, such as derivatives, that have a leveraging effect on the funds portfolio. Other risks described in the Prospectus also
will be compounded because leverage generally magnifies the effect of a change in the value of an asset and creates a risk of loss of value on a larger pool of assets than the fund would otherwise have had. The fund may also have to sell assets at
inopportune times to satisfy its obligations created by the use of leverage or derivatives. The use of leverage is considered to be a speculative investment practice and may result in the loss of a substantial amount, and possibly all, of the
funds assets. In addition, the funds portfolio will be leveraged if it exercises its right to delay payment on a redemption, and losses will result if the value of the funds assets declines between the time a redemption request is
deemed to be received by the fund and the time the fund liquidates assets to meet redemption requests.
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LMP Capital and Income Fund Inc.
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49
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Summary of information regarding the Fund (unaudited) (contd)
Issuer Risk. The value of securities may decline for a number of reasons that directly relate to the issuer, such as management performance, financial leverage
and reduced demand for the issuers goods and services.
Below Investment Grade Securities (High-Yield) Risk. At any one time, a portion of the
Funds Managed Assets may be invested in below investment grade securities (high yield securities). High yield debt securities are generally subject to greater credit risks than higher-grade debt securities, including the risk of default on the
payment of interest or principal. High yield debt securities are considered speculative, typically have lower liquidity and are more difficult to value than higher grade bonds. High yield debt securities tend to be volatile and more susceptible to
adverse events, credit downgrades and negative sentiments and may be difficult to sell at a desired price, or at all, during periods of uncertainty or market turmoil.
Low Rated and Unrated Securities Risk. Low rated and unrated debt instruments generally offer a higher current yield than that available from higher grade issues,
but typically involve greater risk. Low rated and unrated securities are especially subject to adverse changes in general economic conditions, to changes in the financial condition of their issuers and to price fluctuation in response to changes in
interest rates. During periods of economic downturn or rising interest rates, issuers of low rated and unrated instruments may experience financial stress that could adversely affect their ability to make payments of principal and interest and
increase the possibility of default. Adverse publicity and investor perceptions, whether or not based on fundamental analysis, may also decrease the values and liquidity of low rated and unrated securities especially in a market characterized by a
low volume of trading.
Derivatives Risk. The Fund may utilize a variety of derivative instruments for investment or risk management purposes, such as
options, futures contracts, swap agreements and credit default swaps. Using derivatives can increase Fund losses and reduce opportunities for gains when market prices, interest rates, currencies, or the derivatives themselves behave in a way not
anticipated by the Fund. Using derivatives also can have a leveraging effect and increase Fund volatility. Certain derivatives have the potential for unlimited loss, regardless of the size of the initial investment. Derivatives may not be available
at the time or price desired, may be difficult to sell, unwind or value, and the counterparty may default on its obligations to the Fund. Derivatives are generally subject to the risks applicable to the assets, rates, indices or other indicators
underlying the derivative. The value of a derivative may fluctuate more than the underlying assets, rates, indices or other indicators to which it relates. Use of derivatives may have different tax consequences for the Fund than an investment in the
underlying security, and those differences may affect the amount, timing and character of income distributed to shareholders. The U.S. government and foreign governments are in the process of adopting and implementing regulations governing
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50
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LMP Capital and Income Fund Inc.
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derivatives markets, including mandatory clearing of certain derivatives, margin and reporting
requirements. The ultimate impact of the regulations remains unclear. Additional regulation of derivatives may make derivatives more costly, limit their availability or utility, otherwise adversely affect their performance or disrupt markets.
The Securities and Exchange Commission adopted a new rule on October 28, 2020 that mandates that a funds derivatives risk management program provide for
specific items as required by the rule, including compliance with a VaR test. Compliance with these new requirements will be required after an eighteen-month transition period following the effective date of the adopted rule. Following
the compliance date, these requirements may limit the ability of the Fund to use derivatives and reverse repurchase agreements and similar financing transactions as part of its investment strategies. These requirements may increase the cost of the
Funds investments in derivatives, which could adversely affect shareholders.
Credit default swap contracts involve heightened risks and may result in losses
to the Fund. Credit default swaps may be illiquid and difficult to value. When the Fund sells credit protection via a credit default swap, credit risk increases since the Fund has exposure to both the issuer whose credit is the subject of the swap
and the counterparty to the swap.
Credit Risk and Counterparty Risk. If an issuer or guarantor of a security held by the Fund or a counterparty to a
financial contract with the Fund defaults or its credit is downgraded, or is perceived to be less creditworthy, or if the value of the assets underlying a security declines, the value of your investment will typically decline. Changes in actual or
perceived creditworthiness may occur quickly. The Fund could be delayed or hindered in its enforcement of rights against an issuer, guarantor or counterparty. Subordinated securities are more likely to suffer a credit loss than non-subordinated
securities of the same issuer and will be disproportionately affected by a default, downgrade or perceived decline in creditworthiness.
Smaller Company Risk.
The general risks associated with income-producing securities are particularly pronounced for securities issued by companies with smaller market capitalizations. These companies may have limited product lines, markets or financial resources or
they may depend on a few key employees. As a result, they may be subject to greater levels of credit, market and issuer risk. Securities of smaller companies may trade less frequently and in lesser volume than more widely held securities and their
values may fluctuate more sharply than other securities. Companies with medium-sized market capitalizations may have risks similar to those of smaller companies.
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LMP Capital and Income Fund Inc.
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51
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Summary of information regarding the Fund (unaudited) (contd)
Foreign (Non-U.S.) Investment Risk. A fund that invests in foreign (non-U.S.) securities may experience more rapid and extreme changes in value than a fund that
invests exclusively in securities of U.S. companies. The securities markets of many foreign countries are relatively small, with a limited number of companies representing a small number of industries. Investments in foreign securities (including
those denominated in U.S. dollars) are subject to economic and political developments in the countries and regions where the issuers operate or are domiciled, or where the securities are traded, such as changes in economic or monetary policies.
Values may also be affected by restrictions on receiving the investment proceeds from a foreign country. Less information may be publicly available about foreign companies than about U.S. companies. Foreign companies are generally not subject to the
same accounting, auditing and financial reporting standards as are U.S. companies. In addition, the Funds investments in foreign securities may be subject to the risk of nationalization or expropriation of assets, imposition of currency
exchange controls or restrictions on the repatriation of foreign currency, confiscatory taxation, political or financial instability and adverse diplomatic developments. In addition, there may be difficulty in obtaining or enforcing a court judgment
abroad. Dividends or interest on, or proceeds from the sale of, foreign securities may be subject to non-U.S. withholding taxes, and special U.S. tax considerations may apply.
The risks of foreign investment are greater for investments in emerging markets. The Fund considers an investment to be in an emerging market if the local currency
long-term debt rating assigned by all NRSROs to debt issued by that country is below A-. Emerging market countries typically have economic and political systems that are less fully developed, and that can be expected to be less stable, than those of
more advanced countries. Low trading volumes may result in a lack of liquidity and in price volatility. Emerging market countries may have policies that restrict investment by foreigners, that require governmental approval prior to investments by
foreign persons, or that prevent foreign investors from withdrawing their money at will. An investment in emerging market securities should be considered speculative.
Reinvestment Risk. Reinvestment risk is the risk that income from the Funds portfolio will decline if and when the Fund invests the proceeds from matured,
traded or called fixed income securities at market interest rates that are below the portfolios current earnings rate. A decline in income could affect the Funds Common Stock price, its distributions or its overall return.
Fund Distribution Risk. Pursuant to its distribution policy, the Fund intends to make regular distributions on its Common Shares. To the extent the total
distributions for a year exceed the Funds investment company taxable income and net capital gain for that year, the excess will generally constitute a return of capital. Return of capital distributions are generally tax-free up to the amount
of a Common Shareholders tax basis in the Common Shares. In addition, such excess distributions may have the effect of decreasing the Funds total assets and may increase the Funds expense ratio as the Funds fixed expenses may
become a larger percentage of the Funds average net assets. In order to make such distributions, the
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LMP Capital and Income Fund Inc.
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Fund might have to sell a portion of its investment portfolio at a time when independent
investment judgment may not dictate such action. For instance, these sales may result in the Fund recognizing short-term capital gains, which are taxed to shareholders at ordinary income rates.
Inflation/Deflation Risk. Inflation risk is the risk that the value of certain assets or income from the Funds investments will be worth less in the future
as inflation decreases the value of money. As inflation increases, the real value of the Common Stock and distributions on the Common Stock can decline. In addition, during any periods of rising inflation, the dividend rates or borrowing costs
associated with the Funds use of leverage would likely increase, which would tend to further reduce returns to stockholders. Deflation risk is the risk that prices throughout the economy decline over timethe opposite of inflation.
Deflation may have an adverse affect on the creditworthiness of issuers and may make issuer defaults more likely, which may result in a decline in the value of the Funds portfolio.
Liquidity Risk. The Fund may invest up to 15% of its Managed Assets in illiquid securities. Liquidity risk exists when particular investments are difficult to
sell. Securities may become illiquid after purchase by the Fund, particularly during periods of market turmoil. When the Fund holds illiquid investments, the portfolio may be harder to value, especially in changing markets, and if the Fund is forced
to sell these investments in order to segregate assets or for other cash needs, the Fund may suffer a loss.
Market Events Risk. The market values of
securities or other assets will fluctuate, sometimes sharply and unpredictably, due to changes in general market conditions, overall economic trends or events, governmental actions or intervention, actions taken by the U.S. Federal Reserve or
foreign central banks, market disruptions caused by trade disputes or other factors, political developments, investor sentiment, the global and domestic effects of a pandemic, and other factors that may or may not be related to the issuer of the
security or other asset. Economies and financial markets throughout the world are increasingly interconnected. Economic, financial or political events, trading and tariff arrangements, public health events, terrorism, natural disasters and other
circumstances in one country or region could have profound impacts on global economies or markets. As a result, whether or not the Fund invests in securities of issuers located in or with significant exposure to the countries directly affected, the
value and liquidity of the Funds investments may be negatively affected.
The rapid and global spread of a highly contagious novel coronavirus respiratory
disease, designated COVID-19, first detected in China in December 2019, has resulted in extreme volatility in the financial markets and severe losses; reduced liquidity of many instruments; restrictions on international and, in some cases, local
travel, significant disruptions to business operations (including business closures); strained healthcare systems; disruptions to supply chains, consumer demand and employee availability; and widespread uncertainty
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LMP Capital and Income Fund Inc.
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53
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Summary of information regarding the Fund (unaudited) (contd)
regarding the duration and long-term effects of this pandemic. Some sectors of the economy and individual issuers have experienced particularly large losses. In
addition, the COVID-19 pandemic may result in a sustained economic downturn or a global recession, domestic and foreign political and social instability, damage to diplomatic and international trade relations and increased volatility and/or
decreased liquidity in the securities markets. The ultimate economic fallout from the pandemic, and the long-term impact on economies, markets, industries and individual issuers, are not known. Certain risks, such as interest rate risk, credit risk,
liquidity risk and counterparty risk, may be heightened as a result of such market events. The U.S. government and the Federal Reserve, as well as certain foreign governments and central banks, are taking extraordinary actions to support local and
global economies and the financial markets in response to the COVID-19 pandemic, including by pushing interest rates to very low levels. This and other government intervention into the economy and financial markets to address the COVID-19 pandemic
may not work as intended, particularly if the efforts are perceived by investors as being unlikely to achieve the desired results. The COVID-19 pandemic could adversely affect the value and liquidity of the Funds investments and negatively
impact the Funds 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.
Currency Risk. The value of investments in securities denominated in foreign currencies increases or decreases as the rates of exchange between those currencies
and the U.S. dollar change. Currency conversion costs and currency fluctuations could erase investment gains or add to investment losses. Currency exchange rates can be volatile, and are affected by factors such as general economic conditions, the
actions of the U.S. and foreign governments or central banks, the imposition of currency controls and speculation. The Fund may be unable or may choose not to hedge its foreign currency exposure.
Risks of Securities Linked to the Real Estate Industry. Investments by the Fund in REITs will be closely linked to the performance of the real estate markets.
Property values may fall due to increasing vacancies or declining rents resulting from economic, legal, cultural or technological developments. Real Estate Company share prices may drop because of the failure of Real Estate Company borrowers to pay
their loans and poor management. Many Real Estate Companies, including REITs, utilize leverage (and some may be highly leveraged), which increases investment risk and could adversely affect a Real Estate Companys operations and market value in
periods of rising interest rates. Financial covenants related to a Real Estate Companys leveraging may affect its ability to operate effectively. Real estate risks may also arise where Real Estate Companies fail to carry adequate insurance, or
where a Real Estate Company may become liable for removal or other costs related to environmental contamination. Real Estate Companies tend to be small to medium-sized companies. Real Estate Company shares, like other smaller company shares, can be
more volatile than, and perform differently from, larger company shares.
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54
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LMP Capital and Income Fund Inc.
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There may be less trading in a smaller companys shares, which means that buy and sell
transactions in those shares could have a larger impact on the price per share than is the case with larger company shares. The value of the Common Shares will also depend on the general condition of the economy. An economic downturn could have a
material adverse effect on the real estate markets and on the Real Estate Companies in which the Fund invests, which in turn could result in the Fund not achieving its investment objective.
Risks of Warrants and Rights. Warrants and rights are subject to the same market risks as stocks, but may be more volatile in price. Warrants and rights do not
carry the right to dividends or voting rights with respect to their underlying securities, and they do not represent any rights in the assets of the issuer. An investment in warrants or rights may be considered speculative. In addition, the value of
a warrant or right does not necessarily change with the value of the underlying security and a warrant or right ceases to have value if it is not exercised prior to its expiration date. The purchase of warrants or rights involves the risk that the
Fund could lose the purchase value of a warrant or right if the right to subscribe to additional shares is not exercised prior to the warrants or rights expiration. Also, the purchase of warrants and rights involves the risk that the
effective price paid for the warrant or right added to the subscription price of the related security may exceed the value of the subscribed securitys market price such as when there is no movement in the price of the underlying security.
Management Risk. The Fund is subject to management risk because it is an actively managed investment portfolio. Each subadviser will apply investment techniques
and risk analyses in making investment decisions for the Fund, but there can be no guarantee that these will produce the desired results.
Interest Rate
Transactions Risk. The Fund may enter into a swap or cap transaction to attempt to protect itself from increasing interest expenses on Borrowings resulting from increasing short-term interest rates or dividend expenses on Fund Preferred Shares.
A decline in interest rates may result in a decline in net amounts receivable by the Fund from the counterparty under the swap or cap (or an increase in the net amounts payable by the Fund to the counterparty under the swap), which may result in a
decline in the net asset value of the Fund.
Risks of Futures and Options on Futures. The use by the Fund of futures contracts and options on futures
contracts to hedge interest rate risks involves special considerations and risks, as described below.
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Successful use of hedging transactions depends upon the applicable subadvisers ability to correctly predict the
direction of changes in interest rates. There can be no assurance that any particular hedging strategy will succeed.
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LMP Capital and Income Fund Inc.
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55
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Summary of information regarding the Fund (unaudited) (contd)
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There might be imperfect correlation, or even no correlation, between the price movements of a futures or option contract
and the movements of the interest rates being hedged. Such a lack of correlation might occur due to factors unrelated to the interest rates being hedged, such as market liquidity and speculative or other pressures on the markets in which the hedging
instrument is traded.
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Hedging strategies, if successful, can reduce risk of loss by wholly or partially offsetting the negative effect of
unfavorable movements in the interest rates being hedged. However, hedging strategies can also reduce opportunity for gain by offsetting the positive effect of favorable movements in the hedged interest rates.
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There is no assurance that a liquid secondary market will exist for any particular futures contract or option thereon at
any particular time. If the Fund were unable to liquidate a futures contract or an option on a futures contract position due to the absence of a liquid secondary market or the imposition of price limits, it could incur substantial losses. The Fund
would continue to be subject to market risk with respect to the position.
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There is no assurance that the Fund will use hedging transactions. For example, if the Fund determines that the cost of
hedging will exceed the potential benefit to the Fund, the Fund will not enter into such transactions.
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Market Price Discount from Net Asset
Value. Shares of closed-end investment companies frequently trade at a discount from their net asset value. This risk is separate and distinct from the risk that the Funds net asset value could decrease as a result of its investment
activities and may be a greater risk to investors expecting to sell their Common Stock in a relatively short period following completion of this offering. Whether investors will realize gains or losses upon the sale of the Common Stock will depend
not upon the Funds net asset value but upon whether the market price of the Common Stock at the time of sale is above or below the investors purchase price for the Common Stock.
Non-Diversification Risk. The Fund is classified as non-diversified under the 1940 Act. As a result, it can invest a greater portion of its assets in
obligations of a single issuer than a diversified fund. The Fund may therefore be more susceptible than a diversified fund to being adversely affected by any single corporate, economic, political or regulatory occurrence. The Fund
intends to qualify for the special tax treatment available to regulated investment companies under Subchapter M of the Code, and thus intends to satisfy the diversification requirements of Subchapter M, including the less stringent
diversification requirement that applies to the percent of its total assets that are represented by cash and cash items (including receivables), U.S. government securities, the securities of other regulated investment companies and certain other
securities.
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LMP Capital and Income Fund Inc.
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Anti-Takeover Provisions Risk. The Funds Charter and Bylaws include provisions that
are designed to limit the ability of other entities or persons to acquire control of the Fund for short-term objectives, including by converting the Fund to open-end status or changing the composition of the Board, that may be detrimental to the
Funds ability to achieve its primary investment objective. Such provisions may limit the ability of shareholders to sell their shares at a premium over prevailing market prices by discouraging a third party from seeking to obtain control of
the Fund. There can be no assurance, however, that such provisions will be sufficient to deter activist investors that seek to cause the Fund to take actions that may not be aligned with the interests of long-term shareholders.
Operational risk. The valuation of the Funds investments may be negatively impacted because of the operational risks arising from factors such as processing
errors and human errors, inadequate or failed internal or external processes, failures in systems and technology, changes in personnel, and errors caused by third party service providers or trading counterparties. It is not possible to identify all
of the operational risks that may affect the Fund or to develop processes and controls that completely eliminate or mitigate the occurrence of such failures. The Fund and its shareholders could be negatively impacted as a result.
Cybersecurity risk. Cybersecurity incidents, both intentional and unintentional, may allow an unauthorized party to gain access to Fund assets, Fund or
proprietary information, cause the Fund, the Funds manager and subadvisers and/or their service providers to suffer data breaches, data corruption or loss of operational functionality or prevent fund investors from purchasing, redeeming or
exchanging shares or receiving distributions. The Fund, manager and subadvisers have limited ability to prevent or mitigate cybersecurity incidents affecting third party service providers, and such third party service providers may have limited
indemnification obligations to the Fund or the manager. Cybersecurity incidents may result in financial losses to the Fund and its shareholders, and substantial costs may be incurred in order to prevent any future cybersecurity incidents. Issuers of
securities in which the Fund invests are also subject to cybersecurity risks, and the value of these securities could decline if the issuers experience cybersecurity incidents.
More Information
For a complete list of the
Funds fundamental investment restrictions and more detailed descriptions of the Funds investment policies, strategies and risks, see the Funds registration statement on Form N-2 that was declared effective by the SEC on
February 24, 2004, as amended or superseded by subsequent disclosures. The Funds fundamental investment restrictions may not be changed without the approval of the holders of a majority of the outstanding voting securities, as defined in
the 1940 Act.
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LMP Capital and Income Fund Inc.
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57
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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 Funds 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 Agents investment of the most recently declared dividend or distribution on the Common Stock.
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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
Funds 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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59
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Important tax information (unaudited)
By mid-February, tax information related to a shareholders proportionate share of distributions paid during the preceding calendar year will be received, if
applicable. Please also refer to www.franklintempleton.com for per share tax information related to any distributions paid during the preceding calendar year. Shareholders are advised to consult with their tax advisors for further information on the
treatment of these amounts on their tax returns.
The following tax information for the Fund is required to be furnished to shareholders with respect to income
earned and distributions paid during its fiscal year.
The Fund hereby reports the following amounts, or if subsequently determined to be different, the maximum
allowable amounts, for the fiscal year ended November 30, 2021:
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Pursuant
to:
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Amount
Reported
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Income Eligible for Dividends Received Deduction (DRD)
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§854(b)(1)(A)
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$5,606,081
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Qualified Dividend Income Earned (QDI)
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§854(b)(1)(B)
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$5,807,756
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Qualified Business Income Dividends Earned
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§199A
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$302,113
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60
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LMP Capital and Income Fund Inc.
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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
George P. Hoyt
Secretary and Chief Legal Officer
Thomas C. Mandia
Assistant Secretary
Jeanne M. Kelly
Senior Vice President
LMP Capital and Income Fund Inc.
620 Eighth Avenue
47th 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
900 G Street NW
Washington, DC 20001
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, Franklin Distributors, 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 individuals 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 ANNUAL REPORT
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Legg Mason Funds Privacy and Security Notice (contd)
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.franklintempleton.com,or contact the Fund at 1-888-777-0102.
Revised April 2018
Legg Mason California Consumer Privacy Act Policy
Although much of the personal information we collect is nonpublic personal information subject to federal law, residents of California may, in certain
circumstances, have additional rights under the California Consumer Privacy Act (CCPA). For example, if you are a broker,
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NOT PART OF THE ANNUAL REPORT
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Legg Mason Funds Privacy and Security Notice (contd)
dealer, agent, fiduciary, or representative acting by or on behalf of, or for, the account of any
other person(s) or household, or a financial advisor, or if you have otherwise provided personal information to us separate from the relationship we have with personal investors, the provisions of this Privacy Policy apply to your personal
information (as defined by the CCPA).
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In addition to the provisions of the Legg Mason Funds Security and Privacy Notice, you may have the right to know the
categories and specific pieces of personal information we have collected about you.
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You also have the right to request the deletion of the personal information collected or maintained by the Funds.
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If you wish to exercise any of the rights you have in respect of your personal information, you should advise the Funds by contacting them as set
forth below. The rights noted above are subject to our other legal and regulatory obligations and any exemptions under the CCPA. You may designate an authorized agent to make a rights request on your behalf, subject to the identification process
described below. We do not discriminate based on requests for information related to our use of your personal information, and you have the right not to receive discriminatory treatment related to the exercise of your privacy rights.
We may request information from you in order to verify your identity or authority in making such a request. If you have appointed an authorized agent to make a request
on your behalf, or you are an authorized agent making such a request (such as a power of attorney or other written permission), this process may include providing a password/passcode, a copy of government issued identification, affidavit or other
applicable documentation, i.e. written permission. We may require you to verify your identity directly even when using an authorized agent, unless a power of attorney has been provided. We reserve the right to deny a request submitted by an agent if
suitable and appropriate proof is not provided.
For the 12-month period prior to the date of this Privacy Policy, the Legg Mason Funds have not sold any of your
personal information; nor do we have any plans to do so in the future.
Contact Information
Address: Data Privacy Officer, 100 International Dr., Baltimore, MD 21202
Email: DataProtectionOfficer@franklintempleton.com
Phone:
1-800-396-4748
Revised October 2020
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NOT PART OF THE ANNUAL REPORT
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LMP Capital and Income Fund Inc.
LMP Capital and Income Fund Inc.
620 Eighth Avenue
47th 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 Funds Forms N-PORT are available on the SECs 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.franklintempleton.com
and (3) on the SECs 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
FD03548 1/22 SR21-4326