<![CDATA[Flaherty & Crumrine/Claymore Total Return Fund Incorporated]]>

Item 1. Schedule of Investments.

The Schedule(s) of Investment is attached herewith.


FLAHERTY & CRUMRINE/CLAYMORE TOTAL RETURN FUND

To the Shareholders of Flaherty & Crumrine/Claymore Total Return Fund:

The Fund is off to a strong start in the new fiscal year. During the three month period ending February 29th, total return1 on net asset value of the Fund was +11.0%. Total return based on market price of Fund shares for the period was +10.2%. A portion of the Fund’s NAV return in the quarter was recovery from the prior two quarters when total return was -3.7%. To provide context for return during the period, the comparable measure on the S&P 500 was +10.1%, and +2.0% for the Barclays Capital U.S. Aggregate Index.

A number of factors contributed to the strong performance. U.S. investor confidence turned positive after several months of decline. The labor picture is improving, corporate earnings have been rising, and the housing market is finally picking up. Europe appears to have stepped back from the precipice of economic disaster, as policy makers have flooded the continent with liquidity. Interest rates around the globe hover near historically low levels and are not expected to rise substantially anytime soon. All of this has stimulated demand for high-yielding assets, especially preferred securities.

Returns of this magnitude are rare, even in periods of above-average market volatility such as we’ve experienced over the past several years. And while we enjoy double digit quarterly returns as much as the next shareholder, we know it is unlikely to be replicated.

With spring training in full swing it is hard to resist dusting off some baseball analogies. Your Fund is like a part of the lineup built to get singles and doubles and lead the league in on-base percentage. Other investments are intended to hit home runs, and we trust shareholders will determine if these also belong on their team. We’ve tortured you with this to make a point — investors shouldn’t expect this type of quarterly Fund performance to be repeated.

Again, for several quarters we have seen signs of improvement in the U.S. economy, though the pace of growth has been well short of robust. The sovereign debt crisis in Europe appears to be moderating, although economic risks remain elevated in that region. Neither area is out of the woods and recovery could be easily derailed, but we believe the worst is behind us. Our Quarterly Economic Outlook can be viewed on the Fund’s website.

We expect new bank capital guidelines to be issued by the Federal Reserve very soon. Patient readers will recall we have said this before, and eventually we will be right! With the new rules set to go into effect in January 2013, time is running out for the regulators. The new guidelines, when issued, will provide the final pieces of the regulatory capital overhaul which grew out of the financial crisis. We’ve known for some time that most forms of trust preferred and hybrid preferred securities will eventually no longer count towards regulatory capital requirements. We’re waiting to learn what can be used instead.

Even without clear guidelines from regulators, a handful of banks recently have issued new preferred stock with terms expected to conform to the new rules. These securities are all perpetual, non-cumulative preferred stock. This is the basic form of capital we believe will ultimately replace much of the bank preferred capital currently outstanding.

We don’t think the transition will be immediate; nor is it likely that all of the older “non-qualifying” capital will be replaced with newer “good” Tier 1 capital. We have tried to anticipate the shift and stay ahead of the pack by selling some securities which may be called in the near term and reinvesting in suitable replacements. This type of proactive management has always been part of our investment approach.

 

 

1

Following the methodology required by the SEC, total return assumes dividend reinvestment and includes income and principal change, plus the impact of the Fund’s leverage and expenses.


Another fundamental part of our investment process is the hard work of credit analysis. The experience of the past few years has reinforced our commitment to rely on our own independent and objective research focused on the preferred level of the capital structure. The national rating agencies (Moody’s, S&P, and Fitch) often seem to shoot where the rabbit was, especially when it comes to preferred securities.

Although we sometimes disagree with the agencies on their overall ratings of specific credits, we often disagree with their ratings on preferred securities. This divergence typically results from agencies’ mechanical “notching” of preferred securities down from a company’s senior debt rating. In simplified terms, notching is the formulaic lowering of a security’s rating by a predetermined number of rating categories simply based on where it fits in a company’s capital structure. In our view, this methodology is arbitrary.

Our approach is to study every issuer to understand its business and financial condition, and every issue to understand its terms and conditions. Because we are investing in subordinated securities, it is essential that we understand the precise terms, many of which can be buried deep in the legal terms of the issue. With this knowledge we are better equipped to understand the full scope of risk associated with a specific security, and only then can we start to address questions of valuation.

As always, we encourage you to visit the Fund’s website www.fcclaymore.com for a more in-depth discussion of conditions in both preferred markets and the broader economy.

 

Sincerely,   
LOGO    LOGO
Donald F. Crumrine    Robert M. Ettinger
Chairman    President
April 16, 2012   

 

2


   

Flaherty & Crumrine/Claymore Total Return Fund Incorporated

PORTFOLIO OVERVIEW

February 29, 2012 (Unaudited)

 

Fund Statistics        

Net Asset Value

   $ 18.45   

Market Price

   $ 19.43   

Premium

     5.31

Yield on Market Price

     8.62

Common Stock Shares Outstanding

     9,843,064   

 

Moody’s Ratings

   % of Net Assets†  

A

     7.5

BBB

     70.0

BB

     17.5

Below “BB”

     1.9

Not Rated*

     0.5

Below Investment Grade**

     10.4

 

* Does not include net other assets and liabilities of 2.6%.
** Below investment grade by all of Moody’s, S&P and Fitch.

 

Industry Categories

   % of Net Assets†

 

LOGO

 

Top 10 Holdings by Issuer

   % of Net Assets†  

Liberty Mutual Group

     5.2

Banco Santander, S.A.

     4.6

Metlife

     4.1

Capital One Financial

     3.9

Goldman Sachs Group

     3.2

Georgia Power

     2.9

Enbridge Energy Partners

     2.8

HSBC PLC

     2.8

Unum Group

     2.8

Bank of America

     2.5
 
      % of Net Assets***†  

Holdings Generating Qualified Dividend Income (QDI) for Individuals

     32

Holdings Generating Income Eligible for the Corporate Dividend Received Deduction (DRD)

     21

 

*** This does not reflect year-end results or actual tax categorization of Fund distributions. These percentages can, and do, change, perhaps significantly, depending on market conditions. Investors should consult their tax advisor regarding their personal situation.
Net Assets includes assets attributable to the use of leverage.

 

3


Flaherty & Crumrine/Claymore Total Return Fund Incorporated

PORTFOLIO OF INVESTMENTS

February 29, 2012 (Unaudited)

    

 

Shares/$ Par

         Value  

 

Preferred Securities — 88.3%

  

  Banking — 35.1%   
  Astoria Financial:   
$ 4,850,000     

Astoria Capital Trust I, 9.75% 11/01/29, Series B

   $ 5,048,962 (1)(2) 
  Banco Bilbao Vizcaya Argentaria, S.A.:   
$ 2,050,000     

BBVA International Preferred, 5.919%

     1,598,338 **(1)(2)(3) 
  Banco Santander, S.A.:   
  439,755     

Banco Santander, 10.50% Pfd., Series 10

     12,498,936 **(1)(3) 
  Bank of America:   
  26,160     

Bank of America Corporation, 8.625% Pfd.

     666,557
$ 825,000     

BankAmerica Capital II, 8.00% 12/15/26

     832,219   
$ 1,000,000     

BankAmerica Institutional, Series A, 8.07% 12/31/26, 144A****

     1,008,750   
  25,000     

Countrywide Capital V, 7.00% Pfd. 11/01/36

     602,313   
$ 500,000     

Fleet Capital Trust II, 7.92% 12/11/26

     498,125   
$ 965,000     

MBNA Capital, 8.278% 12/01/26, Series A

     980,778   
$ 2,325,000     

NB Capital Trust IV, 8.25% 04/15/27

     2,368,594   
  Barclays Bank PLC:   
$ 3,600,000     

Barclays Bank PLC, 6.278%

     2,912,627 **(1)(3) 
  8,800     

Barclays Bank PLC, 7.75% Pfd., Series 4

     221,320 **(3) 
  120,000     

Barclays Bank PLC, 8.125% Pfd., Series 5

     3,066,000 **(1)(3) 
  BNP Paribas:   
$ 3,000,000     

BNP Paribas, 7.195%, 144A****

     2,655,000 **(1)(3) 
  Capital One Financial:   
$ 8,250,000     

Capital One Capital III, 7.686% 08/15/36

     8,425,313 (1) 
$ 500,000     

Capital One Capital V, 10.25% 08/15/39

     523,750 (1) 
$ 1,643,000     

Capital One Capital VI, 8.875% 05/15/40

     1,706,157 (1)(2) 
  Citigroup:   
  23,050     

Citigroup Capital XII, 8.50% Pfd. 03/30/40

     600,741   
  83,300     

Citigroup Capital XIII, 7.875% Pfd. 10/30/40

     2,258,388 (1)(2) 
  Colonial BancGroup:   
$ 10,000,000     

Colonial BancGroup, 7.114%, 144A****

     20,000 (4)(5)†† 
  FBOP Corp.:   
  7,000     

FBOP Corporation, Adj. Rate Pfd., 144A****

     3,500 *(4)(5)† 
  Fifth Third Bancorp.:   
$ 2,150,000     

Fifth Third Capital Trust IV, 6.50% 04/15/37

     2,144,625 (1) 
  13,150     

Fifth Third Capital Trust V, 7.25% Pfd. 08/15/67

     333,484   
  133,051     

Fifth Third Capital Trust VI, 7.25% Pfd. 11/15/67

     3,396,965 (1)(2) 
  First Horizon:   
  3,900     

First Tennessee Bank, Adj. Rate Pfd., 3.75%(6), 144A****

     2,660,531
  3     

FT Real Estate Securities Company, 9.50% Pfd., 144A****

     2,865,000   

 

4


   

Flaherty & Crumrine/Claymore Total Return Fund Incorporated

PORTFOLIO OF INVESTMENTS (Continued)

February 29, 2012 (Unaudited)

 

Shares/$ Par

          Value  

 

Preferred Securities — (Continued)

  

   Banking — (Continued)   
   First Niagara Financial Group:   
  138,000      

First Niagara Financial Group, Inc., 8.625% Pfd.

   $ 3,824,187
   First Republic Bank:   
  12,005      

First Republic Bank, 6.70% Pfd.

     309,399
   Goldman Sachs Group:   
$ 2,250,000      

Goldman Sachs, Capital I, 6.345% 02/15/34

     2,112,912 (1)(2) 
$ 881,000      

Goldman Sachs, Capital II, 5.793%

     614,498 (1)(2) 
  1,500      

STRIPES Custodial Receipts, Adj. Rate, 10.70%, Pvt.(6)

     727,500 *(4)(5) 
   HSBC PLC:   
  172,000      

HSBC Holdings PLC, 8.00% Pfd., Series 2

     4,670,230 **(1)(3) 
$ 1,000,000      

HSBC USA Capital Trust II, 8.38% 05/15/27, 144A****

     1,017,750 (1)(2) 
  1,828      

HSBC USA, Inc., $2.8575 Pfd.

     86,830
  25,189      

HSBC USA, Inc., 6.50% Pfd., Series H

     638,831 *(1) 
   ING Groep NV:   
  28,700      

ING Groep NV, 7.05% Pfd.

     668,466 **(3) 
  12,475      

ING Groep NV, 7.375% Pfd.

     302,644 **(3) 
   JPMorgan Chase:   
$ 505,000      

JPMorgan Chase Capital XVIII, 6.95% 08/17/36, Series R

     516,161 (1) 
$ 500,000      

JPMorgan Chase Capital XXVII, 7.00% 11/01/39, Series AA

     512,500 (1)(2) 
   KeyCorp:   
  72,900      

Keycorp Capital X, 8.00% Pfd. 03/15/68

     1,909,980 (1)(2) 
   Lloyds Banking Group PLC:   
$ 1,000,000      

Lloyds Banking Group PLC, 6.657%, 144A****

     695,000 **(3)† 
   PNC Financial Services:   
$ 1,676,000      

National City Preferred Capital Trust I, 12.00%

     1,807,095   
  39,995      

PNC Financial Services, 9.875% Pfd., Series L

     1,104,722 *(1) 
$ 1,000,000      

PNC Preferred Funding Trust III, 8.70%, 144A****

     1,035,309 (1)(2) 
   Sovereign Bancorp:   
  3,000      

Sovereign REIT, 12.00% Pfd., Series A, 144A****

     3,449,739   
   SunTrust Banks:   
  8,100      

SunTrust Capital IX, 7.875% Pfd. 03/15/68

     207,563   
   US Bancorp:   
  22,575      

US Bancorp, 6.50% Pfd.

     610,236
   Webster Financial:   
$ 2,800,000      

Webster Capital Trust IV, 7.65% 06/15/37

     2,809,677   

 

5


Flaherty & Crumrine/Claymore Total Return Fund Incorporated

PORTFOLIO OF INVESTMENTS (Continued)

February 29, 2012 (Unaudited)

    

 

Shares/$ Par

         Value  

 

Preferred Securities — (Continued)

  
  Banking — (Continued)   
 

Wells Fargo:

  
$ 600,000     

First Union Capital II, 7.95% 11/15/29

   $ 622,700 (1)(2) 
$ 1,500,000     

Wachovia Capital Trust III, Adj. Rate, 5.56975%(6)

     1,380,000 *(1) 
  14,493     

Wachovia Preferred Funding, 7.25% Pfd., Series A

     381,927 (1) 
  2,325     

Wells Fargo & Company, 7.50% Pfd., Series L

     2,546,456 *(1) 
  50,000     

Wells Fargo & Company, 8.00% Pfd., Series J

     1,462,500
    

 

 

 
       95,921,785   
    

 

 

 
  Financial Services — 2.0%   
 

Ameriprise Financial:

  
$ 250,000     

Ameriprise Financial, Inc., 7.518% 06/01/66

     272,500   
 

Charles Schwab:

  
$ 400,000     

Charles Schwab Corporation, 7.00%

     418,076
 

Credit Suisse Group:

  
$ 1,300,000     

Claudius, Ltd. - Credit Suisse AG, 7.875%, Series B

     1,332,500 (3) 
 

Gulf Stream-Compass CLO:

  
$ 3,000,000     

Gulf Stream-Compass CLO 2005 Composite Notes, 144A****

     2,179,230 (4)(5) 
 

HSBC PLC:

  
  45,011     

HSBC Finance Corporation, 6.36% Pfd., Series B

     1,123,542
 

Lehman Brothers:

  
  20,000     

Lehman Brothers Holdings, Inc., 5.67% Pfd., Series D

     5,600 *†† 
  85,000     

Lehman Brothers Holdings, Inc., 7.95% Pfd.

     425 *†† 
    

 

 

 
       5,331,873   
    

 

 

 
  Insurance — 20.4%   
 

Ace Ltd.:

  
$ 1,550,000     

Ace Capital Trust II, 9.70% 04/01/30

     2,088,021 (1)(2)(3) 
 

Aon Corporation:

  
$ 1,775,000     

AON Corp, 8.205% 01/01/27

     2,084,258 (1) 
 

Arch Capital Group:

  
  12,150     

Arch Capital Group Ltd., 7.875% Pfd., Series B

     310,205 **(1)(3) 
 

AXA SA:

  
$ 1,316,000     

AXA SA, 6.379%, 144A****

     1,065,960 **(1)(2)(3) 
 

Axis Capital:

  
  71,500     

Axis Capital Holdings, 7.50% Pfd., Series B

     6,758,988 (1)(2)(3) 
 

Delphi Financial:

  
  160,000     

Delphi Financial Group, 7.376% Pfd. 05/15/37

     4,065,008 (1)(2) 
 

Everest Re Group:

  
$ 5,760,000     

Everest Re Holdings, 6.60% 05/15/37

     5,450,400 (1)(2) 

 

6


   

Flaherty & Crumrine/Claymore Total Return Fund Incorporated

PORTFOLIO OF INVESTMENTS (Continued)

February 29, 2012 (Unaudited)

 

Shares/$ Par

         Value  

 

Preferred Securities — (Continued)

  

  Insurance — (Continued)   
 

Liberty Mutual Group:

  
$ 8,300,000     

Liberty Mutual Group, 10.75% 06/15/58, 144A****

   $ 10,914,500 (1) 
 

MetLife:

  
$ 2,250,000     

MetLife, Inc., 10.75% 08/01/39

     3,214,607 (1)(2) 
$ 1,700,000     

MetLife Capital Trust IV, 7.875% 12/15/37, 144A****

     1,878,500 (1)(2) 
$ 4,900,000     

MetLife Capital Trust X, 9.25% 04/08/38, 144A****

     6,051,500 (1)(2) 
 

Principal Financial:

  
  12,000     

Principal Financial Group, 5.563% Pfd., Series A

     1,133,250
  68,867     

Principal Financial Group, 6.518% Pfd., Series B

     1,777,629 *(1) 
 

StanCorp Financial Group:

  
$ 1,750,000     

Stancorp Financial Group, 6.90% 06/01/67

     1,636,250 (1) 
 

The Travelers Companies:

  
$ 3,615,000     

USF&G Capital, 8.312% 07/01/46, 144A****

     4,361,335 (1)(2) 
 

XL Group PLC:

  
$ 3,578,000     

XL Capital Ltd., 6.50%, Series E

     3,068,135 (1)(3) 
    

 

 

 
       55,858,546   
    

 

 

 
 

Utilities — 23.7%

  
 

Alabama Power:

  
  7,450     

Alabama Power Company, 6.45% Pfd.

     206,505 *(1) 
 

Baltimore Gas & Electric:

  
  33,700     

Baltimore Gas & Electric Company, 6.70% Pfd., Series 1993

     3,431,081 *(1) 
 

Commonwealth Edison:

  
$ 3,160,000     

COMED Financing III, 6.35% 03/15/33

     3,161,008 (1)(2) 
 

Constellation Energy:

  
  20,170     

Constellation Energy Group, 8.625% Pfd. 06/15/63, Series A

     550,843 (1) 
 

Dominion Resources:

  
$ 2,500,000     

Dominion Resources Capital Trust I, 7.83% 12/01/27

     2,525,293 (1)(2) 
$ 3,500,000     

Dominion Resources, Inc., 7.50% 06/30/66

     3,704,656 (1)(2) 
 

DTE Energy:

  
  38,500     

DTE Energy Company, 6.50%, Pfd.

     1,056,344   
 

Entergy Arkansas:

  
  83,000     

Entergy Arkansas, Inc., 6.45% Pfd.

     2,090,563 *(1) 
 

Entergy Louisiana:

  
  57,000     

Entergy Louisiana, Inc., 6.95% Pfd.

     5,680,409 *(1) 
 

Georgia Power:

  
  72,297     

Georgia Power Company, 6.50% Pfd., Series 2007A

     7,979,781 *(1) 
 

Gulf Power:

  
  5,000     

Gulf Power Company, 6.45% Pfd., Series 2007A

     533,420

 

7


Flaherty & Crumrine/Claymore Total Return Fund Incorporated

PORTFOLIO OF INVESTMENTS (Continued)

February 29, 2012 (Unaudited)

    

 

Shares/$ Par

         Value  

 

Preferred Securities — (Continued)

  

      Utilities — (Continued)       
 

Indianapolis Power & Light:

  
  30,445     

Indianapolis Power & Light Company, 5.65% Pfd.

   $ 2,974,096 *(1) 
 

Integrys Energy Group:

  
$ 2,640,000     

WPS Resources Corporation, 6.11% 12/01/66

     2,622,990 (1)(2) 
 

Interstate Power & Light:

  
  94,721     

Interstate Power & Light Company, 8.375% Pfd., Series B

     2,696,944 *(1) 
 

Nextera Energy:

  
$ 4,197,000     

FPL Group Capital, Inc., 6.65% 06/15/67

     4,254,146 (1)(2) 
$ 1,975,000     

FPL Group Capital, Inc., 7.30% 09/01/67, Series D

     2,081,032 (1)(2) 
 

Peco Energy:

  
$ 4,000,000     

PECO Energy Capital Trust IV, 5.75% 06/15/33

     3,467,492 (1)(2) 
 

PPL Corp.:

  
$ 3,700,000     

PPL Capital Funding, 6.70% 03/30/67, Series A

     3,648,355 (1) 
  6,078     

PPL Electric Utilities Corporation, 6.25% Pfd.

     155,178
 

Puget Energy:

  
$ 5,175,000     

Puget Sound Energy, Inc., 6.974% 06/01/67

     5,182,461 (1) 
 

Southern California Edison:

  
  17,750     

Southern California Edison, 6.00% Pfd., Series C

     1,763,905 *(1) 
  1,650     

Southern California Edison, 6.125% Pfd., Series B

     165,308
  46,460     

Southern California Edison, 6.50% Pfd., Series D

     4,828,935 *(1) 
    

 

 

 
       64,760,745   
    

 

 

 
 

Energy — 5.0%

  
 

Enbridge Energy Partners:

  
$ 7,050,000     

Enbridge Energy Partners LP, 8.05% 10/01/37

     7,649,250 (1)(2) 
 

Enterprise Products Partners:

  
$ 5,550,000     

Enterprise Products Partners, 8.375% 08/01/66, Series A

     6,013,475 (1) 
    

 

 

 
       13,662,725   
    

 

 

 
 

Real Estate Investment Trust (REIT) — 0.1%

  
 

PS Business Parks:

  
  10,000     

PS Business Parks, Inc., 6.875% Pfd., Series R

     266,000   
    

 

 

 
       266,000   
    

 

 

 
 

Miscellaneous Industries — 2.0%

  
 

Ocean Spray Cranberries:

  
  37,400     

Ocean Spray Cranberries, Inc., 6.25% Pfd., 144A****

     3,337,950 *(1) 

 

8


   

Flaherty & Crumrine/Claymore Total Return Fund Incorporated

PORTFOLIO OF INVESTMENTS (Continued)

February 29, 2012 (Unaudited)

 

           Value  

 

Preferred Securities — (Continued)

  

  Miscellaneous Industries — (Continued)   
  Textron, Inc.:   
$ 2,850,000     

Textron Financial Corporation, 6.00% 02/15/67, 144A****

   $ 2,180,250   
    

 

 

 
       5,518,200   
    

 

 

 
 

Total Preferred Securities
(Cost $242,254,944)

     241,319,874   
    

 

 

 

 

Corporate Debt Securities — 9.1%

  
  Banking — 2.7%   
  First Niagara Financial Group:   
$ 300,000     

First Niagara Financial Group, Inc., 7.25% 12/15/21

     317,118   
  Goldman Sachs Group:   
$ 5,175,000     

Goldman Sachs Group, 6.75% 10/01/37, Sub Notes

     5,201,682 (1)(2) 
  Regions Financial:   
$ 1,990,000     

Regions Financial Corporation, 7.375% 12/10/37, Sub Notes

     1,835,775   
    

 

 

 
       7,354,575   
    

 

 

 
  Financial Services — 0.4%   
  Lehman Brothers:   
$ 4,726,012     

Lehman Brothers, Guaranteed Note, Variable Rate, 5.843% 12/16/16, 144A****

     940,004 (4)(5)†† 
    

 

 

 
       940,004   
    

 

 

 
  Insurance — 3.9%   
  Liberty Mutual Group:   
$ 3,400,000     

Liberty Mutual Insurance, 7.697% 10/15/97, 144A****

     3,208,012 (1)(2) 
  Unum Group:   
$ 7,000,000     

UnumProvident Corporation, 7.25% 03/15/28

     7,524,083 (1)(2) 
    

 

 

 
       10,732,095   
    

 

 

 
  Utilities — 1.1%   
  Southern Union:   
$ 1,000,000     

Southern Union Company, 7.60% 02/01/24

     1,191,100 (1) 
$ 1,600,000     

Southern Union Company, 8.25% 11/15/29

     1,928,387 (1)(2) 
    

 

 

 
       3,119,487   
    

 

 

 

 

9


Flaherty & Crumrine/Claymore Total Return Fund Incorporated

PORTFOLIO OF INVESTMENTS (Continued)

February 29, 2012 (Unaudited)

    

 

Shares/$ Par

               Value  

 

Corporate Debt Securities — (Continued)

  

  Miscellaneous Industries — 1.0%     
  Pulte Group Inc.:     
  25,844     

Pulte Homes, Inc., 7.375% 06/01/46

     $ 635,052   
$ 2,160,000     

Pulte Homes, Inc., 7.875% 06/15/32

       1,998,000 (1) 
      

 

 

 
         2,633,052   
      

 

 

 
 

Total Corporate Debt Securities
(Cost $27,056,070)

       24,779,213   
      

 

 

 

 

Common Stock — 0.5%

  

  Banking — 0.2%     
  CIT Group:     
  13,500     

CIT Group, Inc.

       549,585 *† 
      

 

 

 
         549,585   
      

 

 

 
  Utilities — 0.3%     
  Exelon Corp.:     
  11,750     

Exelon Corporation

       459,073
  PPL Corp.:     
  11,653     

PPL Corporation

       332,693
      

 

 

 
         791,766   
      

 

 

 
 

Total Common Stock
(Cost $3,318,243)

       1,341,351   
      

 

 

 

 

Money Market Fund — 0.8%

  

  BlackRock Liquidity Funds:     
  2,365,355     

T-Fund

       2,365,355   
      

 

 

 
 

Total Money Market Fund
(Cost $ 2,365,355)

       2,365,355   
      

 

 

 

 

Total Investments (Cost $274,994,612***)

     98.7     269,805,793   

 

Other Assets And Liabilities (Net)

     1.3     3,438,322   
    

 

 

   

 

 

 

 

Total Managed Assets

     100.0 %‡    $ 273,244,115   
    

 

 

   

 

 

 

 

Loan Principal Balance

       (91,600,000
      

 

 

 

 

Total Net Assets Available To Common Stock

     $ 181,644,115   
      

 

 

 

 

* Securities eligible for the Dividends Received Deduction and distributing Qualified Dividend Income.
** Securities distributing Qualified Dividend Income only.
*** Aggregate cost of securities held.

 

10


   

Flaherty & Crumrine/Claymore Total Return Fund Incorporated

PORTFOLIO OF INVESTMENTS (Continued)

February 29, 2012 (Unaudited)

 

**** Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration to qualified institutional buyers. At February 29, 2012, these securities amounted to $51,527,820 or 18.9% of total managed assets.
(1) 

All or a portion of this security is pledged as collateral for the Fund’s loan. The total value of such securities was $183,633,642 at February 29, 2012.

(2) 

All or a portion of this security has been rehypothecated. The total value of such securities was $86,641,691 at February 29, 2012.

(3) 

Foreign Issuer.

(4) 

Illiquid

(5) 

Valued at fair value as determined in good faith by or under the direction of the Board of Directors as of February 29, 2012.

(6) 

Represents the rate in effect as of the reporting date.

Non-income producing.
†† The issuer has filed for bankruptcy protection. As a result, the Fund may not be able to recover the principal invested and also does not expect to receive income on this security going forward.
The percentage shown for each investment category is the total value of that category as a percentage of total managed assets.

 

   ABBREVIATIONS:
Pfd.       Preferred Securities
Pvt.       Private Placement Securities
REIT       Real Estate Investment Trust
STRIPES       Structured Residual Interest Preferred Enhanced Securities

 

11


Flaherty & Crumrine/Claymore Total Return Fund Incorporated

STATEMENT OF CHANGES IN NET ASSETS AVAILABLE TO COMMON STOCK(1)

For the period from December 1, 2011 through February 29, 2012 (Unaudited)

    

 

 

     Value  

OPERATIONS:

  

Net investment income

   $ 4,094,216   

Net realized gain/(loss) on investments sold during the period

     (674,689

Change in net unrealized appreciation/depreciation of investments

     14,960,039   
  

 

 

 

Net increase in net assets resulting from operations

     18,379,566   

DISTRIBUTIONS:

  

Dividends paid from net investment income to Common Stock Shareholders(2)

     (4,658,718
  

 

 

 

Total Distributions to Common Stock Shareholders

     (4,658,718 ) 

FUND SHARE TRANSACTIONS:

  

Increase from shares issued under the Dividend Reinvestment and Cash Purchase Plan

     195,300   
  

 

 

 

Net increase in net assets available to Common Stock resulting from Fund share transactions

     195,300   
  

 

 

 

NET INCREASE IN NET ASSETS AVAILABLE TO COMMON STOCK FOR THE PERIOD

   $ 13,916,148   
  

 

 

 

NET ASSETS AVAILABLE TO COMMON STOCK:

  

Beginning of period

   $ 167,727,967   

Net increase in net assets during the period

     13,916,148   
  

 

 

 

End of period

   $ 181,644,115   
  

 

 

 

 

(1)

These tables summarize the three months ended February 29, 2012 and should be read in conjunction with the Fund’s audited financial statements, including footnotes, in its Annual Report dated November 30, 2011.

(2)

May include income earned, but not paid out, in prior fiscal year.

 

12


   

Flaherty & Crumrine/Claymore Total Return Fund Incorporated

FINANCIAL HIGHLIGHTS(1)

For the period from December 1, 2011 through February 29, 2012 (Unaudited)

For a Common Stock share outstanding throughout the period

 

PER SHARE OPERATING PERFORMANCE:

  

Net asset value, beginning of period

   $ 17.06   
  

 

 

 

INVESTMENT OPERATIONS:

  

Net investment income

     0.42   

Net realized and unrealized gain/(loss) on investments

     1.44   
  

 

 

 

Total from investment operations

     1.86   
  

 

 

 

DISTRIBUTIONS TO COMMON STOCK SHAREHOLDERS:

  

From net investment income

     (0.47
  

 

 

 

Total distributions to Common Stock Shareholders

     (0.47
  

 

 

 

Net asset value, end of period

   $ 18.45   
  

 

 

 

Market value, end of period

   $ 19.43   
  

 

 

 

Common Stock shares outstanding, end of period

     9,843,064   
  

 

 

 

RATIOS TO AVERAGE NET ASSETS AVAILABLE TO COMMON STOCK SHAREHOLDERS:

  

Net investment income†

     9.47 %* 

Operating expenses including interest expense

     2.07 %* 

Operating expenses excluding interest expense

     1.41 %* 

SUPPLEMENTAL DATA:††

  

Portfolio turnover rate

     6 %** 

Total managed assets, end of period (in 000’s)

   $ 273,244   

Ratio of operating expenses including interest expense to total managed assets

     1.36 %* 

Ratio of operating expenses excluding interest expense to total managed assets

     0.93 %* 

 

(1) 

These tables summarize the three months ended February 29, 2012 and should be read in conjunction with the Fund’s audited financial statements, including footnotes, in its Annual Report dated November 30, 2011.

* Annualized.
** Not annualized.
The net investment income ratios reflect income net of operating expenses, including interest expense.
†† Information presented under heading Supplemental Data includes loan principal balance.

 

13


Flaherty & Crumrine/Claymore Total Return Fund Incorporated

FINANCIAL HIGHLIGHTS (Continued)

Per Share of Common Stock (Unaudited)

    

 

      Total
Dividends
Paid
     Net Asset
Value
     NYSE
Closing Price
     Dividend
Reinvestment
Price
(1)
 

December 30, 2011

   $ 0.1945       $ 17.34       $ 18.70       $ 17.77   

January 31, 2012

     0.1395         18.03         19.20         18.24   

February 29, 2012

     0.1395         18.45         19.43         18.46   

 

(1)

Whenever the net asset value per share of the Fund’s Common Stock is less than or equal to the market price per share on the reinvestment date, new shares issued will be valued at the higher of net asset value or 95% of the then current market price. Otherwise, the reinvestment shares of Common Stock will be purchased in the open market.

 

14


   

Flaherty & Crumrine/Claymore Total Return Fund Incorporated

NOTES TO FINANCIAL STATEMENTS (Unaudited)

 

1. Aggregate Information for Federal Income Tax Purposes

At February 29, 2012, the aggregate cost of securities for federal income tax purposes was $275,337,868, the aggregate gross unrealized appreciation for all securities in which there is an excess of value over tax cost was $22,690,943 and the aggregate gross unrealized depreciation for all securities in which there is an excess of tax cost over value was $28,223,018.

 

2. Additional Accounting Standards

Fair Value Measurement: The inputs and valuation techniques used to measure fair value of the Fund’s investments are summarized into three levels as described in the hierarchy below:

 

   

Level 1 – quoted prices in active markets for identical securities

 

   

Level 2 – other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)

 

   

Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. Transfers in and out of levels are recognized at market value at the end of the period. A summary of the inputs used to value the Fund’s investments as of February 29, 2012 is as follows:

 

      Total
Value at
February 29, 2012
     Level 1
Quoted
Price
     Level 2
Significant
Observable
Inputs
     Level 3
Significant
Unobservable
Inputs
 

Preferred Securities

           

Banking

   $ 95,921,785       $ 66,189,186       $ 29,709,099       $ 23,500   

Financial Services

     5,331,873         1,541,618         1,611,025         2,179,230   

Insurance

     55,858,546         31,280,084         24,578,462         —     

Utilities

     64,760,745         20,615,310         44,145,435         —     

Energy

     13,662,725         13,662,725         —           —     

Real Estate Investment Trust (REIT)

     266,000         266,000         —           —     

Miscellaneous Industries

     5,518,200         —           5,518,200         —     

Corporate Debt Securities

     24,779,213         5,836,734         18,002,475         940,004   

Common Stock

           

Banking

     549,585         549,585         —           —     

Utilities

     791,766         791,766         —           —     

Money Market Fund

     2,365,355         2,365,355         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Investments

   $ 269,805,793       $ 143,098,363       $ 123,564,696       $ 3,142,734   
  

 

 

    

 

 

    

 

 

    

 

 

 

The Fund did not have any significant transfers in and out of Level 1 and Level 2 during the period.

 

15


Flaherty & Crumrine/Claymore Total Return Fund Incorporated

NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)

    

 

The Fund’s investments in Level 2 and Level 3 are based primarily on market information, where available. This includes, but is not limited to, prices provided by third-party providers, observable trading activity (including the recency, depth, and consistency of such information with quoted levels), and the depth and consistency of broker-quoted prices. In the event market information is not directly available, comparable information may be observed for securities that are similar in many respects to those being valued. The Fund may employ an income approach for certain securities that also takes into account credit risk, interest rate risk, and potential recovery prospects.

The following is a reconciliation of Level 3 investments for which significant unobservable inputs were used to determine fair value:

 

           Preferred Securities         
     Total Investments     Banking     Financial
Services
     Corporate Debt
Securities
 

Balance as of 11/30/11

   $ 3,354,693      $ 303,500      $ 2,151,360       $ 899,833   

Accrued discounts/premiums

     —          —          —           —     

Realized gain/(loss)

     —          —          —           —     

Change in unrealized appreciation/(depreciation)

     (211,959     (280,000     27,870         40,171   

Purchases

     —          —          —           —     

Sales

     —          —          —           —     

Transfers in

     —          —          —           —     

Transfers out

     —          —          —           —     
  

 

 

   

 

 

   

 

 

    

 

 

 

Balance as of 2/29/12

   $ 3,142,734      $ 23,500      $ 2,179,230       $ 940,004   

For the period ended February 29, 2012, total change in unrealized gain/(loss) on Level 3 securities still held at period-end and included in the change in net assets was $(211,959).

 

16


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Directors

Donald F. Crumrine, CFA

Chairman of the Board

David Gale

Morgan Gust

Karen H. Hogan

Robert F. Wulf, CFA

 

Officers

Donald F. Crumrine, CFA

Chief Executive Officer

Robert M. Ettinger, CFA

President

R. Eric Chadwick, CFA

Chief Financial Officer,

Vice President and Treasurer

Chad C. Conwell

Chief Compliance Officer,

Vice President and Secretary

Bradford S. Stone

Vice President and

Assistant Treasurer

Laurie C. Lodolo

Assistant Compliance Officer,

Assistant Treasurer and

Assistant Secretary

Linda M. Puchalski

Assistant Treasurer

 

Investment Adviser

Flaherty & Crumrine Incorporated

e-mail: flaherty@pfdincome.com

 

Servicing Agent

Guggenheim Funds Distributors, Inc.

1-866-233-4001

 

Questions concerning your shares of Flaherty &

Crumrine/Claymore Total Return Fund?

•   If your shares are held in a Brokerage

Account, contact your Broker.

•   If you have physical possession of your shares

in certificate form, contact the Fund’s Transfer

Agent —

 

BNY Mellon Investment Servicing

(US) Inc.

P.O. Box 358035

Pittsburgh, PA 15252-8035

1-866-351-7446

 

This report is sent to shareholders of Flaherty &

Crumrine/Claymore Total Return Fund Incorporated for

their information. It is not a Prospectus, circular or

representation intended for use in the purchase or sale of

shares of the Fund or of any securities mentioned in this

report.

  

 

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Quarterly

Report

 

February 29, 2012

 

 

 

www.fcclaymore.com