Edgar Filing: LMP CAPITAL & INCOME FUND INC.

LMP Capital and Income Fund Inc. (SCD)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number 811-21467

LMP Capital and Income Fund Inc.

(Exact name of registrant as specified in charter)

620 Eighth Avenue, 49^th Floor, New York, NY 10018

(Address of principal executive offices) (Zip code)

Robert I. Frenkel, Esq.

Legg Mason & Co., LLC

100 First Stamford Place

Stamford, CT 06902

(Name and address of agent for service)

Registrant’s telephone number, including area code: (888) 777-0102

Date of fiscal year end: November 30

Date of reporting period: May 31, 2014

ITEM 1.

REPORT TO STOCKHOLDERS.

The Semi-Annual Report to Stockholders is filed herewith.

LOGO


Semi-Annual Report		May 31, 2014

LMP

CAPITAL AND INCOME FUND INC. (SCD)

INVESTMENT PRODUCTS: NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE


What’s inside
Letter from the chairman			II
Investment commentary			III
Fund at a glance			1
Schedule of investments			2
Statement of assets and liabilities			8
Statement of operations			9
Statements of changes in net assets			10
Statement of cash flows			11
Financial highlights			12
Notes to financial statements			13
Additional shareholder information			22
Dividend reinvestment plan			23

Fund objective

The Fund’s investment objective is total return with an emphasis on income.

Letter from the chairman

LOGO

Dear Shareholder,

We are pleased to provide the semi-annual report of LMP Capital and Income Fund Inc. for the six-month reporting period ended May 31, 2014. Please read on for Fund performance information and a detailed look at prevailing economic and market conditions during the Fund’s reporting period.

As always, we remain committed to providing you with excellent service and a full spectrum of investment choices. We also remain committed to supplementing the support you receive from your financial advisor. One way we accomplish this is through our website, www.lmcef.com. Here you can gain immediate access to market and investment information, including:

Fund prices and performance,

Market insights and commentaries from our portfolio managers, and

A host of educational resources.

We look forward to helping you meet your financial goals.

Sincerely,

LOGO

Kenneth D. Fuller

Chairman, President and Chief Executive Officer

June 27, 2014


II		LMP Capital and Income Fund Inc.

Investment commentary

Economic review

After generally expanding at a moderate pace since the end of the Great Recession, the U.S. economy experienced a setback toward the end of the six months ended May 31, 2014 (the “reporting period”). Looking back, U.S. gross domestic product (“GDP”)ⁱ growth, as reported by the U.S. Department of Commerce, was 4.1% during the third quarter of 2013, its best reading since the fourth quarter of 2011. The economy then moderated during the fourth quarter of 2013, as GDP growth was 2.6%. Slower growth was due to several factors, including a deceleration in private inventory investment, declining federal government spending and less residential fixed investments. The Commerce Department’s final reading for first quarter 2014 GDP growth, released after the reporting period ended, was -2.9%. This represented the first negative reading for GDP growth since the first quarter of 2011. The contraction was partially attributed to severe winter weather in the U.S., as well as slower growth overseas. In particular, the Commerce Department reported that moderating growth “primarily reflected negative contributions from private inventory investment, exports, state and local government spending, nonresidential fixed investment, and residential fixed investment that were partly offset by a positive contribution from personal consumption expenditures.”

The U.S. job market improved during the reporting period. When the period began, unemployment, as reported by the U.S. Department of Labor, was 7.5%. Unemployment was as low as 6.6% in January 2014, before ticking up to 6.7% in February and holding steady in March 2014. Unemployment then fell to 6.3% in April and

was unchanged in May, the lowest level since September 2008. However, falling unemployment during the period was partially due to a decline in the workforce participation rate, which was 62.8% in both April and May 2014, matching the lowest level since 1978. The number of longer-term unemployed remained elevated, as roughly 34.6% of the 9.8 million Americans looking for work in May 2014 had been out of work for more than six months.

Sales of existing-homes fluctuated during the reporting period given changing mortgage rates and weather-related factors. According to the National Association of Realtors (“NAR”), after three consecutive monthly declines, existing-home sales rose 1.3% on a seasonally adjusted basis in April 2014 versus the previous month’s sales. Sales then rose 4.9% in May versus the previous month. The NAR reported that the median existing-home price for all housing types was $213,400 in May 2014, up 5.1% from May 2013. The inventory of homes available for sale in May 2014 was 2.2% higher than the previous month at a 5.6 month supply at the current sales pace and 6.0% higher than in May 2013.

The manufacturing sector continued to expand during the reporting period. Based on revised figures for the Institute for Supply Management’s Purchasing Managers’ Index (“PMI”)ⁱⁱ, manufacturing expanded during all six months of the reporting period (a reading below 50 indicates a contraction, whereas a reading above 50 indicates an expansion). After a reading of 56.5 in December 2013, the PMI fell to 51.3 in January 2014, its weakest reading since May 2013. However, the PMI moved up the next four months and was 55.4 in May 2014. During May, seventeen of the eighteen industries within the PMI expanded.


LMP Capital and Income Fund Inc.		III

Investment commentary (cont’d)

Market review

Q. How did the Federal Reserve Board (“Fed”)ⁱⁱⁱ respond to the economic environment?

A. The Fed took a number of actions as it sought to meet its dual mandate of fostering maximum employment and price stability. As has been the case since December 2008, the Fed kept the federal funds rate^iv at a historically low range between zero and 0.25%. At its meeting in December 2012, prior to the beginning of the reporting period, the Fed announced that it would continue purchasing $40 billion per month of agency mortgage-backed securities (“MBS”), as well as initially purchasing $45 billion per month of longer-term Treasuries. At a press conference following its meeting that ended on June 19, 2013, then Fed Chairman Ben Bernanke said “…the Committee currently anticipates that it would be appropriate to moderate the monthly pace of purchases later this year.” In a surprise to many investors, at its meeting that ended on September 18, 2013, the Fed did not taper its asset purchase program. Then, at its meeting that concluded on December 18, 2013, the Fed announced that it would begin reducing its monthly asset purchases, saying “Beginning in January 2014, the Committee will add to its holdings of agency MBS at a pace of $35 billion per month rather than $40 billion per month, and will add to its holdings of longer-term Treasury securities at a pace of $40 billion per month rather than $45 billion per

month.”

At each of the Fed’s next three meetings (January, March and May 2014), it announced further $10 billion tapering of its asset purchases. Finally, at its meeting that ended on June 18, 2014, after the reporting period ended, the Fed again cut its monthly

asset purchases. Beginning in July, it will buy a total of $35 billion per month ($15 billion per month of agency MBS and $20 billion per month of longer-term Treasuries).

Q. What factors impacted the U.S. stock market during the reporting period?

A. While there were periods of volatility and several “flights to quality,” the U.S. stock market generated strong results during the reporting period. Despite a number of macro issues, including some mixed economic data and geopolitical concerns, the market posted positive results during the first month of the period. The market then weakened in January 2014, due to concerns related to China’s economy and the potential for moderating global growth. However, the setback was only temporary, as stocks rallied sharply in February given generally solid corporate profits and robust investor demand. Despite weakening economic data and increased geopolitical issues, the market was highly resilient and posted positive returns from March through May 2014. All told, for the six months ended May 31, 2014, the S&P 500 Index^v gained 7.62%.

Looking at the U.S. stock market more closely, mid-cap stocks generated the best returns during the six months ended May 31, 2014, with the Russell Midcap Index^vi returning 8.35%. In contrast, large-cap stocks, as measured by the Russell 1000 Index^vii, returned 7.71% and small-cap stocks, as measured by the Russell 2000 Index^viii, declined 0.10%. From an investment style perspective, growth and value stocks, as measured by the Russell 3000 Growth^ix and Russell 3000 Value^x Indices, returned 6.52% and 7.67%, respectively.


IV		LMP Capital and Income Fund Inc.

Looking at the energy master limited partnership (“MLP”) market, over the six-months ended May 31, 2014, the Alerian MLP Index^xi returned 11.62%. After lagging the broader market in the second half of 2013 as investors focused on short-term interest rate noise, the Alerian MLP Index posted a total return of 9.8% year-to-date through May 31, 2014, outpacing the major U.S. equity indices by a healthy margin. We believe the fundamentals for MLPs on the whole remain intact, as evidenced by strong distribution growth announcements in the industry. Additionally, natural gas prices have surged since October 2013 as demand due to colder-than-expected temperatures led to a drawdown of storage levels. Higher demand and higher prices support the need for infrastructure spending, which in turn supports growth for MLPs. We continue to believe that the U.S. renaissance in energy production represents a secular growth opportunity. The energy infrastructure build-out has continued unabated and is resulting in rising cash flow streams to many energy MLPs.

Q. Did Treasury yields trend higher or lower during the six months ended May 31, 2014?

A. Short-term Treasury yields moved higher, whereas long-term Treasury yields declined during the reporting period. When the reporting period began, the yield on the two-year Treasury was 0.28%, equaling its low for the period. It was as high as 0.47% in March and April 2014, before ending the period at 0.37%. The yield on the ten-year Treasury began the period at 2.75% and it fell as low as 2.44% on May 28, 2014. Ten-year Treasuries peaked at 3.04% on December 31, 2013, and ended the period at 2.48%.

Q. What factors impacted the spread sectors (non-Treasuries) during the reporting period?

A. While the market was volatile at times, the spread sectors generated positive results during the reporting period. After generally weakening in December 2013, the spread sectors largely rallied in January and February 2014, as investor demand was solid overall. The majority of spread sectors then modestly declined in March 2014 as interest rates moved higher. However, the reporting period ended on a positive note as the spread sectors generated positive results in April and May. The overall bond market, as measured by the Barclays U.S. Aggregate Index^xii, gained 3.28% during the six months ended May 31, 2014.

Q. How did the high-yield market perform over the six months ended May 31, 2014?

A. The U.S. high-yield bond market was among the best performing spread sectors during the reporting period. The asset class, as measured by the Barclays U.S. Corporate High Yield — 2% Issuer Cap Index^xiii, posted positive returns during all six months covered by the reporting period. Supporting the high yield market was generally solid investor demand and low defaults. All told, the high-yield bond market gained 5.14% for the six months ended May 31, 2014.

Q. How did the emerging market debt asset class perform over the reporting period?

A. The asset class was volatile but generated solid results overall during the six months ended May 31, 2014. After a brief rally in December 2013, the asset class weakened in January 2014, given renewed concerns about China’s economy and


LMP Capital and Income Fund Inc.		V

Investment commentary (cont’d)

depreciating emerging market currencies. However, the asset class rallied sharply from February through May 2014 as investor demand resumed. Overall, the JPMorgan Emerging Markets Bond Index Global (“EMBI Global”)^xiv gained 9.08% during the six months ended May 31, 2014.

Performance review

For the six months ended May 31, 2014, LMP Capital and Income Fund Inc. returned 12.18% based on its net asset value (“NAV”)^xv and 10.51% based on its New York Stock Exchange (“NYSE”) market price per share. The Fund’s unmanaged benchmarks, the Barclays U.S. Aggregate Index and the S&P 500 Index, returned 3.28% and 7.62%, respectively. The Lipper Income and Preferred Stock Closed-End Funds Category Average^xvi returned 11.05% over the same time frame. Please note that Lipper performance returns are based on each fund’s NAV.

During this six-month period, the Fund made distributions to shareholders totaling $0.56 per share. As of May 31, 2014, the Fund estimates that 88.54% of the distributions were sourced from net investment income and 11.46% constitutes a return of capital.* The performance table shows the Fund’s six-month total return based on its NAV and market price as of May 31, 2014. Past performance is no guarantee of future results.


Performance Snapshot as of May 31, 2014 (unaudited)
Price per share	6-month total return**
$19.05 (NAV)		12.18	%†
$16.98 (Market Price)		10.51	%‡

All figures represent past performance and are not a guarantee of future results. Performance figures for periods shorter than one year represent cumulative figures and are not annualized.

** Total returns are based on changes in NAV or market price, respectively. Returns reflect the deduction of all Fund expenses, including management fees, operating expenses, and other Fund expenses. Returns do not reflect the deduction of brokerage commissions or taxes that investors may pay on distributions or the sale of shares.

† Total return assumes the reinvestment of all distributions, including returns of capital, if any, at NAV.

‡ Total return assumes the reinvestment of all distributions, including returns of capital, if any, in additional shares in accordance with the Fund’s Dividend Reinvestment Plan.

Looking for additional information?

The Fund is traded under the symbol “SCD” and its closing market price is available in most newspapers under the NYSE listings. The daily NAV is available on-line under the symbol “XSCDX” on most financial websites. Barron’s and the Wall Street Journal’s Monday edition both carry closed-end fund tables that provide additional information. In addition, the Fund issues a quarterly press

These estimates are not for tax purposes. The Fund will issue a Form 1099 with final composition of the distributions for tax purposes after year-end. A return of capital is not taxable and results in a reduction in the tax basis of a shareholder’s investment. For more information about a distribution’s composition, please refer to the Fund’s distribution press release or, if applicable, the Section 19 notice located in the press release section of our website, www.lmcef.com.


VI		LMP Capital and Income Fund Inc.

release that can be found on most major financial websites as well as www.lmcef.com.

In a continuing effort to provide information concerning the Fund, shareholders may call 1-888-777-0102 (toll free), Monday through Friday from 8:00 a.m. to 5:30 p.m. Eastern Time, for the Fund’s current NAV, market price and other information.

Thank you for your investment in LMP Capital and Income Fund Inc. As always, we appreciate that you have chosen us to manage your assets and we remain focused on achieving the Fund’s investment goals.

Sincerely,

LOGO

Kenneth D. Fuller

Chairman, President and Chief Executive Officer

June 27, 2014

RISKS: Stock and bond prices are subject to fluctuation. As interest rates rise, bond prices fall, reducing the value of the fixed-income securities held by the Fund. Investing in foreign securities is subject to certain risks not associated with domestic investing, such as currency fluctuations and changes in political and economic conditions. These risks are magnified in emerging or developing markets. High-yield bonds involve greater credit and liquidity risks than investment grade bonds. The repositioning of the Fund’s portfolio may increase a shareholder’s risk of loss associated with an investment in the Fund’s shares. The Fund’s investments in energy-related MLPs subjects it to the risks of investing in MLPs and the energy sector, including the risks of declines in energy and commodity prices, decreases in energy demand, adverse weather conditions, natural or other disasters, changes in government regulation, and changes in tax laws. Funds that invest in securities related to the real estate industry are subject to the risks of real estate markets, including fluctuating property values, changes in interest rates and other mortgage-related risks. The Fund may use derivatives, such as options and futures, which can be illiquid, may disproportionately increase losses, and have a potentially large impact on Fund performance. Leverage may magnify gains and increase losses in the Fund’s portfolio.

All investments are subject to risk including the possible loss of principal. Past performance is no guarantee of future results. All index performance reflects no deduction for fees, expenses or taxes. Please note that an investor cannot invest directly in an index.

The information provided is not intended to be a forecast of future events, a guarantee of future results or investment advice. Views expressed may differ from those of the firm as a whole.


LMP Capital and Income Fund Inc.		VII

Investment commentary (cont’d)

ⁱ	Gross domestic product (“GDP”) is the market value of all final goods and services produced within a country in a given period of time.

ⁱⁱ	The Institute for Supply Management’s PMI is based on a survey of purchasing executives who buy the raw materials for manufacturing at more than 350 companies. It offers an early reading on the health of the manufacturing sector.

ⁱⁱⁱ	The Federal Reserve Board (“Fed”) is responsible for the formulation of policies designed to promote economic growth, full employment, stable prices and a sustainable pattern of international trade and payments.

^iv	The federal funds rate is the rate charged by one depository institution on an overnight sale of immediately available funds (balances at the Federal Reserve) to another depository institution; the rate may vary from depository institution to depository institution and from day to day.

^v	The S&P 500 Index is an unmanaged index of 500 stocks and is generally representative of the performance of larger companies in the U.S.

^vi

The Russell Midcap Index measures the performance of the mid-cap segment of the U.S. equity universe. The Russell Midcap is a subset of the Russell 1000 Index. It includes approximately 800 of the smallest securities based on a combination of their market cap and current index membership. The Russell Midcap represents approximately 31% of the total market capitalization of the Russell 1000 companies.

^vii

The Russell 1000 Index measures the performance of the large-cap segment of the U.S. equity universe. It is a subset of the Russell 3000 Index and includes approximately 1,000 of the largest securities based on a combination of their market cap and current index membership. The Russell 1000 represents approximately 92% of the U.S. market. The Russell 3000 Index measures the performance of the 3,000 largest U.S. companies based on total market capitalization, which represents approximately 98% of the U.S. equity market.

^viii

The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. The Russell 2000 is a subset of the Russell 3000 Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2,000 of the smallest securities based on a combination of their market cap and current index membership.

^xi

The Russell 3000 Growth Index measures the performance of the broad growth segment of the U.S. equity universe. It includes those Russell 3000 Index companies with higher price-to-book ratios and higher forecasted growth values. (A price-to-book ratio is the price of a stock compared to the difference between a company’s assets and liabilities.)

^x	The Russell 3000 Value Index measures the performance of the broad value segment of the U.S. equity universe. It includes those Russell 3000 Index companies with lower price-to-book ratios and lower forecasted growth values.

^xi	The Alerian MLP Index is a composite of the fifty most prominent energy master limited partnerships (“MLPs”) and is calculated using a float-adjusted, capitalization-weighted methodology.

^xii	The Barclays U.S. Aggregate Index is a broad-based bond index comprised of government, corporate, mortgage- and asset-backed issues, rated investment grade or higher, and having at least one year to maturity.

^xiii

The Barclays U.S. Corporate High Yield — 2% Issuer Cap Index is an index of the 2% Issuer Cap component of the Barclays U.S. Corporate High Yield Index, which covers the U.S. dollar-denominated, non-investment grade, fixed-rate, taxable corporate bond market.

^xiv	The JPMorgan Emerging Markets Bond Index Global (“EMBI Global”) tracks total returns for U.S. dollar-denominated debt instruments issued by emerging market sovereign and quasi-sovereign entities: Brady bonds, loans, Eurobonds and local market instruments.

^xv

Net asset value (“NAV”) is calculated by subtracting total liabilities and outstanding preferred stock (if any) from the closing value of all securities held by the Fund (plus all other assets) and dividing the result (total net assets) by the total number of the common shares outstanding. The NAV fluctuates with changes in the market prices of securities in which the Fund has invested. However, the price at which an investor may buy or sell shares of the Fund is the Fund’s market price as determined by supply of and demand for the Fund’s shares.

^xvi

Lipper, Inc., a wholly-owned subsidiary of Reuters, provides independent insight on global collective investments. Returns are based on the six-month period ended May 31, 2014, including the reinvestment of all distributions, including returns of capital, if any, calculated among the 26 funds in the Fund’s Lipper category.


VIII		LMP Capital and Income Fund Inc.

Fund at a glance^† (unaudited)

Investment breakdown (%) as a percent of total investments

LOGO

†	The bar graph above represents the composition of the Fund’s investments as of May 31, 2014 and November 30, 2013. The Fund is actively managed. As a result, the composition of the Fund’s investments is subject to change at any time.

‡	Represents less than 0.1%


LMP Capital and Income Fund Inc. 2014 Semi-Annual Report		1

Schedule of investments (unaudited)

May 31, 2014

LMP Capital and Income Fund Inc.

Security

Value

Common Stocks — 67.4%

Consumer Discretionary — 1.3%

Media — 1.3%

Regal Entertainment Group, Class A Shares

239,000

4,662,890

^(a)

Consumer Staples — 1.7%

Household Products — 1.7%

Kimberly-Clark Corp.

53,000

5,954,550

^(a)

Energy — 4.1%

Energy Equipment & Services — 4.1%

Seadrill Ltd.

371,000

14,098,000

Financials — 21.9%

Capital Markets — 7.6%

Ares Capital Corp.

682,000

11,757,680^(a)

FS Investment Corp.

211,310

2,214,529

Golub Capital BDC Inc.

219,000

3,727,380^(a)

Medley Capital Corp.

248,000

3,072,720^(a)

TCP Capital Corp.

81,000

1,389,960

TriplePoint Venture Growth BDC Corp.

240,000

3,748,800^(a)

Total Capital Markets

25,911,069

Real Estate Investment Trusts (REITs) — 14.3%

American Capital Agency Corp.

102,000

2,420,460^(a)

Annaly Capital Management Inc.

400,000

4,716,000^(a)

DCT Industrial Trust Inc.

150,000

1,188,000

EPR Properties

41,000

2,210,720^(a)

Equity Residential

19,300

1,192,740

Excel Trust Inc.

170,000

2,244,000^(a)

HCP Inc.

41,000

1,711,750^(a)

Health Care REIT Inc.

27,000

1,707,210^(a)

Highwoods Properties Inc.

26,000

1,055,080^(a)

Hospitality Properties Trust

119,000

3,452,190^(a)

Inland Real Estate Corp.

185,000

1,964,700^(a)

Kilroy Realty Corp.

24,000

1,453,920^(a)

Liberty Property Trust

49,000

1,896,790^(a)

Ramco-Gershenson Properties Trust

132,000

2,191,200^(a)

Regency Centers Corp.

22,000

1,174,800^(a)

Retail Properties of America Inc., Class A Shares

155,000

2,331,200

Senior Housing Properties Trust

91,000

2,182,180^(a)

Simon Property Group Inc.

6,600

1,098,636

Spirit Realty Capital Inc.

272,386

3,075,238^(a)

See Notes to Financial Statements.


2		LMP Capital and Income Fund Inc. 2014 Semi-Annual Report

LMP Capital and Income Fund Inc.

Security

Value

Real Estate Investment Trusts (REITs) — continued

Starwood Property Trust Inc.

250,000

6,097,500

^(a)

Urstadt Biddle Properties, Class A Shares

85,000

1,761,200

^(a)

Washington Prime Group Inc.

3,300

65,637

Westfield Group

202,000

2,011,506

^(a)

Total Real Estate Investment Trusts (REITs)

49,202,657

Total Financials

75,113,726

Health Care — 5.1%

Pharmaceuticals — 5.1%

Bristol-Myers Squibb Co.

123,950

6,165,273

^(a)

GlaxoSmithKline PLC, ADR

76,000

4,099,440

^(a)

Merck & Co. Inc.

58,000

3,355,880

^(a)

Pfizer Inc.

126,000

3,733,380

^(a)

Total Health Care

17,353,973

Industrials — 6.8%

Aerospace & Defense — 2.8%

Lockheed Martin Corp.

57,650

9,434,423

^(a)

Electrical Equipment — 1.5%

Eaton Corp. PLC

69,000

5,084,610

^(a)

Trading Companies & Distributors — 2.5%

TAL International Group Inc.

198,000

8,676,360

^(a)

Total Industrials

23,195,393

Information Technology — 6.0%

Semiconductors & Semiconductor Equipment — 1.8%

Intel Corp.

230,000

6,283,600

^(a)

Software — 1.3%

Microsoft Corp.

105,000

4,298,700

^(a)

Technology Hardware, Storage & Peripherals — 2.9%

Seagate Technology PLC

187,360

10,066,853

^(a)

Total Information Technology

20,649,153

Materials — 1.5%

Metals & Mining — 0.8%

Freeport-McMoRan Copper & Gold Inc.

78,000

2,655,900

^(a)

Paper & Forest Products — 0.7%

International Paper Co.

50,000

2,381,500

^(a)

Total Materials

5,037,400

Telecommunication Services — 7.0%

Diversified Telecommunication Services — 4.9%

AT&T Inc.

168,000

5,958,960^(a)

See Notes to Financial Statements.


LMP Capital and Income Fund Inc. 2014 Semi-Annual Report		3

Schedule of investments (unaudited) (cont’d)

May 31, 2014

LMP Capital and Income Fund Inc.

Security

Value

Diversified Telecommunication Services — continued

Verizon Communications Inc.

217,666

$10,874,593^(a)

Total Diversified Telecommunication Services

16,833,553

Wireless Telecommunication Services — 2.1%

Vodafone Group PLC, Sponsored ADR

200,481

7,018,840

Total Telecommunication Services

23,852,393

Utilities — 12.0%

Electric Utilities — 9.2%

Great Plains Energy Inc.

334,000

8,500,300^(a)

NextEra Energy Inc.

110,000

6,223,800

PPL Corp.

445,610

15,636,455

Southern Co.

24,000

1,050,720^(a)

Total Electric Utilities

31,411,275

Independent Power and Renewable Electricity Producers — 0.8%

NRG Yield Inc., Class A Shares

56,960

2,671,994

^(a)

Multi-Utilities — 2.0%

Integrys Energy Group Inc.

34,000

1,971,660^(a)

National Grid PLC

340,000

5,072,177^(a)

Total Multi-Utilities

7,043,837

Total Utilities

41,127,106

Total Common Stocks (Cost — $186,889,743)

231,044,584

Rate

Convertible Preferred Stocks — 18.4%

Financials — 7.7%

Insurance — 3.1%

MetLife Inc.

5.000%

352,000

10,401,600

^(a)

Real Estate Investment Trusts (REITs) — 4.6%

Health Care REIT Inc.

6.500%

117,800

6,979,650

^(a)

Weyerhaeuser Co.

6.375%

151,000

8,854,640

Total Real Estate Investment Trusts (REITs)

15,834,290

Total Financials

26,235,890

Industrials — 5.6%

Industrial Conglomerates — 4.9%

United Technologies Corp.

7.500%

257,000

16,910,600

Machinery — 0.7%

Stanley Black & Decker Inc.

6.250%

20,000

2,275,600

Total Industrials

19,186,200

Utilities — 5.1%

Electric Utilities — 3.6%

NextEra Energy Inc.

5.889%

200,000

12,514,000

See Notes to Financial Statements.


4		LMP Capital and Income Fund Inc. 2014 Semi-Annual Report

LMP Capital and Income Fund Inc.

Security

Rate

Value

Multi-Utilities — 1.5%

Dominion Resources Inc.

6.125%

90,000

5,156,100

Total Utilities

17,670,100

Total Convertible Preferred Stocks (Cost — $53,784,064)

63,092,190

Shares/Units

Master Limited Partnerships — 37.9%

Crude/Refined Products Pipelines — 0.7%

Kinder Morgan Energy Partners LP

31,941

2,429,113

^(a)

Diversified Energy Infrastructure — 14.3%

Energy Transfer Equity LP

412,000

20,995,520

^(a)

Energy Transfer Partners LP

67,000

3,773,440

^(a)

Enterprise Products Partners LP

212,160

15,873,811

^(a)

Genesis Energy LP

95,000

5,415,000

^(a)

Regency Energy Partners LP

45,000

1,251,000

Williams Partners LP

30,000

1,593,300

^(a)

Total Diversified Energy Infrastructure

48,902,071

Financials — 6.2%

Ares Management LP

72,260

1,372,940

Blackstone Group LP

156,000

4,848,480

^(a)

Och-Ziff Capital Management Group LLC

1,119,000

14,871,510

^(a)

Total Financials

21,092,930

Gathering/Processing — 9.2%

Access Midstream Partners LP

100,000

6,299,000

^(a)

Crestwood Midstream Partners LP

53,500

1,166,300

^(a)

DCP Midstream Partners LP

135,021

7,251,978

^(a)

Enable Midstream Partners LP

132,922

3,376,219

MarkWest Energy Partners LP

45,000

2,787,750

^(a)

QEP Midstream Partners LP

47,000

1,136,460

Summit Midstream Partners LP

130,000

5,851,300

^(a)

Targa Resources Partners LP

25,000

1,699,000

Western Gas Partners LP

25,000

1,799,750

^(a)

Total Gathering/Processing

31,367,757

General Partner — 0.1%

Crestwood Equity Partners LP

19,360

272,008

Global Infrastructure — 0.1%

Brookfield Infrastructure Partners LP

13,140

534,535

Liquids Transportation & Storage — 5.2%

Magellan Midstream Partners LP

30,000

2,456,400

^(a)

PBF Logistics LP

98,820

2,643,435

See Notes to Financial Statements.


LMP Capital and Income Fund Inc. 2014 Semi-Annual Report		5

Schedule of investments (unaudited) (cont’d)

May 31, 2014

LMP Capital and Income Fund Inc.


Security						Shares/Units		Value
Liquids Transportation & Storage — continued
Plains All American Pipeline LP							70,000	$	3,952,900	^(a)
Susser Petroleum Partners LP							165,000		7,788,000	^(a)
World Point Terminals LP							47,000		942,820
Total Liquids Transportation & Storage									17,783,555
Natural Gas Transportation & Storage — 0.4%
TC Pipelines LP							30,000		1,560,000
Offshore — 0.8%
Dynagas LNG Partners LP							110,000		2,643,300	^(a)
Refining — 0.3%
Western Refining Logistics LP							32,960		1,083,395
Shipping — 0.6%
Golar LNG Partners LP							61,000		2,009,950	^(a)
Total Master Limited Partnerships (Cost — $79,604,414)									129,678,614

	Rate					Shares
Preferred Stocks — 2.3%
Financials — 2.3%
Real Estate Investment Trusts (REITs) — 2.3%
American Tower Corp.		5.250	%				32,000		3,424,320	^*
Ashford Hospitality Trust, Series E		9.000	%				33,661		907,164	^(a)
Glimcher Realty Trust, Series H		7.500	%				34,000		878,900
Pebblebrook Hotel Trust, Series A		7.875	%				47,512		1,268,333	^(a)
Retail Properties of America Inc., Cumulative		7.000	%				50,000		1,303,500
Total Preferred Stocks (Cost — $7,273,349)									7,782,217

				Maturity Date		Face Amount
Asset-Backed Securities — 0.0%
Fremont Home Loan Trust, 2004-1 M5 (Cost — $ 90,339)		1.800	%		2/25/34	$	90,339		67,102	⁽^b)
Collateralized Mortgage Obligations — 0.0%
MLCC Mortgage Investors Inc., 2004-A B2 (Cost — $234,932)		1.530	%		4/25/29		234,932		122,093	^(b)
Total Investments before Short-term Investments (Cost — $327,876,841)									431,786,800
Short-term Investments — 2.7%
Repurchase Agreements — 2.7%
Interest in $1,600,000,000 joint tri-party repurchase agreement dated 5/30/14 with RBS Securities Inc.; Proceeds at maturity — $6,758,244; (Fully collateralized by various U.S. government obligations, 0.125% to 3.875% due 1/1/15 to 2/15/43; Market value — $6,893,392)		0.050	%		6/2/14		6,758,216		6,758,216

See Notes to Financial Statements.


6		LMP Capital and Income Fund Inc. 2014 Semi-Annual Report

LMP Capital and Income Fund Inc.

Security

Rate

Maturity
Date

Face
Amount

Value

Repurchase Agreements — continued

Interest in $549,443,000 joint tri-party repurchase agreement dated 5/30/14 with Deutsche Bank Securities Inc.; Proceeds at maturity — $2,320,798; (Fully collateralized by various U.S. government obligations, 0.000% to 3.125% due 2/15/15 to 2/15/43; Market value — $2,373,680)

0.070

6/2/14

2,320,784

Total Short-Term Investments (Cost — $9,079,000)

9,079,000

Total Investments — 128.7% (Cost — $336,955,841#)

440,865,800

Liabilities in Excess of Other Assets — (28.7)%

(98,308,058

)

Total Net Assets — 100.0%

342,557,742

*	Non-income producing security.

^(a)	All or a portion of this security is pledged as collateral pursuant to the loan agreement (See Note 5).

^(b)	Variable rate security. Interest rate disclosed is as of the most recent information available.

#	Aggregate cost for federal income tax purposes is substantially the same.


Abbreviations used in this schedule:
ADR		— American Depositary Receipts
REIT		— Real Estate Investment Trust

See Notes to Financial Statements.


LMP Capital and Income Fund Inc. 2014 Semi-Annual Report		7

Statement of assets and liabilities (unaudited)

May 31, 2014



Assets:
Investments, at value (Cost — $336,955,841)	$	440,865,800
Foreign currency, at value (Cost — $165)		69
Cash		997,247
Dividends and interest receivable		1,024,285
Receivable for securities sold		142,560
Principal paydown receivable		1,608
Prepaid expenses		17,326
*Total Assets*		*443,048,895*

Liabilities:
Loan payable (Note 5)		100,000,000
Investment management fee payable		313,454
Interest payable (Note 5)		24,825
Accrued expenses		152,874
*Total Liabilities*		*100,491,153*
Total Net Assets	$	342,557,742

Net Assets:
Par value ($0.001 par value; 17,983,331 shares issued and outstanding; 100,000,000 shares authorized)	$	17,983
Paid-in capital in excess of par value		384,570,298
Undistributed net investment income		5,021,015
Accumulated net realized loss on investments and foreign currency transactions		(150,961,417)
Net unrealized appreciation on investments and foreign currencies		103,909,863
Total Net Assets	$	342,557,742

Shares Outstanding		17,983,331

Net Asset Value		$19.05

See Notes to Financial Statements.


8		LMP Capital and Income Fund Inc. 2014 Semi-Annual Report

Statement of operations (unaudited)

For the Six Months Ended May 31, 2014



Investment Income:
Dividends and distributions	$	18,850,547
Returns of capital (Note1(f))		(3,390,273)
Net dividends and distributions		15,460,274
Interest		21,828
Less: Foreign taxes withheld		(11,044)
*Total Investment Income*		*15,471,058*

Expenses:
Investment management fee (Note 2)		1,734,162
Interest expense (Note 5)		353,955
Audit and tax		59,733
Transfer agent fees		35,411
Directors’ fees		25,807
Legal fees		20,629
Shareholder reports		17,578
Fund accounting fees		15,241
Stock exchange listing fees		14,147
Excise tax (Note 1)		9,354
Insurance		3,445
Custody fees		2,077
Miscellaneous expenses		6,867
*Total Expenses*		*2,298,406*
Net Investment Income		13,172,652

Realized and Unrealized Gain (Loss) on Investments and Foreign Currency Transactions (Notes 1 and 3):
Net Realized Gain From:
Investment transactions		2,979,071
REIT distributions		68,281
Foreign currency transactions		6,113
*Net Realized Gain*		*3,053,465*
Change in Net Unrealized Appreciation (Depreciation) From:
Investments		21,163,911
Foreign currencies		(5,923)
*Change in Net Unrealized Appreciation (Depreciation)*		*21,157,988*
Net Gain on Investments and Foreign Currency Transactions		24,211,453
Increase in Net Assets from Operations	$	37,384,105

See Notes to Financial Statements.


LMP Capital and Income Fund Inc. 2014 Semi-Annual Report		9

Statements of changes in net assets


For the Six Months Ended May 31, 2014 (unaudited) and the Year Ended November 30, 2013	2014		2013

Operations:
Net investment income	$	13,172,652	$	12,899,601
Net realized gain		3,053,465		2,047,760
Change in net unrealized appreciation (depreciation)		21,157,988		60,946,927
*Increase in Net Assets From Operations*		*37,384,105*		*75,894,288*

Distributions to Shareholders From (Note 1):
Net investment income		(10,070,665)		(10,988,352)
Return of capital		—		(9,152,978)
*Decrease in Net Assets From Distributions to Shareholders*		*(10,070,665)*		*(20,141,330)*
*Increase in Net Assets*		*27,313,440*		*55,752,958*

Net Assets:
Beginning of period		315,244,302		259,491,344
End of period*	$	342,557,742	$	315,244,302
*Includesundistributed net investment income of:		$5,021,015		$1,919,028

See Notes to Financial Statements.


10		LMP Capital and Income Fund Inc. 2014 Semi-Annual Report

Statement of cash flows (unaudited)

For the Six Months Ended May 31, 2014



Increase (Decrease) in Cash:
Cash Provided (Used) by Operating Activities:
Net increase in net assets resulting from operations	$	37,384,105
Adjustments to reconcile net increase in net assets resulting from operations to net cash provided (used) by operating activities:
Purchases of portfolio securities		(68,984,005)
Sales of portfolio securities		41,397,991
Net purchases, sales and maturities of short-term investments		(3,246,000)
Net amortization of premium (accretion of discount)		659,411
Return of capital		3,390,273
Decrease in receivable for securities sold		2,291,787
Decrease in dividends and interest receivable		91,057
Increase in prepaid expenses		(3,658)
Decrease in receivable from principal paydown		4,273
Decrease in payable for securities purchased		(872,281)
Increase in investment management fee payable		41,858
Increase in interest payable		6,067
Decrease in accrued expenses		(59,257)
Net realized gain on investments		(2,979,071)
Change in unrealized appreciation of investments		(21,163,911)
Net Cash Used in Operating Activities*		*(12,041,361)*

Cash Flows from Financing Activities:
Distributions paid on common stock	$	(10,070,665)
Increase in loan payable		23,000,000
*Net Cash Provided by Financing Activities*		*12,929,335*
Net Increase in Cash		887,974
Cash at Beginning of Period		109,342
Cash at End of Period	$	997,316

*	Included in operating expenses is cash of $347,888 paid for interest on borrowings.

See Notes to Financial Statements.


LMP Capital and Income Fund Inc. 2014 Semi-Annual Report		11

Financial highlights


For a share of capital stock outstanding throughout each year ended November 30, unless otherwise noted:
	2014^1,2			2013¹			2012¹			2011³			2010⁴			2009⁴			2008^1,5			2008^1,6

Net asset value, beginning of period		$ 17.53			$ 14.43			$ 13.36			$ 13.70			$ 12.44			$ 10.07			$ 11.20			$ 22.95

Income (loss) from operations:
Net investment income		0.73			0.72			0.75			0.86			0.54			0.43			0.11			0.31
Net realized and unrealized gain (loss)		1.35			3.50			1.41			(0.73)			1.26			2.46			(0.96)			(8.85)
*Total income (loss) from operations*		*2.08*			*4.22*			*2.16*			*0.13*			*1.80*			*2.89*			*(0.85)*			*(8.54)*

Less distributions from:
Net investment income		(0.56)	†		(0.61)			(1.12)			(0.58)			(0.54)			(0.52)			(0.28)			(0.20)
Net realized gains		—			—			—			—			—			—			—			(3.01)
Return of capital		—			(0.51)			—			—			—			—			—			—
*Total distributions*		*(0.56)*			*(1.12)*			*(1.12)*			*(0.58)*			*(0.54)*			*(0.52)*			*(0.28)*			*(3.21)*
Increase in net asset value due to shares repurchased in tender offer		—			—			0.03			0.11			—			—			—			—

Net asset value, end of period		$19.05			$17.53			$14.43			$13.36			$13.70			$12.44			$10.07			$11.20

Market price, end of period		$16.98			$15.91			$13.90			$12.23			$12.45			$10.35			$7.73			$9.07
*Total return, based on NAV^7,8*		*12.18*	%		*30.37*	%		*17.02*	%⁹		*1.84*	%⁹		*14.83*	%		*29.52*	%		*(7.43)*	%		*(42.09)*	%
*Total return, based on Market Price¹⁰*		*10.51*	%		*23.50*	%		*23.69*	%		*2.80*	%		*26.18*	%		*42.02*	%		*(11.44)*	%		*(44.95)*	%

Net assets, end of period (000s)		$342,558			$315,244			$259,491			$266,273			$410,458			$372,888			$301,672			$335,588

Ratios to average net assets:
Gross expenses		1.43	%¹¹		1.41	%		1.61	%		1.53	%¹¹		1.49	%		1.59	%		3.10	%¹¹		2.72	%
Net expenses¹²		1.43	¹¹		1.41			1.61			1.53	¹¹		1.49			1.59			3.10	¹¹		2.72
Net investment income		8.20	¹¹		4.41			5.28			5.94	¹¹		4.29			3.90			6.74	¹¹		1.73

Portfolio turnover rate		10	%		38	%		51	%		79	%¹³		49	%¹³		135	%¹³		8	%		169	%¹³

Supplemental data:
Loans Outstanding, End of Period (000s)		$100,000			$77,000			$77,000			$73,000			$100,000			$60,000			$100,000			$145,000
Asset Coverage for Loan Outstanding		443	%		509	%		437	%		465	%		511	%		721	%		402	%		331	%
Weighted Average Loan (000s)		$86,956			$77,000			$75,686			$92,757			$73,589			$66,192			$123,361			$168,497
Weighted Average Interest Rate on Loans		0.81	%		0.84	%		0.91	%		0.91	%		1.62	%		1.44	%		3.35	%		3.89	%

¹	Per share amounts have been calculated using the average shares method.

²	For the six months ended May 31, 2014 (unaudited).

³	For the period January 1, 2011 to November 30, 2011.

⁴	For the year ended December 31.

⁵	For the period November 1, 2008 through December 31, 2008.

⁶	For the year ended October 31.

⁷

Performance figures may reflect compensating balance arrangements, fee waivers and/or expense reimbursements. In the absence of compensating balance arrangements, fee waivers and/or expense reimbursements, the total return would have been lower. Past performance is no guarantee of future results. Total returns for periods of less than one year are not annualized.

⁸	The total return calculation assumes that distributions are reinvested at NAV. Past performance is no guarantee of future results. Total returns for periods of less than one year are not annualized.

⁹	The total return reflects an increase in net asset value due to shares repurchased in tender offers. Absent these tender offers, the total return would have been 16.78% for the year ended November 30, 2012 and 1.00% for the period ended November 30, 2011.

¹⁰	The total return calculation assumes that distributions are reinvested in accordance with the Fund’s dividend reinvestment plan. Past performance is no guarantee of future results. Total returns for periods of less than one year are not annualized.

¹¹	Annualized.

¹²	The impact of compensating balance arrangements, if any, was less than 0.01%.

¹³

Excluding mortgage dollar roll transactions. If mortgage dollar roll transactions had been included, the portfolio turnover rate would have been 115% for the period ended November 30, 2011, 111% and 185% for the years ended December 31, 2010 and 2009, respectively, and 177% for the year ended October 31, 2008.

†	The actual source of the Fund’s current fiscal year distributions may be from net investment income, return of capital or a combination of both. Shareholders will be informed of the tax characteristics of the distributions after the close of the fiscal year.

See Notes to Financial Statements.


12		LMP Capital and Income Fund Inc. 2014 Semi-Annual Report

Notes to financial statements (unaudited)

1. Organization and significant accounting policies

LMP Capital and Income Fund Inc. (the “Fund”) was incorporated in Maryland on November 12, 2003 and is registered as a non-diversified, closed-end management investment company under the Investment Company Act of 1940, as amended (the “1940 Act”). The Board of Directors authorized 100 million shares of $0.001 par value common stock. The Fund’s investment objective is total return with an emphasis on income. The Fund pursues its investment objective by investing 80% of its assets in a broad range of equity and fixed income securities of both U.S. and foreign issuers. The Fund is permitted to invest up to 25% of its total net assets in energy master limited partnerships (“MLPs”).

The following are significant accounting policies consistently followed by the Fund and are in conformity with U.S. generally accepted accounting principles (“GAAP”). Estimates and assumptions are required to be made regarding assets, liabilities and changes in net assets resulting from operations when financial statements are prepared. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ. Subsequent events have been evaluated through the date the financial statements were issued.

(a) Investment valuation. Equity securities for which market quotations are available are valued at the last reported sales price or official closing price on the primary market or exchange on which they trade. The valuations for fixed income securities (which may include, but are not limited to, corporate, government, municipal, mortgage-backed, collateralized mortgage obligations and asset-backed securities) and certain derivative instruments are typically the prices supplied by independent third party pricing services, which may use market prices or broker/dealer quotations or a variety of valuation techniques and methodologies. The independent third party pricing services use inputs that are observable such as issuer details, interest rates, yield curves, prepayment speeds, credit risks/spreads, default rates and quoted prices for similar securities. Short-term fixed income securities that will mature in 60 days or less are valued at amortized cost, unless it is determined that using this method would not reflect an investment’s fair value. When the Fund holds securities or other assets that are denominated in a foreign currency, the Fund will normally use the currency exchange rates as of 4:00 p.m. (Eastern Time). If independent third party pricing services are unable to supply prices for a portfolio investment, or if the prices supplied are deemed by the manager to be unreliable, the market price may be determined by the manager using quotations from one or more broker/dealers or at the transaction price if the security has recently been purchased and no value has yet been obtained from a pricing service or pricing broker. When reliable prices are not readily available, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded, but before the Fund calculates its net asset value, the Fund values these securities as determined in accordance with procedures approved by the Fund’s Board of Directors.

The Board of Directors is responsible for the valuation process and has delegated the supervision of the daily valuation process to the Legg Mason North American Fund Valuation


LMP Capital and Income Fund Inc. 2014 Semi-Annual Report		13

Notes to financial statements (unaudited) (cont’d)

Committee (the “Valuation Committee”). The Valuation Committee, pursuant to the policies adopted by the Board of Directors, is responsible for making fair value determinations, evaluating the effectiveness of the Fund’s pricing policies, and reporting to the Board of Directors. When determining the reliability of third party pricing information for investments owned by the Fund, the Valuation Committee, among other things, conducts due diligence reviews of pricing vendors, monitors the daily change in prices and reviews transactions among market participants.

The Valuation Committee will consider pricing methodologies it deems relevant and appropriate when making fair value determinations. Examples of possible methodologies include, but are not limited to, multiple of earnings; discount from market of a similar freely traded security; discounted cash-flow analysis; book value or a multiple thereof; risk premium/yield analysis; yield to maturity; and/or fundamental investment analysis. The Valuation Committee will also consider factors it deems relevant and appropriate in light of the facts and circumstances. Examples of possible factors include, but are not limited to, the type of security; the issuer’s financial statements; the purchase price of the security; the discount from market value of unrestricted securities of the same class at the time of purchase; analysts’ research and observations from financial institutions; information regarding any transactions or offers with respect to the security; the existence of merger proposals or tender offers affecting the security; the price and extent of public trading in similar securities of the issuer or comparable companies; and the existence of a shelf registration for restricted securities.

For each portfolio security that has been fair valued pursuant to the policies adopted by the Board of Directors, the fair value price is compared against the last available and next available market quotations. The Valuation Committee reviews the results of such back testing monthly and fair valuation occurrences are reported to the Board of Directors quarterly.

The Fund uses valuation techniques to measure fair value that are consistent with the market approach and/or income approach, depending on the type of security and the particular circumstance. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable securities. The income approach uses valuation techniques to discount estimated future cash flows to present value.

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 Fund’s own assumptions in determining the fair value of investments)


14		LMP Capital and Income Fund Inc. 2014 Semi-Annual Report

The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.

The following is a summary of the inputs used in valuing the Fund’s assets carried at fair value:


ASSETS
Description	Quoted Prices (Level 1)		Other Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Long-term investments†:
Common stocks	$	231,044,584		—		—	$	231,044,584
Convertible preferred stocks		63,092,190		—		—		63,092,190
Master limited partnerships		129,678,614		—		—		129,678,614
Preferred stocks		7,782,217		—		—		7,782,217
Asset-backed securities		—	$	67,102		—		67,102
Collateralized mortgage obligations		—		122,093		—		122,093
Total long-term investments	$	431,597,605	$	189,195		—	$	431,786,800
Short-term investments†		—		9,079,000		—		9,079,000
Total investments	$	431,597,605	$	9,268,195		—	$	440,865,800

†	See Schedule of Investments for additional detailed categorizations.

(b) Repurchase agreements. The Fund may enter into repurchase agreements with institutions that its investment adviser has determined are creditworthy. Each repurchase agreement is recorded at cost. Under the terms of a typical repurchase agreement, the Fund acquires a debt security subject to an obligation of the seller to repurchase, and of the Fund to resell, the security at an agreed-upon price and time, thereby determining the yield during the Fund’s holding period. When entering into repurchase agreements, it is the Fund’s policy that its custodian or a third party custodian, acting on the Fund’s behalf, take possession of the underlying collateral securities, the market value of which, at all times, at least equals the principal amount of the repurchase transaction, including accrued interest. To the extent that any repurchase transaction maturity exceeds one business day, the value of the collateral is marked-to-market and measured against the value of the agreement in an effort to ensure the adequacy of the collateral. If the counterparty defaults, the Fund generally has the right to use the collateral to satisfy the terms of the repurchase transaction. However, if the market value of the collateral declines during the period in which the Fund seeks to assert its rights or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of the collateral by the Fund may be delayed or limited.

(c) 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.


LMP Capital and Income Fund Inc. 2014 Semi-Annual Report		15

Notes to financial statements (unaudited) (cont’d)

The Fund does not isolate that portion of the results of operations resulting from fluctuations in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.

Net realized foreign exchange gains or losses arise from sales of foreign currencies, including gains and losses on forward foreign currency contracts, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the values of assets and liabilities, other than investments in securities, on the date of valuation, resulting from changes in exchange rates.

Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of U.S. dollar denominated transactions as a result of, among other factors, the possibility of lower levels of governmental supervision and regulation of foreign securities markets and the possibility of political or economic instability.

(d) Master limited partnerships. The Fund may invest up to 25% of its total net assets in the securities of Master Limited Partnerships (“MLPs”) whose primary business is in the oil and gas, natural resources or commodities 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.


16		LMP Capital and Income Fund Inc. 2014 Semi-Annual Report

(e) Partnership accounting policy. The Fund records its pro rata share of the income (loss) and capital gains (losses), to the extent of distributions it has received, allocated from the underlying partnerships and accordingly adjusts the cost basis of the underlying partnerships for return of capital. These amounts are included in the Fund’s Statement of Operations.

(f) Return of capital estimates. Distributions received from the Fund’s investments in MLPs generally are comprised of income and return of capital and the Fund’s investments in 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.

(g) Foreign investment risks. The Fund’s investments in foreign securities may involve risks not present in domestic investments. Since securities may be denominated in foreign currencies, may require settlement in foreign currencies or pay interest or dividends in foreign currencies, changes in the relationship of these foreign currencies to the U.S. dollar can significantly affect the value of the investments and earnings of the Fund. Foreign investments may also subject the Fund to foreign government exchange restrictions, expropriation, taxation or other political, social or economic developments, all of which affect the market and/or credit risk of the investments.

(h) Security transactions and investment income. Security transactions are accounted for on a trade date basis. Interest income, adjusted for amortization of premium and accretion of discount, is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date. 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.

(i) Distributions to shareholders. Distributions from net investment income by the Fund, if any, are declared and paid on a quarterly basis. The actual source of the Fund’s current fiscal year distributions may be from net investment income, return of capital or a combination of both. Shareholders will be informed of the tax characteristics of the distributions after the close of the fiscal year. The Fund intends to distribute all of its net investment income earned each quarter and any cash received during the quarter from its investments in MLPs and REITs. The Fund intends to distribute the cash received from MLPs and REITs even if all or a portion of that cash may represent a return of capital to the Fund. The Fund may distribute additional amounts if required under the income tax regulations. Distributions of net realized gains, if any, are declared at least annually. Pursuant to its Managed Distribution Policy, the Fund intends to make regular quarterly distributions to


LMP Capital and Income Fund Inc. 2014 Semi-Annual Report		17

Notes to financial statements (unaudited) (cont’d)

shareholders at a fixed rate per common share, which rate may be adjusted from time to time by the Fund’s Board of Directors. Under the Fund’s Managed Distribution Policy, if, for any quarterly distribution, the value of the Fund’s net investment income and net realized capital gain is less than the amount of the distribution, the difference will be distributed from the Fund’s net assets (and may constitute a “return of capital”). The Board of Directors may modify, terminate or suspend the Managed Distribution Policy at any time, including when certain events would make part of the return of capital taxable to shareholders. Any such modification, termination or suspension could have an adverse effect on the market price of the Fund’s shares. Distributions to shareholders of the Fund are recorded on the ex-dividend date and are determined in accordance with income tax regulations, which may differ from GAAP.

(j) 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 Statement of Changes in Net Assets and additional information on cash receipts and cash payments are presented in the Statement of Cash Flows.

(k) Compensating balance arrangements. The Fund has an arrangement with its custodian bank whereby a portion of the custodian’s fees is paid indirectly by credits earned on the Fund’s cash on deposit with the bank.

(l) Federal and other taxes. It is the Fund’s policy to comply with the federal income and excise tax requirements of the Internal Revenue Code of 1986 (the “Code”), as amended, applicable to regulated investment companies. Accordingly, the Fund intends to distribute its taxable income and net realized gains, if any, to shareholders in accordance with timing requirements imposed by the Code. Therefore, no federal or state income tax provision is required in the Fund’s financial statements.

The Fund may invest in up to 25% of its total assets in MLPs, which generally are treated as partnerships for federal income tax purposes. As a limited partner in the MLPs, the Fund reports its allocable share of the MLP’s taxable income in computing its own taxable income. The distributions paid by the MLPs generally do not constitute income for tax purposes. Each MLP may allocate losses to the Fund which are generally not deductible in computing the Fund’s taxable income until such time as that particular MLP either generates income to offset those losses or the Fund disposes of units in that MLP. This may result in the Fund’s taxable income being substantially different than its book income in any given year. As a result, the Fund may have insufficient taxable income to support its distributions paid resulting in a return of capital to shareholders. A return of capital distribution is generally not treated as taxable income to shareholders and instead reduces a shareholder’s basis in their shares of the Fund.

However, due to the timing of when distributions are made by the Fund, the Fund may be subject to an excise tax of 4% of the amount by which 98% of the Fund’s annual taxable income and 98.2% of net realized gains exceed the distributions from such taxable income


18		LMP Capital and Income Fund Inc. 2014 Semi-Annual Report

and realized gains for the calendar year. The Fund paid $9,354 of Federal excise taxes attributable to calendar year 2013.

Management has analyzed the Fund’s tax positions taken on income tax returns for all open tax years and has concluded that as of May 31, 2014, no provision for income tax is required in the Fund’s financial statements. The Fund’s federal and state income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state departments of revenue.

Under the applicable foreign tax laws, a withholding tax may be imposed on interest, dividends and capital gains at various rates.

(m) Reclassification. GAAP requires that certain components of net assets be reclassified to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset value per share.

2. Investment management agreement and other transactions with affiliates

Legg Mason Partners Fund Advisor, LLC (“LMPFA”) is the Fund’s investment manager. ClearBridge Investments, LLC (“ClearBridge”), Western Asset Management Company (“Western Asset”) and Western Asset Management Company Limited (“Western Asset Limited”) are the Fund’s subadvisers. LMPFA, ClearBridge, Western Asset and Western Asset Limited are wholly-owned subsidiaries of Legg Mason, Inc. (“Legg Mason”).

LMPFA provides administrative and certain oversight services to the Fund. The Fund pays LMPFA an investment management fee, calculated daily and paid monthly, at an annual rate of 0.85% of the Fund’s average daily net assets plus the proceeds of any outstanding borrowings used for leverage.

LMPFA delegates to the subadvisers the day-to-day portfolio management of the Fund. ClearBridge provides investment advisory services to the Fund by both determining the allocation of the Fund’s assets between equity and fixed-income investments and performing the day-to-day management of the Fund’s investments in equity securities. Western Asset provides advisory services to the Fund by performing the day-to-day management of the Fund’s fixed-income investments. For its services, LMPFA pays the subadvisers 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, from time to time.

Western Asset Limited provides certain advisory services to the Fund relating to currency transactions and investments in non-U.S. dollar denominated securities. Western Asset Limited does not receive any compensation from the Fund. In turn, Western Asset pays Western Asset Limited a subadvisory fee of 0.30% on the assets managed by Western Asset Limited.

During periods in which the Fund is utilizing borrowings, the fees which are payable to LMPFA as a percentage of the Fund’s net assets will be higher than if the Fund did not


LMP Capital and Income Fund Inc. 2014 Semi-Annual Report		19

Notes to financial statements (unaudited) (cont’d)

utilize borrowings because the fee is calculated as a percentage of the Fund’s net assets, including those investments purchased with borrowings. Borrowings for the purpose of the calculation of the management fee include loans from certain financial institutions, the use of mortgage dollar roll transactions and reverse repurchase agreements, if any.

All officers and one Director of the Fund are employees of Legg Mason or its affiliates and do not receive compensation from the Fund.

3. Investments

During the six months ended May 31, 2014, the aggregate cost of purchases and proceeds from sales of investments (excluding short-term investments) were as follows:


Purchases	$	68,984,005
Sales		41,397,991

At May 31, 2014, the aggregate gross unrealized appreciation and depreciation of investments for federal income tax purposes were substantially as follows:


Gross unrealized appreciation	$	108,337,337
Gross unrealized depreciation		(4,427,378)
Net unrealized appreciation	$	103,909,959

4. Derivative instruments and hedging activities

GAAP requires enhanced disclosure about an entity’s derivative and hedging activities.

During the six months ended May 31, 2014, the Fund did not invest in any derivative instruments.

5. Loan

The Fund has a 364-day revolving credit agreement with Pershing LLC, which allows the Fund to borrow up to an aggregate amount of $125,000,000. Unless renewed, this agreement terminates on December 9, 2014. The interest on the loan is calculated at a variable rate based on the one-month LIBOR, plus any applicable margin. To the extent of the borrowing outstanding, the Fund is required to maintain collateral in a special custody account at the Fund’s custodian on behalf of Pershing LLC. Interest expense related to the loan for the six months ended May 31, 2014 was $353,955. For the six months ended May 31, 2014, the Fund incurred no commitment fee. For the six months ended May 31, 2014, the Fund had an average daily loan balance outstanding of $86,956,044 and the weighted average interest rate was 0.81%. At May 31, 2014, the Fund had $100,000,000 of borrowings outstanding per this credit agreement.

6. Distributions subsequent to May 31, 2014

The following distribution has been declared by the Fund’s Board of Directors and is payable subsequent to the period of this report:


Record Date	Payable Date		Amount
6/20/14		6/27/14	$	0.2800


20		LMP Capital and Income Fund Inc. 2014 Semi-Annual Report

7. Capital loss carryforwards

As of November 20, 2013, the Fund had the following net capital loss carryforwards remaining:


Year of Expiration	Amount
11/30/2016	$	(16,162,643)
11/30/2017		(121,685,830)
11/30/2018		(3,245,411)
	$	(141,093,884)

These amounts will be available to offset any future taxable capital gains.

8. Recent accounting pronouncement

The Fund has adopted the disclosure provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Update 2011-11 (“ASU 2011-11”), Balance Sheet (Topic 210) — Disclosures about Offsetting Assets and Liabilities along with the related scope clarification provisions of FASB Accounting Standards Update 2013-01 (“ASU 2013-01”) entitled Balance Sheet (Topic 210) — Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. ASU 2011-11 is intended to enhance disclosures on the offsetting of financial assets and liabilities by requiring entities to disclose both gross and net information about financial instruments and transactions that are either offset in the statement of assets and liabilities or subject to a master netting agreement or similar arrangement. ASU 2013-01 limits the scope of ASU 2011-11’s disclosure requirements on offsetting to financial assets and financial liabilities related to derivatives, repurchase and reverse repurchase agreements, and securities lending and securities borrowing transactions.


LMP Capital and Income Fund Inc. 2014 Semi-Annual Report		21

Additional shareholder information (unaudited)

Results of annual meeting of shareholders

The Annual Meeting of Shareholders of LMP Capital and Income Fund Inc. was held on March 28, 2014, for the purpose of considering and voting upon the election of Directors. The following table provides information concerning the matter voted upon at the meeting:

Election of directors


Nominees	Votes For		Votes Withheld
Eileen A. Kamerick		16,051,531		462,465
Riordan Roett		16,008,436		505,560
Jeswald W. Salacuse*		16,015,637		498,359
Kenneth D. Fuller		16,029,633		484,363

At May 31, 2014, in addition to Eileen Kamerick, Riordan Roett, Jeswald W. Salacuse and Kenneth D. Fuller, the other Directors of the Fund were as follows:

Carol L. Colman

Daniel P. Cronin

Paolo M. Cucchi

Leslie H. Gelb

William R. Hutchinson

*	Mr. Salacuse has retired from the Board of Directors, effective June 30, 2014.


22		LMP Capital and Income Fund Inc.

Dividend reinvestment plan (unaudited)

Unless you elect to receive distributions in cash, all distributions, on your Common Shares will be automatically reinvested by American Stock Transfer & Trust Company, as agent for the Common Shareholders (the “Plan Agent”), in additional Common Shares under the 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 American Stock Transfer & Trust Company as dividend paying agent.

If you participate in the Plan, the number of Common Shares you will receive will be determined as follows:

(1) If the market price of the Common Shares on the record date (or, if the record date is not a New York Stock Exchange trading day, the immediately preceding trading day) for determining shareholders eligible to receive the relevant distribution (the “determination date”) is equal to or exceeds the net asset value per share of the Common Shares, the Fund will issue new Common Shares at a price equal to the greater of (a) the net asset value per share at the close of trading on the Exchange on the determination date or (b) 95% of the market price per share of the Common Shares on the determination date.

(2) If the net asset value per share of the Common Shares exceeds the market price of the Common Shares on the determination date, the Plan Agent will receive the distribution in cash and will buy Common Shares in the open market, on the Exchange or elsewhere, for your account as soon as practicable commencing on the trading day following the determination date and terminating no later than the earlier of (a) 30 days after the distribution payment date, or (b) the record date for the next succeeding distribution to be made to the Common Shareholders; except when necessary to comply with applicable provisions of the federal securities laws. If during this period: (i) the market price rises so that it equals or exceeds the net asset value per share of the Common Shares at the close of trading on the Exchange on the determination 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 Shares in the open market and the Fund shall issue the remaining Common Shares at a price per share equal to the greater of (a) the net asset value per share at the close of trading on the Exchange on the determination date or (b) 95% of the then current market price per share.

The Plan Agent maintains all participants’ accounts in the Plan and gives written confirmation of all transactions in the accounts, including information you may need for tax records. Common Shares in your account will be held by the Plan Agent in non-certified form. Any proxy you receive will include all Common Shares you have received under the Plan.


LMP Capital and Income Fund Inc.		23

Dividend reinvestment plan (unaudited) (cont’d)

You may withdraw from the Plan by notifying the Plan Agent in writing at 6201 15th Avenue, Brooklyn, New York 11219. Such withdrawal will be effective immediately if notice is received by the Plan Agent not less than ten business days prior to any dividend or distribution record date; otherwise such withdrawal will be effective as soon as practicable after the Plan Agent’s investment of the most recently declared dividend or distribution on the Common Shares. The Plan may be terminated by the Fund upon notice in writing mailed to Common Shareholders at least 30 days prior to the record date for the payment of any dividend or distribution by the Fund for which the termination is to be effective. Upon any termination, you will be sent a certificate or certificates for the full Common Shares held for you under the Plan and cash for any fractional Common Shares. You may elect to notify the Plan Agent in advance of such termination to have the Plan Agent sell part or all of your shares on your behalf. The Plan Agent is authorized to deduct brokerage charges actually incurred for this transaction from the proceeds.

There is no service charge for reinvestment of your dividends or distributions in Common Shares. 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 Common Shares, this allows you to add to your investment through dollar cost averaging, which may lower the average cost of your Common Shares over time.

Automatically reinvesting dividends and distributions does not mean that you do not have to pay income taxes due upon receiving dividends and distributions.

The Fund reserves the right to amend or terminate the Plan if, in the judgment of the Board of Directors, the change is warranted. There is no direct service charge to participants in the Plan; however, the Fund reserves the right to amend the Plan to include a service charge payable by the participants. Additional information about the Plan and your account may be obtained from the Plan Agent at 1-888-888-0151.


24		LMP Capital and Income Fund Inc.

LMP

Capital and Income Fund Inc.

Directors

Carol L. Colman

Daniel P. Cronin

Paolo M. Cucchi

Kenneth D. Fuller

Chairman

Leslie H. Gelb

William R. Hutchinson

Eileen A. Kamerick

Riordan Roett

Jeswald W. Salacuse*

Officers

Kenneth D. Fuller

President and Chief Executive Officer

Richard F. Sennett

Principal Financial Officer

Ted P. Becker

Chief Compliance Officer

Vanessa A. Williams

Identity Theft Prevention Officer

Robert I. Frenkel

Secretary and Chief Legal Officer

Thomas C. Mandia

Assistant Secretary

Steven Frank

Treasurer

Jeanne M. Kelly

Senior Vice President

*	Mr. Salacuse has retired from the Board of Directors, effective June 30, 2014.

LMP Capital and Income Fund Inc.

620 Eighth Avenue

49th Floor

New York, NY 10018

Investment manager

Legg Mason Partners Fund Advisor, LLC

Subadvisers

ClearBridge Investments, LLC

Western Asset Management Company

Western Asset Management Company Limited

Custodian

State Street Bank and Trust Company

1 Lincoln Street

Boston, MA 02111

Transfer agent

American Stock Transfer & Trust Company 6201 15th Avenue

Brooklyn, NY 11219

Independent registered public accounting firm

KPMG LLP

345 Park Avenue

New York, NY 10154

Legal counsel

Simpson Thacher & Bartlett LLP

425 Lexington Avenue

New York, NY 10017

New York Stock Exchange Symbol

SCD

Legg Mason Funds Privacy and Security Notice

Your Privacy and the Security of Your Personal Information is Very Important to the Legg Mason Funds

This Privacy and Security Notice (the “Privacy Notice”) addresses the Legg Mason Funds’ privacy and data protection practices with respect to nonpublic personal information the Funds receive. The Legg Mason Funds include any funds sold by the Funds’ distributor, Legg Mason Investor Services, LLC, as well as Legg Mason-sponsored closed-end funds and certain closed-end funds managed or sub-advised by Legg Mason or its affiliates. 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:

Personal information included on applications or other forms;

Account balances, transactions, and mutual fund holdings and positions;

Online account access user IDs, passwords, security challenge question responses; and

Information received from consumer reporting agencies regarding credit history and creditworthiness (such as the amount of an individual’s total debt, payment history, etc.).

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:

Employees, agents, and affiliates on a “need to know” basis to enable the Funds to conduct ordinary business or comply with obligations to government regulators;

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 marketing services solely for the Funds;

The Funds’ representatives such as legal counsel, accountants and auditors; and

Fiduciaries or representatives acting on your behalf, such as an IRA custodian or trustee of a grantor trust.

NOT PART OF THE SEMI-ANNUAL REPORT

Legg Mason Funds Privacy and Security Notice (cont’d)

Except as otherwise permitted by applicable law, companies acting on the Funds’ behalf 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, or if you have questions about the Funds’ privacy practices, write the Funds using the contact information on your account statements, email the Funds by clicking on the Contact Us section of the Funds’ website at www.leggmason.com, or contact the Fund at 1-888-777-0102.

Revised April 2011

NOT PART OF THE SEMI-ANNUAL REPORT

LMP Capital and Income Fund Inc.

620 Eighth Avenue

49th Floor

New York, NY 10018

Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940, as amended, that from time to time the Fund may purchase, at market prices, shares of its common stock in the open market.

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 on Form N-Q. The Fund’s Forms N-Q are available on the SEC’s website at www.sec.gov. The Fund’s Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington D.C., and information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. To obtain information on Form N-Q from the Fund, shareholders can call 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) on the Fund’s website at www.lmcef.com and (3) on the SEC’s website at www.sec.gov.

This report is transmitted to the shareholders of LMP Capital and Income Fund Inc. for their information. This is not a prospectus, circular or representation intended for use in the purchase of shares of the Fund or any securities mentioned in this report.

American Stock Transfer & Trust Company

6201 15th Avenue

Brooklyn, NY 11219

FD04219 7/14 SR14-2239

ITEM 2.

CODE OF ETHICS.

Not applicable.

ITEM 3.

AUDIT COMMITTEE FINANCIAL EXPERT.

Not applicable.

ITEM 4.

PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Not applicable.

ITEM 5.

AUDIT COMMITTEE OF LISTED REGISTRANTS.

Not applicable.

ITEM 6.

SCHEDULE OF INVESTMENTS.

Included herein under Item 1.

ITEM 7.

DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

Not applicable.

ITEM 8(b).

INVESTMENT PROFESSIONALS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

On or about March 31, 2014, S. Kenneth Leech became part of the portfolio management team of the Fund.

NAME AND

ADDRESS

LENGTH OF
TIME SERVED

PRINCIPAL OCCUPATION(S) DURING

PAST 5 YEARS

S. Kenneth Leech

Western Asset

385 East Colorado Blvd.

Pasadena, CA 91101

Since March 31, 2014

Responsible for the day-to-day management with other members of the Fund’s portfolio management team; Chief Investment Officer of Western Asset from 1998 to 2008 and since 2014; Senior Advisor/Chief Investment Officer Emeritus of Western Asset from 2008-2013; Co- Chief Investment Officer of Western Asset from 2013-2014.

ITEM 9.

PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.

Not applicable.

ITEM 10.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

Not applicable.

ITEM 11.

CONTROLS AND PROCEDURES.

(a)

The registrant’s principal executive officer and principal financial officer have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a- 3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”)) are effective as of a date within 90 days of the filing date of this report that includes the disclosure required by this paragraph, based on their evaluation of the disclosure controls and procedures required by Rule 30a-3(b) under the 1940 Act and 15d-15(b) under the Securities Exchange Act of 1934.

(b)

There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are likely to materially affect the registrant’s internal control over financial reporting.

ITEM 12.

EXHIBITS.

(a) (1) Not applicable.

Exhibit 99.CODE ETH

(a) (2) Certifications pursuant to section 302 of the Sarbanes-Oxley Act of 2002 attached hereto.

Exhibit 99.CERT

(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 attached hereto.

Exhibit 99.906CERT

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this Report to be signed on its behalf by the undersigned, there unto duly authorized.

LMP Capital and Income Fund Inc.


By:		/s/ Kenneth D. Fuller
		Kenneth D. Fuller
		Chief Executive Officer

Date:		July 24, 2014

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.


By:		/s/ Kenneth D. Fuller
		Kenneth D. Fuller
		Chief Executive Officer

Date:		July 24, 2014

By:		/s/ Richard F. Sennett
		Richard F. Sennett
		Principal Financial Officer

Date:		July 24, 2014