bond asset class experienced lackluster performance and broad-based weakness with higher rates and wider spreads across the curve.

     Due to the Fund’s allocations across investment grade, high yield and emerging markets debt, please find three separate market overviews, for the period of this report included below.

Investment Grade Market Review
During the 12 months ended October 31, 2005, markets were primarily driven by Federal Reserve Board (“Fed”)^viii activity, employment and inflation data and rising energy costs, exacerbated near period-end by the devastating impact of Hurricane Katrina on the U.S. Gulf Coast. The Fed’s eight “measured” 25-basis-point^ix hikes during the period brought the federal funds rate^x to 3.75% from 1.75% by the reporting period’s end. The Fed raised rates an additional quarter point to 4.00% on November 1st, after the close of the reporting period. These measured, consecutive rate hikes exerted upward pressure on short-term bond yields, driving 2-year yields up about 183 basis points during the 12 months. However, in what Fed Chairman Alan Greenspan termed a “conundrum,” yields on the long bond stayed low during the period, even declining slightly (four basis points) over the 12 months despite relinquishing all gains to end 53 basis points higher by period-end. This sharp rise in short yields and relative stagnation in longer yields resulted in the extensive yield curve flattening seen during the period.

     As the market fully expected each 25-basis-point hike in the federal funds rate during the period — thanks to the Fed’s well-advertised intentions to raise rates at a measured pace —investors spent much of the period dissecting language from the Fed for clues on its assessment of the U.S. economy and the pace of rate hikes. The Fed reiterated throughout the year that it would increase rates “at a pace that is likely to be measured” and, starting in June 2004, added that, “the Committee will respond to changes in economic prospects as needed to fulfill its obligation to maintain price stability.” In its most recent statement (from the September 20th meeting), the Fed noted that core inflation remained low near the end of the period and long-term inflation expectations remained “contained” (even if the language was downgraded from the “well contained” language used at prior meetings).

     Slowing global growth, rising inflation and surging oil prices undoubtedly restrained economic activity during the period, with Gross Domestic Product (“GDP”)^xi declining year-over-year to 3.8% growth in first quarter 2005 (from first quarter 2004’s 4.5% pace) and to 3.4% growth in second quarter 2005 (from second quarter 2004’s 3.5%). However, economic growth remained remarkably resilient into the third quarter, particularly after fears of a sharp slowdown in the wake of Hurricanes Katrina and Rita, gaining 3.8% on an annualized basis versus 3.9% last year and consensus expectations of 3.6% growth. Although growth remained strong throughout the reporting period, fears of potential slowing, combined with increasing inflation, drove markets. Oil prices, which breached $70 per barrel before reporting period’s end, continue to cast a pall on growth and consumer spending expectations.

     This was particularly true in the latter half of the reporting period, as investors assessed the potential impact of Hurricanes Katrina and Rita on U.S. economic growth, inflation and the pace of interest rates and growth indicators turned increasingly mixed. For example, the U.S. labor market began to pick up in early 2004 and continued to improve through most of the Fund’s fiscal year, although the pace of improvement remained uneven from month to month. Unemployment fell through the majority of the reporting period,

6      Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report

declining from 5.5% in October 2004 to 4.9% in August 2005. However, employment skyrocketed, even if not as much as expected, in the wake of Hurricane Katrina, and the unemployment rate rose to 5.0% in October. Industrial production and retail sales also remained positive through most of the reporting period, even considering the volatility in the auto sector as General Motors and Ford were successively downgraded by three major statistical credit rating agencies to below investment grade. Again, however, as with employment, industrial production and retail sales data turned negative near the reporting period’s end as the effects of Hurricane Katrina roiled through the economy, reductions in auto production hit the market and the highly successful automotive dealer incentive packages offered through the summer came to an end.

     While inflationary pressures from sustained high commodity prices began to creep into the economy, particularly near the end of the reporting period, continued strong growth and limited wage pressures are keeping long-term inflation expectations “contained”. Core inflation rates, in particular, remained subdued throughout the period despite growing inflationary pressure. Specifically, Core Consumer Price Index (CPI) inflation rose only 0.1% year-over-year to 2.1% in October 2005, and core Producer Price Index (PPI) inflation edged up only 0.1% year-over-year to 1.9% in September 2005. However, both consumer and producer headline inflation rose dramatically by period end as continually high and rising energy prices and competitive pricing pressures began to be passed through to the consumer. Headline CPI inflation rose approximately 1.1% to 4.3% in October 2005 versus October 2004, and headline PPI inflation increased 1.5% to 5.9% over the same period. Pricing pressures were also seen in the core PCE deflator, the Fed’s preferred measure of inflation, which rose 0.5% versus September 2004 to 2.0% year-over-year in the latest September reading.

Emerging Markets Debt Review
Emerging markets debt returned 10.54% during the 12 months ended October 31, 2005, as represented by the EMBI Global. Strong country fundamentals and market technicals offset the downward pressure exerted by eight “measured” increases in the federal funds rate throughout the 12 months and credit contagion from the auto sector during volatility of Spring 2005. Continued progress on political and economic reform in many emerging countries, continued commodity price strength and the generally positive macro environment supported broad credit quality improvements across emerging markets during the 12 months.

     Sovereign debt markets achieved positive momentum at the start of the period after recovering from depressed levels earlier in 2004 and rallied through the remainder of the year. Positive returns were supported by strong underlying country fundamentals, commodity prices strength (particularly in metals, agriculture and oil) and relatively low U.S. Treasury market volatility. Emerging market debt continued to trend positive during the first two months of 2005 despite concerns over the path of U.S. interest rates, risks of higher inflation and new bond issuance weighing on the market. However, indications of potentially more aggressive tightening (50-basis-point increments) from the Fed and increasingly prominent inflation worries led the market down in March, broadly in line with the U.S. Treasury market. Emerging debt markets remained under pressure in early April as spillover from volatile credit markets, with the highly visible troubles in the auto sector, worsened technicals.

Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report      7

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     Markets turned again by mid-April and followed a generally upward trajectory through the remainder of the reporting period as U.S. Treasury market volatility declined, the U.S. equity market recovered and country fundamentals remained broadly supportive. Although sovereign market volatility trended upward near the end of the reporting period, emerging markets proved relatively resilient, boosted by strong investor demand for greater risk assets despite the early July terrorist bombings in London, continued political noise in key emerging countries and increasing volatility in U.S. Treasuries.

     Spreads tightened 157 basis points during the 12-month period ended October 31, 2005, closing at 242 basis points over U.S. Treasuries. Of note, sovereign spreads tightened 67 basis points alone during the month of June 2005 due primarily to index rebalancing with the conclusion of the Argentine bond exchange. Over the period, 12-month return volatility stood at 4.92% ^xii, substantially below long-term, historical levels of approximately 16%.

Performance Review
For the 12 months ended October 31, 2005, the Salomon Brothers Capital and Income Fund Inc. returned 6.85%, based on its New York Stock Exchange (“NYSE”) market price and 12.34% based on its net asset value (“NAV”)^xiii per share. In comparison, the Fund’s unmanaged benchmark, the S&P 500 Index, returned 8.72% and its Lipper Income and Preferred Stock Closed-End Funds Category Average^xiv increased 6.76% over the same time frame. Please note that Lipper performance returns are based on each Fund’s NAV.

     During the 12-month period of this report, the Fund made distributions to shareholders totaling $1.20 per share, (which may have included a return of capital). The performance table shows the Fund’s 12-month total return based on its NAV and market price as of October 31, 2005. Past performance is no guarantee of future results.

Q. What were the most significant factors affecting Fund performance?

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Fund Performance as of October 31, 2005 (unaudited)

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		12 Month
Price Per Share		Total Return
$19.69 (NAV)		12.34	%
$17.19 (Market Price)		6.85	%

All figures represent past performance and are not a guarantee of future results.

Total returns are based on changes in NAV or market price, respectively. Total returns assume the reinvestment of all distributions, including returns of capital, if any, in additional shares.

    What were the leading contributors to performance?

A. The performance of the equity portion of the Fund was driven by both asset allocation and security selection. Energy, financials and health care were the strongest contributing sectors to Fund performance with Nexen, Total S.A., Altria Group, SpectraSite Inc., and Marathon Oil making the largest positive contributions.

     We have kept our leverage levels constant over the last 12 months at $220 million, which is approximately 25% of gross assets or 33% of net assets. While the cost of our credit facility rose during the year along with short-term interest rates, we are still comfortable with our leverage ratio.

8      Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report

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     For the fixed-income portion, during the annual period, the Fund benefited from its yield curve positioning, underweight to shorter maturities in favor of the longer portion of the curve. The flattening yield curve positively impacted Fund returns. The Fund’s exposure to higher yielding assets also supported returns during the period on favorable market fundamentals and technicals in non-investment grade markets.

    What were the leading detractors from performance?

A. The weakest performing sectors of the equity portion of the Fund were materials, utilities and industrials. Securities that detracted the most from performance included OSI Pharmaceuticals Inc., Pfizer Inc., Lexmark International, Navistar International Corp., and Zimmer Holdings. Within the fixed income portion of the Fund, emerging markets debt was the only investment class to outperform the S&P 500 Index.

     For the fixed-income portion, the portfolio’s shorter duration posture versus the benchmark early in the reporting period detracted from performance, as the longer end (10+ years) of the yield curve held up better than we expected. However, the portfolio recouped some of its early losses in the second half of the period due to its shorter duration position as rates continued to climb across all parts of the yield curve. The Fund’s allocation to investment grade corporates detracted from performance during the annual period due to market volatility predicated on idiosyncratic risk (i.e. negative auto sector headlines, M&A and LBO activity and shareholder-friendly corporate actions).

Q. Were there any significant changes to the Fund during the reporting period?

A. Last year, the Board of Directors authorized the Fund to repurchase up to 1 million shares of common stock at such times and in such amounts as management believes will enhance shareholder value, subject to review by the Fund’s Board of Directors. For the period, the Fund repurchased 581,400 shares. The NAV discount was 12.7% as of October 31, 2005. We believe this NAV discount is not justified by the Fund’s structure or performance over the period.

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 symbol XSCDX. Barron’s and The Wall Street Journal’s Monday editions carry closed-end fund tables that will provide additional information. In addition, the Fund issues a quarterly press release that can be found on most major financial websites as well as www.citigroupam.com.

     In a continuing effort to provide information concerning the Fund, shareholders may call 1-888-777-0102 or 1-800-SALOMON (toll free), Monday through Friday from 8:00 a.m. to 6:00 p.m. Eastern Time, for the Fund’s current NAV, market price, and other information.

Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report      9

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

Sincerely,

Mark J. McAllister
Co-Portfolio Manager

December 1, 2005

 

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.

Portfolio holdings and breakdowns are as of October 31, 2005 and are subject to change and may not be representative of the Fund’s current or future investments. The Fund’s top ten holdings (as a percentage of net assets) as of this date were: Federal Republic of Brazil (3.0%), Targeted Return Index Securities (TRAINS) (2.5%), Federal Home Loan Mortgage Corp. (FHLMC) (2.3%), Total SA (1.7%), Russian Federation (1.7%), United Mexican States (1.5%), El Paso Corp. (1.4%), Host Marriott Finance Trust (1.4%), United Mexican States (1.4%) and General Electric Co. (1.4%). Please refer to pages 12 through 36 for a list and percentage breakdown of the Fund’s holdings.

The mention of sector breakdowns is for informational purposes only and should not be construed as a recommendation to purchase or sell any securities. The information provided regarding such sectors is not a sufficient basis upon which to make an investment decision. Investors seeking financial advice regarding the appropriateness of investing in any securities or investment strategies discussed should consult their financial professional. Portfolio holdings are subject to change at any time and may not be representative of the Fund’s current or future investments. The Fund’s top five sector holdings (as a percentage of net assets) as of October 31, 2005 were: Financials (24.4%), Consumer Discretionary (13.0%), Energy (12.1%), Health Care (11.0%) and Information Technology (9.1%). The Fund’s portfolio composition is subject to change at any time.

RISKS: Like any investment where there is risk of loss, you may not be able to sell the shares of the Fund for the same amount that you purchased them. The Fund may use derivatives, such as options and futures, which can be illiquid, may disproportionately increase losses, and have a potentially large impact in Fund performance. Leverage may magnify gains and increase losses in the Fund’s portfolio.

All index performance reflects no deduction for fees, expenses or taxes. Please note that an investor cannot invest directly in an index.

i	The S&P 500 Index is an unmanaged index of 500 stocks that is generally representative of the performance of larger companies in the U.S.
ii	The S&P 500 Barra Value Index is a market-capitalization weighted index of stocks in the S&P 500 having lower price-to-book ratios relative to the S&P 500 as a whole. (A price-to-book ratio is the price of a stock compared to the difference between a company’s assets and liabilities.)
iii	The S&P 500 Barra Growth Index is a market-capitalization weighted index of stocks in the S&P 500 having higher price-to-book ratios relative to the S&P 500 as a whole. (A price-to-book ratio is the price of a stock compared to the difference between a company’s assets and liabilities.)
iv	The Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represents approximately 8% of the total market capitalization of the Russell 3000 Index.
v	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. Countries covered are Algeria, Argentina, Brazil, Bulgaria, Chile, China, Colombia, Cote d’Ivoire, Croatia, Ecuador, Greece, Hungary, Lebanon, Malaysia, Mexico, Morocco, Nigeria, Panama, Peru, the Philippines, Poland, Russia, South Africa, South Korea, Thailand, Turkey and Venezuela.
vi	The Citigroup High Yield Market Index is a broad-based unmanaged index of high yield securities.
vii	The Lehman Brothers Aggregate Bond 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.
viii	The Federal Reserve Board is responsible for the formulation of a policy designed to promote economic growth, full employment, stable prices, and a sustainable pattern of international trade and payments.
ix	A basis point is one one-hundredth (1/100 or 0.01) of one percent.
x	The federal funds rate is the interest rate that banks with excess reserves at a Federal Reserve district bank charge other banks that need overnight loans.
xi	Gross domestic product is a market value of goods and services produced by labor and property in a given country.
xii	Source: JP Morgan Chase
xiii	NAV is calculated by subtracting total liabilities from the closing value of all securities (plus all other assets) held by the Fund 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 at the Fund’s market price as determined by supply of and demand for the Fund’s shares.
xiv	Lipper, Inc. is a major independent mutual-fund tracking organization. Returns are based on the 12-month period ended October 31, 2005, including the reinvestment of distributions, including returns of capital, if any, calculated among the 36 funds in the Fund’s Lipper category, and excluding sales charges.

 

10      Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report

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Fund at a Glance (unaudited)

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Investment Breakdown

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As a Percent of Total Investments (Excluding Securities Purchased From Securities Lending Collateral)

Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report      11

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Schedule of Investments (October 31, 2005)

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SALOMON BROTHERS CAPITAL AND INCOME FUND INC.

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Face
Amount		Security#		Value
CORPORATE BONDS & NOTES — 15.7%
Aerospace & Defense — 0.0%
$     150,000		Goodrich Corp., Notes, 7.500% due 4/15/08	$	157,580
125,000		Lockheed Martin Corp., Notes, 7.700% due 6/15/08		133,076
112,000		Raytheon Co., Notes, 6.750% due 8/15/07		115,294
		Total Aerospace & Defense		405,950
Auto Components — 0.0%
213,000		Dura Operating Corp., Senior Unsecured Notes, Series B, 8.625% due 4/15/12 (a)		181,582
125,000		Johnson Controls Inc., Senior Unsecured Notes, 5.000% due 11/15/06		124,971
		Total Auto Components		306,553
Automobiles — 0.3%
150,000		DaimlerChrysler North America Holding Corp., Notes, 6.400% due 5/15/06		151,267
		Ford Motor Co.:
250,000		Debentures, 6.625% due 10/1/28		172,500
1,675,000		Notes, 7.450% due 7/16/31 (a)		1,239,500
		General Motors Corp., Senior Debentures:
150,000		8.250% due 7/15/23 (a)		111,375
1,200,000		8.375% due 7/15/33 (a)		895,500
		Total Automobiles		2,570,142
Beverages — 0.1%
100,000		Bottling Group LLC, Senior Notes, 2.450% due 10/16/06		97,759
500,000		Constellation Brands Inc., Senior Subordinated Notes, Series B,
		8.125% due 1/15/12 (a)		523,125
		Total Beverages		620,884
Building Products — 0.0%
100,000		Masco Corp., Notes, 6.750% due 3/15/06		100,762
Capital Markets — 0.1%
325,000		BCP Crystal U.S. Holdings Corp., Senior Subordinated Notes, 9.625% due 6/15/14 359,125
150,000		Morgan Stanley, Notes, 5.800% due 4/1/07		151,879
		Total Capital Markets		511,004
Chemicals — 1.2%
500,000		Borden U.S. Finance Corp./Nova Scotia Finance ULC,
		Second Priority Senior Secured Notes, 9.000% due 7/15/14 (b)		494,375
1,000,000		Compass Minerals Group Inc., Senior Subordinated Notes,
		10.000% due 8/15/11		1,082,500
1,000,000		Equistar Chemicals LP, Senior Notes, 10.625% due 5/1/11 (a)		1,095,000
650,000		Hercules Inc., Senior Subordinated Notes, 6.750% due 10/15/29		630,500
1,000,000		Huntsman International LLC, Senior Subordinated Notes,
		10.125% due 7/1/09 (a)		1,033,750
104,000		ICI Wilmington Inc., Notes, 4.375% due 12/1/08		101,728
500,000		ISP Holdings Inc., Senior Secured Notes, Series B, 10.625% due 12/15/09		527,500
1,000,000		Lyondell Chemical Co., Senior Secured Notes, 11.125% due 7/15/12		1,120,000
1,116,000		Millennium America Inc., Senior Notes, 9.250% due 6/15/08		1,202,490
600,000		Nalco Co., Senior Subordinated Notes, 8.875% due 11/15/13 (a)		615,750

See Notes to Financial Statements.

12      Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report

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Schedule of Investments (October 31, 2005) (continued)

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Face
Amount		Security#		Value
Chemicals — 1.2% (continued)
$     500,000		OM Group Inc., Senior Subordinated Notes, 9.250% due 12/15/11	$	483,750
6,000		PPG Industries Inc., Notes, 6.500% due 11/1/07		6,181
650,000		PQ Corp., Senior Subordinated Notes, 7.500% due 2/15/13 (b)		601,250
125,000		Praxair Inc., Unsecured Notes, 2.750% due 6/15/08		118,587
500,000		Resolution Performance Products LLC/RPP Capital Corp., Secured Notes,
		9.500% due 4/15/10 (a)		507,500
		Rhodia SA:
500,000		Senior Notes, 7.625% due 6/1/10		486,250
500,000		Senior Subordinated Notes, 8.875% due 6/1/11 (a)		475,000
325,000		Westlake Chemical Corp., Senior Notes, 8.750% due 7/15/11		349,375
		Total Chemicals		10,931,486
Commercial Banks — 0.2%
125,000		American Express Centurion Bank, Notes, 4.087% due 7/19/07 (c)		125,222
380,000		Banesto Finance Ltd., Subordinated Notes, 7.500% due 3/25/07		392,305
125,000		Bank of America Corp., Subordinated Notes, 6.375% due 2/15/08		129,042
250,000		Bank United Corp., Senior Notes, 8.875% due 5/1/07		262,109
109,091		Fifth Third Bank, Notes, 2.870% due 8/10/09		104,838
200,000		SunTrust Bank, Notes, 4.550% due 5/25/09		197,121
150,000		Wells Fargo & Co., Notes, 4.020% due 3/23/07 (c)		150,145
100,000		Zions Bancorp., Senior Notes, 2.700% due 5/1/06		99,042
		Total Commercial Banks		1,459,824
Commercial Services & Supplies — 0.4%
475,000		Aleris International Inc., Senior Secured Notes, 10.375% due 10/15/10		521,312
		Allied Waste North America Inc.:
75,000		Senior Notes, 7.250% due 3/15/15 (a)(b)		74,625
		Senior Secured Notes, Series B:
217,000		9.250% due 9/1/12 (a)		234,978
1,000,000		7.375% due 4/15/14 (a)		942,500
100,000		Cendant Corp., Senior Notes, 6.875% due 8/15/06		101,314
450,000		Cenveo Corp., Senior Subordinated Notes, 7.875% due 12/1/13		418,500
125,000		Cintas Corp. No. 2, Senior Notes, 5.125% due 6/1/07 (a)		125,571
350,000		Corrections Corporation of America, Senior Subordinated Notes,
		6.250% due 3/15/13		346,063
1,325,000		Iron Mountain Inc., Senior Subordinated Notes, 7.750% due 1/15/15		1,325,000
		Total Commercial Services & Supplies		4,089,863
Communications Equipment — 0.2%
2,000,000		Lucent Technologies Inc., Debentures, 6.450% due 3/15/29		1,720,000
Computers & Peripherals — 0.1%
125,000		Hewlett-Packard Co., Senior Notes, 5.500% due 7/1/07		126,468
125,000		IBM Canada Credit Services Co., Senior Notes, 3.750% due 11/30/07 (b)		122,287
200,000		SunGard Data Systems Inc., Senior Notes, 9.125% due 8/15/13 (b)		204,000
		Total Computers & Peripherals		452,755
Consumer Finance — 0.0%
125,000		SLM Corp., Medium-Term Notes, Series A, 4.400% due 1/26/09 (c)		125,404

See Notes to Financial Statements.

Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report      13

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Schedule of Investments (October 31, 2005) (continued)

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Face
Amount		Security#		Value
Containers & Packaging — 0.6%
$     500,000		Anchor Glass Container Corp., Senior Secured Notes,
		11.000% due 2/15/13 (d)*	$	320,000
1,000,000		Berry Plastics Corp., Senior Subordinated Notes, 10.750% due 7/15/12		1,035,000
213,415		Crown European Holdings SA, Secured Notes, 9.500% due 3/1/11		234,757
625,000		Graphic Packaging International Corp., Senior Subordinated Notes,
		9.500% due 8/15/13 (a)		564,062
1,250,000		Jefferson Smurfit Corp., Senior Notes, 8.250% due 10/1/12 (a)		1,184,375
750,000		JSG Funding PLC, Senior Notes, 9.625% due 10/1/12		723,750
900,000		Owens-Illinois Inc., Debentures, 7.500% due 5/15/10 (a)		895,500
500,000		Plastipak Holdings Inc., Senior Notes, 10.750% due 9/1/11		550,000
		Pliant Corp.:
234,020		Senior Secured Notes, 11.625% due 6/15/09		253,912
		Senior Subordinated Notes:
100,000		13.000% due 6/1/10		15,000
50,000		13.000% due 6/1/10		7,500
50,000		Stone Container Finance Co. of Canada II, Senior Notes,
		7.375% due 7/15/14 (a)		44,625
		Total Containers & Packaging		5,828,481
Diversified Financial Services — 2.5%
1,000,000		Alamosa Delaware Inc., Senior Discount Notes, step bond to yield
		10.290% due 7/31/09		1,100,000
125,000		Amvescap PLC, Senior Notes, 5.900% due 1/15/07		125,971
125,000		Bear Stearns Cos. Inc., Notes, 5.700% due 1/15/07		126,245
75,000		Boeing Capital Corp., Senior Notes, 5.650% due 5/15/06		75,521
125,000		Capital One Bank, Notes, 5.750% due 9/15/10		127,445
125,000		CIT Group Inc., Senior Notes, 5.500% due 11/30/07		126,618
113,579		Core Investment Grade Bond Trust I, Pass-Through Certificates,
		4.659% due 11/30/07		112,302
125,000		Countrywide Home Loans Inc., Medium-Term Notes, Series M,
		4.125% due 9/15/09		120,183
		Ford Motor Credit Co.:
200,000		Global Landmark Securities, 6.500% due 1/25/07		197,684
1,050,000		Notes, 7.000% due 10/1/13 (a)		962,440
125,000		General Electric Capital Corp., Medium-Term Notes, Series A,
		3.984% due 6/22/07 (c)		125,162
		General Motors Acceptance Corp., Notes:
156,000		6.125% due 9/15/06		155,576
1,600,000		6.750% due 12/1/14 (a)		1,532,515
162,000		Global Cash Access LLC/Global Cash Finance Corp.,
		Senior Subordinated Notes, 8.750% due 3/15/12		173,137
125,000		HSBC Finance Corp., Senior Subordinated Notes, 5.875% due 2/1/09		128,061
125,000		International Lease Finance Corp., Notes, 5.750% due 10/15/06		125,817
125,000		John Deere Capital Corp., Medium-Term Notes, Series D, 4.400% due 7/15/09		123,023
150,000		JPMorgan Chase & Co., Senior Notes, 5.350% due 3/1/07		151,128
125,000		Nationwide Building Society, Medium-Term Notes, 2.625% due 1/30/07 (b)		121,802
275,000		Nell AF SARL, Senior Notes, 8.375% due 8/15/15 (a)(b)		265,375
150,000		Rio Tinto Finance USA Ltd., Notes, 2.625% due 9/30/08		140,719

See Notes to Financial Statements.

14      Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report

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Schedule of Investments (October 31, 2005) (continued)

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Face
Amount		Security#		Value
Diversified Financial Services — 2.5% (continued)
$     500,000		Sensus Metering Systems Inc., Senior Subordinated Notes,
		8.625% due 12/15/13	$	457,500
15,579,265		Targeted Return Index Securities (TRAINS), Secured Notes,
		Series HY-2005-1, 7.651% due 6/15/15 (b)		15,800,148
125,000		Textron Financial Corp., Medium-Term Notes, Series E, 2.750% due 6/1/06		123,774
125,000		TIAA Global Markets Inc., Notes, 4.125% due 11/15/07 (b)		123,315
350,000		Vanguard Health Holdings Co. I LLC, Senior Discount Notes,
		step bond to yield 5.594% due 10/1/15 (a)		246,750
125,000		Vanguard Health Holdings Co. II LLC, Senior Subordinated Notes,
		9.000% due 10/1/14		130,937
		Total Diversified Financial Services		22,999,148
Diversified Telecommunication Services — 0.6%
125,000		GTE Corp., Debentures, 6.360% due 4/15/06		125,900
750,000		Insight Midwest LP/Insight Capital Inc., Senior Notes, 10.500% due 11/1/10 (a)		791,250
150,000		Intelsat Bermuda Ltd., Senior Notes, 8.695% due 1/15/12 (b)(c)		152,625
550,000		Intelsat Ltd., Senior Discount Notes, step bond to yield 9.253% due 2/1/15 (b)		364,375
850,000		MCI Inc., Senior Notes, 8.735% due 5/1/14		943,500
50,000		NTL Cable PLC, Senior Notes, 8.750% due 4/15/14		52,625
190,000		PanAmSat Corp., Senior Notes, 9.000% due 8/15/14		200,925
2,125,000		Qwest Services Corp., Senior Secured Notes, 14.000% due 12/15/14		2,584,531
125,000		SBC Communications Inc., Notes, 5.750% due 5/2/06 (a)		125,673
		Total Diversified Telecommunication Services		5,341,404
Electric Utilities — 0.3%
1,000,000		Edison Mission Energy, Senior Notes, 7.730% due 6/15/09		1,042,500
75,000		Entergy Gulf States Inc., First Mortgage Notes, 3.600% due 6/1/08		71,991
125,000		Niagara Mohawk Power Corp., First Mortgage Notes, 7.750% due 5/15/06		127,117
150,000		Nisource Finance Corp., Senior Notes, 7.625% due 11/15/05		150,157
250,000		Pinnacle West Capital Corp., Senior Notes, 6.400% due 4/1/06		251,826
1,000,000		Reliant Energy Inc., Senior Secured Notes, 9.500% due 7/15/13		1,070,000
325,000		Texas Genco LLC/Texas Genco Financing Corp., Senior Notes,
		6.875% due 12/15/14 (b)		349,375
		Total Electric Utilities		3,062,966
Energy Equipment & Services — 0.1%
75,000		Cooper Cameron Corp., Senior Notes, 2.650% due 4/15/07		72,379
529,000		Dresser-Rand Group Inc., Senior Subordinated Notes, 7.375% due 11/1/14 (b)		544,870
250,000		Duke Energy Field Services LLC, Senior Notes, 5.750% due 11/15/06		252,208
		Total Energy Equipment & Services		869,457
Food & Staples Retailing — 0.1%
125,000		CVS Corp., Notes, 5.625% due 3/15/06		125,403
325,000		Jean Coutu Group Inc., Senior Subordinated Notes, 8.500% due 8/1/14 (a)		303,062
500,000		Rite Aid Corp., Senior Debentures, 6.875% due 8/15/13 (a)		417,500
150,000		Safeway Inc., Senior Notes, 6.500% due 11/15/08		155,315
		Total Food & Staples Retailing		1,001,280

See Notes to Financial Statements.

Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report      15

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---

Schedule of Investments (October 31, 2005) (continued)

---

Face
Amount		Security#		Value
Food Products — 0.5%
$     396,017		Ahold Lease USA Inc., Pass-Through Certificates, Series 2001 A-1,
		7.820% due 1/2/20	$	425,966
75,000		Bunge Ltd. Finance Corp., Senior Notes, 4.375% due 12/15/08		73,617
125,000		Campbell Soup Co., Notes, 6.900% due 10/15/06		127,145
325,000		Dean Foods Co., Senior Notes, 6.900% due 10/15/17		329,875
500,000		Del Monte Corp., Senior Subordinated Notes, 8.625% due 12/15/12		535,000
		Doane Pet Care Co., Senior Subordinated Notes:
500,000		9.750% due 5/15/07		500,625
325,000		10.625% due 11/15/15 (b)		330,687
		Dole Food Co. Inc.:
350,000		Debentures, 8.750% due 7/15/13		366,625
161,000		Senior Notes, 8.875% due 3/15/11		167,440
125,000		Kellogg Co., Senior Notes, 2.875% due 6/1/08		118,981
200,000		Kraft Foods Inc., Notes, 4.625% due 11/1/06		199,465
500,000		Pinnacle Foods Holding Corp., Senior Subordinated Notes, 8.250% due 12/1/13		465,000
125,000		Unilever Capital Corp., Senior Notes, 6.875% due 11/1/05		125,000
625,000		United Agri Products Inc., Senior Notes, 8.250% due 12/15/11		659,375
		Total Food Products		4,424,801
Health Care Providers & Services — 0.6%
250,000		AmeriPath Inc., Senior Subordinated Notes, 10.500% due 4/1/13		261,250
300,000		DaVita Inc., Senior Subordinated Notes, 7.250% due 3/15/15		304,500
500,000		Extendicare Health Services Inc., Senior Subordinated Notes,
		6.875% due 5/1/14		490,000
600,000		Genesis HealthCare Corp., Senior Subordinated Notes, 8.000% due 10/15/13		637,500
		HCA Inc.:
375,000		Debentures, 7.050% due 12/1/27		347,257
		Notes:
142,000		7.125% due 6/1/06		144,250
975,000		6.375% due 1/15/15 (a)		961,586
925,000		IASIS Healthcare LLC/IASIS Capital Corp., Senior Subordinated Notes,
		8.750% due 6/15/14		952,750
325,000		InSight Health Services Holdings Corp., Senior Subordinated Notes,
		9.174% due 11/1/11 (b)(c)		311,188
150,000		Quest Diagnostics Inc., Senior Notes, 6.750% due 7/12/06		151,913
		Tenet Healthcare Corp., Senior Notes:
650,000		7.375% due 2/1/13 (a)		580,125
375,000		9.875% due 7/1/14		364,687
150,000		UnitedHealth Group Inc., Senior Notes, 3.300% due 1/30/08 (a)		145,141
75,000		WellPoint Health Networks Inc., Notes, 6.375% due 6/15/06		75,767
		Total Health Care Providers & Services		5,727,914
Hotels, Restaurants & Leisure — 1.3%
625,000		AMF Bowling Worldwide Inc., Senior Subordinated Notes, 10.000% due 3/1/10		626,562
1,000,000		Boyd Gaming Corp., Senior Subordinated Notes, 6.750% due 4/15/14		991,250
200,000		Carnival Corp., Secured Notes, 3.750% due 11/15/07		195,682
325,000		Choctaw Resort Development Enterprise, Senior Notes, 7.250% due 11/15/19 (b)		323,375
875,000		Cinemark Inc., Senior Discount Notes, step bond to yield 18.428% due 3/15/14		623,438

See Notes to Financial Statements.

16      Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report

---

---

Schedule of Investments (October 31, 2005) (continued)

---

Face
Amount		Security#		Value
Hotels, Restaurants & Leisure — 1.3% (continued)
$     550,000		Denny’s Holdings Inc., Senior Notes, 10.000% due 10/1/12 (a)	$	540,375
325,000		Gaylord Entertainment Co., Notes, 6.750% due 11/15/15		315,250
450,000		Herbst Gaming Inc., Senior Subordinated Notes, 7.000% due 11/15/14		446,625
1,000,000		Isle of Capri Casinos Inc., Senior Subordinated Notes, 7.000% due 3/1/14		950,000
500,000		Kerzner International Ltd., Senior Subordinated Notes, 6.750% due 10/1/15 (b)		477,500
550,000		Las Vegas Sands Corp., Senior Notes, 6.375% due 2/15/15 (a)		523,875
250,000		Leslie’s Poolmart, Senior Notes, 7.750% due 2/1/13		251,250
25,000		Loews Cineplex Entertainment Corp., Senior Subordinated Notes,
		9.000% due 8/1/14		24,188
125,000		McDonald’s Corp., Medium-Term Notes, Series E, 5.950% due 1/15/08		128,177
		MGM MIRAGE Inc.:
		Senior Notes:
700,000		6.750% due 9/1/12		700,000
575,000		5.875% due 2/27/14 (a)		540,500
203,000		Senior Subordinated Notes, 9.375% due 2/15/10 (a)		222,285
		Mohegan Tribal Gaming Authority, Senior Subordinated Notes:
300,000		7.125% due 8/15/14		304,500
350,000		6.875% due 2/15/15 (a)		351,750
325,000		Penn National Gaming Inc., Senior Subordinated Notes, 6.750% due 3/1/15		313,625
500,000		Pinnacle Entertainment Inc., Senior Subordinated Notes, 8.250% due 3/15/12		498,750
325,000		Riddell Bell Holdings Inc., Senior Subordinated Notes,
		8.375% due 10/1/12 (a)		312,000
625,000		Seneca Gaming Corp., Senior Notes, 7.250% due 5/1/12 (a)		641,406
425,000		Six Flags Inc., Senior Notes, 9.625% due 6/1/14		422,875
625,000		Station Casinos Inc., Senior Subordinated Notes, 6.875% due 3/1/16 (a)		632,812
500,000		Turning Stone Casino Resort Enterprise, Senior Notes,
		9.125% due 12/15/10 (b)		517,500
500,000		VICORP Restaurants Inc., Senior Notes, 10.500% due 4/15/11 (a)		465,000
		Total Hotels, Restaurants & Leisure		12,340,550
Household Durables — 0.3%
100,000		Centex Corp., Notes, 4.750% due 1/15/08		99,053
125,000		Fortune Brands Inc., Notes, 2.875% due 12/1/06		122,185
500,000		Home Interiors & Gifts Inc., Senior Subordinated Notes,
		10.125% due 6/1/08		317,500
600,000		Interface Inc., Senior Subordinated Notes, 9.500% due 2/1/14 (a)		600,000
600,000		Sealy Mattress Co., Senior Subordinated Notes, 8.250% due 6/15/14 (a)		612,000
575,000		Tempur-Pedic Inc./Tempur Production USA Inc.,
		Senior Subordinated Notes, 10.250% due 8/15/10		623,875
		Total Household Durables		2,374,613
Independent Power Producers & Energy Traders — 1.3%
		AES Corp., Senior Notes:
100,000		9.500% due 6/1/09		108,000
1,400,000		7.750% due 3/1/14 (a)		1,459,500
		Calpine Corp.:
13,075,000		Senior Notes, 8.500% due 2/15/11 (a)		6,210,625
1,000,000		Senior Secured Notes, 8.750% due 7/15/13 (a)(b)		697,500

See Notes to Financial Statements.

Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report      17

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---

Schedule of Investments (October 31, 2005) (continued)

---

Face
Amount		Security#		Value
Independent Power Producers & Energy Traders — 1.3% (continued)
$     175,000		Calpine Generating Co. LLC, Secured Notes, 13.216% due 4/1/11 (c)	$	164,062
100,000		Duke Energy Corp., Senior Notes, 4.200% due 10/1/08		97,764
		Dynegy Holdings Inc.:
1,725,000		Debentures, 7.125% due 5/15/18		1,526,625
450,000		Senior Secured Notes, 10.125% due 7/15/13 (b)		497,250
835,000		NRG Energy Inc., Second Priority Senior Secured Notes, 8.000% due 12/15/13		914,325
		Total Independent Power Producers & Energy Traders		11,675,651
Industrial Conglomerates — 0.2%
		Cooper Industries Inc., Senior Notes:
125,000		5.250% due 7/1/07		125,697
100,000		5.500% due 11/1/09		101,519
1,000,000		Koppers Inc., Senior Secured Notes, 9.875% due 10/15/13		1,095,000
350,000		Park-Ohio Industries Inc., Senior Subordinated Notes, 8.375% due 11/15/14 (a)		308,000
		Total Industrial Conglomerates		1,630,216
Insurance — 0.1%
125,000		Hartford Financial Services Group Inc., Senior Notes, 2.375% due 6/1/06		123,391
75,000		Marsh & McLennan Cos. Inc., Notes, 4.270% due 7/13/07 (c)		74,711
500,000		Nationwide Life Global Funding I, Notes, 4.090% due 9/28/07 (b)(c)		500,531
150,000		Protective Life Secured Trust, Senior Secured Notes, Medium-Term Notes,
		4.210% due 4/13/07 (c)		150,208
156,000		Prudential Financial Inc., Medium Term Notes, 3.750% due 5/1/08		153,286
75,000		Unitrin Inc., Senior Notes, 5.750% due 7/1/07		75,648
		Total Insurance		1,077,775
Machinery — 0.2%
352,000		Dover Corp., Notes, 6.450% due 11/15/05		352,207
200,000		Ingersoll-Rand Co., Notes, 6.250% due 5/15/06		201,786
475,000		Invensys PLC, Senior Notes, 9.875% due 3/15/11 (a)(b)		458,375
225,000		Mueller Group Inc., Senior Subordinated Notes, 10.000% due 5/1/12		237,375
775,000		Mueller Holdings Inc., Discount Notes, step bond to yield 11.895% due 4/15/14		569,625
213,000		Terex Corp., Senior Subordinated Notes, 7.375% due 1/15/14		213,000
		Total Machinery		2,032,368
Media — 1.5%
300,000		Bear Creek Corp., Senior Notes, 9.000% due 3/1/13 (b)		309,000
625,000		Cablevision Systems Corp., Senior Notes, Series B, 8.716% due 4/1/09 (c)		642,187
625,000		CanWest Media Inc., Senior Subordinated Notes, Series B, 8.000% due 9/15/12 (a)		657,812
		CCH I Holdings LLC:
1,525,000		Senior Accreting Notes, step bond to yield 19.077% due 5/15/14 (b)		976,000
2,020,563		Senior Secured Notes, 11.000% due 10/1/15 (b)		1,838,712
700,000		Charter Communications Operating LLC, Second Lien Senior Notes,
		8.375% due 4/30/14 (b)		705,250
250,000		Clear Channel Communications Inc., Senior Notes, 3.125% due 2/1/07 (a)		243,635
250,000		COX Communications Inc., Notes, 7.750% due 8/15/06		255,328
		CSC Holdings Inc.:
225,000		Debentures, Series B, 8.125% due 8/15/09		231,188
375,000		Senior Notes, Series B, 8.125% due 7/15/09 (a)		385,312

See Notes to Financial Statements.

18      Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report

---

---

Schedule of Investments (October 31, 2005) (continued)

---

Face
Amount		Security#		Value
Media — 1.5% (continued)
		Dex Media Inc., Discount Notes:
$     750,000		step bond to yield 8.608% due 11/15/13	$	585,000
1,000,000		step bond to yield 8.873% due 11/15/13 (a)		780,000
		DIRECTV Holdings LLC/DIRECTV Financing Co., Inc., Senior Notes:
764,000		8.375% due 3/15/13		830,850
475,000		6.375% due 6/15/15		468,469
1,000,000		EchoStar DBS Corp., Senior Notes, 6.625% due 10/1/14		975,000
300,000		Emmis Communications Corp., Senior Notes, 9.745% due 6/15/12 (c)		302,250
500,000		LodgeNet Entertainment Corp., Senior Subordinated Debentures,
		9.500% due 6/15/13		543,750
750,000		Mediacom Broadband LLC, Senior Notes, 11.000% due 7/15/13 (a)		806,250
200,000		Nexstar Finance Holdings LLC, Senior Discount Notes,
		step bond to yield 9.548% due 4/1/13		145,000
50,000		Rainbow National Services LLC, Senior Subordinated Debentures,
		10.375% due 9/1/14 (b)		55,250
125,000		Reed Elsevier Capital Inc., Notes, 6.125% due 8/1/06		125,890
600,000		Rogers Cable Inc., Senior Secured Notes, 7.875% due 5/1/12		639,000
625,000		Sinclair Broadcast Group Inc., Senior Subordinated Notes,
		8.000% due 3/15/12		645,312
150,000		TCI Communications Inc., Senior Notes, 6.875% due 2/15/06		150,809
150,000		Time Warner Inc., Notes, 6.125% due 4/15/06 (a)		150,905
		Walt Disney Co.:
100,000		Medium-Term Notes, 5.500% due 12/29/06		100,742
125,000		Senior Notes, Series B, 6.750% due 3/30/06		126,115
		Young Broadcasting Inc., Senior Subordinated Notes:
325,000		10.000% due 3/1/11 (a)		303,875
300,000		8.750% due 1/15/14 (a)		267,000
		Total Media		14,245,891
Metals & Mining — 0.1%
600,000		Corporacion Nacional del Cobre-Codelco, Notes, 5.500% due 10/15/13		607,426
275,000		IPSCO Inc., Senior Notes, 8.750% due 6/1/13 (a)		305,250
325,000		Novelis Inc., Senior Notes, 7.250% due 2/15/15 (b)		298,187
150,000		WMC Finance USA, 6.750% due 12/1/06		153,091
		Total Metals & Mining		1,363,954
Multi-Utilities — 0.0%
125,000		Keyspan Gas East Corp., Medium-Term Notes, 6.900% due 1/15/08		130,055
Multiline Retail — 0.0%
225,000		Neiman Marcus Group Inc., Senior Subordinated Notes,
		10.375% due 10/15/15 (b)		218,250
125,000		Target Corp., Senior Notes, 5.500% due 4/1/07		126,320
		Total Multiline Retail		344,570
Oil, Gas & Consumable Fuels — 0.8%
255,000		Burlington Resources Finance Corp., Senior Notes, 5.600% due 12/1/06		256,957
		Chesapeake Energy Corp., Senior Notes:
775,000		6.375% due 6/15/15		765,312
75,000		6.625% due 1/15/16		75,188

See Notes to Financial Statements.

Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report      19

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---

Schedule of Investments (October 31, 2005) (continued)

---

Face
Amount		Security#		Value
Oil, Gas & Consumable Fuels — 0.8% (continued)
		El Paso Corp., Medium-Term Notes:
$     1,050,000		7.750% due 1/15/32 (a)	$	1,047,375
1,000,000		7.800% due 8/1/31 (a)		997,500
500,000		EXCO Resources Inc., Senior Notes, 7.250% due 1/15/11		507,500
325,000		Holly Energy Partners, L.P., Senior Notes, 6.250% due 3/1/15		316,875
125,000		Norsk Hydro ASA, Notes, 6.360% due 1/15/09		130,251
1,550,000		Petronas Capital Ltd., 7.875% due 5/22/22 (b)		1,888,749
1,500,000		Williams Cos. Inc., Senior Notes, 7.750% due 6/15/31 (a)		1,591,875
		Total Oil, Gas & Consumable Fuels		7,577,582
Paper & Forest Products — 0.4%
440,000		Abitibi-Consolidated Inc., Debentures, 8.850% due 8/1/30		369,600
500,000		Appleton Papers Inc., Senior Subordinated Notes, Series B,
		9.750% due 6/15/14 (a)		472,500
250,000		Bowater Inc., Notes, 6.500% due 6/15/13 (a)		221,250
		Buckeye Technologies Inc.:
150,000		Senior Notes, 8.500% due 10/1/13		149,625
		Senior Subordinated Notes:
400,000		9.250% due 9/15/08 (a)		402,000
75,000		8.000% due 10/15/10		71,250
1,000,000		Newark Group Inc., Senior Subordinated Notes, 9.750% due 3/15/14		865,000
1,000,000		Norske Skog Canada Ltd., Senior Notes, 7.375% due 3/1/14 (a)		895,000
115,000		Weyerhaeuser Co., Notes, 5.250% due 12/15/09		114,788
		Total Paper & Forest Products		3,561,013
Personal Products — 0.2%
125,000		Avon Products Inc., Senior Notes, 7.150% due 11/15/09		134,822
675,000		DEL Laboratories Inc., Senior Subordinated Notes, 8.000% due 2/1/12 (a)		509,625
150,000		Gillette Co., Notes, 3.500% due 10/15/07		146,644
600,000		Playtex Products Inc., Senior Subordinated Notes, 9.375% due 6/1/11 (a)		624,000
		Total Personal Products		1,415,091
Pharmaceuticals — 0.0%
350,000		Warner Chilcott Corp., Senior Subordinated Notes, 8.750% due 2/1/15 (b)		323,750
Real Estate — 0.3%
1,000,000		Felcor Lodging LP, Senior Notes, 9.000% due 6/1/11 (a)		1,081,250
1,250,000		Host Marriott LP, Senior Notes, 7.125% due 11/1/13 (a)		1,273,438
500,000		MeriStar Hospitality Corp., Senior Notes, 9.125% due 1/15/11 (a)		535,625
50,000		Simon Property Group LP, Notes, 6.375% due 11/15/07		51,268
200,000		Vornado Realty LP, Senior Notes, 5.625% due 6/15/07		201,828
		Total Real Estate		3,143,409
Semiconductors & Semiconductor Equipment — 0.1%
		Amkor Technology Inc., Senior Notes:
400,000		9.250% due 2/15/08		384,000
500,000		7.125% due 3/15/11 (a)		435,000
213,000		7.750% due 5/15/13 (a)		182,648
		Total Semiconductors & Semiconductor Equipment		1,001,648

See Notes to Financial Statements.

20      Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report

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---

Schedule of Investments (October 31, 2005) (continued)

---

Face
Amount		Security#		Value
Specialty Retail — 0.2%
$     500,000		Buffets Inc., Senior Subordinated Notes, 11.250% due 7/15/10 (a)	$	502,500
125,000		Carrols Corp., Senior Subordinated Notes, 9.000% due 1/15/13 (b)		124,375
500,000		CSK Auto Inc., Senior Notes, 7.000% due 1/15/14		470,000
325,000		Eye Care Centers of America Inc., Senior Subordinated Notes,
		10.750% due 2/15/15 (b)		306,312
225,000		Finlay Fine Jewelry Corp., Senior Notes, 8.375% due 6/1/12 (a)		192,375
150,000		Home Depot Inc., Senior Notes, 5.375% due 4/1/06		150,447
125,000		Lowe’s Cos. Inc., Notes, 7.500% due 12/15/05		125,402
200,000		Toys “R” Us Inc., Notes, 7.375% due 10/15/18 (a)		143,000
		Total Specialty Retail		2,014,411
Textiles, Apparel & Luxury Goods — 0.2%
		Levi Strauss & Co., Senior Notes:
150,000		8.804% due 4/1/12 (c)		149,625
800,000		9.750% due 1/15/15 (a)		812,000
300,000		Oxford Industries Inc., Senior Notes, 8.875% due 6/1/11		309,000
425,000		Simmons Bedding Co., Senior Subordinated Notes, 7.875% due 1/15/14 (a)		377,187
		Total Textiles, Apparel & Luxury Goods		1,647,812
Tobacco — 0.0%
75,000		Altria Group Inc., Notes, 7.200% due 2/1/07		76,779
125,000		Cargill Inc., Notes, 6.250% due 5/1/06 (b)		126,073
		Total Tobacco		202,852
Water Utilities — 0.0%
155,000		United Utilities PLC, Notes, 6.450% due 4/1/08		159,916
Wireless Telecommunication Services — 0.6%
1,000,000		American Tower Corp., Senior Notes, 7.500% due 5/1/12 (a)		1,047,500
1,450,000		Nextel Communications Inc., Senior Notes, Series E, 6.875% due 10/31/13		1,518,120
625,000		Rogers Wireless Communications Inc., Secured Notes, 7.500% due 3/15/15		673,437
650,000		SBA Communications Corp., Senior Notes, 8.500% due 12/1/12		711,750
250,000		Sprint Capital Corp., Notes, 6.000% due 1/15/07		253,259
650,000		UbiquiTel Operating Co., Senior Notes, 9.875% due 3/1/11		713,375
325,000		US Unwired Inc., Second Priority Secured Notes, Series B,
		10.000% due 6/15/12		371,313
		Total Wireless Telecommunication Services		5,288,754
		TOTAL CORPORATE BONDS & NOTES
		(Cost — $152,721,532)		146,101,959
CONVERTIBLE BONDS & NOTES — 8.0%
Airlines — 0.2%
2,000,000		Continental Airlines Inc., Notes, 4.500% due 2/1/07		1,725,000
Biotechnology — 2.1%
5,000,000		BioMarin Pharmaceuticals Inc., Subordinated Notes, 3.500% due 6/15/08		4,706,250
3,000,000		Enzon Pharmaceuticals Inc., Subordinated Notes, 4.500% due 7/1/08 (a)		2,745,000
4,250,000		InterMune Inc., Senior Notes, 0.250% due 3/1/11 (b)		3,277,813
1,500,000		Isis Pharmaceuticals Inc., Subordinated Notes, 5.500% due 5/1/09		1,306,875
4,000,000		NPS Pharmaceuticals Inc., Senior Notes, 3.000% due 6/15/08		3,465,000

See Notes to Financial Statements.

Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report      21

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---

Schedule of Investments (October 31, 2005) (continued)

---

Face
Amount		Security#		Value
Biotechnology — 2.1% (continued)
$     2,750,000		Oscient Pharmaceutical Corp., Senior Notes, 3.500% due 4/15/11	$	2,028,125
900,000		Vertex Pharmaceuticals Inc., Senior Subordinated Notes,
		5.750% due 2/15/11 (b)		1,450,125
		Total Biotechnology		18,979,188
Commercial Services & Supplies — 0.4%
4,500,000		Allied Waste North America Inc., Senior Subordinated Debentures,
		4.250% due 4/15/34		3,920,625
Communications Equipment — 1.2%
9,000,000		Ciena Corp., Senior Notes, 3.750% due 2/1/08		8,223,750
2,000,000		Nortel Networks Corp., Senior Notes, 4.250% due 9/1/08		1,877,500
1,000,000		Terayon Communication Systems Inc., Subordinated Notes,
		5.000% due 8/1/07		965,000
		Total Communications Equipment		11,066,250
Computers & Peripherals — 0.1%
1,500,000		Silicon Graphics Inc., Senior Notes, 6.500% due 6/1/09		1,183,125
Independent Power Producers & Energy Traders — 0.1%
2,500,000		Calpine Corp., Contingent Convertible Senior Notes, 4.750% due 11/15/23 (a)		1,115,625
Media — 0.7%
		Charter Communications Inc., Senior Notes, Class A Shares:
1,560,000		5.875% due 11/16/09		1,146,600
690,000		5.875% due 11/16/09 (b)		507,150
5,000,000		Mediacom Communications Corp., Senior Notes, 5.250% due 7/1/06		4,925,000
		Total Media		6,578,750
Oil, Gas & Consumable Fuels — 1.0%
17,000,000		El Paso Corp., Debentures, zero coupon bond to yield 8.687% due 2/28/21		9,265,000
Pharmaceuticals — 0.2%
2,000,000		Sepracor Inc., Subordinated Debentures, 5.000% due 2/15/07		1,997,500
Semiconductors & Semiconductor Equipment — 0.9%
840,000		Amkor Technology Inc., Subordinated Notes, 5.000% due 3/15/07		739,200
8,500,000		Atmel Corp., Subordinated Notes, zero coupon bond to yield
		5.762% due 5/23/21		4,069,375
3,500,000		Conexant Systems Inc., Subordinated Notes, 4.000% due 2/1/07 (a)		3,377,500
		Total Semiconductors & Semiconductor Equipment		8,186,075
Software — 0.8%
3,545,000		i2 Technologies Inc., Subordinated Notes, 5.250% due 12/15/06		3,505,119
4,275,000		Manugistics Group Inc., Subordinated Notes, 5.000% due 11/1/07		4,071,937
		Total Software		7,577,056
Wireless Telecommunicattion Services — 0.3%
4,500,000		Liberty Media Corp., Senior Debentures, 4.000% due 11/15/29 (a)‡		2,677,500
		TOTAL CONVERTIBLE BONDS & NOTES
		(Cost — $79,078,000)		74,271,694

See Notes to Financial Statements.

22      Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report

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---

Schedule of Investments (October 31, 2005) (continued)

---

Face
Amount		Security#		Value
ASSET-BACKED SECURITIES — 5.9%
Credit Card — 0.0%
$     192,765		First Consumers Master Trust, Series 2001-A, Class A,
		4.280% due 9/15/08 (c)	$	191,671
Home Equity — 5.9%
1,000,000		ACE Securities Corp., Series 2004-OP1, Class M3, 5.288% due 4/25/34 (c)		1,002,400
		Aegis Asset-Backed Securities Trust:
161,700		Series 2004-2N, Class N1, 4.500% due 4/25/34 (b)		161,387
1,250,000		Series 2004-5, Class M2, 5.258% due 12/25/34 (c)		1,265,484
376,357		Series 2004-5N, 5.000% due 12/25/34 (b)		372,911
944,418		Series 2004-6N, 4.750% due 3/25/35 (b)		939,254
		Ameriquest Mortgage Securities Inc.:
1,000,000		Series 2003-12, Class M2, 5.738% due 11/25/33 (c)		1,026,146
1,000,000		Series 2004-R08, Class M10, 6.538% due 9/25/34 (b)(c)		946,525
1,000,000		Series 2004-R11, Class M5, 5.238% due 11/25/34 (c)		1,019,351
1,000,000		Amortizing Residential Collateral Trust, Series 2004-1, Class M4,
		5.088% due 10/25/34 (c)		1,019,841
182,383		AQ Finance NIM Trust, Series 2004-RN5, Class A, 5.193% due 6/25/34 (b)		181,625
		Argent NIM Trust:
34,935		Series 2004-WN08, Class A, 4.700% due 7/25/34 (b)		34,899
500,000		Series 2004-WN10, Class B, 7.385% due 11/25/34 (b)		506,162
		Argent Securities Inc., Series 2004-W8:
600,000		Class M10, 7.538% due 5/25/34 (c)		589,838
2,000,000		Class M4, 5.338% due 5/25/34 (c)		2,018,007
750,000		Asset-Backed Funding Certificates, Series 2004-FF1, Class M2,
		5.488% due 1/25/34 (c)		760,945
227,394		Asset-Backed Funding Corp. NIM Trust, Series 2004-OPT4, Class N1,
		4.450% due 5/26/34 (b)		226,148
		Bear Stearns Asset-Backed Securities Inc.:
2,000,000		Series 2004-HE5, Class M1, 4.608% due 7/25/34 (c)		2,001,166
1,253,068		Series 2005-AC4, Class M2, 4.708% due 7/25/35 (c)		1,253,063
		Bear Stearns Asset-Backed Securities Inc. NIM Trust, Series 2004-HE5N:
117,297		Class A1, 5.000% due 7/25/34 (b)		117,018
79,000		Class A2, 5.000% due 7/25/34 (b)		78,584
		Bear Stearns Asset-Backed Securities NIM Trust:
60,841		Series 2004-FR1N, Class A1, 5.000% due 5/25/34 (b)		60,508
115,852		Series 2004-HE6N, Class A1, 5.250% due 8/25/34 (b)		115,304
		Countrywide Asset-Backed Certificates:
750,000		Series 2003-03, Class M4, 5.438% due 3/25/33 (c)		755,326
236,840		Series 2004-02N, Class N1, 5.000% due 2/25/35 (b)		235,563
410,000		Series 2004-05, Class M4, 5.288% due 6/25/34 (c)		416,360
230,245		Series 2004-05N, Class N1, 5.500% due 10/25/35 (b)		229,409
2,000,000		Series 2004-BC4, Class M2, 4.888% due 10/25/34 (c)		2,007,612
97,737		Credit-Based Asset Servicing and Securitization, Series 2004-AN, Class A,
		5.000% due 9/27/36 (b)		97,253
814,991		CS First Boston Mortgage Securities Corp., Series 2001-HE16, Class M2,
		5.238% due 11/25/31 (c)		817,552
230,088		Finance America NIM Trust, Series 2004-01, Class A, 5.250% due 6/27/34 (b)		229,780

See Notes to Financial Statements.

Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report      23

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---

Schedule of Investments (October 31, 2005) (continued)

---

Face
Amount		Security#		Value
Home Equity — 5.9% (continued)
$     750,000		First Franklin Mortgage Loan Asset Backed Certificates, Series 2004-FF2,
		Class M4, 4.938% due 3/25/34 (c)	$	757,356
1,000,000		First Franklin Mortgage Loan Trust NIM, Series 2004-FF10, Class N2,
		6.000% due 11/26/34 (b)(e)		979,919
256,405		First Franklin NIM Trust, Series 2004-FF7A, Class A,
		5.000% due 9/27/34 (b)		255,170
		Fremont Home Loan Trust:
1,000,000		Series 2004-01, Class M5, 5.138% due 2/25/34 (c)		1,011,727
2,000,000		Series 2004-B, Class M4, 5.208% due 5/25/34 (c)		2,003,316
875,000		Series 2004-D, Class M5, 5.038% due 11/25/34 (c)		879,817
3,640		Fremont NIM Trust, Series 2004-B, 4.703% due 5/25/34 (b)		3,636
1,005,000		GSAMP Trust, Series 2004-OPT, Class M3, 5.188% due 11/25/34 (c)		1,012,197
836,455		Long Beach Asset Holdings Corp., Series 2004-06, Class N2,
		7.500% due 11/25/34 (b)		776,649
750,000		Long Beach Mortgage Loan Trust, Series 2004-06, Class M2,
		5.188% due 11/25/34 (c)		752,996
1,000,000		MASTR Asset-Backed Securities Trust, Series 2004-OPT2, Class M4,
		5.038% due 9/25/34 (c)		1,008,403
		Merrill Lynch Mortgage Investors Inc.:
94,020		Series 2004-WM2N, Class N1, 4.500% due 12/25/34 (b)		93,452
236,671		Series 2005-WM1N, Class N1, 5.000% due 9/25/35 (b)		234,403
		Morgan Stanley Asset Backed Securities Capital I:
1,400,000		Series 2004-HE4, Class M2, 5.338% due 5/25/34 (c)		1,400,814
500,000		Series 2004-HE9, Class M6, 5.288% due 11/25/34 (c)		505,716
1,000,000		Series 2004-NC8, Class M4, 5.038% due 9/25/34 (c)		1,011,981
1,000,000		Series 2004-OP1, Class M5, 5.088% due 11/25/34 (c)		1,013,378
		New Century Home Equity Loan Trust:
1,250,000		Series 2001-NC1, Class M2, 5.100% due 6/20/31 (c)		1,251,395
1,500,000		Series 2003-04, Class M2, 5.858% due 10/25/33 (c)		1,533,809
		Novastar Home Equity Loan:
2,000,000		Series 2003-04, Class M2, 5.663% due 2/25/34 (c)		2,038,294
1,000,000		Series 2004-01, Class M4, 5.013% due 6/25/34 (c)		1,004,655
1,250,000		Series 2004-02, Class M5, 5.538% due 9/25/34 (c)		1,266,030
1,000,000		Series 2004-4, Class M4, 5.138% due 3/25/35 (c)		1,001,251
750,000		Series 2005-02, Class M10, 7.038% due 10/25/35 (c)		682,500
88,070		Novastar NIM Trust, Series 2004-N2, 4.458% due 6/26/34 (b)		87,815
		Option One Mortgage Loan Trust:
422,349		Series 2002-02, Class M2, 5.188% due 6/25/32 (c)		423,062
1,000,000		Series 2002-4, Class M2, 5.168% due 7/25/32 (c)		1,004,801
1,500,000		Series 2004-02, Class M2, 5.088% due 5/25/34 (c)		1,500,875
		Park Place Securities NIM Trust:
500,000		Series 2004-WWF1, Class B, 6.290% due 1/25/35 (b)		497,813
616,675		Series 2005-WHQ2, Class A, 5.192% due 5/25/35 (b)		614,825
1,000,000		Renaissance Home Equity Loan Trust, Series 2003-4, Class M3,
		5.938% due 3/25/34 (c)		1,012,774
1,000,000		Residential Asset Securities Corp., Series 2004-KS10, Class M2,
		5.188% due 11/25/34 (c)		1,013,533

See Notes to Financial Statements.

24      Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report

---

---

Schedule of Investments (October 31, 2005) (continued)

---

Face
Amount		Security#		Value
Home Equity — 5.9% (continued)
		Sail NIM Notes:
$     150,206		Series 2003-BC2A, Class A, 7.750% due 4/27/33 (b)	$	139,517
264,512		Series 2004-002A, Class A, 5.500% due 3/27/34 (b)		264,485
306,049		Series 2004-004A, Class A, 5.000% due 4/27/34 (b)		305,768
185,166		Series 2004-005A, Class A, 4.500% due 6/27/34 (b)		185,166
243,063		Series 2004-008A, Class A, 5.000% due 9/27/34 (b)		241,805
183,271		Series 2004-011A, Class A2, 4.750% due 1/27/35 (b)		182,276
292,389		Series 2004-11A, Class B, 7.500% due 1/27/35 (b)		285,986
398,357		Series 2004-AA, Class B, 7.500% due 10/27/34 (b)		318,685
		Series 2004-BN2A:
391,821		Class A, 5.000% due 12/27/34 (b)		390,903
383,598		Class B, 7.000% due 12/27/34 (b)		296,061
		Series 2005-1A:
100,137		Class A, 4.250% due 2/27/35 (b)		99,529
326,556		Class B, 7.500% due 2/27/35 (b)		319,960
		Sharp SP I LLC, NIM Trust:
266,032		Series 2004-HS1N, 5.920% due 2/25/34 (b)		262,743
190,908		Series 2004-OP1N, 5.190% due 4/25/34 (b)		190,693
280,590		Series 2005-HE1N, 5.190% due 2/25/35 (b)		279,528
1,500,000		Structured Asset Investment Loan Trust, Series 2003-BC10, Class M2,
		5.888% due 10/25/33 (c)		1,514,856
		Total Home Equity		54,397,744
		TOTAL ASSET-BACKED SECURITIES
		(Cost — $54,502,671)		54,589,415
MORTGAGE-BACKED SECURITIES — 2.1%
FHLMC — 1.7%
		Federal Home Loan Mortgage Corp. (FHLMC), Gold:
482,106		8.500% due 9/1/25		524,806
14,672,470		6.000% due 9/1/32-2/1/34		14,831,016
		Total FHLMC		15,355,822
FNMA — 0.4%
		Federal National Mortgage Association (FNMA):
2,058,141		8.000% due 12/1/12		2,154,402
1,924,820		5.500% due 4/1/35		1,900,042
		Total FNMA		4,054,444
		TOTAL MORTGAGE-BACKED SECURITIES
		(Cost — $19,643,686)		19,410,266
COLLATERALIZED MORTGAGE OBLIGATIONS — 1.0%
		Commercial Mortgage Pass-Through Certificates:
2,000,000		Series 2002-FL6, Class E, 4.970% due 6/14/14 (b)(c)		2,005,725
186,860		Series 2003-FL9, Class E, 4.970% due 11/15/15 (b)(c)		187,770
		Federal Home Loan Mortgage Corp. (FHLMC):
245,102		Series 2764, Class DT, 6.000% due 3/15/34 (c)		240,428
736,488		Series 2780, Class SL PAC, 6.000% due 4/15/34 (c)		725,727
446,836		Homestar NIM Trust, Series 2004-6, Class A1, 5.500% due 1/25/35 (b)		447,325

See Notes to Financial Statements.

Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report      25

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---

Schedule of Investments (October 31, 2005) (continued)

---

Face
Amount†		Security#		Value
COLLATERALIZED MORTGAGE OBLIGATIONS — 1.0% (continued)
$     1,299,657		Impac CMB Trust, Series 2004-04, Class 2M2, 5.538% due 9/25/34 (c)	$	1,302,708
915,785		Merit Securities Corp., Series 11PA, Class B2, 5.570% due 9/28/32 (b)(c)		893,606
		MLCC Mortgage Investors Inc.:
750,000		Series 2004-A, Class B2, 4.958% due 4/25/29 (c)		749,415
1,000,000		Series 2004-B, Class B2, 4.918% due 5/25/29 (c)		1,005,845
1,924,950		Saco I Trust, Series 2005-2, Class A, 4.238% due 4/25/35 (b)(c)		1,924,950
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
		(Cost — $9,458,580)		9,483,499
SOVEREIGN BONDS — 14.3%
Argentina — 0.5%
		Republic of Argentina:
437,000	EUR	10.250% due 1/26/07		178,222
1,553,125		4.005% due 8/3/12 (c)		1,379,812
5,951,899	ARS	Discount Bonds, 5.830% due 12/31/33		2,355,614
800,000		Par bonds, 1.330% due 12/31/38 (c)		298,600
		Total Argentina		4,212,248
Brazil — 3.3%
		Federative Republic of Brazil:
2,200,000		11.000% due 8/17/40		2,647,150
18,330,000		Collective Action Security, 8.000% due 1/15/18		18,953,220
8,889,870		DCB, Series L, 5.250% due 4/15/12		8,684,292
		Total Brazil		30,284,662
Bulgaria — 0.2%
1,715,000		Republic of Bulgaria, 8.250% due 1/15/15 (b)		2,058,000
Chile — 0.2%
2,000,000		Republic of Chile, 5.500% due 1/15/13		2,050,971
China — 0.1%
705,000		People’s Republic of China, 4.750% due 10/29/13		686,639
Colombia — 0.7%
		Republic of Colombia:
1,640,000		11.750% due 2/25/20		2,214,000
4,300,000		8.125% due 5/21/24		4,465,550
145,000		10.375% due 1/28/33		181,975
		Total Colombia		6,861,525
Ecuador — 0.2%
		Republic of Ecuador:
190,000		12.000% due 11/15/12 (b)		190,950
1,835,000		Step bond to yield 12.573% due 8/15/30 (b)		1,651,500
		Total Ecuador		1,842,450
El Salvador — 0.1%
1,175,000		Republic of El Salvador, 7.750% due 1/24/23 (b)		1,277,813

See Notes to Financial Statements.

26      Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report

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---

Schedule of Investments (October 31, 2005) (continued)

---

Face
Amount†		Security#		Value
Malaysia — 0.2%
		Federation of Malaysia:
350,000		8.750% due 6/1/09	$	393,223
1,625,000		7.500% due 7/15/11		1,821,621
		Total Malaysia		2,214,844
Mexico — 2.9%
		United Mexican States:
1,170,000		11.375% due 9/15/16		1,696,500
7,770,000		8.125% due 12/30/19		9,318,172
		Medium-Term Notes, Series A:
1,000,000		6.375% due 1/16/13		1,051,250
425,000		5.875% due 1/15/14		433,500
8,325,000		6.625% due 3/3/15		8,901,506
3,425,000		8.000% due 9/24/22		4,092,875
265,000		7.500% due 4/8/33		302,763
600,000		8.300% due 8/15/31		739,500
475,000		Series XW, 10.375% due 2/17/09		551,000
		Total Mexico		27,087,066
Panama — 0.6%
		Republic of Panama:
700,000		7.250% due 3/15/15		738,150
1,915,000		9.375% due 1/16/23		2,336,300
1,625,000		8.875% due 9/30/27		1,901,250
200,000		9.375% due 4/1/29		245,500
		Total Panama		5,221,200
Peru — 0.7%
		Republic of Peru:
380,000		9.125% due 2/21/12		439,945
1,900,000		9.875% due 2/6/15		2,353,625
705,000		7.350% due 7/21/25		715,575
260,000		8.750% due 11/21/33		300,300
2,989,000		FLIRB, 5.000% due 3/7/17 (c)		2,828,341
		Total Peru		6,637,786
Philippines — 0.7%
		Republic of the Philippines:
2,625,000		9.000% due 2/15/13		2,795,625
375,000		8.250% due 1/15/14		385,547
2,175,000		10.625% due 3/16/25		2,516,203
625,000		Senior Notes, 9.500% due 2/2/30		660,937
		Total Philippines		6,358,312
Poland — 0.2%
1,495,000		Republic of Poland, Notes, 5.250% due 1/15/14		1,515,706

See Notes to Financial Statements.

Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report      27

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---

Schedule of Investments (October 31, 2005) (continued)

---

Face
Amount†		Security#		Value
Russia — 1.4%
		Russian Federation:
1,665,000		11.000% due 7/24/18 (b)	$	2,430,900
9,615,000		Step bond to yield 5.000% due 3/31/30 (b)		10,687,673
		Total Russia		13,118,573
South Africa — 0.2%
		Republic of South Africa:
250,000		9.125% due 5/19/09		281,250
1,825,000		6.500% due 6/2/14		1,957,313
		Total South Africa		2,238,563
Supranational — 0.0%
300,000		Corporacion Andina de Fomento, Notes, 4.556% due 1/26/07 (c)		300,225
Turkey — 1.0%
		Republic of Turkey:
200,000		11.750% due 6/15/10		246,000
725,000		11.500% due 1/23/12		917,125
4,150,000		11.000% due 1/14/13		5,229,000
900,000		7.250% due 3/15/15		936,000
1,250,000		7.000% due 6/5/20		1,225,000
800,000		11.875% due 1/15/30		1,163,000
		Total Turkey		9,716,125
Ukraine — 0.2%
1,400,000		Republic of Ukraine, 7.650% due 6/11/13 (b)		1,506,750
Uruguay — 0.1%
		Republic of Uruguay, Benchmark Bonds:
575,000		7.250% due 2/15/11		586,500
750,000		7.500% due 3/15/15		738,750
		Total Uruguay		1,325,250
Venezuela — 0.8%
		Bolivarian Republic of Venezuela:
2,750,000		5.375% due 8/7/10		2,662,000
1,050,000		8.500% due 10/8/14		1,145,550
1,200,000		7.650% due 4/21/25		1,196,400
1,900,000		Collective Action Security, 10.750% due 9/19/13		2,318,000
		Total Venezuela		7,321,950
		TOTAL SOVEREIGN BONDS
		(Cost — $129,249,319)		133,836,658
LOAN PARTICIPATION (c)(e) — 0.1%
United States — 0.1%
1,000,000		UPC Broadband Inc. Term Loan, Tranche H2,
		6.554% due 3/15/12 (Bank of America) (Cost — $1,000,000)		1,009,739

See Notes to Financial Statements.

28      Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report

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---

Schedule of Investments (October 31, 2005) (continued)

---

Shares		Security#		Value
COMMON STOCKS — 40.6%
CONSUMER DISCRETIONARY — 4.3%
Hotels, Restaurants & Leisure — 0.4%
13,000		Ctrip.com International Ltd., ADR (a)	$	747,890
72,800		McDonald’s Corp.		2,300,480
25,000		Outback Steakhouse Inc.		941,500
		Total Hotels, Restaurants & Leisure		3,989,870
Household Durables — 0.3%
117,400		Newell Rubbermaid Inc. (a)		2,699,026
Media — 2.9%
88,100		Cablevision Systems Corp., New York Group, Class A Shares*		2,184,880
425,000		Charter Communications Inc., Class A Shares (a)*		510,000
22,800		Comcast Corp., Class A Shares*		634,524
178,800		EchoStar Communications Corp., Class A Shares*		4,804,356
206,500		Interpublic Group of Cos. Inc. (a)*		2,133,145
52,875		Liberty Global Inc., Class A Shares*		1,309,714
52,875		Liberty Global Inc., Series C Shares*		1,254,195
172,400		Liberty Media Corp., Class A Shares*		1,374,028
196,100		News Corp., Class B Shares		2,953,266
8,400		NTL Inc. (a)*		515,088
100,000		Regal Entertainment Group, Class A Shares (a)		1,843,000
345,800		SES Global SA, FDR		5,468,862
140,500		Time Warner Inc.		2,505,115
		Total Media		27,490,173
Multiline Retail — 0.3%
56,100		J.C. Penney Co. Inc.		2,872,320
Specialty Retail — 0.4%
35,000		Best Buy Co. Inc.		1,549,100
40,000		Sherwin-Williams Co.		1,702,000
		Total Specialty Retail		3,251,100
		TOTAL CONSUMER DISCRETIONARY		40,302,489
CONSUMER STAPLES — 2.1%
Beverages — 0.1%
25,000		PepsiCo Inc.		1,477,000
Food & Staples Retailing — 0.7%
20,000		CVS Corp.		488,200
162,600		Kroger Co.*		3,235,740
53,000		Wal-Mart Stores Inc.		2,507,430
		Total Food & Staples Retailing		6,231,370
Food Products — 0.5%
25,200		Hormel Foods Corp.		801,360
29,300		Kellogg Co.		1,294,181
50,000		McCormick & Co. Inc., Non Voting Shares		1,514,500
75,000		Sara Lee Corp.		1,338,750
		Total Food Products		4,948,791

See Notes to Financial Statements.

Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report      29

---

---

Schedule of Investments (October 31, 2005) (continued)

---

Shares		Security#		Value
Household Products — 0.3%
46,300		Kimberly-Clark Corp.	$	2,631,692
Tobacco — 0.5%
63,000		Altria Group Inc.		4,728,150
		TOTAL CONSUMER STAPLES		20,017,003
ENERGY — 6.2%
Energy Equipment & Services — 2.3%
137,700		ENSCO International Inc.		6,277,743
74,200		GlobalSantaFe Corp.		3,305,610
71,500		Halliburton Co.		4,225,650
32,200		Nabors Industries Ltd.*		2,209,886
29,900		National-Oilwell Varco Inc.*		1,867,853
105,000		Pride International Inc.*		2,947,350
		Total Energy Equipment & Services		20,834,092
Oil, Gas & Consumable Fuels — 3.9%
82,500		Arlington Tankers Ltd. (a)		1,837,275
58,100		CNX Gas Corp. (b)*		1,205,575
87,200		Marathon Oil Corp.		5,245,952
196,414		Nexen Inc.		8,119,755
127,000		OPTI Canada Inc.*		3,947,188
17,600		Suncor Energy Inc.		943,888
87,480		Total SA, Sponsored ADR (a)		11,024,230
190,400		Williams Cos. Inc.		4,245,920
		Total Oil, Gas & Consumable Fuels		36,569,783
		TOTAL ENERGY		57,403,875
FINANCIALS — 12.0%
Capital Markets — 0.5%
6,600		Goldman Sachs Group Inc.		834,042
8,000		Lehman Brothers Holdings Inc.		957,360
35,600		Merrill Lynch & Co. Inc.		2,304,744
		Total Capital Markets		4,096,146
Commercial Banks — 1.1%
82,952		Bank of America Corp.		3,628,320
24,700		Comerica Inc.		1,427,166
16,500		Wachovia Corp.		833,580
58,500		Wells Fargo & Co.		3,521,700
13,000		Zions Bancorporation		955,110
		Total Commercial Banks		10,365,876
Consumer Finance — 1.0%
42,200		American Express Co.		2,100,294
95,032		Capital One Financial Corp.		7,255,693
		Total Consumer Finance		9,355,987
Diversified Financial Services — 0.2%
49,940		JPMorgan Chase & Co.		1,828,803

See Notes to Financial Statements.

30      Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report

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---

Schedule of Investments (October 31, 2005) (continued)

---

Shares		Security#		Value
Insurance — 0.8%
35,200		AFLAC Inc.	$	1,681,856
24,300		American International Group Inc.		1,574,640
8		Berkshire Hathaway Inc., Class A Shares*		687,200
30,800		Chubb Corp.		2,863,476
8,000		Hartford Financial Services Group Inc.		638,000
		Total Insurance		7,445,172
Real Estate — 7.7%
19,300		Alexandria Real Estate Equities Inc.		1,560,405
65,200		AMB Property Corp.		2,880,536
155,000		American Financial Realty Trust		1,908,050
7,400		Apartment Investment and Management Co., Class A Shares		284,160
62,100		Archstone-Smith Trust		2,519,397
60,000		Arden Realty Inc.		2,708,400
25,000		Ashford Hospitality Trust Inc.		262,500
31,900		Avalonbay Communities Inc.		2,751,375
46,500		BioMed Realty Trust Inc.		1,162,965
17,200		Boston Properties Inc.		1,190,584
12,400		BRE Properties Inc., Class A Shares		546,964
66,800		CarrAmerica Realty Corp.		2,199,724
12,000		Developers Diversified Realty Corp.		524,160
20,900		Duke Realty Corp.		712,690
218,000		Equity Office Properties Trust		6,714,400
50,200		Equity Residential		1,970,350
29,800		Federal Realty Investment Trust		1,807,370
60,700		General Growth Properties Inc.		2,578,536
46,000		Global Signal Inc.		1,906,700
47,500		Gramercy Capital Corp.		1,120,525
57,900		Heritage Property Investment Trust (a)		1,887,540
27,000		Highwoods Properties Inc.		761,670
90,000		iStar Financial Inc.		3,318,300
24,800		Kimco Realty Corp.		734,576
70,000		Liberty Property Trust		2,918,300
7,400		Macerich Co.		475,598
100,000		Maguire Properties Inc.		3,000,000
105,000		New Plan Excel Realty Trust Inc. (a)		2,413,950
7,200		Pan Pacific Retail Properties Inc.		457,200
60,000		Prentiss Properties Trust		2,367,600
106,300		ProLogis		4,570,900
39,200		PS Business Parks Inc.		1,824,368
16,400		Public Storage Inc.		1,085,680
26,393		Reckson Associates Realty Corp.		926,394
34,500		Simon Property Group Inc.		2,470,890
41,300		SL Green Realty Corp.		2,809,639
25,000		United Dominion Realty Trust Inc.		553,250
26,900		Vornado Realty Trust		2,178,900
		Total Real Estate		72,064,546

See Notes to Financial Statements.

Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report      31

---

---

Schedule of Investments (October 31, 2005) (continued)

---

Shares		Security#		Value
Thrifts & Mortgage Finance — 0.7%
54,950		Freddie Mac	$	3,371,183
60,000		Golden West Financial Corp.		3,523,800
		Total Thrifts & Mortgage Finance		6,894,983
		TOTAL FINANCIALS		112,051,513
HEALTH CARE — 4.5%
Biotechnology — 0.8%
74,400		Abgenix Inc. (a)*		773,760
39,500		Amgen Inc.*		2,992,520
28,400		CV Therapeutics Inc. (a)*		711,704
8,700		Genentech Inc.*		788,220
34,400		InterMune Inc. (a)*		467,840
9,800		Invitrogen Corp.*		623,182
34,600		Protein Design Labs Inc.*		969,492
		Total Biotechnology		7,326,718
Health Care Equipment & Supplies — 0.3%
63,800		Boston Scientific Corp.*		1,602,656
37,400		DJ Orthopedics Inc. (a)*		1,087,592
		Total Health Care Equipment & Supplies		2,690,248
Health Care Providers & Services — 1.4%
18,600		Aetna Inc.		1,647,216
32,700		Coventry Health Care Inc.*		1,765,473
33,000		DaVita Inc.*		1,622,940
15,700		PacifiCare Health Systems Inc.*		1,293,052
29,800		UnitedHealth Group Inc.		1,725,122
64,500		WellPoint Inc.*		4,816,860
		Total Health Care Providers & Services		12,870,663
Pharmaceuticals — 2.0%
61,500		Abbott Laboratories		2,647,575
49,200		GlaxoSmithKline PLC, Sponsored ADR		2,557,908
51,100		Novartis AG, Sponsored ADR		2,750,202
93,400		Pfizer Inc.		2,030,516
23,900		Sanofi-Aventis		1,915,333
23,100		Sanofi-Aventis, ADR		926,772
53,000		Schering-Plough Corp.		1,078,020
66,800		Sepracor Inc.*		3,757,500
22,800		Teva Pharmaceutical Industries Ltd., Sponsored ADR (a)		869,136
15,300		Wyeth		681,768
		Total Pharmaceuticals		19,214,730
		TOTAL HEALTH CARE		42,102,359
INDUSTRIALS — 3.0%
Aerospace & Defense — 1.0%
98,400		Boeing Co.		6,360,576
90,000		Raytheon Co.		3,325,500
		Total Aerospace & Defense		9,686,076

See Notes to Financial Statements.

32      Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report

---

---

Schedule of Investments (October 31, 2005) (continued)

---

Shares		Security#		Value
Building Products — 0.2%
52,800		American Standard Cos. Inc.	$	2,008,512
Commercial Services & Supplies — 0.2%
35,700		Avery Dennison Corp.		2,022,405
Construction & Engineering — 0.3%
100,500		Chicago Bridge & Iron Co. NV, New York Shares (a)		2,241,150
Industrial Conglomerates — 1.2%
259,800		General Electric Co.		8,809,818
30,100		Textron Inc.		2,168,404
		Total Industrial Conglomerates		10,978,222
Machinery — 0.1%
21,300		Navistar International Corp.*		586,176
Trading Companies & Distributors — 0.0%
9,600		MSC Industrial Direct Co. Inc., Class A Shares		366,528
		TOTAL INDUSTRIALS		27,889,069
INFORMATION TECHNOLOGY — 2.8%
Communications Equipment — 1.0%
154,375		ADC Telecommunications Inc. (a)*		2,693,844
42,451		Comverse Technology Inc.*		1,065,520
159,000		Nokia Oyj, Sponsored ADR		2,674,380
755,700		Nortel Networks Corp.*		2,456,025
		Total Communications Equipment		8,889,769
Computers & Peripherals — 0.1%
40,000		EMC Corp.*		558,400
Internet Software & Services — 0.4%
133,900		Digitas Inc.*		1,446,120
8,500		Netease.com Inc. ADR*		648,295
81,900		SINA Corp.*		2,076,165
		Total Internet Software & Services		4,170,580
IT Services — 0.1%
50,000		Wright Express Corp.*		1,079,000
Semiconductors & Semiconductor Equipment — 0.5%
80,000		Applied Materials Inc.		1,310,400
20,000		ASML Holding NV, NY Registered Shares*		339,600
74,300		Maxim Integrated Products Inc.		2,576,724
		Total Semiconductors & Semiconductor Equipment		4,226,724
Software — 0.7%
42,500		Cognos Inc.*		1,595,025
14,000		Macromedia Inc.*		614,880
175,400		Microsoft Corp.		4,507,780
		Total Software		6,717,685
		TOTAL INFORMATION TECHNOLOGY		25,642,158

See Notes to Financial Statements.

Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report      33

---

---

Schedule of Investments (October 31, 2005) (continued)

---

Shares		Security#		Value
MATERIALS — 1.3%
Chemicals — 0.7%
61,700		Air Products & Chemicals Inc.	$	3,531,708
62,000		E.I. du Pont de Nemours & Co.		2,584,780
		Total Chemicals		6,116,488
Containers & Packaging — 0.1%
20,000		Sealed Air Corp.*		1,006,200
Metals & Mining — 0.5%
153,400		Barrick Gold Corp.		3,873,350
56,200		Compass Minerals International Inc. (a)		1,258,318
		Total Metals & Mining		5,131,668
		TOTAL MATERIALS		12,254,356
TELECOMMUNICATION SERVICES — 2.6%
Diversified Telecommunication Services — 0.7%
276,800		Citizens Communications Co.		3,388,032
80,000		IDT Corp., Class B Shares*		955,200
107,600		Telewest Global Inc.*		2,454,356
		Total Diversified Telecommunication Services		6,797,588
Wireless Telecommunication Services — 1.9%
60,800		ALLTEL Corp.		3,761,088
216,197		American Tower Corp., Class A Shares*		5,156,299
174,300		Dobson Communications Corp., Class A Shares*		1,270,647
313,968		Sprint Nextel Corp.		7,318,594
		Total Wireless Telecommunication Services		17,506,628
		TOTAL TELECOMMUNICATION SERVICES		24,304,216
UTILITIES — 1.8%
Electric Utilities — 0.3%
100,000		ITC Holdings Corp.		2,750,000
Independent Power Producers & Energy Traders — 0.9%
133,000		AES Corp.*		2,113,370
73,800		NRG Energy Inc. (a)*		3,174,138
33,600		TXU Corp.		3,385,200
		Total Independent Power Producers & Energy Traders		8,672,708
Multi-Utilities — 0.6%
123,300		Sempra Energy		5,462,190
		TOTAL UTILITIES		16,884,898
		TOTAL COMMON STOCKS
		(Cost — $337,078,574)		378,851,936
PREFERRED STOCK — 0.0%
CONSUMER DISCRETIONARY — 0.0%
Auto Components — 0.0%
14,000		Delphi Trust I, 8.250% (a) (Cost — $368,200)		103,600

See Notes to Financial Statements.

34      Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report

---

---

Schedule of Investments (October 31, 2005) (continued)

---

Shares		Security#		Value
CONVERTIBLE PREFERRED STOCKS — 1.9%
ENERGY — 0.2%
Energy Equipment & Services — 0.2%
38,000		Hanover Compressor Capital Trust, 7.250% (a)	$	1,814,500
FINANCIALS — 1.5%
Real Estate — 1.1%
167,000		Host Marriott Finance Trust, 6.750%		9,164,125
26,000		Simon Property Group Inc., 6.000%		1,612,000
				10,776,125
Thrifts & Mortgage Finance — 0.4%
77,000		Sovereign Capital Trust IV, 4.375%		3,455,375
		TOTAL FINANCIALS		14,231,500
TELECOMMUNICATION SERVICES — 0.2%
Wireless Telecommunication Services — 0.2%
12,514		Dobson Communications Corp., 6.000%		2,108,609
		TOTAL CONVERTIBLE PREFERRED STOCKS
		(Cost — $17,521,622)		18,154,609
Contracts
PURCHASED OPTION — 0.3%
2,300		S&P 500 Index, Put @ 1,175, Expires 12/05
		(Cost — $3,019,900)		2,530,000
		TOTAL INVESTMENTS BEFORE SHORT-TERM INVESTMENTS
		(Cost — $803,642,084)		838,343,375
Face
Amount
SHORT-TERM INVESTMENTS — 10.1%
Repurchase Agreements — 0.9%
$      3,523,000		Interest in $572,678,000 joint tri-party repurchase agreement
		dated 10/31/05 with Deutche Bank Securities Inc., 4.000%
		due 11/1/05; Proceeds at maturity — $3,523,391; (Fully
		collateralized by various U.S. Government Agency Obligations
		0.000% to 7.125% due 11/28/05 to 1/15/30;
		Market value — $3,593,480)		3,523,000
5,000,000		Interest in $689,187,000 joint tri-party repurchase agreement
		dated 10/31/05 with Merrill Lynch, Pierce, Fenner & Smith Inc.,
		4.000% due 11/1/05; Proceeds at maturity — $5,000,556;
		(Fully collateralized by U.S. Treasury obligations, 0.000% to
		3.750% due 11/3/05 to 5/15/08; Market value — $5,100,011)		5,000,000
		Total Repurchase Agreements (Cost — $8,523,000)		8,523,000
Shares
Securities Purchased from Securities Lending Collateral — 9.2%
85,925,599		State Street Navigator Securities Lending Trust Prime Portfolio
		(Cost — $85,925,599)		85,925,599

See Notes to Financial Statements.

Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report      35

---

 

---

Schedule of Investments (October 31, 2005) (continued)

---

			Value
	TOTAL SHORT-TERM INVESTMENTS
	(Cost — $94,448,599)	$	94,448,599
	TOTAL INVESTMENTS — 100.0%
	(Cost — $898,090,683**)	$	932,791,974

#	All securities (except those on loan) are segregated as collateral pursuant to revolving credit facility.
*	Non-income producing security.
†	Face amount denominated in U.S. dollars, unless otherwise indicated.
‡	Security is exchangeable for Sprint Nexel Corp. Common Stock.
(a)	All or a portion of this security is on loan (See Notes 1 and 3).
(b)	Security is exempt from registration under Rule 144A of the Securities Act of 1933. This security may be resold in transactions that are exempt from registration, normally to qualified institutional buyers. This security has been deemed liquid pursuant to guidelines approved by the Board of Directors, unless otherwise noted.
(c)	Variable rate security. Coupon rates disclosed are those which are in effect at October 31, 2005.
(d)	Security is currently in default.
(e)	Participation interest was acquired through the financial institution indicated parenthetically.
**	Aggregate cost for federal income tax purposes is $899,839,147.
	Abbreviations used in this schedule: ADR — American Depositary Receipt ARS — Argentine Peso DCB — Debt Conversion Bond EUR — Euro Currency FDR — Foreign Depositary Receipt FLIRB — Front-Loaded Interest Reduction Bonds MASTR — Mortgage Asset Securitization Transactions Inc. NIM — Net Interest Margin PAC — Planned Amortization Cost

 

 

See Notes to Financial Statements.

36      Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report

---

---

Statement of Assets and Liabilities (October 31, 2005)

---

ASSETS:
Investments, at value (Cost — $898,090,683)		$	932,791,974
Foreign currency, at value (Cost — $838)			835
Cash			146
Receivable for swap contracts			1,940
Receivable for securities sold			8,643,459
Dividends and interest receivable			6,504,109
Prepaid expenses			12,454
Total Assets			947,954,917
LIABILITIES:
Loan payable (Notes 1 and 4)			220,000,000
Payable for loaned securities collateral (Notes 1 and 3)			85,925,599
Payable for securities purchased			2,134,173
Interest payable (Note 4)			720,266
Management fee payable			623,208
Payable for offering costs			442,559
Payable for Fund shares repurchased			223,668
Payable for swap contracts			5,424
Directors’ fees payable			145
Accrued expenses			225,556
Total Liabilities			310,300,598
Total Net Assets		$	637,654,319
NET ASSETS:
Par value ($0.001 par value; 32,382,706 shares issued and outstanding;
100,000,000 shares authorized)		$	32,383
Paid-in capital in excess of par value			603,674,127
Accumulated net realized loss on investments, swap contracts and foreign currency transactions			(751,862	)
Net unrealized appreciation on investments and foreign currency transactions			34,699,671
Total Net Assets		$	637,654,319
Shares Outstanding			32,382,706
Net Asset Value			$19.69

See Notes to Financial Statements.

Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report      37

---

---

Statement of Operations (For the year ended October 31, 2005)

---

INVESTMENT INCOME:
Interest		$	28,798,058
Dividends			9,524,758
Income from securities lending			199,025
Less: Foreign taxes withheld			(118,810	)
Total Investment Income			38,403,031
EXPENSES:
Interest expense (Notes 3 and 4)			7,777,427
Management fee (Note 2)			7,311,175
Shareholder reports			180,981
Custody fees			161,087
Directors’ fees			61,365
Audit and tax			60,746
Legal fees			45,565
Transfer agent fees			25,159
Loan fees			21,266
Stock exchange listing fees			20,830
Insurance			7,499
Miscellaneous expenses			4,650
Total Expenses			15,677,750
Net Investment Income			22,725,281
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, SWAP CONTRACTS
AND FOREIGN CURRENCY TRANSACTIONS (NOTES 1 AND 3):
Net Realized Gain (Loss) From:
Investments			28,057,054
Swap contracts			3,608
Foreign currency transactions			(100,286	)
Option contracts			(17,321,069	)
Net Realized Gain			10,639,307
Change in Net Unrealized Appreciation/Depreciation From:
Investments			32,522,448
Foreign currency transactions			(2,007	)
Option contracts			7,151,350
Change in Net Unrealized Appreciation/Depreciation			39,671,791
Increase from payment by affiliate			21,460
Net Gain on Investments, Swap Contracts and Foreign Currency Transactions			50,332,558
Increase in Net Assets From Operations		$	73,057,839

See Notes to Financial Statements.

38      Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report

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---

Statements of Changes in Net Assets
(For the year ended October 31, 2005 and the period ended October 31, 2004⁽¹⁾)

---

		2005				2004(1)
OPERATIONS:
Net investment income		$	22,725,281			$	12,181,904
Net realized gain (loss)			10,639,307				(1,394,587	)
Change in net unrealized appreciation/depreciation			39,671,791				(4,972,120	)
Increase from payment by Affiliate			21,460				—
Increase in Net Assets From Operations			73,057,839				5,815,197
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 1):
Net investment income			(32,052,389	)			(13,404,047	)
Net realized gains			(7,365,538	)			—
Return of capital			—				(6,373,531	)
Decrease in Net Assets From Distributions to Shareholders			(39,417,927	)			(19,777,578	)
FUND SHARE TRANSACTIONS:
Net proceeds from sale of shares (32,950,000 shares issued,
net of $1,318,000 offering costs)			—				628,027,000
Reinvestment of distributions (8,859 shares issued)			—				159,269
Cost of shares repurchased (581,400 shares repurchased)			(10,309,481	)			—
Increase (Decrease) in Net Assets From Fund Share Transactions			(10,309,481	)			628,186,269
Increase in Net Assets			23,330,431				614,223,888
NET ASSETS:
Beginning of year			614,323,888				100,000
End of year*		$	637,654,319			$	614,323,888
* Includes overdistributed net investment income of:			—			$	(918,153	)

(1)	For the period February 24, 2004 (commencement of operations) to October 31, 2004.

 

See Notes to Financial Statements.

Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report      39

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---

Statement of Cash Flows (For the year ended October 31, 2005)

---

CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Interest and dividends received		$	35,929,527
Operating expenses paid			(7,843,678	)
Net sales of short-term investments			31,092,350
Realized loss on foreign currency transactions			(100,286	)
Realized loss on options			(17,321,069	)
Realized gain on swap contracts			3,608
Net change in unrealized depreciation on foreign currencies			(2,007	)
Purchases of long-term investments			(535,353,068	)
Proceeds from disposition of long-term investments			550,885,116
Interest paid			(7,435,327	)
Net Cash Flows Provided By Operating Activities			49,855,166
CASH FLOWS USED BY FINANCING ACTIVITIES:
Cash distributions paid on Common Stock			(39,417,927	)
Cost of shares repurchased			(10,085,813	)
Offering costs paid			(351,019	)
Net Cash Flows Used By Financing Activities			(49,854,759	)
NET INCREASE IN CASH			407
Cash and foreign currency Beginning of year			574
Cash and foreign currency End of year		$	981
RECONCILIATION OF INCREASE IN NET ASSETS FROM OPERATIONS
TO NET CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES:
Increase in Net Assets From Operations		$	73,057,839
Accretion of discount on investments			(3,270,499	)
Amortization of premium on investments			1,725,257
Increase in investments, at value			(15,248,259	)
Decrease in payable for securities purchased			(2,325,160	)
Increase in interest receivable			(928,262	)
Increase in receivable for securities sold			(3,554,495	)
Increase in prepaid expenses			(12,454	)
Increase in interest payable			342,100
Increase in accrued expenses			69,099
Total Adjustments			(23,202,673	)
Net Cash Flows Provided By Operating Activities		$	49,855,166

See Notes to Financial Statements.

40      Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report

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---

Financial Highlights

---

For a share of capital stock outstanding throughout each year or period ended October 31, unless
otherwise noted:

---

		2005(1)				2004(1)(2)
Net Asset Value, Beginning of Year		$	18.64			$	19.06	(3)
Income (Loss) From Operations:
Net investment income			0.69				0.37
Net realized and unrealized gain (loss)			1.52				(0.19	)
Total Income From Operations			2.21				0.18
Gain From Repurchase of Stock			0.04				—
Less Distributions From:
Net investment income			(0.98	)			(0.40	)
Realized gains			(0.22	)			—
Return of capital			—				(0.20	)
Total Distributions			(1.20	)			(0.60	)
Net Asset Value, End of Year		$	19.69			$	18.64
Market Price, End of Year		$	17.19			$	17.24
Total Return, Based on Net Asset Value			12.34	%(5)			1.06	%‡
Total Return, Based on Market Price Per Share(4)			6.85	%(5)			(10.74	)%‡
Net Assets, End of Year (000s)		$	637,654			$	614,324
Ratios to Average Net Assets:
Expenses			2.45	%			1.54	%(6)
Expenses, excluding interest expense			1.23				1.15	(6)
Net investment income			3.55				2.97	(6)
Portfolio Turnover Rate			64	%			39	%
Supplemental Data:
Loans Outstanding, End of Year (000s)		$	220,000			$	220,000
Asset Coverage for Loan Outstanding			390	%			379	%
Weighted Average Loan (000s)		$	220,000			$	105,783
Weighted Average Interest Rate on Loans			3.54	%			2.22	%

(1)	Per share amounts have been calculated using the average shares method.
(2)	For the period February 24, 2004 (commencement of operations) through October 31, 2004.
(3)	Initial public offering price of $20.00 per share less offering costs and sales load totaling $0.94 per share.
(4)	The total return calculation assumes that dividends are reinvested in accordance with the Fund’s dividend reinvestment plan. Past performance is no guarantee of future results and the broker commission paid to purchase or sell a share is excluded.
(5)	The investment manager fully reimbursed the Fund for losses incurred resulting from an investment transaction error. Without this reimbursement, total return would not have changed.
(6)	Annualized.
‡	Total return is not annualized, as it may not be representative of the total return for the year.

 

See Notes to Financial Statements.

Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report      41

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Notes to Financial Statements

1. Organization and Significant Accounting Policies
The Salomon Brothers Capital and Income Fund Inc. (“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 (“1940 Act”). The Board of Directors authorized 100 million shares of $0.001 par value common stock. The Fund seeks total return with an emphasis on income by investing primarily in a portfolio consisting of a broad range of equity and fixed income securities of both U.S. and foreign issuers.

     The following are significant accounting policies consistently followed by the Fund and are in conformity with U.S. generally accepted accounting principles (“GAAP”). 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.

     (a) Investment Valuation. Equity securities for which market quotations are available are valued at the last sale price or official closing price on the primary market or exchange on which they trade. Debt securities are valued at the mean between the bid and asked prices provided by an independent pricing service that are based on transactions in debt obligations, quotations from bond dealers, market transactions in comparable securities and various relationships between securities. Publicly traded foreign government debt securities are typically traded internationally in the over-the-counter market, and are valued at the mean between the bid and asked prices as of the close of business of that market. When prices are not readily available, or are determined not to reflect fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded, but before the Fund calculates its net asset value, the Fund may value these investments at fair value as determined in accordance with the procedures approved by the Fund’s Board of Directors. Short-term obligations with maturities of 60 days or less are valued at amortized cost, which approximates market value.

     (b) Repurchase Agreements. When entering into repurchase agreements, it is the Fund’s policy that its custodian or a third party custodian takes possession of the underlying collateral securities, the market value of which at least equals the principal amount of the repurchase transaction, including accrued interest. To the extent that any repurchase transaction exceeds one business day, the value of the collateral is marked-to-market to ensure the adequacy of the collateral. If the seller defaults, and the market value of the collateral declines or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of the collateral by the Fund may be delayed or limited.

     (c) Lending of Portfolio Securities. The Fund has an agreement with its custodian whereby the custodian may lend securities owned by the Fund to brokers, dealers and other financial organizations. In exchange for lending securities under the terms of the agreement with its custodian, the Fund receives a lender’s fee. Fees earned by the Fund on securities lending are recorded as securities lending income. Loans of securities by the Fund are collateralized by cash, U.S. government securities or high quality money market instruments that are maintained at all times in an amount at least equal to the current market value of

42      Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report

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Notes to Financial Statements (continued)

the loaned securities, plus a margin which varies depending on the type of securities loaned. The custodian establishes and maintains the collateral in a segregated account. The Fund has the right under the lending agreement to recover the securities from the borrower on demand.

     The Fund maintains the risk of any loss on the securities on loan as well as the potential loss on investments purchased with cash collateral received from securities lending.

     (d) Loan Participations. The Fund may invest in loans arranged through private negotiation between one or more financial institutions. The Fund’s investment in any such loan may be in the form of a participation in or an assignment of the loan. In connection with purchasing participations, the Fund generally will have no right to enforce compliance by the borrower with the terms of the loan agreement relating to the loan, nor any rights of set-off against the borrower and the Fund may not benefit directly from any collateral supporting the loan in which it has purchased the participation.

     The Fund will assume the credit risk of both the borrower and the lender that is selling the participation and any other persons interpositioned between the Fund and the borrower. In the event of the insolvency of the lender selling the participation, the Fund may be treated as a general creditor of the lender and may not benefit from any set-off between the lender and the borrower.

     (e) Credit, Exchange Rate and Market Risk. The Fund invests in high yield and emerging market instruments that are subject to certain credit and market risks. The yields of high yield and emerging market debt obligations reflect, among other things, perceived credit risk. The Fund’s investment in securities rated below investment grade typically involve risks not associated with higher rated securities including, among others, greater risk related to timely and ultimate payment of interest and principal, greater market price volatility and less liquid secondary market trading. The consequences of political, social, economic or diplomatic changes may have disruptive effects on the market prices of investments held by the Fund. The Fund’s investment in non-dollar denominated securities may also result in foreign currency losses caused by devaluations and exchange rate fluctuations.

     (f ) 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.

     (g) 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 practical 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.

     (h) Foreign Currency Translation. Investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts based upon prevailing exchange rates on the date of valuation. Purchases and sales of investment securities

Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report      43

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Notes to Financial Statements (continued)

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 changes 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 fair values of assets and liabilities, other than investments in securities, at 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.

     (i) Distributions to Shareholders. Distributions from net investment income for the Fund, if any, are declared and paid on a monthly basis. Distributions of net realized gains, if any, are declared at least annually. Distributions are recorded on the ex-dividend date and are determined in accordance with income tax regulations, which may differ from GAAP.

     (j) 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, as amended, applicable to regulated investment companies. Accordingly, the Fund intends to distribute substantially all of its taxable income and net realized gains on investments, if any, to shareholders each year. Therefore, no federal income tax provision is required in the Fund’s financial statements. Under the applicable foreign tax laws, a withholding tax may be imposed on interest, dividends and capital gains at various rates.

     (k) Reclassification. GAAP requires that certain components of net assets be adjusted 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:

		Undistributed Net		Accumulated Net			Paid-in
		Investment Income		Realized Gain			Capital
(a)		$7,896,747		—			$( 7,896,747	)
(b)		2,348,514		$( 2,348,514	)		—

(a)	Reclassifications are primarily due to a taxable overdistribution.
(b)	Reclassifications are primarily due to foreign currency transactions treated as ordinary income for tax purposes and differences between book and tax amortization of premium on fixed income securities, income from mortgage backed securities treated as capital gains for tax purposes, book/tax differences in the treatment of distributions from real estate investment trusts, book/tax differences in the treatment of passive foreign investment companies and book/tax differences in the treatment of credit default swap contracts.

 

 

44      Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report

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Notes to Financial Statements (continued)

2. Management Agreement and Other Transactions with Affiliates
Salomon Brothers Asset Management Inc (“SBAM”), which for the period of this report was an indirect wholly-owned subsidiary of Citigroup Inc. (“Citigroup”), acts as investment manager to the Fund. SBAM is responsible on a day-to-day basis for the management of the Fund’s portfolio in accordance with the Fund’s investment objectives and policies and for making decisions to buy, sell or hold particular securities of the Fund. The management fee for these services is payable monthly at an annual rate of 0.85% of the Fund’s average daily net assets (plus any borrowings).

     During the year ended October 31, 2005, SBAM reimbursed the Fund in the amount of $21,460 for losses incurred resulting from an investment transaction error.

     At October 31, 2005, Citigroup Financial Products Inc., another indirect wholly-owned subsidiary of Citigroup, held 5,789 shares of the Fund.

     Certain officers and/or directors of the Fund are also officers and/or directors of SBAM and do not receive compensation from the Fund.

3. Investments
During the year ended October 31, 2005, the aggregate cost of purchases and proceeds from sales of investments (excluding short-term investments) and U.S Government & Agency Obligations were as follows:

				Investments	U.S. Government & Agency Obligations
Purchases				$531,010,778	$2,017,130
Sales				549,440,539	—

     At October 31, 2005, the aggregate gross unrealized appreciation and depreciation of investments for federal income tax purposes were as follows:

---

Gross unrealized appreciation		$	62,274,357
Gross unrealized depreciation			(29,321,530	)
Net unrealized appreciation		$	32,952,827

     At October 31, 2005, the Fund loaned securities having a market value of $84,035,780. The Fund received cash collateral amounting to $85,925,599 which was invested into the State Street Navigator Securities Lending Trust Prime Portfolio, a Rule 2a-7 money market fund, registered under the 1940 Act.

     At October 31, 2005, the Fund held loan participations with a total cost of $1,000,000 and a total market value of $1,009,739.

4. Loan
At October 31, 2005, the Fund had a $220,000,000 loan pursuant to a revolving credit and security agreement with Crown Point Capital Company LLC and Citicorp North America, Inc. (“CNA”). In addition, CNA acts as administrative agent of the credit facility. The loan generally bears interest at a variable rate based on the weighted average interest rates of the underlying commercial paper or LIBOR plus any applicable margin. Securities held by the Fund are subject to a lien, granted to the lenders, to the extent of the borrowings outstand-

Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report      45

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Notes to Financial Statements (continued)

ing and any additional expenses. For the year ended October 31, 2005, the Fund incurred interest expense on this loan in the amount of $7,777,427.

5. Dividends Subsequent to October 31, 2005
On July 25, 2005, the Board of Directors (“Board”) of the Fund declared a distribution in the amount of $0.10 per share payable on November 25, 2005 to shareholders of record on November 15, 2005.

     On November 18, 2005, the Fund’s board declared three distributions in the amounts of $0.10 per share, payable on December 30, 2005, January 27, 2006 and February 24, 2006 to shareholders of record on December 27, 2005, January 24, 2006 and February 21, 2006, respectively.

6. Capital Shares
On May 14, 2004, the Fund’s Board authorized the Fund to repurchase from time to time in the open market up to 1,000,000 shares of the Fund’s common stock. The Board directed the management of the Fund to repurchase shares of the Fund’s common stock at such times and in such amounts as management believes will enhance shareholder value, subject to review by the Fund’s Board. On June 28, 2005, the Fund commenced this share repurchase plan. Since the inception of the repurchase plan, the Fund repurchased 581,400 shares with a total cost of $10,309,481 at the weighted average discount of 12.10% per share.

7. Income Tax Information and Distributions to Shareholders
Subsequent to the fiscal year end, the Fund has made the following distributions from Net Investment Income:

---

Record Date:		11/15/2005
Payable Date:		11/25/2005
Class A		0.1000

The tax character of distributions paid during the fiscal years ended October 31, were as follows:

		2005			2004
Distributions paid from:
Ordinary Income		$	39,252,185		$	13,404,047
Net Long-term Capital Gains			165,742			—
Total Taxable Distributions		$	39,417,927		$	13,404,047
Tax Return of Capital			—			6,373,531
Total Distributions Paid		$	39,417,927		$	19,777,578

46      Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report

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Notes to Financial Statements (continued)

As of October 31, 2005, the components of accumulated earnings on a tax basis were as follows:

---

Other book/tax temporary differences (a)		$	489,900
Unrealized appreciation (b)			33,457,909
Total Accumulated Earnings/(Losses) — net		$	33,947,809

During the taxable year ended October 31, 2005, the Fund utilized all $9,064,399 of its capital loss carryover available from prior periods.

(a)	Other book/tax temporary differences are attributable primarily to the realization for tax purposes of unrealized lossses on certain options contracts.
(b)	The differences between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax def-feral of losses on wash sales, the difference between book and tax amortization methods for discounts and premiums on fixed income securities, the realization for tax purposes of unrealized gains on investments in passive foreign investment companies, and the difference between the book and tax cost basis of investmments in real estate investment trusts.

8. Change in Independent Registered Public Accounting Firm (unaudited)
PricewaterhouseCoopers LLP resigned as the independent registered public accounting firm for the Fund effective June 17, 2005. The Fund’s Audit Committee approved the engagement of KPMG LLP as the Fund’s new independent registered public accounting firm for the fiscal year ending October 31, 2005. A majority of the Fund’s Board of Directors, including a majority of the independent Directors, approved the appointment of KPMG LLP, subject to the right of the Fund, by a majority vote of the shareholders at any meeting called for that purpose, to terminate the appointment without penalty.

     The report of PricewaterhouseCoopers LLP on the Fund’s financial statements for the period February 24, 2004 (commencement of operations) through October 31, 2004 contained no adverse opinion or disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope or accounting principles. There have been no disagreements with PricewaterhouseCoopers LLP during the period February 24, 2004 (commencement of operations) through October 31, 2004 and any subsequent interim period on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure which, if not resolved to the satisfaction of PricewaterhouseCoopers LLP, would have caused them to make reference thereto in their report on the financial statements for such period.

9. Regulatory Matters
On May 31, 2005, the U.S. Securities and Exchange Commission (“SEC”) issued an order in connection with the settlement of an administrative proceeding against SBFM and Citigroup Global Markets Inc. (“CGM”) relating to the appointment of an affiliated transfer agent for the Smith Barney family of mutual funds (the “Affected Funds”).

     The SEC order finds that SBFM and CGM willfully violated Section 206(1) of the Investment Advisers Act of 1940 (“Advisers Act”). Specifically, the order finds that SBFM and CGM knowingly or recklessly failed to disclose to the boards of the Affected Funds in 1999 when proposing a new transfer agent arrangement with an affiliated transfer agent that: First Data Investors Services Group (“First Data”), the Affected Funds’ then-existing transfer agent, had offered to continue as transfer agent and do the same work for substantially less money than before; and that Citigroup Asset Management (“CAM”), the Citigroup business unit that, at the time, included the fund’s investment manager and other

Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report      47

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Notes to Financial Statements (continued)

investment advisory companies, had entered into a side letter with First Data under which CAM agreed to recommend the appointment of First Data as sub-transfer agent to the affiliated transfer agent in exchange for, among other things, a guarantee by First Data of specified amounts of asset management and investment banking fees to CAM and CGM. The order also finds that SBFM and CGM willfully violated Section 206(2) of the Advisers Act by virtue of the omissions discussed above and other misrepresentations and omissions in the materials provided to the Affected Funds’ boards, including the failure to make clear that the affiliated transfer agent would earn a high profit for performing limited functions while First Data continued to perform almost all of the transfer agent functions, and the suggestion that the proposed arrangement was in the Affected Funds’ best interests and that no viable alternatives existed. SBFM and CGM do not admit or deny any wrongdoing or liability. The settlement does not establish wrongdoing or liability for purposes of any other proceeding.

     The SEC censured SBFM and CGM and ordered them to cease and desist from violations of Sections 206(1) and 206(2) of the Advisers Act. The order requires Citigroup to pay $208.1 million, including $109 million in disgorgement of profits, $19.1 million in interest, and a civil money penalty of $80 million. Approximately $24.4 million has already been paid to the Affected Funds, primarily through fee waivers. The remaining $183.7 million, including the penalty, has been paid to the U.S. Treasury and will be distributed pursuant to a plan prepared and submitted for approval by the SEC. The order also requires that transfer agency fees received from the Funds since December 1, 2004 less certain expenses be placed in escrow and provides that a portion of such fees may be subsequently distributed in accordance with the terms of the order.

     The order required SBFM to recommend a new transfer agent contract to the Affected Fund boards within 180 days of the entry of the order; if a Citigroup affiliate submitted a proposal to serve as transfer agent or sub-transfer agent, SBFM and CGM would have been required, at their expense, to engage an independent monitor to oversee a competitive bidding process. On November 21, 2005, and within the specified timeframe, the Fund’s Board approved a new transfer agent contract for the Fund. No Citigroup affiliate submitted a proposal to serve as transfer agent. Under the order, SBFM also must comply with an amended version of a vendor policy that Citigroup instituted in August 2004.

     At this time, there is no certainty as to how the proceeds of the settlement will be distributed, to whom such distributions will be made, the methodology by which such distributions will be allocated, and when such distributions will be made. Although there can be no assurance, SBFM does not believe that this matter will have a material adverse effect on the Affected Funds.

     This Fund is not one of the Affected Funds and therefore did not implement the transfer agent arrangement described above and therefore will not receive any portion of the distributions.

     On December 1, 2005, Citigroup completed the sale of substantially all of its global asset management business, including SBFM, to Legg Mason Inc.

48      Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report

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Notes to Financial Statements (continued)

10. Other Matters
The Fund has received information from SBAM as follows:

     On September 16, 2005, the staff of the Securities and Exchange Commission (the “Commission”) informed SBAM that the staff is considering recommending that the Commission institute administrative proceedings against SBAM for alleged violations of Sections 19(a) and 34(b) of the Investment Company Act (and related Rule 19a-1). The notification is a result of an industry wide inspection undertaken by the Commission and is based upon alleged deficiencies in disclosures regarding dividends and distributions paid to shareholders of certain funds. In connection with the contemplated proceedings, the staff may seek a cease and desist order and/or monetary damages from SBAM.

     Although there can be no assurance, SBAM believes that this matter is not likely to have a material adverse effect on the Fund or SBAM’s ability to perform investment advisory services relating to the Fund.

11. Subsequent Events
On December 1, 2005, Citigroup completed the sale of substantially all of its asset management business, CAM, to Legg Mason. As a result, the Fund’s Manager, previously an indirect wholly-owned subsidiary of Citigroup, has become a wholly-owned subsidiary of Legg Mason. Completion of the sale caused the Fund’s existing investment management contract to terminate. The Fund’s shareholders previously approved a new investment management contract between the Fund and the Manager which became effective on December 1, 2005.

     Legg Mason, whose principal executive offices are at 100 Light Street, Baltimore, Maryland 21202, is a financial services holding company. As of December 2, 2005, Legg Mason’s asset management operation had aggregate assets under management of approximately $830 billion.

     Effective December 1, 2005, CGM will no longer be an affiliated person of the Fund under the Investment Company Act of 1940, as amended. As a result, the fund will be permitted to execute transactions with CGM or an affiliate of CGM as agent without the restrictions applicable to transactions with affiliated persons. Similarly, the Fund generally will be permitted to purchase securities in underwritings in which CGM or an affiliate of CGM is a member without the restrictions imposed by certain rules of the Securities and Exchange Commission. The Manager’s use of CGM or affiliates of CGM as agent in portfolio transactions with the Fund will be governed by the Fund’s policy of seeking the best overall terms available.

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

     The Fund’s Board has approved American Stock Transfer & Trust Co. (“AST”) to serve as transfer agent for the Fund. The principal business office of AST is located at 59 Maiden Lane, New York, NY 10038.

Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report      49

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders
Salomon Brothers Capital and Income Fund Inc.:

     We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Salomon Brothers Capital and Income Fund Inc. as of October 31, 2005, and the related statement of operations, statement of changes in net assets, statement of cash flows, and the financial highlights for the year then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. The statement of changes in net assets and the financial highlights for the period February 24, 2004 (commencement of operations) through October 31, 2004 were audited by other independent registered public accountants whose report thereon, dated December 21, 2004, expressed an unqualified opinion on that financial statement and those financial highlights.

     We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2005, by correspondence with the custodian and brokers or by other appropriate auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

     In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Salomon Brothers Capital and Income Fund Inc. as of October 31, 2005, and the results of its operations, changes in its net assets, its cash flows, and the financial highlights for the year then ended, in conformity with U.S. generally accepted accounting principles.

New York, New York
December 16, 2005

50      Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report

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Board Approval of Management Agreement (unaudited)

Background
The members of the Board of Salomon Brothers Capital and Income Fund Inc. (the “Fund”), including the Fund’s independent, or non-interested, Board members (the “Independent Board Members”), received extensive information from the Fund’s manager (the “Manager”) to assist them in their consideration of the Fund’s management agreement (the “Management Agreement”). This includes a variety of information about the Manager, including the advisory arrangements for the Fund and other funds overseen by the Board, certain portions of which are discussed below.

     At an in-person meeting held on July 25 and 26, 2005, a presentation was made to the Board by the Manager that encompassed the Fund and all the funds for which the Board has responsibility. The Board evaluated information made available on a fund-by-fund basis and its determinations were made separately in respect of each fund, including the Fund. The Fund has a combined investment advisory and administration agreement. The discussion below covers both advisory and administrative functions being rendered by the Manager.

Board Approval of Management Agreement
The Board unanimously approved the continuation of the Management Agreement for a period of up to one year concluding, in doing so, that the Manager should continue to be the Fund’s investment adviser and that the compensation payable under the agreement is fair and reasonable in light of the services performed, expenses incurred and such other matters as the Board considered relevant in the exercise of its business judgment. In approving continuance of the Management Agreement, the Board considered the announcement on June 24, 2005 by Citigroup that it had signed a definitive agreement under which Citigroup will sell substantially all of its worldwide asset management business to Legg Mason, Inc. Upon completion of this transaction the Manager, which was an indirect wholly-owned subsidiary of Citigroup, would become an indirect wholly-owned subsidiary of Legg Mason, Inc. and the Management Agreement will terminate. Other factors considered and conclusions rendered by the Board in determining to approve the continuation of the Management Agreement included the following:

Nature, Extent and Quality of the Services under the Management Agreement
The Board received and considered information regarding the nature, extent and quality of services provided to the Fund by the Manager under the Management Agreement during the past year. The Board also received a description of the administrative and other services rendered to the Fund and its shareholders by the Manager. The Board noted that it had received information at regular meetings throughout the year related to the services rendered by the Manager about the management of the Fund’s affairs and the Manager’s role in coordinating the activities of the Fund’s other service providers. The Board’s evaluation of the services provided by the Manager took into account the Board’s knowledge and familiarity gained as Board members of funds in the Citigroup Asset Management (“CAM”) fund complex, including the scope and quality of the Manager’s investment management and other capabilities and the quality of its administrative and other services. The

Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report      51

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Board Approval of Management Agreement (unaudited)
(continued)
Board considered that the scope of services provided by the Manager had expanded over time as a result of regulatory and other developments, including maintaining and monitoring its own and the Fund’s expanded compliance programs. The Board also considered the Manager’s response to recent regulatory compliance issues affecting it and the CAM fund complex. The Board reviewed information received from the Manager regarding the implementation to date of the Fund’s compliance policies and procedures established pursuant to Rule 38a-1 under the Investment Company Act of 1940.

     The Board reviewed information describing the qualifications, backgrounds and responsibilities of the Fund’s senior personnel and the portfolio management team primarily responsible for the day-to-day portfolio management of the Fund. The Board also considered the willingness of the Manager to consider and implement organizational changes to improve investment results and the services provided to the CAM fund complex. The Board also considered financial information from the Manager and based on its general knowledge of the Manager, affiliates, the financial resources available to CAM and its then parent organization, Citigroup Inc.

     The Board also considered information presented regarding the Manager’s brokerage policies and practices, the standards applied in seeking best execution, the use of a broker affiliated with the Manager and the existence of quality controls applicable to brokerage allocation procedures. In addition, the Manager also reported to the Board on, among other things, its business plans, recent organizational changes and portfolio manager compensation plan.

     The Board concluded that, overall, it was satisfied with the nature, extent and quality of services provided (and expected to be provided) under the Management Agreement.

Fund Performance
The Board received and considered performance information for the Fund as well as for a group of funds (the “Performance Universe”) selected by Lipper, Inc. (“Lipper”), an independent provider of investment company data. The Board was provided with a description of the methodology Lipper used to select the funds included in the Performance Universe. The Board also noted that it had received information prepared by the Manager throughout the year at periodic intervals comparing the Fund’s performance against its bench-mark(s) and Lipper peers.

     The information comparing the Fund’s performance to that of its Performance Universe, consisting of all closed-end funds classified as “income and preferred stock funds” by Lipper, showed that the Fund’s performance since inception presented was slightly below the median.

     Based on their review, which included consideration of all of the factors noted above, the Board concluded that the investment performance of the Fund has been satisfactory.

Management Fees and Expense Ratios
The Board considered the contractual management fee (the “Contractual Management Fee”) payable by the Fund to the Manager in light of the nature, extent and quality of the management services provided by the Manager. Additionally, the Board received and con-

52      Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report

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Board Approval of Management Agreement (unaudited)
(continued)
sidered information prepared by Lipper comparing the Fund’s Contractual Management Fees and the Fund’s overall expenses with those of funds in a relevant expense group and a broader group of funds, each selected and provided by Lipper. The Board also reviewed information regarding fees charged by the Manager to other U.S. clients investing primarily in an asset class similar to that of the Fund including, where applicable, separate accounts. The Manager reviewed with the Board the significant differences in scope of services provided to the Fund and the scope of the services provided to these other clients, noting that, unlike such other clients, the Fund is provided with administrative services, office facilities, Fund officers (including the Fund’s chief executive, chief financial and chief compliance officers), and that the Manager coordinates and oversees the provision of services to the Fund by other Fund providers. The Board considered the fee comparisons in light of the broader range of services provided to the Fund and did not place a significant weight on this factor. The Board received an analysis of complex-wide management fees provided by the Manager, which, among other things, set out a proposed framework of fees based on asset classes.

     The information comparing the Fund’s Contractual Management Fees as well as its actual total expense ratio to its Expense Group, consisting of 9 closed-end funds (including the Fund) classified as “leveraged income and preferred funds” by Lipper, showed that the Fund’s Contractual Management Fees were equal to the median range of management fees paid by the other funds in the Expense Group. The Board noted that the Fund’s actual total expense ratio was equal to the median, and concluded that the expense ratio of the Fund was acceptable in the light of the quality of the services the Fund received and such other factors as the Board considered relevant.

     Taking all of the above into consideration, the Board determined that the Fund’s Management Fee was reasonable in light of the nature, extent and quality of the services provided to the Fund under the Management Agreement.

     The material factors and conclusions that formed the basis for the Board’s determination to approve the continuance of the Management Agreement (including the determinations that the Manager should continue to serve as the investment adviser to the Fund and that the fees payable to the Manager pursuant to the Management Agreement are appropriate) included the following:

Manager Profitability
The Board considered information regarding the profitability to Manager and its affiliates of their relationships with the Fund. The Board also received profitability information with respect to the CAM fund complex as a whole. In addition, the Board received information with respect to the Manager’s allocation methodologies used in preparing this profitability data as well as a report from an outside consultant that had reviewed the Manager’s methodology. Based upon their review of the information made available, the Board concluded that the Manager’s profitability was not excessive in light of the nature, extent and quality of the services provided to the Fund.

Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report      53

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Board Approval of Management Agreement (unaudited)
(continued)

Economies of Scale
The Board received and considered information regarding whether there have been economies of scale with respect to the management of the Fund, whether the Fund has appropriately benefited from any economies of scale, and whether, given the Fund’s closed-end structure, there is a realistic potential for realization of any further economies of scale. The Board considered whether economies of scale in the provision of services to the Fund were being passed along to the shareholders. The Board also considered whether alternative fee structures (such as breakpoints at lower asset levels) would be more appropriate or reasonable taking into consideration economies of scale or other efficiencies. The Board also noted that as the Fund’s assets have increased over time, it has realized other economies of scale, as certain expenses, such as fees for Board members, auditors and legal fees, become a smaller percentage of overall assets.

     Generally, in light of the Manager’s profitability data, and such other factors as the Board considered relevant, the Board concluded that the Manager’s sharing of current economies of scale with the Fund was reasonable.

Other Benefits to the Manager
The Board considered other benefits received by the Manager and its affiliates as a result of their relationship with the Fund, including soft dollar arrangements and the opportunity to offer additional products and services to Fund shareholders.

     In light of the costs of providing investment management and other services to the Fund and the Manager’s ongoing commitment to the Fund, other ancillary benefits that the Manager and its affiliates received were not considered unreasonable to the Board.

Additional Information
On June 23, 2005, Citigroup Inc. entered into a definitive agreement (the “Transaction Agreement”) with Legg Mason, Inc. under which Citigroup agreed to sell substantially all of its asset management business, Citigroup Asset Management (“CAM”), which includes the Adviser, to Legg Mason in exchange for the broker-dealer and investment banking businesses of Legg Mason and certain other considerations (the “Transaction”). The Transaction closed on December 1, 2005.

     The consummation of the Transaction resulted in the automatic termination of the Fund’s current management agreement for each CAM-advised Fund overseen by the Board (the “CAM funds”) including the Fund (each, a “Current Management Agreement”) in accordance with the Investment Company Act of 1940, as amended (the “1940 Act”). At meetings held on August 12, 2005, the Fund’s Board, including the Independent Board Members, unanimously approved a new management agreement between each CAM fund including the Fund, and the Adviser (each, a “New Management Agreement”) and authorized the Fund’s officers to submit the New Management Agreement to shareholders for their approval.

     In anticipation of the Transaction, members of the Fund’s Board met in person on July 11, 2005 and August 12, 2005 for purposes of, among other things, considering whether it would be in the best interests of each CAM fund and its shareholders to approve the New

54      Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report

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Board Approval of Management Agreement (unaudited)
(continued)
Management Agreement between the fund and the fund’s Adviser. At those Board meetings, and for the reasons discussed below, the Board, including a majority of the Independent Board Members, unanimously approved each New Management Agreement and unanimously recommended its approval by shareholders in order to assure continuity of investment advisory services to the CAM fund after the Transaction.

     To assist the Boards in their consideration of the New Management Agreements, Legg Mason provided materials and information about Legg Mason, including its financial condition and asset management capabilities and organization, and Legg Mason and CAM provided materials and information about the Transaction between Legg Mason and Citigroup. The Independent Board Members, through their independent legal counsel, also requested and received additional information from CAM and Legg Mason in connection with their consideration of the agreements. The additional information was provided in advance of and at the August meetings. In addition, the Independent Board Members consulted with their counsel on various occasions on, and received from their counsel a memorandum outlining, among other things, the legal standards and certain other considerations relevant to the Board Members’ deliberations.

     On July 11, 2005 and August 12, 2005, members of the Boards discussed with CAM management and certain Legg Mason representatives the Transaction and Legg Mason’s general plans and intentions regarding CAM funds, including the preservation, strengthening and growth of CAM’s business and its combination with Legg Mason’s business. The Board Members also inquired about the plans for and anticipated roles and responsibilities of certain CAM employees and officers after the Transaction. The Independent Board Members of the Board also conferred separately and with their counsel about the Transaction on a number of occasions, including in connection with the July discussion and August meetings.

     At the Board’s August meeting, representatives of CAM and Legg Mason made presentations to and responded to questions from the Board. After the presentations and after reviewing the written materials provided, the Independent Board Members met in executive session with their counsel to consider the New Management Agreement.

     Among other things, the Board Members considered:

	(i)		the reputation, financial strength and resources of Legg Mason and its investment advisory subsidiaries;
	(ii)		that Legg Mason and its wholly-owned subsidiary, Western Asset Management Company and its affiliates (“Western Asset”), are experienced and respected asset management firms, and that Legg Mason has advised the Board Members that (a) it intends to combine the fixed income investment operations (including money market fund operations) of CAM with those of Western Asset and may also wish to combine other CAM operations with those of other Legg Mason subsidiaries; (b) after the closing of the Transaction, it will take steps to combine the investment management operations of Western Asset with the fixed income operations of the Adviser to CAM funds, which, among other things, may involve Western Asset, the Adviser to CAM funds sharing common systems and procedures,

Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report      55

---

Board Approval of Management Agreement (unaudited)
(continued)

			employees (including portfolio managers), investment and trading platforms, and other resources; (c) it is expected that these combination processes will result in changes to portfolio managers or portfolio management teams for a number of CAM funds, subject to Board consent and appropriate notice to shareholders, and that, in other cases, the current portfolio managers or portfolio management teams will remain in place; and (d) in the future, it may recommend that Western Asset or other Legg Mason subsidiaries be appointed as the adviser or subadviser to certain CAM fund, including the Fund, subject to applicable regulatory requirements;
	(iii)		that CAM management and Legg Mason have advised the Boards that following the Transaction, there is not expected to be any diminution in the nature, quality and extent of services provided to each CAM fund, including the Fund, and its shareholders by the Adviser, including compliance services;
	(iv)		the assurances from Citigroup and Legg Mason that, for a three year period following the closing of the Transaction, the Adviser will have substantially the same access to the Citigroup sales force when distributing shares of CAM funds as is currently provided to CAM and that other arrangements between the Adviser and Citigroup sales channels will be preserved;
	(v)		that Legg Mason and Citigroup intend to enter into an agreement in connection with the Transaction under which Citigroup-affiliated broker-dealers will continue to offer CAM funds as investment products, and the potential benefits to fund shareholders from this and other third-party distribution access;
	(vi)		the potential benefits to CAM fund shareholders from being part of a combined fund family with Legg Mason-sponsored funds, including possible economies of scale and access to investment opportunities;
	(vii)		that Citigroup and Legg Mason would derive benefits from the Transaction and that as a result, they have a financial interest in the matters that were being considered;
	(viii)		the potential effects of regulatory restrictions on CAM funds if Citigroup-affiliated broker-dealers remain the principal underwriters for CAM funds;
	(ix)		the fact that the Fund’s total advisory and administrative fees will not increase by virtue of the New Management Agreement, but will remain the same;
	(x)		the terms and conditions of the New Management Agreement, including the differences from the Current Management Agreement, and, where applicable, the benefits of a single, uniform form of agreement covering these services;
	(xi)		that in July 2005 each Board had performed a full annual review of the Funds Current Management Agreement as required by the 1940 Act, and had determined that the Adviser has the capabilities, resources and personnel necessary to provide the advisory and administrative services currently provided to the Fund; and that the advisory and/or management fees paid by the Fund represent

56      Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report

---

Board Approval of Management Agreement (unaudited)
(continued)

			reasonable compensation to the Adviser in light of the nature, extent and quality of the services to be provided by the Adviser, the investment performance of the Fund and the Adviser, the costs of the services to be provided and the profits to be realized by the Adviser and its affiliates from the relationship with the Fund, the extent to which economies of scale may be realized as the Fund grows, the reflection of these economies of scale in the fee levels for the benefit of Fund shareholders, and such other matters as the Board Members considered relevant in the exercise of their reasonable judgment;
	(xii)		that the Fund would not bear the costs of obtaining shareholder approval of the New Management Agreements; and
	(xiii)		that under the Transaction Agreement, Citigroup and Legg Mason have agreed not to take any action that is not contemplated by the Transaction or fail to take any action that to their respective knowledge would cause any of the requirements of Section 15(f) not to be met.

     Certain of these considerations are discussed in more detail below.

     In their deliberations, the Board Members considered information received in connection with their recent approval of continuance of each Current Management Agreement in addition to information provided by Legg Mason and CAM in connection with their evaluation of the terms and conditions of the New Management Agreement. The Board Members did not identify any particular information that was all-important or controlling, and each Board Member attributed different weights to the various factors. The Board Members evaluated all information available to them on a Fund-by-Fund basis, and their determinations were made separately in respect of each Fund. The Board Members, including a majority of the Independent Board Members, concluded that the terms of the New Management Agreements, including the New Management Agreement for the Fund, are fair and reasonable, that the fees stated therein are reasonable in light of the services to be provided to each Fund, and that the New Management Agreements should be approved and recommended to Fund shareholders.

Nature, Quality and Extent of Services Provided
In evaluating the nature, quality and extent of the services to be provided by the Adviser under the New Management Agreements, the Board Members considered, among other things, the expected impact, if any, of the Transaction on the operations, facilities, organization and personnel of the Adviser; the potential implications of regulatory restrictions on the CAM funds following the Transaction; the ability of the Adviser to perform its duties after the Transaction, taking into account, where the CAM fund currently has a subadviser, the delegation of certain duties to the subadviser; and any anticipated changes to the current investment and other practices of the CAM funds. The Board Members considered Legg Mason’s advice that, after the closing of the Transaction, Legg Mason intends to review all aspects of the Funds’ operations (including equity, fixed income and money market fund operations). The Board Members considered Legg Mason’s advice that it intends to combine the fixed income investment operations of CAM with those of Western Asset

Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report      57

---

Board Approval of Management Agreement (unaudited)
(continued)
and may also wish to combine other CAM operations with those of other Legg Mason subsidiaries. The Board Members noted that Western Asset is an experienced and respected institutional asset manager that focuses on managing fixed income assets on behalf of institutional separate accounts, retirement plans and other institutional investors, including mutual funds. The Board Members further noted that, as of June 30, 2005, Western Asset managed approximately $230 billion in assets on behalf of its clients. The Board Members considered Legg Mason’s advice that, after the closing of the sale, Legg Mason will take steps to combine the investment management operations of Western Asset with the fixed income operations of the Adviser and, in relevant cases, Citigroup Asset Management Limited (the “Subadviser”) to the CAM funds, which, among other things, may involve Western Asset, the Adviser and, in relevant cases, the Subadviser to the CAM funds sharing common systems and procedures, employees (including portfolio managers), investment and trading platforms, and other resources. The Board Members also considered Legg Mason’s advice that it is expected that the combination processes described above will result in additional changes to portfolio managers or portfolio management teams for a number of the CAM funds, subject to Board consent and appropriate notice to shareholders, and that, in other cases, the current portfolio managers or portfolio management teams will remain in place. The Board Members also considered Legg Mason’s advice that, in the future, Legg Mason may recommend that Western Asset or other Legg Mason subsidiaries be appointed as the adviser or subadviser to some or all of the CAM funds, subject to applicable regulatory requirements.

     The Board Members were advised that if Citigroup-affiliated broker-dealers remain the CAM funds’ principal underwriters, the funds would continue to be subject to restrictions concerning certain transactions involving Citigroup affiliates (for example, transactions with a Citigroup broker-dealer acting as principal) absent regulatory relief or clarification.

     Based on their review of the materials provided and the assurances they had received from CAM management and Legg Mason, the Board Members determined that the Transaction was not expected to adversely affect the nature and quality of services provided by the Adviser and that the Transaction was not expected to have a material adverse effect on the ability of the Adviser to provide those services. It was noted, however, that, in addition to the changes previously described, it is expected that there will be other changes in personnel following the Transaction or after the combination of CAM’s operations with those of Legg Mason subsidiaries. The Board Members noted that if current portfolio managers or other personnel cease to be available, each Board would consider all available options, which could include seeking the investment advisory or other services of Legg Mason affiliates or investment advisers not affiliated with Legg Mason. In this regard, it was noted that Legg Mason has indicated that it could potentially make available to the Adviser additional portfolio management resources in the event of loss of CAM personnel for particular investment disciplines. Accordingly, the Board Members concluded that, overall, they were satisfied at the present time with assurances from Legg Mason and CAM as to the expected nature, extent and quality of the services to be provided to the CAM funds under the New Management Agreements.

58      Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report

---

Board Approval of Management Agreement (unaudited)
(continued)

Costs of Services Provided and Profitability
In evaluating the costs of the services to be provided by the Adviser under the New Management Agreements and the profitability to the Adviser of their relationships with the Funds, the Board Members considered, among other things, whether advisory and administrative (or management) fees or other expenses would change as a result of the Transaction. Based on their review of the materials provided and the assurances they had received from CAM management and Legg Mason, the Board Members determined that the Transaction would not increase the fees payable for advisory and administrative (or management) services and that overall CAM fund expenses were not expected to increase materially as a result of the Transaction. The Board Members noted that it was not possible to predict how the Transaction would affect the Adviser’s profitability from its relationship with the CAM funds, but that they had been satisfied in their most recent review of the Current Management Agreements, including the Funds’ Current Management Agreements, that the Adviser’s level of profitability from its relationship with the Funds was not excessive. It was noted that in conjunction with that review, the Board Members had obtained an independent accountant’s review of the methodology used to determine the Adviser’s profitability. The Board Members concluded that, overall, they were satisfied that currently, the Adviser’s level of profitability from its relationship with each CAM fund, including the Fund, was not excessive.

     The Board Members noted that they expect to receive Adviser profitability information on an annual basis and thus be in a position to evaluate whether any adjustments in Fund fees and/or fee breakpoints would be appropriate.

Fall-Out Benefits
In evaluating the fall-out benefits to be received by the Adviser under the New Management Agreements, the Board Members considered whether the Transaction would have an impact on the fall-out benefits received by virtue of the Current Management Agreements. Based on their review of the materials provided, including materials received in connection with their recent approval of the continuance of each Current Management Agreement, and their discussions with CAM management, Legg Mason and Western Asset, the Board Members determined that those benefits could include increased ability for Legg Mason to distribute shares of its funds and other investment products and to obtain research services using the CAM funds’ portfolio transaction brokerage. The Board Members noted that any such benefits were difficult to quantify with certainty at this time, and indicated that they would continue to evaluate them going forward.

Fees and Economies of Scale
     In reviewing the Transaction, the Board Members considered, among other things, whether advisory and administrative fees or other expenses would change as a result of the Transaction. Based on the assurances they had received from CAM management and Legg Mason, the Board Members determined that as a result of the Transaction, each Fund’s total advisory and administrative fees would not increase. The Board Members noted that in conjunction with their most recent deliberations concerning the Current Management

Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report      59

---

Board Approval of Management Agreement (unaudited)
(continued)
Agreements, advisory or management fee reductions and fee breakpoints had been implemented for certain Funds, and that after taking those reductions and breakpoints into account, the Board Members had determined that the total fees for advisory and administrative services for many CAM funds were reasonable in light of the services provided and that CAM management had already initiated or would be taking steps to address the Board Members’ concerns regarding the fee levels of other CAM funds. It was noted that in conjunction with the recent review of the Current Management Agreements, the Board Members had received, among other things, a report from Lipper, Inc. (“Lipper”) comparing each CAM fund’s fees, expenses and performance to those of a peer group for that Fund selected by Lipper, and information as to the fees charged by the Adviser to other registered investment company clients for investment management services. The Board Members concluded that because the advisory and administrative fees for each CAM fund were not expected to increase as a result of the Transaction, each CAM fund’s fees for advisory and administrative services remain appropriate and that no additional fee reductions or breakpoints were necessary at this time. The Board Members recognized that Legg Mason may realize economies of scale from the Transaction based on certain consolidations and synergies of operations.

Investment Performance
The Board Members noted that investment performance for many CAM funds was satisfactory or better, and that CAM management had already implemented or undertaken to implement steps to address investment performance in other funds. Following the closing of the Transaction, these steps may include combining certain CAM operations with those of certain Legg Mason subsidiaries. The Boards noted Legg Mason’s considerable investment management experience and capabilities, but were unable to predict what effect, if any, consummation of the Transaction would have on the future performance of the CAM funds, including the Fund.

60      Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report

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Additional Information (unaudited)

Information about Directors and Officers
The business and affairs of Salomon Brothers Capital and Income Fund Inc. (“Fund”) are managed under the direction of the Board of Directors. Information pertaining to the Directors and Officers of the Fund is set forth below.

								Portfolios in
								Fund Complex
				Term of		Principal		Overseen by
		Position(s)		Office(1) and		Occupation(s)		Director		Other
Name, Address and		Held with		Length of		During Past		(including		Board Memberships
Birth Year		Fund(1)		Time Served		5 Years		the Fund)		Held by Director
Non-Interested Directors:
Carol L. Colman		Director and		Since		President,		37		None
Colman Consulting Co.		Member of		2003		Colman
278 Hawley Road		the Nominating				Consulting Co.
North Salem, NY 10560		and Audit
Birth year: 1946		Committees,
		Class I
Daniel P. Cronin		Director and		Since		Formerly, Associate		34		None
24 Woodlawn Avenue		Member of		2003		General Counsel,
New Rochelle, NY 10804		the Nominating				Pfizer Inc.
Birth year: 1946		and Audit
		Committees,
		Class I
Leslie H. Gelb		Director and		Since		President, Emeritus		34		Director of two
150 East 69th Street		Member of		2003		and Senior Board Fellow,				registered
New York, NY 10021		the Nominating				The Council on Foreign				investment
Birth year: 1937		and Audit				Relations; Formerly,				companies
		Committees,				Columnist, Deputy				advised by
		Class II				Editorial Page Editor				Blackstone Asia
						and Editor, Op-Ed Page,				Advisors L.L.C.
						The New York Times				(“Blackstone”)
William R. Hutchinson		Director and		Since		President, W.R.		44		Associated
535 N. Michigan Avenue		Member of		2003		Hutchinson & Associates				Banc-Corp.
Suite 1012		Nominating				Inc.; Formerly Group Vice
Chicago, IL 60611		and Audit				President, Mergers and
Birth year: 1942		Committees,				Acquisitions, BP Amoco
		Class II				P.L.C.
Riordan Roett		Director and		Since		Professor and Director		34		None
The Johns Hopkins		Member of		2003		Latin American Studies
University		the Nominating				Program, Paul H. Nitze
1740 Massachusetts		and Audit				School of Avanced
Ave., NW		Committees,				International Studies,
Washington, DC 20036		Class III				The Johns Hopkins
Birth year: 1938						University
Jeswald W. Salacuse		Director and		Since		Henry J. Braker		34		Director of two
Tufts University		Member of		2003		Professor of				registered
The Fletcher School of		the Nominating				Commercial Law and				investment
Law & Diplomacy		and Audit				formerly Dean, The				companies
160 Packard Avenue		Committees,				Fletcher School of				advised by
Medford, MA 02155		Class III				Law & Diplomacy,				Blackstone
Birth year: 1938						Tufts University

Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report      61

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Additional Information (unaudited) (continued)

								Portfolios in
								Fund Complex
				Term of		Principal		Overseen by
		Position(s)		Office(1) and		Occupation(s)		Director		Other
Name, Address and		Held with		Length of		During Past		(including		Board Memberships
Birth Year		Fund(1)		Time Served		5 Years		the Fund)		Held by Director
Interested Director:
R. Jay Gerken, CFA(2)		Director,		Since		Managing Director		171		None
Citigroup Asset		Chairman		2003		of CAM; Chairman,
Management (“CAM”)		and Chief				President, Chief Executive
399 Park Avenue		Executive Officer,				Officer and Director of
Mezzanine		Class II				Smith Barney Fund
New York, NY 10022						Management LLC
Birth year: 1951						(“SBFM”), Travelers
						Investment Adviser, Inc.
						(“TIA”) and Citi Fund
						Management Inc.
						(“CFM”); President and
						Chief Executive Officer
						of certain mutual funds
						associated with CAM;
						Formerly Porfolio
						Manager of Smith Barney
						Allocation Series Inc. (from
						1996 to 2001) and Smith
						Barney Growth and
						Income Fund (from 1996
						to 2000)
Officers:
Andrew B. Shoup		Senior Vice		Since		Director of CAM;		N/A		N/A
CAM		President and		2003		Senior Vice President
125 Broad Street,		Chief				and Chief Administrative
11th Floor		Administrative				Officer of mutual funds
New York, NY 10004		Officer				associated with CAM;
Birth year: 1956						Treasurer of certain
						mutual funds associated
						with CAM; Head of
						International Funds
						Administration of CAM
						(from 2001 to 2003);
						Director of Global Funds
						Administration of CAM
						(from 2000 to 2001); Head
						of U.S. Citibank Funds
						Administration of CAM
						(from 1998 to 2000)

62      Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report

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Additional Information (unaudited) (continued)

								Portfolios in
								Fund Complex
				Term of		Principal		Overseen by
		Position(s)		Office(1) and		Occupation(s)		Director		Other
Name, Address and		Held with		Length of		During Past		(including		Board Memberships
Birth Year		Fund(1)		Time Served		5 Years		the Fund)		Held by Director
Frances M. Guggino		Chief Financial		Since		Director of CAM;		N/A		N/A
CAM		Officer and		2003		Chief Financial Officer
125 Broad Street		Treasurer				and Treasurer of certain
10th Floor						mutual funds associated
New York, NY 10004						with CAM. Controller of
Birth year: 1957						certain mutual funds
						associated with CAM
						from (1999 to 2004)
James E. Craige, CFA		Executive Vice		Since		Managing Director of		N/A		N/A
CAM		President		2003		CAM and SBAM
399 Park Avenue,
4th Floor
New York, NY 10022
Birth Year: 1967
Mark J. McAllister, CFA		Vice President		Since		Managing Director of CAM;		N/A		N/A
CAM		and Investment		2003		Investment Officer of SBFM
399 Park Avenue,		Officer
4th Floor
New York, NY 10022
Birth Year: 1962
Michael Sedoy, CFA		Vice President		Since		Director of CAM and SBAM		N/A		N/A
CAM		and Investment		2005
399 Park Avenue,		Officer
4th Floor
New York, NY 10022
Birth Year:
Beth A. Semmel, CFA		Executive Vice		Since		Managing Director of CAM		N/A		N/A
CAM		President		2003		and SBAM
399 Park Avenue
4th Floor
New York, NY 10022
Birth Year: 1960

Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report      63

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Additional Information (unaudited) (continued)

								Portfolios in
								Fund Complex
				Term of		Principal		Overseen by
		Position(s)		Office(1) and		Occupation(s)		Director		Other
Name, Address and		Held with		Length of		During Past		(including		Board Memberships
Birth Year		Fund(1)		Time Served		5 Years		the Fund)		Held by Director
Andrew Beagley		Chief		Since		Director of CAM		N/A		N/A
CAM		Compliance		2004		(since 2000); Director
399 Park Avenue		Officer				of Compliance, North
4th Floor						America, CAM (since
New York, NY 10022						2000); Chief Anti-Money
Birth Year: 1962						Laundering Compliance
						Officer, Chief Compliance
						Officer and Vice President
						of certain mutual funds
						associated with CAM;
						Director of Compliance,
						Europe, the Middle East
						and Africa. CAM (from 1999
						to 2000); Chief Compliance
						Officer SBFM, CFM, TIA
						Salomon Brothers Asset
						Management Limited,
						Smith Barney Global
						Capital Management Inc.
Wendy S. Setnicka		Controller		Since		Vice President of		N/A		N/A
CAM				2003		CAM (since 2003);
125 Broad Street						Controller of certain
10th Floor						mutual funds associated
New York, NY 10004						with CAM; Assistant
Birth Year: 1964						Controller of CAM
						(from 2002 to 2004);
						Accounting Manager
						of CAM (from 1998
						to 2002)
Robert I. Frenkel		Secretary and Since				Managing Director and		N/A		N/A
CAM		Chief Legal		2003		General Counsel of
300 First Stamford Place		Officer				Global Mutual Funds
4th Floor						for CAM and its
Stamford, CT 06902						predecessor (since
Birth year: 1954						1994); Secretary of CFM
						(from 2001 to 2004);
						Secretary and Chief Legal
						Officer of mutual funds
						associated with CAM

(1)	The Fund’s 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 2006, year 2007 and year 2008, respectively, or thereafter in each case when their respective successors are duly elected and qualified. The Fund’s executive officers are chosen each year by the Fund’s Board of Directors to hold office for a one-year term and until their successors are duly elected and qualified.
(2)	Mr. Gerken is an “interested person” of the Fund as defined in the Investment Company Act of 1940, as amended, because Mr. Gerken is an officer of SBFM and certain of its affiliates.

64      Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report

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Annual Chief Executive Officer and
Chief Financial Officer Certification (unaudited)

The Fund’s CEO has submitted to the NYSE the required annual certification and the Fund also has included the Certifications of the Fund’s CEO and CFO required by Section 302 of the Sarbanes-Oxley Act in the Fund’s Form N-CSR filed with the SEC for the period of this report.

 

 

 

Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report      65

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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 distibution 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.

     You may withdraw from the Plan by notifying the Plan Agent in writing at 59 Maiden Lane, New York, New York 10038. 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

66      Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report

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Dividend Reinvestment Plan (unaudited) (continued)

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 59 Maiden Lane, New York, New York 10038.

Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report      67

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Important Tax Information (unaudited)

The following information is provided with respect to the distributions paid during the taxable year ended October 31, 2005

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Record Date:		Monthly
Payable Date:		Monthly
Qualified Dividend Income for Individuals		16.73	%
Dividends Qualifying for the Dividends Received Deduction for Corporations		13.80	%

Additionally $0.0051 per share of the October 2005 monthly distribution has been redesignated as long-term capital gain.

Please retain this information for your records.

 

 

68      Salomon Brothers Capital and Income Fund Inc. 2005 Annual Report

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	Salomon Brothers Capital and Income Fund Inc. 125 Broad Street 10th Floor, MF-2 New York, New York 10004 Telephone 1-888-777-0102
	DIRECTORS		INVESTMENT MANAGER
	Carol L. Colman		AND ADMINISTRATOR
	Daniel P. Cronin		Salomon Brothers Asset
	Leslie H. Gelb		Management Inc.
	R. Jay Gerken, CFA		399 Park Avenue
	William R. Hutchinson		New York, New York 10022
	Riordan Roett
	Jeswald W. Salacuse		CUSTODIAN
			State Street Bank
	OFFICERS		& Trust Company
	R. Jay Gerken, CFA		225 Franklin Street
	Chairman, President and		Boston, Massachusetts 02110
	Chief Executive Officer
			TRANSFER AGENT
	Andrew B. Shoup		American Stock Transfer &
	Senior Vice President and		Trust Company
	Chief Administrative Officer		59 Maiden Lane
			New York, New York 10038
	James E. Craige, CFA
	Executive Vice President		INDEPENDENT REGISTERED
			PUBLIC ACCOUNTING FIRM
	Mark J. McAllister, CFA		KPMG LLP
	Executive Vice President		345 Park Avenue
			New York, NY 10154
	Michael Sedoy, CFA
	Executive Vice President		LEGAL COUNSEL
			Simpson Thacher & Bartlett LLP
	Beth A. Semmel, CFA		425 Lexington Avenue
	Executive Vice President		New York, New York 10017
	Frances M. Guggino		NEW YORK STOCK
	Chief Financial Officer and		EXCHANGE SYMBOL
	Treasurer		SCD
	Andrew Beagley
	Chief Compliance Officer
	Wendy S. Setnicka
	Controller
	Robert I. Frenkel
	Secretary and Chief Legal Officer

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This report is transmitted to the shareholders of Salomon Brothers Capital and Income Fund Inc. for their information. This is not a prospectus, circular or rep- resentation intended for use in the purchase of shares of the Fund or any securities mentioned in this report. American Stock Transfer & Trust Company 59 Maiden Lane New York, New York 10038 SAM0821           05-9417

Salomon Brothers Capital and Income Fund Inc. 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 (the “Commission”) for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov. The Funds Forms N-Q may be reviewed and copied at the Commission’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 1-800-725-6666. Information on how the Fund voted proxies relating to portfolio securities during the most recent 12 month period ended June 30 and a description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available (1) without charge, upon request, by calling 1-800-725-6666, (2) on the Fund’s website at www.citigroupam.com and (3) on the SEC’s website at www.sec.gov.

 

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ITEM 2.	CODE OF ETHICS.
	The registrant has adopted a code of ethics that applies to the
	registrant’s principal executive officer, principal financial
	officer, principal accounting officer or controller.
ITEM 3.	AUDIT COMMITTEE FINANCIAL EXPERT.
	The Board of Directors of the registrant has determined that
	William R. Hutchinson, the chairman of the Board’s Audit Committee,
	possesses the attributes identified in Instruction 2(b) of Item 3
	to Form N-CSR to qualify as an “audit committee financial expert,”
	and has designated Mr. Hutchinson as the audit committee financial
	expert. Mr. Hutchinson is an “independent” Director pursuant to
	paragraph (a)(2) of Item 3 to Form N-CSR.
ITEM 4.	PRINCIPAL ACCOUNTANT FEES AND SERVICES.
	a) Audit Fees. Effective June 17, 2005 PricewaterhouseCoopers
	LLP (“PWC”) resigned as the Registrant’s principal accountant (the
	“Auditor”). The Registrant’s audit committee approved the
	engagement of KPMG LLP (“KPMG”) as the Registrant’s new principal
	accountant for the fiscal year ended October 31, 2005. The
	aggregate fees billed in the last two fiscal years ending October
	31, 2004 and October 31, 2005 (the "Reporting Periods") for
	professional services rendered by PWC for the audit of the
	Registrant's annual financial statements, or services that are
	normally provided by the Auditor in connection with the statutory
	and regulatory filings or engagements for the Reporting Periods,
	were $72,000 in 2004 and $53,000 in 2005. KPMG has not billed the
	Registrant for professional services rendered as of October 31,
	2005.
	b) Audit-Related Fees. The aggregate fees billed in the Reporting
	Periods for assurance and related services by PWC or KPMG that are
	reasonably related to the performance of the audit of the
	Registrant's financial statements and are not reported under
	paragraph (a) of this Item 4 were $8,500 in 2004 and $8,500 in
	2005.
	In addition, there were no Audit-Related Fees billed in the
	Reporting Period for assurance and related services by the Auditor
	to the Registrant’s investment adviser (not including any sub-
	adviser whose role is primarily portfolio management and is
	subcontracted with or overseen by another investment adviser), and
	any entity controlling, controlled by or under common control with
	the investment adviser that provides ongoing services to the
	Salomon Brothers Capital and Income Fund (“service affiliates”),
	that were reasonably related to the performance of the annual audit
	of the service affiliates. Accordingly, there were no such fees
	that required pre-approval by the Audit Committee for the Reporting
	Periods (prior to May 6, 2003 services provided by the Auditor were
	not required to be pre-approved).
	(c) Tax Fees. The aggregate fees billed in the Reporting Periods
	for professional services rendered by PWC for tax compliance, tax
	advice and tax planning ("Tax Services") were $5,900 in 2004 and $0
	in 2005. These services consisted of (i) review or preparation of
	U.S. federal, state, local and excise tax returns; (ii) U.S.
	federal, state and local tax planning, advice and assistance
	regarding statutory, regulatory or administrative developments, and
	(iii) tax advice regarding tax qualification matters and/or
	treatment of various financial instruments held or proposed to be
	acquired or held. As of October 31, 2005, KPMG has not billed the
	Registrant for any Tax Services rendered.

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	There were no fees billed for tax services by PWC or KPMG to
	service affiliates during the Reporting Periods that required pre-
	approval by the Audit Committee.
	d) All Other Fees. The aggregate fees billed for all other non-
	audit services rendered by PWC to Salomon Brothers Asset Management
	(“SBAM”), and any entity controlling, controlled by or under common
	control with SBAM that provided ongoing services to Salomon
	Brothers Capital and Income Fund, requiring pre-approval by the
	Audit Committee for the period May 6, 2003 through October 31, 2004
	and for the year ended October 31, 2005, which include the issuance
	of reports on internal control under SAS No. 70 related to various
	Citigroup Asset Management (“CAM”) entities a profitability review
	of the Adviser and phase 1 pf an analysis of Citigroup’s current
	and future real estate occupancy requirements in the tri-state area
	and security risk issues in the New York metro region were $0.0 and
	$1.3 million, respectively, all of which were pre-approved by the
	Audit Committee.
	There were no non-audit services rendered by KPMG to SBAM, or any
	entity controlling, controlled by or under common control with SBAM
	that provided ongoing services to the Registrant.
	All Other Fees. There were no other non-audit services rendered by
	PWC or KPMG to Smith Barney Fund Management LLC (“SBFM”), and any
	entity controlling, controlled by or under common control with SBFM
	that provided ongoing services to Salomon Brothers Capital and
	Income Fund requiring pre-approval by the Audit Committee in the
	Reporting Period.
	(e) Audit Committee’s pre–approval policies and procedures
	described in paragraph (c) (7) of Rule 2-01 of Regulation S-X.
	(1) The Charter for the Audit Committee (the “Committee”) of the
	Board of each registered investment company (the “Fund”) advised by
	Smith Barney Fund Management LLC or Salomon Brothers Asset
	Management Inc. or one of their affiliates (each, an “Adviser”)
	requires that the Committee shall approve (a) all audit and
	permissible non-audit services to be provided to the Fund and (b)
	all permissible non-audit services to be provided by the Fund’s
	independent auditors to the Adviser and any Covered Service
	Providers if the engagement relates directly to the operations and
	financial reporting of the Fund. The Committee may implement
	policies and procedures by which such services are approved other
	than by the full Committee.
	The Committee shall not approve non-audit services that the
	Committee believes may impair the independence of the auditors. As
	of the date of the approval of this Audit Committee Charter,
	permissible non-audit services include any professional services
	(including tax services), that are not prohibited services as
	described below, provided to the Fund by the independent auditors,
	other than those provided to the Fund in connection with an audit
	or a review of the financial statements of the Fund. Permissible
	non-audit services may not include: (i) bookkeeping or other
	services related to the accounting records or financial statements
	of the Fund; (ii) financial information systems design and
	implementation; (iii) appraisal or valuation services, fairness
	opinions or contribution-in-kind reports; (iv) actuarial services;
	(v) internal audit outsourcing services; (vi) management functions
	or human resources; (vii) broker or dealer, investment adviser or
	investment banking services; (viii) legal services and expert
	services unrelated to the audit; and (ix) any other service the
	Public Company Accounting Oversight Board determines, by
	regulation, is impermissible.

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	Pre-approval by the Committee of any permissible non-audit services
	is not required so long as: (i) the aggregate amount of all such
	permissible non-audit services provided to the Fund, the Adviser
	and any service providers controlling, controlled by or under
	common control with the Adviser that provide ongoing services to
	the Fund (“Covered Service Providers”) constitutes not more than 5%
	of the total amount of revenues paid to the independent auditors
	during the fiscal year in which the permissible non-audit services
	are provided to (a) the Fund, (b) the Adviser and (c) any entity
	controlling, controlled by or under common control with the Adviser
	that provides ongoing services to the Fund during the fiscal year
	in which the services are provided that would have to be approved
	by the Committee; (ii) the permissible non-audit services were not
	recognized by the Fund at the time of the engagement to be non-
	audit services; and (iii) such services are promptly brought to the
	attention of the Committee and approved by the Committee (or its
	delegate(s)) prior to the completion of the audit.
	(2) For the Salomon Brothers Capital and Income Fund, the
	percentage of fees that were approved by the audit committee, with
	respect to: Audit-Related Fees were 100% and 100% for 2004 and
	2005; Tax Fees were 100% and 100% for 2004 and 2005; and Other Fees
	were 100% and 100% for 2004 and 2005.
	(f) N/A
	(g) Non-audit fees billed by PwC for services rendered to Salomon
	Brothers Capital and Income Fund and CAM and any entity
	controlling, controlled by, or under common control with CAM that
	provides ongoing services to Salomon Brothers Capital and Income
	Fund during the reporting period were $6.4 million and $2.7 million
	for the years ended October 31, 2004 and October 31, 2005,
	respectively.
	Non-audit fees billed by KPMG for services rendered to Salomon
	Brothers Capital and Income Fund and CAM and any entity
	controlling, controlled by, or under common control with CAM that
	provides ongoing services to Salomon Brothers Capital and Income
	Fund during the reporting period was $75,000 and $0 for the years
	ended October 31, 2004 and October 31, 2005, respectively. Such
	fees relate to services provided in connection with the transfer
	agent matter as fully described in the notes to the financial
	statements.
	(h) Yes. The Salomon Brothers Capital and Income Fund‘s Audit
	Committee has considered whether the provision of non-audit
	services that were rendered to Service Affiliates which were not
	pre-approved (not requiring pre-approval) is compatible with
	maintaining the Accountant's independence. All services provided
	by the Auditor to the Salomon Brothers Capital and Income Fund or
	to Service Affiliates, which were required to be pre-approved, were
	pre-approved as required.

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ITEM 5.	AUDIT COMMITTEE OF LISTED REGISTRANTS.
	a) Registrant has a separately-designated standing Audit Committee
	established in accordance with Section 3(a)58(A) of the Exchange
	Act. The Audit Committee consists of the following Board members:
	Carol L. Colman
	Daniel P. Cronin
	Leslie H. Gelb
	William R. Hutchinson
	Riordan Roett
	Jeswald W. Salacuse
	b) Not applicable
ITEM 6.	SCHEDULE OF INVESTMENTS.
	Not applicable.
ITEM 7.	DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
	MANAGEMENT INVESTMENT COMPANIES.
	The Board of Directors of the Fund has delegated the authority to
	develop policies and procedures relating to proxy voting to the
	Manager. The Manager is part of Citigroup Asset Management (“CAM”),
	a group of investment adviser affiliates of Citigroup, Inc.
	(“Citigroup”). Along with the other investment advisers that
	comprise CAM, the Manager has adopted a set of proxy voting
	policies and procedures (the “Policies”) to ensure that the Manager
	votes proxies relating to equity securities in the best interest of
	clients.
	In voting proxies, the Manager is guided by general fiduciary
	principles and seeks to act prudently and solely in the best
	interest of clients. The Manager attempts to consider all factors
	that could affect the value of the investment and will vote proxies
	in the manner that it believes will be consistent with efforts to
	maximize shareholder values. The Manager may utilize an external
	service provider to provide it with information and/or a
	recommendation with regard to proxy votes. However, such
	recommendations do not relieve the Manager of its responsibility
	for the proxy vote.
	In the case of a proxy issue for which there is a stated position
	in the Policies, CAM generally votes in accordance with such stated
	position. In the case of a proxy issue for which there is a list
	of factors set forth in the Policies that CAM considers in voting
	on such issue, CAM votes on a case-by-case basis in accordance with
	the general principles set forth above and considering such
	enumerated factors. In the case of a proxy issue for which there
	is no stated position or list of factors that CAM considers in
	voting on such issue, CAM votes on a case-by-case basis in
	accordance with the general principles set forth above. Issues for
	which there is a stated position set forth in the Policies or for
	which there is a list of factors set forth in the Policies that CAM
	considers in voting on such issues fall into a variety of
	categories, including election of directors, ratification of
	auditors, proxy and tender offer defenses, capital structure
	issues, executive and director compensation, mergers and corporate
	restructurings, and social and environmental issues. The stated
	position on an issue set forth in the Policies can always be
	superseded, subject to the duty to act solely in the best interest
	of the beneficial owners of accounts, by the investment management
	professionals responsible for the account whose shares are being

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	voted. Issues applicable to a particular industry may cause CAM to
	abandon a policy that would have otherwise applied to issuers
	generally. As a result of the independent investment advisory
	services provided by distinct CAM business units, there may be
	occasions when different business units or different portfolio
	managers within the same business unit vote differently on the same
	issue.
	In furtherance of the Manager’s goal to vote proxies in the best
	interest of clients, the Manager follows procedures designed to
	identify and address material conflicts that may arise between the
	Manager’s interests and those of its clients before voting proxies
	on behalf of such clients. To seek to identify conflicts of
	interest, CAM periodically notifies CAM employees (including
	employees of the Manager) in writing that they are under an
	obligation (i) to be aware of the potential for conflicts of
	interest with respect to voting proxies on behalf of client
	accounts both as a result of their personal relationships and due
	to special circumstances that may arise during the conduct of CAM’s
	and the Manager’s business, and (ii) to bring conflicts of interest
	of which they become aware to the attention of compliance
	personnel. The Manager also maintains and considers a list of
	significant relationships that could present a conflict of interest
	for the Manager in voting proxies. The Manager is also sensitive
	to the fact that a significant, publicized relationship between an
	issuer and a non-CAM affiliate might appear to the public to
	influence the manner in which the Manager decides to vote a proxy
	with respect to such issuer. Absent special circumstances or a
	significant, publicized non-CAM affiliate relationship that CAM or
	the Manager for prudential reasons treats as a potential conflict
	of interest because such relationship might appear to the public to
	influence the manner in which the Manager decides to vote a proxy,
	the Manager generally takes the position that non-CAM relationships
	between Citigroup and an issuer (e.g. investment banking or
	banking) do not present a conflict of interest for the Manager in
	voting proxies with respect to such issuer. Such position is based
	on the fact that the Manager is operated as an independent business
	unit from other Citigroup business units as well as on the
	existence of information barriers between the Manager and certain
	other Citigroup business units.
	CAM maintains a Proxy Voting Committee, of which the Manager
	personnel are members, to review and address conflicts of interest
	brought to its attention by compliance personnel. A proxy issue
	that will be voted in accordance with a stated position on an issue
	or in accordance with the recommendation of an independent third
	party is not brought to the attention of the Proxy Voting Committee
	for a conflict of interest review because the Manager’s position is
	that to the extent a conflict of interest issue exists, it is
	resolved by voting in accordance with a pre-determined policy or in
	accordance with the recommendation of an independent third party.
	With respect to a conflict of interest brought to its attention,
	the Proxy Voting Committee first determines whether such conflict
	of interest is material. A conflict of interest is considered
	material to the extent that it is determined that such conflict is
	likely to influence, or appear to influence, the Manager’s
	decision-making in voting proxies. If it is determined by the
	Proxy Voting Committee that a conflict of interest is not material,
	the Manager may vote proxies notwithstanding the existence of the
	conflict.
	If it is determined by the Proxy Voting Committee that a conflict
	of interest is material, the Proxy Voting Committee is responsible
	for determining an appropriate method to resolve such conflict of
	interest before the proxy affected by the conflict of interest is
	voted. Such determination is based on the particular facts and
	circumstances, including the importance of the proxy issue and the
	nature of the conflict of interest. Methods of resolving a

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	material conflict of interest may include, but are not limited to,
	disclosing the conflict to clients and obtaining their consent
	before voting, or suggesting to clients that they engage another
	party to vote the proxy on their behalf.
ITEM 8.	[RESERVED]
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 registrant’s last
		fiscal half-year (the registrant’s second fiscal half-year in
		the case of an annual report) that have materially affected,
		or are likely to materially affect the registrant’s internal
		control over financial reporting.
ITEM 12.	EXHIBITS.
	(a)(1)	Code of Ethics attached hereto.
	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

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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.

Salomon Brothers Capital and Income Fund Inc.

By:	/s/ R. Jay Gerken
	(R. Jay Gerken)
	Chief Executive Officer of
	Salomon Brothers Capital and Income Fund Inc.
Date:	January 9, 2006

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

By:	/s/ R. Jay Gerken
	(R. Jay Gerken)
	Chief Executive Officer of
	Salomon Brothers Capital and Income Fund Inc.
Date:	January 9, 2006
By:	/s/ Frances M. Guggino
	(Frances M. Guggino)
	Chief Financial Officer of
	Salomon Brothers Capital and Income Fund Inc.
Date:	January 9, 2006

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