ffc-nq_022819

FLAHERTY & CRUMRINE Preferred Securities Income Fund

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

While the first fiscal quarter1 began on a very weak note, with fixed-income markets (including preferreds) down sharply in December 2018, markets did a 180-degree turn as the Fed changed its tune on monetary policy. Rebounding prices were broad-based and more than made up for weakness in December, and investors are once again on a hunt for yield. Total return2 on net asset value (“NAV”) for the first fiscal quarter was 6.1%, while total return on market price was 14.4%.

As discussed in our Annual Report dated November 30, 2018, there were many factors contributing to weakness in 2018. A few of them continue today, including a global economic slowdown, ongoing trade wars, and continuous political headlines from both sides of the aisle. However, the Federal Reserve’s unexpected pivot on its outlook for future rate hikes and size of its balance sheet (System Open Market Account (SOMA) portfolio) deserve most of the credit for the market’s sudden mood change. As of its March 20 meeting, the Federal Open Market Committee estimates no rate increases in 2019 and one 0.25% hike in 2020, which would leave the year-end 2021 fed funds rate 0.5% below earlier projections. It also plans to halt SOMA reductions in October 2019, an earlier end point than previously expected.

The Fed’s revised positions on rates and SOMA have been followed by similar policy statements from the European Central Bank (ECB). Investors globally have shifted expectations and now expect government officials to keep close watch over economies and markets with continued dovish monetary policies. The result has been lower, and remarkably stable, Treasury rates and a dramatic re-tightening of credit spreads.

Flow data on money going into and out of markets and investment products from late-2018 indicate many may have underestimated the degree of concern among investors. Outflows, particularly from corporate credit fixed-income funds, were substantial and help explain the magnitude of market weakness. Flows back into markets in 2019 have been impressive as well, although thus far they have fallen short of making up for late-2018’s outflows.

Macro factors have been driving markets, and there is little new to say about the Fund’s portfolio. Our allocations continue to focus on credit quality and structure – both of which remain healthy – and portfolio turnover remains low. The economic outlook and related macro factors – such as global monetary policy and trade – should continue to have an outsized impact on our market’s direction over the near-term.

Credit fundamentals for most issuers of preferreds are strong, and we expect them to remain resilient even if the pace of economic growth slows over the next several years. Supply of newly-issued preferreds should remain very manageable, providing technical support to the market. Combined with competitive yields, tax advantages, and benign credit conditions, we believe the case for preferreds as an income investment remains intact.

Sincerely,

The Flaherty & Crumrine Portfolio Management Team

March 29, 2019


1December 1, 2018 – February 28, 2019

2Following the methodology required by the Securities and Exchange Commission, total return assumes dividend reinvestment.

2

 

Flaherty & Crumrine Preferred Securities Income Fund Incorporated

PORTFOLIO OVERVIEW

February 28, 2019 (Unaudited)

Fund Statistics

 

 

 

 

Net Asset Value

$

18.76

Market Price

$

18.55

Discount

 

1.12

%

Yield on Market Price†

 

7.25

%

Common Stock Shares Outstanding

 

44,252,635

February 2019 dividend of $0.112 per share,
annualized, divided by Market Price.

Security Ratings**% of Net Assets††

A

 

0.5

%

BBB

 

55.7

%

BB

 

30.5

%

Below “BB”

1.1

%

Not Rated***

 

9.3

%

Portfolio Rating Guidelines% of Net Assets††

Security Rated Below Investment Grade By All****

 

29.5

%

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. May not sum to 100% due to rounding.

***Excludes common stock and money market fund investments and net other assets and liabilities of 2.9%.

****Security rating below investment grade by all of Moody’s, S&P Global Ratings, 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

PNC Financial Services Group Inc

4.3

%

MetLife Inc

4.2

%

JPMorgan Chase & Co

4.0

%

Citigroup Inc

3.9

%

Liberty Mutual Group

3.6

%

Morgan Stanley

3.5

%

BNP Paribas

3.4

%

Wells Fargo & Company

3.3

%

Fifth Third Bancorp

3.3

%

HSBC Holdings PLC

2.7

%


% of Net Assets****** ††

Holdings Generating Qualified Dividend Income (QDI) for Individuals

 

 

62

%

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

44

%

******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, 2019 (Unaudited)

Shares/$ Par

Value

Preferred Stock & Hybrid Preferred Securities§ — 76.7%

Banking — 41.4%

$

14,800,000

Bank of America Corporation, 5.875% to 03/15/28 then 3ML + 2.931%, Series FF

$

14,611,670

*(1)(4)

Capital One Financial Corporation:

13,893

6.00%, Series B

352,674

*(4)

58,600

6.00%, Series H

1,522,129

*(4)

34,000

6.20%, Series F

887,060

*(4)

120,900

6.70%, Series D

3,137,959

*(1)(4)

Citigroup, Inc.:

$

1,490,000

5.875% to 03/27/20 then 3ML + 4.059%, Series O

1,507,068

*(4)

$

4,590,000

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

4,631,195

*(4)

1,036,484

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

27,881,420

*(1)(4)

572,357

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

15,651,617

*(1)(4)

Citizens Financial Group, Inc.:

161,500

6.35% to 04/06/24 then 3ML + 3.642%, Series D

4,201,423

*(1)(4)

$

5,700,000

6.375% to 04/06/24 then 3ML + 3.157%, Series C

5,658,533

*(1)(4)

CoBank ACB:

25,820

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

2,615,566

*(4)

104,000

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

10,779,600

*(4)

60,000

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

6,210,000

*(1)(4)

$

2,498,000

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

2,597,920

*(4)

1,480,879

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

42,149,518

*(1)(4)

First Horizon National Corporation:

3,730

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

2,741,550

*(4)

9

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

11,643,750

Goldman Sachs Group:

$

12,000,000

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

11,057,700

*(1)(4)

$

390,000

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

390,488

*(4)

140,000

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

3,752,000

*(1)(4)

HSBC Holdings PLC:

$

4,400,000

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

6,455,768

(1)(2)(4)

Huntington Bancshares, Inc.:

590,000

6.25%, Series D

15,257,400

*(1)(4)

$

5,800,000

5.70% to 04/15/23 then 3ML + 2.88%, Series E

5,587,343

*(1)(4)

243,670

ING Groep NV, 6.375%

6,247,699

**(2)(4)

JPMorgan Chase & Company:

56,600

6.125%, Series Y

1,461,695

*(4)

183,700

6.70%, Series T

4,592,500

*(4)

$

22,954,000

3ML + 3.47%, 6.2205%(5), Series I

23,096,889

*(1)(4)

$

5,450,000

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

5,618,051

*(1)(4)

$

15,155,000

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

16,674,516

*(1)(4)

502,300

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

13,438,434

*(1)(4)

$

9,340,000

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

11,333,623

(1)(2)(4)

$

16,750,000

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

17,852,736

*(1)(4)

4

Shares/$ Par

Value

Preferred Stock & Hybrid Preferred Securities — (Continued)

Banking — (Continued)

 

Flaherty & Crumrine Preferred Securities Income Fund Incorporated

PORTFOLIO OF INVESTMENTS (Continued)

February 28, 2019 (Unaudited)

242,340

MB Financial, Inc., 6.00%, Series C

$

6,099,698

*(1)(4)

Morgan Stanley:

879,089

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

22,293,697

*(1)(4)

519,272

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

14,113,813

*(1)(4)

300,437

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

8,437,773

*(1)(4)

977,000

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

24,542,240

*(1)(4)

89,600

People’s United Financial, Inc., 5.625% to 12/15/26 then 3ML + 4.02%, Series A

2,130,240

*(4)

PNC Financial Services Group, Inc.:

1,941,960

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

51,641,571

*(1)(4)

$

3,043,000

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

3,249,255

*(1)(4)

$

7,885,000

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

8,091,981

(1)(2)(4)

27,213

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

732,370

*(4)

Sovereign Bancorp:

8,641

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

9,691,702

(4)

State Street Corporation:

$

1,000,000

5.625% to 12/15/23 then 3ML + 2.539%, Series H

998,335

*(4)

505,500

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

13,212,506

*(1)(4)

59,724

Sterling Bancorp, 6.50%, Series A

1,637,333

*(4)

150,072

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

4,127,730

*(1)(4)

165,000

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

4,121,700

*(1)(4)

Wells Fargo & Company:

55,000

5.625%, Series Y

1,392,600

*(4)

1,353

7.50%, Series L

1,740,832

*(4)

339,095

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

8,590,022

*(1)(4)

$

3,000,000

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

3,175,590

*(1)(4)

$

16,314,000

3ML + 3.77%, 6.5582%(5), Series K

16,456,748

*(1)(4)

402,925

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

11,080,438

*(1)(4)

Zions Bancorporation:

20,000

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

540,100

*(4)

$

10,265,000

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

10,684,171

*(1)(4)

530,379,939

Financial Services — 1.5%

$

2,540,000

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

2,540,000

(2)

Charles Schwab Corporation:

13,600

5.95%, Series D

358,700

*(4)

176,400

6.00%, Series C

4,663,134

*(1)(4)

$

2,600,000

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

2,413,671

*(1)(4)

General Motors Financial Company:

$

2,625,000

5.75% to 09/30/27 then 3ML + 3.598%, Series A

2,302,847

*(4)

$

4,400,000

6.50% to 09/30/28 then 3ML + 3.436%, Series B

3,999,490

*(4)

5

 

Flaherty & Crumrine Preferred Securities Income Fund Incorporated

PORTFOLIO OF INVESTMENTS (Continued)

February 28, 2019 (Unaudited)

Shares/$ Par

Value

Preferred Stock & Hybrid Preferred Securities — (Continued)

Financial Services — (Continued)

122,000

Stifel Financial Corp., 6.25%, Series B

$

3,074,400

*(4)

19,352,242

Insurance — 19.3%

612,382

Allstate Corporation, 6.625%, Series E

15,536,131

*(1)(4)

$

9,020,000

American International Group, Inc., 8.175% to 05/15/38 then
3ML + 4.195%, 05/15/58

10,476,505

$

718,000

Aon Corporation, 8.205% 01/01/27

840,756

(1)

Arch Capital Group, Ltd.:

67,000

5.25%, Series E

1,530,541

**(2)(4)

56,500

5.45%, Series F

1,307,975

**(2)(4)

Aspen Insurance Holdings Ltd.:

65,962

5.625%

1,546,149

**(2)(4)

65,830

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

1,639,167

**(2)(4)

$

3,315,000

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

3,542,906

**(1)(2)(4)

52,191

Axis Capital Holdings Ltd., 5.50%, Series E

1,239,536

**(2)(4)

Chubb Ltd.:

$

4,566,000

Ace Capital Trust II, 9.70% 04/01/30

6,168,529

(1)

805,950

Delphi Financial Group, 3ML + 3.19%, 5.8738%(5) 05/15/37

18,637,594

(1)

254,000

Enstar Group Ltd., 7.00% to 09/01/28 then 3ML + 4.015%, Series D

6,315,075

**(1)(2)(4)

$

7,310,000

Everest Reinsurance Holdings, 3ML + 2.385%, 5.0688%(5) 05/15/37

6,370,263

(1)

50,000

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

1,429,750

$

24,634,000

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

28,118,356

(1)

MetLife, Inc.:

$

18,250,000

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

24,218,298

(1)

$

17,895,000

10.75% 08/01/39

26,699,877

(1)

$

2,250,000

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

2,741,749

(1)

PartnerRe Ltd.:

140,000

5.875%, Series I

3,574,200

**(1)(2)(4)

36,394

6.50%, Series G

948,791

**(1)(2)(4)

475,799

7.25%, Series H

12,756,171

**(1)(2)(4)

Prudential Financial, Inc.:

$

4,906,000

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

5,097,211

(1)

$

3,900,000

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

4,123,392

(1)

100,000

RenaissanceRe Holdings Ltd., 5.75%, Series F

2,454,000

**(2)(4)

Unum Group:

$

26,660,000

Provident Financing Trust I, 7.405% 03/15/38

27,780,520

(1)

144,335

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

3,638,426

(1)

XL Group Limited:

$

8,000,000

Catlin Insurance Company Ltd., 3ML + 2.975%, 5.736%(5), 144A****

7,711,800

(1)(2)(4)

$

21,893,000

XL Capital Ltd., 3ML + 2.4575%, 5.2448%(5), Series E

20,634,153

(1)(2)(4)

247,077,821

6

 

Flaherty & Crumrine Preferred Securities Income Fund Incorporated

PORTFOLIO OF INVESTMENTS (Continued)

February 28, 2019 (Unaudited)

Shares/$ Par

Value

Preferred Stock & Hybrid Preferred Securities — (Continued)

Utilities — 7.2%

$

3,752,000

CenterPoint Energy, Inc., 6.125% to 09/01/23 then 3ML + 3.27%, Series A

$

3,814,527

*(1)(4)

Commonwealth Edison:

$

16,798,000

COMED Financing III, 6.35% 03/15/33

17,438,088

(1)

768,612

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

19,124,988

(1)

DTE Energy Company:

164,000

5.375% 06/01/76, Series B

4,210,700

(1)

55,000

6.00% 12/15/76, Series F

1,474,275

$

12,170,000

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

12,613,901

(1)(2)

2,500

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

62,713

98,800

Indianapolis Power & Light Company, 5.65%

9,954,100

*(4)

463,700

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

11,724,654

(1)

NextEra Energy:

$

717,000

NextEra Energy Capital Holdings, Inc., 3ML + 2.125%, 4.9132%(5) 06/15/67,
Series C

624,852

(1)

NiSource, Inc.:

$

1,900,000

5.65% to 06/15/23 then T5Y + 2.843%, Series A, 144A****

1,835,087

*(4)

166,000

6.50% to 03/15/24 then T5Y + 3.632%, Series B

4,434,275

*(1)(4)

PECO Energy:

$

2,386,000

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

2,580,203

(1)

Southern California Edison:

70,000

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

1,628,550

*(1)(4)

91,520,913

Energy — 4.0%

DCP Midstream LP:

$

6,450,000

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

6,214,736

(1)(4)

21,500

7.875% to 06/15/23 then 3ML + 4.919%, Series B

521,483

(4)

$

2,510,000

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

2,233,900

$

6,200,000

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

6,084,867

(1)(2)

Energy Transfer Partners LP:

696,750

7.375% to 05/15/23 then 3ML + 4.53%, Series C

16,798,015

(1)(4)

8,600

7.625% to 08/15/23 then 3ML + 4.738%, Series D

210,700

(4)

$

3,700,000

Enterprise Products Operating L.P., 5.25% to 08/16/27 then
3ML + 3.033%, 08/16/77, Series E

3,398,331

191,783

NuStar Logistics LP, 3ML + 6.734%, 9.5213%(5) 01/15/43

4,811,835

(1)

Transcanada Pipelines, Ltd.:

$

4,000,000

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

3,725,900

(1)(2)

$

7,000,000

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

6,975,325

(1)(2)

50,975,092

Real Estate Investment Trust (REIT) — 0.1%

19,210

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

482,555

(4)

20,064

National Retail Properties, Inc., 5.20%, Series F

455,453

(4)

37,673

PS Business Parks, Inc., 5.20%, Series W

871,565

(4)

1,809,573

7

 

Flaherty & Crumrine Preferred Securities Income Fund Incorporated

PORTFOLIO OF INVESTMENTS (Continued)

February 28, 2019 (Unaudited)

Shares/$ Par

Value

Preferred Stock & Hybrid Preferred Securities — (Continued)

Miscellaneous Industries — 3.2%

BHP Billiton Limited:

$

2,500,000

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

$

2,746,063

(2)

$

5,074,000

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

4,789,729

*(1)(4)

Land O’ Lakes, Inc.:

$

6,800,000

7.00%, Series C, 144A****

6,567,950

*(4)

$

7,900,000

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

7,840,750

*(4)

$

9,500,000

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

9,880,000

*(1)(4)

97,900

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

8,517,300

*(4)

40,341,792

Total Preferred Stock & Hybrid Preferred Securities
(Cost $954,672,571)

981,457,372

 

Contingent Capital Securities(3) — 15.9%

Banking — 13.3%

$

5,103,000

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

5,365,651

**(1)(2)(4)

$

12,800,000

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

11,548,416

**(1)(2)(4)

$

2,970,000

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

2,925,450

**(2)(4)

Barclays Bank PLC:

$

5,615,000

7.75% to 09/15/23 then SW5 + 4.842%

5,605,651

**(2)(4)

$

18,863,000

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

19,829,955

**(1)(2)(4)

BNP Paribas:

$

2,340,000

7.00% to 08/16/28 then SW5 + 3.98%, 144A****

2,343,452

**(2)(4)

$

31,040,000

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

32,740,371

**(1)(2)(4)

$

8,000,000

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

8,434,680

**(1)(2)(4)

$

1,630,000

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

1,753,349

**(2)(4)

HSBC Holdings PLC:

$

2,100,000

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

2,047,973

**(1)(2)(4)

$

20,770,000

6.50% to 03/23/28 then ISDA5 + 3.606%

20,465,720

**(1)(2)(4)

$

5,243,000

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

5,449,941

**(1)(2)(4)

$

3,000,000

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

2,732,910

**(2)(4)

Societe Generale SA:

$

17,750,000

6.75% to 04/06/28 then SW5 + 3.929%, 144A****

16,103,155

**(1)(2)(4)

$

7,000,000

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

7,262,500

**(1)(2)(4)

Standard Chartered PLC:

$

11,370,000

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

11,910,075

**(1)(2)(4)

$

8,000,000

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

8,391,800

**(1)(2)(4)

$

6,700,000

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

5,914,052

**(1)(2)(4)

170,825,101

8

 

Flaherty & Crumrine Preferred Securities Income Fund Incorporated

PORTFOLIO OF INVESTMENTS (Continued)

February 28, 2019 (Unaudited)

Shares/$ Par

Value

Contingent Capital Securities — (Continued)

Financial Services — 0.7%

Credit Suisse Group AG:

$

4,500,000

7.25% to 09/12/25 then SW5 + 4.332%, 144A****

$

4,506,637

**(1)(2)(4)

$

4,700,000

7.50% to 07/17/23 then SW5 + 4.60%, 144A****

4,827,300

**(1)(2)(4)

9,333,937

Insurance — 1.9%

$

21,757,000

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

23,611,240

(1)(2)

23,611,240

Total Contingent Capital Securities
(Cost $204,897,820)

203,770,278

Corporate Debt Securities§ — 4.5%

Banking — 1.7%

806,700

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

20,909,664

(1)

25,000

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

731,305

21,640,969

Financial Services — 0.0%

15,000

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

371,475

371,475

Insurance — 1.4%

$

13,500,000

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

17,364,399

(1)

17,364,399

Energy — 0.6%

$

6,717,000

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

8,112,306

(1)

8,112,306

Communication — 0.5%

Qwest Corporation:

127,729

6.50% 09/01/56

2,912,860

155,921

6.75% 06/15/57

3,731,766

6,644,626

Miscellaneous Industries — 0.3%

$

3,550,000

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

3,851,750

(1)

3,851,750

Total Corporate Debt Securities
(Cost $51,695,793)

57,985,525

 

Common Stock — 0.0%

Energy — 0.0%

21,588

Kinder Morgan, Inc.

413,626

*

413,626

Total Common Stock
(Cost $391,748)

413,626

9

 

Flaherty & Crumrine Preferred Securities Income Fund Incorporated

PORTFOLIO OF INVESTMENTS (Continued)

February 28, 2019 (Unaudited)

Shares/$ Par

Value

Money Market Fund — 2.0%

BlackRock Liquidity Funds:

25,379,608

T-Fund, Institutional Class

$

25,379,608

Total Money Market Fund
(Cost $25,379,608)

25,379,608

Total Investments (Cost $1,237,037,540***)

99.1

%

1,269,006,409

Other Assets And Liabilities (Net)

0.9

%

10,949,586

Total Managed Assets

100.0

%‡

$

1,279,955,995

Loan Principal Balance

(449,575,000

)

Total Net Assets Available To Common Stock

$

830,380,995

§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, 2019, these securities amounted to $350,758,543 or 27.4% 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 $792,475,257 at February 28, 2019.

(2)Foreign Issuer.

(3)A Contingent Capital Security is a hybrid security with contractual loss-absorption characteristics.

(4)Perpetual security with no stated maturity date.

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

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

ABBREVIATIONS:

3ML3-Month ICE LIBOR USD A/360

ISDA55-year USD ICE Swap Semiannual 30/360

SW55-year USD Swap Semiannual 30/360

SW1010-year USD Swap Semiannual 30/360

T5YFederal Reserve H.15 5-Yr Constant Maturity Treasury Semiannual yield

T10YFederal 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, 2018 through February 28, 2019 (Unaudited)

Value

OPERATIONS:

Net investment income

$

14,155,676

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

(29,086,942

)

Change in net unrealized appreciation/(depreciation) of investments

62,834,993

Net increase in net assets resulting from operations

47,903,727

DISTRIBUTIONS:

Dividends paid from distributable earnings to Common Stock Shareholders(2)

(14,957,391

)

Total Distributions

(14,957,391

)

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

$32,946,336 

NET ASSETS AVAILABLE TO COMMON STOCK:

Beginning of period

$

797,434,659

Net increase in net assets during the period

32,946,336

End of period

$

830,380,995

(1)These tables summarize the three months ended February 28, 2019 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, 2018.

(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, 2018 through February 28, 2019 (Unaudited)
For a Common Stock share outstanding throughout the period

PER SHARE OPERATING PERFORMANCE:

 

 

 

 

Net asset value, beginning of period

 

$

18.02

INVESTMENT OPERATIONS:

 

 

Net investment income

 

 

0.32

Net realized and unrealized gain/(loss) on investments

 

 

0.76

Total from investment operations

 

 

1.08

DISTRIBUTIONS TO COMMON STOCK SHAREHOLDERS:

 

 

From net investment income

 

 

(0.34

)

Total distributions to Common Stock Shareholders

 

 

(0.34

)

Net asset value, end of period

 

$

18.76

Market value, end of period

 

$

18.55

Common Stock shares outstanding, end of period

 

 

44,252,635

RATIOS TO AVERAGE NET ASSETS AVAILABLE TO COMMON STOCK SHAREHOLDERS:

 

Net investment income†

 

 

7.14

%*

Operating expenses including interest expense

 

 

2.75

%*

Operating expenses excluding interest expense

 

 

0.91

%*

 

 

 

 

SUPPLEMENTAL DATA: ††

 

 

Portfolio turnover rate

 

 

2

%**

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

 

$

1,279,956

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

 

 

1.76

%*

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

 

 

0.58

%*

(1)These tables summarize the three months ended February 28, 2019 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, 2018.

*Annualized.