*******PLEASE DISREGARD SUBMISSION 0000935069-05-000895 AS THIS FILING WAS FILED
WITH INCORRECT FUND.*******
FLAHERTY & CRUMRINE/CLAYMORE TOTAL RETURN FUND
Dear Shareholder:
The Flaherty & Crumrine/Claymore Total Return Fund ("FLC") delivered very
respectable results during the most recently concluded fiscal quarter. For the
three month period ending February 28, 2005, the Fund produced a total return on
net asset value ("NAV") of 5.3%(1). All segments of the investment portfolio
performed well during the period. The Fund's hedges were a modest drag on
investment results, as long-term interest rates declined during the period.
In recent letters, we have indicated that the Fund is susceptible to the
same factors that have forced many other income-oriented funds to reduce their
dividend distributions. In April, the Fund's monthly dividend was set at $0.1480
per share, an 8.9% reduction from the prior month.
As is the case with other leveraged funds, rising short-term interest
rates have increased the amount the Fund must pay on its Auction Market
Preferred Stock ("AMPS"). Typically, rising short-term interest rates are
accompanied by rising long-term rates, which should increase the value of the
Fund's hedges. The gains on the hedges can then be invested in additional
securities, which in turn increase the Fund's income, and, on balance, help keep
the Fund's dividend relatively stable.
U.S. TREASURY YIELD CURVES
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Maturity 4/30/04 2/28/05
0.25 0.97 2.74
0.50 1.14 2.97
2.00 2.31 3.58
3.00 2.75 3.75
5.00 3.61 3.99
10.00 4.50 4.36
30.00 5.28 4.71
As the above chart shows, current market conditions are anything but
typical--since the Federal Reserve signaled its intent to raise short-term
interest rates last April, short-term interest rates have increased by
approximately 175 basis points, while long-term interest rates have FALLEN by
over 50 basis points! As a result, the Fund's AMPS expense is significantly
higher, but the hedges have not enabled us to produce more income. While we do
not expect these conditions to persist for long periods, at this time it is
necessary to adjust the monthly distribution to a more sustainable amount.
Over the longer term, a "flatter" yield curve (as measured by the
difference in short- and long-term interest rates) is not a bad thing for the
Fund. Obviously, the cost of the Fund's leverage will go up, but at
-----------
(1) Based on monthly data provided by Lipper Inc. Distributions are assumed to
be reinvested at NAV in accordance with Lipper's practice.
the same time, the cost of the Fund's hedging strategy should go down. This
effect can be significant since the leverage comprises roughly 35.7% of the
Fund's assets, while the ENTIRE portfolio is hedged. The impact of the higher
leverage cost occurs almost immediately, while the benefits of lower hedging
costs take a bit longer to impact the Fund's income. The mathematics of all this
can be a bit daunting, but over the long run, these two effects have tended to
offset each other.
As a rule, we don't comment on the market price of the Fund's common
shares; however, recent market activity certainly does warrant some
observations. Over the long run, the market price SHOULD track the net asset
value. From time to time we expect to see some deviation due to factors or
circumstances unique to the Fund. For example, most investors cannot replicate
FLC's investment portfolio, hedging strategy, or leverage, and therefore may be
willing to pay a premium to the NAV.
The chart below plots the recent market price and net asset value of FLC.
For portions of this period, the market price traded at a premium to the NAV. We
attributed this in part to the Fund's strategy plus an attractive dividend rate.
During late February of this year, shares were trading around $23 1/2; as of
this writing, they are trading around $21 1/2. During the same period, the net
asset value declined less than $0.50!
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Flaherty & Crumrine/Claymore Total Return Fund
Market Price vs. Net Asset Value
2/6/04 26.16 24.57
2/13/04 26.06 24.63
2/20/04 25.9 24.44
2/27/04 25.86 24.72
3/5/04 25.76 24.98
3/12/04 26.25 25.03
3/19/04 26.3 25.08
3/26/04 25.85 24.75
4/2/04 26.18 24.56
4/9/04 25.4 24.51
4/16/04 24.6 24.34
4/23/04 24.1 24.06
4/30/04 23.24 24.02
5/7/04 21.75 23.46
5/14/04 22.53 23.3
5/21/04 22.58 23.29
5/28/04 23.49 23.45
6/4/04 23.53 23.45
6/11/04 23.25 23.38
6/18/04 23.5 23.36
6/25/04 22.5 23.22
7/2/04 23.34 23.25
7/9/04 23.33 23.31
7/16/04 23.1 23.55
7/23/04 22.67 23.3
7/30/04 22.69 23.28
8/6/04 23.67 23.49
8/13/04 23.4 23.57
8/20/04 23.28 23.42
8/27/04 23.3 23.5
9/3/04 23.74 23.47
9/10/04 23.66 23.71
9/17/04 24.36 23.91
9/24/04 23.65 24.12
10/1/04 23.69 23.84
10/8/04 23.68 23.96
10/15/04 24.05 24.06
10/22/04 24.26 23.79
10/29/04 24.35 23.85
11/5/04 24.33 23.75
11/12/04 23.92 23.79
11/19/04 24.11 23.76
11/26/04 24.3 23.79
12/3/04 24.24 23.7
12/10/04 24.39 24
12/17/04 24.69 24.05
12/24/04 24.35 23.88
12/31/04 24.8 24.08
1/7/05 24.56 23.96
1/14/05 24.53 24.18
1/21/05 24.33 24.17
1/28/05 24.25 24.24
2/4/05 24.74 24.61
2/11/05 24.46 24.55
2/18/05 23.75 24.62
2/25/05 23.63 24.31
3/4/05 23.66 24.37
3/11/05 23.35 24.27
3/18/05 22.36 24.07
3/25/05 21.42 23.64
4/1/05 21.55 23.7
Unlike open-end mutual funds, investors in closed-end funds should have a
longer investment horizon in order to weather swings in the relationship between
market price and NAV. In that same vein, investors with a long-term investment
horizon should stay focused on the NAV performance and dividend history of the
Fund. We plan to stay the course and hopefully will continue to meet and exceed
the objectives of the Fund.
Please take advantage of the Fund's website, www.fcclaymore.com. It
contains a wide range of useful and up-to-date information about the Fund. We
have also addressed in greater detail many of the topics discussed in this
letter.
Sincerely,
/S/ DONALD F. CRUMRINE /S/ ROBERT M. ETTINGER
Donald F. Crumrine Robert M. Ettinger
Chairman of the Board President
April 5, 2005
--------------------------------------------------------------------------------
Flaherty & Crumrine/Claymore Total Return Fund Incorporated
PORTFOLIO OVERVIEW
FEBRUARY 28, 2005 (UNAUDITED)
---------------------------------------------
FUND STATISTICS ON 2/28/05
--------------------------------------------
Net Asset Value $ 24.31
Market Price $ 23.55
Discount -3.13%
Yield on Market Price 8.28%
Common Shares
Outstanding 9,776,333
INDUSTRY CATEGORIES % OF PORTFOLIO
--------------------------------------------------------------------------------
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Banks 34%
Utilities 27%
Insurance 16%
Financial Services 8%
REITs 6%
Other 6%
Oil and Gas 3%
MOODY'S RATINGS % OF PORTFOLIO
--------------------------------------------------------------------------------
Aaa 0.5%
Aa 4.1%
A 32.6%
Baa 45.4%
Ba 7.4%
Not Rated 4.9%
--------------------------------------------------------------------------------
Below by Investment Grade* 7.2%
* BELOW INVESTMENT GRADE BY BOTH MOODY'S AND S&P.
TOP 10 HOLDINGS BY ISSUER % OF PORTFOLIO
--------------------------------------------------------------------------------
Wachovia Corp. 5.2%
J.P. Morgan Chase 5.0%
Lehman Brothers 4.3%
Duke Energy 3.9%
Royal Bank of Scotland 3.6%
North Fork Bancorporation 3.2%
OneAmerica Financial 2.7%
Zurich RegCaPS 2.6%
Nexen, Inc. 2.6%
FPL Group, Inc. 2.5%
% OF PORTFOLIO**
----------------------------------------------------------------------------------------------------------
Holdings Generating Qualified Dividend Income (QDI) for Individuals 28%
Holdings Generating Income Eligible for the Corporate Dividend Received Deduction (DRD) 21%
----------------------------------------------------------------------------------------------------------
** THIS DOES NOT REFLECT YEAR-END RESULTS OR ACTUAL TAX CATEGORIZATION OF
FUND DISTRIBUTIONS. THESE PERCENTAGES CAN, AND DO, CHANGE, PERHAPS
SIGNIFICANTLY, DEPENDING ON MARKET CONDITIONS. INVESTORS SHOULD CONSULT
THEIR TAX ADVISOR REGARDING THEIR PERSONAL SITUATION.
3
--------------------------------------------------------------------------------
Flaherty & Crumrine/Claymore Total Return Fund Incorporated
PORTFOLIO OF INVESTMENTS
FEBRUARY 28, 2005 (UNAUDITED)
-----------------------------------------------------------
SHARES/$ PAR VALUE
------------ ---------
PREFERRED SECURITIES -- 72.5%
BANKING -- 33.6%
-----------------------------------------------------------------------------------------------------------------
1,000 ABN AMRO North America, Inc., 6.59% Pfd., 144A**** ............................ $ 1,041,680*
$ 4,750,000 Astoria Capital Trust I, 9.75% 11/01/29 Capital Security, Series B ............ 5,901,471
38,800 BAC Capital Trust I, 7.00% Pfd. ............................................... 1,027,230
25,000 BAC Capital Trust III, 7.00% Pfd. ............................................. 661,250
10,900 BAC Capital Trust V, 7.00% Pfd. ............................................... 286,452
50,900 Bank One Capital Trust VI, 7.20% Pfd. ......................................... 1,344,523
$ 1,000,000 BT Preferred Capital Trust II, 7.875% 02/25/27 Capital Security ............... 1,092,695(1)
$10,000,000 Chase Capital I, 7.67% 12/01/26 Capital Security .............................. 10,859,450
14,400 Chase Capital XI, 5.875% Pfd. 06/15/33 ........................................ 355,248
40,000 Cobank, ACB, 7.00% Pfd., 144A**** ............................................. 2,223,000*
20,000 Colonial Capital Trust IV, 7.875% Pfd. ........................................ 528,600
11,000 Comerica (Imperial) Capital Trust I, 7.60% Pfd. ............................... 289,850
$ 2,000,000 First Chicago NBD Capital A, 7.95% 12/01/26 Capital Security, 144A**** ........ 2,189,010
$ 400,000 First Empire Capital Trust I, 8.234% 02/01/27 Capital Security ................ 440,982
$ 1,900,000 First Hawaiian Capital I, 8.343% 07/01/27 Capital Security, Series B .......... 2,109,712(1)
$ 2,000,000 First Midwest Capital Trust I, 6.95% Pfd. 12/01/33, Capital Security .......... 2,220,210
$ 1,500,000 First Tennessee Capital Trust II, 6.30% 04/15/34 Capital Security, Series B ... 1,531,290
$ 2,000,000 First Union Institutional Capital II, 7.85% 01/01/27 Capital Security ......... 2,181,430
$ 1,000,000 Fleet Capital Trust II, 7.92% 12/11/26 Capital Security ....................... 1,091,250
18,000 Fleet Capital Trust VII, 7.20% Pfd. ........................................... 474,570
2 FT Real Estate Securities Company, 9.50% Pfd., 144A**** ....................... 2,884,381
$ 7,100,000 GreenPoint Capital Trust I, 9.10% 06/01/27 Capital Security ................... 8,025,378
$ 8,000,000 HBOS Capital Funding LP, 6.85% Pfd. ........................................... 8,443,560(1)
$ 855,000 HSBC Capital Trust II, 8.38% 05/15/27 Capital Security, 144A**** .............. 951,068(1)
$ 3,000,000 Haven Capital Trust I, 10.46% 02/01/27 Capital Security ....................... 3,447,435
4,200 Household Capital Trust VI, 8.25% Pfd. ........................................ 110,040
$ 2,944,000 J.P. Morgan Capital Trust I, 7.54% 01/15/27 Capital Security .................. 3,193,430
3,955 J.P. Morgan Chase & Co., 6.625% Pfd., Series H ................................ 203,959*
$ 5,000,000 Keycorp Institutional Capital A, 7.826% 12/01/26 Capital Security, Series A ... 5,424,775
10 Marshall & Ilsley Investment II, 8.875% Pfd., 144A**** ........................ 1,082,455
$ 1,000,000 NB Capital Trust IV, 8.25% Capital Security ................................... 1,112,265
$ 2,500,000 North Fork Capital Trust I, 8.70% 12/15/26 Capital Security ................... 2,781,575
$ 810,000 North Fork Capital Trust II, 8.00% 12/15/27 Capital Security .................. 898,505
$ 4,000,000 RBS Capital Trust B, 6.80% Pfd. ............................................... 4,198,060**(1)
2,100 Regions Financial Trust I, 8.00% Pfd. ......................................... 55,073
$ 1,600,000 Republic New York Capital I, 7.75% 11/15/26 Capital Security .................. 1,732,720(1)
$ 716,000 Republic New York Capital II, 7.53% 12/04/26 Capital Security ................. 773,978(1)
25 Roslyn Real Estate, 8.95% Pfd., Pvt., Series C, 144A**** ...................... 2,699,688
4
--------------------------------------------------------------------------------
Flaherty & Crumrine/Claymore Total Return Fund Incorporated
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 28, 2005 (UNAUDITED)
-----------------------------------------------------------
SHARES/$ PAR VALUE
------------ ---------
PREFERRED SECURITIES - (CONTINUED)
BANKING - (CONTINUED)
-----------------------------------------------------------------------------------------------------------------
Royal Bank of Scotland Group PLC:
20,000 6.40% Pfd., Series .......................................................... $ 527,500**(1)
$ 6,820,000 7.648% Pfd. ................................................................. 8,506,450**(1)
$ 5,050,000 Union Planters Capital Trust, 8.20% 12/15/26 Capital Security ................. 5,547,173
19,000 USB Capital V, 7.25% Pfd. ..................................................... 504,545
$ 5,000,000 Wachovia Capital Trust I, 7.64% 01/15/27 Capital Security, 144A**** ........... 5,456,025
$ 1,170,000 Wachovia Capital Trust V, 7.965% 06/01/27 Capital Security, 144A**** .......... 1,291,996
350,000 Wachovia Preferred Funding, 7.25% Pfd., Series A .............................. 10,143,000
$ 4,000,000 Webster Capital Trust I, 9.36% 01/29/2027 Capital Security, 144A**** .......... 4,472,520
7,900 Wells Fargo Capital Trust IV, 7.00% Pfd. ...................................... 204,966
20,000 Wells Fargo Capital Trust IX, 5.625% Pfd. ..................................... 492,800
------------------------------------------------------------------------------------------------------------
123,015,223
-------------
FINANCIAL SERVICES -- 6.7%
-----------------------------------------------------------------------------------------------------------------
141,000 Fannie Mae, Adj. Rate Pfd. .................................................... 7,938,300*
Lehman Brothers Holdings, Inc.:
86,500 5.94% Pfd., Series C ........................................................ 4,438,315*
232,100 6.50% Pfd., Series F ........................................................ 6,209,836*
9,700 Merril Lynch Capital Trust III, 7.00% Pfd. .................................... 260,736
168,650 Merrill Lynch Capital Trust V, 7.28% Pfd. ..................................... 4,617,637
17,200 Morgan Stanley Capital Trust II, 7.25% Pfd. ................................... 449,092
15,000 Morgan Stanley Capital Trust IV, 6.25% Pfd. ................................... 384,150
6,000 Morgan Stanley Capital Trust V, 5.75% Pfd. .................................... 147,840
------------------------------------------------------------------------------------------------------------
24,445,906
-------------
INSURANCE -- 11.0%
-----------------------------------------------------------------------------------------------------------------
15,000 AAG Holding Company, Inc., 7.25% Pfd. ......................................... 385,875
177,380 ACE Ltd., 7.80% Pfd., Series C ................................................ 4,754,671**(1)
$ 6,420,000 AON Capital Trust A, 8.205% 01/01/27 Capital Security ......................... 7,353,404
189,400 Everest Re Capital Trust II, 6.20% Pfd., Series B ............................. 4,649,770(1)
ING Groep NV:
36,000 7.05% Pfd. .................................................................. 951,120**(1)
125,000 7.20% Pfd. .................................................................. 3,326,250**(1)
30,000 Renaissancere Holdings Ltd., 6.08% Pfd., Series C ............................. 731,700**(1)
40,000 St. Paul Capital Trust I, 7.60% Pfd. .......................................... 1,051,600
$ 500,000 Sun Life Canada, 8.526% Pfd., 144A**** ........................................ 556,255(1)
$ 4,815,000 USF&G Capital, 8.312% 07/01/46 Capital Security, 144A**** ..................... 5,955,119
30,000 XL Capital Ltd., 7.625% Pfd., Series B ........................................ 807,450**(1)
9,175 Zurich RegCaPS Funding Trust, 6.58% Pfd., 144A**** ............................ 9,692,149*
------------------------------------------------------------------------------------------------------------
40,215,363
-------------
5
--------------------------------------------------------------------------------
Flaherty & Crumrine/Claymore Total Return Fund Incorporated
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 28, 2005 (UNAUDITED)
------------------------------------------------------------
SHARES/$ PAR VALUE
------------ ---------
PREFERRED SECURITIES - (CONTINUED)
UTILITIES -- 13.4%
-----------------------------------------------------------------------------------------------------------------
222,700 Alabama Power Company, 5.30% Pfd. ............................................. $ 5,689,985*
45,700 Baltimore Gas & Electric Company, 6.70% Pfd., Series 1993 ..................... 4,771,308*
$ 2,750,000 COMED Financing II, 8.50% 01/15/27 Capital Security, Series B ................. 3,049,420
$ 2,500,000 Dominion Resources Capital Trust I, 7.83% 12/01/27 Capital Security ........... 2,755,425
Duke Energy Corporation:
50,214 7.04% Pfd., Series Y ........................................................ 5,182,838*
22,934 7.85% Pfd., Series S ........................................................ 2,377,224*
20,000 Energy East Capital Trust I, 8.25% Pfd. ....................................... 527,900
758 Entergy Arkansas, Inc., 7.40% Pfd. ............................................ 78,866*
70,000 FPC Capital I, 7.10% Pfd., Series A ........................................... 1,764,000
$ 4,500,000 Houston Light & Power, Capital Trust II, 8.257%, 02/01/37 Capital Security .... 4,937,423
30,445 Indianapolis Power & Light Company, 5.65% Pfd. ................................ 2,898,821*
Interstate Power & Light Company:
90,000 7.10% Pfd., Series C ........................................................ 2,447,550*
38,600 8.375% Pfd., Series B ....................................................... 1,303,136*
$ 5,000,000 PECO Energy Capital Trust IV, 5.75% 06/15/33 Capital Security ................. 4,910,650
16,200 PSEG Funding Trust II, 8.75% Pfd. ............................................. 454,248
120,000 Southern Union Company, 7.55% Pfd. ............................................ 3,316,200*
10,000 Southwest Gas Capital II, 7.70% Pfd. .......................................... 271,250
5,000 Union Electric Company, $7.64 Pfd. ............................................ 521,975*
82,717 Wisconsin Power & Light Company, 6.50% Pfd. ................................... 2,065,857*
------------------------------------------------------------------------------------------------------------
49,324,076
------------
OIL AND GAS -- 0.8%
-----------------------------------------------------------------------------------------------------------------
2,750 EOG Resources, Inc., 7.195% Pfd., Series B .................................... 2,934,690*
------------------------------------------------------------------------------------------------------------
2,934,690
------------
REAL ESTATE INVESTMENT TRUST (REIT) -- 6.2%
-----------------------------------------------------------------------------------------------------------------
16,020 AMB Property Corporation, 6.75% Pfd., REIT, Series M .......................... 408,590
40,000 BRE Properties, Inc., 6.75% Pfd., REIT, Series C .............................. 1,018,600
38,750 Carramerica Realty Corporation, 7.50% Pfd., REIT, Series E .................... 1,012,344
Duke Realty Corporation:
50,000 6.50% Pfd., REIT, Series K .................................................. 1,252,750
10,000 6.60% Pfd., REIT, Series L .................................................. 251,800
19,549 6.625% Pfd., REIT, Series J ................................................. 493,124
Equity Residential Properties:
18,962 6.48% Pfd., REIT, Series N .................................................. 478,316
85,000 8.29% Pfd., REIT, Series K .................................................. 5,408,125
6
--------------------------------------------------------------------------------
Flaherty & Crumrine/Claymore Total Return Fund Incorporated
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 28, 2005 (UNAUDITED)
-----------------------------------------------------------
SHARES/$ PAR VALUE
------------ ---------
PREFERRED SECURITIES - (CONTINUED)
REAL ESTATE INVESTMENT TRUST (REIT) -- (CONTINUED)
-----------------------------------------------------------------------------------------------------------------
PS Business Parks, Inc.:
57,000 6.875% Pfd., REIT, Series I ................................................. $ 1,418,445
16,900 7.00% Pfd., REIT, Series H .................................................. 424,781
44,500 7.60% Pfd., REIT, Series L .................................................. 1,165,233
45,000 7.95% Pfd., REIT, Series K .................................................. 1,198,575
Public Storage, Inc.:
44,200 7.50% Pfd., REIT, Series V .................................................. 1,177,709
1,400 7.625% Pfd., REIT, Series T ................................................. 36,918
48,600 8.00% Pfd., REIT, Series R .................................................. 1,294,704
125,000 Regency Centers Corporation, 7.25% Pfd., REIT ................................. 3,254,375
86,000 Weingarten Realty Investment, 6.95% Pfd., REIT ................................ 2,323,720
------------------------------------------------------------------------------------------------------------
22,618,109
------------
MISCELLANEOUS INDUSTRIES -- 0.8%
-----------------------------------------------------------------------------------------------------------------
34,000 Ocean Spray Cranberries, Inc., 6.25% Pfd., 144A****............................ 2,859,570*
------------------------------------------------------------------------------------------------------------
2,859,570
------------
TOTAL PREFERRED SECURITIES
(Cost $254,083,997) ......................................................... 265,412,937
------------
CORPORATE DEBT SECURITIES -- 22.1%
FINANCIAL SERVICES -- 1.4%
-----------------------------------------------------------------------------------------------------------------
600 Corp-Backed Trust Certificates, 5.80% Pfd., Series Goldman Sachs .............. 14,967
$ 5,018,000 Lehman Brothers, Guaranteed Note, Variable Rate, 12/16/16, 144A**** ........... 5,030,545
------------------------------------------------------------------------------------------------------------
5,045,512
------------
INSURANCE -- 4.8%
-----------------------------------------------------------------------------------------------------------------
20,000 American Financial Group, Inc., 7.125% 02/03/34, Senior Note .................. 529,400
$ 8,700,000 OneAmerica Financial Partners, 7.00% 10/15/33, 144A**** ....................... 9,778,887
$ 7,000,000 UnumProvident Corporation, 7.25% 03/15/28, Senior Notes ....................... 7,114,380
------------------------------------------------------------------------------------------------------------
17,422,667
------------
OIL AND GAS -- 2.6%
-----------------------------------------------------------------------------------------------------------------
356,200 Nexen, Inc., 7.35% Subordinated Notes ......................................... 9,592,466(1)
------------------------------------------------------------------------------------------------------------
9,592,466
------------
UTILITIES -- 11.0%
-----------------------------------------------------------------------------------------------------------------
$ 2,000,000 AEP Texas Central Company, 6.65% 02/15/33, Senior Notes, Series E............. 2,257,960
$ 6,100,000 Constellation Energy Group, 7.60% Pfd., 04/01/32, Senior Notes ................ 7,507,880
7
--------------------------------------------------------------------------------
Flaherty & Crumrine/Claymore Total Return Fund Incorporated
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 28, 2005 (UNAUDITED)
-----------------------------------------------------------
SHARES/$ PAR VALUE
------------ ---------
CORPORATE DEBT SECURITIES - (CONTINUED)
UTILITIES -- (CONTINUED)
-----------------------------------------------------------------------------------------------------------------
27,200 Corp-Backed Trust Certificates, 7.875% 02/15/32, Series Duke Capital .......... $ 730,864
$ 5,000,000 Duke Capital Corporation, 8.00% 10/01/19 Senior Notes ......................... 6,160,275
5,000 Entergy Mississippi, Inc., 7.25% 1st Mortgage ................................. 133,300
66,700 Georgia Power Company, 6.00%, 08/15/44, Senior Notes, FGIC Insured ............ 1,772,219
$ 4,000,000 Indianapolis Power & Light Company, 6.60% 01/01/34, 1st Mortgage, 144A**** .... 4,481,820
$ 4,000,000 Interstate Power & Light Company, 6.45% 10/15/33, Senior Notes ................ 4,426,860
$ 5,670,000 Oncor Electric Delivery Company, 7.25% 01/15/33, Secured ...................... 6,889,560
$ 1,200,000 TXU Corporation, 6.55% 11/15/34, 144A**** ..................................... 1,227,744
$ 4,000,000 Wisconsin Electric Power Company, 6.875% 12/01/95 ............................. 4,745,140
------------------------------------------------------------------------------------------------------------
40,333,622
------------
MISCELLANEOUS -- 2.3%
-----------------------------------------------------------------------------------------------------------------
19,625 Ford Motor Company, 7.50% 06/10/43, Senior Notes .............................. 496,905
$ 6,265,000 General Motors Corporation, 8.80% 03/01/21 .................................... 6,438,916
25,300 Maytag Corporation, 7.875% 08/01/31 ........................................... 641,608
$ 950,000 Verizon Maryland, 7.15% 05/01/23 .............................................. 1,036,004
------------------------------------------------------------------------------------------------------------
8,613,433
------------
TOTAL CORPORATE DEBT SECURITIES
(Cost $75,942,231) .......................................................... 81,007,700
------------
COMMON STOCK AND CONVERTIBLE SECURITIES -- 2.7%
INSURANCE -- 0.2%
-----------------------------------------------------------------------------------------------------------------
36,000 XL Capital Ltd., 6.50% Mandatory Convertible, 05/15/07 ........................ 878,940(1)
------------------------------------------------------------------------------------------------------------
878,940
------------
UTILITIES -- 2.5%
-----------------------------------------------------------------------------------------------------------------
114,077 FPL Group, Inc ................................................................ 9,066,270*
------------------------------------------------------------------------------------------------------------
9,066,270
------------
TOTAL COMMON STOCK AND CONVERTIBLE SECURITIES
(Cost $8,889,977) .......................................................... 9,945,210
------------
OPTION CONTRACTS -- 1.1%
2,300 June Put Options on June U.S. Treasury Bond Futures, Expiring 05/20/05 ........ 3,935,937+
------------------------------------------------------------------------------------------------------------
TOTAL OPTION CONTRACTS
(Cost $2,773,916) .......................................................... 3,935,937
------------
8
--------------------------------------------------------------------------------
Flaherty & Crumrine/Claymore Total Return Fund Incorporated
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 28, 2005 (UNAUDITED)
-----------------------------------------------------------
SHARES/$ PAR VALUE
------------ ---------
MONEY MARKET FUND -- 0.0%
110,327 BlackRock Provident Institutional, TempFund .................................. $ 110,327
------------------------------------------------------------------------------------------------------------
TOTAL MONEY MARKET FUND
(Cost $110,327) ............................................................ 110,327
-------------
TOTAL INVESTMENTS (Cost $341,800,448***) ....................................... 98.4% 360,412,111
OTHER ASSETS AND LIABILITIES (NET) ............................................. 1.6% 5,702,707
------- -------------
TOTAL NET ASSETS AVAILABLE TO COMMON STOCK AND PREFERRED STOCK ................. 100.0%++ $ 366,114,818
------- -------------
AUCTION MARKET PREFERRED STOCK (AMPS) REDEMPTION VALUE .................................... (128,500,000)
-------------
TOTAL NET ASSETS AVAILABLE TO COMMON STOCK ................................................ $ 237,614,818
=============
-------------
* Securities eligible for the Dividends Received Deduction and distributing
Qualified Dividend Income.
** Securities distributing Qualified Dividend Income only.
*** Aggregate cost of securities held.
**** Securities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration to qualified institutional buyers.
(1) Foreign Issuer
+ Non-income producing.
++ The percentage shown for each investment category is the total value of
that category as a percentage of net assets available to Common and
Preferred Stock.
ABBREVIATIONS:
REIT -- Real Estate Investment Trust
PFD. -- Preferred Securities
PVT. -- Private Placement Securities
Capital Securities are treated as debt instruments for financial
statement purposes and the amounts shown in the Shares/$ Par column
are dollar amounts of par value.
9
--------------------------------------------------------------------------------
Flaherty & Crumrine/Claymore Total Return Fund Incorporated
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE TO COMMON STOCK(1)
FOR THE PERIOD FROM DECEMBER 1, 2004 THROUGH FEBRUARY 28, 2005 (UNAUDITED)
----------------------------------------------------------------------------
VALUE
---------
OPERATIONS:
Net investment income .......................................................... $ 4,980,614
Net realized loss on investments sold during the period ........................ (1,010,880)
Change in net unrealized appreciation of investments held during the period .... 8,799,320
Distributions to Auction Market Preferred Stock (AMPS) Shareholders from net
investment income, including changes in accumulated undeclared distributions (733,100)
-------------
NET INCREASE IN NET ASSETS FROM OPERATIONS ................................. 12,035,954
DISTRIBUTIONS:
Dividends paid from net investment income to Common Stock Shareholders(2) ...... (4,762,983)
-------------
TOTAL DISTRIBUTIONS TO COMMON STOCK SHAREHOLDERS ........................... (4,762,983)
FUND SHARE TRANSACTIONS:
Increase from Common Stock Transactions ........................................ 536,884
-------------
NET INCREASE IN NET ASSETS AVAILABLE TO COMMON STOCK RESULTING
FROM FUND SHARE TRANSACTIONS ............................................... 536,884
NET INCREASE IN NET ASSETS AVAILABLE TO COMMON STOCK -------------
FOR THE PERIOD ............................................................. $ 7,809,855
=============
---------------------------------------------------------------------------------------------------------
NET ASSETS AVAILABLE TO COMMON STOCK:
Beginning of period ............................................................ $ 229,804,963
Net increase during the period ................................................. 7,809,855
-------------
End of period .................................................................. $ 237,614,818
=============
----------
(1) These tables summarize the three months ended February 28, 2005 and should
be read in conjunction with the Fund's audited financial statements,
including footnotes, in its Annual Report dated November 30, 2004.
(2) Includes income earned, but not paid out, in prior fiscal year.
10
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Flaherty & Crumrine/Claymore Total Return Fund Incorporated
FINANCIAL HIGHLIGHTS (1)
FOR THE PERIOD FROM DECEMBER 1, 2004 THROUGH FEBRUARY 28, 2005 (UNAUDITED)
FOR A COMMON SHARE OUTSTANDING THROUGHOUT THE PERIOD.
-----------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ............................................. $ 23.56
------------
INVESTMENT OPERATIONS:
Net investment income ............................................................ 0.51
Net realized and unrealized gain on investments .................................. 0.81
DISTRIBUTIONS TO AMPS* SHAREHOLDERS:
From net investment income ....................................................... (0.08)
From net realized capital gains .................................................. --
------------
Total from investment operations ................................................. 1.24
------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS:
From net investment income ....................................................... (0.49)
From net realized capital gains .................................................. --
------------
Total distributions to Common Shareholders ....................................... (0.49)
------------
Net asset value, end of period ................................................... $ 24.31
============
Market value, end of period ...................................................... $ 23.55
============
Common shares outstanding, end of period ......................................... 9,776,333
============
RATIOS TO AVERAGE NET ASSETS AVAILABLE TO COMMON STOCK SHAREHOLDERS:
Net investment income + .......................................................... 7.20%**
Operating expenses ............................................................... 1.48%**
----------
SUPPLEMENTAL DATA:++
Portfolio turnover rate .......................................................... 5%***
Total net assets available to Common and Preferred Stock, end of period (in 000's) $ 366,115
Ratio of operating expenses to total average net assets available to
Common and Preferred Stock ................................................... 0.96%**
(1) These tables summarize the three months ended February 28, 2005 and should
be read in conjunction with the Fund's audited financial statements,
including footnotes, in its Annual Report dated November 30, 2004.
* Auction Market Preferred Stock.
** Annualized.
*** Not annualized.
+ The net investment income ratios reflect income net of operating expenses
and payments to AMPS* Shareholders.
++ Information presented under heading Supplemental Data includes AMPS*.
--------------------------------------------------------------------------------
11
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Flaherty & Crumrine/Claymore Total Return Fund Incorporated
FINANCIAL HIGHLIGHTS (CONTINUED)
PER SHARE OF COMMON STOCK (UNAUDITED)
-------------------------------------
TOTAL DIVIDEND
DIVIDENDS NET ASSET NYSE REINVESTMENT
PAID VALUE CLOSING PRICE PRICE(1)
------------ ------------ ------------- ------------
December 31, 2004 ........ $0.1625 $24.08 $24.80 $24.08
January 31, 2005 ......... 0.1625 24.33 24.28 24.50
February 28, 2005 ........ 0.1625 24.31 23.55 23.87
----------
(1) Whenever the net asset value per share of the Fund's common stock is less
than or equal to the market price per share on the payment date, new
shares issued will be valued at the higher of net asset value or 95% of
the then current market price. Otherwise, the reinvestment shares of
common stock will be purchased in the open market.
12
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LIGHTHOUSE GRAPHIC
FLAHERTY & CRUMRINE/CLAYMORE
============================
TOTAL RETURN FUND
QUARTERLY
REPORT
FEBRUARY 28, 2005
web site: www.fcclaymore.com
DIRECTORS
Martin Brody
Donald F. Crumrine, CFA
Nicholas Dalmaso
David Gale
Morgan Gust
Robert F. Wulf, CFA
OFFICERS
Donald F. Crumrine, CFA
Chairman of the Board
and Chief Executive Officer
Robert M. Ettinger, CFA
President
R. Eric Chadwick, CFA
Chief Financial Officer,
Vice President, Treasurer
and Secretary
Peter C. Stimes, CFA
Chief Compliance
Officer and Vice President
Nicholas Dalmaso
Vice President
Bradford S. Stone
Vice President
Laurie Lodolo
Assistant Compliance Officer,
Assistant Treasurer and
Assistant Secretary
INVESTMENT ADVISER
Flaherty & Crumrine Incorporated
e-mail: flaherty@pfdincome.com
QUESTIONS CONCERNING YOUR SHARES OF FLAHERTY &
CRUMRINE/CLAYMORE TOTAL RETURN FUND?
o If your shares are held in a Brokerage Account, contact your Broker.
o If you have physical possession of your shares in certificate form, contact
the Fund's Transfer Agent & Shareholder Servicing Agent --
PFPC Inc.
P.O. Box 43027
Providence, RI 02940-3027
1-800-331-1710
THIS REPORT IS SENT TO SHAREHOLDERS OF FLAHERTY & CRUMRINE/CLAYMORE TOTAL RETURN
FUND INCORPORATED FOR THEIR INFORMATION. IT IS NOT A PROSPECTUS, CIRCULAR OR
REPRESENTATION INTENDED FOR USE IN THE PURCHASE OR SALE OF SHARES OF THE FUND OR
OF ANY SECURITIES MENTIONED IN THIS REPORT.