PREFERRED INCOME FUND INCORPORATED
PREFERRED INCOME OPPORTUNITY FUND INCORPORATED
301 E. Colorado Boulevard, Suite 720
Pasadena, California 91101
March 14 , 1998
Dear Shareholder:
We are writing to inform you of and ask your support for an additional proposal
for shareholders of both Preferred Income Fund and Preferred Income Opportunity
Fund to consider at their upcoming Annual Meetings scheduled for April 17.
We are asking shareholders to approve an amendment to the Articles of
Incorporation for each Fund which would require a "supermajority" vote to effect
any of the following:
o a change in the Fund's existing investment objective.
o conversion of the Fund from diversified to non-diversified status under
the Investment Company Act of 1940.
o removal of the prohibition on investments for the purpose of gaining
control of any company.
The proposed supermajority amendment would require that the above three items be
approved by shareholders representing:
o at least 80% of the Fund's outstanding common shares and preferred
stock, voting as a single class; and
o at least 80% of the Fund's preferred stock, voting as a separate class.
These voting requirements would be lowered if at least 80% of the Fund's Board
of Directors approve the change.
We have proposed this supermajority requirement in order to ensure that any
future proposals to modify fundamental elements of the Fund have widespread
support from shareholders. This became an issue with our sister fund, Preferred
Income Management, this Spring. We want to take immediate steps to make sure the
proper protection is in place at Preferred Income and Preferred Income
Opportunity Funds.
The enclosed proxy statement describes the proposed amendments in detail. We
urge you to read it carefully. We have also included another proxy card which
contains this addition as Proposal 3. Time is short, so please take a moment to
vote today.
If you have any questions about the Fund or about voting your shares, we
invite you to call Carl Johns, Manager - Investor Relations at (626) 795-7300 or
MacKenzie Partners, Inc., which is assisting us, toll-free at (800) 322-2885. We
appreciate your continued support of the Funds.
On behalf of your Board of Directors,
Robert T. Flaherty
Chairman of the Board
<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by Registrant [X]
Filed by a 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 Sec. 240.14a-11(c) or
Sec. 240.14a-12
PREFERRED INCOME FUND INCORPORATED
PREFERRED INCOME OPPORTUNITY FUND INCORPORATED
(Name of Registrant as Specified In Its Charter)
TERESA M.R. HAMLIN
ASSISTANT SECRETARY
(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)(4) and
0-11.
1) Title of each class of securities to which transactions 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 identity 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:
<PAGE>
PREFERRED INCOME FUND INCORPORATED
PREFERRED INCOME OPPORTUNITY FUND INCORPORATED
301 E. Colorado Boulevard, Suite 720
Pasadena, California 91101
REVISED NOTICE OF ANNUAL MEETINGS OF SHAREHOLDERS
To Be Held on April 17, 1998
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, One
Citicorp Center, 153 East 53rd Street, 47th Floor, New York, New York 10022 at
8:30 a.m., on April 17, 1998, for the following purposes:
1. To elect Directors of each Fund (Proposal 1).
2. To ratify the selection of Coopers & Lybrand L.L.P. as
independent accountants for each Fund for the fiscal year
ending November 30, 1998 (Proposal 2).
3. To approve an amendment to each Fund's Articles of
Incorporation (as more fully set forth in the Revised Joint
Proxy Statement) (Proposal 3).
4. To transact such other business as may properly come before
the Meetings or any adjournments thereof.
As stated in the previous notice, the Board of Directors of each Fund
has fixed the close of business on January 20, 1998 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
March 14, 1998
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THIS REVISED NOTICE OF ANNUAL MEETINGS OF SHAREHOLDERS SUPERSEDES THE NOTICE OF
ANNUAL MEETINGS OF SHAREHOLDERS FOR THE FUNDS DATED FEBRUARY 6, 1998.
- --------------------------------------------------------------------------------
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IMPORTANT
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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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<PAGE>
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, u/t/d 12/28/78 Jane B. Doe
Custodian or Estate Accounts
(1) John B. Smith, Cust., John B. Smith
f/b/o John B. Smith, Jr. UGMA
(2) John B. Smith John B. Smith, Jr.,
Executor
<PAGE>
PREFERRED INCOME FUND INCORPORATED
PREFERRED INCOME OPPORTUNITY FUND INCORPORATED
301 E. Colorado Boulevard, Suite 720
Pasadena, California 91101
ANNUAL MEETINGS OF SHAREHOLDERS
April 17, 1998
REVISED JOINT PROXY STATEMENT
This document is a revised joint proxy statement ("Revised 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
Revised 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 17, 1998, at 8:30 a.m., at the offices of Willkie Farr &
Gallagher, One Citicorp Center, 153 East 53rd Street, 47th Floor, New York, New
York 10022 and at any adjournments thereof (each a "Meeting" and collectively,
the "Meetings"). This Revised Joint Proxy Statement supersedes the Joint Proxy
Statement for the Funds dated February 6, 1998 (the "Original Joint Proxy
Statement"). A Revised Notice of Annual Meetings of Shareholders and a revised
proxy card for each Fund of which you are a shareholder accompany this Revised
Joint Proxy Statement. Proxy solicitations will be made, beginning on or about
March 14 ,1998, 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 First Data Investor Services Group, Inc. ("Investor
Services Group"), the transfer agent and administrator of each Fund and a
wholly-owned subsidiary of First Data Corporation. In addition, the Funds have
retained MacKenzie Partners, Inc. to assist in the solicitation of proxies for a
fee estimated at $5,000 per Fund plus reimbursement of expenses. The costs of
proxy solicitation and expenses incurred in connection with the preparation of
this Revised 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, 1997, is available upon request, without
charge, by writing First Data Investor Services Group, 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 Revised 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.
- --------------------------------------------------------------------------------
EVEN IF YOU HAVE ALREADY RETURNED A PROXY CARD IN CONNECTION WITH THE ORIGINAL
JOINT PROXY STATEMENT, THE BOARD OF DIRECTORS RECOMMENDS THAT YOU REVOKE THAT
PROXY BY SUBMITTING THE ENCLOSED PROXY CARD BY SIGNING, DATING AND MAILING THE
LATER DATED PROXY. ONLY THE LATEST DATED, PROPERLY SIGNED PROXY CARD WILL BE
COUNTED.
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<PAGE>
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 Revised
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 20, 1998, the following number of Shares
of each Fund were issued and outstanding:
Common Stock MMP(R)
Name of Fund Outstanding Outstanding
Preferred Income Fund 9,838,571 575
Preferred Income Opportunity Fund 11,151,287 700
As of January 20, 1998, to the knowledge of each Fund and its Board,
the following shareholder or "group", as that term is used 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:
Preferred Income Fund
As of December 31, 1997, The Commerce Group, Inc., located at 211 Main
Street, Webster, Massachusetts 01570, beneficially owned 11.1% of Preferred
Income Fund's outstanding shares of Common Stock.
Preferred Income Opportunity Fund
As of December 31, 1997, The Commerce Group, Inc., located at 211 Main
Street, Webster, Massachusetts 01570, beneficially owned 14.4% of Preferred
Income Opportunity Fund's outstanding shares of Common Stock.
Information as to beneficial ownership is based on reports filed with
the Securities and Exchange Commission (the "SEC") by such holders. As of
January 20, 1998, Cede & Co., a nominee partnership of Depository Trust Company,
held 9,069,391 Shares or 92.18% of Shares of Preferred Income Fund outstanding
and 10,260,058 Shares or 92.01% of Shares of Preferred Income Opportunity Fund
outstanding.
This Revised 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 under Proposal 1 and Proposal 3 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
Martin Brody Donald F. Crumrine
David Gale Robert F. Wulf
Class III Directors
Robert T. Flaherty
Morgan Gust
Class III Directors of Preferred Income Fund and Class II Directors of
Preferred Income Opportunity Fund all have been nominated for a three-year term
to expire at each Fund's 2001 Annual Meeting of Shareholders and until their
successors are duly elected and qualified. Class I Directors of Preferred Income
Fund and Class III Directors of Preferred Income Opportunity Fund serve until
each Fund's Annual Meeting of Shareholders in 1999, and 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 2000. 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 Investment Company Act of 1940, as amended (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 Fund in order
for the proposal to elect Mr. Gust to be considered and at the Meeting of
Preferred Income Opportunity Fund in order for the proposal to elect Mr.
Crumrine to be considered.
Information About Directors and Officers
Set forth in the following table are the existing Directors and
nominees for election to the Board of Directors of the Funds, together with
certain other information. Each Director serves in the same capacity for each
Fund. No Director or officer owned any shares of MMP(R) on January 20, 1998.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Business Experience Common Stock
During the Beneficially Owned
Name, Address and Age Past Five Years on January 20, 1998** Percent
- --------------------- --------------- --------------------- -------
Class I Directors
Martin Brody Director of the Funds and 1,160 Shares of PFD ***
c/o HMK Associates Preferred Income 877 Shares of PFO ***
30 Columbia Turnpike Management Fund
Florham Park, NJ 07932 Incorporated;
Age: 76 Director of Jaclyn, Inc.,
Director of several other
investment companies.
David Gale Director of the Funds and 1,500 Shares of PFD ***
Delta Dividend Group, Inc. Preferred Income 1,000 Shares of PFO ***
301 Pine Street Management Fund
San Francisco, CA 94104 Incorporated;
Age: 48 President & CEO of
Delta Dividend Group,
Inc. (Investments).
Class II Directors
Donald F. Crumrine* Director, Chief Financial 10,745 Shares of PFD+ ***
301 E. Colorado Boulevard Officer, Chief Accounting 12,865 Shares of PFO+ ***
Suite 720 Officer, Vice President
Pasadena, CA 91101 and Secretary of the
Age: 50 Funds and Preferred
Income Management Fund
Incorporated; Chairman of
the Board, since December
1996, and previously held
other officerships of
Flaherty & Crumrine;
Director of Flaherty &
Crumrine.
Robert F. Wulf Director of the Funds and 1,224 Shares of PFD ***
3560 Deerfield Drive South Preferred Income 1,000 Shares of PFO ***
Salem, OR 97302 Management Fund
Age: 60 Incorporated;
since March 1984,
Financial Consultant.
<FN>
- -------------------------------------------
* "Interested person" of the Fund as defined in the 1940 Act. Messrs. Crumrine and Flaherty are each
considered an "interested person" because of their affiliation with Flaherty & Crumrine which acts as
the Fund's investment adviser.
** This information has been furnished by each Director. "Beneficial Ownership" is defined under Section
13(d) of the 1934 Act.
*** Less than 1%.
+ 7,169 Shares of PFD and 8,603 Shares of PFO are held by Flaherty &
Crumrine of which the reporting person is a shareholder and director.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Business Experience Common Stock
During the Beneficially Owned
Name, Address and Age Past Five Years on January 20, 1998** Percent
- --------------------- --------------- --------------------- -------
Class III Directors
Robert T. Flaherty* Director, Chairman of the 8,269 Shares of PFD+ ***
301 E. Colorado Boulevard Board, President and 9,603 Shares of PFO+ ***
Suite 720 Chief Executive Officer
Pasadena, CA 91101 of the Funds and
Age: 60 Preferred Income
Management Fund
Incorporated; prior to
December 1996, President
of Flaherty & Crumrine;
Director of Flaherty &
Crumrine.
Morgan Gust Director of the Funds and 1,506 Shares of PFD ***
Giant Industries, Inc. Preferred Income 1,593 Shares of PFO ***
23733 N. Scottsdale Road Management Fund
Scottsdale, AZ 85255 Incorporated; since
Age: 50 August 1990, Vice
President, General Counsel and Corporate
Secretary, and since 1992, also Vice
President-Administration, Giant Industries,
Inc.
Directors and Officers 25,204 Shares of PFD ***
as a Group 32,216 Shares of PFO ***
<FN>
* "Interested person" of the Fund as defined in the 1940 Act. Messrs. Crumrine and Flaherty are each
considered an "interested person" because of their affiliation with Flaherty & Crumrine which acts as
the Fund's investment adviser.
** This information has been furnished by each Director. "Beneficial Ownership" is defined under Section
13(d) of the 1934 Act.
*** Less than 1%.
+ 7,169 Shares of PFD and 8,603 Shares of PFO are held by Flaherty &
Crumrine of which the reporting person is a shareholder and director.
</FN>
</TABLE>
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 five meetings (one of which was held by telephone conference
call) during the fiscal year ended November 30, 1997. Each Director then serving
in such capacity attended in-person at least 75% of the meetings of Directors
and any Committee of which he is a member. The aggregate remuneration paid to
the Directors of each Fund for the fiscal year ended November 30, 1997 amounted
to $58,068, respectively (including reimbursement for travel and out-of-pocket
expenses for both "interested" and non-interested Directors).
Each Board of Directors has an Audit Committee consisting of Messrs.
Gust, Brody and Wulf. The Audit Committee reviews the scope and results of each
Fund's annual audit with the Funds' independent accountants and recommends the
engagement of such accountants. Each Audit Committee met twice during the fiscal
year ended November 30, 1997.
Each Board of Directors has a Nominating Committee consisting of
Messrs. Gust, Brody and Wulf, which 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. Such recommendations should be
forwarded to the Secretary of the Fund. Each Fund's Nominating Committee met
once during the fiscal year ended November 30, 1997.
The names of the officers of each Fund (other than Messrs. Flaherty and
Crumrine who are described above) are listed in the table below. Each officer
was first elected to office at the organization of each Fund. This table also
shows certain additional information. Each officer will hold such office until a
successor has been elected by the Board of Directors of a Fund.
<TABLE>
<CAPTION>
<S> <C> <C>
Principal Occupations
Positions Held and Other Affiliations
Name and Age With each Fund During The Past Five Years
Robert M. Ettinger Vice President and Assistant President, since December 1996, and previously
Age: 39 Treasurer of the Funds. held other officerships with Flaherty & Crumrine;
Vice President and Assistant Treasurer of
Preferred Income Management Fund Incorporated.
Peter C. Stimes Vice President, Treasurer and Vice President, Flaherty & Crumrine;
Age: 42 Assistant Secretary of the Funds. Vice President, Treasurer and Assistant Secretary
of Preferred Income Management Fund Incorporated.
</TABLE>
The following table sets forth certain information regarding the
compensation of each Fund's Directors for the fiscal year ended November 30,
1997. No executive officer or person affiliated with the Fund received
compensation from the Fund during the fiscal year ended November 30, 1997 in
excess of $60,000. Directors and executive officers of the Funds do not receive
pension or retirement benefits from the Funds.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
COMPENSATION TABLE
Name of Aggregate Total Compensation From the Funds and
Person and Compensation Fund Complex
Position from each Fund Paid to Directors*
Robert T. Flaherty $0 $0 (3)
Director, Chairman of the
Board, President and Chief
Executive Officer
Donald F. Crumrine $0 $0 (3)
Director, Chief Financial
Officer, Chief Accounting
Officer, Vice President and
Secretary
Martin Brody $12,100.00 PFD $37,300.00 (3)
Director $12,100.00 PFO
Morgan Gust $12,100.00 PFD $37,400.00 (3)
Director $12,100.00 PFO
Robert F. Wulf $12,100.00 PFD $37,400.00 (3)
Director $12,100.00 PFO
David Gale $9,687.50 PFD $29,162.50 (3)
Director $9,687.50 PFO
<FN>
* Represents the total compensation paid to such persons by the Funds and
Preferred Income Management Fund Incorporated for the fiscal year ended
November 30, 1997, 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.
</FN>
</TABLE>
Required Vote
Election of each of the listed nominees for Director of each Fund will
require the affirmative vote of a plurality of the votes cast at the Meeting in
person or by proxy.
THE DIRECTORS, INCLUDING THE NON-INTERESTED DIRECTORS, UNANIMOUSLY RECOMMEND
THAT THE SHAREHOLDERS VOTE "FOR" PROPOSAL NO. 1.
PROPOSAL 2: RATIFICATION OF THE SELECTION
OF INDEPENDENT ACCOUNTANTS
The firm of Coopers & Lybrand L.L.P. ("Coopers & Lybrand"), One Post
Office Square, Boston, Massachusetts 02109, has served as independent
accountants for each Fund since the Fund's commencement of operations, and has
been selected to serve in such capacity for the Fund's fiscal year ending
November 30, 1998 by the Directors of the Fund, including those Directors who
are not "interested persons" (as defined in the 1940 Act) of the Fund or
Flaherty & Crumrine. Coopers & Lybrand has informed the Funds that it has no
direct or indirect financial interest in the Funds. A representative of Coopers
& Lybrand will not be present at the Meetings 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.
Required Vote
Ratification of the selection of Coopers & Lybrand 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) represented at the Meeting in
person or by proxy voting as a single class.
THE BOARD OF DIRECTORS OF EACH FUND, INCLUDING ALL OF THE NON-INTERESTED
DIRECTORS, RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" PROPOSAL NO. 2.
PROPOSAL 3: APPROVAL OF AN AMENDMENT TO
THE ARTICLES OF INCORPORATION
The third proposal to be considered at the Meeting is amending the
Articles of Incorporation of each Fund as set forth in the proposed Articles of
Amendment described below (the "Articles of Amendment").
The Articles of Amendment would create a "supermajority" voting
requirement to effect any of the following changes: (1) change in the Fund's
existing investment objective, (2) conversion of the Fund from being a
diversified investment company under the 1940 Act to a non-diversified
investment company or (3) removal of the prohibition on the Fund making
investments for the purpose of exercising control or management of any company.
Each Fund is a diversified investment company with an investment
objective of high current income for holders of its Common Stock consistent with
preservation of capital and with a prohibition on investing in companies for the
purpose of exercising control. Changing the Fund's investment objective, its
diversified status and its passive investment approach currently requires a vote
in each case of a "majority of the Fund's outstanding voting securities", voting
as a single class, and approval of the holders of a majority of the Fund's
MMP(R), voting as a separate class. For this purpose, the term "majority of the
Fund's outstanding voting securities" means the lesser of (1) 67% or more of the
shares of the Fund's Common Stock and MMP(R) present at a meeting of
shareholders, voting as a single class, if the holders of more than 50% of such
shares are present or represented by proxy at the meeting, or (2) more than 50%
of the outstanding shares of Common Stock and MMP(R), voting as a single class.
A majority of the Fund's MMP(R) is determined in a similar manner, by applying
the percentages in the previous sentence to shares of MMP(R).
The proposed Articles of Amendment would require that a change in any
of the three relevant items be approved by at least 80% of the votes of the
Fund's Common Stock and MMP(R), voting as a single class, and at least 80% of
the votes of the MMP(R) voting as a separate class, and at least 80% of the
entire Board of Directors; provided that if the Continuing Directors (as defined
below) of the Fund, by a vote of at least 80% of such directors, approve a
change, the affirmative vote of a majority of the votes entitled to be cast by
the holders of the Fund's Common Stock and MMP(R) to be voted on the matter,
voting as a single class, shall be required, unless otherwise required by the
Articles of Incorporation or unless otherwise required by law. For this
provision, "Continuing Director" means any member of the Board of Directors of
the Fund who (A) is not an Interested Party or an Affiliate or an Associate (as
these terms are defined below) of an Interested Party and has been a member of
the Board of Directors for a period of at least 12 months, or (B) is a successor
of a Continuing Director who is not an Interested Party or an Affiliate or
Associate of an Interested Party and is recommended to succeed a Continuing
Director by a majority of the Continuing Directors then on the Board of
Directors, or (C) is elected to the Board by a majority of the Continuing
Directors then on the Board of Directors and who is not an Interested Party or
an Affiliate or Associate of an Interested Party. "Interested Party" means any
person, other than an investment company advised by the Fund's initial
investment manager or any of its Affiliates, which enters, or proposes to enter,
into a Business Combination (as defined in the Articles of Incorporation) with
the Fund or which individually or together with any other persons beneficially
owns or is deemed to own, directly or indirectly, more than 5 percent of any
class of the Fund's securities (within the meaning of Section 13(d) of the 1934
Act and the rules and regulations thereunder). "Affiliate" and "Associate" have
the respective meanings ascribed to such terms in Rule 12b-2 of the 1934 Act;
provided that the term "Affiliate" shall also include any person who, at or
prior to the time of election to the Board, had expressed support in writing of
any proposals of an Interested Party for which shareholder approval would be
required (for purposes of consideration of those proposals only).
The effect of the proposed change to the Articles of Incorporation is
to assure that any proposal to modify certain key aspects of the Fund has
widespread support of directors and shareholders before it could be implemented
and to protect shareholders from having their reasonable expectations about the
nature of the Fund and its operations nullified by the actions of a single
shareholder or group of shareholders. The change would also help prevent
shareholders from taking control of the Fund's Board and then reducing the vote
required to implement these changes since only Continuing Directors (as defined
above) could vote in a manner that would lessen the supermajority voting
requirement.
In part, this suggested modification to the Articles of Incorporation
of the Funds is prompted by the proposal of a group of shareholders of a sister
fund, Preferred Income Management Fund Incorporated, to change that fund's
investment objective to the pursuit of capital gains rather than current income,
and to effect that change by the sale of a significant portion of the fund's
preferred stock portfolio, with the proceeds of the sale to be reinvested in a
non-diversified portfolio of common stocks.
The proposed amendment is as follows:
1. Article III ("Purposes and Powers") is hereby amended to add the
following paragraph, with the existing paragraph (4) consecutively renumbered:
(4) To pursue the investment objective of high current income for
holders of its common stock consistent with preservation of capital.
2. Article III ("Purposes and Powers") is hereby further amended to add
at the end of the last paragraph thereof the following proviso:
; provided, that the [Fund] may not (i) purchase securities (other than
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities ("Government Securities")) of any issuer if as a result
of the purchase more than 5% of the value of the [Fund]'s total assets
would be invested in the securities of the issuer, except that up to 25% of
the value of the [Fund]'s total assets may be invested without regard to
this 5% limitation; (ii) purchase more than 10% of the voting securities of
any one issuer, or more than 10% of the securities of any class of any one
issuer, except that (X) this limitation is not applicable to the Fund's
investment in Government Securities and (Y) up to 25% of the value of the
Fund's total assets may be invested without regard to this 10% limitation;
and (iii) make any investments for the purpose of exercising control or
management of any company.
3. Paragraphs (ii), (iii) and (vii) of Section 2 of Article VI
("Certain Transactions") are hereby amended and restated in their entirety as
follows:
(ii) "Continuing Director" means any member of the Board of Directors
of the Fund who (A) is not an Interested Party or an Affiliate or an
Associate (as these terms are defined below) of an Interested Party and has
been a member of the Board of Directors for a period of at least 12 months,
or (B) is a successor of a Continuing Director who is not an Interested
Party or an Affiliate or Associate of an Interested Party and is
recommended to succeed a Continuing Director by a majority of the
Continuing Directors then on the Board of Directors, or (C) is elected to
the Board to be a Continuing Director by a majority of the Continuing
Directors then on the Board of Directors and who is not an Interested Party
or an Affiliate or Associate of an Interested Party.
<PAGE>
(iii) "Interested Party" shall mean any person, other than an
investment company advised by the Fund's initial investment manager or any
of its Affiliates, which enters, or proposes to enter, into a Business
Combination with the Fund or which individually or together with any other
persons beneficially owns or is deemed to own, directly or indirectly, more
than 5 percent of any class of the Fund's securities (within the meaning of
Section 13(d) of the Securities Exchange Act of 1934 and the rules and
regulations thereunder (the "Exchange Act")).
(vii) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the Exchange Act; provided that the
term "Affiliate" shall also include any person who, at or prior to the time
of election to the Board of Directors, had expressed support in writing of
any proposals of an Interested Party for which shareholder approval would
be required (for purposes of consideration of those proposals only).
Once adopted, these provisions, like all other provisions of Articles
III and VI, may be amended only by the affirmative vote of at least 80% of the
votes of the Fund's Common Stock and MMP(R), voting as a single class, and at
least 80% of the votes of the MMP(R), voting as a separate class, unless such
action previously has been approved by the affirmative vote of 80% of the total
number of Continuing Directors, in which case the affirmative vote of a majority
of the votes entitled to be cast by the holders of the Fund's Common Stock and
MMP(R) to be voted on the matter, voting as a single class, shall be required,
unless otherwise required by the Articles of Incorporation or unless otherwise
required by law.
Required Vote
Approval of the Articles of Amendment will require the affirmative vote
of a majority of the votes entitled to be cast by the holders of the Fund's
Common Stock and MMP(R) to be voted on the matter, voting as a single class, and
a majority of the holders of the Fund's MMP(R) to be voted on the matter, voting
as a separate class.
THE BOARD OF DIRECTORS OF EACH FUND UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS VOTE "FOR" PROPOSAL NO. 3.
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 1999
must be received by the Fund for consideration for inclusion in the Fund's proxy
statement relating to the meeting no later than November 14 , 1998.
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. Investor Services Group acts as the administrator to the Funds
and is located at One Exchange Place, Boston, Massachusetts 02109.
<PAGE>
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
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 and the New York
Stock Exchange. 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 the SEC's review of the copies of such forms
it receives and written representations from certain of such persons, each Fund
believes that through the date hereof all such filing requirements applicable to
such persons were complied with.
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.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
<PAGE>
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, Teresa M.R.
Hamlin and Christine P. Ritch, 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, One Citicorp Center, 153 East 53rd
Street, 47th Floor, New York, New York 10022 at 8:30 a.m., on April 17, 1998,
and any adjournments thereof. The undersigned hereby acknowledges receipt of the
Revised Notice of Annual Meeting and Revised 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
<PAGE>
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
ELECTION OF NOMINEE AS DIRECTOR AND FOR PROPOSALS 2 AND 3.
Please refer to the Proxy Statement for a discussion of the Proposals.
1. ELECTION OF DIRECTOR
FOR ____ WITHHELD ____
Nominee: Morgan Gust
2. To ratify the selection of
Coopers & Lybrand L.L.P. as
independent accountants for
the Fund. FOR ____ AGAINST ____ ABSTAIN _____
3. To approve an amendment to
the Fund's Articles of
Incorporation. FOR ____ AGAINST ____ ABSTAIN ____
The Board of Directors recommends that the shareholders vote "FOR" the election
of the nominee, "FOR" ratification of the selection of Coopers & Lybrand L.L.P.
as independent accountants for the Fund and "FOR" the approval of an amendment
to the Fund's Articles of Incorporation.
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:__________________
<PAGE>
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, Teresa M.R. Hamlin and Christine P. Ritch, 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, One Citicorp
Center, 153 East 53rd Street, 47th Floor, New York, New York 10022 at 8:30 a.m.,
on April 17, 1998, and any adjournments thereof. The undersigned hereby
acknowledges receipt of the Revised Notice of Annual Meeting and Revised 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
<PAGE>
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
ELECTION OF NOMINEE AS DIRECTOR AND FOR PROPOSALS 2 AND 3.
Please refer to the Proxy Statement for a discussion of the Proposals.
1. ELECTION OF DIRECTOR
FOR ____ WITHHELD ____
Nominee: Donald F. Crumrine
2. To ratify the selection of
Coopers & Lybrand L.L.P. as
independent accountants for FOR ____ AGAINST ____ ABSTAIN ____
the Fund.
3. To approve an amendment to
the Fund's Articles of
Incorporation. FOR ____ AGAINST ____ ABSTAIN ____
The Board of Directors recommends that the shareholders vote "FOR" the election
of the nominee, "FOR" ratification of the selection of Coopers & Lybrand L.L.P.
as independent accountants for the Fund and "FOR" the approval of an amendment
to the Fund's Articles of Incorporation.
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:__________________
<PAGE>
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, Teresa M.R. Hamlin and Christine P. Ritch,
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, One Citicorp Center, 153 East 53rd Street, 47th
Floor, New York, New York 10022 at 8:30 a.m., on April 17, 1998, and any
adjournments thereof. The undersigned hereby acknowledges receipt of the Revised
Notice of Annual Meeting and Revised 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
<PAGE>
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
ELECTION OF NOMINEE AS DIRECTOR AND FOR PROPOSALS 2 AND 3.
Please refer to the Proxy Statement for a discussion of the Proposals.
1. ELECTION OF DIRECTOR
FOR ____ WITHHELD ____
Nominee: Robert T. Flaherty
2. To ratify the selection
of Coopers & Lybrand L.L.P.
as independent accountants FOR ____ AGAINST ____ ABSTAIN ___
for the Fund.
3. To approve an amendment to
the Fund's Articles of
Incorporation. FOR ____ AGAINST ____ ABSTAIN ____
The Board of Directors recommends that the shareholders vote "FOR" the election
of the nominee, "FOR" ratification of the selection of Coopers & Lybrand L.L.P.
as independent accountants for the Fund and "FOR" the approval of an amendment
to the Fund's Articles of Incorporation.
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:__________________
<PAGE>
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, Teresa M.R. Hamlin and Christine P. Ritch,
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, One Citicorp Center, 153 East 53rd Street, 47th
Floor, New York, New York 10022 at 8:30 a.m., on April 17, 1998, and any
adjournments thereof. The undersigned hereby acknowledges receipt of the Revised
Notice of Annual Meeting and Revised 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
<PAGE>
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
ELECTION OF NOMINEE AS DIRECTOR AND FOR PROPOSALS 2 AND 3.
Please refer to the Proxy Statement for a discussion of the Proposals.
1. ELECTION OF DIRECTOR
FOR ____ WITHHELD ____
Nominee: Robert F. Wulf
2. To ratify the selection of
Coopers & Lybrand L.L.P. as
independent accountants for
the Fund. FOR ____ AGAINST ____ ABSTAIN ____
3. To approve an amendment to
the Fund's Articles of
Incorporation. FOR ____ AGAINST _____ ABSTAIN ____
The Board of Directors recommends that the shareholders vote "FOR" the election
of the nominee, "FOR" ratification of the selection of Coopers & Lybrand L.L.P.
as independent accountants for the Fund and "FOR" the approval of an amendment
to the Fund's Articles of Incorporation.
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:__________________
<PAGE>
