DEF: Flaherty & Crumrine Funds Seek Shareholder Approval for Director Elections and New Advisory Agreements

Flaherty & Crumrine funds are holding annual meetings to elect directors and approve new investment advisory agreements due to an internal restructuring of the Adviser.

Summary

• Flaherty & Crumrine Preferred and Income Fund Incorporated, Flaherty & Crumrine Preferred and Income Opportunity Fund Incorporated, Flaherty & Crumrine Preferred and Income Securities Fund Incorporated, Flaherty & Crumrine Total Return Fund Incorporated and Flaherty & Crumrine Dynamic Preferred and Income Fund Incorporated will hold Annual Meetings of Shareholders on April 16, 2025.
• Shareholders will vote on the election of Directors for each fund.
• Shareholders will also vote to approve a new investment advisory agreement with Flaherty & Crumrine Incorporated for each fund.
• The need for new agreements arises from an internal restructuring of the Adviser, potentially triggering a change of control.
• The terms of the new advisory agreements are identical to the current agreements, including advisory fees, except for the date and initial term.
• The Board of Directors unanimously recommends voting FOR both proposals.

Sentiment

Score: 7

Explanation: The document is primarily procedural, focused on seeking shareholder approval for routine matters. The tone is professional and straightforward, with a clear recommendation from the board. The potential change of control at the advisor level introduces a slight element of uncertainty, but the overall sentiment is neutral to positive.

Positives

• The proposed new advisory agreements are identical to the current agreements, ensuring continuity in terms and fees.
• The day-to-day management of Flaherty & Crumrine and the investment objectives and strategies of the Funds will not change as a result of the internal restructuring of the Adviser or each Funds entry into its respective new investment advisory agreement.
• The Board of Directors has carefully considered the proposals and unanimously recommends voting in favor.

Risks

• Failure to approve the new advisory agreements could create uncertainty regarding the management of the funds.
• The internal restructuring of the Adviser introduces a potential change of control, which could have unforeseen consequences.

Future Outlook

If approved by shareholders, the New Investment Advisory Agreements will become effective upon completion of the Transaction. The day-to-day management and investment strategies of the Funds are expected to remain unchanged.

Management Comments

• The Board of Directors of each Fund last approved the continuance of an additional year for the Current Investment Advisory Agreements on January 22, 2025.
• The Board unanimously recommends that shareholders vote FOR the proposals.

Industry Context

Closed-end funds are periodically required to seek shareholder approval for advisory agreements, especially in cases of potential control changes at the advisor level. This announcement is standard practice to ensure compliance with regulatory requirements and maintain investor confidence.

Comparison to Industry Standards

• The document mentions that the Board members considered detailed information regarding performance and expenses of other investment companies thought to be generally comparable to each Fund.
• The Board members also reviewed in detail relative fees and expenses of the Fund and the funds in the comparison group, including comparative advisory fee, administration fee and total expense ratios, and noted that each Fund had below average advisory fees and below average combined advisory/administration fees, while each of FFC and DFP had a below average total expense ratio.

Management Changes

Stakeholder Impact

• Shareholders are directly impacted by the proposals, as they involve the election of Directors and the approval of the investment advisory agreement.
• The internal restructuring of the Adviser could indirectly affect the Funds' employees and service providers.

Next Steps

• Shareholders are urged to vote on the proposals.
• The New Investment Advisory Agreements will become effective upon completion of the Transaction, pending shareholder approval.

Key Dates