SCHEDULE 14A
PROXY STATEMENT
PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by Registrant [X]
Filed by Party other than the Registrant
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential for Use of the Commission Only as permitted by Rule 14a-6(e)(2)
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11c or Rule 14a-12
FLAHERTY & CRUMRINE/CLAYMORE TOTAL RETURN FUND INCORPORATED
(Name of Registrant as Specified in Its Charter)
---------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
___________________________
(2) Aggregate number of securities to which transaction applies: ____________
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11. (Set forth the amount on which the filing fee is
calculated and state how it was determined):_______________________________
(4) Proposed maximum aggregate value of transaction:___________________________
(5) Total fee paid:____________________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount previously paid:________________________________________________
(2) Form, Schedule or Registration Statement No.:__________________________
(3) Filing Party: _________________________________________________________
(4) Date Filed: ___________________________________________________________
FLAHERTY & CRUMRINE/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, 2006
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
offices of Willkie Farr & Gallagher LLP, 787 Seventh Avenue, Conference Room
45A, New York, New York 10019 at 8:30 a.m. ET, on April 21, 2006, for the
following purposes:
1. To elect Directors of each Fund (PROPOSAL 1).
2. To transact such other business as may properly come before the
Annual Meetings or any adjournments thereof.
YOUR VOTE IS IMPORTANT!
The Board of Directors of each Fund has fixed the close of business on
January 30, 2006 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 22, 2006 CHAD C. CONWELL
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
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, 2006
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, 2006, at 8:30 a.m. at the
offices of Willkie Farr & Gallagher LLP, 787 Seventh Avenue, Conference Room
45A, New York, New York 10019 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 22, 2006, primarily by mail, but proxy solicitations may also be made
by telephone, telefax or personal interviews conducted by officers of each Fund,
Flaherty & Crumrine Incorporated ("Flaherty & Crumrine" or the "Adviser"), the
investment adviser of each Fund, Claymore Securities, Inc. (the "Servicing
Agent"), the servicing agent of 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
proportionally by the Funds. Each Fund also will reimburse brokerage firms and
others for their expenses in forwarding solicitation material to the beneficial
owners of its shares. This proxy statement and form of proxy are first being
sent to shareholders on or about February 22, 2006.
THE ANNUAL REPORT OF EACH FUND, INCLUDING AUDITED FINANCIAL STATEMENTS FOR
THE FISCAL YEAR ENDED NOVEMBER 30, 2005, 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
("SEC") 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 of that proposal. Under the
Bylaws 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 respect to matters to be voted
on by the class to which such Share belongs, with pro rata voting rights for any
fractional Shares. On the record date, January 30, 2006, the following number of
Shares of each Fund were issued and outstanding:
1
COMMON STOCK AMPS
NAME OF FUND OUTSTANDING OUTSTANDING
Preferred Securities Fund (FFC) 42,601,719 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) 9,776,332 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 30, 2006*:
NAME AND ADDRESS OF BENEFICIAL/ AMOUNT AND NATURE
RECORD OWNER TITLE OF CLASS OF OWNERSHIP PERCENT OF CLASS
Cede & Co.** Common FFC - 42,520,353 99.81%
Depository Trust Company Stock (record)
55 Water Street, 25th Floor FLC - 9,747,386 99.70%
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 February 10, 2006, the Directors and officers, as a group, owned less
than 1% of each class of Shares of each Fund.
** A nominee partnership of The Depository Trust Company.
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 separately for each of FFC and FLC on each proposal on which shareholders
of that Fund are entitled to vote. Separate proxy cards are enclosed for each
Fund in which a shareholder is a record owner of Shares. Thus, if a proposal is
approved by shareholders of one Fund and not approved 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
PROPOSALS 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 Directors Common Shareholders as a single class AMPS Shareholders as a single class
elect one Director: Morgan Gust elect one Director: Karen H. Hogan
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2. 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 Common Shareholders as a single class AMPS Shareholders as a single class
elect one Director: Morgan Gust elect one Director: Karen H. Hogan
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2. 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. The Board of each Fund is divided into three classes,
each class having a term of three years. Each year the term of office of one
class expires and the successor or successors elected to such class serve for a
three-year term and until their successors are duly elected and qualified.
NOMINEES FOR THE BOARD OF DIRECTORS
Each nominee named below has consented to serve as a Director if elected at
the relevant Meeting. If a designated nominee declines or otherwise becomes
unavailable for election, however, the proxy confers discretionary power on the
persons named therein to vote in favor of a substitute nominee or nominees.
Mr. Gust and Ms. Hogan, each a Class II Director of FFC, have each been
nominated for a three-year term to expire at FFC's 2009 Annual Meeting of
Shareholders and until their successors are duly elected and qualified. Mr. Gust
and Ms. Hogan, each a Class II Director of FLC, have each been nominated for a
three-year term to expire at FLC's 2009 Annual Meeting of Shareholders and until
their successors are duly elected and qualified.
Under each Fund's Articles of Incorporation, Articles Supplementary and the
Investment Company Act of 1940, as amended (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. However, 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, that when combined with the
two Directors elected by the holders of AMPS, would give the holders of AMPS a
majority of the Directors. David Gale and Morgan Gust, as Directors, currently
represent holders of AMPS of each Fund. Karen H. Hogan, as a Director of each
Fund, has been nominated by each Fund's Board as a Director to represent each
Fund's holders of AMPS (to replace Mr. Gust). A quorum of the AMPS shareholders
must be present at the Meeting of each Fund in order for the proposal to elect
Ms. Hogan to be considered.
FUND (CLASS) NOMINEE(S) FOR DIRECTOR
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FFC (Common Stock) Gust
FFC (AMPS) Hogan
FLC (Common Stock) Gust
FLC (AMPS) Hogan
INFORMATION ABOUT DIRECTORS AND OFFICERS
Set forth in the table below are the existing Directors and nominees for
election to the Boards of Directors of the Funds, including information relating
to their respective positions held with each Fund, a brief statement of their
principal occupations during the past five years and other directorships, if
any. Each Director serves in the same capacity for each Fund.
3
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:
DAVID GALE (1) Director Class I Director President and CEO 4 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) Flaherty & Crumrine
San Francisco, CA 94104 Preferred Income
Age: 56 Fund Incorporated
and Flaherty & Crumrine
Preferred Income
Opportunity Fund
Incorporated
MORGAN GUST (1) Director Class II Director Since March 2002, 4 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: 58 and marketing) since March Preferred Income
2002 and, for more than five Opportunity Fund.
years prior thereto, Incorporated;
Executive Vice President, CoBiz, Inc.
and various other Vice (financial services)
President positions at
Giant Industries, Inc.
KAREN H. HOGAN (2) Director Class II Director Retired; Community 4 Flaherty & Crumrine
301 E. Colorado Boulevard FFC - Since 2005 Volunteer; From Sept Preferred Income Fund
Suite 720 FLC - Since 2005 1985 to Jan 1997, Incorporated and Flaherty
Pasadena, CA 91101 Senior Vice President of & Crumrine Preferred
Age: 44 Preferred Stock Origination Income Opportunity
at Lehman Brothers and, Fund Incorporated
previously Vice President of
New Product Development
ROBERT F. WULF Director Class III Director Financial Consultant; 4 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: 68 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 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 Incorporated and
Age: 58 Executive Flaherty & Crumrine
Officer Preferred Income
Opportunity Fund
Incorporated
OFFICERS:
ROBERT M. ETTINGER President Officer President and Director N/A N/A
301 E. Colorado Boulevard FFC - since inception of Flaherty
Suite 720 FLC - since inception & Crumrine
Pasadena, CA 91101 Incorporated
Age: 47
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 and FFC - since inception Incorporated since
Pasadena, CA 91101 Treasurer August 2001, and
Age: 30 previously (since
January 1999) portfolio
manager of Flaherty &
Crumrine Incorporated
CHAD C. CONWELL Chief Officer Chief Compliance N/A N/A
301 E. Colorado Boulevard Compliance FFC - since 2005 Officer
Suite 720 Officer, FLC - since 2005 of Flaherty & Crumrine
Pasadena, CA 91101 Vice President Incorporated since
Age: 33 and Secretary September 2005, and
since July 2005,
Vice President of Flaherty
& Crumrine Incorporated; from
Sept 1998 to June 2005, Attorney
with Paul, Hastings, Janofsky
& Walker LLP
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 Vice President of N/A N/A
392 Springfield Avenue and Assistant FFC - since 2003 Flaherty & Crumrine
Mezzanine Suite Treasurer FLC - since inception Incorporated since
Summit, NJ 07901 May 2003; from June 2001
Age: 46 to 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
NICHOLAS DALMASO Vice President Officer Director of Claymore N/A Trustee, Dreman/
2455 Corporate West Drive and Assistant FFC - since inception Group, LLC since Claymore Dividend
Lisle, IL 60532 Secretary FLC - since inception January 2002. and Income Fund,
Age: 39 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
CHRISTOPHER D. RYAN Vice President Officer Vice President of N/A N/A
301 E. Colorado Boulevard FFC - since 2005 Flaherty & Crumrine
Suite 720 FLC - since 2005 Incorporated since February
Pasadena, CA 91101 2005; from Oct 2002 to
Age: 38 Feb 2004, Product Analyst of
Flaherty & Crumrine
Incorporated
6
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:
LAURIE C. LODOLO Assistant Officer Assistant Compliance N/A N/A
301 E. Colorado Boulevard Compliance FFC - since 2004 Officer of Flaherty &
Suite 720 Officer, Assistant FLC - since 2004 Crumrine Incorporated
Pasadena, CA 91101 Treasurer and since August 2004;
Age: 41 Assistant Secretary since February 2004,
Secretary of Flaherty &
Crumrine Incorporated;
since January 1987
Account Administrator of
Flaherty & Crumrine
Incorporated
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* The Class II Directors of each Fund have been nominated for a
three-year term to expire at each Fund's 2009 Annual Meeting of
Shareholders and until their sucessors are duly elected and qualified.
The 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 qualifed. The Class I Director each Fund will serve until
each Fund's 2008 Annual Meeting of Shareholders and until his successor
is duly elected and qualified.
** The funds in the fund complex are: Flaherty & Crumrine Preferred Income
Fund Incorporated, Flaherty & Crumrine Preferred Income Opportunity
Fund Incorporated, Flaherty & Crumrine/Claymore Preferred Securities
Income Fund Incorporated and Flaherty & Crumrine/Claymore Total Return
Fund Incorporated (together, the "Flaherty & Crumrine Fund Family").
(1) As a Director, currently represents holders of AMPS.
(2) As a Director, nominated to represent holders of AMPS.
(3) "Interested person" of the Funds as defined in the 1940 Act. Mr.
Crumrine is considered an "interested person" because of his
affiliation with the Adviser.
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.
7
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: --- --- -----
David Gale C C E
Morgan Gust C C E
Karen H. Hogan A A A
Robert F. Wulf C C D
INTERESTED DIRECTORS:
Donald F. Crumrine E(4) E(4) E(4)
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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 February 10, 2006.
(1) No Director or officer of the Funds owned any shares of AMPS on
February 10, 2006.
(2) This information has been furnished by each Director as of February 10,
2006. "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 Incorporated
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 Incorporated or any of their affiliates receives for each
Fund a fee of $9,000 per annum plus $500 for each in-person meeting attended,
and $150 for each telephone meeting attended. In addition, the Audit Committee
Chairman receives 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 seven meetings
(three of which were held by telephone conference call) and the Board of
Directors of FLC held seven meetings (three of which were held by telephone
conference call) during the fiscal year ended November 30, 2005, and each
Director 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. The aggregate
remuneration paid to the Directors of each Fund for the fiscal year ended
November 30, 2005 is set forth below:
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BOARD MEETING TRAVEL AND
ANNUAL AND OUT-OF-POCKET
DIRECTORS FEES COMMITTEE MEETING FEES EXPENSES*
-----------------------------------------------------------------------------------------------------------------------
FFC $36,000 $24,900 $3,993
FLC $36,000 $24,900 $3,993
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* Includes reimbursement for travel and out-of-pocket expenses for both
"interested" and "non-interested" Directors ("Independent Directors").
AUDIT COMMITTEE REPORT
The role of each Fund's Audit Committee is to assist the Board of Directors
in its oversight of (i) the integrity of each Fund's financial statements and
the independent audit thereof; (ii) each Fund's accounting and financial
reporting policies and practices, its internal controls and, as appropriate, the
internal controls of certain service providers; (iii) each Fund's compliance
with legal and regulatory requirements; and (iv) the independent auditor's
qualifications, independence and performance. 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 27, 2006 and which is available on the Funds' website
(www.fcclaymore.com). As set forth in the Charter, management is responsible for
(i) the preparation, presentation 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 com-
8
pliance with accounting standards and applicable laws and regulations. The
Funds' independent registered public accounting firm ("independent accountants")
is responsible for planning and carrying out proper audits and reviews of each
Fund's financial statements and expressing an opinion as to their conformity
with accounting principles generally accepted in the United States of America.
In performing its oversight function, at a meeting held on January 26,
2006, 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, 2005,
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, 2005.
THIS REPORT WAS SUBMITTED BY THE AUDIT COMMITTEE OF EACH FUND'S BOARD OF
DIRECTORS
David Gale
Morgan Gust
Karen H. Hogan
Robert Wulf (Chairman)
January 27, 2006
Each Audit Committee met four times in connection with its Board of
Directors regularly scheduled meetings during the fiscal year ended November 30,
2005. 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
Ms. Hogan and Messrs. Gale, Gust and Wulf.
NOMINATING COMMITTEE
Each Board of Directors has a Nominating Committee composed entirely of
each Fund's independent (as such term is defined by the NYSE Listing Standards)
Directors, namely Ms. Hogan and Messrs. Gale, Gust and Wulf. The Nominating
Committee of each Fund met twice during the fiscal year ended November 30, 2005.
The Nominating Committee is responsible for identifying individuals believed to
be qualified to become Board members and recommending to the Board of Directors
such nominees to stand for election as directors at each Fund's annual meeting
of shareholders and to fill any vacancies on the Board. Each Fund's Nominating
Committee has a charter which is available on the Funds' website
(www.fcclaymore.com).
9
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 (except Ms.
Hogan, who was not a Director at that time) attended the April 21, 2005 Annual
Meetings of Shareholders.
COMPENSATION
The following table sets forth certain information regarding the
compensation of each Fund's Directors for the fiscal year ended November 30,
2005. No executive officer or person affiliated with a Fund received
compensation from a Fund during the fiscal year ended November 30, 2005 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 (0)
Director, Vice President and
Assistant Secretary
MARTIN BRODY*** $8,523 - FFC $25,940(0)
Director $8,523 - FLC
DAVID GALE $14,600 - FFC $58,700(4)
Director $14,600 - FLC
MORGAN GUST $14,450 - FFC $58,100(4)
Director $14,450 - FLC
KAREN H. HOGAN**** $5,927 - FFC $30,160(4)
Director $5,927 - FLC
ROBERT F. WULF $17,400 - FFC $69,900(4)
Director $17,400 - 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, 2005, 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,
2005.
** Mr. Dalmaso resigned as a Director of each Fund effective April 21, 2005.
*** Mr. Brody resigned as a Director of each Fund effective July 22, 2005.
**** Ms. Hogan became a Director of each Fund on July 22, 2005.
10
REQUIRED VOTE
The election of Mr. Gust as a Director of each Fund will require the
affirmative vote of a plurality of the votes cast by holders of the shares of
Common Stock of each Fund at the Meeting in person or by proxy. The election of
Ms. Hogan as a Director of each Fund 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.
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 2007 must be
received by the relevant Fund for consideration for inclusion in the relevant
Fund's proxy statement relating to the meeting no later than October 22, 2006
and must satisfy the other requirements of federal securities laws.
Each Fund's Bylaws require shareholders wishing to nominate Directors or
make proposals to be voted on at the Fund's annual meeting to provide timely
notice of the proposal in writing. To be considered timely, any such notice must
be delivered to or mailed and received at the principal executive offices of the
Fund 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 Bylaws with respect to each matter the shareholder proposes to bring
before the annual meeting.
ADDITIONAL INFORMATION
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
KPMG, 99 High Street, Boston, Massachusetts 02110-2371, has been selected
to serve as each Fund's independent accountants for each Fund's fiscal year
ending November 30, 2006. KPMG acted as the independent accountants for each
Fund for the fiscal year ended November 30, 2005. 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 years ended November 30, 2004 and 2005, respectively.
FISCAL YEAR ENDED AUDIT-RELATED
FUND NOVEMBER 30 AUDIT FEES FEES TAX FEES* ALL OTHER FEES**
---- ------------ ---------- ---- ---------- -----------------
FFC 2004 $36,500 $0 $6,000 $12,800
2005 $38,500 $0 $6,400 $13,700
FLC 2004 $36,500 $0 $6,000 $12,800
2005 $38,500 $0 $6,400 $13,700
* "Tax Fees" are those fees billed to each Fund by KPMG in connection with
tax consulting services, including primarily the review of each Fund's
income tax returns.
** "All Other Fees" are those fees billed to each Fund by KPMG in connection
with the preparation of a quarterly agreed-upon-procedures report. These
Agreed-Upon-Procedures ("AUP") are requirements arising from the Articles
Supplementary creating th Fund's Preferred Stock. Specifically, Moody's and
Fitch each require that such AUP be undertaken and a report be provided in
order to maintain their rating on the AMPS.
Each Fund's Audit Committee Charter requires that the Audit Committee
pre-approve all audit and non-audit services to be provided by the independent
accountants to the Fund, and all non-audit services to be provided by the
independent accountants to the Fund's investment adviser and any entity
controlling, controlled by or under common control with the Funds' investment
adviser that provide on-going services to each Fund ("affiliates"), if the
engagement relates directly to the operations and financial reporting of each
Fund, or to establish detailed pre-approval policies and procedures for such
services in accordance with applicable laws. All of the audit, audit-related and
tax services for which KPMG billed each Fund fees for each Fund's fiscal period
ended November 30, 2005 and fiscal year ended November 30, 2004 were
pre-approved by the Audit Committee.
11
For each Fund's fiscal year ended November 30, 2005, KPMG did not provide
any non-audit services (or bill any fees for such services) to the Funds'
investment adviser or any affiliates thereof that provide services to the Funds.
INVESTMENT ADVISER, ADMINISTRATOR AND SERVICING AGENT
Flaherty & Crumrine serves as the investment adviser to each Fund and its
business address is 301 E. Colorado Boulevard, Suite 720, Pasadena, California
91101. 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 2005, 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
at the meeting for purposes of determining the presence of a quorum. With
respect to Proposal 1, abstentions do not constitute a vote "for" or "against"
the proposal and will be disregarded in determining the "votes cast" on the
proposal.
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.
12
This Page Left Blank Intentionally.
DETACH HERE ZFCAC2
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, each with full powers of
substitution and revocation, to represent the undersigned and to vote on behalf
of the undersigned all shares of Common Stock which the undersigned is entitled
to vote at the Annual Meeting of Shareholders of the Fund to be held at the
offices of Willkie Farr & Gallagher LLP, 787 Seventh Avenue, Conference Room
45A, New York, New York 10019 at 8:30 a.m. ET, on April 21, 2006, 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
P.O. BOX 8586
EDISON, NJ 08818-8586
DETACH HERE ZFCAC1
X Please mark 3519
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 NOMINEE AS DIRECTOR.
PLEASE REFER TO THE PROXY STATEMENT FOR A DISCUSSION OF THE PROPOSAL.
1. ELECTION OF DIRECTOR
Nominee: (01) Morgan Gust
FOR WITHHELD
The Board of Directors recommends that the shareholders vote "FOR" the election
of the nominee as Director.
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 ZFCA82
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, each 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 offices of Willkie Farr & Gallagher LLP, 787 Seventh Avenue, Conference Room
45A, New York, New York 10019 at 8:30 a.m. ET, on April 21, 2006, 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
P.O. BOX 8586
EDISON, NJ 08818-8586
DETACH HERE ZFCA81
X Please mark 3519
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 NOMINEE AS DIRECTOR.
PLEASE REFER TO THE PROXY STATEMENT FOR A DISCUSSION OF THE PROPOSAL.
1. ELECTION OF DIRECTOR
NOMINEE: (01) Karen H. Hogan
FOR WITHHELD
The Board of Directors recommends that the shareholders vote "FOR" the election
of the nominee as Director.
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:---------