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
Preferred Income Fund Incorporated
Preferred Income Opportunity Fund Incorporated
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(Name of Registrant as Specified in Its Charter)
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(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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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PREFERRED INCOME FUND INCORPORATED
PREFERRED INCOME OPPORTUNITY FUND INCORPORATED
301 E. Colorado Boulevard, Suite 720
Pasadena, California 91101
NOTICE OF ANNUAL MEETINGS OF SHAREHOLDERS
To Be Held on April 19, 2002
To the Shareholders:
Notice is hereby given that the Annual Meetings of Shareholders of
Preferred Income Fund Incorporated and 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, 787
Seventh Avenue, 38th Floor, New York, New York 10019 at 8:30 a.m., on April 19,
2002, for the following purposes:
1. To elect Directors of each Fund (PROPOSAL 1).
2. To ratify the selection of KPMG LLP as independent accountants
for each Fund for the fiscal year ~ending November 30, 2002
(PROPOSAL 2).
3. To transact such other business as may properly come before
the Meetings or any adjournments thereof.
The Board of Directors of each Fund has fixed the close of business on
January 22, 2002 as the record date for the determination of shareholders of the
Funds entitled to notice of and to vote at the Annual Meetings.
By Order of the Board of Directors,
DONALD F. CRUMRINE
Secretary
February 8, 2002
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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
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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.,
estate of Jane Smith Executor
PREFERRED INCOME FUND INCORPORATED
PREFERRED INCOME OPPORTUNITY FUND INCORPORATED
301 E. Colorado Boulevard, Suite 720
Pasadena, California 91101
ANNUAL MEETINGS OF SHAREHOLDERS
April 19, 2002
JOINT PROXY STATEMENT
This document is a joint proxy statement ("Joint Proxy Statement") for
Preferred Income Fund Incorporated ("Preferred Income Fund" or "PFD") and
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 19,
2002, at 8:30 a.m., at the offices of Willkie Farr & Gallagher, 787 Seventh
Avenue, 38th Floor, 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 8, 2002, primarily by mail, but proxy
solicitations may also be made by telephone, telegraph or personal interviews
conducted by officers of the Funds, Flaherty & Crumrine Incorporated ("Flaherty
& Crumrine"), the investment adviser of each Fund, and PFPC Inc., the transfer
agent and administrator of each Fund and a majority-owned subsidiary 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 paid by the Funds in proportion to each Fund's net
assets. Each Fund also will reimburse brokerage firms and others for their
expenses in forwarding solicitation material to the beneficial owners of its
shares.
THE ANNUAL REPORT OF EACH FUND, INCLUDING AUDITED FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED NOVEMBER 30, 2001, IS AVAILABLE UPON REQUEST, WITHOUT
CHARGE, BY WRITING PFPC INC., P.O. BOX 1376, BOSTON, MASSACHUSETTS 02104, OR
CALLING 1-800-331-1710.
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 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 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" any proposal in favor of such an adjournment and will vote those proxies
required to be voted "AGAINST" any proposal against any such adjournment. A
shareholder vote may be taken on one or more of the proposals in the Joint Proxy
Statement prior to any such adjournment if sufficient votes have been received
for approval. Under the By-Laws 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"). On the record date, January 22, 2002, the following number of Shares
of each Fund were issued and outstanding:
COMMON STOCK MMP(R)
NAME OF FUND OUTSTANDING OUTSTANDING
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Preferred Income Fund 9,922,794 575
Preferred Income Opportunity Fund 11,215,879 700
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"), beneficially owned more than
5% of the relevant Fund's outstanding shares as of January 22, 2002:
NAME AND ADDRESS OF BENEFICIAL/ AMOUNT AND NATURE
RECORD OWNER TITLE OF CLASS OF OWNERSHIP PERCENT OF CLASS
------------ -------------- ------------ ----------------
The Commerce Group, Inc.* Common PFD - 2,981,700 30.0%
211 Main Street Shares (beneficial)
Webster, MA PFO - 4,050,400 36.1%
01570 (beneficial)
Cede & Co.** Common PFD - 9,356,072 (record) 94.3%
Depository Trust Company Shares PFO - 10,645,694 (record) 94.9%
55 Water Street, 25th Floor
New York, NY MMP(R) PFD - 575 (record) 100%
10041 Shares PFO - 700 (record) 100%
* Considered to be a control person of the Fund, as such term is defined in Section 2(a)(9) of the
Investment Company Act of 1940, as amended (the "1940 Act"). Information as to beneficial ownership
of The Commerce Group, Inc. is based on reports filed with the Securities and Exchange Commission
(the "SEC") and state regulatory agencies by such holder of PFD and PFO on June 30, 2001 and
September 30, 2001, respectively.
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** 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 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 disapproved 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 all 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:
PROPOSAL 1: ELECTION OF DIRECTORS
The first proposal to be considered at the Meetings is the election of
Directors of the Funds. 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.
NOMINEES FOR THE BOARD OF DIRECTORS
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. The
classes of Directors are the same for each Fund and are indicated below:
CLASS I DIRECTORS CLASS II DIRECTORS CLASS III DIRECTORS
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Martin Brody Donald F. Crumrine Robert T. Flaherty
David Gale Robert F. Wulf Morgan Gust
The Class I Directors of Preferred Income Fund and Class III Directors
of Preferred Income Opportunity Fund all have been nominated for a three-year
term to expire at each Fund's 2005 Annual Meeting of Shareholders and until
their successors are duly elected and qualified. Class II Directors of Preferred
Income Fund and Class I Directors of Preferred Income Opportunity Fund serve
until each Fund's Annual Meeting of Shareholders in 2003, and Class III
Directors of Preferred Income Fund and Class II Directors of Preferred Income
Opportunity Fund serve until each Fund's Annual Meeting of Shareholders in 2004.
Except for Mr. Gale (who has served as a Director of each Fund since January 24,
1997), each Director has served in such capacity since each Fund's commencement
of operations.
Under each Fund's Articles of Incorporation, Articles Supplementary and
the 1940 Act, holders of Shares of MMP(R), voting as a single class, will be
entitled to elect two Directors, and holders of the Common Stock will be
entitled to elect the remaining Directors, subject to the provisions of the 1940
Act and the Fund's Articles of Incorporation, which permit the holders of Shares
of MMP(R), when dividends are in arrears for two full years, to elect the
minimum number of additional Directors that when combined with the two Directors
elected by the holders of Shares of MMP(R) would give the holders of Shares of
MMP(R) a majority of the Directors. Donald F. Crumrine and Morgan Gust currently
represent holders of Shares of MMP(R) of each Fund. A quorum of the MMP(R)
shareholders must be present at the Meeting of Preferred Income Opportunity Fund
in order for the proposal to elect Mr. Gust to be considered.
INFORMATION ABOUT DIRECTORS AND OFFICERS
Set forth in the table below are the existing Directors and nominees
for election to the Board 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.
Number of
Principal Funds In
Term of Office Occupation(s) Fund Complex
Name, Address, Position(s) and Length of During Past Overseen Other Directorships
and Age Held with Fund Time Served* Five Years by Director Held by Director
- ------- -------------- ------------ ---------- ----------- ----------------
NON-INTERESTED
DIRECTORS:
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MARTIN BRODY Director Class I Director Retired. 2 Director, Jaclyn, Inc.
c/o HMK Associates PFD - since 1991 (luggage and
30 Columbia Turnpike PFO - since 1992 accessories); Director,
Florham Park, NJ 07932 Smith Barney Mutual
Age: 80 Funds (18 funds).
DAVID GALE Director Class I Director President & CEO 2 Director, Stone Container
Delta Dividend Group, Inc. PFD - since 1997 of Delta Dividend Corporation (packaging),
301 Pine Street PFO - since 1997 Group, Inc. until Dec. 31, 2000;
San Francisco, CA 94104 (Investments). Director
Age: 52 Free Real Time.com,
until Feb 1, 2001.
MORGAN GUST (1) Director Class III Director Since January 1, 1999, 2 --
Giant Industries, Inc. PFD - since 1991 Executive Vice President,
23733 N. Scottsdale Road PFO - since 1992 Giant Industries, Inc.
Scottsdale, AZ 85255 (pump construction);
Age: 54 and, for more than
five years prior thereto,
Vice President, General
Counsel and Vice
President-Administration,
Giant Industries, Inc.
ROBERT F. WULF Director Class II Director Since March 1984, 2 --
3560 Deerfield Drive South PFD - since 1991 Financial Consultant;
Salem, OR 97302 PFO - since 1992 Trustee, University of
Age: 64 Oregon Foundation;
Trustee, San Francisco
Theological Seminary.
INTERESTED~DIRECTORS:
ROBERT T. FLAHERTY (2) Director, Class III Director Director of Flaherty & 2 --
301 E. Colorado Boulevard Chairman PFD - since 1991 Crumrine Incorporated
Suite 720 of the Board, PFO - since 1992 ("Flaherty &
Pasadena, CA 91101 President and Crumrine").
Age: 64 Chief Executive
Officer
DONALD F. CRUMRINE (1)(2) Director, Chief Class II Director Chairman of the Board 2 --
301 E. Colorado Boulevard Financial PFD - since 1991 and Director of
Suite 720 Officer, Chief PFO - since 1992 Flaherty &~Crumrine.
Pasadena, CA 91101 Accounting Officer,
Age: 54 Vice President
and Secretary
OTHER~OFFICERS:
ROBERT M. ETTINGER Vice Officer President and -- --
301 E. Colorado Boulevard President PFD - since 1991 Director of
Suite 720 and Assistant PFO - since 1992 Flaherty & Crumrine.
Pasadena, CA 91101 Treasurer
Age: 43
PETER C. STIMES Vice Officer Vice President of -- --
301 E. Colorado Boulevard President, PFD - since 1991 Flaherty & Crumrine.
Suite 720 Treasurer PFO - since 1992
Pasadena, CA 91101 and Assistant
Age: 46 Secretary
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* The Class I Directors of Preferred Income Fund and Class III Directors of Preferred Income Opportunity Fund all have
been nominated for a three-year term to expire at each Fund's 2005 Annual Meeting of Shareholders and until their
successors are duly elected and qualified. Class II Directors of Preferred Income Fund and Class I Directors of
Preferred Income Opportunity Fund serve until each Fund's Annual Meeting of Shareholders in 2003, and Class III
Directors of Preferred Income Fund and Class II Directors of Preferred Income Opportunity Fund serve until each
Fund's Annual Meeting of Shareholders in 2004.
(1) Represents holders of shares of the Funds' Money Market Cumulative Preferred(TM)Stock.
(2) "Interested person" of the Funds as defined in the 1940 Act. Messrs. Flaherty and Crumrine are each considered an
"interested person" because of their affiliation with Flaherty & Crumrine, which acts as the Funds' investment
adviser.
BENEFICIAL OWNERSHIP OF SHARES IN FUND 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 both Funds
beneficially owned by each Director.
DOLLAR RANGE OF EQUITY AGGREGATE DOLLAR RANGE OF EQUITY
NAME OF DIRECTOR SECURITIES HELD IN FUND* (1)(2) SECURITIES HELD IN FUND COMPLEX* (3)
- ---------------- ------------------------------- ------------------------------------
PFD PFO Total
--- --- -----
Martin Brody B B B
David Gale C C C
Morgan Gust C C D
Robert F. Wulf C C C
Robert T. Flaherty E E E
Donald F. Crumrine E E E
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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 December 31, 2001.
(1) No Director or officer of the Funds owned any shares of MMP(R)on January 22, 2002.
(2) This information has been furnished by each Director as of December 31,
2001. "Beneficial Ownership" is determined in accordance with
16a-1(a)(2) of the 1934 Act.
(3) Less than 1%.
Each Director of each Fund who is not a director, officer or employee
of Flaherty & Crumrine or any of their affiliates receives a fee of $9,000 per
annum plus $500 for each in-person meeting, and $100 for each telephone meeting.
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 each Fund held seven meetings (three of which were held by telephone
conference call) during the fiscal year ended November 30, 2001, and all of the
Directors 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 and officers of each Fund for the
fiscal year ended November 30, 2001 amounted to $72,354 and $72,354 for PFD and
PFO, respectively (including reimbursement for travel and out-of-pocket expenses
for both "interested" and independent Directors).
AUDIT COMMITTEE REPORT
The role of each Fund's Audit Committee is to assist the Board of
Directors in its oversight of each Fund's financial reporting process. The Audit
Committee operates pursuant to a Charter that was most recently reviewed and
approved by the Board of Directors of each Fund on January 14, 2002. As set
forth in the Charter, management is responsible for the preparation,
presentation and integrity of each Fund's financial statements, and for the
procedures designed to ensure compliance with accounting standards and
applicable laws and regulations. The independent accountants are 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 14,
2002, the Audit Committee reviewed and discussed with management and the
independent accountants, KPMG LLP ("KPMG"), the audited financial statements of
each Fund as of and for the fiscal year ended November 30, 2001, 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 may have on the objectivity and
independence of the independent accountants.
The members of the Audit Committee are not 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 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 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, 2001.
THIS REPORT WAS SUBMITTED BY THE AUDIT COMMITTEE OF EACH FUND'S BOARD OF
DIRECTORS
Martin Brody
David Gale
Morgan Gust
Robert Wulf
January 14, 2002
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 year ended November 30, 2001. No fees were billed by KPMG to the Funds'
adviser or its affiliates.
Financial Information Systems
Fund Audit Fees* Design and Implementation Fees All Other Fees
- ---- ----------- ------------------------------ --------------
PFD $40,800 $0 $6,250
PFO $40,800 $0 $6,250
- ----------
* Includes $7,200 and $2,100 which were billed to each Fund by
PricewaterhouseCoopers ("PwC")~and KPMG, respectively, for billing in connection
with their agreed-upon procedures reports on each Fund's Articles Supplementary.
Such reports are required quarterly by Moody's Investors Service, Inc. in
connection with maintaining public ratings for the Funds' MMP(R) shares. PwC
resigned as each Fund's independent auditors on October 17, 2001. For more
information, please see Proposal No. 2 on page 9.
The Audit Committee has considered and concluded that the provision of
non-audit services to the Funds and professional services to the Funds'
investment adviser and those affiliates thereof that provide services to the
Funds is compatible with maintaining the auditors' independence.
Each Audit Committee met three times during the fiscal year ended
November 30, 2001. Each Board of Directors has an Audit Committee composed
entirely of each Fund's independent Directors: Messrs. Brody, Gale, Gust and
Wulf.
OTHER COMMITTEES
Each Board of Directors of the Funds has a Nominating Committee
composed entirely of each Fund's independent Directors: Messrs. Brody, Gale,
Gust and Wulf. The Nominating Committee is responsible for considering
candidates for election to the Board of Directors of each Fund in the event a
position is vacated or created. The Nominating Committee will consider
recommendations by shareholders if a vacancy were to exist. Any such
recommendations should be forwarded to the Secretary of the Fund. The Nominating
Committee of each Fund met three times during the fiscal year ended November 30,
2001.
COMPENSATION
The following table sets forth certain information regarding the
compensation of each Fund's Directors for the fiscal year ended November 30,
2001. No executive officer or person affiliated with the Fund received
compensation from the Fund during the fiscal year ended November 30, 2001 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*
-------- -------------- --------------------------
ROBERT T. FLAHERTY $0 $0 (2)
Director, Chairman of the Board,
President and Chief Executive Officer
DONALD F. CRUMRINE $0 $0 (2)
Director, Chief Financial Officer,
Chief Accounting Officer, Vice President and Secretary
MARTIN BRODY $12,800 - PFD $25,600 (2)
Director $12,800 - PFO
DAVID GALE $13,400 - PFD $26,800 (2)
Director $13,400 - PFO
MORGAN GUST $13,400 - PFD $26,800 (2)
Director $13,400 - PFO
ROBERT F. WULF $13,400 - PFD $26,800 (2)
Director $13,400 - PFO
- ----------------
* Represents the total compensation paid to such persons by the Funds for the fiscal year ended November 30, 2001,
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.
REQUIRED VOTE
The election of Messrs. Brody and Gale as Directors 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. Gust 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 MMP(R) of such Fund at the Meeting in person or by
proxy. The election of Mr. Flaherty 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.
THE BOARD OF DIRECTORS, INCLUDING ALL OF THE INDEPENDENT DIRECTORS, UNANIMOUSLY
RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" EACH NOMINEE AS DIRECTOR.
PROPOSAL 2: RATIFICATION OF THE SELECTION
OF INDEPENDENT ACCOUNTANTS
On November 7, 2001, based on the recommendation of the Audit Committee
of each Fund, the Board of Directors, including those Directors who are not
"interested persons" (as defined in the 1940 Act) of the Fund or Flaherty &
Crumrine, approved the selection of KPMG, 99 High Street, Boston, Massachusetts
02110-2371, to serve as the Funds' independent accountants for the Funds' fiscal
year ending November 30, 2001. 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 the representative so desires, and will be available to
respond to appropriate questions. KPMG has informed the Fund that it has no
direct or indirect financial interest in the Funds.
PwC, 160 Federal Street, Boston, Massachusetts 02110, served as
independent accountants for each Fund since each Fund's respective commencement
of operations until October 17, 2001 when PwC resigned as each Fund's auditor.
PwC's reports on each Fund's financial statements for the past two years
contained no adverse opinion or disclaimer of opinion and was not qualified or
modified as to uncertainty, audit scope, or accounting principles.
Additionally, during the two fiscal years immediately preceding PwC's
resignation, and through October 17, 2001, there were no disagreements with PwC
on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements, if not resolved
to the satisfaction of PwC, would have caused them to make reference to the
subject matter of the disagreement in their report on the financial statements
for such years.
REQUIRED VOTE
Ratification of the selection of KPMG as independent accountants for a
Fund requires the affirmative vote of the holders of a majority of the shares of
Common Stock and MMP(R), voting as a single class, cast at the Meeting in person
or by proxy.
THE BOARD OF DIRECTORS, INCLUDING ALL OF THE INDEPENDENT DIRECTORS, 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 2003
must be received by the Fund for consideration for inclusion in the Fund's proxy
statement relating to the meeting no later than December 19, 2002.
ADDITIONAL INFORMATION
INVESTMENT ADVISER AND ADMINISTRATOR
Flaherty & Crumrine serves as the Investment Adviser to the Funds and
its business address is 301 E. Colorado Boulevard, Suite 720, Pasadena,
California 91101. PFPC Inc. acts as the administrator to the Funds and is
located at 101 Federal Street, 6th Floor, Boston, Massachusetts 02110.
COMPLIANCE WITH THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the 1934 Act requires the Funds' 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 New York
Stock Exchange, Inc. and the Fund. Directors, officers and greater-than-10%
shareholders are required by SEC regulations to furnish the Fund with copies of
all Section 16(a) 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 2001, 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
on the matter for purposes of determining the presence of a quorum. Under
Maryland law, abstentions do not constitute a vote "for" or "against" a matter
and will be disregarded in determining the "votes cast" on an issue.
OTHER MATTERS TO COME BEFORE THE MEETING
The Funds do not intend to present any other business at the Meetings,
nor are they aware that any shareholder intends to do so. If, however, any other
matters are properly brought before the Meetings, the persons named in the
accompanying form of proxy will vote thereon in accordance with their judgment.
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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.
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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 Preferred Income Fund Incorporated, a Maryland
corporation (the "Fund"), hereby appoints Robert T. Flaherty, Donald F. Crumrine
and Teresa M.R. Hamlin, attorneys and proxies for the undersigned, 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, 787 Seventh Avenue, 38th Floor, New
York, New York 10019 at 8:30 a.m., on April 19, 2002, 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.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
Please indicate your vote by an "X" in the appropriate box below.
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
PROPOSAL 2.
PLEASE REFER TO THE PROXY STATEMENT FOR A DISCUSSION OF THE PROPOSALS.
1. ELECTION OF DIRECTOR
FOR ____
AGAINST ____
ABSTAIN ____
NOMINEE: Not Applicable
2. TO RATIFY THE SELECTION OF KPMG LLP AS INDEPENDENT ACCOUNTANTS FOR THE FUND
FOR ____
AGAINST ____
ABSTAIN ____
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE
RATIFICATION OF THE SELECTION OF KPMG LLP AS INDEPENDENT ACCOUNTANTS FOR THE
FUND.
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: _____________________
PREFERRED INCOME FUND INCORPORATED
PROXY SOLICITED BY THE BOARD OF DIRECTORS
The undersigned holder of shares of Common Stock of Preferred Income
Fund Incorporated, a Maryland corporation (the "Fund"), hereby appoints Robert
T. Flaherty, Donald F. Crumrine and Teresa M.R. Hamlin, attorneys and proxies
for the undersigned, 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,
787 Seventh Avenue, 38th Floor, New York, New York 10019 at 8:30 a.m., on April
19, 2002, 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.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
Please indicate your vote by an "X" in the appropriate box below.
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 NOMINEES AS DIRECTOR AND FOR PROPOSAL 2.
PLEASE REFER TO THE PROXY STATEMENT FOR A DISCUSSION OF THE PROPOSALS.
1. ELECTION OF DIRECTORS
FOR ____
AGAINST ____
ABSTAIN ____
NOMINEE: Martin Brody and David Gale
2. TO RATIFY THE SELECTION OF KPMG LLP AS INDEPENDENT ACCOUNTANTS FOR THE FUND
FOR ____
AGAINST ____
ABSTAIN ____
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE ELECTION
OF THE NOMINEES AND "FOR" THE RATIFICATION OF THE SELECTION OF KPMG LLP AS
INDEPENDENT ACCOUNTANTS FOR THE FUND.
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: _____________________
PREFERRED INCOME OPPORTUNITY FUND INCORPORATED
PROXY SOLICITED BY THE BOARD OF DIRECTORS
The undersigned holder of shares of Money Market Cumulative
Preferred(TM) Stock ("MMP(R)") of Preferred Income Opportunity Fund
Incorporated, a Maryland corporation (the "Fund"), hereby appoints Robert T.
Flaherty, Donald F. Crumrine and Teresa M.R. Hamlin, attorneys and proxies for
the undersigned, 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, 787 Seventh
Avenue, 38th Floor, New York, New York 10019 at 8:30 a.m., on April 19, 2002,
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.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
Please indicate your vote by an "X" in the appropriate box below.
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
FOR ____
AGAINST ____
ABSTAIN ____
NOMINEE: Morgan Gust
2. TO RATIFY THE SELECTION OF KPMG LLP AS INDEPENDENT ACCOUNTANTS FOR THE FUND
FOR ____
AGAINST ____
ABSTAIN ____
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE ELECTION
OF THE NOMINEE AND "FOR" THE RATIFICATION OF THE SELECTION OF KPMG LLP AS
INDEPENDENT ACCOUNTANTS FOR THE FUND.
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: _____________________
PREFERRED INCOME OPPORTUNITY FUND INCORPORATED
PROXY SOLICITED BY THE BOARD OF DIRECTORS
The undersigned holder of shares of Common Stock of Preferred Income
Opportunity Fund Incorporated, a Maryland corporation (the "Fund"), hereby
appoints Robert T. Flaherty, Donald F. Crumrine and Teresa M.R. Hamlin,
attorneys and proxies for the undersigned, 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, 787 Seventh Avenue, 38th Floor, New York, New York
10019 at 8:30 a.m., on April 19, 2002, 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.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
Please indicate your vote by an "X" in the appropriate box below.
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
FOR ____
AGAINST ____
ABSTAIN ____
NOMINEE: Robert T. Flaherty
2. TO RATIFY THE SELECTION OF KPMG LLP AS INDEPENDENT ACCOUNTANTS FOR THE FUND
FOR ____
AGAINST ____
ABSTAIN ____
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE ELECTION
OF THE NOMINEE AND "FOR" THE RATIFICATION OF THE SELECTION OF KPMG LLP AS
INDEPENDENT ACCOUNTANTS FOR THE FUND.
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: _____________________