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 PREFERRED INCOME FUND INCORPORATED
(Name of Registrant as Specified in Its Charter)
---------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
___________________________
(2) Aggregate number of securities to which transaction applies: ____________
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11. (Set forth the amount on which the filing fee is
calculated and state how it was determined):_______________________________
(4) Proposed maximum aggregate value of transaction:___________________________
(5) Total fee paid:____________________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount previously paid:________________________________________________
(2) Form, Schedule or Registration Statement No.:__________________________
(3) Filing Party: _________________________________________________________
(4) Date Filed: ___________________________________________________________
FLAHERTY & CRUMRINE PREFERRED INCOME FUND INCORPORATED (NYSE: PFD)
FLAHERTY & CRUMRINE PREFERRED INCOME OPPORTUNITY FUND INCORPORATED (NYSE: PFO)
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 Preferred Income Fund Incorporated and Flaherty & Crumrine Preferred
Income Opportunity Fund Incorporated (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 approve an amendment to each Fund's Articles Supplementary Creating
and Fixing the Rights of Money Market Cumulative Preferred(TM) Stock of
each of PFD and PFO (each, the "Articles Supplementary"), relating to
the removal of the requirement that potential buyers of a Fund's Money
Market Cumulative PreferredTM Stock execute a "Master Purchaser's
Letter" (as more fully set forth in the Joint Proxy Statement) (PROPOSAL
2).
3. To transact such other business as may properly come before the Annual
Meetings or any adjournments thereof.
YOUR VOTE IS IMPORTANT!
THE NEW YORK STOCK EXCHANGE, INC. ("NYSE") HAS ADVISED THE FUNDS THAT THE
PROPOSALS SET FORTH ABOVE ARE "ROUTINE MATTERS" UNDER NYSE RULES. AS SUCH,
BROKER-DEALERS ARE PERMITTED TO VOTE THE SHARES OF THEIR CLIENTS WHO HAVE NOT
INDICATED VOTING INSTRUCTIONS ON THEIR PROXY CARD(S) WITH RESPECT TO SUCH A
PROPOSAL.
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,
CHAD C. CONWELL
SECRETARY
February 22, 2006
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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 PREFERRED INCOME FUND INCORPORATED (NYSE: PFD)
FLAHERTY & CRUMRINE PREFERRED INCOME OPPORTUNITY FUND INCORPORATED (NYSE: PFO)
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 Preferred Income Fund Incorporated ("PREFERRED INCOME FUND"
OR "PFD") and Flaherty & Crumrine Preferred Income Opportunity Fund Incorporated
("PREFERRED INCOME OPPORTUNITY FUND" OR "PFO") (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. ET, 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, 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.PREFERREDINCOME.COM) AND THE SECURITIES AND EXCHANGE
COMMISSION'S ("SEC") WEBSITE (WWW.SEC.GOV).
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 Money Market Cumulative Preferred(TM) Stock,
par value $0.01 per share ("MMP(R)"; 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 MMP(R)
NAME OF FUND OUTSTANDING OUTSTANDING
------------ ----------- -----------
Preferred Income Fund (PFD) 10,389,076 800
Preferred Income Opportunity Fund (PFO) 11,676,584 700
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 AMOUNT AND NATURE
BENEFICIAL/RECORD OWNER TITLE OF CLASS OF OWNERSHIP PERCENT OF CLASS
------------------------ -------------- ------------ -----------------
Cede & Co.** Common PFD - 9,879,836 95.10%
Depository Trust Company Stock (record)
55 Water Street, 25th Floor PFO - 11,149,573 95.49%
New York, NY (record)
10041
MMP(R) PFD - 800 (record) 100%
PFO - 700 (record) 100%
----------------------
* 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 as a
single class except as described below under Proposal 1 and will vote separately
for each of PFD and PFO 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 matter:
SUMMARY OF VOTING RIGHTS ON PROXY PROPOSALS
PREFERRED INCOME FUND (PFD)
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PROPOSAL COMMON SHAREHOLDERS MMP(R) SHAREHOLDERS
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1. Election of Directors Common Shareholders as a single class MMP(R) Shareholders as a single class
elect one Director: Robert F. Wulf elect one Director: Donald F. Crumrine
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2. Amendment to Articles Common and MMP(R) Shareholders, voting together as a single class
Supplementary - Removal of
Master Purchaser's Letter
Requirement
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3. Other Business Common and MMP(R) Shareholders, voting together as a single class
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2
PREFERRED INCOME OPPORTUNITY FUND (PFO)
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PROPOSAL COMMON SHAREHOLDERS MMP(R) SHAREHOLDERS
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1. Election of Directors Common Shareholders as a single class None
elect one Director: David Gale
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2. Amendment to Articles Common and MMP(R) Shareholders, voting together as a single class
Supplementary-Removal of Master
Purchaser's Letter Requirement
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3. Other Business Common and MMP(R) Shareholders, voting together as a single class
---------------------------------------------------------------------------------------------------------------------------------
PROPOSAL 1: ELECTION OF DIRECTORS
At the Meetings, shareholders are being asked to consider the election of
Directors of each Fund. The Board of each Fund is divided into three classes,
each class having a term of three years. Each year the term of office of one
class expires and the successor or successors elected to such class serve for a
three-year term and until their successors are duly elected and qualified.
NOMINEES FOR THE 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. Wulf and Mr. Crumrine, each a Class II Director of PFD, have each been
nominated for a three-year term to expire at PFD's 2009 Annual Meeting of
Shareholders and until their successors are duly elected and qualified. Mr.
Gale, a Class I Director of PFO, has been nominated for a three-year term to
expire at PFO's 2009 Annual Meeting of Shareholders and until his successor is
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 MMP(R),
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 MMP(R), 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 MMP(R), would give the holders of MMP(R)
a majority of the Directors. Donald F. Crumrine and Karen H. Hogan, as
Directors, currently represent holders of MMP(R) of each Fund. Mr. Crumrine, as
a Director of PFD, has been nominated by PFD's Board as a Director to
represent its holders of MMP(R). A quorum of the MMP(R) shareholders must be
present at the Meeting of PFD in order for the proposal to elect Mr. Crumrine to
be considered.
FUND (CLASS) NOMINEE FOR DIRECTOR
PFD (Common Stock) Wulf
PFD (MMP(R)) Crumrine
PFO (Common Stock) Gale
3
INFORMATION ABOUT DIRECTORS AND OFFICERS
Set forth in the table below are the existing Directors and nominees for
election to the Boards of Directors of the Funds, including information relating
to their respective positions held with each Fund, a brief statement of their
principal occupations during the past five years and other directorships, if
any.
NUMBER OF
PRINCIPAL FUNDS IN
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 Director Class I Director President and CEO 4 Metromedia
Delta Dividend Group, Inc. PFD - since 1997 of Delta Dividend International Group, Inc.
220 Montgomery Street, PFO - since 1997 Group, Inc. (telecommunications);
Suite 426 (investments) Flaherty &
San Francisco, CA 94104 Crumrine/Claymore
Age: 56 Preferred Securities
Income Fund
Incorporated and
Flaherty & Crumrine/
Claymore Total
Return Fund
Incorporated
MORGAN GUST Director Class III Director President of Giant 4 Flaherty &
Giant Industries, Inc. PFD - since inception Industries, Inc. Crumrine/Claymore
23733 N. Scottsdale Road PFO - since inception (petroleum refining Preferred Securities
Scottsdale, AZ 85255 and marketing) since Income Fund
Age: 58 March 2002, and for more Incorporated
than five years prior thereto, and Flaherty &
Executive Vice President, and Crumrine/Claymore
various other Vice President Total Return Fund
positions at Giant Incorporated;
Industries, Inc. CoBiz, Inc.
(financial services)
KAREN H. HOGAN (1) Director Since 2005 Retired; 4 Flaherty &
301 E. Colorado Boulevard PFD - Class I Community Volunteer; Crumrine/Claymore
Suite 720 PFO - Class III From September 1985 Preferred Securities
Pasadena, CA 91101 to January 1997, Income Fund
Age: 44 Senior Vice President Incorporated
of Preferred Stock and Flaherty &
Origination at Lehman Crumrine/Claymore
Brothers and, previously, Total Return Fund
Vice President of New Incorporated
Product Development
ROBERT F. WULF Director Class II Director Financial Consultant; 4 Flaherty &
3560 Deerfield Drive South PFD - since inception Trustee, University of Crumrine/Claymore
Salem, OR 97302 PFO - since inception Oregon Foundation; Preferred Securities
Age: 68 Trustee, San Francisco Income Fund
Theological Seminary Incorporated
and Flaherty &
Crumrine/Claymore
Total Return 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 DIRECTOR:
DONALD F. CRUMRINE (2),(3) Director, Class II Director Chairman of the Board 4 Flaherty &
301 E. Colorado Boulevard Chairman of PFD - since inception and Director of Crumrine/Claymore
Suite 720 the Board and PFO - since inception Flaherty & Crumrine Preferred Securities
Pasadena, CA 91101 Chief Executive Incorporated Income Fund
Age: 58 Officer Incorporated
and Flaherty &
Crumrine/Claymore
Total Return Fund
Incorporated
OFFICERS:
ROBERT M. ETTINGER President Officer President and N/A N/A
301 E. Colorado Boulevard PFD - since 2002 Director of Flaherty &
Suite 720 PFO - since 2002 Crumrine Incorporated
Pasadena, CA 91101
Age: 47
R. ERIC CHADWICK Chief Financial Officer Vice President of N/A N/A
301 E. Colorado Boulevard Officer, Vice PFD - since 2002 Flaherty & Crumrine
Suite 720 President and PFO - since 2002 Incorporated since
Pasadena, CA 91101 Treasurer August 2001,
Age: 30 and previously (since
January 1999) portfolio
manager of Flaherty &
Crumrine Incorporated
CHAD C. CONWELL Chief Compliance Officer Chief Compliance Officer N/A N/A
301 E. Colorado Boulevard Officer, PFD - since 2005 of Flaherty & Crumrine
Suite 720 Vice President PFO - since 2005 Incorporated since
Pasadena, CA 91101 and Secretary September 2005, and since
Age: 33 July 2005, Vice President of
Flaherty & Crumrine
Incorporated; from Sept 1998
to June 2005, Attorney with
Paul, Hastings, Janofsky &
Walker LLP
BRADFORD S. STONE Vice President Officer Vice President of N/A N/A
392 Springfield Avenue and Assistant PFD - since 2003 Flaherty & Crumrine
Mezzanine Suite Treasurer PFO - since 2003 Incorporated since
Summit, NJ 07901 May 2003; from June
Age: 46 2001 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
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:
CHRISTOPHER D. RYAN Vice Officer Vice President of N/A N/A
301 E. Colorado Boulevard President PFD - since 2005 Flaherty & Crumrine
Suite 720 PFO - since 2005 Incorporated since
Pasadena, CA 91101 February 2005; from
Age: 38 Oct 2002 to Feb 2004,
Product Analyst of
Flaherty & Crumrine
Incorporated
LAURIE C. LODOLO Assistant Officer Assistant Compliance N/A N/A
301 E. Colorado Boulevard Compliance PFD - since 2004 Officer of Flaherty &
Suite 720 Officer, Assistant PFO - since 2004 Crumrine Incorporated
Pasadena, CA 91101 Treasurer and since August 2004;
Age: 42 Assistant Secretary Assistant Secretary
since February 2004,
Secretary of Flaherty &
Crumrine Incorporated;
since January 1987,
Account Administrator
of Flaherty & Crumrine
Incorporated
---------------------
* The Class II Directors of PFD and the Class I Director of PFO have been
nominated for a three-year term to expire at each Fund's 2009 Annual
Meeting of Shareholders and until their successors are duly elected and
qualified. The Class III Director of PFD and the Class II Directors of PFO
serve until each Fund's Annual Meeting of Shareholders in 2007 and until
their successors are duly elected and qualified. The Class I Directors of
PFD and Class III Directors of PFO serve until each Fund's Annual Meeting
of Shareholders in 2008 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, represents holders of the Funds' MMP(R).
(2) As a Director, currently represents holders of the Funds' MMP(R) and is
nominated to represent holders of PFD's MMP(R).
(3) "Interested person" of the Funds as defined in the 1940 Act. Mr. Crumrine
is considered an "interested person" because of his affiliation with
Flaherty & Crumrine, which acts as each Fund's investment adviser.
BENEFICIAL OWNERSHIP OF SHARES IN FUNDS AND FUND COMPLEX FOR EACH DIRECTOR AND
NOMINEE FOR ELECTION AS DIRECTOR
Set forth in the table below is the dollar range of equity securities in
each Fund and the aggregate dollar range of equity securities in the Flaherty &
Crumrine Fund Family beneficially owned by each Director.
AGGREGATE DOLLAR RANGE OF EQUITY
SECURITIES IN ALL REGISTERED INVESTMENT
DOLLAR RANGE OF EQUITY COMPANIES OVERSEEN BY DIRECTOR IN
NAME OF DIRECTOR OR NOMINEE SECURITIES HELD IN FUND* (1)(2) FAMILY OF INVESTMENT COMPANIES* (3)
--------------------------- -------------------------------- -----------------------------------
PFD PFO TOTAL
NON-INTERESTED DIRECTORS: --- --- -----
David Gale C C E
Morgan Gust C C E
Karen H. Hogan A A A
6
AGGREGATE DOLLAR RANGE OF EQUITY
SECURITIES IN ALL REGISTERED INVESTMENT
DOLLAR RANGE OF EQUITY COMPANIES OVERSEEN BY DIRECTOR IN
NAME OF DIRECTOR OR NOMINEE SECURITIES HELD IN FUND* (1)(2) FAMILY OF INVESTMENT COMPANIES* (3)
--------------------------- -------------------------------- -----------------------------------
PFD PFO TOTAL
NON-INTERESTED DIRECTORS: --- --- -----
Robert F. Wulf C C D
INTERESTED DIRECTORS:
Donald F. Crumrine E(4) E(4) E(4)
---------------
* 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 MMP(R) 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 PFD and PFO 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 PFD held eight meetings
(four of which were held by telephone conference call) and the Board of
Directors of PFO held eight meetings (four 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 or she 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:
-----------------------------------------------------------------------------------------------------------------------
BOARD MEETING TRAVEL AND
ANNUAL AND OUT-OF-POCKET
DIRECTORS FEES COMMITTEE MEETING FEES EXPENSES*
-----------------------------------------------------------------------------------------------------------------------
PFD $36,000 $24,500 $4,643
-----------------------------------------------------------------------------------------------------------------------
PFO $36,000 $24,500 $4,643
-----------------------------------------------------------------------------------------------------------------------
--------------
* Includes reimbursement for travel and out-of-pocket expenses for both
"interested" and "non-interested" Directors ("Independent Directors").
AUDIT COMMITTEE REPORT
The role of each Fund's Audit Committee is to assist the Board of Directors
in its oversight of (i) the integrity of each Fund's financial statements and
the independent audit thereof; (ii) each Fund's accounting and financial
reporting policies and practices, its internal controls and, as appropriate, the
internal controls of certain service providers; (iii) each Fund's compliance
with legal and regulatory requirements; and (iv) the independent auditor's
qualifications, independence and performance. Each Fund's Audit Committee is
also required to prepare an audit committee report pursuant to the rules of the
Securities and Exchange Commission (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.preferredincome.com). As set forth in the Charter, management is
responsible for (i) prep-
7
aration, 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 compliance with accounting standards and applicable laws and
regulations. The Funds' independent registered public accounting firm (the
"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 control systems, and the independent audit process.
The members of the Audit Committee are not, and do not represent themselves
to be, professionally engaged in the practice of auditing or accounting and are
not employed by each Fund for accounting, financial management or internal
control. Moreover, the Audit Committee relies on and makes no independent
verification of the facts presented to it or representations made by management
or the independent accountants. Accordingly, the Audit Committee's oversight
does not provide an independent basis to determine that management has
maintained appropriate accounting and financial reporting principles and
policies, or internal controls and procedures, designed to assure compliance
with accounting standards and applicable laws and regulations. Furthermore, the
Audit Committee's considerations and discussions referred to above do not
provide assurance that the audit of each Fund's financial statements has been
carried out in accordance with generally accepted accounting standards or that
the financial statements are presented in accordance with generally accepted
accounting principles.
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 for recommending to the Board of
Directors such nominees to stand for election as directors at each Fund's annual
meeting of shareholders, and to fill any vacancies on the Board. Each Fund's
Nominating Committee has a charter which is available on the Funds' website
(www.preferredincome.com).
8
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 of each Fund
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
ROBERT M. ETTINGER** $0 $0 (0)
Director and President
MARTIN BRODY** $4,447 - PFD $25,940(0)
Director $4,447 - PFO
DAVID GALE $14,750 - PFD $58,700(4)
Director $14,750 - PFO
MORGAN GUST $14,600 - PFD $58,100(4)
Director $14,600 - PFO
KAREN H. HOGAN*** $9,153 - PFD $30,160(4)
Director $9,153 - PFO
ROBERT F. WULF $17,550 - PFD $69,900(4)
Director $17,550 - PFO
----------------
* 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.
** Messrs. Ettinger and Brody each resigned as a Director of the Funds
effective April 21, 2005.
*** Ms. Hogan became a Director of each Fund on April 21, 2005.
9
REQUIRED VOTE
The election of Mr. Wulf as a Director of Preferred Income Fund will
require the affirmative vote of a plurality of the votes cast by holders of the
shares of Common Stock of such Fund at the Meeting in person or by proxy. The
election of Mr. Crumrine as a Director of Preferred Income Fund will require the
affirmative vote of a plurality of the votes cast by holders of the shares of
MMP(R) of such Fund at the Meeting in person or by proxy. The election of Mr.
Gale as a Director of Preferred Income Opportunity Fund will require the
affirmative vote of a plurality of the votes cast by holders of the shares of
Common Stock of such Fund at the Meeting in person or by proxy.
EACH BOARD OF DIRECTORS, INCLUDING ALL OF THE INDEPENDENT DIRECTORS, UNANIMOUSLY
RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" EACH NOMINEE AS DIRECTOR.
PROPOSAL 2: APPROVAL OF AN AMENDMENT TO EACH FUND'S ARTICLES SUPPLEMENTARY
RELATING TO THE REMOVAL OF THE MASTER PURCHASER'S LETTER REQUIREMENT
The second proposal to be considered at the Meeting is amending the
Articles Supplementary Creating and Fixing the Rights of Money Market Cumulative
Preferred(TM) Stock of each of PFD and PFO (each, the "Articles Supplementary")
as set forth in the proposed ArticlES of Amendment for each of PFD and PFO (the
"Proposed Amendments") described below and attached to this Joint Proxy
Statement as Proposed Amendments A-1 and A-2, respectively.
The purpose of the Proposed Amendments is to remove the requirement that
potential buyers of a Fund's MMP(R) execute a "Master Purchaser's Letter".
REASONS FOR PROPOSED AMENDMENTS A-1 AND A-2. The Proposed Amendments would
remove the requirement that potential buyers of a Fund's MMP(R) execute a Master
Purchaser's Letter. By way of background, when the Articles Supplementary of
each Fund were first adopted in the early 1990's, it was common practice for
closed-end funds to require a potential investor in its preferred stock (through
its broker-dealer) to execute a Master Purchaser's Letter which set forth the
buyer's intent to purchase the preferred stock in accordance with the terms of
the Articles Supplementary. Accordingly, both Funds have such a provision in
their Articles Supplementary. Market practice has changed over the past 15 years
so that now it is more common not to require this letter. Because of this shift
in market practice, each Fund has received several requests from broker-dealers
to remove this requirement from the Funds' Articles Supplementary and has been
informed by others that the Master Purchaser's Letter requirement can be an
impediment to participation in the Funds' auctions. The Funds believe that the
Proposed Amendments will not have a material effect on the rights of any
existing common or preferred Shareholders.
REQUIRED VOTE
Approval of the Articles of Amendment of each Fund 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 MMP(R), 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 MMP(R), about the Proposed Amendments. They have
indicated preliminarily that the changes would not impair their current ratings
on the MMP(R) ("Aa1" and "AAA," respectively). In any event, the Proposed
Amendments will not be implemented unless Moody's and Fitch each confirms that
they would not impair their current ratings on the MMP(R).
THE BOARD OF DIRECTORS OF EACH FUND UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS VOTE "FOR" PROPOSAL NO. 2.
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 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.
10
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**
---- ----------- ---------- ---- -------- ----------------
PFD 2004 $34,500 -- $6,000 $11,200
2005 $36,427 -- $6,400 $12,100
PFO 2004 $34,500 -- $5,000 $11,200
2005 $36,500 -- $6,400 $12,100
-------------------
* "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 the 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 MMP(R).
Each Fund's Audit Committee Charter requires that the Audit Committee
pre-approve all audit and non-audit services to be provided by the independent
accountants to the Fund, and all non-audit services to be provided by the
independent accountants to the Fund's investment adviser and any entity
controlling, controlled by or under common control with the Funds' investment
adviser ("affiliates") that provide on-going services to each Fund, if the
engagement relates directly to the operations and financial reporting of each
Fund, or to establish detailed pre-approval policies and procedures for such
services in accordance with applicable laws. All of the audit and non-audit
services described above for which KPMG billed each Fund fees for the fiscal
years ended November 30, 2004 and November 30, 2005 were pre-approved by the
Audit Committee.
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 AND ADMINISTRATOR
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.
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.
11
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. With respect to Proposal 2, abstentions will count as a vote against
the proposal.
OTHER MATTERS TO COME BEFORE THE MEETING
Each Fund does not intend to present any other business at the relevant
Meeting, nor is 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
PROPOSED AMENDMENT A-1
ARTICLES OF AMENDMENT
OF
FLAHERTY & CRUMRINE PREFERRED INCOME FUND INCORPORATED
Flaherty & Crumrine Preferred Income Fund Incorporated, a Maryland
corporation (hereinafter the "Corporation"), hereby certifies to the State
Department of Assessments and Taxation that:
FIRST: Part I of the Articles Supplementary Creating and Fixing the Rights
of Money Market Cumulative Preferred(TM) Stock of the Corporation, filed with
the Maryland State of Department of Assessments and Taxation ("SDAT") on April
12, 1991, as amended (the "Articles Supplementary") is hereby further amended as
follows: By deleting in its entirety Section 11(rr) of Part I and substituting
therefore the following new Section 11(rr):
"(rr) [Reserved]"
SECOND: Part II of the Articles Supplementary is hereby further amended as
follows: By deleting in its entirety each of Section 1(b), Section 1(h), Section
1(j) and Section 1(o) of Part II and substituting each therefore with the
following new Section 1(b), Section 1(h), Section 1(j) and Section 1(o),
respectively:
"(b) "Agent Member" shall mean a member of or participant in the Securities
Depository that will act on behalf of a Bidder."
"(h) "Existing Holder," when used with respect to shares of MMP(R), shall
mean a Person who is listed as the beneficial owner of such shares of
MMP(R) in the records of the Auction Agent."
"(j) [Reserved]"
"(o) "Potential Holder," when used with respect to shares of MMP(R), shall
mean any Person, including any Existing Holder of shareS of MMP(R),
who may be interested in acquiring shares of MMP(R) (or, in the case
of an Existing Holder of shares of MMP(R), additional shares of
MMP(R))."
THIRD: The amendments to the Charter of the Corporation set forth in
Articles FIRST and SECOND above were 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 state 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 the penalties of perjury.
DATE: _______________, 2006
FLAHERTY & CRUMRINE PREFERRED
INCOME FUND INCORPORATED
------------------------------
Robert M. Ettinger
President
WITNESS:
----------------
Chad C. Conwell
Secretary
A-1
PROPOSED AMENDMENT A-2
ARTICLES OF AMENDMENT
OF
FLAHERTY & CRUMRINE PREFERRED INCOME OPPORTUNITY FUND INCORPORATED
Flaherty & Crumrine Preferred Income Opportunity Fund Incorporated, a
Maryland corporation (hereinafter the "Corporation"), hereby certifies to the
State Department of Assessments and Taxation that:
FIRST: Part I of the Articles Supplementary Creating and Fixing the Rights
of Money Market Cumulative Preferred(TM) Stock of the Corporation, filed with
the Maryland State of Department of Assessments and Taxation ("SDAT") on April
6, 1992, as amended (the "Articles Supplementary") is hereby further amended as
follows: By deleting in its entirety Section 11(rr) of Part I and substituting
therefore the following new Section 11(rr):
"(rr) [Reserved]"
SECOND: Part II of the Articles Supplementary is hereby further amended as
follows: By deleting in its entirety each of Section 1(b), Section 1(h), Section
1(j) and Section 1(o) of Part II and substituting each therefore with the
following new Section 1(b), Section 1(h), Section 1(j) and Section 1(o),
respectively:
"(b) "Agent Member" shall mean a member of or participant in the Securities
Depository that will act on behalf of a Bidder."
"(h) "Existing Holder," when used with respect to shares of MMP(R), shall
mean a Person who is listed as the beneficial owner of such shares of
MMP(R) in the records of the Auction Agent."
"(j) [Reserved]"
"(o) "Potential Holder," when used with respect to shares of MMP(R), shall
mean any Person, including any Existing Holder of shares of MMP(R),
who may be interested in acquiring shares of MMP(R) (or, in the case
of an Existing Holder of shares of MMP(R), additional shares of
MMP(R))."
THIRD: The amendments to the Charter of the Corporation set forth in
Articles FIRST and SECOND above were 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 state 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 the penalties of perjury.
DATE: _______________, 2006
FLAHERTY & CRUMRINE PREFERRED
INCOME OPPORTUNITY FUND
INCORPORATED
-----------------------------
Robert M. Ettinger
President
WITNESS:
---------------------------------
Chad C. Conwell
Secretary
A-2
DETACH HERE ZFCP72
FLAHERTY & CRUMRINE PREFERRED INCOME FUND INCORPORATED
PROXY SOLICITED BY THE BOARD OF DIRECTORS
THE UNDERSIGNED HOLDER OF SHARES OF COMMON STOCK OF FLAHERTY & CRUMRINE
PREFERRED INCOME 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
PREFERRED INCOME FUND
C/O PFPC INC.
P.O. BOX 8586
EDISON, NJ 08818-8586
DETACH HERE ZFCP71
3201
PLEASE MARK
VOTES AS IN
THIS EXAMPLE. X
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 AND FOR PROPOSAL 2.
PLEASE REFER TO THE PROXY STATEMENT FOR A DISCUSSION OF THE PROPOSALS.
1. ELECTION OF DIRECTOR
NOMINEE: (01) ROBERT F. WULF
FOR WITHHELD
2. TO APPROVE AN AMENDMENT TO THE FUND'S ARTICLES SUPPLEMENTARY RELATING TO THE
REMOVAL OF THE MASTER PURCHASER'S LETTER REQUIREMENT.
FOR AGAINST ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE ELECTION
OF THE NOMINEE AS DIRECTOR AND "FOR" THE APPROVAL OF AN AMENDMENT TO THE FUND'S
ARTICLES SUPPLEMENTARY RELATING TO THE REMOVAL OF THE MASTER PURCHASER'S LETTER
REQUIREMENT.
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 ZFCM52
FLAHERTY & CRUMRINE PREFERRED INCOME FUND INCORPORATED
PROXY SOLICITED BY THE BOARD OF DIRECTORS
THE UNDERSIGNED HOLDER OF SHARES OF MONEY MARKET CUMULATIVE PREFERRED(TM)
STOCK ("MMP(R)") OF FLAHERTY & CRUMRINE PREFERRED INCOME 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 MMP(R) 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
PREFERRED INCOME FUND
C/O PFPC INC.
P.O. BOX 8586
EDISON, NJ 08818-8586
DETACH HERE ZFCM51
3201
PLEASE MARK
VOTES AS IN
THIS EXAMPLE. X
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 AND FOR PROPOSAL 2.
PLEASE REFER TO THE PROXY STATEMENT FOR A DISCUSSION OF THE PROPOSALS.
1. ELECTION OF DIRECTOR
NOMINEE: (01) DONALD F. CRUMRINE
FOR WITHHELD
2. TO APPROVE AN AMENDMENT TO THE FUND'S ARTICLES SUPPLEMENTARY RELATING TO THE
REMOVAL OF THE MASTER PURCHASER'S LETTER REQUIREMENT.
FOR AGAINST ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE ELECTION
OF THE NOMINEE AS DIRECTOR AND "FOR" THE APPROVAL OF AN AMENDMENT TO THE FUND'S
ARTICLES SUPPLEMENTARY RELATING TO THE REMOVAL OF THE MASTER PURCHASER'S LETTER
REQUIREMENT.
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:-----------