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 (PFD), Flaherty & Crumrine Preferred and Income Opportunity Fund Incorporated (PFO), Flaherty & Crumrine Preferred and Income Securities Fund Incorporated (FFC), Flaherty & Crumrine Total Return Fund Incorporated (FLC) and Flaherty & Crumrine Dynamic Preferred and Income Fund Incorporated (DFP) 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 on approving 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, which could be viewed as 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, focusing on necessary approvals due to an internal restructuring. The board's recommendation for approval and the maintenance of existing terms suggest a stable outlook.

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 unanimously recommended voting in favor of the proposals.

Risks

• If the new investment advisory agreements are not approved, the current agreements could terminate due to the Adviser's internal restructuring.
• Failure to achieve a quorum at the Annual Meetings could lead to adjournment and additional expenses to solicit more votes.

Future Outlook

If approved by shareholders, the New Investment Advisory Agreements will become effective upon completion of the Transaction. 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 Transaction or each Funds entry into the respective New Investment Advisory Agreement.

Management Comments

• The Board of Directors of each Fund unanimously recommends that shareholders vote FOR the approval of the New Investment Advisory Agreements.
• The Board members concluded that the nature and extent of the services provided were reasonable and appropriate in relation to each Funds investment goals and strategies, the corporate and regulatory environment in which each Fund operates and the level of services provided by the Adviser, and that the quality of the Advisers service continues to be high.

Industry Context

Closed-end funds often require shareholder approval for advisory agreements, especially when there are potential changes in control of the investment adviser. This is a standard practice to ensure that the fund's interests are protected.

Comparison to Industry Standards

• The Board members also considered detailed information regarding performance and expenses of other investment companies thought to be generally comparable to each Fund.
• The Board members reviewed the Funds performance compared to relevant indices and funds thought to be generally comparable to the Fund and took note of differences between the Fund and certain funds in the comparison group.
• 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 vote on directors and advisory agreements.
• The internal restructuring of the Adviser is designed to ensure the continued stability and management of the Funds.

Next Steps

• Shareholders need to vote on the election of directors and the approval of the new investment advisory agreements.
• The new investment advisory agreements will become effective upon completion of the internal restructuring of the Adviser, pending shareholder approval.

Key Dates