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: February 28, 2011
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:
During the first fiscal quarter of 2011, the total return on net asset
value(1) of the Fund was +6.0%. Since the depth of the financial crisis, the
Fund has delivered eight consecutive quarters of positive returns. We never tire
of reporting positive returns, but our focus remains on providing high current
income to shareholders.
Present conditions for the Fund's dividend are about as good as we can
recall. Low short-term interest rates have continued to amplify the Fund's
leverage strategy - we are able to borrow funds at historically attractive
levels. At the same time, the investment portfolio is generating relatively high
levels of income. We don't see anything on the immediate horizon to change these
conditions, but one or both sides of the equation is likely to come under
pressure sometime down the road.
As of this writing, the world is still dealing with the devastating events
in Japan. Our thoughts go out to the people of Japan in these difficult times.
Global financial markets were weaker in the immediate aftermath of the disaster,
as investors assessed the impact. The Fund has very little direct exposure to
the Japanese economy, and we do not anticipate any material decline in the
credit quality of our holdings as a result of these events. Rest assured we are
monitoring the impact very closely.
The situation at the Fukushima Dai-Ichi nuclear plant has raised fresh
questions about nuclear power safety around the world. Since the Fund must have
at least 25% of the portfolio invested in the utility industry, the topic is
very relevant. We do not believe the incident in Japan will negatively impact
utility positions owned by the Fund in any material way. In the U.S., most
regulated utility companies have reduced their exposure to nuclear energy, and
very few have "bet the farm" on this form of power generation.
The European sovereign debt situation continues to simmer. It may boil over
in Portugal and require a bailout similar to those in Greece and Ireland. This
may create some turbulence in the preferred market, but the overall impact on
the Fund should be modest. The Fund has no direct investments in Portuguese
banks or sovereign debt. Although it does own securities issued by companies
with exposure to Portugal, we believe those exposures are manageable given the
strength and diversification of those companies' activities.
Preferred securities issued by banks comprise the largest portion of the
Fund's portfolio and, thus, play a critical role in the Fund's strategy. Bank
regulators here and abroad have analyzed bank securities in light of the
financial crisis, and some conclusions have begun to trickle out. The Basel
Committee on Bank Supervision, the body charged with setting global capital
standards, has finalized its recommendations for bank capital, although it will
be up to regulators in individual countries to adopt these standards. Bank
regulators in the U.S. have until July of this year to propose new capital
rules, and we expect final rules will be issued before year-end. Over time, we
expect the current crop of preferred securities issued by banks to be replaced
with new securities designed to conform to the new standards. As details of the
new securities become known, we will study them carefully and determine their
appropriateness for the Fund. Based on the information currently available, we
are optimistic about the transition.
----------
(1) Following the methodology required by the SEC, total return includes
income, principal change and the impact of the Fund's leverage.
We encourage you to visit the Fund's website www.fcclaymore.com for a more
in-depth discussion of conditions in the preferred markets, as well as the
broader economy.
Sincerely,
/s/ Donald F. Crumrine /s/ Robert M. Ettinger
Donald F. Crumrine Robert M. Ettinger
Chairman President
April 5, 2011
2
Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
PORTFOLIO OVERVIEW
FEBRUARY 28, 2011 (UNAUDITED)
FUND STATISTICS
---------------
Net Asset Value $ 16.88
Market Price $ 17.01
Premium 0.77%
Yield on Market Price 9.17%
Common Stock Shares Outstanding 42,885,580
MOODY'S RATINGS % OF NET ASSETS+
--------------- ----------------
AAA 0.4%
A 7.6%
BBB 72.5%
BB 14.6%
Below "BB" 2.9%
Not Rated* 0.8%
Below Investment Grade** 14.8%
* Does not include net other assets and liabilities of 1.2%.
** Below investment grade by both Moody's and S&P.
(PIE CHART)
INDUSTRY CATEGORIES % OF NET ASSETS+
------------------- ----------------
Banking 39%
Utilities 25%
Insurance 25%
Energy 5%
Financial Services 3%
Other 3%
TOP 10 HOLDINGS BY ISSUER % OF NET ASSETS+
------------------------- ----------------
Liberty Mutual Group 5.6%
Banco Santander 5.4%
Capital One Financial 4.4%
Metlife 3.9%
Wells Fargo 3.6%
Dominion Resources 3.3%
Enbridge Energy Partners 3.0%
Axis Capital 2.8%
HSBC Plc 2.7%
Puget Energy 2.6%
% OF NET ASSETS***+
-------------------
Holdings Generating Qualified Dividend Income (QDI) for Individuals 30%
Holdings Generating Income Eligible for the Corporate Dividend Received Deduction (DRD) 15%
*** 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
FEBRUARY 28, 2011 (UNAUDITED)
SHARES/$ PAR VALUE
------------ --------------
PREFERRED SECURITIES -- 94.2%
BANKING -- 38.4%
$17,750,000 Astoria Capital Trust I, 9.75% 11/01/29, Series B .................... $ 18,501,943(1)
2,046,320 Banco Santander, 10.50% Pfd., Series 10 .............................. 58,509,405**(1)(2)
Bank of America Corporation:
80,000 8.20% Pfd. ........................................................ 2,072,000*
151,540 8.625% Pfd. ....................................................... 3,955,194*(1)
$ 2,815,000 BankAmerica Institutional, Series A, 8.07% 12/31/26, 144A**** ........ 2,871,300
Barclays Bank PLC:
$14,750,000 6.278% ............................................................ 12,758,750**(1)(2)
3,300 7.75% Pfd., Series 4 .............................................. 83,787**(2)
529,700 8.125% Pfd., Series 5 ............................................. 13,655,666**(1)(2)
32,000 BB&T Capital Trust V, 8.95% Pfd. 09/15/63 ............................ 897,008
165,000 BB&T Capital Trust VI, 9.60% Pfd. 08/01/64 ........................... 4,686,000(1)
$ 8,490,000 BBVA International Preferred, 5.919% ................................. 6,896,597**(1)(2)
$ 4,100,000 BNP Paribas, 7.195%, 144A**** ........................................ 3,925,750**(2)
$34,990,000 Capital One Capital III, 7.686% 08/15/36 ............................. 36,345,863(1)
$ 5,362,000 Capital One Capital V, 10.25% 08/15/39 ............................... 5,857,985
$ 5,350,000 Capital One Capital VI, 8.875% 05/15/40 .............................. 5,717,812(1)
341,100 Citigroup Capital XIII, 7.875% Pfd. 10/30/40 ......................... 9,275,021(1)
$35,100,000 Colonial BancGroup, 7.114%, 144A**** ................................. 1,755,000++
28,800 FBOP Corporation, Adj. Rate Pfd., 144A**** ........................... 298,944*(3)+
$ 8,785,000 Fifth Third Capital Trust IV, 6.50% 04/15/37 ......................... 8,631,262(1)
40,000 Fifth Third Capital Trust V, 7.25% Pfd. 08/15/67 ..................... 1,000,000
490,000 Fifth Third Capital Trust VI, 7.25% Pfd. 11/15/67 .................... 12,280,625(1)
19,905 Fifth Third Capital Trust VII, 8.875% Pfd. 05/15/68 .................. 522,954
7,850 First Republic Preferred Capital Corporation, 10.50% Pfd., 144A**** .. 8,109,050(1)
14,500 First Tennessee Bank, Adj. Rate Pfd., 144A**** ....................... 9,511,094*
$10,285,000 First Union Institutional Capital I, 8.04% 12/01/26 .................. 10,542,341(1)
$ 1,500,000 Fleet Capital Trust II, 7.92% 12/11/26 ............................... 1,533,750
6 FT Real Estate Securities Company, 9.50% Pfd., 144A**** .............. 5,895,000
Goldman Sachs:
$ 2,550,000 Capital I, 6.345% 02/15/34 ........................................ 2,504,574(1)
$ 4,362,000 Capital II, 5.793% ................................................ 3,773,130(1)
3,600 STRIPES Custodial Receipts, Pvt. .................................. 2,484,000*(3)
714,400 HSBC Holdings PLC, 8.00% Pfd., Series 2 .............................. 19,347,738**(1)(2)
$ 1,500,000 HSBC USA Capital Trust II, 8.38% 05/15/27, 144A**** .................. 1,509,747
HSBC USA, Inc.:
344,300 6.50% Pfd., Series H ................................................. 8,403,089*(1)
3,750 $2.8575 Pfd. ......................................................... 181,406*
98,825 ING Groep NV, 8.50% Pfd. ............................................. 2,485,449**(2)
4
Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 28, 2011 (UNAUDITED)
SHARES/$ PAR VALUE
------------ --------------
PREFERRED SECURITIES -- (CONTINUED)
BANKING -- (CONTINUED)
$ 5,900,000 JPMorgan Chase Capital XVIII, 6.95% 08/17/36, Series R ............... $ 6,208,906(1)
$ 6,500,000 JPMorgan Chase Capital XXVII, 7.00% 11/01/39, Series AA .............. 6,827,548(1)
30,405 Keycorp Capital VIII, 7.00% Pfd. 06/15/66 ............................ 762,025
241,593 Keycorp Capital IX, 6.75% Pfd. 12/15/66 .............................. 5,949,228
279,600 Keycorp Capital X, 8.00% Pfd. 03/15/68 ............................... 7,264,008(1)
$17,800,000 Lloyds Banking Group PLC, 6.657%, 144A**** ........................... 13,661,500**(2)+
150,000 Morgan Stanley Capital Trust VI, 6.60% Pfd. 02/01/46 ................. 3,648,375
78,000 National City Capital Trust II, 6.625% Pfd. 11/15/36 ................. 1,946,997
$13,825,000 National City Preferred Capital Trust I, 12.00% ...................... 15,606,642(1)
$ 4,767,000 NB Capital Trust IV, 8.25% 04/15/27 .................................. 4,910,010(1)
164,520 PNC Financial Services, 9.875% Pfd., Series L ........................ 4,729,950*(1)
$ 2,500,000 PNC Preferred Funding Trust III, 8.70%, 144A**** ..................... 2,692,978(1)
8,641 Sovereign REIT, 12.00% Pfd., Series A, 144A**** ...................... 9,870,182
60 Union Planters Preferred Funding, 7.75% Pfd., Series A, 144A**** ..... 5,272,500
$ 3,000,000 Wachovia Capital Trust I, 7.64% 01/15/27, 144A**** ................... 3,150,894
$ 8,000,000 Wachovia Capital Trust V, 7.965% 06/01/27, 144A**** .................. 8,402,352(1)
509,900 Wachovia Preferred Funding, 7.25% Pfd., Series A ..................... 13,002,450(1)
Washington Mutual:
$ 2,100,000 9.75%, 144A**** ................................................... 52,500++
$10,050,000 6.534%, 144A**** .................................................. 251,250++
$11,067,000 Webster Capital Trust IV, 7.65% 06/15/37 ............................. 11,094,446(1)
100,000 Wells Fargo & Company, 8.00% Pfd., Series J .......................... 2,758,000*
$ 650,000 Wells Fargo Capital XV, 9.75% ........................................ 716,625
--------------
415,558,600
--------------
FINANCIAL SERVICES -- 3.0%
$ 1,340,000 Ameriprise Financial, Inc., 7.518% 06/01/66 .......................... 1,430,450(1)
$ 7,000,000 Gulf Stream-Compass 2005 Composite Notes, 144A**** ................... 4,586,750(3)
Heller Financial, Inc.:
147,820 6.687% Pfd., Series C ............................................. 14,449,405*
31,730 6.95% Pfd., Series D .............................................. 3,223,571*
Lehman Brothers Holdings, Inc.:
34,000 5.67% Pfd., Series D .............................................. 9,350*++
471,500 7.95% Pfd ......................................................... 3,536*++
20,000 Lehman Capital Trust III, 6.375% Pfd., Series K ...................... 2,050++
$10,000,000 RACERS(R) Series 2005 AMMC V Trust, 144A**** ......................... 6,075,790(3)
$ 3,000,000 Schwab Capital Trust I, 7.50% 11/15/37 ............................... 3,167,994(1)
--------------
32,948,896
--------------
5
Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 28, 2011 (UNAUDITED)
SHARES/$ PAR VALUE
------------ --------------
PREFERRED SECURITIES -- (CONTINUED)
INSURANCE -- 23.3%
$ 4,566,000 Ace Capital Trust II, 9.70% 04/01/30 ................................. $ 5,707,500(1)(2)
$ 455,000 AON Corporation, 8.205% 01/01/27 ..................................... 511,306
Arch Capital Group Ltd.:
117,750 7.875% Pfd., Series B ............................................. 2,979,252**(1)(2)
100,000 8.00% Pfd., Series A .............................................. 2,528,130**(1)(2)
$ 8,500,000 AXA SA, 6.463%, 144A**** ............................................. 7,596,875**(1)(2)
Axis Capital Holdings:
117,707 7.25% Pfd., Series A .............................................. 2,990,499**(1)(2)
281,505 7.50% Pfd., Series B .............................................. 27,816,213(1)(2)
37,000 Corts Provident Financing Trust I, 8.50% Pfd. ........................ 998,723(1)
558,000 Delphi Financial Group, 7.376% Pfd. 05/15/37 ......................... 13,531,500(1)
$20,919,000 Everest Re Holdings, 6.60% 05/15/37 .................................. 20,552,917(1)
$ 4,650,000 Great West Life & Annuity Insurance, 7.153% 05/16/46, 144A**** ....... 4,812,750(1)
$35,418,000 Liberty Mutual Group, 10.75% 06/15/58, 144A**** ...................... 46,486,125(1)
$ 6,600,000 MetLife Capital Trust IV, 7.875% 12/15/37, 144A**** .................. 7,144,500(1)
$13,285,000 MetLife Capital Trust X, 9.25% 04/08/38, 144A**** .................... 16,141,275(1)
$13,520,000 MetLife, Inc., 10.75% 08/01/39 ....................................... 18,740,140(1)
Principal Financial Group:
90,000 5.563% Pfd., Series A ............................................. 8,713,125*(1)
352,000 6.518% Pfd., Series B ............................................. 8,610,448*(1)
Renaissancere Holdings Ltd.:
161,510 6.08% Pfd., Series C .............................................. 3,779,334**(1)(2)
197,779 6.60% Pfd., Series D .............................................. 4,875,252**(1)(2)
407,200 Scottish Re Group Ltd., 7.25% Pfd. ................................... 3,753,895**(2)+
$ 7,500,000 Stancorp Financial Group, 6.90% 06/01/67 ............................. 7,208,940(1)
$ 7,425,000 USF&G Capital, 8.312% 07/01/46, 144A**** ............................. 8,345,440(1)
$13,000,000 USF&G Capital I, 8.50% 12/15/45, 144A**** ............................ 14,912,105(1)
$12,200,000 XL Capital Ltd., 6.50%, Series E ..................................... 11,407,000(1)(2)
$ 2,000,000 ZFS Finance USA Trust V, 6.50% 05/09/37, 144A**** .................... 2,005,000
--------------
252,148,244
--------------
UTILITIES -- 23.7%
320,000 Alabama Power Company, 6.45% Pfd. .................................... 8,480,000*(1)
Baltimore Gas & Electric Company:
10,000 6.70% Pfd., Series 1993 ........................................... 1,008,750*(1)
10,000 7.125% Pfd., Series 1993 .......................................... 1,009,688*
6
Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 28, 2011 (UNAUDITED)
SHARES/$ PAR VALUE
------------ --------------
PREFERRED SECURITIES -- (CONTINUED)
UTILITIES -- (CONTINUED)
462,029 Calenergy Capital Trust III, 6.50% Pfd. 09/01/27 ..................... $ 22,870,436(1)
$18,533,000 COMED Financing III, 6.35% 03/15/33 .................................. 15,513,622(1)
6,100 Constellation Energy Group, 8.625% Pfd. 06/15/63, Series A ........... 167,140
$19,675,000 Dominion Resources Capital Trust I, 7.83% 12/01/27 ................... 19,956,136(1)
$15,262,000 Dominion Resources, Inc., 7.50% 06/30/66 ............................. 15,889,818(1)
296,300 Entergy Arkansas, Inc., 6.45% Pfd. ................................... 7,166,756*(1)
72,500 Entergy Louisiana, Inc., 6.95% Pfd. .................................. 7,059,688*
FPL Group Capital, Inc.:
$17,620,000 6.65% 06/15/67 .................................................... 17,554,119(1)
$ 4,000,000 7.30% 09/01/67, Series D .......................................... 4,175,372(1)
165,000 Georgia Power Company, 6.50% Pfd., Series 2007A ...................... 17,211,563*(1)
119,805 Indianapolis Power & Light Company, 5.65% Pfd. ....................... 11,175,566*
343,606 Interstate Power & Light Company, 8.375% Pfd., Series B .............. 9,814,246*(1)
$ 2,386,000 PECO Energy Capital Trust III, 7.38% 04/06/28, Series D .............. 2,386,909(1)
$24,500,000 PECO Energy Capital Trust IV, 5.75% 06/15/33 ......................... 20,883,212(1)
$ 4,485,000 PPL Capital Funding, 6.70% 03/30/67, Series A ........................ 4,411,921
218,000 PPL Electric Utilities Corporation, 6.25% Pfd. ....................... 5,463,625*(1)
$28,015,000 Puget Sound Energy, Inc., 6.974% 06/01/67 ............................ 27,837,021(1)
Southern California Edison:
118,850 6.00% Pfd., Series C .............................................. 11,424,456*(1)
15,245 6.125% Pfd. ....................................................... 1,508,779*
$ 2,950,000 Southern Union Company, 7.20% 11/01/66 ............................... 2,787,750(1)
$11,000,000 Wisconsin Energy Corporation, 6.25% 05/15/67 ......................... 11,000,209(1)
$10,000,000 WPS Resources Corporation, 6.11% 12/01/66 ............................ 9,736,580(1)
--------------
256,493,362
--------------
ENERGY -- 4.9%
$30,000,000 Enbridge Energy Partners LP, 8.05% 10/01/37 .......................... 32,000,700(1)
Enterprise Products Partners:
$ 565,000 7.00% 06/01/67 .................................................... 564,850(1)
$18,956,000 8.375% 08/01/66, Series A ......................................... 20,471,077(1)
--------------
53,036,627
--------------
REAL ESTATE INVESTMENT TRUST (REIT) -- 0.1%
34,947 PS Business Parks, Inc., 6.70% Pfd., Series P ........................ 844,756
--------------
844,756
--------------
7
Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 28, 2011 (UNAUDITED)
SHARES/$ PAR VALUE
------------ --------------
PREFERRED SECURITIES -- (CONTINUED)
MISCELLANEOUS INDUSTRIES -- 0.8%
112,750 Ocean Spray Cranberries, Inc., 6.25% Pfd., 144A**** .................. $ 9,104,563*(1)
--------------
9,104,563
--------------
TOTAL PREFERRED SECURITIES
(Cost $1,027,721,114) ............................................. 1,020,135,048
--------------
CORPORATE DEBT SECURITIES -- 4.4%
BANKING -- 0.5%
$ 4,900,000 Goldman Sachs Group, 6.75% 10/01/37, Sub Notes ....................... 5,037,950
--------------
5,037,950
--------------
FINANCIAL SERVICES -- 0.1%
$ 4,726,012 Lehman Brothers, Guaranteed Note, Variable Rate, 12/16/16, 144A**** .. 860,134(3)++
--------------
860,134
--------------
INSURANCE -- 1.6%
$15,750,000 Liberty Mutual Insurance, 7.697% 10/15/97, 144A**** .................. 14,286,132(1)
$ 2,500,000 UnumProvident Corporation, 7.25% 03/15/28 ............................ 2,618,850(1)
--------------
16,904,982
--------------
UTILITIES -- 1.7%
Southern Union Company:
$ 9,300,000 7.60% 02/01/24, Senior Notes ...................................... 10,279,336(1)
$ 7,587,000 8.25% 11/15/29, Senior Notes ...................................... 8,630,956(1)
--------------
18,910,292
--------------
MISCELLANEOUS INDUSTRIES -- 0.5%
16,500 Corp-Backed Trust Certificates, 7.00% 11/15/28, Series Sprint ........ 392,700(1)
Pulte Homes, Inc.:
58,240 7.375% 06/01/46 ................................................... 1,415,960(1)
$ 3,550,000 7.875% 06/15/32 ................................................... 3,283,750(1)
--------------
5,092,410
--------------
TOTAL CORPORATE DEBT SECURITIES
(Cost $48,995,371) ................................................ 46,805,768
--------------
8
Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 28, 2011 (UNAUDITED)
SHARES/$ PAR VALUE
------------ --------------
COMMON STOCK -- 0.2%
BANKING -- 0.2%
54,740 CIT Group, Inc. ...................................................... $ 2,371,337*+
--------------
TOTAL COMMON STOCK
(Cost $10,901,025) ................................................ 2,371,337
--------------
MONEY MARKET FUND -- 0.1%
1,106,819 BlackRock Liquidity Funds, T-Fund .................................... 1,106,819
TOTAL MONEY MARKET FUND
(Cost $1,106,819) ................................................. 1,106,819
--------------
TOTAL INVESTMENTS (Cost $1,088,724,329***) ......................................... 98.9% 1,070,418,972
OTHER ASSETS AND LIABILITIES (Net) ................................................. 1.1% 12,356,052
----- --------------
TOTAL MANAGED ASSETS ............................................................... 100.0%+++ $1,082,775,024
----- --------------
LOAN PRINCIPAL BALANCE ............................................................. (358,675,000)
--------------
TOTAL NET ASSETS AVAILABLE TO COMMON STOCK ......................................... $ 724,100,024
==============
----------
* 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 February 28, 2011, these
securities amounted to $219,587,480 or 20.3% 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 $754,630,669 at February 28,
2011.
(2) Foreign Issuer.
(3) Illiquid.
+ 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:
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, 2010 THROUGH FEBRUARY 28, 2011 (UNAUDITED)
VALUE
------------
OPERATIONS:
Net investment income ...................................................... $ 17,163,649
Net realized gain/(loss) on investments sold during the period ............. 3,944,582
Change in net unrealized appreciation/depreciation of investments .......... 20,190,503
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ....................... 41,298,734
DISTRIBUTIONS:
Dividends paid from net investment income to Common Stock Shareholders(2) .. (18,435,044)
------------
TOTAL DISTRIBUTIONS TO COMMON STOCK SHAREHOLDERS ........................... (18,435,044)
FUND SHARE TRANSACTIONS:
Increase from shares issued under the Dividend Reinvestment and
Cash Purchase Plan ...................................................... 608,995
------------
NET INCREASE IN NET ASSETS AVAILABLE TO COMMON STOCK RESULTING FROM
FUND SHARE TRANSACTIONS ................................................. 608,995
NET INCREASE IN NET ASSETS AVAILABLE TO COMMON STOCK .......................... --
------------
FOR THE PERIOD ............................................................. $ 23,472,685
============
NET ASSETS AVAILABLE TO COMMON STOCK:
Beginning of period ....................................................... $700,627,339
Net increase in net assets during the period .............................. 23,472,685
------------
End of period ............................................................. $724,100,024
============
----------
(1) These tables summarize the three months ended February 28, 2011 and should
be read in conjunction with the Fund's audited financial statements,
including footnotes, in its Annual Report dated November 30, 2010.
(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, 2010 THROUGH FEBRUARY 28, 2011 (UNAUDITED)
FOR A COMMON STOCK SHARE OUTSTANDING THROUGHOUT THE PERIOD.
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period .............................................. $ 16.35
-----------
INVESTMENT OPERATIONS:
Net investment income ............................................................. 0.40
Net realized and unrealized gain/(loss) on investments ............................ 0.56
-----------
Total from investment operations .................................................. 0.96
-----------
DISTRIBUTIONS TO COMMON STOCK SHAREHOLDERS:
From net investment income ........................................................ (0.43)
-----------
Total distributions to Common Stock Shareholders .................................. (0.43)
-----------
Net asset value, end of period .................................................... $ 16.88
===========
Market value, end of period ....................................................... $ 17.01
-----------
Common Stock shares outstanding, end of period .................................... 42,885,580
===========
RATIOS TO AVERAGE NET ASSETS AVAILABLE TO COMMON STOCK SHAREHOLDERS:
Net investment income+ ............................................................ 9.86%*
Operating expenses including interest expense ..................................... 1.72%*
Operating expenses excluding interest expense ..................................... 1.06%*
SUPPLEMENTAL DATA:++
Portfolio turnover rate ........................................................... 5%**
Total managed assets, end of period (in 000's) .................................... $ 1,082,775
Ratio of operating expenses including interest expense to total managed assets .... 1.15%*
Ratio of operating expenses excluding interest expense to total managed assets .... 0.71%*
(1) These tables summarize the three months ended February 28, 2011 and should
be read in conjunction with the Fund's audited financial statements,
including footnotes, in its Annual Report dated November 30, 2010.
* 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, 2010 - Extra .... $0.0400 $16.34 $16.21 $16.28
December 31, 2010 ............ 0.1300 16.34 16.21 16.28
January 31, 2011 ............. 0.1300 16.56 16.58 16.56
February 28, 2011 ............ 0.1300 16.88 17.01 16.88
----------
(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 February 28, 2011, the aggregate cost of securities for federal income
tax purposes was $1,090,327,144, the aggregate gross unrealized appreciation for
all securities in which there is an excess of value over tax cost was
$100,867,251 and the aggregate gross unrealized depreciation for all securities
in which there is an excess of tax cost over value was $120,775,423.
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 28, 2011 is as follows:
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
FEBRUARY 28, 2011 PRICE INPUTS INPUTS
----------------- ------------ ------------ ------------
Preferred Securities
Banking $ 415,558,600 $261,514,318 $153,745,338 $ 298,944
Financial Services 32,948,896 -- 26,261,491 6,687,405
Insurance 252,148,244 132,559,073 119,589,171 --
Utilities 256,493,362 25,871,204 230,622,158 --
Energy 53,036,627 -- 53,036,627 --
Real Estate Investment Trust (REIT) 844,756 844,756 -- --
Miscellaneous Industries 9,104,563 -- 9,104,563 --
Corporate Debt Securities 46,805,768 25,756,902 20,188,732 860,134
Common Stock
Banking 2,371,337 2,371,337 -- --
Money Market Fund 1,106,819 1,106,819 -- --
-------------- ------------ ------------ ------------
Total Investments $1,070,418,972 $450,024,409 $612,548,080 $ 7,846,483
============== ============ ============ ============
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 11/30/10 $6,068,024 $127,411 $5,291,259 $649,354
Accrued discounts/premiums -- -- -- --
Realized gain/(loss) -- -- -- --
Change in unrealized appreciation/
(depreciation) 1,778,459 171,533 1,396,146 210,780
Net purchases/(sales) -- -- -- --
Transfers in and/or out of Level 3 -- -- -- --
---------- -------- ---------- --------
BALANCE AS OF 2/28/11 $7,846,483 $298,944 $6,687,405 $860,134
For the period ended February 28, 2011 total change in unrealized
gain/(loss) on Level 3 securities still held at period-end and included in the
change in net assets was $1,778,459.
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 Shareowner Services
1-866-351-7446
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
February 28, 2011
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 4/21/11
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 4/21/11
By (Signature and Title)* /s/ R. Eric Chadwick
------------------------------------------------------
R. Eric Chadwick, Chief Financial Officer, Treasurer
and Vice President
(principal financial officer)
Date 4/21/11
* Print the name and title of each signing officer under his or her
signature.