UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-Q
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY
Investment Company Act file number 811-21129
Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
(Exact name of registrant as specified in charter)
301 E. Colorado Boulevard, Suite 720
Pasadena, CA 91101
(Address of principal executive offices) (Zip code)
Donald F. Crumrine
Flaherty & Crumrine Incorporated
301 E. Colorado Boulevard, Suite 720
Pasadena, CA 91101
(Name and address of agent for service)
Registrant's telephone number, including area code: 626-795-7300
Date of fiscal year end: November 30
Date of reporting period: August 31, 2010
Form N-Q is to be used by management investment companies, other than small
business investment companies registered on Form N-5 (Sections 239.24 and 274.5
of this chapter), to file reports with the Commission, not later than 60 days
after the close of the first and third fiscal quarters, pursuant to rule 30b1-5
under the Investment Company Act of 1940 (17 CFR 270.30b1-5). The Commission may
use the information provided on Form N-Q in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-Q, and
the Commission will make this information public. A registrant is not required
to respond to the collection of information contained in Form N-Q unless the
Form displays a currently valid Office of Management and Budget ("OMB") control
number. Please direct comments concerning the accuracy of the information
collection burden estimate and any suggestions for reducing the burden to the
Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC
20549. The OMB has reviewed this collection of information under the clearance
requirements of 44 U.S.C. Section 3507.
ITEM 1. SCHEDULE OF INVESTMENTS.
The Schedule(s) of Investments is attached herewith.
FLAHERTY & CRUMRINE/CLAYMORE PREFERRED SECURITIES INCOME FUND
To the Shareholders of Flaherty & Crumrine/Claymore Preferred Securities Income
Fund:
The combination of falling interest rates and ongoing demand for preferred
securities helped the Fund produce excellent returns during its third fiscal
period ending August 31, 2010. For the three month period, total return on net
asset value was +12.5%. Total return using market price of Fund shares was
+13.7% during the period.
It has been quite an eventful summer in the preferred securities market.
We'll hit the highlights here, and readers willing to do a little extra-credit
homework will find more detailed discussions on the Fund's website.
In addition to strong performance of the Fund's investment portfolio, the
monthly dividend paid to shareholders was increased to $0.125 per share from
$0.12, commencing with the August distribution. This 4.2% increase reflects the
ongoing favorable environment of relatively high yields on Fund investments and
the low cost of Fund borrowings.
We expect the level of economic growth to remain tepid over the coming
quarters and then to show gradual improvement. We anticipate the Fund's cost of
borrowing will follow a similar path, remaining low for a period, then
increasing gradually. Of course, unless income from the Fund's investments also
increases, a rise in the cost of borrowing would negatively impact the
distribution to shareholders.
Although economic activity has slowed recently, we do not expect the
economy to fall back into recession. In fact, we see some healthy signs, such as
a substantial increase in personal savings and steady levels of business
investment aimed at improving productivity. As individuals save more, some of
these dollars are likely to find their way into the preferred market. As
companies become more efficient, their financial condition generally improves.
These trends, along with declining interest rates, have helped boost the Fund's
investment performance.
In the aftermath of the financial meltdown, Congress and various bank
regulators set out to establish new rules to hopefully prevent a repeat of the
crisis. We are now getting a better sense of how new regulations will impact the
market. With passage of the Dodd-Frank Wall Street Reform and Consumer
Protection Act in July, along with increasing clarification from international
bank regulators, the fog is beginning to lift on the future role of preferred
securities as a source of capital for the banking industry(1).
Since our last letter, rule makers have indicated which security structures
they don't like, but have yet to decide what will be okay. It is now clear that
trust preferred securities, which are favored by banks as a form of capital,
will not meet the new standards. As a result, not only will there be no new
issues of this type, issuers will want to redeem or replace outstanding trust
preferreds sooner than was previously expected. In response, prices of many bank
trust preferred securities have moved higher--contributing to the Fund's strong
performance.
It is less clear what types of securities banks will be allowed to issue to
meet future capital requirements. We are monitoring the debate closely and
throwing in our two cents whenever appropriate. At this time, we believe the
parties are moving toward a sensible conclusion and will ultimately induce banks
to issue preferred securities suitable for the Fund's portfolio. Of course, we
will stay on top of this and report important developments in these letters or
on the Fund's website.
----------
(1) The treatment of preferred securities issued by NON-BANKS has not changed
in any meaningful way.
As of this writing, roughly 24% of the Fund's portfolio is invested in
trust preferred securities issued by U.S. banks. In light of the new rules, we
think it is likely that many of these issues will be redeemed, beginning in
2013. We'll have our work cut out for us trying to replace the income on these
securities, but until we have a better idea how the banks will replace these
issues, it is difficult to predict the impact on the Fund.
As always, we encourage you to visit www.fcclaymore.com to read our
Quarterly Economic Update as well as a more detailed discussion of factors
affecting the wonderful world of preferred securities.
Sincerely,
/s/ Donald F. Crumrine /s/ Robert M. Ettinger
Donald F. Crumrine Robert M. Ettinger
Chairman of the Board President
October 15, 2010
2
Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
PORTFOLIO OVERVIEW
AUGUST 31, 2010 (UNAUDITED)
FUND STATISTICS
---------------
Net Asset Value $ 15.86
Market Price $ 16.50
Premium 4.04%
Yield on Market Price 9.09%
Common Stock Shares Outstanding 42,794,496
MOODY'S RATINGS % OF NET ASSETS+
--------------- ----------------
AAA 0.5%
A 8.0%
BBB 70.2%
BB 16.5%
Below "BB" 2.1%
Not Rated* 0.4%
Below Investment Grade** 15.3%
* Does not include net other assets and liabilities of 2.3%.
** Below investment grade by both Moody's and S&P.
(PIE CHART)
INDUSTRY CATEGORIES % OF NET ASSETS+
------------------- ----------------
Banking 38%
Utilities 26%
Insurance 24%
Energy 5%
Financial Services 3%
Other 4%
TOP 10 HOLDINGS BY ISSUER % OF NET ASSETS+
------------------------- -----------------
Banco Santander 5.9%
Liberty Mutual Group 5.6%
Capital One Financial 4.6%
Dominion Resources 3.6%
Comerica 3.2%
HSBC Plc 3.2%
Wells Fargo 3.1%
Metlife 3.1%
Puget Energy 3.0%
Southern Union 3.0%
% OF NET ASSETS***+
-------------------
Holdings Generating Qualified Dividend Income (QDI) for Individuals 28%
Holdings Generating Income Eligible for the Corporate Dividend Received
Deduction (DRD) 14%
*** 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 Preferred Securities Income Fund Incorporated
PORTFOLIO OF INVESTMENTS
AUGUST 31, 2010 (UNAUDITED)
SHARES/$ PAR VALUE
------------ --------------
PREFERRED SECURITIES -- 93.5%
BANKING -- 38.0%
$ 17,750,000 Astoria Capital Trust I, 9.75% 11/01/29, Series B ................. $ 18,494,950(1)
2,046,320 Banco Santander, 10.50% Pfd., Series 10 ........................... 59,532,565**(1)(2)
87,400 Bank of America Corporation, 8.625% Pfd., Series 8 ................ 2,245,306*(1)
$ 1,815,000 BankAmerica Institutional, Series A, 8.07% 12/31/26, 144A**** ..... 1,864,912
Barclays Bank PLC:
$ 13,500,000 6.278% ......................................................... 11,356,875**(1)(2)
345,000 6.625% Pfd., Series 2 .......................................... 8,214,450**(1)(2)
17,000 7.75% Pfd., Series 4 ........................................... 438,090**(2)
200,000 8.125% Pfd., Series 5 .......................................... 5,252,000**(1)(2)
35,000 BB&T Capital Trust V, 8.95% Pfd. .................................. 969,588
216,000 BB&T Capital Trust VI, 9.60% Pfd. ................................. 6,112,800(1)
115,700 BB&T Capital Trust VII, 8.10% Pfd. ................................ 3,100,760(1)
$ 34,490,000 Capital One Capital III, 7.686% 08/15/36 .......................... 34,921,125(1)
$ 5,362,000 Capital One Capital V, 10.25% 08/15/39 ............................ 5,824,473
$ 5,350,000 Capital One Capital VI, 8.875% 05/15/40 ........................... 5,671,000(1)
$ 35,100,000 Colonial BancGroup, 7.114%, 144A**** .............................. 930,150++
$ 34,500,000 Comerica Capital Trust II, 6.576% 02/20/37 ........................ 32,430,000(1)
28,800 FBOP Corporation, Adj. Rate Pfd., 144A**** ........................ 111,168*+
$ 7,500,000 Fifth Third Capital Trust IV, 6.50% 04/15/37 ...................... 6,525,000(1)
35,000 Fifth Third Capital Trust V, 7.25% Pfd. 08/15/67 .................. 873,250
12,100 Fifth Third Capital Trust VII, 8.875% Pfd. 05/15/68 ............... 320,272
7,850 First Republic Preferred Capital Corporation, 10.50% Pfd.,
144A**** ....................................................... 8,109,050(1)
14,500 First Tennessee Bank, Adj. Rate Pfd., 144A**** .................... 8,749,844*
$ 3,000,000 First Tennessee Capital I, 8.07% 01/06/27, Series A ............... 2,886,372(1)
$ 9,000,000 First Union Institutional Capital I, 8.04% 12/01/26 ............... 9,220,536(1)
$ 1,500,000 Fleet Capital Trust II, 7.92% 12/11/26 ............................ 1,515,000
6 FT Real Estate Securities Company, 9.50% Pfd., 144A**** ........... 5,550,000
Goldman Sachs:
$ 1,500,000 Capital I, 6.345% 02/15/34 ..................................... 1,401,393(1)
$ 12,537,000 Capital II, 5.793% ............................................. 10,139,299(1)
3,600 STRIPES Custodial Receipts, Pvt ................................ 1,890,000*
720,000 HSBC Holdings PLC, 8.00% Pfd., Series 2 ........................... 19,125,000**(1)(2)
$ 1,500,000 HSBC USA Capital Trust II, 8.38% 05/15/27, 144A**** ............... 1,581,901
HSBC USA, Inc.:
109,900 Adj. Rate Pfd., Series D ....................................... 2,651,338*(1)
344,300 6.50% Pfd., Series H ........................................... 8,682,833*(1)
60,000 ING Groep NV, 8.50% Pfd. .......................................... 1,491,600**(2)
$ 725,000 JPMorgan Chase Capital XVIII, 6.95% 08/17/36, Series R ............ 746,201
4
Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2010 (UNAUDITED)
SHARES/$ PAR VALUE
------------ --------------
PREFERRED SECURITIES -- (CONTINUED)
BANKING -- (CONTINUED)
$ 6,500,000 JPMorgan Chase Capital XXVII, 7.00% 11/01/39, Series AA ........... $ 6,912,906(1)
7,000 Keycorp Capital VIII, 7.00% Pfd. 06/15/66 ......................... 175,000
172,000 Keycorp Capital X, 8.00% Pfd. ..................................... 4,472,000(1)
$ 17,800,000 Lloyds Banking Group PLC, 6.657%, 144A**** ........................ 11,525,500**(2)+
$ 13,825,000 National City Preferred Capital Trust I, 12.00% ................... 15,332,326(1)
$ 3,317,000 NB Capital Trust IV, 8.25% 04/15/27 ............................... 3,423,768(1)
164,520 PNC Financial Services, 9.875% Pfd., Series F ..................... 4,699,103*(1)
$ 2,500,000 PNC Preferred Funding Trust III, 8.70%, 144A**** .................. 2,589,505(1)
8,641 Sovereign REIT, 12.00% Pfd., Series A, 144A**** ................... 10,066,765
60 Union Planters Preferred Funding, 7.75% Pfd., Series A, 144A**** .. 4,314,375
$ 8,000,000 Wachovia Capital Trust V, 7.965% 06/01/27, 144A**** ............... 8,287,944(1)
509,900 Wachovia Preferred Funding, 7.25% Pfd., Series A .................. 13,034,319(1)
Washington Mutual:
$ 2,100,000 9.75%, 144A**** ................................................ 131,250++
$ 10,050,000 6.534%, 144A**** ............................................... 628,125++
$ 11,067,000 Webster Capital Trust IV, 7.65% 06/15/37 .......................... 8,760,704(1)
$ 650,000 Wells Fargo Capital XV, 9.75% ..................................... 712,725
--------------
383,995,416
--------------
FINANCIAL SERVICES -- 2.8%
$ 1,340,000 Ameriprise Financial, Inc., 7.518% 06/01/66 ....................... 1,329,950(1)
$ 7,000,000 Gulf Stream-Compass 2005 Composite Notes, 144A**** ................ 2,695,560
155,225 Heller Financial, Inc., 6.687% Pfd., Series C ..................... 15,095,631*
Lehman Brothers Holdings, Inc.:
34,000 5.67% Pfd., Series D ........................................... 9,452*++
471,500 7.95% Pfd. ..................................................... 8,016*++
20,000 Lehman Capital Trust III, 6.375% Pfd., Series K ................... 5,250 ++
$ 10,000,000 RACERS(R) Series 2005 AMMC V Trust, 144A**** ...................... 6,086,764
$ 3,000,000 Schwab Capital Trust I, 7.50% 11/15/37 ............................ 3,042,762(1)
--------------
28,273,385
--------------
INSURANCE -- 22.5%
$ 3,291,000 Ace Capital Trust II, 9.70% 04/01/30 .............................. 4,036,026(1)(2)
$ 455,000 AON Corporation, 8.205% 01/01/27 .................................. 493,310
Arch Capital Group Ltd.:
117,750 7.875% Pfd., Series B .......................................... 2,998,951**(1)(2)
100,000 8.00% Pfd., Series A ........................................... 2,587,500**(1)(2)
$ 8,500,000 AXA SA, 6.463%, 144A**** .......................................... 6,800,000**(1)(2)
5
Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2010 (UNAUDITED)
SHARES/$ PAR VALUE
------------ --------------
PREFERRED SECURITIES -- (CONTINUED)
INSURANCE -- (CONTINUED)
Axis Capital Holdings:
160,519 7.25% Pfd., Series A ........................................... $ 4,023,007**(1)(2)
281,505 7.50% Pfd., Series B ........................................... 25,097,944(1)(2)
37,000 Corts Provident Financing Trust I, 8.50% Pfd. ..................... 983,553(1)
558,000 Delphi Financial Group, 7.376% Pfd. 05/15/37 ...................... 12,366,675(1)
$ 20,919,000 Everest Re Holdings, 6.60% 05/15/37 ............................... 18,905,546(1)
$ 4,650,000 Great West Life & Annuity Insurance, 7.153% 05/16/46, 144A**** .... 4,440,750(1)
Liberty Mutual Group:
$ 2,000,000 7.80% 03/15/37, 144A**** ....................................... 1,780,000(1)
$ 35,418,000 10.75% 06/15/58, 144A**** ...................................... 39,756,705(1)
$ 12,000,000 MetLife Capital Trust X, 9.25% 04/08/38, 144A**** ................. 13,860,000(1)
$ 13,520,000 MetLife, Inc., 10.75% 08/01/39 .................................... 17,140,980(1)
Principal Financial Group:
90,000 5.563% Pfd., Series A .......................................... 7,678,125*
352,000 6.518% Pfd., Series B .......................................... 8,853,680*(1)
Renaissancere Holdings Ltd.:
162,700 6.08% Pfd., Series C ........................................... 3,701,425**(1)(2)
241,029 6.60% Pfd., Series D ........................................... 6,004,032**(1)(2)
60,835 7.30% Pfd., Series B ........................................... 1,528,479**(2)
407,200 Scottish Re Group Ltd., 7.25% Pfd. ................................ 2,532,295**(2)+
$ 7,500,000 Stancorp Financial Group, 6.90% 06/01/67 .......................... 6,476,407(1)
$ 7,425,000 USF&G Capital, 8.312% 07/01/46, 144A**** .......................... 8,708,292(1)
$ 13,000,000 USF&G Capital I, 8.50% 12/15/45, 144A**** ......................... 15,557,295(1)
$ 12,200,000 XL Capital Ltd., 6.50%, Series E .................................. 9,318,360(1)(2)
$ 2,000,000 ZFS Finance USA Trust V, 6.50% 05/09/37, 144A**** ................. 1,830,000
--------------
227,459,337
--------------
UTILITIES -- 24.2%
Baltimore Gas & Electric Company:
10,000 6.70% Pfd., Series 1993 ........................................ 1,005,938*(1)
10,000 7.125% Pfd., Series 1993 ....................................... 1,006,875*
328,179 Calenergy Capital Trust III, 6.50% Pfd. 09/01/27 .................. 15,719,774(1)
$ 18,533,000 COMED Financing III, 6.35% 03/15/33 ............................... 16,562,497(1)
62,100 Constellation Energy Group, 8.625% Pfd. 06/15/63, Series A ........ 1,694,709
$ 19,675,000 Dominion Resources Capital Trust I, 7.83% 12/01/27 ................ 19,899,374(1)
Dominion Resources, Inc.:
$ 15,262,000 7.50% .......................................................... 15,585,448(1)
26,700 8.375% Pfd., Series A .......................................... 770,028
6
Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2010 (UNAUDITED)
SHARES/$ PAR VALUE
------------ --------------
PREFERRED SECURITIES -- (CONTINUED)
UTILITIES -- (CONTINUED)
296,300 Entergy Arkansas, Inc., 6.45% Pfd. ................................ $ 7,166,756*
69,500 Entergy Louisiana, Inc., 6.95% Pfd. ............................... 6,691,550*
FPL Group Capital, Inc.:
$ 7,500,000 6.65% 06/15/67 ................................................. 7,134,503(1)
$ 4,000,000 7.30% 09/01/67, Series D ....................................... 4,065,508(1)
168,640 Georgia Power Company, 6.50% Pfd., Series 2007A ................... 17,554,378*(1)
119,805 Indianapolis Power & Light Company, 5.65% Pfd. .................... 10,752,499*
346,600 Interstate Power & Light Company, 8.375% Pfd., Series B ........... 10,055,733*
$ 2,386,000 PECO Energy Capital Trust III, 7.38% 04/06/28, Series D ........... 2,378,785(1)
$ 24,500,000 PECO Energy Capital Trust IV, 5.75% 06/15/33 ...................... 20,764,608(1)
$ 32,500,000 Puget Sound Energy, Inc., 6.974% 06/01/67 ......................... 30,213,235(1)
Southern California Edison:
118,850 6.00% Pfd., Series C ........................................... 11,275,894*(1)
15,245 6.125% Pfd. .................................................... 1,457,327*
$ 18,130,000 Southern Union Company, 7.20% 11/01/66 ............................ 16,452,975(1)
$ 4,200,000 Union Electric Power Company, 7.69% 12/15/36, Series A ............ 4,313,156(1)
$ 23,000,000 Wisconsin Energy Corporation, 6.25% 05/15/67 ...................... 21,764,072(1)
--------------
244,285,622
--------------
ENERGY -- 4.7%
$ 27,500,000 Enbridge Energy Partners LP, 8.05% 10/01/37 ....................... 27,637,968(1)
Enterprise Products Partners:
$ 4,915,000 7.00% 06/01/67 ................................................. 4,536,540(1)
$ 15,000,000 8.375% 08/01/66, Series A ...................................... 15,467,865(1)
--------------
47,642,373
--------------
REAL ESTATE INVESTMENT TRUST (REIT) -- 0.1%
45,947 PS Business Parks, Inc., 6.70% Pfd., Series P ..................... 1,110,654
--------------
1,110,654
--------------
MISCELLANEOUS INDUSTRIES -- 1.2%
112,750 Ocean Spray Cranberries, Inc., 6.25% Pfd., 144A**** ............... 9,922,000*(1)
$ 2,500,000 Stanley Works, 5.902% 12/01/45 .................................... 2,507,873(1)
--------------
12,429,873
--------------
TOTAL PREFERRED SECURITIES
(Cost $982,048,579) ............................................ 945,196,660
--------------
7
Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2010 (UNAUDITED)
SHARES/$ PAR VALUE
------------ --------------
CORPORATE DEBT SECURITIES -- 4.2%
FINANCIAL SERVICES -- 0.2%
55,000 Ameriprise Financial, Inc., 7.75% 06/15/39 ........................ $ 1,509,338(1)
$ 4,726,012 Lehman Brothers, Guaranteed Note, Variable Rate, 12/16/16,
144A**** ....................................................... 649,354++
--------------
2,158,692
--------------
INSURANCE -- 1.7%
$ 15,750,000 Liberty Mutual Insurance, 7.697% 10/15/97, 144A**** ............... 14,684,103(1)
$ 2,500,000 UnumProvident Corporation, 7.25% 03/15/28, Senior Notes ........... 2,664,568(1)
--------------
17,348,671
--------------
UTILITIES -- 1.4%
21,000 Entergy Texas, Inc., 7.875% 06/01/39 .............................. 603,960
Southern Union Company:
$ 5,300,000 7.60% 02/01/24, Senior Notes ................................... 6,399,877(1)
$ 6,047,000 8.25% 11/15/29, Senior Notes ................................... 7,152,742(1)
--------------
14,156,579
--------------
REAL ESTATE INVESTMENT TRUST (REIT) -- 0.4%
$ 3,500,000 Realty Income Corporation, 5.875% 03/15/35 ........................ 3,203,480(1)
--------------
3,203,480
--------------
MISCELLANEOUS INDUSTRIES -- 0.5%
16,500 Corp-Backed Trust Certificates, 7.00% 11/15/28, Series Sprint ..... 377,025(1)
Pulte Homes, Inc.:
58,240 7.375% 06/01/46 ................................................ 1,323,143(1)
$ 3,550,000 7.875% 06/15/32 ................................................ 3,159,500(1)
--------------
4,859,668
--------------
TOTAL CORPORATE DEBT SECURITIES
(Cost $43,311,319) ............................................. 41,727,090
--------------
COMMON STOCKS -- 0.6%
BANKING -- 0.2%
54,740 CIT Group, Inc..................................................... 2,007,863*+
--------------
2,007,863
--------------
8
Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2010 (UNAUDITED)
SHARES/$ PAR VALUE
------------ --------------
COMMON STOCKS -- (CONTINUED)
UTILITIES -- 0.4%
115,000 Southern Company .................................................. $ 4,219,350*
--------------
4,219,350
--------------
TOTAL COMMON STOCKS
(Cost $14,698,578) ............................................. 6,227,213
--------------
MONEY MARKET FUND -- 1.5%
15,400,686 BlackRock Provident Institutional, T-Fund ......................... 15,400,686
--------------
TOTAL MONEY MARKET FUND
(Cost $15,400,686) ............................................. 15,400,686
--------------
TOTAL INVESTMENTS (Cost $1,055,459,162***) .............................. 99.8% 1,008,551,649
OTHER ASSETS AND LIABILITIES (Net) ...................................... 0.2% 2,330,330
----- --------------
NET ASSETS BEFORE LOAN .................................................. 100.0%+++ $1,010,881,979
----- --------------
LOAN PRINCIPAL BALANCE .............................................................. (331,975,000)
--------------
TOTAL NET ASSETS AVAILABLE TO COMMON STOCK .......................................... $ 678,906,979
==============
----------
* 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. At August 31, 2010, these
securities amounted to $191,211,312 or 18.9% of net assets before the loan.
These securities have been determined to be liquid under the guidelines
established by the Board of Directors.
(1) All or a portion of this security is pledged as collateral for the Fund's
loan. The total value of such securities was $716,442,679 at August 31,
2010.
(2) Foreign Issuer.
+ 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 net assets before the loan.
ABBREVIATIONS:
CORTS -- Corporate-Backed Trust Securities
PFD. -- Preferred Securities
PVT. -- Private Placement Securities
RACERS -- Restructured Asset Certificates with Enhanced Returns
REIT -- Real Estate Investment Trust
STRIPES -- Structured Residual Interest Preferred Enhanced Securities
9
Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE TO COMMON STOCK(1)
FOR THE PERIOD FROM DECEMBER 1, 2009 THROUGH AUGUST 31, 2010 (UNAUDITED)
VALUE
------------
OPERATIONS:
Net investment income ....................................................... $ 49,989,885
Net realized gain/(loss) on investments sold during the period .............. 5,843,183
Change in net unrealized appreciation/depreciation of investments ........... 95,216,822
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ........................ 151,049,890
DISTRIBUTIONS:
Dividends paid from net investment income to Common Stock Shareholders(2) ... (45,078,721)
------------
TOTAL DISTRIBUTIONS TO COMMON STOCK SHAREHOLDERS ............................ (45,078,721)
FUND SHARE TRANSACTIONS:
Increase from shares issued under the Dividend Reinvestment and
Cash Purchase Plan ....................................................... 1,796,248
------------
NET INCREASE IN NET ASSETS AVAILABLE TO COMMON STOCK RESULTING FROM
FUND SHARE TRANSACTIONS .................................................. 1,796,248
------------
NET INCREASE IN NET ASSETS AVAILABLE TO COMMON STOCK
FOR THE PERIOD .............................................................. $107,767,417
============
NET ASSETS AVAILABLE TO COMMON STOCK:
Beginning of period ......................................................... $571,139,562
Net increase in net assets during the period ................................ 107,767,417
------------
End of period ............................................................... $678,906,979
============
----------
(1) These tables summarize the nine months ended August 31, 2010 and should be
read in conjunction with the Fund's audited financial statements, including
footnotes, in its Annual Report dated November 30, 2009.
(2) May include income earned, but not paid out, in prior fiscal year.
10
Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
FINANCIAL HIGHLIGHTS(1)
FOR THE PERIOD FROM DECEMBER 1, 2009 THROUGH AUGUST 31, 2010 (UNAUDITED)
FOR A COMMON STOCK SHARE OUTSTANDING THROUGHOUT THE PERIOD.
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ........................................ $ 13.38
--------------
INVESTMENT OPERATIONS:
Net investment income
1.17
Net realized and unrealized gain/(loss) on investments ...................... 2.37
--------------
Total from investment operations ............................................ 3.54
--------------
DISTRIBUTIONS TO COMMON STOCK SHAREHOLDERS:
From net investment income .................................................. (1.06)
--------------
Total distributions to Common Stock Shareholders ............................ (1.06)
--------------
Net asset value, end of period .............................................. $ 15.86
==============
Market value, end of period ................................................. $ 16.50
==============
Common Stock shares outstanding, end of period .............................. 42,794,496
==============
RATIOS TO AVERAGE NET ASSETS AVAILABLE TO COMMON STOCK SHAREHOLDERS:
Net investment income+ ...................................................... 10.54%*
Operating expenses including interest expense ............................... 1.74%*
Operating expenses excluding interest expense ............................... 1.02%*
SUPPLEMENTAL DATA:++
Portfolio turnover rate ..................................................... 21%**
Net assets before loan, end of period (in 000's) ............................ $ 1,010,882
Ratio of operating expenses including interest expense to net assets
before loan .............................................................. 1.16%*
Ratio of operating expenses excluding interest expense to net assets
before loan .............................................................. 0.68%*
(1) These tables summarize the nine months ended August 31, 2010 and should be
read in conjunction with the Fund's audited financial statements, including
footnotes, in its Annual Report dated November 30, 2009.
* 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.
11
Flaherty & Crumrine/Claymore Preferred Securities Income 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, 2009 ... $0.1140 $13.99 $13.97 $13.99
January 29, 2010 .... 0.1140 14.52 14.34 14.51
February 26, 2010 ... 0.1140 14.52 14.89 14.52
March 31, 2010 ...... 0.1140 15.12 15.28 15.12
April 30, 2010 ...... 0.1140 15.49 15.72 15.49
May 28, 2010 ........ 0.1200 14.43 14.86 14.43
June 30, 2010 ....... 0.1200 14.72 15.64 14.86
July 30, 2010 ....... 0.1200 15.37 16.32 15.50
August 31, 2010 ..... 0.1250 15.86 16.50 15.86
----------
(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.
12
Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. AGGREGATE INFORMATION FOR FEDERAL INCOME TAX PURPOSES
At August 31, 2010, the aggregate cost of securities for federal income tax
purposes was $1,058,217,670, the aggregate gross unrealized appreciation for all
securities in which there is an excess of value over tax cost was $85,447,147
and the aggregate gross unrealized depreciation for all securities in which
there is an excess of tax cost over value was $135,113,168.
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
August 31, 2010 is as follows:
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
AUGUST 31, 2010 PRICE INPUTS INPUTS
--------------- ------------ ------------ ------------
Preferred Securities
Banking $ 383,995,416 $219,733,503 $164,150,745 $ 111,168
Financial Services 28,273,385 -- 24,177,389 4,095,996
Insurance 227,459,337 76,580,577 150,878,760 --
Utilities 244,285,622 28,105,918 216,179,704 --
Energy 47,642,373 -- 47,642,373 --
Real Estate Investment Trust (REIT) 1,110,654 1,110,654 -- --
Miscellaneous Industries 12,429,873 -- 12,429,873 --
Corporate Debt Securities 41,727,090 17,366,085 23,711,651 649,354
Common Stock
Banking 2,007,863 2,007,863 -- --
Utilities 4,219,350 4,219,350 -- --
Money Market Fund 15,400,686 15,400,686 -- --
-------------- ------------ ------------ ----------
Total Investments $1,008,551,649 $364,524,636 $639,170,495 $4,856,518
============== ============ ============ ==========
The Fund did not have any significant transfers in and out of Level 1 and
Level 2 during the period.
13
Flaherty & Crumrine/Claymore Preferred Securities Income 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
---------------------
FINANCIAL CORPORATE DEBT
TOTAL INVESTMENTS BANKING SERVICES SECURITIES
----------------- -------- ---------- --------------
BALANCE AS OF 11/30/09 $2,574,696 $158,400 $1,920,537 $495,759
Accrued discounts/premiums -- -- -- --
Realized gain/(loss) -- -- -- --
Change in unrealized appreciation/
(depreciation) 2,281,822 (47,232) 2,175,459 153,595
Net purchases/(sales) -- -- -- --
Transfers in and/or out of Level 3 -- -- -- --
---------- -------- ---------- --------
BALANCE AS OF 8/31/10 $4,856,518 $111,168 $4,095,996 $649,354
For the period ended August 31, 2010, total change in unrealized
gain/(loss) on Level 3 securities still held at period-end and included in the
change in net assets was $2,281,822.
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
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 PREFERRED
SECURITIES INCOME 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.
1-800-331-1710
THIS REPORT IS SENT TO SHAREHOLDERS OF FLAHERTY & CRUMRINE/CLAYMORE PREFERRED
SECURITIES INCOME 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.
(FLAHERTY & CRUMRINE/CLAYMORE LOGO)
PREFERRED SECURITIES
INCOME FUND
Quarterly
Report
August 31, 2010
www.fcclaymore.com
ITEM 2. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers,
or persons performing similar functions, have concluded that the
registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940, as amended (the
"1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within
90 days of the filing date of the report that includes the disclosure
required by this paragraph, based on their evaluation of these
controls and procedures required by Rule 30a-3(b) under the 1940 Act
(17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the
Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or
240.15d-15(b)).
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act
(17 CFR 270.30a-3(d)) that occurred during the registrant's last
fiscal quarter that have materially affected, or are reasonably likely
to materially affect, the registrant's internal control over financial
reporting.
ITEM 3. EXHIBITS.
Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of
the Sarbanes-Oxley Act of 2002 are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Flaherty & Crumrine/Claymore Preferred Securities Income Fund
Incorporated
By (Signature and Title)* /s/ Donald F. Crumrine
------------------------------------------------------
Donald F. Crumrine, Director, Chairman of the Board
and Chief Executive Officer
(principal executive officer)
Date October 25, 2010
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ Donald F. Crumrine
-----------------------------------------------------
Donald F. Crumrine, Director, Chairman of the Board
and Chief Executive Officer
(principal executive officer)
Date October 25, 2010
By (Signature and Title)* /s/ R. Eric Chadwick
------------------------------------------------------
R. Eric Chadwick, Chief Financial Officer, Treasurer
and Vice President
(principal financial officer)
Date October 25, 2010
* Print the name and title of each signing officer under his or her
signature.