FLAHERTY & CRUMRINE/CLAYMORE TOTAL RETURN FUND
To the Shareholders of the Flaherty & Crumrine/Claymore Total Return Fund
("FLC"):
During the Fund's first fiscal quarter ended February 28, 2007, the Fund
performed well in choppy, but ultimately little-changed, fixed-income markets by
earning a total return of 2.0% on its net asset value (NAV). These three months
saw the Fund continue its recent strong performance.
Interest rates were unchanged to slightly higher over the quarter, as the
Federal Reserve left the federal funds rate unchanged and long-term Treasury
rates rose only slightly. Corporate credit spreads also ended the quarter little
changed, while the Fund's interest-rate hedge had only a minimal impact. Both
the recent quarter and trailing twelve-month periods delivered what the Fund is
intended to produce - current income and stability of principal.
As you can see on the following pages detailing actual holdings in the
Fund's portfolio, the Fund invests in a relatively small number of industries,
including utilities and insurers, banks and other finance companies. In fact,
the Fund has an investment mandate to concentrate at least 25% of its assets in
each of the banking and utilities industries. In terms of the industries the
Fund's assets are in, its portfolio is no different than the overall preferred
securities market. Because of the preferred securities market's overall emphasis
in financial services, a portfolio of preferred securities, including the
Fund's, can be at risk if the U.S. economy goes into recession.
One important area of recent concern for the U.S. economy in general, and
U.S. credit markets in particular, is subprime mortgage lending, which has
experienced increasing default and delinquency rates in recent months. The
numbers here are large in an absolute sense, but they are small relative to a
$13 trillion U.S. economy and to the mortgage market as a whole. Because of
this, while we cannot entirely rule it out, we currently do not believe that
problems in subprime mortgages will push the economy into recession.
The Fund holds no positions in securities issued by mortgage brokers or
subprime specialty lenders. Nonetheless, many of the banks and insurance
companies in which we have invested do have some exposure to subprime mortgages
in their lending or investment portfolios. While we are examining these
companies very closely, the lack of detailed disclosure about subprime mortgages
makes it impossible for us to make definitive statements about the Fund's
potential exposure to the problem. However, given what we now know and can infer
about the companies in which we invest, we expect that EARNINGS (which flow to
the companies' common shareholders) will be reduced at some of the companies we
hold as a result of the problems in subprime lending. However, we currently do
not expect that they will suffer losses large enough to cut meaningfully into
CAPITAL (which support the debt and preferred securities owned by the Fund).
Although we cannot rule out the possibility - despite our best judgment to the
contrary - that some of the Fund's investments could be seriously affected, we
do not currently see any serious subprime credit problems in the holdings of the
Fund.
The Fund's website at WWW.FCCLAYMORE.COM has more information about Fund
performance and a more complete discussion of the state of the economy (in our
First Quarter Economic Update) and of subprime mortgages and their potential
impact on the economy and the Fund's portfolio (in the "FAQ" section). We
encourage you to explore the website for a wide range of additional information
about your Fund.
Sincerely,
/S/ DONALD F. CRUMRINE /S/ ROBERT M. ETTINGER
Donald F. Crumrine Robert M. Ettinger
Chairman of the Board President
April 20, 2007
--------------------------------------------------------------------------------
Flaherty & Crumrine/Claymore Total Return Fund Incorporated
PORTFOLIO OVERVIEW
FEBRUARY 28, 2007 (UNAUDITED)
-----------------------------------------------------------
FUND STATISTICS ON 02/28/07
---------------------------
Net Asset Value $ 23.37
Market Price $ 21.62
Discount 7.49%
Yield on Market Price 7.08%
Common Stock Shares
Outstanding 9,776,333
MOODY'S RATINGS % OF PORTFOLIO
------------------------------------------
AAA 0.0%
AA 1.8%
A 23.7%
BBB 52.9%
BB 13.3%
Not Rated 5.7%
------------------------------------
Below Investment Grade* 16.2%
* BELOW INVESTMENT GRADE BY BOTH MOODY'S AND
S&P.
INDUSTRY CATEGORIES % OF PORTFOLIO
-----------------------------------------------------
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS
Energy 6%
Other 5%
Banks 35%
Utilities 27%
Insurance 17%
Financial Services 4%
REITs 6%
TOP 10 HOLDINGS BY ISSUER % OF PORTFOLIO
------------------------------------------------------
Capital One Financial 5.2%
Banco Santander 4.3%
Dominion Resources 3.7%
Entergy Louisiana 3.6%
Liberty Mutual Group 3.5%
Wachovia Corp 3.4%
Midamerican Energy 3.1%
Nexen, Inc 2.6%
Interstate Power & Light 2.2%
UnumProvident Corp 2.1%
% OF PORTFOLIO**
-----------------------------------------------------------------------------------------------------------------------
Holdings Generating Qualified Dividend Income (QDI) for Individuals 27%
Holdings Generating Income Eligible for the Corporate Dividend Received Deduction (DRD) 16%
-----------------------------------------------------------------------------------------------------------------------
** 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.
3
--------------------------------------------------------------------------------
Flaherty & Crumrine/Claymore Total Return Fund Incorporated
PORTFOLIO OF INVESTMENTS
FEBRUARY 28, 2007 (UNAUDITED)
-----------------------------------------------------------
SHARES/$ PAR VALUE
------------ ---------------
PREFERRED SECURITIES -- 79.0%
BANKING -- 35.1%
--------------------------------------------------------------------------------------------------------------------------
$ 5,750,000 Astoria Capital Trust I, 9.75% 11/01/29 Capital Security, Series B............... $ 6,616,317
Auction Pass-Through Trust, Cl. B:
15 Series 2006-5, Variable Rate Pfd., 144A****.................................... 492,000*
15 Series 2006-6, Variable Rate Pfd., 144A****.................................... 492,000*
10,900 BAC Capital Trust II, 7.00% Pfd. 02/01/32........................................ 274,884(2)
17,000 BAC Capital Trust XII, 6.875% Pfd. 08/02/55...................................... 441,320
Banco Santander:
235,920 6.80% Pfd., 144A****........................................................... 6,056,065**(1)
360,000 6.50% Pfd., 144A****........................................................... 9,180,000**(1)
50,900 Bank One Capital Trust VI, 7.20% Pfd............................................. 1,288,405
$ 2,600,000 Barclays Bank PLC, 6.278% Pfd.................................................... 2,616,120**(1)
68,750 Capital One Capital II, 7.50% Pfd. 06/15/66...................................... 1,824,026
$ 5,000,000 Capital One Capital III, 7.686% Pfd.............................................. 5,660,750
20,000 Citigroup Capital VIII, 6.95% Pfd. 09/15/31...................................... 508,750
40,000 Citizens Funding Trust I, 7.50% Pfd. 09/15/66.................................... 1,042,500
40,000 Cobank, ACB, 7.00% Pfd., 144A****................................................ 2,115,280*
20,000 Colonial Capital Trust IV, 7.875% Pfd............................................ 514,800
11,000 Comerica (Imperial) Capital Trust I, 7.60% Pfd. 07/01/50......................... 279,124
7,000 FBOP Corporation, Adj. Rate Pfd., 144A****....................................... 7,262,500*
$ 400,000 First Empire Capital Trust I, 8.234% 02/01/27 Capital Security................... 416,935
$ 1,900,000 First Hawaiian Capital I, 8.343% 07/01/27 Capital Security, Series B............. 1,990,254(1)
First Republic Bank:
160,000 6.25% Pfd...................................................................... 4,145,008*
23,898 7.25% Pfd...................................................................... 610,893
1,500 First Republic Preferred Capital Corporation, 10.50% Pfd., 144A****.............. 1,661,910
2 FT Real Estate Securities Company, 9.50% Pfd., 144A****.......................... 2,730,544
$ 7,100,000 GreenPoint Capital Trust I, 9.10% 06/01/27 Capital Security...................... 7,460,630
HBOS Capital Funding LP:
$ 2,000,000 6.85% Pfd...................................................................... 2,025,800(1)
$ 3,750,000 6.413% Pfd., 144A****.......................................................... 3,899,314**(1)
$ 3,000,000 Haven Capital Trust I, 10.46% 02/01/27 Capital Security.......................... 3,164,400
$ 855,000 HSBC Capital Trust II, 8.38% 05/15/27 Capital Security, 144A****................. 894,357(1)
ING Groep NV:
36,000 7.05% Pfd...................................................................... 909,000**(1)(2)
20,500 7.20% Pfd...................................................................... 521,469**(1)
$ 2,550,000 JPMorgan Capital Trust I, 7.54% 01/15/27 Capital Security........................ 2,644,557
42,000 Keycorp Capital IX, 6.75% Pfd. 12/15/66.......................................... 1,088,065
$ 1,000,000 Lloyds TSB Group PLC, 6.267% Pfd., 144A****...................................... 1,010,059**(1)
10 Marshall & Ilsley Investment II, 8.875% Pfd., 144A****........................... 1,023,241
4
--------------------------------------------------------------------------------
Flaherty & Crumrine/Claymore Total Return Fund Incorporated
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 28, 2007 (UNAUDITED)
-----------------------------------------------------------
SHARES/$ PAR VALUE
------------ ---------------
PREFERRED SECURITIES -- (CONTINUED)
BANKING -- (CONTINUED)
--------------------------------------------------------------------------------------------------------------------------
18,570 National City Capital Trust II, 6.625% Pfd. 11/15/36............................. $ 470,634
$ 2,500,000 North Fork Capital Trust I, 8.70% 12/15/26 Capital Security...................... 2,606,778
$ 810,000 North Fork Capital Trust II, 8.00% 12/15/27 Capital Security..................... 854,032
141,059 PFGI Capital Corporation, 7.75% Pfd.............................................. 3,670,355
$ 1,500,000 RBS Capital Trust B, 6.80% Pfd................................................... 1,545,000**(1)
Roslyn Real Estate:
25 8.95% Pfd., Series C, 144A****................................................. 2,760,390
10 Adj. Rate Pfd., Series D, 144A****............................................. 1,009,375
$ 500,000 Sovereign Capital Trust VI, 7.908% 06/13/36 Capital Security..................... 570,234
33,100 Sovereign Bancorp, 7.30% Pfd., Series C.......................................... 921,630*
191,525 Sovereign Capital Trust V, 7.75% Pfd. 05/22/36................................... 5,111,323
$ 5,050,000 Union Planters Capital Trust, 8.20% 12/15/26 Capital Security.................... 5,247,561
14,320 USB Capital X, 6.50% Pfd. 04/12/66............................................... 365,053
3,180 USB Capital XI, 6.60% Pfd. 09/15/66.............................................. 81,440
$ 5,000,000 Wachovia Capital Trust I, 7.64% 01/15/27 Capital Security, 144A****.............. 5,192,525
$ 670,000 Wachovia Capital Trust V, 7.965% 06/01/27 Capital Security, 144A****............. 699,193
217,200 Wachovia Preferred Funding, 7.25% Pfd., Series A................................. 6,101,973
$ 4,000,000 Webster Capital Trust I, 9.36% 01/29/27 Capital Security, 144A****............... 4,194,000
43,200 Wells Fargo Capital Trust IV, 7.00% Pfd. 09/01/31................................ 1,084,052
------------------------------------------------------------------------------------------------------------------
125,346,825
----------------
FINANCIAL SERVICES -- 2.8%
--------------------------------------------------------------------------------------------------------------------------
36,000 CABCO Trust for Goldman Sachs, Variable Rate Pfd................................. 860,627
1,500 Goldman Sachs Group, Inc., STRIPES Custodial Receipts, Pvt....................... 1,731,000*
$ 3,000,000 Gulf Stream-Compass 2005 Composite Notes, 144A****............................... 3,009,960
4,500 Merrill Lynch Capital Trust III, 7.00% Pfd....................................... 115,453
3,000 Merrill Lynch Series II STRIPES Custodial Receipts, Pvt.......................... 3,369,000*
17,200 Morgan Stanley Capital Trust II, 7.25% Pfd....................................... 436,988
4,100 Morgan Stanley Capital Trust V, 5.75% Pfd........................................ 98,400
9,200 Morgan Stanley Capital Trust VI, 6.60% Pfd....................................... 234,715
------------------------------------------------------------------------------------------------------------------
9,856,143
----------------
INSURANCE -- 12.1%
--------------------------------------------------------------------------------------------------------------------------
15,000 AAG Holding Company, Inc., 7.25% Pfd............................................. 381,300
177,380 ACE Ltd., 7.80% Pfd., Series C................................................... 4,569,752**(1)
$ 6,420,000 AON Capital Trust A, 8.205% 01/01/27 Capital Security............................ 7,560,372
Arch Capital Group Ltd.:
28,650 7.875% Pfd., Series B.......................................................... 750,272**(1)
7,100 8.00% Pfd...................................................................... 188,594**(1)
5
--------------------------------------------------------------------------------
Flaherty & Crumrine/Claymore Total Return Fund Incorporated
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 28, 2007 (UNAUDITED)
-----------------------------------------------------------
SHARES/$ PAR VALUE
------------ ---------------
PREFERRED SECURITIES -- (CONTINUED)
INSURANCE -- (CONTINUED)
--------------------------------------------------------------------------------------------------------------------------
$ 500,000 AXA SA, 6.463% Pfd., 144A****.................................................... $ 497,754**(1)
Axis Capital Holdings:
96,150 7.25% Pfd., Series A........................................................... 2,508,919**(1)
35,100 7.50% Pfd., Series B........................................................... 3,733,938(1)
70,400 Berkley W.R. Capital Trust II, 6.75% Pfd. 07/26/45............................... 1,790,800
48,800 Endurance Specialty Holdings, 7.75% Pfd.......................................... 1,290,150**(1)
166,700 Everest Re Capital Trust II, 6.20% Pfd., Series B................................ 4,021,638(1)
$ 4,500,000 Liberty Mutual Group, 7.80% Pfd., 144A****....................................... 4,491,045
$ 1,250,000 Renaissancere Capital Trust, 8.54% 03/01/27 Capital Security, Series B........... 1,303,294(1)
128,350 Renaissancere Holdings Ltd., 6.08% Pfd., Series C................................ 3,098,369**(1)
109,000 Scottish Re Group Ltd., 7.25% Pfd................................................ 2,236,680**(1)
$ 1,906,000 Sun Life Canada Capital Trust, 8.526% Capital Security, 144A****................. 1,995,144(1)
31,600 Torchmark Capital Trust III, 7.10% Pfd........................................... 840,364
$ 1,215,000 USF&G Capital, 8.312% 07/01/46 Capital Security, 144A****........................ 1,537,826
10,067 XL Capital Ltd., 7.625% Pfd., Series B........................................... 258,911**(1)
------------------------------------------------------------------------------------------------------------------
43,055,122
----------------
UTILITIES -- 20.3%
--------------------------------------------------------------------------------------------------------------------------
$ 362,000 AGL Capital Trust, 8.17% 06/01/37 Capital Security............................... 377,838
45,700 Baltimore Gas & Electric Company, 6.70% Pfd., Series 1993........................ 4,791,362*
230,000 Calenergy Capital Trust III, 6.50% Pfd. 09/01/27................................. 11,126,250
$ 500,000 COMED Financing II, 8.50% 01/15/27 Capital Security, Series B.................... 520,800
$ 2,375,000 COMED Financing III, 6.35% 03/15/33 Capital Security............................. 2,200,913
$ 4,500,000 Dominion Resources Capital Trust I, 7.83% 12/01/27 Capital Security............. 4,784,040
$ 6,750,000 Dominion Resources Capital Trust III, 8.40% 01/15/31 Capital Security............ 8,451,614
50,000 Dominion CNG Capital Trust I, 7.80% Pfd.......................................... 1,262,500
145,000 Entergy Arkansas, Inc., 6.45% Pfd................................................ 3,775,800*
50,000 Entergy Louisiana, Inc., 6.95% Pfd............................................... 5,149,500*
103,500 FPC Capital I, 7.10% Pfd., Series A.............................................. 2,590,740
129,400 FPL Group Capital, Inc., 6.60% Pfd. 10/01/66, Series A........................... 3,348,225
48,700 Georgia Power Capital Trust V, 7.125% Pfd. 03/31/42............................. 1,238,806
30,445 Indianapolis Power & Light Company, 5.65% Pfd.................................... 2,919,676*
Interstate Power & Light Company:
90,000 7.10% Pfd., Series C........................................................... 2,489,067*
38,600 8.375% Pfd., Series B.......................................................... 1,223,138*
$ 5,000,000 PECO Energy Capital Trust IV, 5.75% 06/15/33 Capital Security.................... 4,640,000
$ 1,800,000 Puget Sound Energy Capital Trust, 8.231% 06/01/27 Capital Security, Series B..... 1,880,100
22,500 Southern California Edison, 6.00% Pfd............................................ 2,318,906*
130,550 Southern Union Company, 7.55% Pfd................................................ 3,399,522*
6
--------------------------------------------------------------------------------
Flaherty & Crumrine/Claymore Total Return Fund Incorporated
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 28, 2007 (UNAUDITED)
-----------------------------------------------------------
SHARES/$ PAR VALUE
------------ ---------------
PREFERRED SECURITIES -- (CONTINUED)
UTILITIES -- (CONTINUED)
--------------------------------------------------------------------------------------------------------------------------
10,000 Southwest Gas Capital II, 7.70% Pfd.............................................. $ 262,188
5,000 Union Electric Company, $7.64 Pfd................................................ 517,600*
5,000 Virginia Electric & Power Company, $6.98 Pfd..................................... 516,407*
30,000 Virginia Power Capital Trust, 7.375% Pfd. 07/30/42............................... 763,575
85,137 Wisconsin Power & Light Company, 6.50% Pfd....................................... 2,064,572*
------------------------------------------------------------------------------------------------------------------
72,613,139
----------------
OIL AND GAS -- 1.4%
--------------------------------------------------------------------------------------------------------------------------
$ 2,000,000 Enterprise Products Partners, 8.375% Pfd......................................... 2,231,220
2,750 EOG Resources, Inc., 7.195% Pfd., Series B....................................... 2,948,358*
------------------------------------------------------------------------------------------------------------------
5,179,578
----------------
REAL ESTATE INVESTMENT TRUST (REIT) -- 5.5%
--------------------------------------------------------------------------------------------------------------------------
24,500 BRE Properties, Inc., 8.08% Pfd., Series B....................................... 627,048
20,000 Equity Office Property Trust, 7.75% Pfd., Series G............................... 501,876
85,000 Equity Residential Properties, 8.29% Pfd., Series K.............................. 5,137,400
PS Business Parks, Inc.:
124,620 7.20% Pfd., Series M........................................................... 3,197,288
23,538 7.375% Pfd., Series O.......................................................... 613,459
44,500 7.60% Pfd., Series L........................................................... 1,168,125
45,000 7.95% Pfd., Series K........................................................... 1,202,346
Public Storage, Inc.:
32,850 6.45% Pfd., Series F........................................................... 817,144
45,100 6.625% Pfd., Series M.......................................................... 1,121,863
30,000 6.85% Pfd., Series Y........................................................... 762,000
120,000 7.25% Pfd., Series K........................................................... 3,138,756
60,000 Realty Income Corp., 6.75% Pfd., Series E........................................ 1,509,378
------------------------------------------------------------------------------------------------------------------
19,796,683
----------------
MISCELLANEOUS INDUSTRIES -- 1.8%
--------------------------------------------------------------------------------------------------------------------------
1,395 Centaur Funding Corporation, 9.08% Pfd. 04/21/20 144A****........................ 1,637,817
40,000 Ocean Spray Cranberries, Inc., 6.25% Pfd., 144A****.............................. 3,600,000*
$ 1,000,000 TCI Comm Financing III, 9.65% 03/31/27 Capital Security.......................... 1,050,247
------------------------------------------------------------------------------------------------------------------
6,288,064
----------------
TOTAL PREFERRED SECURITIES
(Cost $272,106,370)............................................................ 282,135,554
----------------
7
--------------------------------------------------------------------------------
Flaherty & Crumrine/Claymore Total Return Fund Incorporated
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 28, 2007 (UNAUDITED)
-----------------------------------------------------------
SHARES/$ PAR VALUE
------------ ---------------
CORPORATE DEBT SECURITIES -- 20.9%
FINANCIAL SERVICES -- 1.3%
--------------------------------------------------------------------------------------------------------------------------
$ 4,824,312 Lehman Brothers, Guaranteed Note, Variable Rate, 12/16/16, 144A****.............. $ 4,439,332
------------------------------------------------------------------------------------------------------------------
4,439,332
----------------
INSURANCE -- 5.2%
--------------------------------------------------------------------------------------------------------------------------
20,000 American Financial Group, Inc., 7.125% 02/03/34, Senior Note..................... 509,600
$ 2,000,000 Farmers Exchange Capital, 7.20% 07/15/48, 144A****............................... 2,120,158
$ 7,577,000 Liberty Mutual Insurance, 7.697% 10/15/97, 144A****.............................. 8,160,474
$ 7,000,000 UnumProvident Corporation, 7.25% 03/15/28, Senior Notes.......................... 7,625,877
------------------------------------------------------------------------------------------------------------------
18,416,109
----------------
UTILITIES -- 7.0%
--------------------------------------------------------------------------------------------------------------------------
27,200 Corp-Backed Trust Certificates, 7.875% 02/15/32, Series Duke Capital............. 694,451
$ 1,000,000 Duke Capital Corporation, 8.00% 10/01/19, Senior Notes........................... 1,152,800
$ 4,500,000 Duquesne Light Holdings, 6.25% 08/15/35.......................................... 4,129,070
$ 7,562,000 Entergy Louisiana LLC, 6.30%, 09/01/35........................................... 7,572,549
5,000 Entergy Mississippi, Inc., 7.25%, 1st Mortgage................................... 126,407
$ 4,000,000 Interstate Power & Light Company, 6.45% 10/15/33, Senior Notes................... 4,129,200
62,000 PPL Energy Supply LLC, 7.00% 07/15/46............................................ 1,629,441
$ 1,220,000 Southern Union Company, 7.60% 02/01/24, Senior Notes............................. 1,315,018
$ 4,000,000 Wisconsin Electric Power Company, 6.875% 12/01/95................................ 4,386,608
------------------------------------------------------------------------------------------------------------------
25,135,544
----------------
OIL AND GAS -- 4.4%
--------------------------------------------------------------------------------------------------------------------------
$ 2,500,000 KN Energy, Inc., 7.45% 03/01/98.................................................. 2,451,965
356,200 Nexen, Inc., 7.35% Subordinated Notes............................................ 9,161,037(1)
$ 4,000,000 Noble Energy Inc, 7.25%, 08/01/97................................................ 4,192,992
------------------------------------------------------------------------------------------------------------------
15,805,994
----------------
MISCELLANEOUS INDUSTRIES -- 3.0%
--------------------------------------------------------------------------------------------------------------------------
30,000 AT&T Inc, 6.375% 02/15/56........................................................ 748,125
20,000 Corp-Backed Trust Certificates, 7.00% 11/15/28, Series FON....................... 505,000
19,625 Ford Motor Company, 7.50% 06/10/43, Senior Notes................................. 380,970
$ 6,265,000 General Motors Corporation, 8.80% 03/01/21....................................... 6,051,364
Pulte Homes, Inc.:
25,844 7.375% 06/01/46................................................................ 664,677(3)
$ 2,160,000 7.875% 06/15/32, Senior Notes.................................................. 2,473,593
------------------------------------------------------------------------------------------------------------------
10,823,729
----------------
TOTAL CORPORATE DEBT SECURITIES
(Cost $73,905,640)............................................................. 74,620,708
----------------
8
--------------------------------------------------------------------------------
Flaherty & Crumrine/Claymore Total Return Fund Incorporated
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 28, 2007 (UNAUDITED)
-----------------------------------------------------------
SHARES/$ PAR VALUE
------------ ---------------
COMMON STOCK -- 0.1%
BANKING -- 0.1%
--------------------------------------------------------------------------------------------------------------------------
20,000 New York Community Bancorp, Inc.................................................. $ 334,800*
------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $328,544)................................................................ 334,800
----------------
OPTION CONTRACTS -- 0.1%
2,360 June Put Options on June U.S Treasury Bond Futures, Expiring 05/25/07............ 229,469+
------------------------------------------------------------------------------------------------------------------
TOTAL OPTION CONTRACTS
(Cost $1,002,073).............................................................. 229,469
----------------
9
--------------------------------------------------------------------------------
Flaherty & Crumrine/Claymore Total Return Fund Incorporated
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 28, 2007 (UNAUDITED)
-----------------------------------------------------------
SHARES/$ PAR VALUE
------------ ---------------
MONEY MARKET FUND -- 0.1%
353,336 BlackRock Provident Institutional, TempFund...................................... $ 353,336
------------------------------------------------------------------------------------------------------------------
TOTAL MONEY MARKET FUND
(Cost $353,336)................................................................ 353,336
----------------
SECURITIES LENDING COLLATERAL -- 0.2%
BANKING -- 0.2%
--------------------------------------------------------------------------------------------------------------------------
697,788 Institutional Money Market Trust................................................. 697,788
------------------------------------------------------------------------------------------------------------------
697,788
----------------
TOTAL SECURITIES LENDING COLLATERAL
(Cost $697,788)................................................................ 697,788
----------------
TOTAL INVESTMENTS (Cost $348,393,751***).......................................... 100.4% 358,371,655
OTHER ASSETS AND LIABILITIES (Net)................................................ (0.4)% (1,379,009)
--------- ----------------
TOTAL NET ASSETS AVAILABLE TO COMMON STOCK AND PREFERRED STOCK.................... 100.0%++ $ 356,992,646
--------- ----------------
AUCTION MARKET PREFERRED STOCK (AMPS) REDEMPTION VALUE......................................... (128,500,000)
----------------
TOTAL NET ASSETS AVAILABLE TO COMMON STOCK..................................................... $ 228,492,646
================
-----------------------------
* Securities eligible for the Dividends Received Deduction and distributing
Qualified Dividend Income.
** Securities distributing Qualified Dividend Income only.
*** Aggregate cost of securities held.
**** 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. These securities have been
determined to be liquid under the guidelines established by the Board of
Directors.
(1) Foreign Issuer.
(2) All or a portion of this security has been pledged as collateral for
written option positions.
(3) Security on loan.
+ Non-income producing.
++ The percentage shown for each investment category is the total value of
that category as a percentage of net assets available to Common and
Preferred Stock.
ABBREVIATIONS:
PFD. -- Preferred Securities
PVT. -- Private Placement Securities
10
--------------------------------------------------------------------------------
Flaherty & Crumrine/Claymore Total Return Fund Incorporated
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE TO COMMON STOCK(1)
FOR THE PERIOD FROM DECEMBER 1, 2006 THROUGH FEBRUARY 28, 2007 (UNAUDITED)
--------------------------------------------------------------------------
VALUE
--------
OPERATIONS:
Net investment income .................................................................... $ 5,229,615
Net realized gain/(loss) on investments sold during the period............................ 1,802,953
Change in net unrealized appreciation/depreciation of investments held
during the period .................................................................... (825,093)
Distributions to Auction Market Preferred Stock (AMPS) Shareholders from net
investment income, including changes in accumulated undeclared distributions.......... (1,653,203)
----------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ..................................... 4,554,272
DISTRIBUTIONS:
Dividends paid from net investment income to Common Stock Shareholders (2)................ (3,739,447)
----------------
TOTAL DISTRIBUTIONS TO COMMON STOCK SHAREHOLDERS ......................................... (3,739,447)
FUND SHARE TRANSACTIONS:
Increase from shares issued under the Dividend Reinvestment
and Cash Purchase Plan ............................................................... --
----------------
NET INCREASE IN NET ASSETS AVAILABLE TO COMMON STOCK RESULTING
FROM FUND SHARE TRANSACTIONS .......................................................... --
NET INCREASE IN NET ASSETS AVAILABLE TO COMMON STOCK
----------------
FOR THE PERIOD............................................................................ $ 814,825
================
-------------------------------------------------------------------------------------------------------------------------
NET ASSETS AVAILABLE TO COMMON STOCK:
Beginning of period....................................................................... $ 227,677,821
Net increase in net assets during the period.............................................. 814,825
----------------
End of period ............................................................................ $ 228,492,646
================
--------------------------------------------------------
(1) These tables summarize the three months ended February 28, 2007 and should
be read in conjunction with the Fund's audited financial statements,
including footnotes, in its Annual Report dated November 30, 2006.
(2) May include income earned, but not paid out, in prior fiscal year.
11
--------------------------------------------------------------------------------
Flaherty & Crumrine/Claymore Total Return Fund Incorporated
FINANCIAL HIGHLIGHTS(1)
FOR THE PERIOD FROM DECEMBER 1, 2006 THROUGH FEBRUARY 28, 2007 (UNAUDITED)
FOR A COMMON STOCK SHARE OUTSTANDING THROUGHOUT THE PERIOD.
--------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ......................................................... $ 23.29
-------------
INVESTMENT OPERATIONS:
Net investment income......................................................................... 0.53
Net realized and unrealized gain/(loss) on investments ....................................... 0.10
DISTRIBUTIONS TO AMPS* SHAREHOLDERS:
From net investment income.................................................................... (0.17)
From net realized capital gains............................................................... --
-------------
Total from investment operations.............................................................. 0.46
-------------
DISTRIBUTIONS TO COMMON STOCK SHAREHOLDERS:
From net investment income.................................................................... (0.38)
From net realized capital gains............................................................... --
-------------
Total distributions to Common Stock Shareholders.............................................. (0.38)
-------------
Net asset value, end of period................................................................ $ 23.37
=============
Market value, end of period................................................................... $ 21.62
=============
Common shares outstanding, end of period...................................................... 9,776,333
=============
RATIOS TO AVERAGE NET ASSETS AVAILABLE TO COMMON STOCK SHAREHOLDERS:
Net investment income+........................................................................ 6.34%**
Operating expenses............................................................................ 1.50%**
--------------------------------------------------------
SUPPLEMENTAL DATA:++
Portfolio turnover rate ...................................................................... 12%***
Total net assets available to Common and Preferred Stock, end of period (in 000's) ........... $ 356,993
Ratio of operating expenses to total average net assets available to
Common and Preferred Stock ................................................................ 0.96%**
(1) These tables summarize the three months ended February 28, 2007 and should
be read in conjunction with the Fund's audited financial statements,
including footnotes, in its Annual Report dated November 30, 2006.
* Auction Market Preferred Stock.
** Annualized.
*** Not annualized.
+ The net investment income ratios reflect income net of operating expenses
and payments to AMPS* Shareholders.
++ Information presented under heading Supplemental Data includes AMPS*.
12
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Flaherty & Crumrine/Claymore Total Return Fund Incorporated
FINANCIAL HIGHLIGHTS (CONTINUED)
PER SHARE OF COMMON STOCK (UNAUDITED)
-------------------------------------
TOTAL DIVIDEND
DIVIDENDS NET ASSET NYSE REINVESTMENT
PAID VALUE CLOSING PRICE PRICE(1)
---------- --------- ---------------- -------------
December 31, 2006............................... $0.1275 $22.99 $21.48 $21.68
January 31, 2007................................ 0.1275 23.01 21.70 21.78
February 28, 2007............................... 0.1275 23.37 21.62 21.84
--------------------
(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 payment 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.
13
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Flaherty & Crumrine/Claymore Total Return Fund Incorporated
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
----------------------------------------
1. AGGREGATE INFORMATION FOR FEDERAL INCOME TAX PURPOSES
At February 28, 2007 the aggregate cost of securities for federal income tax
purposes was $350,372,591, the aggregate gross unrealized appreciation for all
securities in which there is an excess of value over tax cost was $11,693,941
and the aggregate gross unrealized depreciation for all securities in which
there is an excess of tax cost over value was $3,694,876.
14
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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
Nicholas Dalmaso
Vice President and Assistant Secretary
Laurie C. Lodolo
Assistant Compliance Officer,
Assistant Treasurer and
Assistant Secretary
INVESTMENT ADVISER
Flaherty & Crumrine Incorporated
e-mail: flaherty@pfdincome.com
SERVICING AGENT
Claymore Securities, Inc.
1-866-233-4001
QUESTIONS CONCERNING YOUR SHARES OF FLAHERTY &
CRUMRINE/CLAYMORE TOTAL RETURN FUND?
o If your shares are held in a Brokerage
Account, contact your Broker.
o If you have physical possession of your shares
in certificate form, contact the Fund's Transfer
Agent --
PFPC Inc. 1-800-331-1710
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.
[GRAPHIC OMITTED]
LIGHTHOUSE ART
FLAHERTY & CRUMRINE/CLAYMORE
============================
TOTAL RETURN FUND
QUARTERLY
REPORT
FEBRUARY 28, 2007
www.fcclaymore.com