SCHEDULE 14A
PROXY STATEMENT
PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by Registrant [X]
Filed by Party other than the Registrant
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential for Use of the Commission Only as permitted by Rule 14a-6(e)(2)
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11c or Rule 14a-12
Flaherty & Crumrine/Claymore Total Return Fund Incorporated
(Name of Registrant as Specified in Its Charter)
__________________________________________
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies: ___________
(2) Aggregate number of securities to which transaction applies: ______________
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11. (Set forth the amount on which the filing fee is
calculated and state how it was determined):_______________________________
(4) Proposed maximum aggregate value of transaction:___________________________
(5) Total fee paid:_____________________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount previously paid:____________________________________________________
(2) Form, Schedule or Registration Statement No.:______________________________
(3) Filing Party: _____________________________________________________________
(4) Date Filed: _______________________________________________________________
FLAHERTY & CRUMRINE PREFERRED INCOME FUND INCORPORATED (NYSE: PFD)
FLAHERTY & CRUMRINE PREFERRED INCOME OPPORTUNITY FUND INCORPORATED (NYSE: PFO)
FLAHERTY & CRUMRINE/CLAYMORE PREFERRED SECURITIES INCOME FUND INCORPORATED
(NYSE: FFC)
FLAHERTY & CRUMRINE/CLAYMORE TOTAL RETURN FUND INCORPORATED (NYSE: FLC)
301 E. COLORADO BOULEVARD, SUITE 720
PASADENA, CALIFORNIA 91101
QUESTIONS AND ANSWERS
WHAT AM I BEING ASKED TO VOTE FOR IN PROPOSAL 2 FOR FLAHERTY & CRUMRINE
PREFERRED INCOME OPPORTUNITY FUND (PFO)?
You are being asked to vote to change PFO's current fundamental policy relating
to concentration. If approved, PFO will invest at least 25% of its total assets
in each of the utilities industry and the financial services sector under normal
market conditions. Currently, PFO invests more than 25% of its total assets in
the utilities industry under normal market conditions and limits its investments
in any other industry to 25%.
WHY IS THE PFO BOARD OF DIRECTORS RECOMMENDING A CHANGE TO PFO'S INDUSTRY
CONCENTRATION POLICY?
Simply stated, preferred securities issuers have changed dramatically since PFO
was launched in 1992 - particularly in recent months. Since last September, the
U.S. financial system and the preferred securities market have undergone, and
continue to undergo, a profound transformation. As an example, over a ten day
period in September 2008, the government placed the federal housing agencies
into conservatorship, Lehman Brothers Holdings filed for bankruptcy, AIG
required the first of two massive doses of government assistance, and Bank of
America entered into an agreement to acquire Merrill Lynch.
Since its inception in 1992, PFO has sought to achieve its primary investment
objective of high current income by investing at least 80% of its assets in
preferred securities. The preferred securities market has historically been
comprised of regulated industries, including utilities and financial services
companies, such as banks, broker-dealers, finance and insurance companies.
In recent years and throughout much of its history, PFO has invested between 20%
and 25% of its total assets in banking companies. Separately, PFO has
traditionally had meaningful exposure to other parts of the financial services
sector, including broker-dealers, insurance companies and other finance
companies. Flaherty & Crumrine has advised the Board that PFO's current
investments in financial services companies would likely be even higher if not
for the relative recent under-performance of this sector.
PFO has historically defined the various types of financial services companies
as distinct industries and consequently has not invested more than 25% of its
total assets in any one type of financial services company. Under its current
industry definitions, as of January 31, 2009, PFO had approximately 31% of its
assets invested in banks and another 16% invested in insurance companies, for a
total of 47% invested in the financial services sector. (PFO's 31% investment in
banks primarily resulted from the conversion of some of its finance company
holdings to banks in late 2008 and the acquisition of Merrill Lynch by Bank of
America in early 2009).
The proposed concentration policy would require PFO to invest, under normal
market conditions, more than 25% of its assets in companies principally engaged
in financial services. For purposes of the proposed concentration policy, a
company is "principally engaged" in financial services if it derives at least
50% of its revenue from providing financial services. Companies in the financial
services sector include: commercial banks, industrial banks, savings
institutions, finance companies, diversified financial services companies,
investment banking firms, securities brokerage houses, investment advisory
companies, leasing companies, insurance companies and companies providing
similar services.
Flaherty & Crumrine has recommended the proposed concentration policy so that
PFO can more efficiently invest its portfolio in the various types of financial
services companies. Under the current policy, PFO cannot invest more than 25% of
its total assets in any particular type of financial services company. Under the
proposed policy, PFO would have the flexibility to go above or below 25% in any
one type of financial services company as long as at least 25% was invested in
financial services companies in the aggregate. For example, PFO could have more
than 25% of its total assets in insurance companies, while at other times it
could have that portion invested in banks. At all times, though, PFO would have
at least 25% of its assets invested in financial services companies, although it
would have the authority to invest any portion of its assets not invested in
utilities in financial services companies or any type of financial services
company. Further, Flaherty & Crumrine intends to diversify its investments as
appropriate in light of current market and credit conditions.
1
Flaherty & Crumrine estimates that over 80% of all outstanding preferred
securities are issued by companies principally engaged in financial services.
Importantly, though, the portion of preferred securities issued by companies in
the financial services sector as a percentage of all preferreds would be even
higher if the preferred securities recently issued by various financial
institutions directly to the U.S. or foreign governments were taken into
account. As of late January, the U.S. government has separately acquired $194
billion of preferred securities through its Capital Purchase Program and another
$90 billion through other programs under the Emergency Economic Stabilization
Act of 2008 (sometimes referred to as the Troubled Assets Relief Program or
TARP). Flaherty & Crumrine has advised PFO's Board of Directors that it does not
foresee significant reductions in outstanding preferred securities issued by
financial services companies both because of the TARP and its expectation that
those companies will continue to issue preferred securities as a source of
equity capital.
Flaherty & Crumrine has also advised PFO's Board of Directors that it believes
preferred securities of companies in the financial services sector on average
currently represent the highest yielding preferred securities and that investing
more than 25% of its assets in financial services preferred securities will
afford PFO greater flexibility in meeting its primary investment objective of
high current income.
PFO's Board of Directors unanimously recommends that shareholders vote "Yes" on
Proposal 2.
WHAT IF I HAVE ADDITIONAL QUESTIONS?
PFO has engaged The Altman Group, Inc. to assist in the solicitation of proxies.
The Altman Group has set up a toll-free number, (866) 751-6315, for you to call
with any additional questions.
ARE THERE ANY CHANGES PROPOSED TO THE INDUSTRY CONCENTRATION POLICIES OF
FLAHERTY & CRUMRINE PREFERRED INCOME FUND (PFD), FLAHERTY & CRUMRINE/CLAYMORE
PREFERRED SECURITIES INCOME FUND (FFC) OR FLAHERTY & CRUMRINE/CLAYMORE TOTAL
RETURN FUND (FLC)?
No. At the annual meeting, shareholders of all four funds are being asked to
consider the election of Directors for each Fund.
2
FLAHERTY & CRUMRINE PREFERRED INCOME FUND INCORPORATED (NYSE: PFD)
FLAHERTY & CRUMRINE PREFERRED INCOME OPPORTUNITY FUND INCORPORATED (NYSE: PFO)
FLAHERTY & CRUMRINE/CLAYMORE PREFERRED SECURITIES INCOME FUND INCORPORATED
(NYSE: FFC)
FLAHERTY & CRUMRINE/CLAYMORE TOTAL RETURN FUND INCORPORATED (NYSE: FLC)
301 E. Colorado Boulevard, Suite 720
Pasadena, California 91101
NOTICE OF ANNUAL MEETINGS OF SHAREHOLDERS
To Be Held on April 21, 2009
To the Shareholders:
Notice is hereby given that the Annual Meetings of Shareholders of
Flaherty & Crumrine Preferred Income Fund Incorporated, Flaherty & Crumrine
Preferred Income Opportunity Fund Incorporated, Flaherty & Crumrine/Claymore
Preferred Securities Income Fund Incorporated and Flaherty & Crumrine/Claymore
Total Return Fund Incorporated (each, a "Fund" and collectively, the "Funds"),
each a Maryland corporation, will be held at the offices of Flaherty & Crumrine
Incorporated, 301 E. Colorado Boulevard, Suite 720, Pasadena, California 91101
at 8:30 a.m. PT, on April 21, 2009, for the following purposes:
Each Fund:
1. To elect Directors of each Fund (Proposal 1).
PFO only:
2. To approve changes to PFO's fundamental investment policy regarding
concentration of investments (Proposal 2).
Each Fund:
3. To transact such other business as may properly come before the
Annual Meetings or any adjournments thereof.
YOUR VOTE IS IMPORTANT!
The Board of Directors of each Fund has fixed the close of business on
January 21, 2009 as the record date for the determination of shareholders of
each Fund entitled to notice of and to vote at the Annual Meetings and any
adjornments or postponements thereof..
By Order of the Boards of Directors,
February 24, 2009 CHAD C. CONWELL
Secretary
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
SHAREHOLDER MEETING TO BE HELD ON APRIL 21, 2009.
THE NOTICE OF ANNUAL MEETINGS OF SHAREHOLDERS, JOINT PROXY STATEMENT AND PROXY
CARDS FOR THE FUNDS ARE AVAILABLE TO YOU ON EACH FUND'S WEBSITE -
WWW.PREFERREDINCOME.COM FOR PFD AND PFO AND WWW.FCCLAYMORE.COM FOR FFC AND FLC.
YOU ARE ENCOURAGED TO REVIEW ALL OF THE INFORMATION CONTAINED IN THE PROXY
MATERIALS BEFORE VOTING.
FOR DIRECTIONS TO THE ANNUAL MEETINGS, PLEASE CALL 1-626-795-7300 OR
1-866-751-6315.
SEPARATE PROXY CARDS ARE ENCLOSED FOR EACH FUND IN WHICH YOU OWN SHARES.
SHAREHOLDERS WHO DO NOT EXPECT TO ATTEND THE ANNUAL MEETINGS ARE REQUESTED TO
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD(S). THE PROXY CARD(S) SHOULD BE
RETURNED IN THE ENCLOSED ENVELOPE, WHICH NEEDS NO POSTAGE IF MAILED IN THE
CONTINENTAL UNITED STATES. INSTRUCTIONS FOR THE PROPER EXECUTION OF PROXIES ARE
SET FORTH ON THE INSIDE COVER.
INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general rules for signing proxy cards may be of assistance
to you and may minimize the time and expense to the Fund(s) involved in
validating your vote if you fail to sign your proxy card(s) properly.
1. Individual Accounts: Sign your name exactly as it appears in the
registration on the proxy card(s).
2. Joint Accounts: Either party may sign, but the name of the party
signing should conform exactly to a name shown in the registration.
3. All Other Accounts: The capacity of the individual signing the proxy
card should be indicated unless it is reflected in the form of registration. For
example:
Registration Valid Signature
---------------------------------------- ----------------------------
Corporate Accounts
(1) ABC Corp. ABC Corp.
(2) ABC Corp. John Doe, Treasurer
(3) ABC Corp. c/o John Doe, Treasurer John Doe
(4) ABC Corp. Profit Sharing Plan John Doe, Trustee
Trust Accounts
(1) ABC Trust Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee Jane B. Doe
u/t/d 12/28/78
Custodian or Estate Accounts
(1) John B. Smith, Cust., John B. Smith
f/b/o John B. Smith, Jr. UGMA
(2) John B. Smith, Executor, John B. Smith, Jr., Executor
estate of Jane Smith
FLAHERTY & CRUMRINE PREFERRED INCOME FUND INCORPORATED (NYSE: PFD)
FLAHERTY & CRUMRINE PREFERRED INCOME OPPORTUNITY FUND INCORPORATED (NYSE: PFO)
FLAHERTY & CRUMRINE/CLAYMORE PREFERRED SECURITIES INCOME FUND INCORPORATED
(NYSE:FFC)
FLAHERTY & CRUMRINE/CLAYMORE TOTAL RETURN FUND INCORPORATED (NYSE: FLC)
301 E. Colorado Boulevard, Suite 720
Pasadena, California 91101
ANNUAL MEETINGS OF SHAREHOLDERS
April 21, 2009
JOINT PROXY STATEMENT
This document is a joint proxy statement ("Joint Proxy Statement") for
Flaherty & Crumrine Preferred Income Fund Incorporated ("Preferred Income Fund"
or "PFD"), Flaherty & Crumrine Preferred Income Opportunity Fund Incorporated
("Preferred Income Opportunity Fund" or "PFO"), Flaherty & Crumrine/Claymore
Preferred Securities Income Fund Incorporated ("Preferred Securities Income
Fund" or "FFC") and Flaherty & Crumrine/Claymore Total Return Fund Incorporated
("Total Return Fund" or "FLC") (each a "Fund" and collectively, the "Funds").
This Joint Proxy Statement is furnished in connection with the solicitation of
proxies by each Fund's Board of Directors (each, a "Board" and collectively, the
"Boards") for use at the Annual Meeting of Shareholders of each Fund to be held
on April 21, 2009, at 8:30 a.m. PT, at the offices of Flaherty & Crumrine
Incorporated, 301 E. Colorado Boulevard, Suite 720, Pasadena, California 91101
and at any adjournments or postponements thereof (each a "Meeting" and
collectively, the "Meetings").
A Notice of Annual Meetings of Shareholders and proxy card for each Fund
of which you are a shareholder accompany this Joint Proxy Statement. Proxy
solicitations will be made, beginning on or about February 27, 2009, primarily
by mail, but proxy solicitations may also be made by telephone, telefax or
personal interviews conducted by officers of each Fund, Flaherty & Crumrine
Incorporated ("Flaherty & Crumrine" or the "Adviser"), the investment adviser of
each Fund, Claymore Securities, Inc. (the "Servicing Agent"), the servicing
agent of FFC and FLC, and PNC Global Investment Servicing (U.S.) Inc. ("PNC"),
the transfer agent and administrator of each Fund and a member of The PNC
Financial Services Group, Inc. In addition, PFO has retained the Altman Group,
Inc., a proxy solicitation firm, to assist in the solicitation of proxies. Other
costs of proxy solicitation and expenses incurred in connection with the
preparation of this Joint Proxy Statement and its enclosures will be shared
proportionally by the Funds. Each Fund also will reimburse brokerage firms and
others for their expenses in forwarding solicitation material to the beneficial
owners of its shares. This Joint Proxy Statement and form of proxy are first
being sent to shareholders on or about February 27, 2009.
THE ANNUAL REPORT OF EACH FUND, INCLUDING AUDITED FINANCIAL STATEMENTS FOR
THE FISCAL YEAR ENDED NOVEMBER 30, 2008, IS AVAILABLE UPON REQUEST, WITHOUT
CHARGE, BY WRITING TO PNC GLOBAL INVESTMENT SERVICING (U.S.) INC., P.O. BOX
43027, PROVIDENCE, RHODE ISLAND 02940-3027, OR CALLING 1-800-331-1710. EACH
FUND'S ANNUAL REPORT IS ALSO AVAILABLE ON THE FUNDS' WEBSITES -
WWW.PREFERREDINCOME.COM FOR PFD AND PFO AND WWW.FCCLAYMORE.COM FOR FFC AND FLC -
THE SECURITIES AND EXCHANGE COMMISSION'S ("SEC") WEBSITE (WWW.SEC.GOV) OR, FOR
FFC AND FLC ONLY, BY CALLING CLAYMORE SECURITIES, INC. AT 1-866-233-4001.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
SHAREHOLDER MEETING TO BE HELD ON APRIL 21, 2009.
THE NOTICE OF ANNUAL MEETINGS OF SHAREHOLDERS, JOINT PROXY STATEMENT AND PROXY
CARDS FOR THE FUNDS ARE AVAILABLE TO YOU ON EACH FUND'S WEBSITE -
WWW.PREFERREDINCOME.COM FOR PFD AND PFO AND WWW.FCCLAYMORE.COM FOR FFC AND FLC.
YOU ARE ENCOURAGED TO REVIEW ALL OF THE INFORMATION CONTAINED IN THE PROXY
MATERIALS BEFORE VOTING.
FOR DIRECTIONS TO THE ANNUAL MEETINGS, PLEASE CALL 1-626-795-7300 OR
1-866-751-6315.
SEPARATE PROXY CARDS ARE ENCLOSED FOR EACH FUND IN WHICH YOU OWN SHARES.
SHAREHOLDERS WHO DO NOT EXPECT TO ATTEND THE ANNUAL MEETINGS ARE REQUESTED TO
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD(S). THE PROXY CARD(S) SHOULD BE
RETURNED IN THE ENCLOSED ENVELOPE, WHICH NEEDS NO POSTAGE IF MAILED IN THE
CONTINENTAL UNITED STATES. INSTRUCTIONS FOR THE PROPER EXECUTION OF PROXIES ARE
SET FORTH ON THE INSIDE COVER.
1
If the enclosed proxy card is properly executed and returned in time to be
voted at the relevant Meeting, the Shares (as defined below) represented thereby
will be voted in accordance with the instructions marked thereon. Unless
instructions to the contrary are marked thereon, a proxy will be voted "FOR" the
election of the nominees for Director and "FOR" other matters (as applicable to
each Fund) listed in the accompanying Notice of Annual Meetings of Shareholders.
Any shareholder who has given a proxy has the right to revoke it at any time
prior to its exercise either by attending the relevant Meeting and voting his or
her Shares in person or by submitting a letter of revocation or a later-dated
proxy to the appropriate Fund delivered at the above address prior to the date
of the Meeting.
Under the Bylaws of each Fund, the presence in person or by proxy of the
holders of a majority of the outstanding Shares of the Fund entitled to vote
shall be necessary and sufficient to constitute a quorum for the transaction of
business (a "Quorum") at that Fund's Meeting. If a proposal is to be voted upon
by only one class of a Fund's Shares, a Quorum of that class of Shares must be
present at the Meeting in order for the proposal to be considered. In the event
that a Quorum is not present at a Meeting, or in the event that a Quorum is
present but sufficient votes to approve any of the proposals are not received,
the persons named as proxies may propose one or more adjournments of the Meeting
to permit further solicitation of proxies. Any such adjournment will require the
affirmative vote of a majority of those Shares represented at the Meeting in
person or by proxy. If a Quorum is present, the persons named as proxies will
vote those proxies which they are entitled to vote "FOR" a proposal in favor of
such an adjournment with respect to that proposal and will vote those proxies
required to be voted "AGAINST" a proposal against any such adjournment with
respect to that proposal. A shareholder vote may be taken on a proposal in the
Joint Proxy Statement prior to any such adjournment if sufficient votes have
been received for approval of that proposal.
Each Fund has two classes of capital stock including common stock, par
value $0.01 per share (the "Common Stock") and preferred stock (the "Preferred
Stock" and together with the Common Stock, the "Shares"). PFD and PFO each has
one series of Preferred Stock outstanding which is classified as Auction
Preferred Stock. FFC and FLC each have multiple series of Preferred Stock
outstanding which are classified as Auction Market Preferred Stock. Each Share
is entitled to one vote at the Meeting with respect to matters to be voted on by
the class to which such Share belongs, with pro rata voting rights for any
fractional Shares. On the record date, January 21, 2009, the following number of
Shares of each Fund were issued and outstanding:
Common Stock Preferred Stock
Name of Fund Outstanding Outstanding
--------------------------------------- ------------ ------------------
Preferred Income Fund (PFD) 10,590,178 548
Preferred Income Opportunity Fund (PFO) 11,833,198 496
Preferred Securities Income Fund (FFC) 42,601,719 Series M7 - 542
Series T7 - 542
Series W7 - 542
Series Th7 - 542
Series F7 - 542
Series T28 - 481
Series W28 - 480
Total Return Fund (FLC) 9,776,333 Series T7 - 790
Series W28 - 790
To the knowledge of each Fund and its Board, the following
shareholder(s) or "group," as that term is defined in Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "1934 Act"), is the beneficial
owner or owner of record of more than 5% of the relevant Fund's outstanding
shares as of January 21, 2009*:
Name and Address of Amount and Nature
Beneficial/Record Owner Title of Class of Ownership Percent of Class
--------------------------- ---------------- ----------------- ----------------
Cede & Co.** Common Stock PFD - 10,212,463 96.43%
Depository Trust Company (record)
55 Water Street, 25th Floor PFO - 11,429,526 96.59%
New York, NY 10041 (record)
FFC - 42,537,668 99.85%
(record)
FLC - 9,766,300 99.90%
(record)
2
Name and Address of Amount and Nature
Beneficial/Record Owner Title of Class of Ownership Percent of Class
--------------------------- ---------------- ----------------- ----------------
Preferred Stock PFD - 548 (record) 100%
PFO - 496 (record) 100%
Preferred Stock FFC
Series M7 - 542 (record) 100%
Series T7 - 542 (record) 100%
Series W7 - 542 (record) 100%
Series Th7 - 542 (record) 100%
Series F7 - 542 (record) 100%
Series T28 - 481 (record) 100%
Series W28 - 480 (record) 100%
FLC
Series T7 - 790 (record) 100%
Series W28 - 790 (record) 100%
UBS AG(1) Preferred Stock PFD - 31(1) 6.47%
Bahnhafstrasse 45 (beneficial)
PO Box CH-8021
Zurich, Switzerland
Fifth Third Bancorp(2) Common Stock PFO - 1,055,064(2) 8.84%
Fifth Third Bank(2) (beneficial)
Fifth Third Center
Cincinnati, OH 45263
Fifth Third Bank(2)
111 Lynn Street NW
Grand Rapids, MI 49503
Bank of America Corporation(3) Preferred Stock PFO - 213(3) 37.0%
Banc of America Securities LLC(3) (beneficial)
Bank of America Corporate Center
100 North Tryon Street
Charlotte, North Carolina 28255
Merrill Lynch, Pierce, Fenner
& Smith Incorporated(3)
4 World Financial Center
250 Vesey Street
New York, New York 10080
Spectrum Asset Management, Inc.(4,5) Common Stock FFC - 3,372,900(4) 7.92%
2 High Ridge Park (beneficial)
Stamford, CT 06905
Principal Financial Group, Inc. (4,5) FLC - 566,750(5) 5.79%
711 High Street (beneficial)
Des Moines, IA 50392-0088
Morgan Stanley (6,7) Preferred Stock FFC - 780(6) 10.6%
Morgan Stanley & Co. Incorporated(6,7) (beneficial)
1585 Broadway
New York, NY 10036 FLC - 355(7) 12.7%
(beneficial)
3
Name and Address of Amount and Nature
Beneficial/Record Owner Title of Class of Ownership Percent of Class
--------------------------- ---------------- ----------------- ----------------
Bank of America Corporation(8)(,9) Preferred Stock FFC - 708(8) 17.6%
Bank of America, N.A. (8)(,9) (beneficial)
Bank of America Corporate Center
100 North Tryon Street FLC - 465(9) 29.4%
Charlotte, North Carolina 28255 (beneficial)
Merrill Lynch, Pierce, Fenner
& Smith Inc. (8)(,9)
4 World Financial Center
250 Vesey Street
New York, New York 10080
Sit Investment Associates, Inc.(10) Common Stock FLC - 552,000(10) 5.65%
3300 IDS Center (beneficial)
80 South Eighth Street
Minneapolis, MN 55402
Claymore Securities Defined Common Stock FLC - 570,340(11) 5.83%
Portfolios, Series 305, 352,
357, 358, 374, 376, 384, 390,
398, 406, 426, 433, 434, 438,
446, 453, 458, 459, 461, 468
and 494(11)
2455 Corporate West Drive
Lisle, IL 60532
--------------
* As of January 21, 2009, the Directors and officers, as a group, owned
less than 1% of each class of Shares of each Fund.
** A nominee partnership of The Depository Trust Company. (1) Information
obtained from a Schedule 13G filed by UBS AG ("UBS"), for the benefit
and on behalf of UBS Securities LLC and UBS Financial Services Inc.
(two wholly owned subsidiaries of UBS AG to which UBS AG has delegated
portions of its performance obligations with respect to Auction Rate
Securities Rights issued by UBS AG to certain clients and pursuant to
which the securities reported in the Schedule 13G have been purchased
from clients), with the SEC reporting share ownership as of January 31,
2009. Based on that filing, UBS has the shared power to vote or direct
the vote or dispose or direct the disposition of 31 Shares of Preferred
Stock.
(2) Information obtained from a joint Schedule 13G/A filed by Fifth Third
Bancorp ("FTBC"), Fifth Third Bank (an Ohio Banking Corporation)
("FTBO") and Fifth Third Bank (a Michigan Banking Corporation) ("FTBM")
with the SEC reporting share ownership as of December 31, 2008. Based
on that filing, (a) FTBC and FTBO each has sole voting power to vote or
direct the vote of 175,859 Shares of Common Stock, (b) FTBC and FTBM
each has sole power to vote or direct the vote of 859,415 Shares of
Common Stock, (c) FTBC and FTBO each has sole power to dispose or
direct the disposition of 176,859 Shares of Common Stock, (d) FTBC and
FTBM each has sole power to dispose or direct the disposition of
817,726 Shares of Common Stock and (e) FTBC and FTBM have the shared
power to dispose or direct the disposition of 43,867 Shares of Common
Stock.
(3) Information obtained from a joint Schedule 13G filed by Bank of America
Corporation ("Bank of America"), Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("MLFPS") and Banc of America Securities LLC ("BAS") with
the SEC reporting share ownership as of January 30, 2009. Based on that
filing (a) Bank of America and MLFPS have the shared power to vote or
direct the vote or dispose or direct the disposition of 7 Shares of
Preferred Stock and (b) Bank of America and BAS have the shared power
to vote or direct the vote or dispose or direct the disposition of 206
Shares of Preferred Stock.
(4) Information obtained from a Schedule 13G filed by Spectrum Asset
Management, Inc. ("Spectrum") with the SEC reporting share ownership as
of December 31, 2008. Based on that filing, Spectrum and Principal
Financial Group Inc. ("Principal") have the shared power to vote or
direct the vote or dispose or direct the disposition of 3,372,900
Shares of Common Stock.
(5) Information obtained from a Schedule 13G filed by Spectrum with the SEC
reporting share ownership as of December 31, 2008. Based on that
filing, Spectrum and Principal have the shared power to vote or direct
the vote or dispose or direct the disposition of 566,750 Shares of
Common Stock.
4
(6) Information obtained from a Schedule 13G filed by Morgan Stanley with
the SEC reporting share ownership as of December 31, 2008. Based on
that filing, each of Morgan Stanley and Morgan Stanley & Co.
Incorporated ("Morgan Stanley & Co.") has the sole power to vote or
direct the vote or dispose or direct the disposition of 780 Shares of
Preferred Stock.
(7) Information obtained from a Schedule 13G filed by Morgan Stanley with
the SEC reporting share ownership as of December 31, 2008. Based on
that filing, each of Morgan Stanley and Morgan Stanley & Co.
Incorporated has the sole power to vote or direct the vote or dispose
or direct the disposition of 355 Shares of Preferred Stock.
(8) Information obtained from a joint Schedule 13G filed by Bank of
America, MLFPS and Bank of America, N.A. ("BANA") with the SEC
reporting share ownership as of January 30, 2009. Based on that filing
(a) Bank of America and MLFPS have the shared power to vote or direct
the vote or dispose or direct the disposition of 699 Shares of
Preferred Stock and (b) Bank of America and BANA have the shared power
to vote or direct the vote or dispose or direct the disposition of 9
Shares of Preferred Stock.
(9) Information obtained from a joint Schedule 13G/A filed by Bank of
America Corporation, MLFPS and BANA with the SEC reporting share
ownership as of January 30, 2009. Based on that filing (a) Bank of
America and MLFPS have the shared power to vote or direct the vote or
dispose or direct the disposition of 445 Shares of Preferred Stock and
(b) Bank of America and BANA have the shared power to vote or direct
the vote or dispose or direct the disposition of 20 Shares of Preferred
Stock.
(10) Information obtained from a Schedule 13G filed by Sit Investment
Associates, Inc. ("SIA") with the SEC reporting share ownership as of
December 31, 2008. Based on that filing, SIA and its affiliated
entities have the sole power to vote or direct the vote or dispose or
direct the disposition of 552,000 Shares of Common Stock.
(11) Information obtained from a Schedule 13G/A filed by Claymore
Securities, Inc. with the SEC reporting share ownership as of December
31, 2008. Based on that filing, Claymore Securities Defined Portfolios
has the sole power to vote or direct the vote or dispose or direct the
disposition of 570,340 Shares of Common Stock.
This Joint Proxy Statement is being used in order to reduce the
preparation, printing, handling and postage expenses that would result from the
use of a separate proxy statement for each Fund. Shareholders of each Fund will
vote as a single class except as described below under Proposal 1 for each Fund
and Proposal 2 for PFO. Shareholders of each Fund will vote separately for each
of PFD, PFO, FFC and FLC on each proposal on which shareholders of that Fund are
entitled to vote. Separate proxy cards are enclosed for each Fund in which a
shareholder is a record owner of Shares. Thus, if a proposal is approved by
shareholders of one or more Funds and not approved by shareholders of one or
more other Funds, the proposal will be implemented for the Fund or Funds that
approved the proposal and will not be implemented for any Fund that did not
approve the proposal. It is therefore essential that shareholders complete, date
and sign each enclosed proxy card. Shareholders of each Fund are entitled to
vote on the proposals pertaining to that Fund.
In order that your Shares may be represented at the Meetings, you are
requested to vote on the following matter:
SUMMARY OF VOTING RIGHTS ON PROXY PROPOSALS
PREFERRED INCOME FUND (PFD)
PROPOSAL COMMON STOCK SHAREHOLDERS PREFERRED STOCK SHAREHOLDERS
------------------------ ----------------------------------------------- ----------------------------------------
1. Election of Directors Common Stock Shareholders voting as a Preferred Stock Shareholders voting as a
single class elect one Director: Robert F. Wulf separate class elect one Director:
Donald F. Crumrine
2. Not Applicable
3. Other Business Common Stock and Preferred Stock Shareholders, voting together as a single class
5
PREFERRED INCOME OPPORTUNITY FUND (PFO)
PROPOSAL COMMON STOCK SHAREHOLDERS PREFERRED STOCK SHAREHOLDERS
---------------------------- -------------------------------------------------------- ------------------------------------------
1. Election of Directors Common Stock Shareholders voting as a single class elect None
one Director: David Gale
2.Changes in Fundamental Common Stock and Preferred Stock Shareholders, voting - Preferred Stock Shareholders, voting as
Investment Policy Regarding together as a single class a separate class
Concentration of Investments - Common Stock and Preferred Shareholders,
voting together as a single class
3. Other Business Common Stock and Preferred Stock Shareholders, voting together as a single class
PREFERRED SECURITIES FUND (FFC)
PROPOSAL COMMON STOCK SHAREHOLDERS PREFERRED STOCK SHAREHOLDERS
---------------------------- -------------------------------------------------------- ------------------------------------------
1. Election of Director Common Stock and Preferred Stock Shareholders, voting Preferred Stock Shareholders voting as a
together as a single class elect one Director: Morgan separate class elect one Director:
Gust Karen H. Hogan
2. Not Applicable
3. Other Business Common Stock and Preferred Stock Shareholders, voting together as a single class
TOTAL RETURN FUND (FLC)
PROPOSAL COMMON STOCK SHAREHOLDERS PREFERRED STOCK SHAREHOLDERS
---------------------------- -------------------------------------------------------- ------------------------------------------
1. Election of Director Common Stock and Preferred Stock Shareholders, voting Preferred Stock Shareholders voting as a
together as a single class elect one Director: Morgan separate class elect one Director:
Gust Karen H. Hogan
2. Not Applicable
3. Other Business Common Stock and Preferred Stock Shareholders, voting together as a single class
PROPOSAL 1: ELECTION OF DIRECTORS
At the Meetings, shareholders are being asked to consider the election of
Directors of each Fund. The Board of each Fund is divided into three classes,
each class having a term of three years. Each year the term of office of one
class expires and the successor or successors elected to such class serve for a
three-year term and until their successors are duly elected and qualified.
NOMINEES FOR THE BOARDS OF DIRECTORS
Each nominee named below has consented to serve as a Director if elected
at the relevant Meeting. If a designated nominee declines or otherwise becomes
unavailable for election, however, the proxy confers discretionary power on the
persons named therein to vote in favor of a substitute nominee or nominees.
Mr. Wulf and Mr. Crumine, each a Class II Director of PFD, have each been
nominated for a three-year term to expire at PFD's 2012 Annual Meeting of
Shareholders and until their successors are duly elected and qualified. Mr.
Gale, a Class I Director of PFO, has been nominated for a three-year term to
expire at PFO's 2012 Annual Meeting of Shareholders and until his successor is
duly elected and qualified.
Mr. Gust and Ms. Hogan, each a Class II Director of FFC and FLC, have each
been nominated for a three-year term to expire at each Fund's 2012 Annual
Meeting of Shareholders and until their successors are duly elected and
qualified.
Under the Articles of Incorporation and Articles Supplementary, as amended
to date, of PFD and PFO, holders of each Fund's Preferred Stock, voting as a
single class, are entitled to elect two
Directors, and holders of each Fund's Common Stock,voting as a single
class, are entitled to elect the remaining Directors. Under the Articles of
Incorporation and Articles Supplementary, as amended to date, of FFC and FLC,
holders of each Fund's Preferred Stock, voting as a single class, are entitled
to elect two
6
Directors and holders of each Fund's Common Stock and Preferred Stock, voting
together as a single class, are entitled to elect the remaining Directors.
However, subject to the provisions of the Investment Company Act of 1940, as
amended (the "1940 Act"), and each Fund's Articles of Incorporation and Articles
Supplementary, the holders of Preferred Stock, when dividends are in arrears for
two full years, are able to elect the minimum number of additional Directors
that, when combined with the two Directors elected by the holders of Preferred
Stock, would give the holders of Preferred Stock each a majority of the
Directors. Donald F. Crumrine and Karen H. Hogan, as Directors, currently
represent holders of Preferred Stock for PFD and PFO. Mr. Crumrine, as a
Director of PFD, has been nominated by the Board of PFD as a Director to
represent its holders of Preferred Stock. A Quorum of the Preferred Stock
shareholders must be present at the Meeting of PFD in order for the proposal to
elect Mr. Crumrine to be considered for the Fund. Donald F. Crumrine and Karen
H. Hogan, as Directors, currently represent holders of Preferred Stock for FFC
and FLC. Ms. Hogan, as a Director of FFC and FLC, has been nominated by the
Board of FFC and FLC, respectively, as a Director to represent its holders of
Preferred Stock. A Quorum of the Preferred Stock Shareholders must be present at
the Meeting of each of FFC and FLC, respectively, in order for the proposal to
elect Ms. Hogan to be considered for that Fund.
6
Fund (Class) Nominee for Director
-------------------------------------- --------------------
PFD (Common Stock) Wulf
PFD (Preferred Stock) Crumrine
PFO (Common Stock) Gale
FFC (Common Stock and Preferred Stock) Gust
FFC (Preferred Stock) Hogan
FLC (Common Stock and Preferred Stock) Gust
FLC (Preferred Stock) Hogan
INFORMATION ABOUT DIRECTORS AND OFFICERS
Set forth in the table below are the existing Directors and nominees for
election to the Boards of Directors of the Funds, including information relating
to their respective positions held with each Fund, a brief statement of their
principal occupations during the past five years and other directorships, if
any.
NUMBER OF
PRINCIPAL FUNDS IN OTHER
CURRENT TERM OF OFFICE OCCUPATION(s) FUND COMPLEX DIRECTORSHIPS
NAME, ADDRESS, POSITION(s) AND LENGTH OF DURING PAST OVERSEEN HELD BY
AND AGE HELD WITH FUNDS TIME SERVED* FIVE YEARS BY DIRECTOR** DIRECTOR
-------------------------- --------------- ----------------------- ------------------------ ------------- ---------------------
NON-INTERESTED
DIRECTORS:
DAVID GALE Director CLASS I DIRECTOR President of 4 None
Delta Dividend Group, Inc. PFD - since 1997 Delta Dividend
220 Montgomery Street, PFO - since 1997 Group, Inc.
Suite 1920 FFC - since inception (investments)
San Francisco, CA 94104 FLC - since inception
Age: 59
MORGAN GUST Director CLASS III DIRECTOR Owner and operator 4 CoBiz, Inc.
301 E. Colorado Boulevard and PFD - since inception of various entities (financial services)
Suite 720 Nominating PFO - since inception engaged in
Pasadena, CA 91101 Committee CLASS II DIRECTOR agriculture and
Age: 61 Chairman FFC - since inception real estate;
FLC - since inception Former President
of Giant
Industries, Inc.
(petroleum refining
and marketing)
from March 2002
through June 2007
7
NUMBER OF
PRINCIPAL FUNDS IN OTHER
CURRENT TERM OF OFFICE OCCUPATION(s) FUND COMPLEX DIRECTORSHIPS
NAME, ADDRESS, POSITION(s) AND LENGTH OF DURING PAST OVERSEEN HELD BY
AND AGE HELD WITH FUNDS TIME SERVED* FIVE YEARS BY DIRECTOR** DIRECTOR
-------------------------- --------------- ----------------------- ------------------------ ------------- ---------------------
KAREN H. HOGAN (1) Director CLASS I DIRECTOR Active Committee 4 None
301 E. Colorado Boulevard PFD - since 2005 member and volunteer
Suite 720 CLASS III DIRECTOR of several non-profit
Pasadena, CA 91101 PFO - since 2005 organizations.
Age: 47 CLASS II DIRECTOR From September 1985
FFC - since 2005 to January 1997,
FLC - since 2005 Senior Vice President
of Preferred Stock
Origination at Lehman
Brothers and previously,
Vice President of New
Product Development
7
NUMBER OF
PRINCIPAL FUNDS IN OTHER
CURRENT TERM OF OFFICE OCCUPATION(s) FUND COMPLEX DIRECTORSHIPS
NAME, ADDRESS, POSITION(s) AND LENGTH OF DURING PAST OVERSEEN HELD BY
AND AGE HELD WITH FUNDS TIME SERVED* FIVE YEARS BY DIRECTOR** DIRECTOR
-------------------------- --------------- ----------------------- ---------------------- ------------- -------------
NON-INTERESTED
DIRECTORS:
ROBERT F. WULF Director CLASS II DIRECTOR Financial Consultant; 4 None
P.O. Box 753 and Audit PFD - since inception Trustee, San Francisco
Neskowin, OR 97149 Committee PFO - since inception Theological Seminary
Age: 71 Chairman CLASS III DIRECTOR
FFC - since inception
FLC - since inception
INTERESTED
DIRECTOR:
DONALD F. CRUMRINE (1), (2) Director, CLASS II DIRECTOR Chairman of the Board 4 None
301 E. Colorado Boulevard Chairman of PFD - since inception and Director of
Suite 720 the Board and PFO - since inception Flaherty & Crumrine
Pasadena, CA 91101 Chief Executive CLASS III DIRECTOR
Age: 61 Officer FFC - since inception
FLC - since inception
8
PRINCIPAL
CURRENT TERM OF OFFICE OCCUPATION(s)
NAME, ADDRESS, POSITION(s) AND LENGTH OF DURING PAST
AND AGE HELD WITH FUNDS TIME SERVED* FIVE YEARS
--------------------------- ------------------- --------------------- --------------------------
OFFICERS:
ROBERT M. ETTINGER President PFD - since 2002 President and
301 E. Colorado Boulevard PFO - since 2002 Director of Flaherty &
Suite 720 FFC - since inception Crumrine
Pasadena, CA 91101 FLC - since inception
Age: 50
R. ERIC CHADWICK Chief Financial PFD - since 2004 Director of Flaherty &
301 E. Colorado Boulevard Officer, PFO - since 2004 Crumrine since
Suite 720 Vice President FFC - since 2004 June 2006; Vice
Pasadena, CA 91101 and Treasurer FLC - since 2004 President of
Age: 33 Flaherty & Crumrine
CHAD C. CONWELL Chief Compliance PFD - since 2005 Chief Compliance Officer
301 E. Colorado Boulevard Officer, PFO - since 2005 of Flaherty & Crumrine
Suite 720 Vice President FFC - since 2005 since September 2005;
Pasadena, CA 91101 and Secretary FLC - since 2005 Vice President of
Age: 36 Flaherty & Crumrine
since July 2005;
Attorney with
Paul, Hastings, Janofsky &
Walker LLP
from September 1998
to June 2005
BRADFORD S. STONE Vice President PFD - since 2003 Director of Flaherty &
392 Springfield Avenue and Assistant PFO - since 2003 Crumrine
Mezzanine Suite Treasurer FFC - since 2003 since June 2006;
Summit, NJ 07901 FLC - since inception Vice President of
Age: 49 Flaherty & Crumrine
LAURIE C. LODOLO Assistant PFD - since 2004 Assistant Compliance
301 E. Colorado Boulevard Compliance PFO - since 2004 Officer of Flaherty &
Suite 720 Officer, FFC - since 2004 Crumrine since
Pasadena, CA 91101 Assistant FLC - since 2004 August 2004;
Age: 45 Treasurer and Secretary of Flaherty &
Assistant Secretary Crumrine since
February 2004;
Account Administrator
of Flaherty & Crumrine
----------
* The Class I Director of PFO and the Class II Directors of PFD, FFC and FLC
have each been nominated for a three-year term to expire at each Fund's
2012 Annual Meeting of Shareholders and until their successors are duly
elected and qualified. The Class III Director of PFD, the Class III
Directors of FFC and FLC and the Class II Directors of PFO will serve
until each Fund's Annual Meeting of Shareholders in 2010 and until their
successors are duly elected and qualified. The Class I Directors of PFD,
and the Class I Director of FFC and FLC and the Class III Directors of PFO
will serve until each Fund's Annual Meeting of Shareholders in 2011 and
until their successors are duly elected and qualified.
** The funds in the fund complex are: Flaherty & Crumrine Preferred Income
Fund Incorporated, Flaherty & Crumrine Preferred Income Opportunity
Fund Incorporated, Flaherty & Crumrine/Claymore Preferred Securities
Income Fund Incorporated and Flaherty & Crumrine/Claymore Total Return
Fund Incorporated (together, the "Flaherty & Crumrine Fund Family").
(1) As a Director, currently represents holders of Preferred Stock.
(2) "Interested person" of the Funds as defined in the 1940 Act. Mr. Crumrine
is considered an "interested person" because of his affiliation with
Flaherty & Crumrine, which acts as each Fund's investment adviser.
9
BENEFICIAL OWNERSHIP OF SHARES IN FUNDS AND FUND COMPLEX FOR EACH DIRECTOR AND
NOMINEE FOR ELECTION AS DIRECTOR
Set forth in the table below is the dollar range of equity securities in
each Fund and the aggregate dollar range of equity securities in the Flaherty &
Crumrine Fund Family beneficially owned by each Director.
Aggregate Dollar Range of Equity
Securities in All Registered Investment
Dollar Range of Equity Companies Overseen by Director in
Securities Held in Fund* (1)(2)(3) Family of Investment Companies* (4)
---------------------------------- -----------------------------------------
Name of Director or Nominee PFD PFO FFC FLC Total
------------------------------------------ ---- ---- ---- ---- -----------------------------------------
NON-INTERESTED DIRECTORS:
David Gale C C C C D
Morgan Gust C C C C D
Karen H. Hogan A A A A A
Robert F. Wulf B B B B C
INTERESTED DIRECTOR:
Donald F. Crumrine D (5) D (5) D (5) D (5) E (5)
----------
* Key to Dollar Ranges
A. None
B. $1 - $10,000
C. $10,001 -$50,000
D. $50,001 - $100,000
E. over $100,000
All shares were valued as of January 21, 2009.
(1) No Director or officer of PFD or PFO owned any shares of Preferred Stock
on January 21, 2009.
(2) No Director or officer of FFC or FLC owned any shares of Preferred Stock
on January 21, 2009.
(3) This information has been furnished by each Director as of January 21,
2009. "Beneficial Ownership" is determined in accordance with Rule
16a-1(a)(2) of the 1934 Act.
(4) As a group, less than 1%.
(5) Includes shares of the Fund held by Flaherty & Crumrine of which the
reporting person is a shareholder and director.
Each Director of each Fund who is not a director, officer or employee of
Flaherty & Crumrine or any of its affiliates receives from each Fund a fee of
$9,000 per annum plus $500 for each in-person meeting attended, and $150 for
each telephone meeting attended. In addition, the Audit Committee Chairman
receives from each Fund an annual fee of $2,500. Each Director of each Fund is
reimbursed for travel and out-of-pocket expenses associated with attending Board
and committee meetings. During the fiscal year ended November 30, 2008, the
Board of Directors held sixteen meetings for PFD (ten of which were held by
telephone conference call), seventeen meetings for PFO (eleven of which were
held by telephone conference call), fourteen meetings for FFC (eight of which
were held by telephone conference call) and thirteen meetings for FLC (seven of
which were held by telephone conference call). Each Director of each Fund then
serving in such capacity attended at least 75% of the meetings of Directors and
of any Committee of which he or she is a member. The aggregate remuneration paid
to the Directors of each Fund for the fiscal year ended November 30, 2008 is set
forth below:
Board Meeting Travel and
Annual and Out-of-Pocket
Directors Fees Committee Meeting Fees Expenses*
-------------- ---------------------- --------------
PFD $ 36,000 $ 31,550 $ 6,733
PFO $ 36,000 $ 32,150 $ 6,733
10
Board Meeting Travel and
Annual and Out-of-Pocket
Directors Fees Committee Meeting Fees Expenses*
-------------- ---------------------- -------------
FFC $ 36,000 $ 30,950 $ 6,733
FLC $ 36,000 $ 30,350 $ 6,733
----------
* Includes reimbursement for travel and out-of-pocket expenses for both
"interested" and "non-interested" Directors ("Independent Directors").
AUDIT COMMITTEE REPORT
The role of each Fund's Audit Committee is to assist the Board of
Directors in its oversight of: (i) the integrity of each Fund's financial
statements and the independent audit thereof; (ii) each Fund's accounting and
financial reporting policies and practices, its internal controls and, as
appropriate, the internal controls of certain service providers; (iii) each
Fund's compliance with legal and regulatory requirements; and (iv) the
independent auditor's qualifications, independence and performance. Each Fund's
Audit Committee is also required to prepare an audit committee report pursuant
to the rules of the SEC for inclusion in each Fund's annual proxy statement.
Each Audit Committee operates pursuant to a charter (the "Audit Committee
Charter" or "Charter") that was most recently reviewed and approved by the Board
of Directors of each Fund on January 27, 2009 and which is available on PFD and
PFO's website at www.preferredincome.com and FFC and FLC's web-site at
www.fcclaymore.com. As set forth in the Charter, management is responsible for
the (i) preparation, presentation and integrity of each Fund's financial
statements, (ii) maintenance of appropriate accounting and financial reporting
principles and policies and (iii) maintenance of internal controls and
procedures designed to assure compliance with accounting standards and
applicable laws and regulations. The Funds' independent registered public
accounting firm, KPMG LLP, (the "independent accountants" or "KPMG") is
responsible for planning and carrying out proper audits and reviews of each
Fund's financial statements and expressing an opinion as to their conformity
with accounting principles generally accepted in the United States of America.
In performing its oversight function, at a meeting held on January 26,
2009, the Audit Committee reviewed and discussed with management of each Fund
and the independent accountants, the audited financial statements of each Fund
as of and for the fiscal year ended November 30, 2008, and discussed the audit
of such financial statements with the independent accountants.
In addition, the Audit Committee discussed with the independent
accountants the accounting principles applied by each Fund and such other
matters brought to the attention of the Audit Committee by the independent
accountants required by Statement of Auditing Standards No. 61, Communications
with Audit Committees, as currently modified or supplemented. The Audit
Committee also received from the independent accountants the written disclosures
and statements required by the SEC's independence rules, delineating
relationships between the independent accountants and each Fund and discussed
the impact that any such relationships might have on the objectivity and
independence of the independent accountants.
As set forth above, and as more fully set forth in each Fund's Audit
Committee Charter, the Audit Committee has significant duties and powers in its
oversight role with respect to the Fund's financial reporting procedures,
internal control systems, and the independent audit process.
The members of the Audit Committee are not, and do not represent
themselves to be, professionally engaged in the practice of auditing or
accounting and are not employed by each Fund for accounting, financial
management or internal control. Moreover, the Audit Committee relies on and
makes no independent verification of the facts presented to it or
representations made by management or the independent accountants. Accordingly,
the Audit Committee's oversight does not provide an independent basis to
determine that management has maintained appropriate accounting and financial
reporting principles and policies, or internal controls and procedures, designed
to assure compliance with accounting standards and applicable laws and
regulations. Furthermore, the Audit Committee's considerations and discussions
referred to above do not provide assurance that the audit of each Fund's
financial statements has been carried out in accordance with generally accepted
accounting standards or that the financial statements are presented in
accordance with generally accepted accounting principles.
11
Based on its consideration of the audited financial statements and the
discussions referred to above with management and the independent accountants,
and subject to the limitations on the responsibilities and role of the Audit
Committee set forth in the Charter and those discussed above, the Audit
Committee of each Fund recommended to the Board of Directors of each Fund that
the audited financial statements be included in each Fund's Annual Report for
the fiscal year ended November 30, 2008.
THIS REPORT WAS SUBMITTED BY THE AUDIT COMMITTEE OF EACH FUND'S BOARD OF
DIRECTORS
David Gale
Morgan Gust
Karen H. Hogan
Robert F. Wulf (Chairman)
January 26, 2009
Each Audit Committee was established in accordance with Section
3(a)(58)(A) of the 1934 Act. Each Audit Committee met four times in connection
with its Board of Directors' regularly scheduled meetings during the fiscal year
ended November 30, 2008. Each Audit Committee is composed entirely of each
Fund's Independent (as such term is defined by the New York Stock Exchange
("NYSE") listing standards applicable to closed-end funds, as may be modified or
supplemented (the "NYSE Listing Standards")) Directors, namely Ms. Hogan and
Messrs. Gale, Gust and Wulf.
NOMINATING COMMITTEE
Each Board of Directors has a Nominating Committee composed entirely of
each Fund's Independent (as such term is defined by the NYSE Listing Standards)
Directors, namely Ms. Hogan and Messrs. Gale, Gust and Wulf. The Nominating
Committee of each Fund met twice during the fiscal year ended November 30, 2008.
The Nominating Committee is responsible for identifying individuals believed to
be qualified to become Board members and for recommending to the Board of
Directors such nominees to stand for election as directors at each Fund's annual
meeting of shareholders, and to fill any vacancies on the Board. Each Fund's
Nominating Committee has a charter which is available on its website. PFD and
PFO's website address is www.preferredincome.com and FFC and FLC's website
address is www.fcclaymore.com.
Each Fund's Nominating Committee believes that it is in the best interest
of the Fund and its shareholders to obtain highly qualified candidates to serve
as members of the Board of Directors. The Nominating Committees have not
established a formal process for identifying candidates where a vacancy exists
on the Board. In nominating candidates, the Nominating Committee shall take into
consideration such factors as it deems appropriate. These factors may include
judgment, skill, diversity, experience with investment companies and other
organizations of comparable purpose, complexity, size and subject to similar
legal restrictions and oversight, the interplay of the candidate's experience
with the experience of other Board members, and the extent to which the
candidate would be a desirable addition to the Board and any committees thereof.
Each Fund's Nominating Committee will consider director candidates
recommended by shareholders and submitted in accordance with applicable law and
procedures as described in this Joint Proxy Statement. (See "Submission of
Shareholder Proposals" below.)
OTHER BOARD-RELATED MATTERS
Shareholders who wish to send communications to the Board should send them
to the address of their Fund(s) and to the attention of the Board. All such
communications will be directed to the Board's attention.
The Funds do not have a formal policy regarding Board member attendance at
the Annual Meeting of Shareholders. However, all of the Directors of each Fund,
except Ms. Hogan, attended the April 18, 2008 Annual Meetings of Shareholders.
COMPENSATION
The following table sets forth certain information regarding the
compensation of each Fund's Directors for the fiscal year ended November 30,
2008. No executive officer or person affiliated with a Fund received
compensation from a Fund during the fiscal year ended November 30, 2008 in
excess of $120,000. Directors and executive officers of the Funds do not receive
pension or retirement benefits from the Funds.
12
COMPENSATION TABLE
Name of Aggregate Total Compensation From
Person and Compensation the Funds and Fund
Position from each Fund Complex Paid to Directors*
------------------------------------------------------ --------------- --------------------------
Donald F. Crumrine $ 0 $ 0 (4)
Director, Chairman of the Board and Chief Executive
Officer
David Gale $ 16,150 - PFD $ 64,300 (4)
Director $ 16,300 - PFO
$ 16,000 - FFC
$ 15,850 - FLC
Morgan Gust $ 16,150 - PFD $ 64,300 (4)
Director; Nominating Committee Chairman $ 16,300 - PFO
$ 16,000 - FFC
$ 15,850 - FLC
Karen H. Hogan $ 16,150 - PFD $ 64,300 (4)
Director $ 16,300 - PFO
$ 16,000 - FFC
$ 15,850 - FLC
Robert F. Wulf $ 19,100 - PFD $ 76,100 (4)
Director; Audit Committee Chairman $ 19,250 - PFO
$ 18,950 - FFC
$ 18,800 - FLC
----------
* Represents the total compensation paid for the fiscal year ended November
30, 2008, to such persons by the Funds and the other funds in the Flaherty
& Crumrine Fund Family, which are considered part of the same "fund
complex" because they have a common adviser. The parenthetical number
represents the total number of investment company directorships held by
the Director or nominee in the fund complex as of November 30, 2008.
REQUIRED VOTE
The election of Mr. Wulf as a Director of PFD will require the affirmative
vote of a plurality of the votes cast by holders of the Shares of Common Stock
of PFD at the meeting in person or by proxy. The election of Mr. Crumrine as a
Director of PFD will require the affirmative vote of a plurality of the votes
cast by holders of the Shares of Preferred Stock of PFD at the Meeting in person
or by proxy. The election of Mr. Gale as a Director of PFO will require the
affirmative vote of a plurality of the votes cast by holders of the Shares of
Common Stock of PFO at the Meeting in person or by proxy. The election of Mr.
Gust as a Director of each of FFC and FLC will require the affirmative vote of a
plurality of the votes cast by holders of the Shares of Common Stock and
Preferred Stock, voting as a single class, of each such Fund at the Meeting in
person or by proxy. The election of Ms. Hogan as a Director of each of FFC and
FLC will require the affirmative vote of a plurality of the votes cast by
holders of the Shares of Preferred Stock of each such Fund at the Meeting in
person or by proxy.
EACH BOARD OF DIRECTORS, INCLUDING ALL OF THE INDEPENDENT DIRECTORS, UNANIMOUSLY
RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" EACH NOMINEE AS DIRECTOR.
PROPOSAL 2: TO APPROVE A CHANGE TO PFO'S FUNDAMENTAL INVESTMENT POLICY REGARDING
CONCENTRATION OF INVESTMENTS
PFO, like all registered funds, is required by law to have policies
governing certain of its investment practices that may only be changed with the
prior approval of the holders of a majority of its outstanding voting
securities, voting as a single class, and approval of the holders of a majority
of its outstanding shares of preferred stock, voting as a separate class.
These policies are referred to as "fundamental." Under Section 8(b)(1) of
the 1940 Act, a fund is required to include in its registration statement a
recital of its policy regarding concentration, and such policy must be a
fundamental policy. If a fund has stated that it will be concentrated in an
industry, it must maintain at least 25% of its assets invested in that industry.
Similarly, if a fund has not stated that it will be concentrated in an industry,
it may not invest more than 25% of its assets in that industry, although the
holdings in that industry may increase to above 25% due to market action and in
some other cases.
13
PFO's current fundamental investment policy regarding concentration
permits it to concentrate its investments in the utilities industry so that,
under normal market conditions, more than 25% of PFO's total assets must be
invested in securities issued by companies in the utilities industry. Similarly,
its current policy is to not invest more than 25% of its total assets in any
other single industry.
Shareholders are being asked to approve a revision to PFO's concentration
policy to permit PFO also to concentrate its investments in the financial
services sector. This proposed revision would require PFO, under normal market
conditions, to invest at least 25% of its total assets in securities issued by
companies principally engaged in financial services. For purposes of this
concentration policy, a company is "principally engaged" in financial services
if it derives at least 50% of its revenue from providing financial services.
Companies in the financial services sector include: commercial banks, industrial
banks, savings institutions, finance companies, diversified financial services
companies, investment banking firms, securities brokerage houses, investment
advisory companies, leasing companies, insurance companies and companies
providing similar services.
PFO's current fundamental investment policy relating to concentration of
investments provides that PFO may not:
INVEST MORE THAN 25% OF ITS TOTAL ASSETS IN THE SECURITIES OF
ISSUERS IN A SINGLE INDUSTRY OTHER THAN THE UTILITIES INDUSTRY,
EXCEPT THAT THIS LIMITATION WILL NOT BE APPLICABLE TO THE PURCHASE
OF GOVERNMENT SECURITIES.
If shareholders of PFO approve this proposal, PFO's current fundamental
policy relating to concentration of investments will be revised so that PFO may
not:
INVEST MORE THAN 25% OF ITS TOTAL ASSETS IN THE SECURITIES OF ANY
SINGLE INDUSTRY, EXCEPT THAT THIS LIMITATION WILL NOT BE APPLICABLE
TO THE PURCHASE OF GOVERNMENT SECURITIES, PROVIDED THAT THE FUND
WILL INVEST AT LEAST 25% OF ITS TOTAL ASSETS IN EACH OF THE
UTILITIES INDUSTRY AND THE FINANCIAL SERVICES SECTOR.
Preferred securities issuers have changed dramatically since PFO was
launched in 1992 - particularly in recent months. Since last September, the U.S.
financial system and the preferred securities market have undergone, and
continue to undergo, a profound transformation. As an example, over a ten day
period in September 2008, the government placed the federal housing agencies
into conservatorship, Lehman Brothers Holdings filed for bankruptcy, AIG
required the first of two massive doses of government assistance, and Bank of
America entered into an agreement to acquire Merrill Lynch.
Since its inception in 1992, PFO has sought to achieve its primary
investment objective of high current income by investing at least 80% of its
assets in preferred securities. The preferred securities market has historically
been comprised of regulated industries, including utilities and financial
services companies, such as banks, broker-dealers, finance and insurance
companies.
In recent years and throughout much of its history, PFO has invested
between 20% and 25% of its total assets in banking companies. Separately, PFO
has traditionally had meaningful exposure to other parts of the financial
services sector, including broker-dealers, insurance companies and other finance
companies. Flaherty & Crumrine has advised the Board that PFO's current
investments in financial services companies would likely be even higher if not
for the relative recent under-performance of this sector.
PFO has historically defined the various types of financial services
companies as distinct industries and consequently has not invested more than 25%
of its total assets in any one type of financial services company. Under its
current industry definitions, as of January 31, 2009, PFO had approximately 31%
of its assets invested in banks and another 16% invested in insurance companies,
for a total of 47% invested in the financial services sector. (PFO's 31%
investment in banks primarily resulted from the conversion of some of its
finance company holdings to banks in late 2008 and the acquisition of Merrill
Lynch by Bank of America in early 2009.)
The proposed concentration policy would require PFO to invest, under
normal market conditions, more than 25% of its assets in companies principally
engaged in financial services. For purposes of the proposed concentration
policy, a company is "principally engaged" in financial services if it derives
at least 50% of its revenue from providing financial services. Companies in the
financial services sector include: commercial banks, industrial banks, savings
institutions, finance companies, diversified financial services companies,
investment banking firms, securities brokerage houses, investment advisory
companies, leasing companies, insurance companies and companies providing
similar services.
14
Flaherty & Crumrine has recommended the proposed concentration policy so
that PFO can more efficiently invest its portfolio in the various types of
financial services companies. Under the current policy, PFO cannot invest more
than 25% of its total assets in any particular type of financial services
company. Under the proposed policy, PFO would have the flexibility to go above
or below 25% in any one type of financial services company as long as at least
25% was invested in financial services companies in the aggregate. For example,
PFO could have more than 25% of its total assets in insurance companies, while
at other times it could have that portion invested in banks. At all times,
though, PFO would have at least 25% of its assets invested in financial services
companies. Further, Flaherty & Crumrine intends to diversify its investments as
appropriate in light of current market and credit conditions.
Flaherty & Crumrine estimates that over 80% of all outstanding preferred
securities are issued by companies principally engaged in financial services.
Importantly, though, the portion of preferred securities issued by companies in
the financial services sector as a percentage of all preferreds would be even
higher if the preferred securities recently issued by various financial
institutions directly to the U.S. or foreign governments were taken into
account. As of late January, the U.S. government has separately acquired $194
billion of preferred securities through its Capital Purchase Program and another
$90 billion through other programs under the Emergency Economic Stabilization
Act of 2008 (sometimes referred to as the Troubled Assets Relief Program or
TARP). Flaherty & Crumrine has advised PFO's Board of Directors that it does not
foresee significant reductions in outstanding preferred securities issued by
financial services companies both because of the TARP and its expectation that
those companies will continue to issue preferred securities as a source of
equity capital.
Flaherty & Crumrine has also advised PFO's Board of Directors that it
believes preferred securities of companies in the financial services sector on
average currently represent the highest yielding preferred securities and that
investing more than 25% of its assets in financial services preferred securities
will afford PFO greater flexibility in meeting its primary investment objective
of high current income.
THE FOLLOWING DESCRIBES RISKS ASSOCIATED WITH INVESTING IN THE FINANCIAL
SERVICES SECTOR. AS NOTED ABOVE, PFO ALREADY IS SUBJECT TO THESE RISKS BECAUSE
OF ITS CURRENT LARGE POSITION IN PREFERRED SECURITIES OF VARIOUS TYPES OF
FINANCIAL SERVICES COMPANIES.
U.S. and foreign laws and regulations require commercial banks and bank
holding companies to maintain minimum levels of capital and liquidity and to
establish loan loss reserves. A bank's failure to maintain specified capital
ratios may trigger dividend restrictions, suspensions on payments on
subordinated debt, and limitations on growth. Bank regulators have broad
authority in these instances and can ultimately impose sanctions, including
conservatorship or receivership, on such non-complying banks even when these
banks continue to be solvent, thereby possibly resulting in the elimination of
stockholders' equity. Unless a bank holding company has subsidiaries other than
banks that generate substantial revenues, the holding company's cash flow and
ability to declare dividends may be impaired severely by restrictions on the
ability of its bank subsidiaries to declare dividends.
Similarly, U.S. and foreign laws and regulations require insurance
companies to maintain minimum levels of capital and liquidity. An insurance
company's failure to maintain these capital ratios may also trigger dividend
restrictions, suspensions on payments of subordinated debt, and limitations on
growth. Insurance regulators (at the state-level in the United States) have
broad authority in these instances and can ultimately impose sanctions,
including conservatorship or receivership, on such non-complying insurance
companies even when these companies continue to be solvent, thereby possibly
resulting in the elimination of shareholders' equity. In addition, insurance
regulators have extensive authority in some categories of insurance of approving
premium levels and setting required levels of underwriting.
Governmental fiscal and monetary policies and general economic and
political conditions can affect the availability and cost of funds to financial
services companies, loan demand and asset quality and thereby impact the
earnings and financial condition of financial services companies. In addition,
the enactment of new legislation and regulation, as well as changes in the
interpretation and enforcement of existing laws and regulations, may directly
affect the manner of operations and profitability of participants in the
financial services sector. Downturns in a national, regional or local economy or
in the general business cycle or depressed conditions in an industry, for
example, may adversely affect the quality or volume of a bank's loan portfolio
or an insurance company's investment portfolio, particularly if the portfolio is
concentrated in the affected region, industry or market sector. From time to
time, general economic conditions have adversely affected financial
institutions' energy, agricultural, commercial and/or residential real estate,
less-developed country, venture capital, technology, telecommunications, and
highly-leveraged loan portfolios. Since September 2008, the financial services
sector has experienced unprecedented turbulence. The U.S. economy's current
recession, led by the downturn in the housing industry, adversely affected the
quality of most financial services companies' loan and securities portfolios.
Loan charge-offs and mark-to-
15
market losses have caused the capital ratios and overall financial condition of
most financial services companies to deteriorate. In response, U.S. and foreign
governments purchased significant equity capital positions in many banks and
some insurance companies. Governments now hold a greater amount of preferred
stock in some issuers than the total outstanding public preferred stock of that
issuer. The full impact of government actions and deteriorating economic
conditions is still unknown and could continue to adversely affect financial
services companies. The impact of a deteriorating economy or industry upon
institutions depends, in part, on the size of the institutions, the extent to
which they are involved in the type of lending or market affected, the duration
of the softening in the affected area and the managerial and capital resources
of the financial institutions. In addition, changes in accounting rules
applicable to loans and investment securities also may adversely impact the
financial condition of these institutions.
THE BOARD OF DIRECTORS OF PFO, INCLUDING ALL OF THE INDEPENDENT DIRECTORS,
UNANIMOUSLY RECOMMENDS THAT PFO SHAREHOLDERS VOTE "FOR" PROPOSAL 2.
REQUIRED VOTE
Approval of the change in PFO's fundamental policy with respect to
concentration of investments will require the approval of the holders of a
majority of PFO's outstanding voting securities, voting as a single class, and
approval of the holders of a majority of the Fund's outstanding shares of
Preferred Stock, voting as a separate class. A "majority of the Fund's
outstanding voting securities" for this purpose means the lesser of (1) 67% or
more of the Shares of Common Stock and Shares of Preferred Stock, present at a
meeting of shareholders, voting as a single class, if the holders of more than
50% of such Shares are present or represented by proxy at the meeting, or (2)
more than 50% of the outstanding Shares of Common Stock and outstanding Shares
of Preferred Stock, voting as a single class. A majority of the Fund's
outstanding Shares of Preferred Stock for this purpose is determined in a
similar manner, by applying the percentages in the previous sentence to
outstanding Shares of Preferred Stock.
16
SUBMISSION OF SHAREHOLDER PROPOSALS
All proposals by shareholders of each Fund that are intended to be
presented at each Fund's next Annual Meeting of Shareholders to be held in 2010
must be received by the relevant Fund for consideration for inclusion in the
relevant Fund's proxy statement relating to the meeting no later than October
29, 2009, and must satisfy the requirements of federal securities laws.
Each Fund's Bylaws require shareholders wishing to nominate Directors or
make proposals to be voted on at the Fund's Annual Meeting to provide timely
notice of the proposal in writing. To be considered timely, any such notice must
be delivered to or mailed and received at the principal executive offices of the
Fund at the address set forth on the first page of this proxy statement not
later than 60 days prior to the date of the meeting; provided, however, that if
less than 70 day's notice or prior public disclosure of the date of the meeting
is given or made to shareholders, any such notice by a shareholder to be timely
must be so received not later than the close of business on the 10th day
following the day on which notice of the date of the annual meeting was given or
such public disclosure was made.
Any such notice by a shareholder shall set forth the information required
by the Fund's Bylaws with respect to each matter the shareholder proposes to
bring before the annual meeting.
ADDITIONAL INFORMATION
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
KPMG, 99 High Street, Boston, Massachusetts 02110-2371, has been selected
to serve as each Fund's independent registered public accounting firm for each
Fund's fiscal year ending November 30, 2009. KPMG acted as the independent
registered public accounting firm for each Fund for the fiscal year ended
November 30, 2008. The Funds know of no direct financial or material indirect
financial interest of KPMG in the Funds. A representative of KPMG will not be
present at the Meetings, but will be available by telephone to respond to
appropriate questions and will have an opportunity to make a statement, if
asked.
Set forth in the table below are audit fees and non-audit related fees
billed to each Fund by KPMG for professional services for the fiscal years ended
November 30, 2007 and 2008, respectively.
Fiscal Year Ended Audit-Related
Fund November 30 Audit Fees Fees Tax Fees* All Other Fees**
-------------- ----------------- ---------- -------------- --------- ----------------
PFD 2007 $ 40,600 $ 0 $ 7,300 $ 15,100
2008 $ 44,000 $ 0 $ 8,100 $ 16,600
PFO 2007 $ 40,600 $ 0 $ 7,300 $ 15,100
2008 $ 44,000 $ 0 $ 8,100 $ 16,600
17
Fiscal Year Ended Audit-Related
Fund November 30 Audit Fees Fees Tax Fees* All Other Fees**
-------------- ----------------- ---------- ------------- --------- ----------------
FFC 2007 $ 42,800 $ 0 $ 7,300 $ 15,500
2008 $ 46,400 $ 0 $ 8,100 $ 16,600
FLC 2007 $ 42,800 $ 0 $ 7,300 $ 15,500
2008 $ 46,400 $ 0 $ 8,100 $ 16,600
----------
* "Tax Fees" are those fees billed to each Fund by KPMG in connection with
tax consulting services, including primarily the review of each Fund's
income tax returns.
** "All Other Fees" are those fees billed to each Fund by KPMG in connection
with the preparation of a quarterly agreed-upon-procedures report. These
Agreed-Upon-Procedures ("AUP") are required pursuant to each Fund's
Articles Supplementary. Specifically, Moody's Investors Service and Fitch,
Inc. each require that such AUP be undertaken and a report be provided in
order to maintain their ratings on the Preferred Stock.
Each Fund's Audit Committee Charter requires that the Audit Committee
pre-approve all audit and non-audit services to be provided by the independent
accountants to the Fund, and all non-audit services to be provided by the
independent accountants to the Fund's investment adviser and any entity
controlling, controlled by or under common control with the Funds' investment
adviser ("affiliates") that provide on-going services to each Fund, if the
engagement relates directly to the operations and financial reporting of each
Fund, or to establish detailed pre-approval policies and procedures for such
services in accordance with applicable laws. All of the audit and non-audit
services described above for which KPMG billed each Fund fees for the fiscal
years ended November 30, 2007 and November 30, 2008 were pre-approved by the
Audit Committee.
For each Fund's fiscal year ended November 30, 2008, KPMG did not provide
any non-audit services (or bill any fees for such services) to the Funds'
investment adviser or any affiliates thereof that provide services to the Funds.
INVESTMENT ADVISER, ADMINISTRATOR AND SERVICING AGENT
Flaherty & Crumrine serves as the investment adviser to each Fund, and its
business address is 301 E. Colorado Boulevard, Suite 720, Pasadena, California
91101. PNC acts as the administrator to each Fund and is located at 4400
Computer Drive, Westborough, Massachusetts 01581. Claymore Securities, Inc. acts
as the servicing agent to FFC and FLC and is located at 2455 Corporate West
Drive, Lisle, Illinois 60532.
COMPLIANCE WITH THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the 1934 Act and Section 30(h) of the 1940 Act require
each Fund's Directors and executive officers, certain persons affiliated with
Flaherty & Crumrine and persons who beneficially own more than 10% of a
registered class of each Fund's securities, to file reports of ownership and
changes of ownership with the SEC, the NYSE and each Fund. Directors, officers
and greater-than-10% shareholders are required by SEC regulations to furnish
each Fund with copies of such forms they file. Based solely upon its review of
the copies of such forms received by it and written representations from certain
of such persons, each Fund believes that during 2008, all such filing
requirements applicable to such persons were met.
BROKER NON-VOTE AND ABSTENTIONS
A proxy which is properly executed and returned accompanied by
instructions to withhold authority to vote represents a broker "non-vote" (i.e.,
shares held by brokers or nominees as to which (i) instructions have not been
received from the beneficial owners or the persons entitled to vote and (ii) the
broker or nominee does not have discretionary voting power on a particular
matter). Proxies that reflect abstentions or broker non-votes (collectively,
"abstentions") will be counted as Shares that are present and entitled to vote
at the meeting for purposes of determining the presence of a Quorum. With
respect to Proposal 1, abstentions do not constitute a vote "for" or "against"
the proposal and will be disregarded in determining the "votes cast" on the
proposal. With respect to Proposal 2, abstentions do not constitute a vote "for"
the proposal and will instead count as a vote "against" the proposal.
OTHER MATTERS TO COME BEFORE THE MEETING
Each Fund does not intend to present any other business at the relevant
Meeting, nor is any Fund aware that any shareholder intends to do so. If,
however, any other matters are properly brought before the Meeting, the persons
named in the accompanying form of proxy will vote thereon in accordance with
their judgment.
18
EXPENSES OF PROXY SOLICITATION
The total expenses of the Annual Meetings, including the solicitation of
proxies and the expenses incurred in connection with the preparation of this
Joint Proxy Statement, are approximately $15,000. In addition, the Adviser has
retained The Altman Group, Inc., a proxy solicitation firm, to assist in the
solicitation of proxies for PFO. It is anticipated that PFO will pay The Altman
Group approximately $20,000 for such solicitation services (plus reimbursements
of out-of-pocket expenses). The Altman Group also may solicit proxies personally
and by telephone.
VOTING RESULTS
Each Fund will advise its shareholders of the voting results of the
matters voted upon at its Meeting in its next Semi-Annual Report to
Shareholders.
NOTICE TO BANKS, BROKER/DEALERS AND VOTING TRUSTEES AND THEIR NOMINEES
Please advise the Funds whether other persons are the beneficial owners of
Fund Shares for which proxies are being solicited from you, and, if so, the
number of copies of the joint proxy statement and other soliciting material you
wish to receive in order to supply copies to the beneficial owners of Fund
Shares.
19
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. SHAREHOLDERS WHO DO NOT
EXPECT TO ATTEND THE MEETINGS ARE THEREFORE URGED TO COMPLETE, SIGN, DATE AND
RETURN ALL PROXY CARDS AS SOON AS POSSIBLE IN THE ENCLOSED POSTAGE-PAID
ENVELOPE.
20
Proxy - FLAHERTY & CRUMRINE/CLAYMORE TOTAL RETURN FUND INCORPORATED
PROXY IN CONNECTION WITH THE ANNUAL
MEETING OF SHAREHOLDERS TO BE HELD ON
APRIL 21, 2009
Important Notice Regarding the Availability of Proxy Materials for the
Shareholder Meeting to be held on April 21, 2009.
The notice of annual meetings of shareholders, joint proxy statement and
proxy cards for the Fund are available on the Fund's website at
www.fcclaymore.com.
PROXY SOLICITED BY BOARD OF DIRECTORS
The undersigned holder of shares of Common Stock of Flaherty &
Crumrine/Claymore Total Return Fund Incorporated, a Maryland corporation
(the "Fund"), hereby appoints Donald F. Crumrine, Robert M. Ettinger,
Teresa M.R. Hamlin and Emily H. Harris, attorneys and proxies for the
undersigned, each with full powers of substitution and revocation, to
represent the undersigned and to vote on behalf of the undersigned all
shares of Common Stock which the undersigned is entitled to vote at the
Annual Meeting of Shareholders of the Fund to be held at the offices of
Flaherty & Crumrine Incorporated, 301 East Colorado Boulevard, Suite 720,
Pasadena, California 91101 at 8:30 a.m. PT, on April 21, 2009, and any
adjournments or postponements thereof. The undersigned hereby acknowledges
receipt of the Notice of Annual Meeting and Proxy Statement and hereby
instructs said attorneys and proxies to vote said shares as indicated
hereon. In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the Meeting. A majority of the
proxies present and acting at the Meeting in person or by substitute (or,
if only one shall be so present, then that one) shall have and may exercise
all of the power and authority of said proxies hereunder. The undersigned
hereby revokes any proxy previously given.
NOTE: Please sign this proxy exactly as your name(s)
appear(s) on the books of the Fund. Joint owners should each
sign personally. Trustees and other fiduciaries should
indicate the capacity in which they sign, and where more
than one name appears, a majority must sign. If a
corporation, the signature should be that of an authorized
officer who should state his or her title.
Signature
Date
Signature (Joint Owners)
Date
FLC-CMN-PXC
Annual Meeting Proxy Card
Election of Director - The Board of Directors recommends a vote "FOR" the
nominee listed.
1. Nominee: FOR WITHHOLD
01 - Morgan Gust
This proxy, if properly executed will be voted in the manner directed by the
undersigned shareholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
THE ELECTION OF THE NOMINEE AS DIRECTOR.
Non-Voting Items Change of Address - Please print new address below.
PLEASE SIGN ON REVERSE SIDE
Please mark your votes as
indicated in this example
FLC-CMN-PXC
Proxy - FLAHERTY & CRUMRINE/CLAYMORE TOTAL RETURN FUND INCORPORATED
PROXY IN CONNECTION WITH THE ANNUAL
MEETING OF SHAREHOLDERS TO BE HELD ON
APRIL 21, 2009
Important Notice Regarding the Availability of Proxy Materials for the
Shareholder Meeting to be held on April 21, 2009.
The notice of annual meetings of shareholders, joint proxy statement and
proxy cards for the Fund are available on the Fund's website at
www.fcclaymore.com.
PROXY SOLICITED BY BOARD OF DIRECTORS
The undersigned holder of shares of Preferred Stock of Flaherty &
Crumrine/Claymore Total Return Fund Incorporated, a Maryland corporation
(the "Fund"), hereby appoints Donald F. Crumrine, Robert M. Ettinger,
Teresa M.R. Hamlin and Emily H. Harris, attorneys and proxies for the
undersigned, each with full powers of substitution and revocation, to
represent the undersigned and to vote on behalf of the undersigned all
shares of Preferred Stock which the undersigned is entitled to vote at the
Annual Meeting of Shareholders of the Fund to be held at the offices of
Flaherty & Crumrine Incorporated, 301 East Colorado Boulevard, Suite 720,
Pasadena, California 91101 at 8:30 a.m. PT, on April 21, 2009, and any
adjournments or postponements thereof. The undersigned hereby acknowledges
receipt of the Notice of Annual Meeting and Proxy Statement and hereby
instructs said attorneys and proxies to vote said shares as indicated
hereon. In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the Meeting. A majority of the
proxies present and acting at the Meeting in person or by substitute (or,
if only one shall be so present, then that one) shall have and may exercise
all of the power and authority of said proxies hereunder. The undersigned
hereby revokes any proxy previously given.
NOTE: Please sign this proxy exactly as your name(s)
appear(s) on the books of the Fund. Joint owners should each
sign personally. Trustees and other fiduciaries should
indicate the capacity in which they sign, and where more
than one name appears, a majority must sign. If a
corporation, the signature should be that of an authorized
officer who should state his or her title.
Signature Date
Signature (Joint Owners) Date
FLC-PFD-PXC
Annual Meeting Proxy Card
Election of Directors - The Board of Directors recommends a vote "FOR" the
nominees listed.
1. Nominee: FOR WITHHOLD FOR WITHHOLD
01 - Morgan Gust 02 - Karen H. Hogan
This proxy, if properly executed will be voted in the manner directed by the
undersigned shareholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
THE ELECTION OF THE NOMINEES AS DIRECTOR.
Non-Voting Items Change of Address - Please print new address below.
PLEASE SIGN ON REVERSE SIDE
Please mark your votes as
indicated in this example
FLC-PFD-PXC