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:
[X] Preliminary Proxy Statement
[ ] Confidential for Use of the Commission Only as permitted by Rule 14a-6(e)(2)
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11c or Rule 14a-12
FLAHERTY & CRUMRINE/CLAYMORE TOTAL RETURN FUND INCORPORATED
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(Name of Registrant as Specified in Its Charter)
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(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/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, 2005
To the Shareholders:
Notice is hereby given that the Annual Meetings of Shareholders of
Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
("PREFERRED SECURITIES FUND" OR "FFC") and Flaherty & Crumrine/Claymore Total
Return Fund Incorporated ("TOTAL RETURN FUND" OR "FLC") (EACH A "FUND" AND,
COLLECTIVELY, THE "FUNDS"), each a Maryland corporation, will be held at the
Board Room of the Radisson Bridge Resort, Boca Raton, Florida 33432 at 8:30
a.m., on April 21, 2005, for the following purposes:
1. To elect Directors of each Fund (PROPOSAL 1).
2. To approve an amendment to the Articles Supplementary Establishing
and Fixing the Rights and Preferences of Auction Market Preferred
Stock of each FFC and FLC (each, the "Articles Supplementary")
relating to the term of office of certain Directors (as more fully
set forth in the Joint Proxy Statement) (PROPOSAL 2).
3. To approve an amendment to FFC's Articles Supplementary relating
to the Force Majeure Provision (as more fully set forth in the Joint
Proxy Statement) (PROPOSAL 3 - FFC only).
4. To transact such other business as may properly come before the
Meetings or any adjournments thereof.
Your vote is important!
The Board of Directors of each Fund has fixed the close of business on
January 28, 2005 as the record date for the determination of shareholders of
each Fund entitled to notice of and to vote at the Annual Meetings.
By Order of the Boards of Directors,
February , 2005 R. ERIC CHADWICK
SECRETARY
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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.
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INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general rules for signing proxy cards may be of assistance
to you and may avoid 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
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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/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, 2005
JOINT PROXY STATEMENT
This document is a joint proxy statement ("Joint Proxy Statement") for
Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
("PREFERRED SECURITIES 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, 2005, at 8:30 a.m., at the
Board Room of the Radisson Bridge Resort, Boca Raton, Florida 33432 and at any
adjournments 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 , 2005, primarily
by mail, but proxy solicitations may also be made by telephone, telegraph 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 each Fund, and PFPC Inc., the transfer agent and
administrator of each Fund and a member of The PNC Financial Services Group,
Inc. The costs of proxy solicitation and expenses incurred in connection with
the preparation of this Joint Proxy Statement and its enclosures will be shared
proportionately 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.
THE ANNUAL REPORT OF EACH FUND, INCLUDING AUDITED FINANCIAL STATEMENTS FOR
THE FISCAL YEAR ENDED NOVEMBER 30, 2004, IS AVAILABLE UPON REQUEST, WITHOUT
CHARGE, BY WRITING TO PFPC INC., P.O. BOX 43027, PROVIDENCE, RI 02940-3027, OR
CALLING 1-800-331-1710. Each Fund's Annual Report is also available on the
Funds' website (www.fcclaymore.com), the Securities and Exchange Commission's
website (www.sec.gov), or by calling Claymore Securities Inc. at 1-866-233-4001.
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" the 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.
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. Under the By-Laws of each
Fund, a quorum is constituted by the presence in person or by proxy of the
holders of a majority of the outstanding shares of the Fund entitled to vote at
the 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.
Each Fund has two classes of capital stock: common stock, par value $0.01
per share (the "Common Stock"); and Auction Market Preferred Shares, par value
$0.01 per share ("AMPS"; together with the Common Stock, the "Shares"). Each
Share is entitled to one vote at the Meeting, with pro rata voting rights for
any fractional Shares. On the record date, January 28, 2005, the following
number of Shares of each Fund were issued and outstanding:
1
COMMON STOCK AMPS
NAME OF FUND OUTSTANDING OUTSTANDING
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Preferred Securities Fund (FFC) 42,508,040 Series M7 - 3,200
Series T7 - 3,200
Series W7 - 3,200
Series Th7 - 3,200
Series F7 - 3,200
Series T28 - 2,840
Series W28 - 2,840
Total Return Fund (FLC) 9,771,344 Series T7 - 2,570
Series W28 - 2,570
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 (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 28, 2005*:
NAME AND ADDRESS OF BENEFICIAL/ AMOUNT AND NATURE
RECORD OWNER TITLE OF CLASS OF OWNERSHIP PERCENT OF CLASS
------------ -------------- ------------ ----------------
Cede & Co.** Common FFC - 42,422,595 99.80%
Depository Trust Company Stock (record)
55 Water Street, 25th Floor FLC - 9,768,545 99.97%
New York, NY (record)
10041
AMPS FFC -
Series M7 - 3,200 (record) 100%
Series T7 - 3,200 (record) 100%
Series W7 - 3,200 (record) 100%
Series Th7 - 3,200 (record) 100%
Series F7 - 3,200 (record) 100%
Series T28 - 2,840 (record) 100%
Series W28 - 2,840 (record) 100%
FLC -
Series T7 - 2,570 (record) 100%
Series W28 - 2,570 (record) 100%
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* As of January 28, 2005, the Directors and officers, as a group, owned less
than 1% of each class of Shares.
** A nominee partnership of The Depository Trust Company.
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 and will vote
separately 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
Fund and disapproved by shareholders of the other Fund, the proposal will be
implemented for the Fund that approved the proposal and will not be implemented
for the 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 PROPOSAL(S) PERTAINING TO THAT FUND.
In order that your Shares may be represented at the Meetings, you are
requested to vote on the following matters:
SUMMARY OF VOTING RIGHTS ON PROXY PROPOSALS
PREFERRED SECURITIES FUND (FFC)
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PROPOSAL COMMON SHAREHOLDERS AMPS SHAREHOLDERS
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1. Election of Director None. AMPS Shareholders as a single class
elect one Director: David Gale
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2. Amendment to Articles Common and AMPS Shareholders, voting together as a single class
Supplementary - Term of Office
of Certain Directors Provision
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3. Amendment to Articles Common and AMPS Shareholders, voting together as a single class
Supplementary - Force Majeure
Provision
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4. Other Business Common and AMPS Shareholders, voting together as a single class
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2
SUMMARY OF VOTING RIGHTS ON PROXY PROPOSALS
TOTAL RETURN FUND (FLC)
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PROPOSAL COMMON SHAREHOLDERS AMPS SHAREHOLDERS
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1. Election of Directors None. AMPS Shareholders as a single class
elect two Directors: David Gale and
Morgan Gust
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2. Amendment to Articles Common and AMPS Shareholders, voting together as a single class
Supplementary - Term of Office
of Certain Directors Provision
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3. Other Business Common and AMPS Shareholders, voting together as a single class
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PROPOSAL 1: ELECTION OF DIRECTORS
At the Meetings, shareholders are being asked to consider the election of
Directors of each Fund. At the Regular Meeting of the Board of Directors of
each Fund held on January 21, 2005 (the "January Board Meetings"), based on a
recommendation from each Fund's respective Nominating Committee, the Board of
each Fund separately determined to decrease the size of the Board from six to
five directors effective April 21, 2005. This determination was made in
connection with each Board's consideration of the recently adopted Securities
and Exchange Commission ("SEC") rule amendments under the Investment Company
Act of 1940, as amended (the "1940 Act") relating to fund governance practices.
Each Board specifically considered the requirement under the amendments that
at least 75% of a Fund's board be not "interested" (as defined under the 1940
Act), in order for such Fund to rely on certain exemptive rules under the
1940 Act (the "75% Requirement"). After consideration of the options available
to each Fund to comply with the 75% Requirement, each Board separately
determined that a reduction in the size of the Board was the optimal manner
in which to comply with the 75% Requirement. Accordingly, such reduction in
the size of each Board effectively eliminates a Class I Director seat on April
21, 2005, at which time the current term of office of Mr. Dalmaso as a Class I
Director will expire.
NOMINEES FOR THE BOARD OF DIRECTORS
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.
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. Gale, the remaining Class I Director of each Fund (as of April 21,
2005) has been nominated for a three-year term to expire at each Fund's 2008
Annual Meeting of Shareholders and until his successor is duly elected and
qualified. Mr. Brody serves as a Class II Director of each Fund and will serve
until each Fund's 2006 Annual Meeting of Shareholders and until his successor is
duly elected and qualified. Mr. Gust a Class II Director of each Fund has been
nominated for a one-year term to expire at FLC's 2006 Annual Meeting of
Shareholders and until his successor is duly elected and qualified Mr. Gust
currently serves as a Director of FFC and will serve until FFC's 2006 Annual
Meeting of Shareholders and until his sucessor is duly elected and qualifed.
Messrs. Crumrine and Wulf serve as Class III Directors of each Fund and will
serve until each Fund's 2007 Annual Meeting of Shareholders and until their
successors are duly elected and qualified. Each Director has served in such
capacity since each Fund's commencement of operations.
Under each Fund's Articles of Incorporation, Articles Supplementary and
the 1940 Act, holders of AMPS, voting as a single class, will be entitled to
elect two Directors, and holders of the Common Stock will be entitled to elect
the remaining Directors. However, subject to the provisions of the 1940 Act and
the Fund's Articles of Incorporation, the holders of AMPS, 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
AMPS, would give the holders of AMPS a majority of the Directors. Nicholas
Dalmaso and Morgan Gust, as Directors, currently represent holders of AMPS of
each Fund. Mr. Gale has been nominated (to replace Mr. Dalmaso) as one of the
two directors that represent holders of AMPS of each Fund. A quorum of the AMPS
shareholders must be present at the Meeting of each Fund in order for the
proposal to elect Mr. Gale (for FFC) and Messrs. Gale and Gust (for FLC),
respectively, to be considered.
3
FUND (CLASS) NOMINEE(S) FOR DIRECTOR
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FFC (AMPS) Gale
FLC (AMPS) Gale
Gust
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. Each Director serves in the same capacity for each Fund.
NUMBER OF
PRINCIPAL FUNDS IN
CURRENT TERM OF OFFICE OCCUPATION(S) FUND COMPLEX
NAME, ADDRESS, POSITION(S) AND LENGTH OF DURING PAST OVERSEEN OTHER DIRECTORSHIPS
AND AGE HELD WITH FUNDS TIME SERVED* FIVE YEARS BY DIRECTOR** HELD BY DIRECTOR
------- --------------- ------------ ---------- ------------- ----------------
NON-INTERESTED
DIRECTORS:
MARTIN BRODY Director Class II Director Retired 4 Director, Jaclyn, Inc.
c/o HMK Associates FFC - since inception (luggage and accessories);
30 Columbia Turnpike FLC - since inception Director Emeritus, Smith
Florham Park, NJ 07932 Barney Mutual Funds
Age: 83 (18 funds); Director,
Flaherty & Crumrine
Preferred Income
Fund Incorporated
and Flaherty & Crumrine
Preferred Income
Opportunity Fund
Incorporated.
DAVID GALE (1) Director Class I Director President and CEO 4 Director, Metromedia
Delta Dividend Group, Inc. FFC - since inception of Delta Dividend International Group, Inc.
220 Montgomery Street, FLC - since inception Group, Inc. (telecommunications);
Suite 426 (investments) Director, Flaherty &
San Francisco, CA 94104 Crumrine Preferred Income
Age: 56 Fund Incorporated
and Flaherty & Crumrine
Preferred Income
Opportunity Fund
Incorporated.
MORGAN GUST (2) Director Class II Director Since March 2002, 4 Director, Flaherty &
Giant Industries, Inc. FFC - since inception President of Giant Crumrine Preferred
23733 N. Scottsdale Road FLC - since inception Industries, Inc. Income Fund Incorporated
Scottsdale, AZ 85255 (petroleum refining and Flaherty & Crumrine
Age: 57 and marketing) and, Preferred Income
for more than five Opportunity Fund.
years prior thereto, Incorporated
Executive Vice President,
and various other Vice
President positions at
Giant Industries, Inc.
ROBERT F. WULF Director Class III Director Financial Consultant; 4 Director, Flaherty &
3560 Deerfield Drive South FFC - since inception Trustee, University of Crumrine Preferred
Salem, OR 97302 FLC - since inception Oregon Foundation; Income Fund Incorporated
Age: 67 Trustee, San Francisco and Flaherty & Crumrine
Theological Seminary Preferred Income
Opportunity Fund
Incorporated.
4
NUMBER OF
PRINCIPAL FUNDS IN
CURRENT TERM OF OFFICE OCCUPATION(S) FUND COMPLEX
NAME, ADDRESS, POSITION(S) AND LENGTH OF DURING PAST OVERSEEN OTHER DIRECTORSHIPS
AND AGE HELD WITH FUNDS TIME SERVED* FIVE YEARS BY DIRECTOR** HELD BY DIRECTOR
------- --------------- ------------ ---------- ------------- ----------------
INTERESTED
DIRECTORS:
DONALD F. CRUMRINE (3) Director, Class III Director Chairman of the Board 4 Director, Flaherty &
301 E. Colorado Boulevard Chairman FFC - since inception and Director of Crumrine Preferred
Suite 720 of the Board FLC - since inception Flaherty & Crumrine Income Fund
Pasadena, CA 91101 and Chief Incorporated and
Age: 57 Executive Flaherty & Crumrine
Officer Preferred Income
Opportunity Fund
Incorporated.
NICHOLAS DALMASO (1), (3) Director, Class I Director* Director of Claymore 2 Trustee, Dreman/
2455 Corporate West Drive Vice President FFC - since inception Group, LLC since Claymore Dividend
Lisle, IL 60532 and Assistant FLC - since inception January 2002. and Income Fund,
Age: 39 Secretary Senior Managing Advent Claymore
Director and Equity Income Fund,
General Counsel of Advent/Claymore
Claymore Securities, Growth and Income
Inc. since November Fund,
2001 and Claymore MBIA Capital/Fund,
Advisers, LLC since Claymore Managed
October 2003. Partner Duration Investment
of DBN Group since Grade Municipal
April 2001. Assistant Fund, Western
General Counsel of Asset/Claymore U.S.
Nuveen Investments Treasury Inflation
from July 1999 to Protection Securities
November 2001. Prior Fund, and
to that, Vice President Fiduciary/Claymore MLP
and Associate General Opportunity Fund.
Counsel of Van Kampen
Investments.
OFFICERS:
ROBERT M. ETTINGER President Officer President and N/A N/A
301 E. Colorado Boulevard FFC - since inception Director of
Suite 720 FLC - since inception Flaherty & Crumrine
Pasadena, CA 91101
Age: 46
R. ERIC CHADWICK Chief Financial Officer Vice President of N/A N/A
301 E. Colorado Boulevard Officer, Vice FFC - since inception Flaherty & Crumrine
Suite 720 President, FFC - since inception since August 2001,
Pasadena, CA 91101 Treasurer and previously (since
Age: 29 and Secretary January 1999) portfolio
manager of Flaherty &
Crumrine. Prior to that,
portfolio manager of
Koch Industries, Inc.
PETER C. STIMES Chief Officer Vice President of N/A N/A
301 E. Colorado Boulevard Compliance FFC - since inception Flaherty & Crumrine
Suite 720 Officer FLC - since inception
Pasadena, CA 91101 and
Age: 49 Vice President
5
NUMBER OF
PRINCIPAL FUNDS IN
CURRENT TERM OF OFFICE OCCUPATION(S) FUND COMPLEX
NAME, ADDRESS, POSITION(S) AND LENGTH OF DURING PAST OVERSEEN OTHER DIRECTORSHIPS
AND AGE HELD WITH FUNDS TIME SERVED* FIVE YEARS BY DIRECTOR** HELD BY DIRECTOR
------- --------------- ------------ ---------- ------------- ----------------
OFFICERS:
BRADFORD S. STONE Vice President Officer Since May 2003, N/A N/A
392 Springfield Avenue and Assistant FFC - since 2003 Vice President of
Mezzanine Suite Treasurer FLC - since inception Flaherty & Crumrine;
Summit, NJ 07901 from June 2001 to
Age: 45 April 2003, Director of
US Market Strategy at
Barclays Capital; from
February 1987 to June
2001, Vice President of
Goldman, Sachs &
Company as Director
of US Interest Rate
Strategy and, previously,
Vice President of
Interest Rate
Product Sales
LAURIE C. LODOLO Assistant Officer Since August 2004, N/A N/A
301 E. Colorado Boulevard Compliance FFC - since 2004 Assistant Compliance
Suite 720 Officer, Assistant FLC - since 2004 Officer of Flaherty &
Pasadena, CA 91101 Treasurer and Crumrine Incorporated;
Age: 41 Assistant Secretary since February 2004,
Secretary of Flaherty &
Crumrine Incorporated;
Account Administrator of
Flaherty & Crumrine
Incorporated.
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* The Board of Directors of each Fund has determined to decrease the size of
the Board from of each Fund six to five Directors effective April 21,
2005, thereby effectively eliminating a Class I Director seat. Mr.
Dalmaso's term as a Class I Director of each Fund will expire at the 2005
Annual Meeting and he will not stand for re-election. The remaining Class
I Director of each Fund has been nominated for a three-year term to expire
at each Fund's 2008 Annual Meeting of Shareholders and until his successor
is duly elected and qualified. Mr. Gust, a Class II Director of each Fund,
has been nominated for a one-year term to expire at FLC'S Annual Meeting
of Shreholders and until his successor is duly elected and qualified will
serve until until FFC's 2006 Annual Meeting of Shareholders and until his
successor is duly elected and qualified. Mr. Brody, a Class II Director of
each Fund, will serve until each Fund's 2006 Annual Meeting of
Shareholders and until his successor is duly elected and qualified. Class
III Directors of each Fund will serve until each Fund's 2007 Annual
Meeting of Shareholders 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, nominated to represent holders of AMPS.
(2) As a Director, currently represents holders of AMPS.
(3) "Interested person" of the Funds as defined in the 1940 Act. Messrs.
Crumrine and Dalmaso are each considered an "interested person" because of
their affiliation with the Adviser and the Servicing Agent, respectively.
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.
6
AGGREGATE DOLLAR RANGE OF EQUITY
SECURITIES IN ALL REGISTERED INVESTMENT
DOLLAR RANGE OF EQUITY COMPANIES OVERSEEN BY DIRECTOR IN
NAME OF DIRECTOR SECURITIES HELD IN FUND* (1)(2) FAMILY OF INVESTMENT COMPANIES* (3)
---------------- ------------------------------- -----------------------------------
FFC FLC TOTAL
--- --- -----
NON-INTERESTED DIRECTORS:
Martin Brody C C E
David Gale C C E
Morgan Gust C C E
Robert F. Wulf C C E
INTERESTED DIRECTORS:
Donald F. Crumrine E(4) E(4) E(4)
Nicholas Dalmaso A A A
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* 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 December 31, 2004.
(1) No Director or officer of the Funds owned any shares of AMPS on January
28, 2005.
(2) This information has been furnished by each Director as of January 28,
2005. "Beneficial Ownership" is determined in accordance with Rule
16a-1(a)(2) of the 1934 Act.
(3) As a group, less than 1%.
(4) Includes shares of FFC and FLC 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 their affiliates receives a fee of $9,000 per
annum plus $500 for each in-person meeting, and $150 for each telephone meeting.
In addition, the Audit Committee Chairman receives an annual fee per Fund of
$2,500. Each Director of each Fund is reimbursed for travel and out-of-pocket
expenses associated with attending Board and committee meetings. The Board of
Directors of FFC held six meetings (one of which was held by telephone
conference call) and the Board of Directors of FLC held six meetings (one of
which was held by telephone conference call) during the fiscal year ended
November 30, 2004, and all of the Directors of each Fund then serving in such
capacity attended at least 75% of the meetings of Directors and any Committee of
which he is a member, with the exception of Martin Brody. In addition, one
meeting of a special "ad hoc" committee of the Board of Directors was held for
each Fund. The aggregate remuneration paid to the Directors and officers of each
Fund for the fiscal year ended November 30, 2004 is set forth below:
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BOARD MEETING TRAVEL AND
ANNUAL AND OUT-OF-POCKET
DIRECTORS FEES COMMITTEE MEETING FEES EXPENSES*
--------------------------------------------------------------------------------------------------------------
FFC $38,801 $22,700 $14,232
FLC $38,801 $22,300 $13,030
--------------------------------------------------------------------------------------------------------------
----------
* 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 therof; (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. In addition,
pursuant to each Fund's Audit Committee Charter, 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 that was most recently reviewed and approved by
the Board of Directors of each Fund on January 21, 2005 and which is available
on the Funds' website (www.fcclaymore.com). As set forth in the Charter,
management is responsible for (i) the preparation, presen-
7
tation and integrity of each Fund's financial statements, (ii) the maintenance
of appropriate accounting and financial reporting principles and policies, and
(iii) the maintenance of internal controls and procedures designed to assure
compliance with accounting standards and applicable laws and regulations. The
independent accountants are 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 21,
2005, the Audit Committee reviewed and discussed with management of each Fund
and the independent accountants, KPMG LLP ("KPMG"), the audited financial
statements of each Fund as of and for the fiscal year ended November 30, 2004,
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 controls 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.
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, 2004.
THIS REPORT WAS SUBMITTED BY THE AUDIT COMMITTEE OF EACH FUND'S BOARD OF
DIRECTORS
Martin Brody
David Gale
Morgan Gust
Robert Wulf (Chairman)
January 21, 2005
Each Audit Committee met four times in connection with their regularly
scheduled meetings during the fiscal year ended November 30, 2004. Each Audit
Committee is composed entirely of each Fund's independent (as such term
is defined by the New York Stock Exchange, Inc.'s listing standards applicable
to closed-end funds (the "NYSE Listing Standards")) Directors, namely Messrs.
Brody, 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 Messrs. Brody, Gale, Gust and Wulf. The Nominating Committee
of each Fund met three times during the fiscal year ended November 30, 2004. The
Nominating Committee is responsible for identifying individuals believed to be
qualified to become Board members and recommending to the Board
8
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 the Funds'
website (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 the Fund 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 attended the
April 23, 2004 Annual Meeting 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,
2004. No executive officer or person affiliated with the Fund received
compensation from the Fund during the fiscal year ended November 30, 2004 in
excess of $60,000. Directors and executive officers of the Funds do not receive
pension or retirement benefits from the Funds.
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
NICHOLAS DALMASO $0 $0 (2)
Director, Vice President and
Assistant Secretary
MARTIN BRODY $12,250 - FFC $49,650 (4)
Director $12,200 - FLC
DAVID GALE $15,250 - FFC $61,650 (4)
Director $15,200 - FLC
MORGAN GUST $15,500 - FFC $62,700 (4)
Director $15,400 - FLC
ROBERT F. WULF $18,501 - FFC $73,903 (4)
Director $18,301 - FLC
----------
* Represents the total compensation paid to such persons by the Funds and
the other funds in the Flaherty & Crumrine Fund Family for the fiscal year
ended November 30, 2004, 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 such fund complex as of November 30, 2004.
9
REQUIRED VOTE
The election of Mr. Gale as a Director of FFC and FLC will require the
affirmative vote of a plurality of the votes cast by holders of the shares of
AMPS of each Fund at the Meeting in person or by proxy. The election of Mr. Gust
as a Director of FLC will require the affirmative vote of a plurality of the
votes cast by holders of the shares of AMPS of FLC 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.
THE BOARD OF DIRECTORS OF FFC UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE
"FOR" PROPOSAL NO. 2.
PROPOSAL 2: APPROVAL OF AN AMENDMENT TO EACH
FUND'S ARTICLES SUPPLEMENTARY RELATING TO THE
TERM OF OFFICE OF CERTAIN DIRECTORS
The second proposal to be considered at the Meeting is amending the
Articles Supplementary of each of FFC and FLC as set forth in the proposed
Articles of Amendment for each of FFC and FLC ("Proposed Amendment A") described
below and attached to this Joint Proxy Statement as Proposed Amendments A-1
and A-2, respectively.
10
As discussed in connection with Proposal 1, under the each Fund's Articles
of Incorporation, Articles Supplementary and the 1940 Act, holders of AMPS,
voting as a single class, are entitled to elect two Directors, and holders of
the Common Stock are entitled to elect the remaining Directors. In addition,
subject to the provisions of the 1940 Act and each Fund's Articles of
Incorporation, the holders of AMPS, when dividends are in arrears for two full
years, are able to elect the minimum number of additional directors which, when
combined with the two Directors elected by the holders of the AMPS, would give
the holders of AMPS a majority of the Directors. However, the Funds' Articles of
Incorporation and Articles Supplementary are silent on the status of directors
elected by holders of AMPS in the event all of the AMPS shares were to be
redeemed in full. Therefore, in the event of a redemption in full, the directors
elected by holders of the AMPS could be entitled to continue to serve as
directors until their terms of office expire.
The purpose of Proposed Amendment A is to specifically set forth in each
Fund's Articles Supplementary a provision that the term of certain directors
elected by a single series of preferred stock, such as the AMPS, will terminate
automatically upon redemption in full of the holders of the stock. As discussed
more fully below, in the event of such redemption of preferred stock in full,
all obligations to the holders of preferred stock will cease and separate
representatives for them would serve no real function. In that circumstance, the
1940 Act provision requiring separate representatives for holders of preferred
stock would no longer apply or have any relevance.
REASONS FOR PROPOSED AMENDMENT A . Proposed Amendment A would
specifically set forth in each Fund's Articles Supplementary a provision that
the term of any Director (other than a Continuing Director) elected by a single
series of preferred stock of the Fund would terminate automatically upon
redemption in full of the holders of that series of preferred stock. As applied
to the Funds, the holders of the AMPS in the aggregate would be considered
a single series so that, upon a redemption in full of the AMPS, the term of
office of any director elected by the AMPS who was not a Continuing Director
would automatically terminate. As a result, Proposed Amendment A would
give the Board of Directors of each Fund the flexibility to indirectly cause the
directorship of a preferred director to terminate by redeeming the preferred
stock the director represents. Taking this action may be particularly
appropriate where a person or group acquires a large position in preferred
shares immediately prior to the record date with a view of obtaining a seat on
the board to serve as a platform for initiating and instigating action that
would be contrary to the interest of the preferred shareholders or of the
relevant Fund as a whole. Neither Fund is aware of an intention on the part of
any third party to seek to obtain a seat on the board or to recommend any
business combination, open-ending or other corporate action to change the
manner in which a Fund operates. Nevertheless, the Board of each Fund considers
it prudent to have the flexibility Proposed Amendment A would afford. Of course,
there would be costs and other implications associated with any decision to
redeem the preferred stock which would be evaluated in full by the Fund's Board
of Directors at the time that any such action is contemplated. Because the
automatic termination provision would not apply to persons considered to
be Continuing Directors, Proposed Amendment A would enable the Fund to
retain the services of persons who do not have sizable shareholdings or
strategic proposals that could place them in a posture adverse to a Fund.
"Continuing Director" is defined in each Fund's Articles of Incorporation
generally as a Director who (a) is not an Interested Party or an Affiliate or an
Associate (as these terms are defined in the Articles of Incorporation;
generally, an Interested Party is a person who has entered into a business
combination with the Fund or individually or together with other persons owns or
is deemed to own, directly or indirectly, more than 5% of any class of the
Fund's securities) of an Interested Party and has been a member of the Board of
Directors for a period of at least 12 months; or (b) is a successor of a
Continuing Director who is not an Interested Party or an Affiliate or an
Associate of an Interested Party and is recommended to succeed a Continuing
Director by a majority of the Continuing Directors then on the Board of
Directors; or (c) is elected to the Board of Directors to be a Continuing
Director by a majority of the Continuing Directors then on the Board of
Directors and who is not an Interested Party or an Affiliate or Associate of an
Interested Party.
At the January Board Meetings, the Board of Directors of each Fund
separately approved Proposed Amendment A, subject to shareholder approval and
subject to receipt of certain written confirmations from the rating agencies
rating the AMPS. The Board considered a number of factors in its deliberations,
including (i) that in the event of a redemption in full of a single series
of preferred stock of the Fund, separate representatives for the preferred stock
would serve no real function; (ii) that closed-end funds continue to be subject
to action by parties with agendas contrary to the interest of Fund shareholders
as a whole that are disruptive to Fund operations and involve significant costs;
(iii) that Proposed Amendment A would give the Board of each Fund
flexibility in certain circumstances to take appropriate action in a situation
where a person or group obtains a Board seat through an investment in a Fund's
preferred stock action considered to be contrary to the interests of the
preferred holders or the Fund as a whole; and (iv) the benefit of retaining the
knowledge and expertise of representing preferred shares in the event a decision
is made to redeem a series of preferred stock and/or replace that series with
another series.
If adopted, Proposal 2 would render more difficult or discourage the
assumption of control by a holder of a large block of a Fund's AMPS, a proxy
contest, a merger, a tender offer or the removal of incumbent management.
REQUIRED VOTE
Approval of the Articles of Amendment will require the affirmative vote of
a majority of the votes of the outstanding shares of stock entitled to be cast
by holders of each Fund's Common Stock and AMPS, voting together as a single
class. The Funds have had conversations with both Moody's Investor Service, Inc.
("Moody's") and Fitch Ratings ("Fitch"), the rating agencies currently rating
the AMPS, about Proposed Amendment II. They have indicated preliminarily that
the changes would not impair the current ratings on the AMPS ("Aaa" and "AAA,"
respectively). In any event, Proposed Amendment II will not be implemented
unless Moody's and Fitch confirm that it would not impair their current ratings
on the AMPS.
THE BOARD OF DIRECTORS OF EACH FUND UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS VOTE "FOR" PROPOSAL NO. 2.
11
PROPOSAL 3: APPROVAL OF AN AMENDMENT TO THE PREFERRED SECURITIES FUND'S
ARTICLES SUPPLEMENTARY RELATING TO THE FORCE MAJEURE PROVISION - FFC ONLY
The third proposal to be considered at the Meeting is amending FFC's
Articles Supplementary Establishing and Fixing the Rights and Preferences of
Auction Market Preferred Stock (the "Articles Supplementary") as set forth in
the proposed Articles of Amendment ("Proposed Amendment B") described below
and attached to this Joint Proxy Statement as Proposed Amendment B. For ease
of reference, the Articles of Amendment in Proposed Amendment B have been
marked to show the proposed changes by underlining the new language and putting
it in bold typeface.
The Articles Supplementary establish procedures for regular periodic
auctions for FFC's AMPS. The auctions establish the dividend rate to be paid to
the holders of the AMPS for the next dividend period and are held by FFC's
auction agent at the times and in the manner provided in the Articles
Supplementary.
The Articles Supplementary currently contain a provision (the "Force
Majeure Provision") which provides that, if an auction date for any series
("Series") of AMPS is not a business day because the New York Stock Exchange
("NYSE") is closed for business due to an act of God, natural disaster, extreme
weather, act of war, civil or military disturbance, act of terrorism, sabotage,
riots or a loss or malfunction of utilities or communications services (each, an
"Extraordinary Event"), or if the auction agent is not able to conduct an
auction in accordance with the auction procedures for any such reason, the
dividend rate for the next dividend period for that Series will be the dividend
rate determined on the previous auction date.
Proposed Amendment B would revise the Force Majeure Provision to (a)
modify how the dividend rate to be paid to the holders of AMPS is determined by
creating a distinction between situations where the NYSE is closed for (i) more
than three calendar days or (ii) three or fewer calendar days and (b) provides
that if an Extraordinary Event occurs with respect to a Series of AMPS, existing
holders of such Series will continue to hold their AMPS until the next auction
for that Series of AMPS is held. With regard to dividend payments that cannot be
effected due to NYSE closures for an Extraordinary Event, Proposed Amendment B
also creates a distinction between deferral of dividend payment dates for more
than three days and three or fewer days.
The purpose of Proposed Amendment B is to revise and clarify the
procedures for auctions and dividend payments for certain situations outside the
control of FFC that force the NYSE to close or prevent the auction agent from
conducting an auction.
DIVIDEND RATE PROVISION. The revised Force Majeure Provision provides that
if an auction date is not a business day because the NYSE is closed for more
than three consecutive calendar days (excluding Saturdays and Sundays and
previously announced NYSE holidays), or the auction agent cannot conduct an
auction in accordance with the auction procedures for such period, due to an
Extraordinary Event, then the dividend rate to be paid to the holders of the
AMPS will be the dividend rate determined on the previous auction date. If an
auction date is not a business day because the NYSE is closed for three or fewer
than three consecutive calendar days, or if the auction agent cannot conduct an
auction in accordance with the auction procedures for such period due to an
Extraordinary Event, then the dividend rate to be paid to the holders of the
AMPS will be the dividend rate determined by auction on the first business day
(i.e., the first day on which the NYSE is open) following such auction date.
DIVIDEND PAYMENT PROVISION. The current provision applicable to payment of
a dividend where the NYSE is closed due to an Extraordinary Event would
similarly be modified to distinguish short-term from longer-term closings. Under
the Articles Supplementary currently, special provisions allow the deferral of a
dividend payment to the next business day on
12
which FFC and the auction agent are able to cause the dividend to be paid using
commercially reasonable available means. Proposed Amendment B narrows the
circumstances in which this deferral would apply to where the NYSE is closed for
more than three consecutive calendar days due to an Extraordinary Event.
HOLD OVER PROVISION. The proposed revised Force Majeure Provision also
provides that in the event an auction for a Series of AMPS cannot be held due to
an Extraordinary Event, each existing holder of such Series of AMPS, will
continue to hold all of his or her AMPS until the next auction for such Series
of AMPS is held (unless a holder sells his or her AMPS outside of an auction in
a secondary trading market). This means that a holder would, under these
circumstances, be required to hold his or her AMPS for another dividend period
(which would be seven days in the case of Series M7, T7, W7, TH7 and F7 AMPS and
28 days in the case of Series T28 and W28 AMPS).
REASONS FOR THE PROPOSED AMENDMENT. Proposed Amendment B is designed to
bring the Force Majeure provisions for FFC into line with those for FLC and
current practices for newly issued preferred shares of closed-end funds. It is
also designed to make clear, rather than implicit, that holders of a Series of
AMPS will be required to continue to hold their shares of that Series until an
auction is held following an Extraordinary Event. Under Proposed Amendment B,
if a NYSE closing is of short duration, a new auction will be held, while only
under longer-duration closings (or a longer- duration inability of the auction
agent to conduct an auction) will the holders maintain the current dividend
rate. As a result, AMPS holders may benefit. Rather than receiving the existing
dividend rate for an additional period in all instances, AMPS holders will be
entitled to the rate resulting from an auction when the NYSE is closed for three
days or less due to an Extraordinary Event. The same holds true for dividend
payment dates. If a NYSE closing is of short duration, the dividend payment date
would be the regular dividend payment date determined in accordance with the
Articles Supplementary. A dividend payment date would be deferred to the next
business day on which FFC and the auction agent are able to cause the dividend
to be paid using commercially reasonable means only for longer-duration
closings.
At a meeting held on January 21, 2005, the Board of Directors of FFC
approved Proposed Amendment II, subject to shareholder approval and subject to
receipt of written confirmation by the rating agencies rating the AMPS. The
Board considered a number of factors in its deliberations, including that the
effect of Proposed Amendment B to the Articles Supplementary is to ensure that,
upon an Extraordinary Event, FFC's auction for its AMPS can be conducted
pursuant to clear procedures set forth in its Articles Supplementary;
that Proposed Amendment I will benefit AMPS holders in the event of a NYSE
closing of three days or less due to an Extraordinary Event by allowing
their dividend rate to be determined at an auction in the ordinary course;
and that the Proposed Amendment would bring the Force Majeure Provision for FFC
in line with that for FLC and current industry practice. The Board also
considered the potential benefit to the Common Shareholders of Proposed
Amendment B. In particular, they considered that the change could mitigate any
disruption of the Fund's AMPS auction due to an Extraordinary Event, thereby
preserving any potential benefit derived from the Fund being leveraged with
AMPS. The Board was aware that this proposal was presented at the 2004 Annual
Meeting and had narrowly failed to receive the vote necessary for approval. In
light of the perceived benefits of Proposed Amendment B, the Board determined to
resubmit the proposal for shareholder consideration.
REQUIRED VOTE
Approval of the Articles of Amendment will require the affirmative vote of
a majority of the votes of the outstanding shares of stock entitled to be cast
by the holders of FFC's Common Stock and AMPS, voting together as a single
class. The Fund has had conversations with both Moody's Investor Service, Inc.
("Moody's") and Fitch Ratings ("Fitch"), the rating agencies currently rating
the AMPS, about Proposed Amendment I. They have indicated preliminarily that the
changes would not impair the current rating on the AMPS ("Aaa" and "AAA,"
respectively). In any event, Proposed Amendment I will not be implemented unless
Moody's and Fitch confirm that it would not impair their current ratings on the
AMPS.
THE BOARD OF DIRECTORS OF FFC UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE
"FOR" PROPOSAL NO. 3.
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 2006
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 , 2005
and must satisfy the other requirements of federal securities laws.
Each Fund's By-Laws 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 not later than 60 days prior to the date of the meeting; provided however,
that if less than 70 days' 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 By-Laws with respect to each matter the shareholder proposes to
bring before the annual meeting.
ADDITIONAL INFORMATION
INDEPENDENT ACCOUNTANTS
KPMG, 99 High Street, Boston, Massachusetts 02110-2371, has been selected
to serve as each Fund's independent accountants for each Fund's fiscal year
ending November 30, 2005. KPMG acted as the independent accountants for each
Fund for the fiscal year ended November 30, 2004. 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 Meeting, but will be available
by telephone and will have an opportunity to make a statement, if asked, and
will be available to respond to appropriate questions.
Set forth in the table below are audit fees and non-audit related fees
billed to each Fund by KPMG for professional services received for each Fund's
fiscal period from commencement of operations through November 30, 2003 and each
Fund's fiscal year ended November 30, 2004, respectively.
FISCAL YEAR ENDED AUDIT-RELATED
FUND NOVEMBER 30 AUDIT FEES FEES** TAX FEES*** ALL OTHER FEES
---- ----------- ----------- ------ ----------- --------------
FFC 2003 $58,500* $12,800 $6,000 --
2004 $38,500 $14,000 $6,400 --
FLC 2003 $58,500* $ 6,400 $6,000 --
2004 $38,500 $14,000 $6,400
----------
* Includes non-recurring fees billed to each Fund by KPMG in connection with
the initial offering of Common Stock and AMPS of each Fund.
** "Audit-Related Fees" are those fees billed to each Fund by KPMG in
connection with their agreed-upon procedures reports on each Fund's
Articles Supplementary. Such reports are required quarterly by Moody's and
Fitch in connection with maintaining public ratings for each Fund's AMPS.
*** "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.
Each Fund's Audit Committee Charter requires that the Audit Committee
pre-approve all audit and non-audit services to be provided by the auditors to
the Fund, and all non-audit services to be provided by the auditors to the
Fund's investment adviser and any entity controlling, controlled by or under
common control with the Funds' investment adviser that provide on-going services
to each Fund, if the engagement relates directly to the operations and financial
reporting of each Fund ("affiliates"), or to establish detailed pre-approval
policies and procedures for such services in accordance with applicable laws.
All of the audit, audit-related and tax services for which KPMG billed each Fund
fees for each Fund's fiscal period ended November 30, 2003 and fiscal year ended
November 30, 2004 were pre-approved by the Audit Committee.
For each Fund's fiscal year ended November 30, 2004, 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.
13
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. PFPC Inc. 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 each Fund 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 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 2004, all such filing requirements applicable
to such persons were met.
BROKER NON-VOTES 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
on the matter for purposes of determining the presence of a quorum. With
respect to Proposal 1, abstentions do not constitute a vote "for" or "against"
a matter and will be disregarded in determining the "votes cast" on a matter.
With respect to Proposal 2 for both Funds and Proposal 3 for FFC, abstentions
will count as a vote against a matter.
OTHER MATTERS TO COME BEFORE THE MEETING
Each Fund does not intend to present any other business at the relevant
Meeting, nor is either 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.
--------------------------------------------------------------------------------
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.
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14
PROPOSED AMENDMENT A-1
ARTICLES OF AMENDMENT
OF
FLAHERTY & CRUMRINE/CLAYMORE
PREFERRED SECURITIES INCOME FUND INCORPORATED
FLAHERTY & CRUMRINE/CLAYMORE PREFERRED SECURITIES INCOME FUND
INCORPORATED, a Maryland corporation (hereinafter called the "Corporation"),
hereby certifies to the State Department of Assessments and Taxation of Maryland
that:
FIRST: The Articles Supplementary Creating and Fixing the Rights of
the Auction Market Preferred Stock of the Corporation, as filed with the State
Department of Assessments and Taxation on April 22, 2003, is hereby amended as
follows: by adding the following subsection 4(b)(v) to Part I thereof:
(v) "Terms of Office of Certain Directors to Terminate.
Simultaneously with and at the time that none of the
issued Preferred Shares are "outstanding" as set forth
in subsection (j) of this Section 4, i.e., the requisite
Notice of Redemption with respect to such Preferred
Shares shall have been mailed as provided in paragraph
8(c) of this Part I and the Redemption Price for the
redemption of such Preferred Shares shall have been
deposited in trust with the Auction Agent for that
purpose, the terms of office of any Directors elected
solely by the Holders of such Preferred Shares shall
automatically terminate and the remaining Directors
shall constitute the Directors of the Fund; provided,
however, that the terms of office of any such Directors
who meet the definition of "Continuing Directors" in the
Fund's Articles of Amendment and Restatement shall
continue and shall not terminate."
SECOND: The amendment to the Charter of the Corporation as set forth
in Article FIRST was advised by the Corporation's Board of Directors and
approved by the stockholders.
IN WITNESS WHEREOF, the undersigned officers of the Corporation have
executed these Articles of Amendment and do hereby acknowledge that these
Articles of Amendment are the act and deed of the Corporation and to the best of
their knowledge, information and belief, the matters and facts contained herein
with respect to authorization and approval are true in all material respects,
under the penalties of perjury.
DATE: _______________, 2005
FLAHERTY & CRUMRINE/CLAYMORE PREFERRED
SECURITIES INCOME FUND INCORPORATED
______________________________________
Robert M. Ettinger
President
WITNESS:
__________________________
R. Eric Chadwick
Secretary
A-1
PROPOSED AMENDMENT A-2
ARTICLES OF AMENDMENT
OF
FLAHERTY & CRUMRINE/CLAYMORE
TOTAL RETURN FUND INCORPORATED
FLAHERTY & CRUMRINE/CLAYMORE TOTAL RETURN FUND INCORPORATED, a
Maryland corporation (hereinafter called the "Corporation"), hereby certifies to
the State Department of Assessments and Taxation of Maryland that:
FIRST: The Articles Supplementary Creating and Fixing the Rights of
the Auction Market Preferred Stock of the Corporation, as filed with the State
Department of Assessments and Taxation on October 29, 2003, is hereby amended as
follows: by adding the following subsection 4(b)(v) to Part I thereof:
(v) "Terms of Office of Certain Directors to Terminate.
Simultaneously with and at the time that none of the
issued Preferred Shares are "outstanding" as set forth
in subsection (j) of this Section 4, i.e., the requisite
Notice of Redemption with respect to such Preferred
Shares shall have been mailed as provided in paragraph
8(c) of this Part I and the Redemption Price for the
redemption of such Preferred Shares shall have been
deposited in trust with the Auction Agent for that
purpose, the terms of office of any Directors elected
solely by the Holders of such Preferred Shares shall
automatically terminate and the remaining Directors
shall constitute the Directors of the Fund; provided,
however, that the terms of office of any such Directors
who meet the definition of "Continuing Directors" in the
Fund's Articles of Incorporation shall continue and
shall not terminate."
SECOND: The amendment to the Charter of the Corporation as set forth
in Article FIRST was advised by the Corporation's Board of Directors and
approved by the stockholders.
IN WITNESS WHEREOF, the undersigned officers of the Corporation have
executed these Articles of Amendment and do hereby acknowledge that these
Articles of Amendment are the act and deed of the Corporation and to the best of
their knowledge, information and belief, the matters and facts contained herein
with respect to authorization and approval are true in all material respects,
under the penalties of perjury.
DATE: _______________, 2005
FLAHERTY & CRUMRINE/CLAYMORE TOTAL
RETURN FUND INCORPORATED
__________________________________
Robert M. Ettinger
President
WITNESS:
___________________________
R. Eric Chadwick
Secretary
A-2
PROPOSED AMENDMENT B
ARTICLES OF AMENDMENT OF
FLAHERTY & CRUMRINE/CLAYMORE PREFERRED SECURITIES INCOME FUND INCORPORATED
FLAHERTY & CRUMRINE/CLAYMORE PREFERRED SECURITIES INCOME FUND
INCORPORATED, a Maryland corporation (hereinafter called the "Corporation"),
hereby certifies to the State Department of Assessments and Taxation of Maryland
that:
FIRST: Part II, Section 7 of the Articles Supplementary Establishing and Fixing
the Rights and Preferences of Auction Market Preferred Stock of the Corporation,
as filed with the State Department of Assessments and Taxation on April 22,
2003, is hereby amended as follows: By deleting in its entirety the current
Section 7 of Part II and substituting therefore the following new Section 7:
"7. Force Majeure.
(a) Notwithstanding anything else set forth herein,
(i) if an Auction Date is not a Business Day because the New York
Stock Exchange is closed for business FOR MORE THAN THREE
CONSECUTIVE CALENDAR DAYS (EXCLUDING SATURDAYS AND SUNDAYS AND
PREVIOUSLY ANNOUNCED NEW YORK STOCK EXCHANGE HOLIDAYS) due to
an act of God, natural disaster, extreme weather, act of war,
civil or military disturbance, act of terrorism, sabotage,
riots or a loss or malfunction of utilities or communications
services, or if the Auction Agent is not able to conduct an
Auction in accordance with the Auction Procedures for any such
reason, then the Applicable Rate for the next Dividend Period
shall be the Applicable Rate determined on the previous
Auction Date.; and
(II) IF AN AUCTION DATE IS NOT A BUSINESS DAY BECAUSE THE NEW YORK
STOCK EXCHANGE IS CLOSED FOR BUSINESS FOR THREE OR FEWER THAN
THREE CONSECUTIVE CALENDAR DAYS (EXCLUDING SATURDAYS AND
SUNDAYS AND PREVIOUSLY ANNOUNCED NEW YORK STOCK EXCHANGE
HOLIDAYS) DUE TO AN ACT OF GOD, NATURAL DISASTER, EXTREME
WEATHER, ACT OF WAR, CIVIL OR MILITARY DISTURBANCE, ACT OF
TERRORISM, SABOTAGE, RIOTS OR A LOSS OR MALFUNCTION OF
UTILITIES OR COMMUNICATIONS SERVICES, OR IF THE AUCTION AGENT
IS NOT ABLE TO CONDUCT AN AUCTION IN ACCORDANCE WITH THE
AUCTION PROCEDURES FOR ANY SUCH REASON, THEN THE APPLICABLE
RATE FOR THE NEXT DIVIDEND PERIOD SHALL BE THE APPLICABLE RATE
DETERMINED BY AUCTION ON THE FIRST BUSINESS DAY FOLLOWING SUCH
AUCTION DATE.
(b) Notwithstanding anything else set forth herein, if a Dividend
Payment Date is not a Business Day because the New York Stock
Exchange is closed for business FOR MORE THAN THREE CONSECUTIVE
CALENDAR DAYS due to an act of God, natural disaster, extreme
weather, act of war, civil or military disturbance, act of
terrorism, sabotage, riots or a loss or malfunction of utilities or
communications services, or if the dividend payable on such date can
not be paid for any such reason, then:
(i) The Dividend Payment Date for the affected Dividend Period
shall be the next Business Day on which the Fund and the
Auction Agent are able to cause the dividend to be paid using
commercially reasonable best efforts;
(ii) The affected Dividend Period shall end on the day it would
have ended had such event not occurred and the Dividend
Payment Date had remained the scheduled date; and
(iii) The next Dividend Period will begin and end on the dates on
which it would have begun and ended had such event not
occurred and the Dividend Payment Date remained the scheduled
date.
(C) IN THE EVENT THAT EITHER PROVISION (A) OR (B) OF THIS SECTION 7 IS
APPLICABLE FOR A SERIES OF PREFERRED SHARES, EACH BENEFICIAL OWNER
OR EXISTING HOLDER, AS THE CASE MAY BE, OF SUCH SERIES OF PREFERRED
SHARES SHALL HOLD ALL OF THE PREFERRED SHARES OF SUCH SERIES HELD BY
SUCH BENEFICIAL OWNER OR EXISTING HOLDER UNTIL THE NEXT AUCTION DATE
FOR SUCH SERIES OF PREFERRED SHARES (UNLESS THE BENEFICIAL OWNER OR
EXISTING HOLDER, AS THE CASE MAY BE, OF SUCH SERIES OF PREFERRED
SHARES SELLS HIS OR HER PREFERRED SHARES OUTSIDE OF AN AUCTION IN A
SECONDARY TRADING MARKET)."
B-1
SECOND: The amendment to the Charter of the Corporation set forth in
Article FIRST above was advised by the Board of Directors and approved by the
stockholders.
IN WITNESS WHEREOF, the undersigned officers of the Corporation have
executed these Articles of Amendment and do hereby acknowledge that these
Articles of Amendment are the act and deed of the Corporation and that, to the
best of their knowledge, information and belief, the matters and facts contained
herein with respect to authorization and approval are true in all material
respects, under penalties of perjury.
FLAHERTY & CRUMRINE/CLAYMORE PREFERRED
SECURITIES INCOME FUND INCORPORATED
DATE: _______________, 2005 ____________________________
Robert M. Ettinger
President
WITNESS:
__________________________
R. Eric Chadwick
Secretary
B-2
DETACH HERE ZFCT22
FLAHERTY & CRUMRINE/CLAYMORE TOTAL RETURN FUND INCORPORATED
PROXY SOLICITED BY THE 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 AND TERESA M. R. HAMLIN,
ATTORNEYS AND PROXIES FOR THE UNDERSIGNED, 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 BOARD
ROOM OF THE RADISSON BRIDGE RESORT, BOCA RATON, FL 33432 AT 8:30 A.M., ON APRIL
21, 2005, AND ANY ADJOURNMENTS 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.
------------- -------------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
------------- -------------
FLAHERTY & CRUMRINE/CLAYMORE
TOTAL RETURN FUND
C/O PFPC INC.
P.O. BOX 8586
EDISON, NJ 08818-8586
DETACH HERE ZFCT21
--- PLEASE MARK 3519
X VOTES AS IN
--- THIS EXAMPLE.
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
PROPOSAL 1.
PLEASE REFER TO THE PROXY STATEMENT FOR A DISCUSSION OF THE PROPOSAL.
FOR AGAINST ABSTAIN
1. TO APPROVE AN AMENDMENT TO THE FUND'S
ARTICLES SUPPLEMENTARY ESTABLISHING AND
FIXING THE RIGHTS AND PREFERENCES OF
AUCTION MARKET PREFERRED STOCK --
TERM OF OFFICE OF CERTAIN DIRECTORS.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE APPROVAL
OF AN AMENDMENT TO THE FUND'S ARTICLES SUPPLEMENTARY ESTABLISHING AND FIXING THE
RIGHTS OF AUCTION MARKET PREFERRED STOCK -- TERM OF OFFICE OF CERTAIN DIRECTORS.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME APPEARS ON THIS PROXY. IF JOINT OWNERS,
EITHER MAY SIGN THIS PROXY. WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR,
TRUSTEE, GUARDIAN OR CORPORATE OFFICER, PLEASE GIVE YOUR FULL TITLE.
SIGNATURE:____________ DATE:________ SIGNATURE:_______________ DATE:____________
DETACH HERE VZFCA22
FLAHERTY & CRUMRINE/CLAYMORE TOTAL RETURN FUND INCORPORATED
PROXY SOLICITED BY THE BOARD OF DIRECTORS
THE UNDERSIGNED HOLDER OF SHARES OF AUCTION MARKET PREFERRED STOCK
("AMPS") OF FLAHERTY & CRUMRINE/CLAYMORE TOTAL RETURN FUND INCORPORATED, A
MARYLAND CORPORATION (THE "FUND"), HEREBY APPOINTS DONALD F. CRUMRINE, ROBERT M.
ETTINGER AND TERESA M.R. HAMLIN, ATTORNEYS AND PROXIES FOR THE UNDERSIGNED, WITH
FULL POWERS OF SUBSTITUTION AND REVOCATION, TO REPRESENT THE UNDERSIGNED AND TO
VOTE ON BEHALF OF THE UNDERSIGNED ALL SHARES OF AMPS, WHICH THE UNDERSIGNED IS
ENTITLED TO VOTE AT THE ANNUAL MEETING OF SHAREHOLDERS OF THE FUND TO BE HELD AT
THE BOARD ROOM OF THE RADISSON BRIDGE RESORT, BOCA RATON, FL 33432 AT 8:30 A.M.,
ON APRIL 21, 2005, AND ANY ADJOURNMENTS 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.
------------- -------------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
------------- -------------
FLAHERTY & CRUMRINE/CLAYMORE
TOTAL RETURN FUND
C/O EQUISERVE TRUST COMPANY, N.A.
P.O. BOX 8694
EDISON, NJ 08818-8694
DETACH HERE ZFCA21
--- PLEASE MARK
X VOTES AS IN
--- THIS EXAMPLE.
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 DIRECTORS AND FOR PROPOSAL 2.
PLEASE REFER TO THE PROXY STATEMENT FOR A DISCUSSION OF THE PROPOSALS.
1. ELECTION OF DIRECTORS
NOMINEES: (01) DAVID GALE AND (02) MORGAN GUST
FOR WITHHELD
ALL FROM ALL
NOMINEES NOMINEES
------------------------------------------
FOR ALL NOMINEE(S) EXCEPT AS WRITTEN ABOVE
FOR AGAINST ABSTAIN
2. TO APPROVE AN AMENDMENT TO THE FUND'S
ARTICLES SUPPLEMENTARY ESTABLISHING AND
FIXING THE RIGHTS AND PREFERENCES OF
AUCTION MARKET PREFERRED STOCK --
TERM OF OFFICE OF CERTAIN DIRECTORS.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE
ELECTION OF THE NOMINEES AS DIRECTOR AND "FOR" THE APPROVAL OF AN AMENDMENT TO
THE FUND'S ARTICLES SUPPLEMENTARY CREATING AND FIXING THE RIGHTS AND PREFERENCES
OF AUCTION MARKET PREFERRED STOCK -- TERM OF OFFICE OF CERTAIN DIRECTORS.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME APPEARS ON THIS PROXY. IF JOINT OWNERS,
EITHER MAY SIGN THIS PROXY. WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR,
TRUSTEE, GUARDIAN OR CORPORATE OFFICER, PLEASE GIVE YOUR FULL TITLE.
SIGNATURE:_____________ DATE:___________ SIGNATURE:_______________ DATE:________