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 proposed new advisory agreements are identical to the current agreements, except for the date and initial term, and have identical advisory fees.
• The Board of Directors unanimously recommends voting FOR the proposals.

Sentiment

Score: 7

Explanation: The document is primarily informational, outlining the reasons for the shareholder vote and the Board's recommendations. The tone is professional and confident, suggesting a stable outlook for the funds. The Board's unanimous recommendation to approve the proposals contributes to a positive sentiment.

Positives

• The proposed new advisory agreements maintain the same terms and advisory fees as the current agreements.
• The day-to-day management and investment strategies of the Funds will not change as a result of the internal restructuring or the new advisory agreements.
• The Board of Directors has unanimously recommended that shareholders vote FOR the proposals, indicating their confidence in the restructuring and new agreements.

Risks

• If the new investment advisory agreements are not approved, the funds may need to seek alternative advisory arrangements.
• The internal restructuring of the Adviser could potentially lead to unforeseen operational or management challenges, although the document states that day-to-day management will not change.

Future Outlook

The Funds are seeking shareholder approval for new investment advisory agreements that will become effective upon completion of the internal restructuring of the Adviser, expected between July 1 and December 31, 2025. The day-to-day management and investment strategies are expected to remain the same.

Management Comments

• The Board unanimously recommends that you vote FOR the proposals.
• After careful consideration of the proposals, the Board unanimously recommends that you vote FOR the proposals.

Industry Context

The document reflects a common practice in the investment management industry where internal restructurings or changes in control trigger the need for shareholder approval of new advisory agreements to ensure continuity and compliance with regulatory requirements.

Comparison to Industry Standards

• The advisory fees for each fund are detailed in the document, but without specific industry benchmarks for similar funds, it's difficult to assess their competitiveness.
• The document mentions that the Board considered performance and expenses of other investment companies thought to be generally comparable to each Fund.
• The Board 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.

Corporate Governance

Stakeholder Impact

• Shareholders will be impacted by the outcome of the vote on the new investment advisory agreements.
• The internal restructuring of the Adviser is not expected to impact the day-to-day management or investment strategies of the Funds.

Next Steps

• Shareholders need to vote on the proposals before the Annual Meetings on April 16, 2025.
• The internal restructuring of the Adviser is expected to occur between July 1 and December 31, 2025.
• If the proposals are approved, the new investment advisory agreements will become effective upon completion of the Transaction.

Key Dates