ffc-nq_022818

  

 

 

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

 

FORM N-Q

 

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY

 

Investment Company Act file number 811-21129

 

  Flaherty & Crumrine Preferred Securities Income Fund Incorporated  
  (Exact name of registrant as specified in charter)  

 

  301 E. Colorado Boulevard, Suite 720
Pasadena, CA 91101
 
  (Address of principal executive offices) (Zip code)  

 

 

R. Eric Chadwick

Flaherty & Crumrine Incorporated

301 E. Colorado Boulevard, Suite 720

Pasadena, CA 91101

 
  (Name and address of agent for service)  

 

Registrant's telephone number, including area code: 626-795-7300

 

Date of fiscal year end: November 30

 

Date of reporting period: February 28, 2018

 

Form N-Q is to be used by management investment companies, other than small business investment companies registered on Form N-5 (§§ 239.24 and 274.5 of this chapter), to file reports with the Commission, not later than 60 days after the close of the first and third fiscal quarters, pursuant to rule 30b1-5 under the Investment Company Act of 1940 (17 CFR 270.30b1-5). The Commission may use the information provided on Form N-Q in its regulatory, disclosure review, inspection, and policymaking roles.

 

A registrant is required to disclose the information specified by Form N-Q, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-Q unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to the Secretary, Securities and Exchange Commission, 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. § 3507.

 

   
 

Item 1. Schedule of Investments.

The Schedule(s) of Investments is attached herewith.

 

FLAHERTY & CRUMRINE Preferred Securities Income Fund

To the Shareholders of Flaherty & Crumrine Preferred Securities Income Fund (“FFC”):

Despite general weakness in most fixed-income markets (e.g., investment-grade corporate bonds), attributable mostly to higher benchmark interest rates, preferred securities performed reasonably well on a relative basis. Total return1 on net asset value (“NAV”) for the first fiscal quarter2 was -0.2%, while total return on market price was -5.1%.

The U.S. economy remains on solid footing, with most economists forecasting faster growth in 2018. Inflation has remained in check thus far, and modest wage growth and strong business investment suggest that faster economic growth can be accommodated without the economy overheating. Faster economic growth combined with optimism around tax reform has caused interest rates to move modestly higher. Tax reform should be supportive of growth and investment, but much of it will be deficit-financed and could result in higher Treasury rates as government borrowing increases.

Investors often associate higher long-term interest rates with lower prices for preferred securities, and to some extent this is true. However, sensitivity of the Fund’s preferred portfolio to benchmark interest rates is much lower today than it was ten years ago. That is primarily attributable to larger holdings of fixed-to-floating rate securities relative to traditional fixed-for-life preferreds. Including these securities in a portfolio (~74% as of 2/28/2018) reduces sensitivity to benchmark interest rates. Moderate interest-rate sensitivity, along with a tightening of preferred credit spreads during the quarter, offset much of the weakness experienced by other fixed-income asset classes.

Most of the portfolio experienced credit-spread tightening as noted above, but one area of mixed performance was the energy sector, notably master limited partnerships (MLPs). The MLP industry appears to be in transition. The traditional MLP structure has struggled to meet investor expectations, leading some to collapse partnership structures into simpler organizations. Lower corporate tax rates from recent tax reform may accelerate that trend. While a simpler structure should benefit preferred investors over time, many MLPs issued preferreds in the last few months, causing yields to increase as concessions were offered to entice demand. Importantly, individual MLPs are in various stages of transition, and we remain comfortable with the level of MLP exposure in the Fund’s portfolio (~6.4% as of 2/28/2018). Many of the MLPs held by the Fund are among the strongest credits in the sector and a step ahead of peers in navigating these rough waters.

The Fund’s dividend rate was reduced during the quarter to reflect changes in interest rates and credit spreads that have cumulated over time. Tightening by the Federal Reserve has raised short-term interest rates and, therefore, leverage cost, while lower preferred yields have gradually reduced portfolio income. The investment objective of the Fund is to provide high current income consistent with the preservation of capital, and we believe the Fund will continue to meet that objective – although distributable income may be reduced as we proceed through this economic cycle. Fund shareholders have benefited from years of record-low interest rates and low leverage costs, but rates have moved up as the economy has improved. We believe the Fund’s strategy of investing in preferred securities and using leverage to increase income will continue to produce a competitive distribution rate for shareholders. We encourage shareholders to read the Fund’s 2017 annual report for a more-thorough discussion of this important topic.


1 Following the methodology required by the Securities and Exchange Commission, total return assumes dividend reinvestment.

2 December 1, 2017 — February 28, 2018

Market volatility is likely to increase from record-low levels as we move into later stages of this economic cycle, but we believe preferreds will continue to offer competitive performance. Their combination of credit quality and yield (much of which is tax-advantaged) will be difficult to replicate in other fixed-income asset classes.

As always, we encourage you to visit the Fund’s website, www.preferredincome.com, for timely and important information.

Sincerely,

The Flaherty & Crumrine Portfolio Management Team

March 31, 2018

2

 

Flaherty & Crumrine Preferred Securities Income Fund Incorporated

PORTFOLIO OVERVIEW

February 28, 2018 (Unaudited)


Fund Statistics

 

 

 

 

Net Asset Value

$

19.95

 

Market Price

$

19.20

 

Discount

 

3.76

%

Yield on Market Price

 

7.13

%

Common Stock Shares Outstanding

 

44,252,635

 


Security Ratings**

% of Net Assets†

A

 

0.7

%

BBB

 

56.4

%

BB

 

32.0

%

Below “BB”

1.0

%

Not Rated***

 

8.1

%


Portfolio Rating Guidelines

% of Net Assets†

Security Rated Below Investment Grade By All****

 

27.9

%

Issuer or Senior Debt Rated Below Investment Grade by All*****

2.0

%


**Ratings are from Moody’s Investors Service, Inc. “Not Rated” securities are those with no ratings available from Moody’s.

***Excludes common stock and money market fund investments and net other assets and liabilities of 1.8%.

****Security rating below investment grade by all of Moody’s, Standard & Poor’s, and Fitch Ratings.

*****Security rating and issuer’s senior unsecured debt or issuer rating are below investment grade by all of Moody’s, S&P, and Fitch. The Fund’s investment policy currently limits such securities to 10% of Net Assets.

Industry Categories*

% of Net Assets†


Top 10 Holdings by Issuer

% of Net Assets†

JPMorgan Chase & Co

 

 

4.6

%

PNC Financial Services Group Inc

 

 

4.5

%

Wells Fargo & Company

 

 

4.3

%

MetLife Inc

 

 

4.3

%

Liberty Mutual Group

3.7

%

Citigroup Inc

3.6

%

Morgan Stanley

 

 

3.5

%

BNP Paribas

 

 

3.2

%

Fifth Third Bancorp

3.2

%

XL Group Limited

3.0

%



 

% of Net Assets******†

Holdings Generating Qualified Dividend Income (QDI) for Individuals

 

 

58

%

Holdings Generating Income Eligible for the Corporate Dividends Received Deduction (DRD)

45

%


******This does not reflect year-end results or actual tax categorization of Fund distributions. These percentages can, and do, change, perhaps significantly, depending on market conditions. Investors should consult their tax advisor regarding their personal situation.

Net Assets includes assets attributable to the use of leverage.

3

 

Flaherty & Crumrine Preferred Securities Income Fund Incorporated

PORTFOLIO OF INVESTMENTS

February 28, 2018 (Unaudited)


Shares/$ Par

Value

Preferred Securities§ — 93.4%

Banking — 54.0%

$

5,103,000

Australia & New Zealand Banking Group Ltd., 6.75% to 06/15/26 then
ISDA5 + 5.168%, 144A****

$

5,594,164

**(1)(2)

$

12,800,000

Banco Bilbao Vizcaya Argentaria SA, 6.125% to 11/16/27 then SW5 + 3.87%

13,056,000

**(1)(2)

$

2,970,000

Banco Mercantil del Norte SA, 7.625% to 01/06/28 then T10Y + 5.353%, 144A****

3,241,607

**(2)

Bank of America Corporation:

$

13,571,000

3ML + 3.63%, 5.3969%(5), Series K

13,689,746

*(1)

$

11,000,000

8.125% to 05/15/18 then 3ML + 3.64%, Series M

11,178,750

*(1)

Barclays Bank PLC:

$

18,863,000

7.875% to 03/15/22 then SW5 + 6.772%, 144A****

20,390,997

**(1)(2)

300,036

8.125%, Series 5

7,968,956

**(1)(2)

BNP Paribas:

$

31,040,000

7.375% to 08/19/25 then SW5 + 5.15%, 144A****

34,570,800

**(1)(2)

$

8,000,000

7.625% to 03/30/21 then SW5 + 6.314%, 144A****

8,720,000

**(2)

Capital One Financial Corporation:

13,893

6.00%, Series B

353,577

*

58,600

6.00%, Series H

1,548,212

*

34,000

6.20%, Series F

903,380

*

120,900

6.70%, Series D

3,228,030

*(1)

Citigroup, Inc.:

$

2,000,000

5.95% to 05/15/25 then 3ML + 3.905%, Series P

2,081,500

*

1,036,484

6.875% to 11/15/23 then 3ML + 4.13%, Series K

29,218,484

*(1)

572,357

7.125% to 09/30/23 then 3ML + 4.04%, Series J

16,438,093

*(1)

CoBank ACB:

38,420

6.125%, Series G, 144A****

3,899,630

*

104,000

6.20% to 01/01/25 then 3ML + 3.744%, Series H, 144A****

11,146,200

*

60,000

6.25% to 10/01/22 then 3ML + 4.557%, Series F, 144A****

6,450,000

*(1)

$

2,498,000

6.25% to 10/01/26 then 3ML + 4.66%, Series I, 144A****

2,724,991

*

$

35,100,000

Colonial BancGroup, 7.114%, 144A****

3,510

(3)(4)††

$

1,630,000

Credit Agricole SA, 7.875% to 01/23/24 then SW5 + 4.898%,144A****

1,823,562

**(2)

1,483,814

Fifth Third Bancorp, 6.625% to 12/31/23 then 3ML + 3.71%, Series I

42,659,652

*(1)

First Horizon National Corporation:

3,730

First Tennessee Bank, 3ML + 0.85%, min 3.75%, 3.75%(5), 144A****

2,974,675

*

9

FT Real Estate Securities Company, 9.50% 03/31/31, 144A****

11,666,250

Goldman Sachs Group:

$

12,000,000

5.00% to 11/10/22 then 3ML + 2.874%, Series P

11,701,440

*(1)

$

390,000

5.70% to 05/10/19 then 3ML + 3.884%, Series L

400,783

*

140,000

6.375% to 05/10/24 then 3ML + 3.55%, Series K

3,917,200

*(1)

HSBC Holdings PLC:

$

2,100,000

6.00% to 05/22/27 then ISDA5 + 3.746%

2,150,400

**(1)(2)

$

5,243,000

6.875% to 06/01/21 then ISDA5 + 5.514%

5,623,117

**(1)(2)

114,004

8.00%, Series 2

3,036,497

**(1)(2)

$

4,400,000

HSBC Capital Funding LP, 10.176% to 06/30/30 then 3ML + 4.98%, 144A****

7,048,272

(1)(2)


4

 

Flaherty & Crumrine Preferred Securities Income Fund Incorporated

PORTFOLIO OF INVESTMENTS (Continued)

February 28, 2018 (Unaudited)


Shares/$ Par

Value

 

 

 

 

 

 

 

 

Preferred Securities — (Continued)

 

 

 

Banking — (Continued)


$

5,800,000

Huntington Bancshares Inc.:
5.700% to 04/15/23 then 3ML + 2.88%, Series E

$

5,854,375

*

590,000

6.25%, Series D

15,971,300

*(1)

300,000

ING Groep NV, 6.375%

7,755,000

**(2)

JPMorgan Chase & Company:

$

5,450,000

6.00% to 08/01/23 then 3ML + 3.30%, Series R

5,711,600

*(1)

56,600

6.125%, Series Y

1,494,806

*

183,700

6.70%, Series T

4,800,081

*(1)

$

15,155,000

6.75% to 02/01/24 then 3ML + 3.78%, Series S

16,765,219

*(1)

$

32,000,000

7.90% to 04/30/18 then 3ML + 3.47%, Series I

32,320,000

*(1)

502,300

KeyCorp, 6.125% to 12/15/26 then 3ML + 3.892%, Series E

13,994,178

*(1)

$

9,340,000

Lloyds TSB Bank PLC, 12.00% to 12/16/24 then 3ML + 11.756%, 144A****

12,189,830

(2)

$

16,750,000

M&T Bank Corporation, 6.45% to 02/15/24 then 3ML + 3.61%, Series E

18,614,778

*(1)

$

3,000,000

Macquarie Bank Ltd., 6.125% to 03/08/27 then SW5 + 3.703%, 144A****

3,060,000

**(2)

242,340

MB Financial, Inc., 6.00%, Series C

6,022,149

*

Morgan Stanley:

879,089

5.85% to 04/15/27 then 3ML + 3.491%, Series K

23,577,167

*(1)

502,400

6.875% to 01/15/24 then 3ML + 3.94%, Series F

14,283,232

*(1)

298,300

7.125% to 10/15/23 then 3ML + 4.32%, Series E

8,632,802

*(1)

977,000

New York Community Bancorp, Inc., 6.375% to 03/17/27 then
3ML + 3.821%, Series A

27,502,550

*(1)

PNC Financial Services Group, Inc.:

2,014,460

6.125% to 05/01/22 then 3ML + 4.067%, Series P

56,272,731

*(1)

$

3,043,000

6.75% to 08/01/21 then 3ML + 3.678%, Series O

3,292,739

*(1)

$

7,885,000

RaboBank Nederland, 11.00% to 06/30/19 then 3ML + 10.868%, 144A****

8,643,931

(1)(2)

27,213

Regions Financial Corporation, 6.375% to 09/15/24 then 3ML + 3.536%, Series B

750,714

*

$

7,000,000

Societe Generale SA, 7.375% to 09/13/21 then SW5 + 6.238%, 144A****

7,560,000

**(2)

8,641

Sovereign Bancorp:
Sovereign REIT, 12.00%, Series A, 144A****

10,758,045

Standard Chartered PLC:

$

9,970,000

7.50% to 04/02/22 then SW5 + 6.301%, 144A****

10,812,964

**(1)(2)

$

8,000,000

7.75% to 04/02/23 then SW5 + 5.723%, 144A****

8,710,000

**(1)(2)

505,500

State Street Corporation, 5.90% to 03/15/24 then 3ML + 3.108%, Series D

13,774,875

*(1)

59,724

Sterling Bancorp, 6.50%, Series A

1,564,769

*

156,166

SunTrust Banks, Inc., 5.875%, Series E

3,938,507

*

216,000

US Bancorp, 6.50% to 01/15/22 then 3ML + 4.468%, Series F

6,077,398

*(1)

165,000

Valley National Bancorp, 5.50% to 09/30/22 then 3ML + 3.578%, Series B

4,266,900

*(1)


5

 

Flaherty & Crumrine Preferred Securities Income Fund Incorporated

PORTFOLIO OF INVESTMENTS (Continued)

February 28, 2018 (Unaudited)


Shares/$ Par

Value

 

 

 

 

 

 

 

 

Preferred Securities — (Continued)

 

 

 

Banking — (Continued)


Wells Fargo & Company:

55,000

5.625%, Series Y

$

1,383,910

*

339,095

5.85% to 09/15/23 then 3ML + 3.09%, Series Q

9,060,618

*(1)

$

3,000,000

5.875% to 06/15/25 then 3ML + 3.99%, Series U

3,193,140

*(1)

402,925

6.625% to 03/15/24 then 3ML + 3.69%, Series R

11,148,935

*(1)

1,353

7.50% , Series L

1,725,075

*

$

16,314,000

7.98% to 06/15/18 then 3ML + 3.77%, Series K

16,599,495

*(1)

550,500

8.00%, Series J

14,329,515

*(1)

$

6,700,000

Westpac Banking Corporation, 5.00% to 09/21/27 then ISDA5 + 2.888%

6,412,801

**(1)(2)

Zions Bancorporation:

20,000

6.30% to 03/15/23 then 3ML + 4.24%, Series G

537,402

*

$

9,000,000

7.20% to 09/15/23 then 3ML + 4.44%, Series J

9,945,000

*(1)

718,717,006

Financial Services — 1.0%

$

2,540,000

AerCap Global Aviation Trust, 6.50% to 06/15/25 then
3ML + 4.30%, 06/15/45, 144A****

2,768,600

(2)

Charles Schwab Corporation:

13,600

5.95%, Series D

359,041

*

176,400

6.00%, Series C

4,664,422

*(1)

$

2,600,000

E*TRADE Financial Corporation, 5.30% to 03/15/23 then 3ML + 3.16%, Series B

2,574,000

*

$

2,625,000

General Motors Financial Company, 5.75% to 09/30/27 then
3ML + 3.598%,
Series A

2,668,050

*

13,034,113

Insurance — 20.1%

612,382

Allstate Corporation, 6.625%, Series E

16,191,809

*(1)

$

718,000

Aon Corporation, 8.205% 01/01/27

928,015

(1)

Arch Capital Group, Ltd.:

67,000

5.25%, Series E

1,574,500

**(2)

56,500

5.45%, Series F

1,366,735

**(2)

Aspen Insurance Holdings Ltd.:

65,962

5.625%

1,629,261

**(2)

65,830

5.95% to 07/01/23 then 3ML + 4.06%

1,745,858

**(2)

$

3,315,000

AXA SA, 6.379% to 12/14/36 then 3ML + 2.256%, 144A****

3,861,975

**(1)(2)

52,191

Axis Capital Holdings Ltd., 5.50%, Series E

1,269,285

**(2)

$

4,566,000

Chubb Ltd.:
Ace Capital Trust II, 9.70% 04/01/30

6,814,755

(1)(2)

732,250

Delphi Financial Group, 3ML + 3.19%, 5.0288%(5) 05/15/37

16,841,750

(1)

$

10,158,000

Everest Reinsurance Holdings, 3ML + 2.385%, 4.2238%(5) 05/15/37

9,990,393

(1)

50,000

Hartford Financial Services Group, Inc., 7.875% to 04/15/22 then
3ML + 5.596%, 04/15/42

1,491,500

$

24,634,000

Liberty Mutual Group, 7.80% 03/15/37, 144A****

30,669,330

(1)


6

 

Flaherty & Crumrine Preferred Securities Income Fund Incorporated

PORTFOLIO OF INVESTMENTS (Continued)

February 28, 2018 (Unaudited)


Shares/$ Par

Value

 

 

 

 

 

 

 

 

Preferred Securities — (Continued)

 

 

 

Insurance — (Continued)


MetLife, Inc.:

$

18,250,000

9.25% 04/08/38, 144A****

$

25,595,625

(1)

$

17,895,000

10.75% 08/01/39

28,676,737

(1)

$

2,250,000

MetLife Capital Trust IV, 7.875% 12/15/37, 144A****

2,891,250

(1)

PartnerRe Ltd.:

140,000

5.875%, Series I

3,588,200

**(1)(2)

36,394

6.50%, Series G

957,526

**(1)(2)

475,799

7.25%, Series H

13,146,326

**(1)(2)

Prudential Financial, Inc.:

$

4,906,000

5.625% to 06/15/23 then 3ML + 3.92%, 06/15/43

5,181,962

(1)

$

3,900,000

5.875% to 09/15/22 then 3ML + 4.175%, 09/15/42

4,192,500

(1)

$

21,757,000

QBE Insurance Group Ltd., 7.50% to 11/24/23 then
SW10 + 6.03%, 11/24/43, 144A****

24,748,588

(1)(2)

$

18,380,000

Unum Group:
Provident Financing Trust I, 7.405% 03/15/38

20,953,200

(1)

144,335

W.R. Berkley Corporation, 5.75% 06/01/56

3,704,935

(1)

XL Group Limited:

$

8,000,000

Catlin Insurance Company Ltd., 3ML + 2.975%, 4.7142%(5), 144A****

7,880,000

(1)(2)

$

33,000,000

XL Capital Ltd., 3ML + 2.4575%, 4.1790%(5), Series E

31,556,250

(1)(2)

267,448,265

Utilities — 9.3%

$

16,798,000

Commonwealth Edison:
COMED Financing III, 6.35% 03/15/33

17,973,860

(1)

810,000

Dominion Energy, Inc., 5.25% 07/30/76, Series A

19,723,581

(1)

DTE Energy Company:

164,000

5.375% 06/01/76, Series B

4,042,584

(1)

55,000

6.00% 12/15/76, Series F

1,469,605

$

12,170,000

Emera, Inc., 6.75% to 06/15/26 then 3ML + 5.44%, 06/15/76, Series 2016A

13,569,550

(1)(2)

127,200

Georgia Power Company, 5.00% 10/01/77, Series 2017A

3,105,588

98,800

Indianapolis Power & Light Company, 5.65%

10,208,737

*

463,700

Integrys Energy Group, Inc., 6.00% to 08/01/23 then 3ML + 3.22%, 08/01/73

12,403,975

(1)

$

16,293,000

NextEra Energy:
FPL Group Capital, Inc., 3ML + 2.125%, 3.7135%
(5) 06/15/67, Series C

15,855,701

(1)

$

2,386,000

PECO Energy:
PECO Energy Capital Trust III, 7.38% 04/06/28, Series D

2,732,085

(1)

$

12,190,000

PPL Corp:
PPL Capital Funding, Inc., 3ML + 2.665%, 4.3584%
(5) 03/30/67, Series A

12,159,525

(1)

$

9,102,000

Puget Sound Energy, Inc., 3ML + 2.53%, 4.0106%(5) 06/01/67, Series A

9,033,735

(1)

70,000

Southern California Edison:
SCE Trust V, 5.45% to 03/15/26 then 3ML + 3.79%, Series K

1,830,948

*(1)

124,109,474


7

 

Flaherty & Crumrine Preferred Securities Income Fund Incorporated

PORTFOLIO OF INVESTMENTS (Continued)

February 28, 2018 (Unaudited)


Shares/$ Par

Value

 

 

 

 

 

 

 

 

Preferred Securities — (Continued)

 

 

 

Energy — 5.6%


$

2,510,000

DCP Midstream LLC, 5.85% to 05/21/23 then 3ML + 3.85%, 05/21/43, 144A****

$

2,390,775

$

6,450,000

DCP Midstream LP, 7.375% to 12/15/22 then 3ML + 5.148%, Series A

6,518,531

(1)

$

6,200,000

Enbridge, Inc., 6.00% to 01/15/27 then 3ML + 3.89%, 01/15/77

6,293,000

(1)(2)

$

38,198,000

Enbridge Energy Partners LP, 3ML + 3.7975%, 5.4917%(5) 10/01/37

38,293,495

(1)

Enterprise Products Operating L.P.:

$

1,471,000

3ML + 3.7075%, 5.4809%(5) 08/01/66, Series A

1,465,484

$

3,700,000

5.25% to 08/16/27 then 3ML + 3.033%, 08/16/77, Series E

3,579,750

191,783

NuStar Logistics LP, 3ML + 6.734%, 8.4555%(5) 01/15/43

4,919,234

Transcanada Pipelines, Ltd.:

$

4,000,000

5.30% to 03/15/27 then 3ML + 3.208%, 03/15/77, Series 2017-A

4,037,500

(1)(2)

$

7,000,000

5.875% to 08/15/26 then 3ML + 4.64%, 08/15/76, Series 2016-A

7,542,500

(1)(2)

75,040,269

Real Estate Investment Trust (REIT) — 0.5%

19,210

Annaly Capital Management, Inc., 6.95% to 09/30/22 then 3ML + 4.993%, Series F

474,871

National Retail Properties, Inc.:

20,064

5.20%, Series F

463,278

181,849

5.70%, Series E

4,460,065

(1)

PS Business Parks, Inc.:

37,673

5.20%, Series W

908,673

20,727

5.70%, Series V

513,822

6,756

5.75%, Series U

167,481

6,988,190

Miscellaneous Industries — 2.9%

 

$

 

2,500,000

BHP Billiton Limited:

BHP Billiton Finance U.S.A., Ltd., 6.75% to 10/19/25 then
SW5 + 5.093%, 10/19/75, 144A****

2,843,750

(2)

$

6,974,000

General Electric Company, 5.00% to 01/21/21 then 3ML + 3.33%, Series D

6,895,543

*(1)

Land O’ Lakes, Inc.:

$

7,900,000

7.25%, Series B, 144A****

8,828,250

*

$

9,500,000

8.00%, Series A, 144A****

10,758,750

*(1)

97,900

Ocean Spray Cranberries, Inc., 6.25%, 144A****

8,908,900

*

38,235,193

Total Preferred Securities
(Cost $1,200,528,025)

1,243,572,510


8

 

Flaherty & Crumrine Preferred Securities Income Fund Incorporated

PORTFOLIO OF INVESTMENTS (Continued)

February 28, 2018 (Unaudited)


Shares/$ Par

Value

 

 

 

 

 

 

 

 

Corporate Debt Securities§ — 4.9%

 

 

 

Banking — 1.9%


$

3,077,000

Regions Financial Corporation, 7.375% 12/10/37, Sub Notes

$

4,076,917

(1)

806,700

Texas Capital Bancshares Inc., 6.50% 09/21/42, Sub Notes

20,868,522

(1)

25,000

Zions Bancorporation, 6.95% to 09/15/23 then 3ML + 3.89%, 09/15/28, Sub Notes

731,248

25,676,687

Financial Services — 0.1%

15,000

B. Riley Financial, Inc., 7.50% 05/31/27

385,349

$

4,726,012

Lehman Brothers, Guaranteed Note, 5.843%, 12/16/16,144A****

65,219

(3)(4)††

450,568

Insurance — 1.4%

$

13,500,000

Liberty Mutual Insurance, 7.697% 10/15/97, 144A****

18,566,668

(1)

18,566,668

Energy — 0.6%

$

6,717,000

Energy Transfer Partners LP, 8.25% 11/15/29

8,431,115

(1)

8,431,115

Communication — 0.5%

Qwest Corporation:

127,729

6.50% 09/01/56

2,758,946

155,921

6.75% 06/15/57

3,526,933

2,300

7.00% 04/01/52

54,491

6,340,370

Miscellaneous Industries — 0.4%

38,000

eBay, Inc., 6.00% 02/01/56

1,004,397

$

3,550,000

Pulte Group, Inc., 7.875% 06/15/32

4,286,625

(1)

5,291,022

Total Corporate Debt Securities
(Cost $55,848,543)

64,756,430

Common Stock — 0.2%

Banking — 0.2%

54,740

CIT Group, Inc.

2,903,957

*

2,903,957

Insurance — 0.0%

241,737

WMI Holdings Corporation, 144A****

311,841

*†

311,841

Total Common Stock
 (Cost $23,031,471)

3,215,798


9

 

Flaherty & Crumrine Preferred Securities Income Fund Incorporated

PORTFOLIO OF INVESTMENTS (Continued)

February 28, 2018 (Unaudited)


Shares/$ Par

Value

 

 

 

 

 

 

 

 

Money Market Fund — 1.0%


13,778,141

BlackRock Liquidity Funds:
T-Fund, Institutional Class

$

13,778,141

Total Money Market Fund
 (Cost $13,778,141)

13,778,141


Total Investments (Cost $1,293,186,180***)

99.5

%

1,325,322,879

Other Assets And Liabilities (Net)

0.5

%

6,957,579

Total Managed Assets

100.0

%‡

$

1,332,280,458

Loan Principal Balance

(449,575,000)

Total Net Assets Available To Common Stock

$

882,705,458


 

§Date shown is maturity date unless referencing the end of the fixed-rate period of a fixed-to-floating rate security.

*Securities eligible for the Dividends Received Deduction and distributing Qualified Dividend Income.

**Securities distributing Qualified Dividend Income only.

***Aggregate cost of securities held.

****Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration to qualified institutional buyers. At February 28, 2018, these securities amounted to $333,078,949 or 25.0% of total managed assets.

(1)All or a portion of this security is pledged as collateral for the Fund’s loan. The total value of such securities was $792,198,367 at February 28, 2018.

(2)Foreign Issuer.

(3)Level 3, illiquid security (designation is unaudited; see Note 2: Additional Accounting Standards).

(4)Valued at fair value as determined in good faith by or under the direction of the Board of Directors as of February 28, 2018.

(5)Represents the rate in effect as of the reporting date.

Non-income producing.

††The issuer has filed for bankruptcy protection. As a result, the Fund may not be able to recover the principal invested and also does not expect to receive income on this security going forward.

The percentage shown for each investment category is the total value of that category as a percentage of total managed assets.

ABBREVIATIONS:

3ML  3-Month ICE LIBOR USD A/360

ISDA5  5-year USD ICE Swap Semiannual 30/360

SW5  5-year USD Swap Semiannual 30/360

SW10  10-year USD Swap Semiannual 30/360

T10Y  Federal Reserve H.15 10-Yr Constant Maturity Treasury Semiannual yield

10

 

Flaherty & Crumrine Preferred Securities Income Fund Incorporated

STATEMENT OF CHANGES IN NET ASSETS AVAILABLE TO COMMON STOCK(1)

For the period from December 1, 2017 through February 28, 2018 (Unaudited)


Value

OPERATIONS:

Net investment income

$

13,920,645

Net realized gain/(loss) on investments sold during the period

(434,791

)

Change in net unrealized appreciation/(depreciation) of investments

(15,772,990

)

Net decrease in net assets resulting from operations

(2,287,136

)

DISTRIBUTIONS:

Dividends paid from net investment income to Common Stock Shareholders(2)

(15,574,459

)

Total Distributions to Common Stock Shareholders

(15,574,459

)

FUND SHARE TRANSACTIONS:

Increase from shares issued under the Dividend Reinvestment and Cash Purchase Plan

838,921

Net increase in net assets available to Common Stock resulting from
Fund share transactions

838,921

NET DECREASE IN NET ASSETS AVAILABLE TO COMMON STOCK FOR THE period

$(17,022,674

)

NET ASSETS AVAILABLE TO COMMON STOCK:

Beginning of period

$

899,728,132

Net decrease in net assets during the period

(17,022,674

)

End of period

$

882,705,458


 

(1)These tables summarize the three months ended February 28, 2018 and should be read in conjunction with the Fund’s audited financial statements, including notes to the financial statements, in its Annual Report dated November 30, 2017.

(2)May include income earned, but not paid out, in prior fiscal year.

 

11

 

Flaherty & Crumrine Preferred Securities Income Fund Incorporated

Financial Highlights(1)

For the period December 1, 2017 through February 28, 2018 (Unaudited)
For a Common Stock share outstanding throughout the period


 

PER SHARE OPERATING PERFORMANCE:

 

 

 

 

Net asset value, beginning of period

 

$

20.35

INVESTMENT OPERATIONS:

 

 

Net investment income

 

 

0.31

Net realized and unrealized gain/(loss) on investments

 

 

(0.36

)

Total from investment operations

 

 

(0.05

)

DISTRIBUTIONS TO COMMON STOCK SHAREHOLDERS:

 

 

From net investment income

 

 

(0.35

)

Total distributions to Common Stock Shareholders

 

 

(0.35

)

Net asset value, end of period

 

$

19.95

Market value, end of period

 

$

19.20

Common Stock shares outstanding, end of period

 

 

44,252,635

RATIOS TO AVERAGE NET ASSETS AVAILABLE TO COMMON STOCK SHAREHOLDERS:

 

Net investment income†

 

 

6.32

%*

Operating expenses including interest expense

 

 

2.01

%*

Operating expenses excluding interest expense

 

 

0.85

%*

 

 

 

 

SUPPLEMENTAL DATA: ††

 

 

Portfolio turnover rate

 

 

2

%**

Total managed assets, end of period (in 000’s)

 

$

1,332,280

Ratio of operating expenses including interest expense to average total managed assets

 

 

1.34

%*

Ratio of operating expenses excluding interest expense to average total managed assets