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
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(Exact name of registrant as specified in charter)
301 E. Colorado Boulevard, Suite 720
PASADENA, CA 91101
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(Address of principal executive offices) (Zip code)
Donald F. Crumrine
Flaherty & Crumrine Incorporated
301 E. Colorado Boulevard, Suite 720
PASADENA, CA 91101
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(Name and address of agent for service)
Registrant's telephone number, including area code: 626-795-7300
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Date of fiscal year end: NOVEMBER 30, 2006
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Date of reporting period: AUGUST 31, 2006
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Form N-Q is to be used by management investment companies, other than small
business investment companies registered on Form N-5 (ss.ss. 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. ss. 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 the Flaherty & Crumrine/Claymore Preferred Securities
Income Fund ("FFC"):
During the Fund's 3rd fiscal quarter, the economy slowed from its rapid
growth earlier in the year and, for the first time in two years, the Federal
Reserve paused in its ratcheting up of short-term interest rates. In this
environment, the Fund performed very well, earning a total return of +3.3% on
its net asset value (NAV) in the three months ended August 31st and +5.4% over
its fiscal year-to-date.
In a reversal of the weak markets for Treasury securities earlier in the
year, when the Fund's hedging strategies contributed significantly to results,
long-term interest rates declined during the recent fiscal quarter and the
interest-rate hedge proved unnecessary. However, as always, we follow the Fund's
investment strategy of maintaining the hedge in place, while attempting to
control its cost. Doing so helps protect the value of the Fund's holdings
against significant increases in long-term interest rates and potentially
results in an increase in the Fund's distributable income. During the recent
fiscal quarter, the Fund's NAV performed very well, even after absorbing the
cost of the hedge.
Conditions in the market for preferred securities continue to be positive.
This market is somewhat amorphous, so we find it useful to break it down into
smaller groups of similarly-structured issues. Fully taxable or "hybrid"
preferred securities comprise the lion's share of the preferred market, and this
segment continues to grow rapidly. Over $24 billion of new taxable preferred
securities have come to market in 2006. Income from these issues is taxed as
ordinary income to investors and is a deductible expense for the issuer. As of
August 31st, 71% of the Fund's portfolio was invested in fully-taxable preferred
securities.
Much of the recent growth in taxable preferred securities has come from
issuance of "enhanced" preferreds. These issues have certain terms and
conditions which may result in better credit ratings for the issuer (which in
turn helps keep their borrowing costs down). Since most of these features favor
the issuer, investors should require a higher return. In our view, too often
this is not the case. As a result, the portfolio's allocation to enhanced
preferreds has increased at a much slower pace than that of the overall market.
The market for traditional preferred stock (issues that pay dividends and
may have tax advantages to certain investors which the Fund can pass through to
its shareholders) has been delivering strong relative returns for some time. As
of August 31st, this type of security comprised 17% of the Fund's portfolio.
Since the beginning of 2006, fourteen new traditional preferred stock
issues totaling $5.7 billion have been brought to market (increasing the sector
total by roughly 10%); the additional supply has helped focus interest on
traditional preferred stock and appears to have attracted new investors. Several
of these recent issues have dividend rates that adjust every quarter to reflect
changes in short-term interest rates. This floating-rate feature fits the Fund
nicely because it tends to offset changes in the cost of the Fund's leverage and
requires only a minimal interest-rate hedge. However, unless the level of income
we can earn on this type of security goes up, we don't anticipate increasing the
Fund's holdings much beyond present levels.
While changes in short-term interest rates affect the valuation of some of
the Fund's securities (and therefore its NAV), short-term rates more directly
affect the Fund's income and the amount of its dividend by influencing both the
cost of its Auction Market Preferred Stock (AMPS) leverage and its hedging
strategy. The Fund's leverage generally produces additional distributable income
for its Common Stock shareholders. The amount of this additional income is
influenced by the "spread" between the income generated by the portfolio and the
cost of leverage.
As the Fed increased short-term interest rates through June 2006, these
spreads narrowed significantly and the Fund generated less additional
distributable income. If the Fed maintains its pause on short-term rates, and
long-term rates do not decrease materially, the Fund's leverage should continue
to produce the same additional distributable income as it does now. Of course,
if the Fed lowers short-term interest rates, the Fund should see a greater
benefit from its use of leverage and consequently have more additional
distributable income for its Common Stock shareholders.
The cost of the Fund's hedging strategy is also directly affected by the
slope of the yield curve (in other words, the difference between short- and
long-term interest rates). When the yield curve is steep - as it was for most of
the period from mid-2001 through 2004 - hedging tends to be expensive, because
the market charges the difference between long- and short-term yields to those
hedging. However, if the slope of the yield curve is as flat as it has been this
year, the market will not charge as much to hedge and the Fund should not need
to spend as much on its hedging strategy as it has over the past few years.
We hope investors will take advantage of the Fund's website,
WWW.FCCLAYMORE.COM. On it, there is a more extensive discussion of enhanced
hybrid preferred securities, the impact of changing short-term interest rates on
the additional distributable income provided by the Fund's leverage and how the
slope of the yield curve affects the cost of the Fund's hedging strategy. It
also contains a wide range of additional information about the Fund.
Sincerely,
/S/ DONALD F. CRUMRINE /S/ ROBERT M. ETTINGER
Donald F. Crumrine Robert M. Ettinger
Chairman of the Board President
October 19, 2006
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Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
PORTFOLIO OVERVIEW
AUGUST 31, 2006 (UNAUDITED)
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FUND STATISTICS ON 08/31/06
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Net Asset Value $ 22.64
Market Price $ 20.50
Discount 9.45%
Yield on Market Price 7.46%
Common Stock Shares
Outstanding 42,601,719
INDUSTRY CATEGORIES % OF PORTFOLIO
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[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS
Banks 35%
Utilities 26%
Insurance 18%
Financial Services 11%
Oil and Gas 4%
REITs 4%
Other 2%
MOODY'S RATINGS % OF PORTFOLIO
--------------------------------------------
AAA 0.3%
AA 1.8%
A 28.8%
BBB 50.9%
BB 11.2%
B 0.5%
Not Rated 5.6%
Below Investment Grade* 11.3%
* BELOW INVESTMENT GRADE BY BOTH MOODY'S AND
S&P.
TOP 10 HOLDINGS BY ISSUER % OF PORTFOLIO
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Wachovia Corp. 3.8%
JPMorgan Chase 3.4%
ACE Ltd. 2.9%
North Fork Bancorporation 2.9%
HSBC 2.8%
Midamerican Energy 2.6%
Morgan Stanley 2.5%
HBOS Plc 2.4%
Washington Mutual 2.4%
Countrywide Financial 2.3%
% OF PORTFOLIO**
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Holdings Generating Qualified Dividend Income (QDI) for Individuals 26%
Holdings Generating Income Eligible for the Corporate Dividend Received Deduction (DRD) 17%
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** 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
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Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
PORTFOLIO OF INVESTMENTS
AUGUST 31, 2006 (UNAUDITED)
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SHARES/$ PAR VALUE
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PREFERRED SECURITIES -- 85.1%
BANKING -- 35.4%
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$ 19,000,000 Astoria Capital Trust I, 9.75% 11/01/29 Capital Security, Series B............... $ 21,567,280
Auction Pass-Through Trust, Cl. B:
65 Series 2006-5, Variable Rate Pfd., 144A****.................................... 1,941,875*
65 Series 2006-6, Variable Rate Pfd., 144A****.................................... 1,941,875*
40,000 BAC Capital Trust I, 7.00% Pfd. 12/15/31 ........................................ 1,022,400
10,400 BAC Capital Trust II, 7.00% Pfd. 02/01/32 ....................................... 262,288
20,400 BAC Capital Trust VIII, 6.00% Pfd. 08/25/35 ..................................... 484,398
$ 1,240,000 BankBoston Capital Trust I, 8.25% 12/15/26 Capital Security ..................... 1,297,034
$ 3,155,000 BankBoston Capital Trust II, 7.75% 12/15/26 Capital Security, Series B .......... 3,288,772
1,800 Bank of New York Capital IV, 6.875% Pfd., Series E .............................. 45,360
77,900 Bank One Capital Trust VI, 7.20% Pfd. ........................................... 1,975,154
$ 8,800,000 Barclays Bank PLC, Adj. Rate Pfd. ............................................... 8,248,284**(1)
210,000 Capital One Capital II, 7.50% Pfd. 06/15/66 ..................................... 5,516,700
$ 17,500,000 Capital One Capital III, 7.686% Pfd. ............................................ 18,287,237
$ 120,000 Citicorp Capital II, 8.015% 02/15/27 Capital Security ........................... 125,589
6,600 Citigroup Capital VIII, 6.95% Pfd. 09/15/31 ..................................... 167,970
105,000 Cobank, ACB, 7.00% Pfd., 144A**** ............................................... 5,438,475*
27,900 Comerica (Imperial) Capital Trust I, 7.60% Pfd. 07/01/50 ........................ 710,613
$ 800,000 CoreStates Capital Trust I, 8.00% 12/15/26 Capital Security, 144A**** ........... 836,240
$ 11,000,000 Cullen/Frost Capital Trust I, 8.42% 02/01/27 Capital Security, Series A ......... 11,564,410
$ 2,500,000 Dime Capital Trust I, 9.33% 05/06/27 Capital Security, Series A ................. 2,648,563
28,800 FBOP Corporation, Adj. Rate Pfd., 144A**** ...................................... 29,376,000*
$ 5,600,000 First Chicago NBD Capital A, 7.95% 12/01/26 Capital Security, 144A**** .......... 5,833,548
$ 875,000 First Chicago NBD Capital B, 7.75% 12/01/26 Capital Security, 144A**** .......... 911,124
$ 3,000,000 First Midwest Capital Trust I, 6.95% 12/01/33 Capital Security .................. 3,091,725
First Republic Bank:
400,000 6.25% Pfd...................................................................... 9,828,000*
30,000 7.25% Pfd...................................................................... 758,250
62,600 Fleet Capital Trust VII, 7.20% Pfd. 12/15/31 .................................... 1,596,613
110,200 Fleet Capital Trust VIII, 7.20% Pfd. 03/15/32 ................................... 2,831,038
6 FT Real Estate Securities Company, 9.50% Pfd., 144A**** ......................... 7,962,472
$ 37,550,000 GreenPoint Capital Trust I, 9.10% 06/01/27 Capital Security ..................... 39,898,565
HBOS Capital Funding LP:
$ 30,725,000 6.85% Pfd ..................................................................... 31,141,324(1)
$ 5,500,000 Variable Rate Pfd., 144A****................................................... 5,232,755**(1)
7,500 HSBC Series II, Variable Inverse Pfd., Pvt. ..................................... 8,265,000*
645,000 HSBC USA, Inc., 6.50% Pfd., Series H ............................................ 17,050,575*
4
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Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2006 (UNAUDITED)
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SHARES/$ PAR VALUE
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PREFERRED SECURITIES -- (CONTINUED)
BANKING -- (CONTINUED)
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ING Groep NV:
36,000 7.05% Pfd...................................................................... $ 914,760**(1)
143,900 7.20% Pfd...................................................................... 3,705,425**(1)
$ 15,343,000 JPMorgan Capital Trust I, 7.54% 01/15/27 Capital Security ....................... 15,947,207
$ 11,271,000 JPMorgan Capital Trust II, 7.95% 02/01/27 Capital Security ...................... 11,779,604
16,200 JPMorgan Chase Capital X, 7.00% Pfd. 02/15/32, Series J.......................... 408,888
147,800 JPMorgan Chase Capital XIV, 6.20% Pfd., 10/15/34................................. 3,648,443
$ 10,710,000 JPMorgan Chase Capital XVIII, 6.95% 08/17/36 Capital Security, Series R.......... 11,249,570
23,800 Keycorp Capital V, 5.875% Pfd., Series A......................................... 556,920
20,000 Keycorp Capital VIII, 7.00% Pfd. 06/15/66........................................ 517,300
$ 20,280,000 Marshall & Ilsley Capital Trust A, 7.65% 12/01/26 Capital Security.............. 21,057,941
20 Marshall & Ilsley Investment II, 8.875% Pfd., 144A****........................... 2,064,458
$ 3,000,000 North Fork Capital Trust I, 8.70% 12/15/26 Capital Security...................... 3,139,380
265,000 PFGI Capital Corporation, 7.75% Pfd.............................................. 6,839,650
$ 6,500,000 RBS Capital Trust B, 6.80% Pfd................................................... 6,556,290**(1)
$ 7,200,000 Republic New York Capital I, 7.75% 11/15/26 Capital Security..................... 7,481,556(1)
$ 6,992,000 Republic New York Capital II, 7.53% 12/04/26 Capital Security.................... 7,270,456(1)
Roslyn Real Estate:
40 8.95% Pfd., Series C, 144A****................................................. 4,375,265
135 Adj. Rate Pfd., Series D, 144A****............................................. 13,668,750
534,000 Royal Bank of Scotland Group PLC, 5.75% Pfd., Series L........................... 12,874,740**(1)
63,700 Sovereign Bancorp, 7.30% Pfd., Series C.......................................... 1,698,242*
248,100 Sovereign Capital Trust V, 7.75% Pfd. 05/22/36................................... 6,544,878
$ 10,000,000 Sovereign Capital Trust VI, 7.908% 06/13/36 Capital Security..................... 10,851,400
45,000 SunTrust Capital IV, 7.125% Pfd. 10/15/31........................................ 1,147,275
5,800 SunTrust Capital V, 7.05% Pfd. 12/15/31.......................................... 147,784
$ 14,167,000 Union Planters Capital Trust, 8.20% 12/15/26 Capital Security.................... 14,776,535
60 Union Planters Preferred Funding, 7.75% Pfd., Series 144A****.................... 6,442,279
115,200 USB Capital IV, 7.35% Pfd. 11/01/31.............................................. 2,912,832
14,300 USB Capital V, 7.25% Pfd. 12/15/31............................................... 364,507
127,600 USB Capital VIII, 6.35% Pfd. 12/29/65............................................ 3,171,498
64,600 USB Capital X, 6.50% Pfd. 04/12/66............................................... 1,612,739
23,500 VNB Capital Trust I, 7.75% Pfd................................................... 591,495
2,010,800 Wachovia Preferred Funding, 7.25% Pfd., Series A................................. 56,453,210
$ 20,750,000 Washington Mutual, Inc., 8.36% 12/01/26 Capital Security, 144A****............... 21,695,474
$ 11,550,000 Washington Mutual Preferred Funding, Variable Rate Pfd., 144A****................ 11,336,498
$ 8,000,000 Webster Capital Trust II, 10.00% 04/01/27 Capital Security....................... 8,536,480
------------------------------------------------------------------------------------------------------------------
533,487,235
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5
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Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2006 (UNAUDITED)
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SHARES/$ PAR VALUE
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PREFERRED SECURITIES -- (CONTINUED)
FINANCIAL SERVICES -- 8.3%
---------------------------------------------------------------------------------------------------------------------------
30,000 Corporate-Backed Trust Certificates, 7.75% Pfd., Series CIT Group................ $ 782,250
$ 15,459,000 Countrywide Capital I, 8.00% 12/15/26 Capital Security........................... 15,528,411
755,100 Countrywide Capital IV, 6.75% Pfd................................................ 19,070,050
Goldman Sachs Group, Inc.:
150,000 Adj. Rate Pfd., Series D....................................................... 3,836,250*
3,600 STRIPES Custodial Receipts, Pvt................................................ 3,830,400*
$ 7,000,000 Gulf Stream-Compass 2005 Composite Notes, 144A****............................... 7,026,460
100,000 Household Capital Trust VII, 7.50% Pfd. 11/15/31................................. 2,526,500
Lehman Brothers Holdings, Inc.:
167,750 5.67% Pfd., Series D........................................................... 8,214,718*
85,000 5.94% Pfd., Series C........................................................... 4,306,525*
8,600 Lehman Capital Trust V, 6.00% Pfd., Series M..................................... 205,669
27,800 Lehman Capital Trust VI, 6.24% Pfd., Series N.................................... 682,907
4,000 Merrill Lynch Series II STRIPES Custodial Receipts, Pvt.......................... 4,096,000*
10,000 Merrill Lynch Preferred Capital Trust IV, 7.12% Pfd.............................. 257,300
79,600 Morgan Stanley Capital Trust II, 7.25% Pfd....................................... 2,019,054
773,498 Morgan Stanley Capital Trust III, 6.25% Pfd...................................... 18,815,339
202,000 Morgan Stanley Capital Trust IV, 6.25% Pfd....................................... 4,974,250
9,000 Morgan Stanley Capital Trust V, 5.75% Pfd........................................ 208,575
389,500 Morgan Stanley Capital Trust VI, 6.60% Pfd....................................... 9,793,978
$ 10,000,000 RACERS(R) Series 2005 AMMC V Trust, 144A****..................................... 10,095,839
160,000 SLM Corporation, 6.97% Pfd., Series A............................................ 8,607,200*
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124,877,675
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INSURANCE -- 15.4%
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1,669,980 ACE Ltd., 7.80% Pfd., Series C................................................... 43,135,583**(1)
Aegon NV:
292,100 6.375% Pfd..................................................................... 7,305,421**(1)(2)
60,000 6.50% Pfd...................................................................... 1,502,400**(1)
$ 12,051,000 AON Capital Trust A, 8.205% 01/01/27 Capital Security ........................... 13,778,571(3)
Arch Capital Group Ltd.:
167,650 7.875% Pfd., Series B.......................................................... 4,284,296**(1)
21,800 8.00% Pfd...................................................................... 563,094**(1)
Axis Capital Holdings:
451,300 7.25% Pfd., Series A........................................................... 11,523,945**(1)
77,655 Variable Rate Pfd., Series B .................................................. 7,870,723(1)
339,800 Berkley W.R. Capital Trust II, 6.75% Pfd. 07/26/45............................... 8,365,876
106,000 Corts-AON Capital, 8.205% Pfd.................................................... 2,937,260
37,000 Corts-UnumProvident Corporation, 8.50% Pfd....................................... 994,005
6
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Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2006 (UNAUDITED)
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SHARES/$ PAR VALUE
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PREFERRED SECURITIES -- (CONTINUED)
INSURANCE -- (CONTINUED)
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267,900 Endurance Specialty Holdings, 7.75% Pfd.......................................... $ 6,661,333**(1)
134,150 Everest Re Capital Trust II, 6.20% Pfd., Series B ............................... 3,080,084(1)
$ 3,500,000 Great West Life & Annuity Insurance, Variable Rate Pfd. 05/16/46................. 3,590,318
111,500 Hartford Capital III, 7.45% Pfd. 10/31/50, Series C.............................. 2,832,100
23,200 Lincoln National Corporation, 6.75% Pfd. 04/20/66................................ 582,668
$ 10,000,000 Mangrove Bay Passthru Trust, 6.102% 07/15/33 Capital Security, 144A****.......... 9,588,350(1)
$ 9,650,000 Oil Insurance Ltd., Variable Rate Pfd., 144A****................................. 9,843,579(1)
50,000 PartnerRe Capital Trust I, 7.90% Pfd. 12/31/31................................... 1,271,750**(1)
284,049 PartnerRe Ltd., 6.75% Pfd., Series C............................................. 7,091,283**(1)
626,700 Principal Financial Group, 6.518% Pfd............................................ 17,306,321*
$ 714,000 Provident Financing Trust I, 7.405% 03/15/38 Capital Security.................... 678,496
24,900 Prudential PLC, 6.50% Pfd........................................................ 634,577**(1)
$ 9,000,000 Renaissancere Capital Trust, 8.54% 03/01/27 Capital Security, Series B........... 9,477,945(1)
Renaissancere Holdings Ltd.:
116,000 6.08% Pfd., Series C........................................................... 2,582,160**(1)
308,935 7.30% Pfd., Series B........................................................... 7,746,545**(1)
15,000 8.10% Pfd., Series A........................................................... 377,250**(1)
94,900 Saturns-AON 2003-3, 8.00% Pfd., Series AON Corp.................................. 2,454,114
56,000 Saturns-SAFC 2001-7, 8.25% Pfd., Series Safeco Corp.............................. 1,434,440
407,200 Scottish Re Group Ltd., 7.25% Pfd................................................ 8,056,452**(1)
58,950 St. Paul Capital Trust I, 7.60% Pfd. 10/15/50.................................... 1,497,330
36,600 Torchmark Capital Trust III, 7.10% Pfd........................................... 932,019
$ 8,675,000 USF&G Capital, 8.312% 07/01/46 Capital Security, 144A****........................ 10,422,232
$ 17,000,000 USF&G Capital I, 8.50% 12/15/45 Capital Security, 144A****....................... 20,848,545
15,000 XL Capital Ltd., 7.625% Pfd., Series B........................................... 385,275**(1)
------------------------------------------------------------------------------------------------------------------
231,636,340
---------------
UTILITIES -- 18.3%
---------------------------------------------------------------------------------------------------------------------------
$ 3,750,000 AGL Capital Trust, 8.17% 06/01/37 Capital Security............................... 3,968,137
Baltimore Gas & Electric Company:
10,000 6.70% Pfd., Series 1993........................................................ 1,041,500*
50,000 7.125% Pfd., Series 1993....................................................... 5,204,250*
820,359 Calenergy Capital Trust III, 6.50% Pfd. 09/01/27................................. 38,753,759
35,000 Central Maine Power, 5.25% Pfd., Pvt............................................. 3,163,650*
$ 2,600,000 COMED Financing II, 8.50% 01/15/27 Capital Security, Series B.................... 2,726,984
$ 17,645,000 COMED Financing III, 6.35% 03/15/33 Capital Security............................. 15,630,911
85,630 Dominion CNG Cap Trust I, 7.80% Pfd.............................................. 2,165,583
$ 10,175,000 Dominion Resources Capital Trust I, 7.83% 12/01/27 Capital Security............. 10,758,638
10,000 Dominion Resources Capital Trust II, 8.40% Pfd. 01/30/41......................... 255,350
7
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Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2006 (UNAUDITED)
--------------------------------------------------------------------------
SHARES/$ PAR VALUE
------------- ---------
PREFERRED SECURITIES -- (CONTINUED)
UTILITIES -- (CONTINUED)
---------------------------------------------------------------------------------------------------------------------------
$ 12,250,000 Dominion Resources Capital Trust III, 8.40% 01/15/31 Capital Security............ $ 14,147,341
$ 6,000,000 Dominion Resources, Inc., Adj. Rate, Capital Security............................ 6,212,760
96,450 Duquesne Light Company, 6.50% Pfd................................................ 4,897,249*
Entergy Arkansas, Inc.:
10,240 4.56% Pfd., Series 1965........................................................ 810,598*
625,000 6.45% Pfd...................................................................... 16,068,750*
85,000 Entergy Louisiana, Inc., 6.95% Pfd., 144A**** ................................... 8,806,425*
Florida Power Company:
49,750 4.40% Pfd...................................................................... 4,125,021*
21,585 4.60% Pfd...................................................................... 1,870,988*
146,000 FPC Capital I, 7.10% Pfd., Series A ............................................. 3,687,960
12,442 Great Plains Energy, Inc., 4.20% Pfd ............................................ 956,292*
37,800 Gulf Power Capital Trust III, 7.375% Pfd ........................................ 962,199
19,000 Gulf Power Company, 6.00% Pfd., Series 1 ........................................ 1,984,075*
$ 17,962,000 Houston Light & Power Capital Trust II, 8.257% 02/01/37 Capital Security ........ 18,871,326
5,000 Indiana Michigan Power, 4.56% Pfd. .............................................. 406,875*
119,805 Indianapolis Power & Light Company, 5.65% Pfd. .................................. 11,092,745*
Interstate Power & Light Company:
110,000 7.10% Pfd., Series C........................................................... 2,817,650*
11,000 8.375% Pfd., Series B.......................................................... 338,415*
32,300 Laclede Capital Trust I, 7.70% Pfd. ............................................. 823,165
Pacific Enterprises:
4,550 $4.40 Pfd...................................................................... 375,876*
4,510 $4.50 Pfd...................................................................... 381,050*
23,085 $4.75 Pfd., Series 53.......................................................... 2,058,720*
2,500 PacifiCorp, $7.48 Sinking Fund Pfd. ............................................. 254,313*
$ 2,386,000 PECO Energy Capital Trust III, 7.38% 04/06/28 Capital Security, Series D ........ 2,546,053
$ 27,000,000 PECO Energy Capital Trust IV, 5.75% 06/15/33 Capital Security ................... 23,724,765
9,495 Portland General Electric, 7.75% Sinking Fund Pfd. .............................. 967,778*
3,500 PPL Electric Utilities Corporation, 6.25% Pfd. .................................. 89,793*
365,750 PSEG Funding Trust II, 8.75% Pfd. ............................................... 9,632,026
$ 8,200,000 Puget Sound Energy Capital Trust, 8.231% 06/01/27 Capital Security, Series B .... 8,673,919
200,000 San Diego Gas & Electric Company, $1.70 Pfd. .................................... 5,188,000*
Southern California Edison:
115,750 6.00% Pfd...................................................................... 11,486,104*
16,900 6.125% Pfd..................................................................... 1,694,707*
7,800 Southern Company Capital Trust VI, 7.125% Pfd. 06/30/42 ......................... 198,822
264,700 Southern Union Company, 7.55% Pfd. .............................................. 6,878,230*
$ 4,200,000 Union Electric Company, 7.69% 12/15/36 Capital Security, Series A ............... 4,401,726
8
--------------------------------------------------------------------------------
Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2006 (UNAUDITED)
--------------------------------------------------------------------------
SHARES/$ PAR VALUE
------------- ---------
PREFERRED SECURITIES -- (CONTINUED)
UTILITIES -- (CONTINUED)
---------------------------------------------------------------------------------------------------------------------------
Virginia Electric & Power Company:
14,985 $4.12 Pfd...................................................................... $ 1,146,952*
21,684 $4.80 Pfd...................................................................... 1,951,885*
35,000 $6.98 Pfd...................................................................... 3,593,100*
189,000 Virginia Power Capital Trust, 7.375% Pfd. 07/30/42 .............................. 4,839,345
15,000 Wisconsin Power & Light Company, 6.20% Pfd. ..................................... 1,537,425*
Xcel Energy, Inc.:
7,110 $4.10 Pfd., Series C........................................................... 559,699*
10,210 $4.11 Pfd., Series D........................................................... 805,722*
------------------------------------------------------------------------------------------------------------------
275,534,606
---------------
OIL AND GAS -- 3.3%
---------------------------------------------------------------------------------------------------------------------------
$ 16,814,000 Enterprise Products Partners, Variable Rate Pfd.................................. 17,496,816
13,200 EOG Resources, Inc., 7.195% Pfd., Series B....................................... 13,823,172*
$ 5,000,000 KN Capital Trust III, 7.63% 04/15/28 Capital Security............................ 4,512,250
$ 13,315,000 Phillips 66 Capital Trust II, 8.00% 01/15/37 Capital Security.................... 13,903,390
------------------------------------------------------------------------------------------------------------------
49,735,628
---------------
REAL ESTATE INVESTMENT TRUST (REIT) -- 3.6%
---------------------------------------------------------------------------------------------------------------------------
BRE Properties, Inc.:
76,200 6.75% Pfd., Series C........................................................... 1,842,516
224,000 8.08% Pfd., Series B........................................................... 5,746,720
221,750 Duke Realty Corporation, 6.60% Pfd., Series L.................................... 5,442,854
45,000 Equity Office Property Trust, 7.75% Pfd., Series G............................... 1,142,550
51,000 Equity Residential Properties, 8.29% Pfd., Series K.............................. 3,014,355
4,980 Prologis Trust, 8.54% Pfd., Series C............................................. 274,821
PS Business Parks, Inc.:
192,464 7.00% Pfd., Series H........................................................... 4,791,391
160,000 7.20% Pfd., Series M........................................................... 4,047,200
203,400 7.60% Pfd., Series L........................................................... 5,256,873
60,000 7.95% Pfd., Series K........................................................... 1,563,000
9
--------------------------------------------------------------------------------
Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2006 (UNAUDITED)
--------------------------------------------------------------------------
SHARES/$ PAR VALUE
------------- ---------
PREFERRED SECURITIES -- (CONTINUED)
REAL ESTATE INVESTMENT TRUST (REIT) -- (CONTINUED)
---------------------------------------------------------------------------------------------------------------------------
Public Storage, Inc.:
12,000 6.18% Pfd., Series D........................................................... $ 284,760
206,070 6.45% Pfd., Series F........................................................... 4,999,258
58,400 6.75% Pfd., Series E........................................................... 1,466,716
30,000 6.85% Pfd., Series Y........................................................... 730,650
481,000 7.25% Pfd., Series K........................................................... 12,253,475
14,700 7.625% Pfd., Series U.......................................................... 375,144
38,500 8.00% Pfd., Series R........................................................... 979,633
------------------------------------------------------------------------------------------------------------------
54,211,916
---------------
MISCELLANEOUS INDUSTRIES -- 0.8%
---------------------------------------------------------------------------------------------------------------------------
2,245 Centaur Funding Corporation, 9.08% Pfd. 04/21/20 144A****........................ 2,585,634
112,750 Ocean Spray Cranberries, Inc., 6.25% Pfd., 144A****.............................. 9,782,190*
------------------------------------------------------------------------------------------------------------------
12,367,824
---------------
TOTAL PREFERRED SECURITIES
(Cost $1,261,880,326) ......................................................... 1,281,851,224
---------------
CORPORATE DEBT SECURITIES -- 13.9%
FINANCIAL SERVICES -- 2.4%
---------------------------------------------------------------------------------------------------------------------------
200,000 Ford Motor Credit Company, 7.375% 10/15/31....................................... 4,377,000
$ 25,000,000 General Motors Acceptance Corporation, 8.00% 11/01/31, Senior Bonds.............. 25,245,250
$ 4,853,000 Lehman Brothers, Guaranteed Note, Variable Rate, 12/16/16, 144A****.............. 4,449,595
$ 2,200,000 Morgan Stanley Finance, 8.03% 02/28/17, Capital Units............................ 2,344,870
17,400 Saturns-GS, 6.00% 02/15/33, Series Goldman Sachs................................. 414,207
------------------------------------------------------------------------------------------------------------------
36,830,922
---------------
INSURANCE -- 2.4%
---------------------------------------------------------------------------------------------------------------------------
239,000 Delphi Financial, 8.00% 05/15/33, Senior Notes................................... 6,149,470
$ 4,000,000 Farmers Exchange Capital, 7.20% 07/15/48, 144A****............................... 3,982,180
Liberty Mutual Insurance:
$ 3,011,000 7.50% 08/15/36, 144A****....................................................... 3,099,313
$ 21,845,000 7.697% 10/15/97, 144A****...................................................... 21,797,705
$ 1,000,000 UnumProvident Corporation, 7.25% 03/15/28, Senior Notes.......................... 991,065
------------------------------------------------------------------------------------------------------------------
36,019,733
---------------
UTILITIES -- 7.5%
---------------------------------------------------------------------------------------------------------------------------
$ 16,000,000 AEP Texas Central Company, 6.65% 02/15/33, Senior Notes, Series E................ 16,489,280
$ 11,410,000 Constellation Energy Group, 7.60% 04/01/32, Senior Notes......................... 13,116,423
10
--------------------------------------------------------------------------------
Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2006 (UNAUDITED)
--------------------------------------------------------------------------
SHARES/$ PAR VALUE
------------- ---------
CORPORATE DEBT SECURITIES -- (CONTINUED)
UTILITIES -- (CONTINUED)
---------------------------------------------------------------------------------------------------------------------------
$ 1,000,000 DTE Energy Company, 6.375% 04/15/33, Senior Notes................................ $ 990,680
Duke Capital Corporation:
$ 6,179,000 6.75% 02/15/32, Senior Notes................................................... 6,363,350
$ 1,200,000 8.00% 10/01/19, Senior Notes................................................... 1,372,530
$ 11,000,000 Duquesne Light Holdings, 6.25% 08/15/35.......................................... 10,195,350
$ 5,000,000 Entergy Gulf States, Inc., 6.20% 07/01/33, 1st Mortgage.......................... 4,714,825
Entergy Louisiana LLC:
$ 4,458,000 6.30% 09/01/35, 1st Mortgage................................................... 4,281,686
9,400 7.60% 04/01/32................................................................. 240,217
16,500 Entergy Mississippi, Inc., 7.25%, 1st Mortgage................................... 422,895
477,315 Georgia Power Company, 5.90% 04/15/33, Senior Notes.............................. 11,395,896
40,000 Northern States Power Company, 8.00%............................................. 1,039,600
Oncor Electric Delivery Company:
$ 2,000,000 7.00% 09/01/22................................................................. 2,142,250
$ 10,000,000 7.25% 01/15/33................................................................. 11,187,650
227,000 PPL Energy Supply LLC, 7.00% 07/15/46............................................ 5,800,985
$ 8,268,000 PSEG Power LLC, 8.625% 04/15/31.................................................. 10,552,324
$ 6,300,000 TXU Corporation, 6.50% 11/15/24.................................................. 5,868,986
$ 6,000,000 Wisconsin Electric Power Company, 6.875% 12/01/95................................ 6,485,250
------------------------------------------------------------------------------------------------------------------
112,660,177
---------------
OIL AND GAS -- 1.0%
---------------------------------------------------------------------------------------------------------------------------
$ 9,000,000 KN Energy, Inc., 7.45% 03/01/98.................................................. 7,951,455
296,911 Nexen, Inc., 7.35% Subordinated Notes............................................ 7,556,385(1)
------------------------------------------------------------------------------------------------------------------
15,507,840
---------------
REAL ESTATE INVESTMENT TRUST (REIT) -- 0.2%
---------------------------------------------------------------------------------------------------------------------------
$ 3,500,000 Realty Income Corporation, 5.875% 03/15/35....................................... 3,216,640
------------------------------------------------------------------------------------------------------------------
3,216,640
---------------
MISCELLANEOUS INDUSTRIES -- 0.4%
---------------------------------------------------------------------------------------------------------------------------
$ 390,000 BellSouth Telecommunication, 7.00% 12/01/95...................................... 397,999
Pulte Homes, Inc.:
58,240 7.375% 06/01/46................................................................ 1,490,653
$ 3,550,000 7.875% 06/15/32, Senior Notes.................................................. 3,902,905
------------------------------------------------------------------------------------------------------------------
5,791,557
---------------
TOTAL CORPORATE DEBT SECURITIES
(Cost $206,857,474) ........................................................... 210,026,869
---------------
11
--------------------------------------------------------------------------------
Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2006 (UNAUDITED)
--------------------------------------------------------------------------
SHARES/$ PAR VALUE
------------- ---------
OPTION CONTRACTS -- 0.1%
1,307 December Call Options on December U.S. Treasury Bond Futures, Expiring 11/21/06.. $ 1,007,094+
7,184 December Put Options on December U.S. Treasury Bond Futures, Expiring 11/21/06... 785,750+
2,991 October Put Options on December U.S. Treasury Bond Futures, Expiring 09/22/06.... 46,734+
------------------------------------------------------------------------------------------------------------------
TOTAL OPTION CONTRACTS
(Cost $5,875,791) ............................................................. 1,839,578
---------------
MONEY MARKET FUND -- 0.1%
1,140,918 BlackRock Provident Institutional, TempFund...................................... 1,140,918
------------------------------------------------------------------------------------------------------------------
TOTAL MONEY MARKET FUND
(Cost $1,140,918) ............................................................. 1,140,918
---------------
12
--------------------------------------------------------------------------------
Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2006 (UNAUDITED)
--------------------------------------------------------------------------
SHARES/$ PAR VALUE
------------- ---------
SECURITIES LENDING COLLATERAL -- 0.7%
9,945,000 Institutional Money Market Trust ................................................ $ 9,945,000
------------------------------------------------------------------------------------------------------------------
TOTAL SECURITIES LENDING COLLATERAL
(Cost $9,945,000) ............................................................. 9,945,000
---------------
TOTAL INVESTMENTS (Cost $1,485,699,509***) ............................................. 99.9% 1,504,803,589
OTHER ASSETS AND LIABILITIES (Net) ..................................................... 0.1% 1,530,921
----- ---------------
TOTAL NET ASSETS AVAILABLE TO COMMON STOCK AND PREFERRED STOCK ......................... 100.0%++ $ 1,506,334,510
----- ---------------
AUCTION MARKET PREFERRED STOCK (AMPS) REDEMPTION VALUE ......................................... (542,000,000)
---------------
TOTAL NET ASSETS AVAILABLE TO COMMON STOCK ..................................................... $ 964,334,510
===============
-----------------------------
* 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) A portion of the security is 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
REIT -- Real Estate Investment Trust
OPEN OPTION CONTRACTS WRITTEN
CONTRACTS CONTRACT DESCRIPTION VALUE
--------- -------------------- ---------------
1,050 December Call Options on December U.S. Treasury Bond Futures,
Expiring 11/21/06, Strike Price 108 .............................. $ (3,510,937)
257 December Call Options on December U.S. Treasury Bond Futures,
Expiring 11/21/06, Strike Price 110 .............................. (485,891)
----------------------------------------------------------------------------------------------------
TOTAL OPEN OPTION CONTRACTS WRITTEN (Cost $3,268,202) ............ (3,996,828)
--------------
13
--------------------------------------------------------------------------------
Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE TO COMMON STOCK(1)
FOR THE PERIOD FROM DECEMBER 31, 2005 THROUGH AUGUST 31, 2006 (UNAUDITED)
------------------------------------------------------------------------
VALUE
-------
OPERATIONS:
Net investment income ....................................................................... $ 64,522,403
Net realized gain/(loss) on investments sold during the period .............................. 12,636,719
Change in net unrealized appreciation/depreciation of investments held
during the period ........................................................................ (7,708,444)
Distributions to AMPS* Shareholders from net investment income,
including changes in accumulated undeclared distributions ................................ (19,052,431)
---------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ........................................ 50,398,247
DISTRIBUTIONS:
Dividends paid from net investment income to Common Stock Shareholders (2) .................. (50,483,037)
---------------
TOTAL DISTRIBUTIONS TO COMMON STOCK SHAREHOLDERS ............................................ (50,483,037)
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 DECREASE IN NET ASSETS AVAILABLE TO COMMON STOCK ---------------
FOR THE PERIOD .............................................................................. $ (84,790)
===============
-----------------------------------------------------------------------------------------------------------------------
NET ASSETS AVAILABLE TO COMMON STOCK:
Beginning of period ......................................................................... $ 964,419,300
Net decrease in net assets during the period ................................................ (84,790)
---------------
End of period ............................................................................... $ 964,334,510
===============
--------------------------------------------------------
* Auction Market Preferred Stock.
(1) These tables summarize the nine months ended August 31, 2006 and should be
read in conjunction with the Fund's audited financial statements, including
footnotes, in its Annual Report dated November 30, 2005.
(2) May include income earned, but not paid out, in prior fiscal year.
14
--------------------------------------------------------------------------------
Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
FINANCIAL HIGHLIGHTS(1)
FOR THE PERIOD FROM DECEMBER 1, 2005 THROUGH AUGUST 31, 2006 (UNAUDITED)
FOR A COMMON STOCK SHARE OUTSTANDING THROUGHOUT THE PERIOD.
-----------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ............................................. $ 22.64
-------------
INVESTMENT OPERATIONS:
Net investment income ............................................................ 1.51
Net realized and unrealized gain/(loss) on investments ........................... 0.13
DISTRIBUTIONS TO AMPS* SHAREHOLDERS:
From net investment income ....................................................... (0.45)
From net realized capital gains .................................................. --
-------------
Total from investment operations ................................................. 1.19
-------------
DISTRIBUTIONS TO COMMON STOCK SHAREHOLDERS:
From net investment income ....................................................... (1.19)
From net realized capital gains .................................................. --
-------------
Total distributions to Common Stock Shareholders ................................. (1.19)
-------------
Net asset value, end of period ................................................... $ 22.64
=============
Market value, end of period ...................................................... $ 20.50
=============
Common Stock shares outstanding, end of period ................................... 42,601,719
=============
RATIOS TO AVERAGE NET ASSETS AVAILABLE TO COMMON STOCK SHAREHOLDERS:
Net investment income+ .................................................... 6.32%**
Operating expenses ........................................................ 1.16%**
--------------------------------------------------------
SUPPLEMENTAL DATA:++
Portfolio turnover rate 39%***
Total net assets available to Common and Preferred Stock, end of period (in 000's) $ 1,506,335
Ratio of operating expenses to total average net assets
available to Common and Preferred Stock 0.74%**
(1) These tables summarize the nine months ended August 31, 2006 and should be
read in conjunction with the Fund's audited financial statements, including
footnotes, in its Annual Report dated November 30, 2005.
* 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*.
15
--------------------------------------------------------------------------------
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, 2005............................... $0.1400 $22.82 $19.30 $19.65
January 31, 2006................................ 0.1400 22.83 21.03 21.19
February 28, 2006............................... 0.1400 22.87 21.30 21.60
March 31, 2006.................................. 0.1275 22.66 19.81 19.85
April 30, 2006.................................. 0.1275 22.34 19.76 19.74
May 31, 2006.................................... 0.1275 22.29 19.82 19.98
June 30, 2006................................... 0.1275 22.02 19.50 19.62
July 31, 2006................................... 0.1275 22.09 19.97 20.00
August 31, 2006................................. 0.1275 22.64 20.50 20.76
--------------------
(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.
16
--------------------------------------------------------------------------------
Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
-----------------------------------------
1. AGGREGATE INFORMATION FOR FEDERAL INCOME TAX PURPOSES
At August 31, 2006, the aggregate cost of securities for federal income tax
purposes was $1,493,535,933, the aggregate gross unrealized appreciation for all
securities in which there is an excess of value over tax cost was $26,705,627,
and the aggregate gross unrealized depreciation for all securities in which
there is an excess of tax cost over value was $19,434,799.~
17
[This page intentionally left blank]
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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
Christopher D. Ryan, CFA
Vice President
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 PREFERRED SECURITIES
INCOME 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 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.
[GRAPHIC OMITTED]
LIGHTHOUSE ART
FLAHERTY & CRUMRINE/CLAYMORE
PREFERRED SECURITIES
INCOME FUND
QUARTERLY
REPORT
AUGUST 31, 2006
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 16, 2006
----------------------------------------------------------------------------
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 16, 2006
----------------------------------------------------------------------------
By (Signature and Title)* /S/ R. ERIC CHADWICK
-----------------------------------------------------
R. Eric Chadwick, Chief Financial Officer, Treasurer
and Vice President
(principal financial officer)
Date OCTOBER 16, 2006
----------------------------------------------------------------------------
* Print the name and title of each signing officer under his or her signature.