Edgar Filing: F&C/CLAYMORE PREFERRED SECURITIES INCOME FUND INC

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES

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 Inc.
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, 2004
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Date of reporting period: MAY 31, 2004
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.

A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
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 Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.

ITEM 1. REPORTS TO STOCKHOLDERS.

The Report to Shareholders is attached herewith.

FLAHERTY & CRUMRINE/CLAYMORE
PREFERRED SECURITIES INCOME FUND

Dear Shareholder:

During Flaherty & Crumrine/Claymore Preferred Securities Income Fund's
("FFC") recently concluded 2nd fiscal quarter, the biggest challenge we faced
was holding on to the impressive returns of the 1st quarter. In this regard, we
can report success. Although the Fund's total return on Net Asset Value ("NAV")
DECLINED 4.3%(1) during the three month period ending May 31st, results over the
first six months of fiscal 2004 INCREASED 0.7%(1).

As can be seen from the table below, over longer time periods, the Fund has
produced consistently strong results. For comparison purposes, we have included
the average return on all funds in the Lipper Domestic Investment Grade Bond
Fund category. Although the investment strategies that we use in the Fund
typically differ significantly from those of the bond funds, we believe that FFC
provides a superior way of accomplishing a similar investment objective.

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AVERAGE TOTAL RETURN PER YEAR FOR PERIODS ENDING MAY 31, 2004(1)
ONE LIFE OF
YEAR FUND(2)
---- -------

Flaherty & Crumrine/Claymore Preferred Securities Income Fund's Return
on Net Asset Value .................................................... 4.4% 11.0%
Lipper Domestic Investment Grade Bond Funds(3) ........................... 2.1% 5.9%

----------------
(1) Based on monthly data provided by Lipper Inc. Distributions are assumed to
be reinvested at NAV in accordance with Lipper's practice, which differs
from the procedures used elsewhere in this report.
(2) Since inception on January 31, 2003.
(3) Includes all U.S. Government bond, mortgage bond and term trust and
investment grade bond funds in Lipper's closed-end fund database at each
point in time.

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In early April, we learned that the economy had finally begun to experience
job growth consistent with an expanding economy. As a result, investors stopped
wondering IF the Federal Reserve would raise interest rates, and instead simply
asked WHEN. From a low of 3.7% in mid-March, the yield on the benchmark ten-year
U.S. Treasury had risen a full percentage point by the end of May.

Of course, the Fund's hedging strategy is intended to protect the NAV
against substantial increases in interest rates. So, how did it work? As
expected, the hedge significantly cushioned the decline (without the hedge, the
total return for the quarter would have been -6.5% instead of -4.3%).

Recall that our hedge positions are analogous to an insurance policy. We
make regular "premium" payments to buy protection against rising interest rates.
In order to keep the cost of these payments

down, we typically structure the hedge with a "deductible," meaning some
portion of the loss must be absorbed by the Fund before we can collect on the
policy. (For those familiar with options, we are purchasing OUT-OF-THE-MONEY PUT
OPTIONS on the U.S. Treasury Bond future contract.) During the most recent
quarter, the Fund absorbed the entire amount of the deductible. If long-term
interest rates continue to climb, the current hedge position should neutralize
more of the decline in the value of preferred positions.

Also working against the Fund's NAV was a modest, adverse move in the
relationship between the preferred securities market and U.S. Treasuries. Simply
stated, the price of a typical preferred security fell by more than the price of
a corresponding Treasury bond during the quarter. Since our hedge positions are
tied to Treasuries, this meant the appreciation in the Fund's hedge position
didn't quite keep up with the decline in the value of the preferred securities.

The MARKET PRICE of FFC fell steadily throughout April. Needless to say,
this had a lot of people scratching their heads, including us. We address this
more completely in the Question and Answer section, but the drop can be
attributed primarily to two factors--a concern about rising interest rates and
technical factors in the market. For some owners of FFC as well as other
closed-end income funds, the attitude appeared to be "sell now, ask questions
later." Such across-the-board selling ignores the fundamental differences
between FFC and most other funds, especially its hedging strategy. As the chart
below demonstrates, the relationship of the market price of the Fund's shares to
the NAV has been a bit erratic over time. We'd like to see the price track the
NAV more closely, but obviously that has not been the case.

[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

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FLAHERTY & CRUMRINE/CLAYMORE PREFERRED SECURITIES INCOME FUND
PREMIUM/DISCOUNT OF MARKET PRICE TO NAV

Date Premium/Discount
5/28/04 0.0204
5/21/04 0.0038
5/14/04 0.0241
5/7/04 -0.0084
4/30/04 -0.0016
4/23/04 -0.0037
4/16/04 0.0385
4/9/04 0.0547
4/2/04 0.0756
3/26/04 0.084
3/19/04 0.0636
3/12/04 0.0541
3/5/04 0.0499
2/27/04 0.057
2/20/04 0.0611
2/13/04 0.0564
2/6/04 0.058
1/30/04 0.0463
1/23/04 0.0512
1/16/04 0.0514
1/9/04 0.053
1/2/04 0.0732
12/26/03 0.0678
12/19/03 0.0623
12/12/03 0.0712
12/5/03 0.0254
11/28/03 0.0357
11/21/03 0.01
11/14/03 0.0226
11/7/03 0.0431
10/31/03 0.0105
10/24/03 0.0121
10/17/03 0.0117
10/10/03 0.0047
10/3/03 -0.0109
9/26/03 -0.0228
9/19/03 -0.0207
9/12/03 -0.0079
9/5/03 -0.002
8/29/03 -0.0028
8/22/03 -0.004
8/15/03 -0.004
8/8/03 0.0073
8/1/03 -0.004
7/25/03 -0.002
7/18/03 0.0016
7/11/03 0.0012
7/4/03 0.0027
6/27/03 -0.0051
6/20/03 -0.0136
6/13/03 -0.0412
6/6/03 -0.0245
5/30/03 -0.0232
5/23/03 -0.0427
5/16/03 -0.0158
5/9/03 0.0101
5/2/03 0.0264
4/25/03 0.0285
4/18/03 0.0409
4/11/03 0.0517
4/4/03 0.0545
3/28/03 0.05
3/21/03 0.0523
3/14/03 0.0463
3/7/03 0.0417
2/28/03 0.0447
2/21/03 0.0512
2/14/03 0.0535
2/7/03 0.0516
1/31/03 0.0516

Of course, FFC is all about income. We believe that the Fund's income
should hold up well if the interest rate on long-term Treasury bonds declines.
In addition, if the long-term Treasury interest rate increases substantially,
the Fund's income should reflect a large part of the increase.

In recent weeks, a number of investors have visited the new web site
created by the Fund's adviser, Flaherty & Crumrine. We think you'll find
www.preferredstockguide.com contains useful information about most of the issues
that make up the preferred securities universe. We hope you will also continue
to visit the Fund's web site at www.fcclaymore.com.

Sincerely,

/S/ DONALD F. CRUMRINE /S/ ROBERT M. ETTINGER
Donald F. Crumrine Robert M. Ettinger
Chairman of the Board President

July 23, 2004
3

QUESTIONS & ANSWERS

WHAT CAUSED THE FUND'S MARKET PRICE TO DROP IN APRIL?

It appears as though the drop can be attributed mainly to two things --
concerns about rising interest rates and a large number of stop-loss sell orders
for the Fund's shares.

In early April, the Department of Labor announced the economy had added
over 300,000 new non-farm jobs during March. In the preceding months, job
creation had been persistently below expectations despite other indications that
economic activity was picking up. The widespread belief was the Federal Reserve
would keep short-term interest rates low until there was sufficient evidence
employment conditions were improving. With the job growth in March, policymakers
began talking about the need to remove current policy accommodation and move
rates gradually back to "normal". A sharp market selloff ensued.

With concerns about rising interest rates, shareholders of income oriented
closed-end funds apparently began selling indiscriminately. Of course, selling
FFC simply due to concerns about rising interest rates seems to ignore the
Fund's hedging strategy. Nonetheless, for the sellers, the decision was sell
first, ask questions later.

Stop-loss orders apparently also contributed to the price decline. It is
impossible to get information on stop-loss orders since the NYSE keeps the data
private. But anecdotal evidence indicates that small bits of selling pressure
triggered stop-loss orders, which in turn led to more selling and more
stop-losses being triggered.

HOW DID PREFERRED SECURITIES PERFORM DURING THE QUARTER?

Concerns about rising interest rates also resulted in weak performance for
most segments of the preferred market. As with closed-end funds, the prices of
NYSE listed hybrid preferred securities were especially hard hit as a result of
stop-loss orders being triggered. By the end of the quarter, preferred prices
had stabilized, but relative to other market sectors were still somewhat below
where they started.

WHAT IS THE IMPACT OF RISING INTEREST RATES ON THE FUND'S INCOME?

Rising rates can affect the income earned in the Fund in different ways.

On the plus side, if we make money on the hedge, we can purchase more
securities and produce more income. This should occur if long-term interest
rates rise. Increases in short-term rates, however, generally result in higher
costs, as the Fund will pay higher rates on its shares of Auction Market
Preferred Stock (AMPS).

Over time, changes in the slope of the yield curve (the difference between
long-term and short-term interest rates) will also impact the Fund's income.
When the differential is small (the yield curve is "flat"), the cost of leverage
is relatively high, but the Fund's hedging strategy should be less expensive. In
a steep yield curve environment (as we've seen over recent quarters), the
opposite occurs--the cost of leverage is low but the cost of the hedge goes up.

Over the long-run, changes in the cost of leverage and changes in the cost
of hedging should substantially offset one another. This is not by accident; the
Fund's leverage and hedging strategy have

been carefully structured to maintain this balance. In the near term, however,
sharp increases in short-term interest rates may adversely impact the Fund's
dividend rate.

IN THE STATEMENT OF ASSETS AND LIABILITIES IT APPEARS THAT DISTRIBUTIONS HAVE
EXCEEDED NET INVESTMENT INCOME. DOES THIS MEAN THE FUND IS EARNING LESS THAN THE
CURRENT DIVIDEND RATE?

The short answer is "No". For FFC, the negative number DOES NOT mean the
Fund's income is less than what it is paying in dividends.

The long answer requires an understanding of certain esoteric accounting
concepts, so for those gluttons for punishment we'll try to summarize the rules.

Most companies, including funds such as FFC, are required to maintain
financial records that conform to both accounting and tax rules. Logic would
suggest that the results should be similar, but, over short periods of time,
logic doesn't apply.

The financial statements included in shareholder reports reflect book
accounting rules only. However, when the Fund's Board of Directors determines
the dividend rate, it uses income and expense numbers determined under the rules
of tax accounting. While book and tax accounting differ in many respects, one
big difference is the adjustment for income under a book accounting concept that
goes by the quaint name of "Amortization and Accretion of Premiums and
Discounts." In the case of FFC, due to recent market conditions, the adjustment
has caused the difference between book income and distributions shown in the
financial statements to become negative.

In contrast, under tax accounting rules, the adjustments are only made when
a security is sold (or disposed of in some manner). This means that for FFC, the
income actually available to distribute to shareholders is roughly equal to the
current dividend rate (no surprise here, this is what the tax rules encourage!).

Obviously there are a lot of moving parts when trying to determine the
appropriate dividend rate. The Fund's management continually monitors all of
these factors and strives to recommend to the Board a sustainable long-term
rate. Of course there can be no guarantee that income will remain at its current
level indefinitely.

WILL THERE BE ANOTHER SPECIAL DISTRIBUTION IN DECEMBER?

Special year-end distributions typically occur for two reasons -- the Fund
has earned more investment income than it has paid out in dividends during the
year or has net realized capital gains.

With only half of the fiscal year under our belt, it is simply too early to
predict either number. The Fund's monthly dividend is carefully evaluated to
reflect investment income of the Fund.

The Fund's hedging strategy makes it impossible to predict what the
realized gain or loss situation will be at year-end. Recall that the gain or
loss on the hedge position is assumed to be realized at year-end, while
offsetting gains or losses on the investment portfolio are only realized when a
position is sold. If interest rates rise substantially and portfolio turnover is
low (as occurred last year), the result is net realized gains, even though the
overall portfolio value remains relatively steady.

HAVE THERE BEEN RECENT CHANGES IN THE WAY THE FUND IS REGULATED?

In a word, yes. Over the past several quarters a number of meaningful new
regulations have been imposed on the mutual fund industry. As we have discussed
in the past, while every fiduciary breach has occurred in open-end funds, most
of the new rules also apply to closed-end funds, such as FFC. Shareholders
should be aware that, as a result, the Fund's regulatory expenses continue to
increase.

The deadline for implementation of the most recently adopted rules is
October, 2004. The Fund will have a Chief Compliance Officer ("CCO") reporting
directly to the Board of Directors. The CCO will oversee development and
implementation of all aspects of regulatory compliance.

One significant change you will notice will be in the August quarterly
report. Beginning with this report, all of the Fund's quarterly reports will
contain a complete listing of the portfolio's investments. Other changes may not
be as apparent, but we'll do our best to keep you informed about the most
significant ones.

WHAT WAS THE RECENT CHANGE REGARDING INVESTMENTS IN FOREIGN SECURITIES?

The Board of Directors has recently amended the investment policies to
raise the authorized maximum percentage investment in DOLLAR-DENOMINATED
SECURITIES OF FOREIGN ISSUERS in the Fund to 30% of total assets. The change was
approved at the regular Board meeting held on April 23, 2004.

The percentage limitation does not include the portion of the Fund's assets
that can be invested in high quality money market obligations of foreign banks
or foreign branches of U.S. banks, which remains at 25% of total assets.

The change was undertaken in consideration of the significant cumulative
growth in the amount of U.S. dollar-denominated foreign preferred securities
outstanding. In the opinion of the Fund's Adviser, the income and return
available from foreign securities often exceeds that of comparably situated U.S.
issuers.

Investments by the Funds in such securities are subject to the same
restrictions on credit quality and diversification that apply to U.S. domestic
debt and preferred securities. The Fund's Adviser has stated that investing a
greater portion of the Fund's assets in non-U.S. securities is not expected to
adversely impact the effectiveness of the Fund's hedging strategies.

Investors are cautioned that, although U.S. dollar-denominated foreign
securities are not subject to currency risk, they may be subject to risks
different from U.S. investments. In particular, the prices of foreign securities
may be affected by political and economic conditions, less stringent regulation,
and higher volatility. In addition, many foreign securities may be less liquid
and more volatile than U.S. securities.

DOES THE FUND USE CREDIT DERIVATIVES?

Not at this time, but the Fund is currently considering the ability to
purchase protection against both an issuer's deteriorating credit quality and
adverse interest rate spread changes through the use of credit derivatives.

While we attempt to manage credit risk, primarily through diversification
and the sale of securities holdings before an issuer's credit quality
deteriorates significantly, the Fund is considering from time to time managing
the credit risk of its securities holdings by entering into credit derivative
contracts, such as credit default swaps. At the risk of oversimplification, as a
buyer of such credit protection the Fund would be entitled to receive the par
value of a preferred or debt security from a counterparty in the event of a
default by the issuer, offsetting some or all of the corresponding loss on the
underlying security. In return, the Fund would pay to the counterparty a
periodic stream of payments over the term of the contract, provided that no
event of default has occurred. Of course, if no default occurs, the Fund would
have spent the stream of payments and received no benefit from entering into the
contract.

To protect against an adverse interest rate spread change (such as an
adverse change in the yield spread between preferred securities and a benchmark
Treasury security), the Fund is also considering from time to time purchasing
options on market spread swaps. In the typical market spread swap, two
counterparties agree to exchange payments at future dates based on the yield
spread between a reference rate and a benchmark rate. Options on such swaps,
which are analogous to interest rate swaptions, would give the Fund as the buyer
the right, but not the obligation, to buy or sell the market spread between the
reference and benchmark rate at a fixed price from the seller. At each future
payment date, if the spread between the reference and benchmark rates were above
(or below depending on the contract) the contract spread, the Fund would receive
from the seller the difference between the current spread and the contracted
spread. Of course, if the current spread were below (or above) the contract
spread, the Fund would receive no benefit from entering into the contract for
that payment date.

Because the Fund has paid the option premium for both credit derivative
transactions being considered, the financial risk of the transactions is
initially limited to the amount of the premium paid and to the marked-to-market
value of the option at a future date. In addition to the option expiring
worthless, there are various other ways for financial risk to occur in such
derivatives. Even though major financial and broker/dealer organizations are the
usual counterparties, anyone entering into such agreements must carefully
consider the other party's credit worthiness and its ability to perform its
obligations. In addition, because credit derivatives are highly specialized
investments and are not traded on any securities exchange, market liquidity may
also be a risk at certain times. Further, such derivatives are not regulated by
either the Commodities Futures Trading Commission or the Securities and Exchange
Commission. Nonetheless, the liquidity and transparency of credit derivatives
has increased significantly over the past several years, and we believe that
having the ability to use them is in the best interest of shareholders.

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Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
FINANCIAL DATA
PER SHARE OF COMMON STOCK (UNAUDITED)
--------------------------------------------------------------------------

TOTAL DIVIDEND
DIVIDENDS NET ASSET NYSE REINVESTMENT
PAID VALUE CLOSING PRICE PRICE (1)
--------- --------- ------------- ------------

December 16, 2003 ............................................... $0.1725 $24.90 $26.42 $25.10
December 31, 2003 Extra ......................................... 0.9000 25.12 26.76 25.42
January 31, 2004 ................................................ 0.1725 25.49 26.67 25.49
February 29, 2004 ............................................... 0.1725 25.61 27.07 25.72
March 31, 2004 .................................................. 0.1725 25.69 27.66 26.28
April 30, 2004 .................................................. 0.1725 24.49 24.45 24.46
May 31, 2004 .................................................... 0.1725 24.00 24.49 24.00

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(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.

The accompanying notes are an integral part of the financial statements.

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Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
PORTFOLIO OF INVESTMENTS
MAY 31, 2004 (UNAUDITED)
--------------------------------------------------------------------------

VALUE
SHARES/$ PAR (NOTE 1)
------------ --------

PREFERRED SECURITIES -- 78.0%
ADJUSTABLE RATE PREFERRED SECURITIES -- 3.0%
BANKING-- 3.0%
J.P. Morgan Chase & Co.:
500,100 Adj. Rate Pfd. ................................. $ 25,267,553*
191,041 Series A, Adj. Rate Pfd. ....................... 17,623,532*
30 Roslyn Real Estate,
Series D, Adj. Rate Pfd.,
144A**** ...................................... 3,022,500
--------------
TOTAL BANKING ADJUSTABLE RATE
PREFERRED SECURITIES .......................... 45,913,585
--------------
UTILITIES -- 0.0%
5,000 Northern Indiana Public Service Company,
Series A, Adj. Rate Pf ........................ 261,250*
--------------
TOTAL ADJUSTABLE RATE
PREFERRED SECURITIES .......................... 46,174,835
--------------
FIXED RATE PREFERRED SECURITIES -- 75.0%
BANKING -- 31.0%
108,197 Abbey National Group,
7.375% Pfd. ................................... 2,803,384**
ABN AMRO North America, Inc.:
2,015 6.46% Pfd., 144A**** .......................... 2,089,756*
12,301 6.59% Pfd., 144A**** .......................... 12,985,243*
15,000 ABN AMRO Capital Fund Trust VII,
6.08% Pfd. .................................... 349,650
$17,500,000 Astoria Capital Trust I,
9.75% 11/01/29 Capital Security,
Series B ...................................... 21,565,600
Bank of America Corporation:
19,500 BAC Capital Trust III,
7.00% Pfd. .................................... 495,885
1,179,000 BAC Capital Trust IV,
5.875% Pfd. ................................... 27,170,055
600 BAC Capital Trust V,
7.00% Pfd. .................................... 15,270
$1,240,000 BankBoston Capital Trust I,
8.25% 12/15/26 Capital Security ............... 1,380,312
$16,155,000 BankBoston Capital Trust II,
7.75% 12/15/26 Capital Security,
Series B ...................................... 17,373,814

VALUE
SHARES/$ PAR (NOTE 1)
------------ --------

62,600 Fleet Capital Trust VII,
7.20% Pfd. .................................... $ 1,614,454
86,500 Fleet Capital Trust VIII,
7.20% Pfd. .................................... 2,227,375
478,100 Bank of New York Capital V,
5.95% Pfd. .................................... 10,998,690
Bank One Corporation:
7,000 Bank One Capital Trust I,
8.00% Pfd. .................................... 178,080
51,000 Bank One Capital Trust VI,
7.20% Pfd. .................................... 1,311,210
$ 5,600,000 First Chicago NBD Capital A,
7.95% 12/01/26 Capital Security,
144A**** ...................................... 6,080,928
99,535 Citigroup Capital IX,
6.00% Pfd. .................................... 2,333,598
105,000 Cobank, ACB,
7.00% Pfd., 144A**** .......................... 5,584,425*
27,900 Comerica (Imperial) Capital Trust I,
7.60% Pfd. .................................... 726,656
$11,000,000 Cullen/Frost Capital Trust I,
8.42% 02/01/27 Capital Security,
Series A ...................................... 12,253,285
Deutsche Bank,
$ 500,000 BT Capital Trust B,
7.90% 01/15/27 Capital Security,
Series B1 ..................................... 537,265
$ 3,000,000 First Midwest Capital Trust I,
6.95% 12/01/33
Capital Security, 144A**** .................... 3,028,245
$ 3,500,000 First Tennessee Capital Trust II,
6.30% 04/15/34 Capital Security
Series B ...................................... 3,285,660
2 FT Real Estate Securities Company,
9.50% Pfd., 144A**** .......................... 2,725,106
$33,550,000 GreenPoint Capital Trust I,
9.10% 06/01/27 Capital Security ............... 38,277,363
$23,725,000 HBOS Capital Funding LP,
6.85% 03/23/09 ................................ 23,576,007
HSBC USA, Inc.:
$15,600,000 Republic New York Capital I,
7.750% 11/15/26 Capital Security .............. 16,683,186

The accompanying notes are an integral part of the financial statements.

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Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
SUMMARY OF INVESTMENTS (CONTINUED)
MAY 31, 2004 (UNAUDITED)
--------------------------------------------------------------------------------

VALUE
SHARES/$ PAR (NOTE 1)
------------ --------

PREFERRED SECURITIES -- (CONTINUED)
FIXED RATE PREFERRED SECURITIES -- (CONTINUED)
BANKING (CONTINUED)
$17,127,000 Republic New York Capital II,
7.53% 12/04/26 Capital Security,
STOPS ......................................... $ 18,198,294
6,300 Household Capital Trust VI,
8.25% Pfd. .................................... 167,139
J.P. Morgan Chase & Co.:
401,250 5.875% Pfd. ................................... 9,134,456
15,000 6.625% Pfd., Series H ......................... 801,675*
$ 5,000,000 Chase Capital I,
7.67% 12/01/26 Capital Security ............... 5,303,200
62,900 Chase Capital VII,
7.00% Pfd., Series G .......................... 1,561,493
$12,497,000 J.P. Morgan Capital Trust I,
7.54% 01/15/27 Capital Security ............... 13,219,389
$11,908,000 J.P. Morgan Capital Trust II,
7.95% 02/27/27 Capital Security ............... 13,002,762
KeyCorp:
23,800 Keycorp Capital V,
5.875% Pfd., Series A ......................... 532,763
$12,595,000 KeyCorp Institutional Capital A,
7.826% 12/01/26 Capital Security,
Series A ...................................... 13,547,812
$ 4,000,000 Lloyds TSB Bank PLC, Tier I,
6.90% 10/22/49 ................................ 4,036,140
Marshall & Ilsley Corporation:
$25,280,000 Marshall & Ilsley Capital Trust A,
7.65% 12/01/26 Capital Security ............... 27,052,886
20 Marshall & Ilsley Investment II,
8.875% Pfd., REIT, 144A**** ................... 2,131,835
$ 1,000,000 North Fork Capital Trust I,
8.70% 12/15/26 Capital Security ............... 1,116,700
10 Roslyn Real Estate,
8.95% Pfd., Pvt., REIT,
Series C, 144A**** ............................ 1,103,562
Royal Bank of Scotland Group PLC:
739,000 5.75% Pfd. .................................... 16,306,035**
$13,750,000 RBS Capital Trust B,
6.80% 12/29/49 ................................ 13,624,669**

VALUE
SHARES/$ PAR (NOTE 1)
------------ --------

Union Planters Corporation:
$14,167,000 Union Planters Capital Trust,
8.20% 12/15/26 Capital Security ............... $ 15,523,986
60 Union Planters Preferred Funding,
7.75% Pfd., Series 144A**** ................... 6,560,944
23,500 VNB Capital Trust I,
7.75% Pfd. .................................... 606,183
Wachovia Corporation,
2,217,200 Wachovia Preferred Funding,
7.25% Pfd., Series A .......................... 59,332,272
Washington Mutual, Inc.:
$20,750,000 8.36% 12/01/26 Capital Security,
144A**** ...................................... 22,855,814
$ 500,000 Great Western Finance Trust II,
8.206% 02/01/27 Capital Security,
Series A ...................................... 545,340
$ 8,000,000 Webster Capital Trust II,
10.00% 04/01/27 Capital Security .............. 9,357,640
Wells Fargo & Co.:
365,000 Wells Fargo Capital Trust VII,
5.85% Pfd. .................................... 8,265,425
45,000 Wells Fargo Capital Trust IX,
5.625% Pfd. ................................... 985,275
--------------
TOTAL BANKING FIXED
RATE PREFERRED SECURITIES ..................... 482,524,191
--------------
FINANCIAL SERVICES -- 12.9%
Bear Stearns Companies, Inc.:
58,500 5.49% Pfd., Series G .......................... 2,722,882*
228,300 5.72% Pfd., Series F .......................... 10,854,523*
CIT Group, Inc.,
30,000 Corporate-Backed Trust Certificates,
7.75% Pfd., Series CIT ........................ 761,700
Countrywide Financial Corporation:
$15,459,000 Countrywide Capital I,
8.00% 12/15/26 Capital Security ............... 16,362,501
1,030,200 Countrywide Capital IV,
6.75% Pfd. .................................... 25,054,464
Fannie Mae:
71,100 4.75% Pfd. .................................... 2,958,115*
680,420 5.10% Pfd., Series E .......................... 29,656,106*
108,900 5.125% Pfd. ................................... 4,850,406*

The accompanying notes are an integral part of the financial statements.

--------------------------------------------------------------------------------
Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
PORTFOLIO OF INVESTMENTS (CONTINUED)
MAY 31, 2004 (UNAUDITED)
--------------------------------------------------------------------------

VALUE
SHARES/$ PAR (NOTE 1)
------------ --------

PREFERRED SECURITIES -- (CONTINUED)
FIXED RATE PREFERRED SECURITIES -- (CONTINUED)
FINANCIAL SERVICES (CONTINUED)
68,600 Freddie Mac,
5.79% Pfd. .................................... $ 3,451,952*
Lehman Brothers Holdings, Inc.:
25,000 5.94% Pfd., Series C .......................... 1,220,500*
1,384,750 6.50% Pfd., Series F .......................... 35,788,864*
1,065,000 Lehman Capital Trust III,
6.375% Pfd. Series K .......................... 26,183,025
Merrill Lynch & Company, Inc.,
18,975 Merrill Lynch Capital Trust V,
7.28% Pfd., Series F .......................... 493,730
Morgan Stanley:
25,800 Morgan Stanley Capital Trust II,
7.25% Pfd. .................................... 660,738
1,074,900 Morgan Stanley Capital Trust III,
6.25% Pfd. .................................... 25,351,517
9,000 Morgan Stanley Capital Trust V,
5.75% Pfd. .................................... 199,305
202,000 Morgan Stanley Capital Trust IV,
6.25% Pfd. .................................... 4,810,630
160,000 SLM Corporation,
6.97% Pfd. Series A ........................... 8,513,600*
--------------
TOTAL FINANCIAL SERVICES FIXED
RATE PREFERRED SECURITIES ..................... 199,894,558
--------------
INSURANCE -- 14.3%
ACE Ltd.:
1,719,980 7.80% Pfd., Series C .......................... 44,710,880**
73,600 Capital Re LLC,
7.65% MIPS .................................... 1,844,416
AON Corporation:
$13,626,000 AON Capital Trust A,
8.205% 01/01/27 Capital Security .............. 14,883,135
48,100 Corporate-Backed Trust Certificates,
8.00% Pfd. Series AON ......................... 1,211,398
106,000 Corts-AON Capital,
8.205% Pfd. ................................... 2,695,050
94,900 Saturns-AON 2003-3,
8.00% Pfd. Series AON ......................... 2,432,762

VALUE
SHARES/$ PAR (NOTE 1)
------------ --------

126,300 Everest Re Cap Trust II,
6.20% Pfd. .................................... $ 2,807,649
ING Groep NV:
36,000 7.05% Pfd. .................................... 905,040
344,000 7.20% Pfd. .................................... 8,775,440**
270,989 PartnerRe Ltd.,
6.75% Pfd., Series C .......................... 6,434,634**
332,235 Renaissancere Holding,
7.30% Pfd., Series B .......................... 8,400,562
SAFECO Corporation:
$20,764,000 SAFECO Capital Trust I,
8.072% 07/15/37 Capital Security .............. 22,683,217
56,000 Saturns-SAFC 2001-7,
8.25% Pfd., Series SAFC ....................... 1,472,800
The St. Paul Companies, Inc.:
$ 2,200,000 MMI Capital Trust I,
7.625% 12/15/27 Capital Security,
Series B ...................................... 2,289,870
22,390 St. Paul Capital Trust I,
7.60% Pfd. .................................... 572,176
$ 8,075,000 USF&G Capital,
8.312% 07/01/46 Capital Security,
144A**** ...................................... 9,168,274
$16,750,000 USF&G Capital I,
8.50% 12/15/45 Capital Security,
144A**** ...................................... 19,429,246
UnumProvident Corporation:
37,000 Corts-UnumProvident Corporation,
8.50% Pfd. .................................... 882,265
$ 8,000,000 Provident Financing Trust I,
7.405% 03/15/38 Capital Security .............. 6,513,680
XL Capital Ltd.:
15,000 7.625% Pfd., Series B ......................... 389,175**
$10,000,000 Mangrove Bay Passthru Trust,
6.102% 07/11/33 Capital Security,
144A**** ...................................... 9,808,050
Zurich RegCaps Fund Trust I:
21,500 6.01% Pfd., 144A**** .......................... 21,967,840*
31,900 6.58% Pfd., 144A**** .......................... 32,271,476*
--------------
TOTAL INSURANCE FIXED RATE
PREFERRED SECURITIES ........................... 222,549,035
--------------

The accompanying notes are an integral part of the financial statements.

VALUE
SHARES/$ PAR (NOTE 1)
------------ --------

PREFERRED SECURITIES -- (CONTINUED)
FIXED RATE PREFERRED SECURITIES -- (CONTINUED)
UTILITIES -- 13.0%
38,200 AEP Texas Central Company,
CPL Capital I,
8.00% Pfd., Series A, QUIPS ................... $ 969,516
AGL Resources, Inc.,
$ 3,750,000 AGL Capital Trust,
8.17% 06/01/37 Capital Security .............. 4,142,250
275,000 Alabama Power Company,
5.30% Pfd. .................................... 6,528,500*
6,146 Appalachian Power Company,
5.92% Sinking Fund Pfd. ....................... 618,226*
CenterPoint Energy, Inc.,
$17,262,000 Houston Light & Power, Capital Trust II,
8.257% 02/01/37 Capital Security,
Series B ...................................... 17,175,690
35,000 Central Maine Power,
5.25$ Pfd., Pvt. .............................. 3,039,400*
Commonwealth Edison Company:
$ 5,700,000 COMED Financing II,
8.50% 01/15/27 Capital Security,
Series B ...................................... 6,365,532
$20,395,000 COMED Financing III,
6.35% 03/15/33 Capital Security ............... 19,549,321
Constellation Energy Group:
10,000 Baltimore Gas & Electric Company,
6.70% Pfd., Series 1993 ....................... 1,047,900*
50,000 Baltimore Gas & Electricity,
7.125% Pfd., Series 1993 ...................... 5,255,500*
23,883 Delmarva Power & Light,
5.00% Pfd. .................................... 2,139,917*
50,000 Dominion Resources, Inc.,
Dominion CNG Cap Trust I,
7.80% Pfd. .................................... 1,291,750
Duke Energy Corporation:
85,385 4.50% Pfd., Pvt., Series C .................... 6,728,765*
59,662 7.04% Pfd., Series Y .......................... 6,168,753*
51,331 7.85% Pfd., Series S .......................... 5,329,954*
7,800 Duke Energy Capital Trust II,
7.20% TOPrS ................................... 198,705
700,000 Duke Capital Finance Trust III,
8.375% Pfd. ................................... 17,762,500

VALUE
SHARES/$ PAR (NOTE 1)
------------ --------

96,450 Duquesne Light Company,
6.50% Pfd. .................................... $ 4,779,098*
67,700 Energy East Capital Trust I,
8.25% TOPrS ................................... 1,756,815
Entergy Arkansas, Inc.:
10,240 4.56% Pfd., Series 1965 ....................... 751,565*
5,692 7.40% Pfd. .................................... 592,850*
11,675 Entergy Louisiana, Inc.,
8.00% Pfd., Series 92 ......................... 294,735*
105,000 Entergy Louisiana Capital I,
9.00% Pfd., Series A .......................... 2,690,100
Florida Power Company:
49,750 4.40% Pfd. .................................... 3,825,029*
37,088 4.58% Pfd. .................................... 2,981,133*
21,585 4.60% Pfd. .................................... 1,734,894*
60,000 FPC Capital I,
7.10% Pfd., Series A .......................... 1,474,500
12,442 Great Plains Energy, Inc.,
4.20% Pfd. .................................... 846,118*
5,000 Gulf Power Capital Trust III,
7.375% Pfd. ................................... 130,000
Indiana Michigan Power Company:
4,342 5.90% Sinking Fund Pfd. ....................... 439,215*
25,999 6.875% Sinking Fund Pfd. ...................... 2,636,169*
119,805 Indianapolis Power & Light Company,
5.65% Pfd. .................................... 10,312,814*
Interstate Power & Light Company:
110,000 7.10% Pfd., Series C .......................... 2,861,650*
11,000 8.375% Pfd., Series B ......................... 337,590*
15,017 Kentucky Utilities Company,
Kentucky Energy Corp.,
4.75% Pfd. .................................... 1,205,039*
32,300 The Laclede Group, Inc.,
Laclede Capital Trust I,
7.70% Pfd. .................................... 823,166
120,000 Mississippi Power Co,
5.25% Pfd. .................................... 2,800,800*
3,800 OGE Energy Capital Trust I,
8.375% Pfd. .................................. 97,451
4,000 PacifiCorp,
7.48% Sinking Fund Pfd. ....................... 415,280*

The accompanying notes are an integral part of the financial statements.

--------------------------------------------------------------------------------
Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
PORTFOLIO OF INVESTMENTS (CONTINUED)
MAY 31, 2004 (UNAUDITED)
--------------------------------------------------------------------------

VALUE
SHARES/$ PAR (NOTE 1)
------------ --------

PREFERRED SECURITIES -- (CONTINUED)
FIXED RATE PREFERRED SECURITIES -- (CONTINUED)
UTILITIES (CONTINUED)
Pacific Enterprises:
4,550 $4.40 Pfd. .................................... $ 343,229*
23,085 $4.75 Pfd. .................................... 1,879,927*
4,510 $4.50 Pfd. .................................... 347,947*
PECO Energy Company:
$ 2,337,000 PECO Energy Capital Trust III,
7.38% 04/6/28, Capital Security,
Series D ...................................... 2,551,198
$17,000,000 PECO Energy Capital Trust IV,
5.75% 06/15/33 Capital Security ............... 15,122,605
14,845 Portland General Electric,
7.75%, Sinking Fund Pfd. ...................... 1,529,035*
65,488 Potomac Electric Power Company,
$3.40 Sinking Fund Pfd. ....................... 3,280,294*
Public Service Enterprise Group, Inc.:
215,750 PSEG Funding Trust II,
8.75% Pfd. .................................... 5,877,030
19,646 Public Service Electric & Gas,
4.30% Pfd., Series C .......................... 1,427,773*
$ 6,000,000 Puget Sound Energy, Inc.,
Puget Capital Trust,
8.231% 06/01/27 Capital Security,
Series B ...................................... 6,435,840
160,000 Southern Union Company,
7.55% Pfd. .................................... 4,220,800*
34,252 TXU U.S. Holdings Company,
$4.00 Pfd., Series TES ........................ 2,284,437*
$ 2,500,000 Union Electric Company,
7.69% 12/15/36 Capital Security,
Series A, 144A**** ............................ 2,694,575
Virginia Electric & Power Company:
66,000 Virginia Power Capital Trust,
7.375% 07/30/42 ............................... 1,685,970
14,985 $4.12 Pfd. .................................... 1,122,976*
21,684 $4.80 Pfd. .................................... 1,893,122*
Xcel Energy, Inc.:
7,110 $4.10 Pfd., Series C .......................... 488,599*
10,210 $4.11 Pfd., Series D .......................... 703,367*
--------------
TOTAL UTILITIES FIXED RATE
PREFERRED SECURITIES ............................ 201,986,914
--------------

VALUE
SHARES/$ PAR (NOTE 1)
------------ --------

OIL AND GAS -- 1.8%
12,700 EOG Resources, Inc.,
7.195% Pfd., Series B ......................... $ 13,667,486*
$13,315,000 Phillips 66 Capital Trust II,
8.00% 01/15/37 Capital Security ............... 14,718,068
--------------
TOTAL OIL AND GAS FIXED RATE
PREFERRED SECURITIES .......................... 28,385,554
--------------
MISCELLANEOUS INDUSTRIES -- 2.0%
AMB Property Corporation:
57,905 6.50% Pfd., REIT, Series L .................... 1,307,205
20,000 6.75% Pfd., REIT, Series M .................... 461,900
160,000 BRE Properties, Inc.,
6.75% Pfd., REIT, Series C .................... 3,768,000
Delphi Corporation:
21,500 Delphi Trust I,
8.25% Pfd. .................................... 544,380
$ 5,000,000 Delphi Trust II,
6.197% 11/15/33 Capital Security .............. 5,022,700
19,100 Equity Office Property Trust,
7.75% Pfd., REIT, Series G .................... 492,493
51,000 Equity Residential Properties,
8.29% Pfd., REIT, Series K .................... 2,994,210
Health Care Property Investment:
25,000 7.25% Pfd., REIT, Series E .................... 614,000
160,000 7.10% Pfd., REIT, Series F .................... 3,847,200
100,000 Ocean Spray Cranberries, Inc.,
6.25% Pfd., 144A**** .......................... 7,725,500*
133,000 PS Business Parks, Inc.,
6.875% Pfd., REIT, Series I ................... 2,992,500
Public Storage, Inc.:
14,700 7.625% Pfd., REIT, Series U ................... 375,806
18,000 8.00% Pfd., REIT, Series R .................... 467,460
--------------
TOTAL MISCELLANEOUS
INDUSTRIES FIXED RATE
PREFERRED SECURITIES .......................... 30,613,354
--------------
TOTAL FIXED RATE
PREFERRED SECURITIES ............................ 1,165,953,606
--------------
TOTAL PREFERRED SECURITIES
(Cost $1,217,415,366) ......................... 1,212,128,441
--------------

The accompanying notes are an integral part of the financial statements.

VALUE
SHARES/$ PAR (NOTE 1)
------------ --------

CORPORATE DEBT SECURITIES -- 14.2%
FINANCIAL SERVICES -- 3.2%
47,000 Corp-Backed Trust Certificates,
5.80% Pfd., Series Goldman Sachs .............. $ 1,088,520
683,052 General Electric Capital Corporation,
5.875%. ....................................... 16,171,256
$20,000,000 General Motors
Acceptance Corporation,
8.00% 11/01/31, Senior Bonds .................. 20,231,800
$ 9,740,000 Lehman Brothers,
Guaranteed Note
5.494% 10/15/15, 144A**** ..................... 9,740,000
$ 2,200,000 Morgan Stanley Finance,
8.03% 02/28/17, Capital Units ................. 2,415,292
--------------
TOTAL FINANCIAL SERVICES
CORPORATE DEBT SECURITIES ..................... 49,646,868
--------------
INSURANCE -- 0.5%
239,000 Delphi Financial,
8.00% 05/15/33, Senior Notes .................. 6,029,970
$ 1,400,000 Oneamerica Financial Partners,
7.00% 10/15/33, 144A**** ...................... 1,376,704
$ 1,000,000 UnumProvident Corporation,
7.25% 03/15/28, Senior Notes .................. 908,450
--------------
TOTAL INSURANCE CORPORATE
DEBT SECURITIES ............................... 8,315,124
--------------
OIL & GAS -- 0.4%
238,261 Nexen, Inc.,
7.35% Subordinated Notes ...................... 6,056,595
--------------
UTILITIES -- 9.7%
$32,000,000 AEP Texas Central Company,
6.65% 02/15/33, Series E ...................... 32,386,560
$ 9,000,000 CenterPoint Energy
Houston Electric LLC,
6.95% 03/15/33, Series K2 ..................... 9,590,265
$10,000,000 Constellation Energy Group,
7.60% 04/1/32, Senior Notes ................... 11,093,150
$ 1,000,000 DTE Energy Company,
6.375% 04/15/33, Senior Notes ................. 932,765

VALUE
SHARES/$ PAR (NOTE 1)
------------ --------

Duke Capital Corporation:
$11,179,000 6.75% 02/15/32, Senior Notes .................. $ 10,844,189
$10,000,000 8.00% 10/1/19, Senior Notes ................... 11,257,900
$ 5,000,000 Entergy Gulf States, Inc.,
6.20% 07/01/33, 1st Mortgage .................. 4,636,425
Georgia Power Company:
567,015 5.90% 04/15/33, Senior Notes .................. 13,078,201
125,000 6.00% 10/15/33, Senior Notes .................. 2,950,000
$ 3,000,000 Indianapolis Power & Light Company,
6.60% 01/01/34, 1st Mortgage,
144A**** ...................................... 2,967,075
40,000 Northern States Power Company,
8.00% PINES ................................... 1,064,200
Public Service Enterprise Group, Inc.,
$18,268,000 PSEG Power LLC,
8.625% 04/15/31 ............................... 22,158,810
TXU U.S. Holdings Company:
$10,250,000 7.00% 03/15/13 ................................ 11,180,495
$10,000,000 Oncor Electric Delivery Company,
7.25% 01/15/33, Senior Notes .................. 11,086,800
$ 6,000,000 Wisconsin Electric Power Company,
6.875% 12/01/95 ............................... 6,216,390
--------------
TOTAL UTILITIES CORPORATE
DEBT SECURITIES ............................... 151,443,225
--------------
MISCELLANEOUS -- 0.4%
$ 390,000 BellSouth Telecommunication,
7.00% 12/01/95 ................................ 394,212
$ 5,000,000 Ford Motor Company,
7.45% 07/16/31 ............................... 4,744,025
$ 30,000 Maytag Corporation,
7.875% 08/01/31 ............................... 771,900
--------------
TOTAL MISCELLANEOUS CORPORATE
DEBT SECURITIES ............................... 5,910,137
--------------
TOTAL CORPORATE DEBT SECURITIES
(Cost $218,731,026) ........................... 221,371,949
--------------
COMMON STOCK AND CONVERTIBLE SECURITIES -- 4.0%
INSURANCE -- 0.3%
20,000 Hartford Financial Services,
7.00% Pfd. Mandatory
Convertible 08/16/06 .......................... 1,295,700

The accompanying notes are an integral part of the financial statements.

--------------------------------------------------------------------------------
Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
PORTFOLIO OF INVESTMENTS (CONTINUED)
MAY 31, 2004 (UNAUDITED)
--------------------------------------------------------------------------

VALUE
SHARES/$ PAR (NOTE 1)
------------ --------

COMMON STOCK AND CONVERTIBLE SECURITIES -- (CONTINUED)
INSURANCE (CONTINUED)
45,000 UnumProvident Corporation,
8.25% Pfd. Mandatory Convertible
05/15/06 ...................................... $ 1,382,850
54,000 XL Capital Ltd.,
6.50% Pfd. Mandatory Convertible
05/15/07 ...................................... 1,350,270
--------------
TOTAL INSURANCE COMMON STOCK
AND CONVERTIBLE SECURITIES .................... 4,028,820
--------------
MISCELLANEOUS -- 0.2%
65,000 Alltel Corporation,
7.75% Pfd. Mandatory Convertible
05/17/05 ...................................... 3,231,475
--------------
UTILITIES -- 3.5%
170,700 Ameren Corporation,
9.75% Pfd. Mandatory Convertible
05/15/05 ...................................... 4,548,301
125,000 American Electric Power,
9.25% Pfd. Mandatory Convertible
08/16/05 ...................................... 5,523,125
300,000 Duke Energy Corporation ......................... 6,001,500*
324,300 FPL Group, Inc.,
8.50% Pfd. Mandatory Convertible
02/16/05 ...................................... 17,740,832
100,000 Keyspan Corporation,
8.75% Pfd. Mandatory Convertible
05/16/05 ...................................... 5,050,500
365,000 TXU Corporation,
8.75% Pfd. Mandatory Convertible
11/16/05 ...................................... 16,224,250
--------------
TOTAL UTILITIES COMMON STOCK
AND CONVERTIBLE SECURITIES .................... 55,088,508
--------------
TOTAL COMMON STOCK
AND CONVERTIBLE SECURITIES
(Cost $53,073,434) ............................ 62,348,803
--------------
OPTION CONTRACTS-- 2.3% (Cost $47,646,119)
10,868 Put Options on U.S. Treasury Bonds,
September Futures,
Expiring 08/27/04 ............................. 35,755,313+
--------------

VALUE
SHARES/$ PAR (NOTE 1)
------------ --------

MONEY MARKET FUND -- 0.3% (Cost $4,647,958)
4,647,958 BlackRock Provident Institutional
TempFund, 0.91% ............................... $ 4,647,958
--------------
TOTAL INVESTMENTS
(Cost $1,541,513,903***) ................... 98.8% 1,536,252,464
OTHER ASSETS AND LIABILITIES (Net) ......... 1.2% 17,982,489
----- --------------
TOTAL NET ASSETS AVAILABLE TO COMMON
STOCK AND PREFERRED STOCK .................. 100.0%++ $1,554,234,953
----- --------------
AUCTION MARKET PREFERRED STOCK (AMPS)
REDEMPTION VALUE (542,000,000)
ACCUMULATED UNDECLARED DISTRIBUTIONS
TO AMPS (149,600)
--------------
TOTAL NET ASSETS AVAILABLE TO COMMON STOCK $1,012,085,353
==============

--------------
* 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 by resold in transactions exempt from
registration to qualified institutional buyers.
+ 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 (Note 7):
MIPS -- Monthly Income Preferred Securities
PINES -- Public Income Notes
QUIPS -- Quarterly Income Preferred Securities
STOPS -- Semi-Annual Trust Originated Pass Through Securities
TOPRS -- Trust Originated Preferred Securities
PFD. -- Preferred Securities
PVT. -- Private Placement Securities

Capital Securities are treated as debt instruments for financial statement
purposes and the amounts shown in the Shares/$ Par column are dollar amounts of
par value.

The accompanying notes are an integral part of the financial statements.

--------------------------------------------------------------------------------
Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 2004 (UNAUDITED)
--------------------------------------------------------------------------

ASSETS:
Investments, at value (Cost $1,541,513,903)
(See accompanying Portfolio of Investments) ............ $1,536,252,464
Dividends and interest receivable ......................... 20,853,125
Prepaid expenses .......................................... 239,404
--------------
Total Assets ...................................... 1,557,344,993

LIABILITIES:
Payable for securities purchased .......................... $1,060,000
Dividends payable to Common Shareholders .................. 959,644
Investment advisory fee payable ........................... 557,590
Administration, Transfer Agent and Custodian fees and
expenses payable ........................................ 157,165
Servicing agent fees payable .............................. 162,512
Professional fees payable ................................. 55,588
Directors' fees payable ................................... 5,783
Accrued expenses and other payables ....................... 151,758
Accumulated undeclared distributions to Auction Market
Preferred Stock Shareholders ............................ 149,600
----------
Total Liabilities ................................. 3,259,640
--------------

AUCTION MARKET PREFERRED STOCK (21,680 SHARES
OUTSTANDING) REDEMPTION VALUE ............................. 542,000,000
--------------

NET ASSETS AVAILABLE TO COMMON STOCK ......................... $1,012,085,353
==============

NET ASSETS AVAILABLE TO COMMON STOCK consist of:
Distributions in excess of net investment income .......... $ (2,366,132)
Accumulated net realized gain on investments sold ......... 18,670,912
Unrealized depreciation of investments .................... (5,261,439)
Par value of Common Stock ................................. 421,717
Paid-in capital in excess of par value of Common Stock .... 1,000,620,295
--------------
Total Net Assets Available to Common Stock ........ $1,012,085,353
==============

NET ASSET VALUE PER SHARE OF COMMON STOCK:
Common Stock (42,171,678 shares outstanding) ............ $ 24.00
==============

The accompanying notes are an integral part of the financial statements.

--------------------------------------------------------------------------------
Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MAY 31, 2004 (UNAUDITED)
--------------------------------------------------------------------------

INVESTMENT INCOME:
Dividends ............................................................. $ 27,707,380
Interest .............................................................. 21,913,429
------------
Total Investment Income .......................................... 49,620,809

EXPENSES:
Investment advisory fee ............................................... $3,394,419
Servicing agent fee ................................................... 997,779
Administrator's fee ................................................... 294,779
Auction Market Preferred Stock broker commissions and auction
agent fees ......................................................... 702,380
Professional fees ..................................................... 91,899
Insurance expense ..................................................... 132,541
Shareholder transfer and payment agent fees and expenses .............. 105,701
Directors' fees and expenses .......................................... 37,449
Custodian fees and expenses ........................................... 59,989
Other ................................................................. 240,975
----------
Total Expenses ................................................... 6,057,911
------------

NET INVESTMENT INCOME ...................................................... 43,562,898
------------

REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS
Net realized gain on investments sold during the period ............... 20,810,239
Change in unrealized depreciation of investments during the period .... (54,111,455)
------------

NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS ............................ (33,301,216)
------------

DISTRIBUTIONS TO AUCTION MARKET PREFERRED STOCK
SHAREHOLDERS:
From net investment income (including changes in accumulated
undeclared distributions) .......................................... (3,128,194)
------------

NET INCREASE IN NET ASSETS TO COMMON STOCK
RESULTING FROM OPERATIONS ............................................... $ 7,133,488
============

The accompanying notes are an integral part of the financial statements.

--------------------------------------------------------------------------------
Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------

FOR THE PERIOD FROM
SIX MONTHS ENDED JANUARY 31, 2003*
MAY 31, 2004 THROUGH
(UNAUDITED) NOVEMBER 30, 2003
-------------- -----------------

OPERATIONS:
Net investment income .................................................. $ 43,562,898 $ 60,137,839
Net realized gain on investments sold during the period ................ 20,810,239 35,783,891
Change in net unrealized (depreciation)/appreciation of
investments sold during the period .................................. (54,111,455) 48,850,016
Distributions to AMPS** Shareholders from net investment income,
including changes in accumulated undeclared distributions ........... (3,128,194) (2,789,342)
Distributions to AMPS** Shareholders from net realized
capital gains ....................................................... -- (1,109,654)
-------------- --------------
Net increase in net assets resulting from operations ................... 7,133,488 140,872,750

DISTRIBUTIONS:
Dividends paid from net investment income to Common
Stock Shareholders .................................................. (44,657,984) (56,535,953)
Distributions paid from net realized capital gains to Common
Stock Shareholders .................................................. (35,768,960) --
-------------- --------------
Total Distributions to Common Stock Shareholders ....................... (80,426,944) (56,535,953)

FUND SHARE TRANSACTIONS:
Increase from Common Stock transactions ................................ 26,926,507 981,761,703
Decrease due to Cost of Common Stock offering .......................... -- (1,851,215)
Decrease due to Cost of AMPS** Issuance ................................ -- (5,895,000)
-------------- --------------
Net increase in net assets available to Common Stock
resulting from Fund share transactions .............................. 26,926,507 974,015,488

NET (DECREASE)/INCREASE IN NET ASSETS TO COMMON STOCK
FOR THE PERIOD .......................................................... (46,366,949) 1,058,352,285

NET ASSETS AVAILABLE TO COMMON STOCK:
Beginning of period .................................................... 1,058,452,302 100,017
-------------- --------------
End of period (including distributions in excess of net investment
income of ($2,366,132) and undistributed net investment income
of $747,494, respectively) .......................................... $1,012,085,353 $1,058,452,302
============== ==============

--------------------
* Commencement of operations.
** Auction Market Preferred Stock.

The accompanying notes are an integral part of the financial statements.

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Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
FINANCIAL HIGHLIGHTS
FOR A COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
--------------------------------------------------------------------------

Contained below is per share operating performance data, total investment
returns, ratios to average net assets and other supplemental data. This
information has been derived from information provided in the financial
statements and market price data for the Fund's shares.

SIX MONTHS FOR THE PERIOD
ENDED FROM JANUARY 31,
MAY 31, 2004 2003(1) THROUGH
(UNAUDITED) NOVEMBER 30, 2003
------------ -----------------

PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ............................................ $ 25.74 $ 23.82(2)
---------- ----------
INVESTMENT OPERATIONS:
Net investment income ........................................................... 1.03 1.46
Net realized and unrealized gain on investments ................................. (0.79) 2.07

DISTRIBUTIONS TO AMPS* SHAREHOLDERS:
From net investment income ...................................................... (0.07) (0.06)
From net realized capital gains ................................................. -- (0.03)
---------- ----------
Total from investment operations ................................................ 0.17 3.44
---------- ----------
COST OF ISSUANCE OF AMPS* ....................................................... -- (0.14)

DISTRIBUTIONS TO COMMON SHAREHOLDERS:
From net investment income ...................................................... (1.06) (1.38)
From net realized capital gains ................................................. (0.85) --
---------- ----------
Total distributions to Common Shareholders ...................................... (1.91) (1.38)
---------- ----------
Net asset value, end of period .................................................. $ 24.00 $ 25.74
========== ==========
Market value, end of period ..................................................... $ 24.49 $ 26.66
========== ==========
Total investment return based on net asset value**** ............................ 0.58%*** 14.15%***(3)
========== ==========
Total investment return based on market value **** .............................. (0.91)%*** 12.65%***(3)
========== ==========
RATIOS TO AVERAGE NET ASSETS AVAILABLE
TO COMMON STOCK SHAREHOLDERS:
Total net assets, end of period (in 000's) ................................ $1,012,085 $1,058,452
Operating expenses ......................................................... 1.15%** 1.01%**
Net Investment Income + .................................................... 7.66%** 6.65%**

------------------------------------------
SUPPLEMENTAL DATA:++
Portfolio turnover rate .................................................... 12%*** 101%***
Total net assets available to Common and Preferred Stock,
end of period (in 000's) ................................................ $1,554,085 $1,600,452
Ratio of operating expenses to total average net assets available to
Common and Preferred Stock .............................................. 0.76%** 0.72%**

* Auction Market Preferred Stock.
** Annualized.
*** Not annualized.
**** Assumes reinvestment of distributions at the price obtained by the Fund's
Dividend Reinvestment and Cash Purchase Plan.
+ The net investment income ratios reflect income net of operating expenses
and payments to AMPS* Shareholders.
++ Information presented under heading Supplemental Data includes AMPS*.
(1) Commencement of operations.
(2) Net asset value at beginning of period reflects the deduction of the sales
load of $1.125 per share and offering costs of $0.05 per share paid by the
shareholder from the $25.00 offering price.
(3) Total return on net asset value is calculated assuming a purchase at the
offering price of $25.00 less the sales load of $1.125 and offering costs
of $0.05 and the ending net asset value per share. Total return on market
value is calculated assuming a purchase at the offering price of $25.00 on
the inception date of trading (January 29, 2003) and the sale at the
current market price on the last day of the period. Total return on net
asset value and total return on market value are not computed on an
annualized basis.

The accompanying notes are an integral part of the financial statements.

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Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
FINANCIAL HIGHLIGHTS (CONTINUED)
--------------------------------------------------------------------------

The table below sets out information with respect to Auction Market
Preferred Stock (AMPS) currently outstanding.

INVOLUNTARY AVERAGE
ASSET LIQUIDATING MARKET
TOTAL SHARES COVERAGE PREFERENCE VALUE
DATE OUTSTANDING (1) PER SHARE (2) PER SHARE PER SHARE (3)
---- --------------- -------------- ----------- -------------
05/31/04* 21,680 $71,683 $25,000 $25,000
11/30/03 21,680 73,827 25,000 25,000

-------------
(1) See note 6.
(2) Calculated by subtracting the Fund's total liabilities (excluding the AMPS)
from the Fund's total assets and dividing that amount by the number of AMPS
shares outstanding.
(3) Excludes accumulated undeclared dividends.
* Unaudited.

The accompanying notes are an integral part of the financial statements.

--------------------------------------------------------------------------------
Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------

1. ORGANIZATION

Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
(the "Fund" formerly known as F&C/Claymore Preferred Securities Income Fund
Incorporated) was incorporated as a Maryland corporation on May 23, 2002, and
commenced operations on January 31, 2003 as a diversified, closed-end management
investment company under the Investment Company Act of 1940, as amended. The
Fund's investment objective is to provide its common shareholders with high
current income consistent with the preservation of capital.

2. SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements is in conformity with accounting principles
generally accepted in the United States of America and requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities in the financial statements and the reported amounts of increases
and decreases in net assets from operations during the reporting period. Actual
results could differ from those estimates. Certain prior period items have been
reclassified to conform to the current year's presentation.

PORTFOLIO VALUATION: The net asset value of the Fund's Common Stock is
determined by the Fund's Administrator no less frequently than on the last
business day of each week and month. It is determined by dividing the value of
the Fund's net assets attributable to Common Stock by the number of shares of
Common Stock outstanding. The value of the Fund's net assets available to Common
Stock is deemed to equal the value of the Fund's total assets less (i) the
Fund's liabilities, (ii) the aggregate liquidation value of its Auction Market
Preferred Stock ("AMPS"), and (iii) accumulated and unpaid dividends on AMPS.

Securities listed on a national securities exchange are valued on the basis
of the last sale on such exchange on the day of valuation, except as described
hereafter. In the absence of sales of listed securities and with respect to (a)
securities for which the most recent sale prices are not deemed to represent
fair market value and (b) unlisted securities (other than money market
instruments), securities are valued at the mean between the closing bid and
asked prices when quoted prices for investments are readily available.
Investments in over-the-counter derivative instruments, such as interest rate
swaps and options thereon ("swaptions"), are valued at the prices obtained from
the broker/dealer or bank that is the counterparty to such instrument, subject
to comparison of such valuation with a valuation obtained from a broker/dealer
or bank that is not a counterparty to the particular derivative instrument.
Investments for which market quotations are not readily available or for which
management determines that the prices are not reflective of current market
conditions are valued at fair value as determined in good faith by or under the
direction of the Board of Directors of the Fund, including reference to
valuations of other securities which are comparable in quality, maturity and
type. Investments in money market instruments, which mature in 60 days or less,
are valued at amortized cost. Investments in money market funds are valued at
the net asset value of such funds.

--------------------------------------------------------------------------------
Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------

SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded as of the trade date. Realized gains and losses from securities sold
are recorded on the identified cost basis. Dividend income is recorded on
ex-dividend dates. Interest income is recorded on an accrual basis. The Fund
also amortizes premiums and accretes discounts on those fixed income securities,
such as capital securities and bonds, which trade and are quoted on an "accrued
income" basis.

OPTIONS: Upon the purchase of an option by the Fund, the total purchase
price paid is recorded as an investment. The market valuation is determined as
set forth in the preceding portfolio valuation paragraph. When the Fund enters
into a closing sale transaction, the Fund will record a gain or loss depending
on the difference between the purchase and sale price. The risks associated with
purchasing options and the maximum loss the Fund would incur are limited to the
purchase price originally paid.

REPURCHASE AGREEMENTS: The Fund may engage in repurchase agreement
transactions. The Fund's investment adviser reviews and approves the eligibility
of the banks and dealers with which the Fund may enter into repurchase agreement
transactions. The value of the collateral underlying such transactions is at
least equal at all times to the total amount of the repurchase obligations,
including interest. The Fund maintains possession of the collateral through its
custodian and, in the event of counterparty default, the Fund has the right to
use the collateral to offset losses incurred. There is the possibility of loss
to the Fund in the event the Fund is delayed or prevented from exercising its
rights to dispose of the collateral securities.

DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: The Fund expects to declare
dividends on a monthly basis to Shareholders of Common Stock ("Shareholders").
Distributions to Shareholders are recorded on the ex-dividend date. Any net
realized short-term capital gains are distributed to Shareholders at least
annually. Any net realized long-term capital gains may be distributed to
Shareholders at least annually or may be retained by the Fund as determined by
the Fund's Board of Directors. Capital gains retained by the Fund are subject to
tax at the capital gains corporate tax rate. Subject to the Fund qualifying as a
regulated investment company, any taxes paid by the Fund on such net realized
long-term gains may be used by the Fund's Shareholders as a credit against their
own tax liabilities.

FEDERAL INCOME TAXES: The Fund intends to continue to qualify as a
regulated investment company by complying with the requirements under subchapter
M of the Internal Revenue Code of 1986, as amended, applicable to regulated
investment companies and intends to distribute substantially all of its taxable
net investment income to its shareholders. Therefore, no Federal income tax
provision is required.

Income and capital gain distributions are determined and characterized in
accordance with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to (1) differing
treatments of income and gains on various investment securities held by the
Fund, including timing differences, (2) the attribution of expenses against
certain components of taxable investment income, and (3) federal regulations
requiring proportionate allocation of income and gains to all classes of
shareholders.

--------------------------------------------------------------------------------
Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------

Distributions from net realized gains for book purposes may include
short-term capital gains, which are included as ordinary income for tax purposes
and may exclude amortization of premium on "accrued income" securities, which
are not reflected in ordinary income for tax purposes. The tax character of
distributions paid, including changes in accumulated undeclared distributions to
AMPS Shareholders, during 2003 and year-to-date was as follows:

DISTRIBUTIONS PAID IN FISCAL YEAR 2004 DISTRIBUTIONS PAID IN FISCAL YEAR 2003
-------------------------------------- --------------------------------------
ORDINARY INCOME LONG-TERM CAPITAL GAINS ORDINARY INCOME LONG-TERM CAPITAL GAINS
--------------- ----------------------- --------------- -----------------------

Common N/A N/A $56,535,953 --
Preferred* N/A N/A $3,150,779 $748,217

* November 30, 2003 distributions from net investment income and net realized
capital gains reflect subsequent tax classifications.

As of November 30, 2003, the components of distributable earnings (i.e.,
ordinary income and capital gain/loss) available to Common and Preferred Stock
shareholders, on a tax basis were as follows:

UNDISTRIBUTED UNDISTRIBUTED UNREALIZED
ORDINARY INCOME LONG-TERM GAIN APPRECIATION/(DEPRECIATION)
--------------- -------------- ---------------------------
$22,377,817 $19,658,198 $45,987,747

EXCISE TAX: The Internal Revenue Code of 1986, as amended, imposes a 4%
nondeductible excise tax on the Fund to the extent the Fund does not distribute
by the end of any calendar year at least (1) 98% of the sum of its net
investment income for that year and its capital gains (both long term and short
term) for its fiscal year and (2) certain undistributed amounts from previous
years. The Fund paid $161,432 of Federal excise taxes attributable to calendar
year 2003 in March 2004.

3. INVESTMENT ADVISORY FEE, SERVICING AGENT FEE, ADMINISTRATION FEE, CUSTODIAN
FEE, TRANSFER AGENT FEE AND DIRECTORS' FEES

Flaherty & Crumrine Incorporated (the "Adviser") serves as the Fund's
investment adviser. The Fund pays the Adviser a monthly fee at an annual rate of
0.525% of the first $200 million of the Fund's average weekly total managed
assets, 0.45% of the next $300 million of the Fund's average weekly total
managed assets, and 0.40% of the Fund's average weekly total managed assets
above $500 million.

For purposes of calculating such fee and the fees to the Servicing Agent,
the Administrator and the Custodian (described below), the Fund's average weekly
total managed assets means the total assets of the Fund (including assets
attributable to any AMPS outstanding or otherwise attributable to the use of
leverage) minus the sum of accrued liabilities (other than debt representing
financial leverage). For purposes of determining total managed assets, the
liquidation preference of any AMPS issued by the Fund is not treated as a
liability.

--------------------------------------------------------------------------------
Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------

Claymore Securities, Inc. (the "Servicing Agent") serves as the Fund's
Servicing Agent. In this capacity, it acts as Shareholder Servicing Agent to the
Fund. As compensation for its services, the Fund pays the Servicing Agent a fee
computed and paid monthly at the annual rate of 0.025% of the first $200 million
of the Fund's average weekly total managed assets, 0.10% of the next $300
million of the Fund's average weekly total managed assets and 0.15% of the
Fund's average weekly total managed assets above $500 million.

PFPC Inc., a member of the PNC Financial Services Group, Inc. ("PNC
Financial Services"), serves as the Fund's Administrator and Transfer Agent. As
Administrator, PFPC Inc. calculates the net asset value of the Fund's shares
attributable to Common and Preferred Stock and generally assists in all aspects
of the Fund's administration and operation. As compensation for PFPC Inc.'s
services as Administrator, the Fund pays PFPC Inc. a monthly fee at an annual
rate of 0.10% of the first $200 million of the Fund's average weekly total
managed assets, 0.04% of the next $300 million of the Fund's average weekly
total managed assets, 0.03% of the next $500 million of the Fund's average
weekly total managed assets and 0.02% of the Fund's average weekly total managed
assets above $1 billion.

PFPC Inc. also serves as the Fund's Common Stock dividend-paying agent and
registrar and, as compensation for PFPC Inc.'s services as such, the Fund pays
PFPC Inc. a fee at an annual rate of 0.02% of the first $150 million of the
Fund's average weekly net assets attributable to Common Stock, 0.01% of the next
$350 million of the Fund's average weekly net assets attributable to Common
Stock, 0.005% of the next $500 million of the Fund's average weekly net assets
attributable to the Common Stock and 0.0025% of the Fund's average weekly net
assets attributable to the Common Stock above $1 billion, plus certain
out-of-pocket expenses. For purpose of calculating such fee, the Fund's average
weekly net assets attributable to the Common Stock will be deemed to be the
average weekly value of the Fund's total assets minus the sum of the Fund's
liabilities and accumulated dividends, if any, on AMPS. For this calculation,
the Fund's liabilities are deemed to INCLUDE the aggregate liquidation
preference of any outstanding Fund preferred shares.

PFPC Trust Company ("PFPC Trust") serves as the Fund's custodian. PFPC
Trust is an indirect subsidiary of PNC Financial Services. As compensation for
PFPC Trust's services as custodian, the Fund pays PFPC Trust a monthly fee at
the annual rate of 0.010% of the first $200 million of the Fund's average weekly
total managed assets, 0.008% of the next $300 million of the Fund's average
weekly total managed assets, 0.006% of the next $500 million of the Fund's
average weekly total managed assets, and 0.005% of the Fund's average weekly
total managed assets above $1 billion.

The Fund currently pays each Director who is not a director, officer or
employee of the Adviser or the Servicing Agent a fee of $9,000 per annum, plus
$500 for each in-person meeting of the Board of Directors or any committee and
$150 for each telephone meeting. The Audit Committee Chairman receives an
additional annual fee of $2,500. The Fund also reimburses all Directors for
travel and out-of-pocket expenses incurred in connection with such meetings.

--------------------------------------------------------------------------------
Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------

4. PURCHASES AND SALES OF SECURITIES

For the six months ended May 31, 2004, the cost of purchases of securities,
excluding short-term investments, aggregated $187,855,939. Proceeds from sales
of securities, excluding short-term investments, aggregated $219,689,645.

At May 31, 2004, aggregate gross unrealized appreciation for all securities
in which there is an excess of value over tax cost was $35,336,580 and aggregate
gross unrealized depreciation for all securities in which there is an excess of
tax cost over value was $40,598,019.

5. COMMON STOCK

There are 250,000,000 shares of capital stock authorized of which
240,000,000 are classified as Common Stock, par value $0.01 per share. At May
31, 2004, there were 41,113,748 shares of Common Stock issued and outstanding.

ORGANIZATION EXPENSES AND COSTS OF THE COMMON STOCK OFFERING: Organization
expenses relating to organizing the Fund of $24,113 have been paid by the
Adviser. Costs of the Common Stock offering were $1,851,215. Costs of the Common
Stock offering up to $0.05 per share and sales charges were borne by the Fund
and its shareholders and accounted for as a reduction to paid-in capital.

At May 31, 2004, 250,000,000 shares of $0.01 par value Common Stock were
authorized.

Common Stock transactions were as follows:

PERIOD ENDED 11/30/03 (FUND INCEPTION TO DATE)
----------------------------------------------

SHARES GROSS AMOUNT SALES LOAD NET AMOUNT
------ ------------ ---------- ----------

Beginning Capitalization 4,198 $100,017 $0 $100,017

Initial Public Offering
on 1/29/03 36,500,000 912,500,000 41,062,500 871,437,500

Shares offered through
exercise of underwriters'
over-allotment option
On 2/18/03 2,500,000 62,500,000 2,812,500 59,687,500
On 3/19/03 1,850,000 46,250,000 2,081,250 44,168,750

Issued under the Dividend
Reinvestment and Cash
Purchase Plan 259,550 6,467,953 0 6,467,953
---------- -------------- ----------- ------------
Total 41,113,748 $1,027,817,970 $45,956,250 $981,861,720

--------------------------------------------------------------------------------
Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------

SIX MONTHS ENDED
5/31/04
----------------
SHARES AMOUNT
------ ------
Shares issued under the Dividend
Reinvestment and Cash Purchase Plan 1,057,931 $26,926,506
--------- -----------

6. AUCTION MARKET PREFERRED STOCK ("AMPS")

The Fund's Articles of Incorporation authorize the issuance of up to
10,000,000 shares of $0.01 par value preferred stock. The AMPS, which consists
of Series M7, T7, W7, Th7, F7, T28 and W28, are senior to the Common Stock and
results in the financial leveraging of the Common Stock. Such leveraging tends
to magnify both the risks and opportunities to Common Stock Shareholders.
Dividends on AMPS are cumulative.

The Fund is required to meet certain asset coverage tests with respect to
the AMPS. If the Fund fails to meet these requirements and does not correct such
failure, the Fund may be required to redeem, in part or in full, AMPS at a
redemption price of $25,000 per share plus an amount equal to the accumulated
and unpaid dividends on such shares in order to meet these requirements.
Additionally, failure to meet the foregoing asset requirements could restrict
the Fund's ability to pay dividends to Common Stock Shareholders and could lead
to sales of portfolio securities at inopportune times.

An auction of the AMPS is generally held every 7 days for Series M7, T7,
W7, Th7 and F7 and every 28 days for Series T28 and W28. Existing AMPS
shareholders may submit an order to hold, bid or sell such shares at par value
on each auction date. AMPS shareholders may also trade shares in the secondary
market between auction dates.

On April 23, 2003, the Fund issued 3,200 shares each for Series M7, T7, W7,
Th7 and F7 and 2,840 shares each for Series T28 and W28 totaling 21,680 shares
of AMPS. The AMPS represent a par value of $80 million each for Series M7, T7,
W7, Th7 and F7, and $71 million each for Series T28 and W28 or $542 million in
total, with an initial dividend rate equal to 1.35% for all Series.

The underwriters' sales load of 1% of the $542 million face value totaled
$5,420,000 and was immediately charged to common equity capital upon completion
of the offering.

Costs of the issue, including legal, printing, registration, rating agency
fees, etc. of $475,000 were charged against common equity capital. The sum of
underwriters' sales load and cost of the issue totaled $5,895,000.

At May 31, 2004, 3,200 shares for Series M7, T7, W7, Th7 and F7 and 2,840
shares for Series T28 and W28 of Auction Market Preferred Shares were
outstanding at the annual rate of 1.32%, 1.35%, 1.35%, 1.32%, 1.35%, 1.35%,
1.198%, for Series M7, T7, W7, Th7, F7, T28 and W28 respectively. The dividend

--------------------------------------------------------------------------------
Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------

rate, as set by the auction process, is generally expected to vary with
short-term interest rates. These rates may vary in a manner unrelated to the
income received on the Fund's assets, which could have either a beneficial or
detrimental impact on net investment income and gains available to Common Stock
shareholders. While the Fund expects to structure its portfolio holdings and
hedging transactions to lessen such risks to Common Stock Shareholders, there
can be no assurance that such results will be attained.

7. PORTFOLIO INVESTMENTS, CONCENTRATION AND INVESTMENT QUALITY

The Fund invests primarily in diversified portfolio of preferred
securities. This includes fully taxable ("hybrid") preferred securities and
traditional preferred stocks eligible for the inter-corporate Dividends Received
Deduction ("DRD"). Under normal market conditions, at least 80% of the value of
the Fund's total assets will be invested in preferred securities. Under normal
market conditions, the Fund invests at least 25% of its total assets in
securities issued by companies in the utilities industry and at least 25% of its
total assets in securities issued by companies in the banking industry. Because
of the Fund's concentration of investments in the utility industry and in the
banking industry, the ability of the Fund to maintain its dividend and the value
of the Fund's investments could be adversely affected by the possible inability
of companies in these industries to pay dividends and interest on their
securities and the ability of holders of securities of such companies to realize
any value from the assets of the issuer upon liquidation or bankruptcy.

The Fund may invest up to 20% of its total assets in securities rated below
investment grade. These securities must be rated at least either "Ba3" by
Moody's Investors Service, Inc. or "BB-" by Standard & Poor's or judged to be
comparable in quality, in either case, at the time of purchase; however, these
securities must be issued by an issuer having a class of senior debt rated
investment grade outstanding.

The Fund may invest up to 15% of its total assets in common stocks, which
total includes those convertible securities that trade in close relationship to
the underlying common stock of an issuer, and, under normal market conditions,
may invest up to 20% of its total assets in debt securities. Certain of its
investments in hybrid, i.e., fully taxable, preferred securities, such as TOPrS,
QUIPS, MIPS, TrUPS, QUIDS, QUIBS, CorTS, Trust Preferred Securities, capital
securities, and other similar or related investments, will be subject to the
foregoing 20% limitation to the extent that, in the opinion of the Fund's
Adviser, such investments are deemed to be debt-like in key characteristics.
Typically, a security will not be considered debt-like (a) if an issuer can
defer payment of income for eighteen months or more without triggering an event
of default and (b) if such issue is a junior and fully subordinated liability of
an issuer or its ultimate guarantor.

The Fund may invest up to 30% of its total assets in the securities, other
than money market securities, of companies organized or having their principal
place of business outside the United States. All foreign securities held by the
Fund will be denominated in U.S. dollars. The percentage limitation was raised
from 10% by the Fund's Board of Directors at its regular board meeting on April
23, 2004.

--------------------------------------------------------------------------------
Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------

8. SPECIAL INVESTMENT TECHNIQUES

The Fund may employ certain investment techniques in accordance with its
fundamental investment policies. These may include the use of when-issued and
delayed delivery transactions. Securities purchased or sold on a when-issued or
delayed delivery basis may be settled within 45 days after the date of the
transaction. Such transactions may expose the Fund to credit and market
valuation risk greater than that associated with regular trade settlement
procedures. The Fund may also enter into transactions, in accordance with its
fundamental investment policies, involving any or all of the following: lending
of portfolio securities, short sales of securities, futures contracts, interest
rate swaps, options on futures contracts, options on securities and swaptions.
As in the case of when-issued securities, the use of over-the-counter
derivatives, such as interest rate swaps and swaptions, may expose the Fund to
greater credit, operations, and market value risk than is the case with
regulated, exchange traded futures and options. With the exception of purchasing
securities on a when-issued or delayed delivery basis and lending portfolio
securities, these transactions are used for hedging or other appropriate
risk-management purposes or, under certain other circumstances, to increase
income. As of May 31, 2004, the Fund owned put options on U.S. Treasury bond
futures contracts. No assurance can be given that such transactions will achieve
their desired purposes or will result in an overall reduction of risk to the
Fund.

--------------------------------------------------------------------------------
Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
ADDITIONAL INFORMATION (UNAUDITED)
--------------------------------------------------------------------------

DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN

Under the Fund's Dividend Reinvestment and Cash Purchase Plan (the "Plan"),
a shareholder whose Common Stock is registered in his or her own name will have
all distributions reinvested automatically by PFPC Inc. as agent under the Plan,
unless the shareholder elects to receive cash. Distributions with respect to
shares registered in the name of a broker-dealer or other nominee (that is, in
"street name") may be reinvested by the broker or nominee in additional shares
under the Plan, but only if the service is provided by the broker or nominee,
unless the shareholder elects to receive distributions in cash. A shareholder
who holds Common Stock registered in the name of a broker or other nominee may
not be able to transfer the Common Stock to another broker or nominee and
continue to participate in the Plan. Investors who own Common Stock registered
in street name should consult their broker or nominee for details regarding
reinvestment.

The number of shares of Common Stock distributed to participants in the
Plan in lieu of a cash dividend is determined in the following manner. Whenever
the market price per share of the Fund's Common Stock is equal to or exceeds the
net asset value per share on the valuation date, participants in the Plan will
be issued new shares valued at the higher of net asset value or 95% of the then
current market value. Otherwise, PFPC Inc. will buy shares of the Fund's Common
Stock in the open market, on the New York Stock Exchange or elsewhere, on or
shortly after the payment date of the dividend or distribution and continuing
until the ex-dividend date of the Fund's next distribution to holders of the
Common Stock or until it has expended for such purchases all of the cash that
would otherwise be payable to the participants. The number of purchased shares
that will then be credited to the participants' accounts will be based on the
average per share purchase price of the shares so purchased, including brokerage
commissions. If PFPC Inc. commences purchases in the open market and the then
current market price of the shares (plus any estimated brokerage commissions)
subsequently exceeds their net asset value most recently determined before the
completion of the purchases, PFPC Inc. will attempt to terminate purchases in
the open market and cause the Fund to issue the remaining dividend or
distribution in shares. In this case, the number of shares received by the
participant will be based on the weighted average of prices paid for shares
purchased in the open market and the price at which the Fund issues the
remaining shares. These remaining shares will be issued by the Fund at the
higher of net asset value or 95% of the then current market value.

Plan participants are not subject to any charge for reinvesting dividends
or capital gains distributions. Each Plan participant will, however, bear a
proportionate share of brokerage commissions incurred with respect to PFPC
Inc.'s open market purchases in connection with the reinvestment of dividends or
capital gains distributions. For the period ended May 31, 2004, $1,209 in
brokerage commissions were incurred.

The automatic reinvestment of dividends and capital gains distributions
will not relieve Plan participants of any income tax that may be payable on the
dividends or capital gains distributions. A participant in the Plan will be
treated for Federal income tax purposes as having received, on the

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dividend payment date, a dividend or distribution in an amount equal to the cash
that the participant could have received instead of shares.

In addition to acquiring shares of Common Stock through the reinvestment of
cash dividends and distributions, a Shareholder may invest any further amounts
from $100 to $3,000 semi-annually at the then current market price in shares
purchased through the Plan. Such semi-annual investments are subject to any
brokerage commission charges incurred by PFPC Inc. under the Plan.

A Shareholder whose Common Stock is registered in his or her own name may
terminate participation in the Plan at any time by notifying PFPC Inc. in
writing, by completing the form on the back of the Plan account statement and
forwarding it to PFPC Inc. or by calling PFPC Inc. directly. A termination will
be effective immediately if notice is received by PFPC Inc. not less than 10
days before any dividend or distribution record date. Otherwise, the termination
will be effective, and only with respect to any subsequent dividends or
distributions, on the first day after the dividend or distribution has been
credited to the participant's account in additional shares of the Fund. Upon
termination and according to a participant's instructions, PFPC Inc. will either
(a) issue certificates for the whole shares credited to the shareholder's Plan
account and a check representing any fractional shares or (b) sell the shares in
the market. Shareholders who hold common stock registered in the name of a
broker or other nominee should consult their broker or nominee to terminate
participation.

The Plan is described in more detail in the Fund's Plan brochure.
Information concerning the Plan may be obtained from PFPC Inc. at
1-800-331-1710.

ADDITIONAL COMPENSATION AGREEMENT

The Adviser has agreed to compensate Merrill Lynch from its own resources
at an annualized rate of 0.10% of the Fund's total managed assets for certain
services, including after-market support services designed to maintain
visibility of the Fund.

PROXY VOTING POLICIES

The Fund's proxy voting policies and procedures are available (i) without
charge, upon request, by calling the Fund's transfer agent at 1-800-331-1710,
(ii) on the Fund's website at www.fcclaymore.com and (iii) on the Securities and
Exchange Commission's website at www.sec.gov.

PORTFOLIO MANAGEMENT TEAM

In managing the day-to-day operations of the Fund, the Adviser relies on
the expertise of its team of money management professionals, consisting of
Messrs. Crumrine, Ettinger, Stimes, Stone and Chadwick. The professional
backgrounds of each member of the management team are included in the
"Information about Fund Directors and Officers" section of this report beginning
on page 32.

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MEETING OF SHAREHOLDERS

On April 23, 2004, the Fund held its Annual Meeting of Shareholders (the
"Meeting") (1) to elect six Directors of the Fund ("Proposal 1") and (2) approve
an amendment to the Fund's Articles Supplementary Establishing and Fixing the
Rights and Preferences of Auction Market Preferred Stock ("Articles
Supplementary") to modify the provision entitled "Force Majeure" ("Proposal 2").
With respect to Proposal 2, the meeting was adjourned and reconvened on May 25,
2004. Proposal 2 did not receive sufficient votes to pass. The results of each
proposal are as follows:

PROPOSAL 1: ELECTION OF DIRECTORS.
NAME FOR WITHHELD
---- ---- --------
COMMON STOCK
Martin Brody ............................. 32,495,070 373,528
Donald Crumrine .......................... 32,536,571 320,027
David Gale ............................... 32,538,531 330,067
Robert F. Wulf ........................... 32,525,211 343,387

FOR WITHHELD
---- --------
PREFERRED STOCK
Nicholas Dalmaso ......................... 13,471 12
Morgan Gust .............................. 13,471 12

PROPOSAL 2: APPROVAL OF AN AMENDMENT TO THE FUND'S ARTICLES SUPPLEMENTARY COMMON
AND PREFERRED STOCK (VOTING TOGETHER AS A SINGLE CLASS)

FOR AGAINST ABSTAINED
--- ------- ---------
Voted ........................... 19,406,843 327,011 563,506

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Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
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INFORMATION ABOUT FUND DIRECTORS AND OFFICERS

The business and affairs of the Fund are managed under the direction of the
Fund's Board of Directors. Information pertaining to the Directors and officers
of the Fund is set forth below.

PRINCIPAL NUMBER OF FUNDS
TERM OF OFFICE OCCUPATION(S) IN FUND COMPLEX
NAME, ADDRESS, POSITION(S) AND LENGTH OF DURING PAST OVERSEEN OTHER DIRECTORSHIPS
AND AGE HELD WITH FUND TIME SERVED* FIVE YEARS BY DIRECTOR HELD BY DIRECTOR
-------------- -------------- -------------- ------------- --------------- -------------------

NON-INTERESTED
DIRECTORS:
----------

MARTIN BRODY Director Class II Director Retired 4 Director, Jaclyn, Inc.
c/o HMK Associates since (luggage and
30 Columbia Turnpike January 2003 accessories). Director,
Florham Park, NJ 07932 Emeritus, Smith Barney
Age: 82 Mutual Funds (18 Funds).
Director, Flaherty &
Crumrine Preferred Income
Fund, Flaherty & Crumrine
Preferred Income Opportunity
Fund and Flaherty &
Crumrine/Claymore Total
Return Fund.

DAVID GALE Director Class I Director President & CEO of 4 Director, Golden State
Delta Dividend Group, Inc. since Delta Dividend Vintners, Inc. (wine
220 Montgomery Street January 2003 Group, Inc. (investments). pressing). Director,
Suite 426 Flaherty & Crumrine
San Francisco, CA 94104 Preferred Income Fund,
Flaherty & Crumrine Preferred Income
Age: 55 Opportunity Fund and
Flaherty & Crumrine/
Claymore Total Return
Fund.

--------------------------------
* The Fund's Board of Directors is divided into three classes, each class having
a term of three years. Each year the term of office of one class expires and the
successor or successors elected to such class serve for a three year term. The
initial term for each class expires as follows:

CLASS I DIRECTORS - one year term expires at
the Fund's 2005 Annual Meeting of Shareholders;
directors may continue in office until their
successors are duly elected and qualified.
CLASS II DIRECTORS - two year term expires at
the Fund's 2006 Annual Meeting of Shareholders;
directors may continue in office until their
successors are duly elected and qualified.
CLASS III DIRECTORS - three year term expires
at the Fund's 2007 Annual Meeting of
Shareholders; directors may continue in office
until their successors are duly elected and
qualified.

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Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
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NON-INTERESTED
DIRECTORS:
----------

MORGAN GUST+ Director Class II Director From March 2002, 4 Director, Flaherty &
Giant Industries, Inc. since President of Giant Crumrine Preferred
23733 N. Scottsdale Road January 2003 Industries, Inc. (petroleum Income Fund,
Scottsdale, AZ 85255 refining and marketing) Flaherty & Crumrine
Age: 57 and, for more than five Preferred Income
years prior thereto, Opportunity Fund and
Executive Vice President, Flaherty & Crumrine/
and various other Vice Claymore Total Return
President positions at Fund.
Giant Industries, Inc.

ROBERT F. WULF Director Class III Director Financial Consultant; 4 Director, Flaherty &
3560 Deerfield Drive South since Trustee, University of Crumrine Preferred
Salem, OR 97302 January 2003 Oregon Foundation; Income Fund,
Age: 67 Trustee, San Francisco Flaherty & Crumrine
Theological Seminary. Preferred Income
Opportunity Fund and
Flaherty & Crumrine/
Claymore Total Return
Fund.

+ As a Director, represents holders of shares of the Fund's Auction Market
Preferred Stock.

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Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
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INTERESTED
DIRECTORS:

DONALD F. CRUMRINE++ Director, Class III Director Chairman of the Board 4 Director, Flaherty &
301 E. Colorado Boulevard Chairman since and Director of Flaherty & Crumrine Preferred
Suite 720 of the Board January 2003 Crumrine Incorporated. Income Fund, Flaherty &
Pasadena, CA 91101 and Chief Crumrine Preferred
Age: 56 Executive Officer Income Opportunity Fund
and Flaherty & Crumrine/
Claymore Total Return
Fund.

NICHOLAS DALMASO+, ++ Director, Class I Director Senior Managing Director 2 Trustee, Dreman/
210 N. Hale Street Vice President since and General Counsel of Claymore Dividend and
Wheaton, IL 60187 and Assistant January 2003 Claymore Securities, Inc. Income Fund, Advent
Age: 39 Secretary since November, 2001 and Claymore Equity Income
Claymore Advisors, LLC since Fund, MBIA Capital/
October 2003. Partner of DBN Claymore Managed
Group since April 2001. Duration Investment
Associate General Counsel Grade Municipal Fund,
of Nuveen Investments from Western Asset/Claymore
July 1999 to November 2001. U.S. Treasury Inflation
Prior to that, Associate General Protection Securities
Counsel of Van Kampen Funds, TS&W/Claymore
Investments. Balanced Income Fund,
Madison/Claymore
Covered Call Fund and
Director of Flaherty &
Crumrine/Claymore Total
Return Fund.

+ As a Director, represents holders of shares of the Fund's Auction Market
Preferred Stock.
++ "Interested person" of the Fund as defined in the Investment Company Act of
1940. Mr. Crumrine is considered an "interested person" because of his
affiliation with Flaherty & Crumrine Incorporated, which acts as the Fund's
investment adviser. Mr. Dalmaso is considered an "interested person" because of
his affiliation with Claymore Securities, Inc. which acts as the Fund's
servicing agent.

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Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
ADDITIONAL INFORMATION (UNAUDITED) (CONTINUED)
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OFFICERS:
---------

ROBERT M. ETTINGER President Since President and Director of 2 Director, Flaherty & Crumrine
301 E. Colorado Boulevard January 2003 Flaherty & Crumrine Preferred Income Fund
Suite 720 Incorporated. and Flaherty & Crumrine
Pasadena, CA 91101 Preferred Income
Age: 45 Opportunity Fund.

PETER C. STIMES Chief Financial Since Vice President of -- --
301 E. Colorado Boulevard Officer, Chief January 2003 Flaherty & Crumrine
Suite 720 Accounting Officer, Incorporated.
Pasadena, CA 91101 Vice President, Treasurer,
Age: 48 and Assistant Secretary

BRADFORD S. STONE Vice President Since Since May 2003, Vice -- --
392 Springfield Avenue and Assistant July 2003 President of Flaherty &
Mezzanine Suite Treasurer Crumrine; from June 2001
Summit, NJ 07901 to April 2003, Director of
Age: 44 US Market Strategy at
Barclays Capital;
from February 1987 to
June 2001, Vice
President of Goldman,
Sachs & Company as
Director of US Interest
Rate Strategy and,
previously, Vice
President of Interest
Rate Product Sales.

R. ERIC CHADWICK Vice President, Since Vice President of -- --
301 E. Colorado Boulevard Secretary and January Flaherty & Crumrine
Suite 720 Assistant 2003 Incorporated since
Pasadena, CA 91101 Treasurer August 2001, and previously
Age: 29 (since January 1999)
portfolio manager of Flaherty
& Crumrine Incorporated.

DIRECTORS
Martin Brody
Donald F. Crumrine, CFA
Nicholas Dalmaso
David Gale
Morgan Gust
Robert F. Wulf, CFA

OFFICERS
Donald F. Crumrine, CFA
Chairman of the Board
and Chief Executive Officer
Robert M. Ettinger, CFA
President
Peter C. Stimes, CFA
Chief Financial Officer,
Chief Accounting Officer,
Vice President, Treasurer,
and Assistant Secretary
Nicholas Dalmaso
Vice President and
Assistant Secretary
Bradford S. Stone
Vice President and
Assistant Treasurer
R. Eric Chadwick, CFA
Vice President, Secretary and
Assistant Treasurer

INVESTMENT ADVISER
Flaherty & Crumrine Incorporated
e-mail: flaherty@fin-mail.com

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 & Shareholder Servicing Agent --
PFPC Inc.
P.O. Box 43027
Providence, RI 02940-3027
1-800-331-1710

THIS REPORT IS SENT TO SHAREHOLDERS OF FLAHERTY & CRUMRINE/CLAYMORE PREFERRED
SECURITIES INCOME FUND 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] FLAHERTY & Crumrine/Claymore
LIGHTHOUSE ART PREFERRED SECURITIES
INCOME FUND

SEMI-ANNUAL
REPORT

May 31, 2004

web site: www.fcclaymore.com

ITEM 2. CODE OF ETHICS.

Not applicable.

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.

Not applicable.

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Not applicable.

ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.

Not applicable.

ITEM 6. SCHEDULE OF INVESTMENTS

Not yet applicable.

ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.

Not applicable.

ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.

Not applicable.

ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

Not applicable.

ITEM 10. CONTROLS AND PROCEDURES.

(a) The registrant's principal executive and principal financial officers
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))) were effective, as
of a date within 90 days of the filing date of this report, 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
half-year (the registrant's second fiscal half-year in the case of an
annual report) that have materially affected, or are reasonably likely
to materially affect, the registrant's internal control over financial
reporting.

ITEM 11. EXHIBITS.

(a)(1) Not applicable.

(a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and
Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto.

(a)(3) Not applicable.

(b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and
Section 906 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 JULY 29, 2004
----------------------------------------------------------------------------

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.

Date JULY 29, 2004
----------------------------------------------------------------------------

By (Signature and Title)* /S/ PETER C. STIMES
-------------------------------------------------------
Peter C. Stimes, Chief Financial and Accounting
Officer, Vice President, Treasurer & Assistant
Secretary
(principal financial officer)

Date JULY 29, 2004
----------------------------------------------------------------------------

* Print the name and title of each signing officer under his or her signature.