Edgar Filing: Flaherty & Crumrine/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
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FLAHERTY & CRUMRINE/CLAYMORE PREFERRED SECURITIES INCOME FUND INCORPORATED
--------------------------------------------------------------------------
(Exact name of registrant as specified in charter)

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

Donald F. Crumrine
Flaherty & Crumrine Incorporated
301 E. Colorado Boulevard, Suite 720
PASADENA, CA 91101
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(Name and address of agent for service)

registrant's telephone number, including area code: 626-795-7300
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Date of fiscal year end: NOVEMBER 30
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Date of reporting period: MAY 31, 2008
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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, 100 F Street, NE,
Washington, DC 20549. The OMB has reviewed this collection of information under
the clearance requirements of 44 U.S.C. ss. 3507.

ITEM 1. REPORTS TO STOCKHOLDERS.

The Report to Shareholders is attached herewith.

FLAHERTY & CRUMRINE/CLAYMORE PREFERRED SECURITIES INCOME FUND

To the Shareholders of the Flaherty & Crumrine/Claymore Preferred Securities
Income Fund:

The table below presents investment performance of the Fund through May
31, 2008. The market for preferred securities remains turbulent, as weakness in
the U.S. economy and fallout from the dramatic decline of the housing market
continue to put downward pressure on the portfolio. Over long periods of time,
the relationship between preferred security prices and prices of various other
types of fixed income instruments can swing dramatically. As of this writing,
preferred prices are as low relative to other markets as any time in memory. We
can't be certain when this trend will reverse, but there is little doubt that
eventually it will -- whenever an asset class gets too cheap, buyers always
emerge. This pattern of weakness and recovery is familiar, and while the recent
period of weakness has been long and dramatic, we believe financial companies
are taking the tough steps necessary to restore confidence and create a healthy
recovery.

TOTAL RETURN ON NET ASSET VALUE (1)
FOR PERIODS ENDED MAY 31, 2008

AVERAGE ANNUALIZED
ACTUAL RETURNS RETURNS
---------------------------- -----------------------------
THREE SIX ONE THREE FIVE LIFE OF
MONTHS MONTHS YEAR YEARS YEARS FUND (2)
------ ------ ------- ------ ----- -------

Flaherty & Crumrine/Claymore
Preferred Securities Income Fund ........................... -7.0% -8.3% -18.8% -4.0% 0.2% 2.0%
Lipper Domestic Investment Grade Funds (3) .................. -0.4% -0.6% 1.2% 3.7% 4.2% 5.1%

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(1) Based on monthly data provided by Lipper Inc. in each calendar month
during the relevant period. Distributions are assumed to be reinvested at
NAV in accordance with Lipper's practice, which differs from the
methodology used elsewhere in this report.

(2) Since inception on January 29, 2003.

(3) Reflects the equally-weighted average performance returns of all
closed-end funds in Lipper's Domestic Investment-Grade funds category in
each month during the period. The category currently includes closed-end
funds in the U.S. Mortgage and Corporate Debt BBB Rated sub-categories and
has included other sub-categories in prior periods. Although the
investment strategies used by the Fund differ significantly from the
strategies used by these other fixed-income funds, the Fund seeks to
accomplish a similar objective.

As a general observation, the Fund is performing much like broader U.S.
markets -- while the investment performance has been negative for the entire
portfolio, the worst performing positions are concentrated in the financial
sector, which comprised 66% of the portfolio as of May 31, 2008.

It became apparent some time ago that most financial companies (banks,
brokers, insurance companies and the housing agencies) would be hurt by the
subprime mortgage crisis. The Fund had no direct exposure to subprime mortgages,
and avoided companies that aggressively participated in the mortgage market and
made huge (implicit or explicit) bets that housing prices would continue to
rise. However, collateral damage from the subprime implosion has been widespread
and touched almost every financial company in the portfolio. In our

opinion, every credit currently in the Fund is a viable going concern. But
several are facing tremendous challenges, fixing problems of their own doing as
well as dealing with circumstances beyond their control.

It has become commonplace now for these companies to write-down the value
of assets on their balance sheets, and when these write-downs become large
enough, to raise new capital. Often the new capital comes from selling preferred
securities. Financial companies have issued over $100 billion of preferred
securities since the beginning of the Fund's fiscal year, typically with
dividend or interest rates above those available in existing markets (for
perspective, these new issues have increased the size of the preferred market by
nearly one-third). This is a staggering amount of new supply to come in a
relatively short period of time, and as a result the prices of most preferred
issues have fallen.

Recently, several financial companies have sold common stock rather than
preferred securities to replace capital depleted by write-downs. This is
certainly a positive trend -- common stock is the cushion below preferred, so
the more common stock the better. Although companies generally don't like to
sell common stock (management usually thinks the market undervalues their
shares), more and more are biting the bullet. Credits held by the Fund that have
issued common stock include Merrill Lynch, Lehman Brothers and Citicorp. We
believe the steps taken by these and other financial companies currently in the
portfolio will enable them to successfully weather the current credit storm.

Someone unfamiliar with FFC may wonder why we own any financial positions.
Please remember that by our offering prospectus, at least 80% of the Fund's
investments must be in preferred securities. And, since roughly 85% of the
preferred securities universe is comprised of financial issuers, owning only
preferred securities of non-financial issuers is not a viable option. With its
mandate to invest at least 25% of assets in utilities, the Fund does own a
disproportionately large percentage of non-financials, but it would not be
possible to avoid financials and still maintain a diversified portfolio of
quality holdings.

In fact, even non-financial investments have been impacted by the weakness
in financials. The higher yields now available on financial issues have induced
some investors to sell holdings in non-financial credits. So, while on the whole
non-financial preferred securities have out-performed those of financial
issuers, their returns still have been disappointing.

The Fund's interest-rate hedges did little to offset the drop in prices of
the preferred positions. Prices of long-term U.S. Treasury bonds were generally
flat during the period, and as a result the impact of the hedge was neutral. (As
a reminder, the hedge is designed to protect against substantial increases in
yields on long-term Treasury bonds or similar investments. The hedging strategy
typically will not provide protection against the scenario in which preferred
securities dramatically underperform Treasury bonds.)

The Fund's strategy of employing leverage produced mixed results during
the first half of the year. The leverage did enhance income earned by the Fund,
enabling us to meet the objective of high current income for shareholders. On
the flip side, leverage magnified the drop in value of the investment portfolio.
These subjects are addressed in greater detail in the section that follows.

There is also important news regarding the refinancing of leverage --
during the past quarter the Fund arranged for new borrowing to replace
approximately 70% of the outstanding shares of Auction Market Preferred Stock.
Since the breakdown of the entire auction market earlier this year, we've been
looking for alternative sources of funds. The new financing, detailed in the
following section, should prove advantageous to the Fund.

We saved the best news for last -- the combination of higher yields
available on the Fund's investment portfolio and the new leverage put in place
during the last quarter has enabled the Fund to increase the monthly dividend by
6.4%. Beginning in July the monthly dividend will be $0.141 per share, up from
the previous rate of $0.1325.

As always, we encourage readers to learn more about the Fund by reading
the discussion topics which follow and visiting the Fund's website 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 21, 2008

DISCUSSION TOPICS

MARKET TOTAL RETURN

An investor's actual total return is comprised of monthly dividend
payments plus changes in the Fund's market price. For the six months ended May
31, 2008, the total return on market value for the Fund's common shares was
-2.6%. During the three months ended May 31 alone, total return on market value
was -0.5%.

We've often said that in a perfect world market prices would closely track
net asset values; however, as seen in the chart below, in the real world
deviations can be large. Over recent months, shareholders saw some significant
volatility in the relationship between net asset value and market price.

FLAHERTY & CRUMRINE/CLAYMORE PREFERRED SECURITIES INCOME FUND (FFC)
PREMIUM/DISCOUNT OF MARKET PRICE TO NAV THROUGH JUNE 30, 2008

[LINE CHART]

DATE PREM/DISC
-------------- -----------------------

12/31/02
1/31/03 0.0516
2/7/03 0.0516
2/14/03 0.0535
2/21/03 0.0512
2/28/03 0.0447
3/7/03 0.0417
3/14/03 0.0463
3/21/03 0.0523
3/28/03 0.05
4/4/03 0.0545
4/11/03 0.0517
4/18/03 0.0409
4/25/03 0.0285
5/2/03 0.0264
5/9/03 0.0101
5/16/03 -0.0158
5/23/03 -0.0427
5/30/03 -0.0232
6/6/03 -0.0245
6/13/03 -0.0412
6/20/03 -0.0136
6/27/03 -0.0051
7/4/03 0.0027
7/11/03 0.0012
7/18/03 0.0016
7/25/03 -0.002
8/1/03 -0.004
8/8/03 0.0073
8/15/03 -0.004
8/22/03 -0.004
8/29/03 -0.0028
9/5/03 -0.002
9/12/03 -0.0079
9/19/03 -0.0207
9/26/03 -0.0228
10/3/03 -0.0109
10/10/03 0.0047
10/17/03 0.0117
10/24/03 0.0121
10/31/03 0.0105
11/7/03 0.0431
11/14/03 0.0226
11/21/03 0.01
11/28/03 0.0357
12/5/03 0.0254
12/12/03 0.0712
12/19/03 0.0623
12/26/03 0.0678
1/2/04 0.0732
1/9/04 0.053
1/16/04 0.0514
1/23/04 0.0512
1/30/04 0.0463
2/6/04 0.058
2/13/04 0.0564
2/20/04 0.0611
2/27/04 0.057
3/5/04 0.0499
3/12/04 0.0541
3/19/04 0.0636
3/26/04 0.084
4/2/04 0.0756
4/9/04 0.0547
4/16/04 0.0385
4/23/04 -0.0037
4/30/04 -0.0016
5/7/04 -0.0084
5/14/04 0.0241
5/21/04 0.0038
5/28/04 0.0204
6/4/04 0.0167
6/11/04 0.0209
6/18/04 0.0155
6/25/04 0.003
7/2/04 0.0143
7/9/04 0.0189
7/16/04 0.0245
7/23/04 0.0189
7/30/04 0.0339
8/6/04 0.0333
8/13/04 0.036
8/20/04 0.0366
8/27/04 0.0456
9/3/04 0.0465
9/10/04 0.0432
9/17/04 0.0346
9/24/04 0.0252
10/1/04 0.0415
10/8/04 0.0494
10/15/04 0.0517
10/22/04 0.0472
10/29/04 0.0607
11/5/04 0.044
11/12/04 0.0562
11/19/04 0.0642
11/26/04 0.0632
12/3/04 0.0379
12/10/04 0.0322
12/17/04 0.0322
12/24/04 0.0553
12/31/04 0.0691
1/7/05 0.0632
1/14/05 0.0426
1/21/05 0.0422
1/28/05 0.036
2/4/05 0.0524
2/11/05 0.0343
2/18/05 0.0344
2/25/05 0.0363
3/4/05 0.0347
3/11/05 0.002
3/18/05 -0.0413
3/25/05 -0.0514
4/1/05 -0.0742
4/8/05 -0.089
4/15/05 -0.0775
4/22/05 -0.061
4/29/05 -0.0475
5/6/05 -0.0283
5/13/05 -0.058
5/20/05 -0.0523
5/27/05 -0.0455
6/3/05 -0.0371
6/10/05 -0.0238
6/17/05 -0.0272
6/24/05 -0.0343
7/1/05 -0.0344
7/8/05 -0.0155
7/15/05 -0.0285
7/22/05 -0.0206
7/29/05 0.0008
8/5/05 -0.0156
8/12/05 -0.0076
8/19/05 -0.0181
8/26/05 -0.019
9/2/05 -0.0122
9/9/05 -0.0008
9/16/05 -0.0132
9/23/05 -0.0272
9/30/05 -0.0703
10/7/05 -0.0808
10/14/05 -0.0984
10/21/05 -0.0776
10/28/05 -0.0815
11/4/05 -0.0861
11/11/05 -0.0861
11/18/05 -0.1203
11/25/05 -0.1106
12/2/05 -0.1113
12/9/05 -0.1325
12/16/05 -0.1641
12/23/05 -0.1467
12/30/05 -0.1543
1/6/06 -0.0989
1/13/06 -0.0965
1/20/06 -0.076
1/27/06 -0.0751
2/3/06 -0.083
2/10/06 -0.068
2/17/06 -0.06
2/24/06 -0.0687
3/3/06 -0.0751
3/10/06 -0.1315
3/17/06 -0.1183
3/24/06 -0.1078
3/31/06 -0.1258
4/7/06 -0.1264
4/14/06 -0.1499
4/21/06 -0.1301
4/28/06 -0.1155
5/5/06 -0.1271
5/12/06 -0.1249
5/19/06 -0.1309
5/26/06 -0.1219
6/2/06 -0.1114
6/9/06 -0.1187
6/16/06 -0.1109
6/23/06 -0.1091
6/30/06 -0.1144
7/7/06 -0.1288
7/14/06 -0.1201
7/21/06 -0.1218
7/28/06 -0.1032
8/4/06 -0.104
8/11/06 -0.0886
8/18/06 -0.0874
8/25/06 -0.0899
9/1/06 -0.0821
9/8/06 -0.0943
9/15/06 -0.0897
9/22/06 -0.1064
9/29/06 -0.0966
10/6/06 -0.0912
10/13/06 -0.0814
10/20/06 -0.0707
10/27/06 -0.0735
11/3/06 -0.0926
11/10/06 -0.0848
11/17/06 -0.0734
11/24/06 -0.0705
12/1/06 -0.0652
12/8/06 -0.0587
12/15/06 -0.0528
12/22/06 -0.0621
12/29/06 -0.0752
1/5/07 -0.067
1/12/07 -0.0574
1/19/07 -0.065
1/26/07 -0.0561
2/2/07 -0.06
2/9/07 -0.0561
2/16/07 -0.072
2/23/07 -0.0656
3/2/07 -0.0639
3/9/07 -0.0617
3/16/07 -0.063
3/23/07 -0.0291
3/30/07 -0.0283
4/5/07 -0.0192
4/13/07 -0.0376
4/20/07 -0.0414
4/27/07 -0.031
5/4/07 -0.0434
5/11/07 -0.0443
5/18/07 -0.0315
5/25/07 -0.0571
6/1/07 -0.0426
6/8/07 -0.0655
6/15/07 -0.0645
6/22/07 -0.0969
6/29/07 -0.0794
7/6/07 -0.0757
7/13/07 -0.0761
7/20/07 -0.0986
7/27/07 -0.0922
8/3/07 -0.1027
8/10/07 -0.105
8/17/07 -0.1382
8/24/07 -0.1163
8/31/07 -0.1092
9/7/07 -0.1101
9/14/07 -0.0877
9/21/07 -0.1074
9/28/07 -0.1316
10/5/07 -0.1218
10/12/07 -0.1342
10/19/07 -0.146
10/26/07 -0.1282
11/2/07 -0.1437
11/9/07 -0.1489
11/16/07 -0.1519
11/23/07 -0.1545
11/30/07 -0.1094
12/7/07 -0.1016
12/14/07 -0.1227
12/21/07 -0.1264
12/28/07 -0.1264
1/4/08 -0.1153
1/11/08 -0.0829
1/18/08 -0.0825
1/25/08 -0.064
2/1/08 -0.0702
2/8/08 -0.0571
2/15/08 -0.088
2/22/08 -0.1033
2/29/08 -0.1182
3/7/08 -0.0861
3/14/08 -0.0959
3/20/08 -0.1049
3/28/08 -0.1105
4/4/08 -0.1136
4/11/08 -0.1201
4/18/08 -0.0992
4/25/08 -0.0768
5/2/08 -0.0875
5/9/08 -0.0885
5/16/08 -0.0789
5/23/08 -0.0803
5/30/08 -0.058
6/6/08 -0.081
6/13/08 -0.0592
6/20/08 -0.0982
6/27/08 -0.1055
6/30/08 -0.1104

THE FUND'S PREFERRED SECURITIES PORTFOLIO AND COMPONENTS OF TOTAL RETURN ON NAV

The table below reflects the performance of each investment category used
by the Fund to achieve its objective, namely: (a) investing in a portfolio of
securities; (b) hedging that portfolio of securities against significant
increases in long-term U.S. Treasury interest rates; and (c) using leverage to
enhance returns to common stock shareholders. The table then adjusts for the
impact of the Fund's expenses to arrive at a total return on NAV (which factors
in all of these items).

COMPONENTS OF FFC'S TOTAL RETURN ON NAV
FOR SIX MONTHS ENDED MAY 31, 2008

Total Return on Unleveraged Securities Portfolio (including principal and income) .......... (3.62)%
Return from Interest Rate Hedging Strategy ................................................. 0.01%
Impact of Leverage ......................................................................... (3.97)%
Expenses (Excludes interest expense) ....................................................... (0.68)%
-----
Total Return on NAV ..................................................................... (8.26)%
-----

While the Fund's strategy of using leverage continues to provide Common
Stock shareholders with additional income, this strategy does amplify changes in
principal - both positively and negatively. Consequently, for the six months
ended May 31, 2008, leverage, in effect, doubled the losses suffered in the
portfolio.

STRUCTURE OF PREFERRED SECURITIES MARKET

As indicated in the shareholder letter, the preferred securities market is
dominated by financial issuers such as banks, insurance companies and
broker-dealers. The following chart illustrates the various types of issuers of
preferred securities using market information maintained by the Fund's adviser,
Flaherty & Crumrine Incorporated.

PREFERRED MARKET INDUSTRY BREAKDOWN AS PERCENTAGE
OF TOTAL $436 BILLION OUTSTANDING 7/1/2008

[PIE CHART]

Bank 51
Finance 15
Insurance 12
Utility 4
REIT 5
Energy 1
Communications 2
U.S. Government Agency 7
Miscellaneous 3

REFINANCING OF FUND'S LEVERAGE

Historically, the Fund has leveraged the returns to common stock
shareholders through the issuance of Auction Market Preferred Stock ("AMPS").
AMPS pay dividends that are reset periodically through a Dutch auction process.
In the past, rates paid on AMPS correlated well with short-term commercial paper
benchmarks, and have been well below what the Fund earned on its investments.
This positive "spread" between the Fund's income from investments and the cost
of the AMPS is passed on to common stock shareholders as additional income.

The AMPS issued by the Fund are highly rated by the rating agencies: Aaa
by Moody's and AAA by Fitch. In order to maintain these ratings, the Fund
maintains sufficient asset coverage relative to the AMPS and any other
liabilities of the Fund at all times. Further, under the Investment Company Act
of 1940 (the "1940 Act"), the market value of the assets of the Fund must exceed
the amount of AMPS outstanding by at least two times.

In February, the entire auction-rate securities market collapsed, as there
were not sufficient buyers to reach a clearing level in the auctions. Under the
terms of the AMPS, the Fund must pay dividends according to a maximum rate
formula if the auction does not find a clearing level. Maximum rates on the AMPS
are high relative to the short-term benchmarks to which they are often compared.
However, they are currently lower than the rates paid by the Fund in late 2007,
primarily due to the easing of monetary policy by the Federal Reserve that led
all short-term interest rates lower.

While the Fund was not obligated to redeem the AMPS under their terms and
could continue to pay maximum rates, continuous failed auctions over a long
period of time may not be in the best interest of the Fund or either the holders
of the AMPS or the common stock of the Fund.

With this in mind, the Board of Directors and Fund management began
evaluating refinancing options. After reviewing a variety of alternatives, the
Fund secured committed financing to redeem approximately 70%, or $377 million,
of its outstanding AMPS. This redemption was completed in early June.

Unfortunately, the combination of financing availability, asset coverage
and rating agency considerations only allowed a partial redemption of the Fund's
auction-rate securities. The Fund continues to evaluate liquidity solutions that
could enable it to redeem additional outstanding AMPS consistent with the
interests of all Fund shareholders. However, it is not certain when, or if,
liquidity solutions will be available to redeem the remaining AMPS.

Nonetheless, the refinancing of approximately 70% of the Fund's AMPS did
have a meaningful impact on common stock shareholders. Because the Fund was able
to refinance at much more favorable terms than the maximum rates on the AMPS, it
has belatedly captured the benefits of the overall lower short-term interest
rates. With lower costs of leverage, the Fund prospectively has additional
income available to common stock shareholders. Consequently, it has raised its
common stock dividend by approximately 6.4%, beginning with the July payment.

Additional information about the AMPS redemption and the terms of the
Fund's committed financing agreement are available in Notes 6 and 7 to the
Financial Statements in this Report.

RISKS OF THE FUND'S USE OF BORROWING FOR LEVERAGE

The use of leverage can be beneficial on a longer term basis depending on
a number of variables and market conditions. The following describes risks
associated with leveraging the common stock through the use of a combination of
AMPS and borrowing, which do not materially differ from the risks the Fund
previously faced through leveraging using only AMPS.

Because the investment risk associated with assets purchased with borrowed
money is borne solely by the Fund's common stock shareholders, resulting in
greater risk to these shareholders. Leverage creates risks for the Fund's common
stock shareholders, including the likelihood of greater volatility of the Fund's
net asset value and the market price of its shares, and the risk that
fluctuations in interest rates on borrowings or in the dividend rates on any
outstanding AMPS may affect the return to common stock shareholders. If the
income from the securities purchased with such funds is not sufficient to cover
the cost of leverage, the net income of the Fund would be less than if leverage
had not been used, and therefore the amount available for distribution to common
stock shareholders as dividends would be reduced. In such an event, the Fund
might nevertheless maintain its leveraged position to avoid capital losses on
securities purchased with the leverage that would need to be sold to generate
cash used to reduce the leverage. Further, all expenses associated with
borrowing, such as interest expenses and transaction costs, are borne solely by
the Fund's common stock shareholders.

Similarly, if the asset coverage for borrowing declines below the limits
specified in the 1940 Act, in the terms of the AMPS or, the financing
arrangement, the Fund may be forced to sell a portion of its investments when it
may not be advantageous to do so. In the extreme, sales of investments required
to meet asset coverage tests imposed by the Investment Company Act could also
cause a Fund to lose its status as a regulated investment company under the
Internal Revenue Code. If a Fund were unable to make adequate distributions to
shareholders because of asset coverage or other restrictions, it could fail to
qualify as a regulated investment company for federal income tax purposes and,
even if it did not fail to so qualify, it could become liable for income and
excise tax on the portion of its earnings which are not distributed on a timely
basis in accordance with applicable provisions of the Internal Revenue Code.

Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
PORTFOLIO OVERVIEW
MAY 31, 2008 (UNAUDITED)

FUND STATISTICS ON 5/31/08
--------------------------

Net Asset Value $ 16.91
Market Price $ 15.93
Discount 5.80%
Yield on Market Price 9.98%
Common Stock Shares Outstanding 42,601,719

[PIE CHART]

INDUSTRY CATEGORIES % OF PORTFOLIO
------------------- --------------

Banking 38
Utilities 26
Insurance 19
Financial Services 8
Oil and Gas 4
REITs 3
Other 2

MOODY'S RATINGS % OF PORTFOLIO
--------------- --------------

AAA 0.2%
AA 5.6%
A 24.5%
BBB 50.5%
BB 15.5%
Below "BB" 0.5%
Not Rated 3.2%
--------
Below Investment Grade* 12.9%

----------
* BELOW INVESTMENT GRADE BY BOTH MOODY'S AND S&P.

TOP 10 HOLDINGS BY ISSUER % OF PORTFOLIO
------------------------- --------------

Midamerican Energy 4.8%
Banco Santander 4.7%
Wachovia Corp 4.3%
Liberty Mutual Group 3.8%
ACE Ltd 3.3%
Dominion Resources 2.8%
PNC Financial Services 2.6%
Citigroup 2.4%
Wisconsin Energy 2.3%
HBOS Plc 2.3%

% OF PORTFOLIO**
----------------

Holdings Generating Qualified Dividend Income (QDI) for Individuals 33%
Holdings Generating Income Eligible for the Corporate Dividends Received Deduction (DRD) 20%

----------
** 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.

Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
PORTFOLIO OF INVESTMENTS
MAY 31, 2008 (UNAUDITED)

SHARES/$ PAR VALUE
------------ ----------------------

PREFERRED SECURITIES -- 91.0%
BANKING -- 37.8%

$ 19,000,000 Astoria Capital Trust I, 9.75% 11/01/29, Series B .......... $ 19,885,400 (1)
Banco Santander:
1,644,000 6.50% Pfd. ................................................ 35,037,750** (1)(2)
1,044,500 6.80% Pfd. ................................................ 23,892,938** (1)(2)
550,000 Bank of America Corporation, 8.20% Pfd., Series H .......... 13,695,000* (1)
117,400 Barclays Bank PLC, 8.125% Pfd., Series 5 ................... 2,954,958** (1)(2)
$ 35,000,000 Capital One Capital III, 7.686% 08/15/36 ................... 29,162,000 (1)
$ 35,100,000 CBG Florida REIT Corporation, 7.114%, 144A**** ............. 14,415,570
38,000 Citigroup Capital VIII, 6.95% Pfd. 09/15/31 ................ 878,750 (1)
Citigroup, Inc.:
820,950 8.125% Pfd., Series AA .................................... 20,215,894* (1)
345,000 8.50% Pfd., Series F ...................................... 8,590,500* (1)
112,000 Citizens Funding Trust I, 7.50% Pfd. 09/15/66 .............. 1,828,120 (1)
105,000 Cobank, ACB, 7.00% Pfd., 144A**** .......................... 4,630,500* (1)
$ 27,416,000 Comerica Capital Trust II, 6.576% 02/20/37 ................. 18,832,050 (1)
28,800 FBOP Corporation, Adj. Rate Pfd., 144A**** ................. 22,032,000*
$ 2,635,000 First Midwest Capital Trust I, 6.95% 12/01/33, Series B .... 2,109,317 (1)
$ 1,950,000 First Tennessee Capital I, 8.07% 01/06/27, Series A ........ 1,575,795 (1)
6 FT Real Estate Securities Company, 9.50% Pfd., 144A**** .... 6,138,795
$ 38,000,000 HBOS PLC, 6.657%, 144A**** ................................. 29,556,400** (1)(2)
6,600 HSBC Series II, Variable Inverse Pfd., Pvt. ................ 2,752,200*
$ 18,290,000 JPMorgan Chase & Co., 7.90%, Series I ...................... 18,035,769* (1)
23,800 Keycorp Capital V, 5.875% Pfd., Series A ................... 419,178 (1)
617,000 Keycorp Capital IX, 6.75% Pfd. 12/15/66 .................... 12,427,923 (1)
10,600 Keycorp Capital X, 8.00% Pfd. .............................. 238,818 (1)
79,565 National City Capital Trust II, 6.625% Pfd. 11/15/36 ....... 1,243,004 (1)
164,520 National City Corporation, 9.875% Pfd. ..................... 3,709,926* (1)
$ 14,150,000 National City Preferred Capital Trust I, 12.00% ............ 14,498,090 (1)
295,000 PFGI Capital Corporation, 7.75% Pfd. ....................... 5,661,050 (1)
$ 15,425,000 PNC Financial Services, 8.25%, Series K .................... 15,332,450*
$ 17,125,000 PNC Preferred Funding Trust III, 8.70%, 144A**** ........... 17,148,975 (1)
$ 5,000,000 Regions Financing Trust II, 6.625% 05/15/47 ................ 3,586,000 (1)
Roslyn Real Estate:
40 8.95% Pfd., Series C, 144A**** ............................ 3,757,971
135 Adj. Rate Pfd., Series D, 144A**** ........................ 12,386,250
63,700 Sovereign Bancorp, 7.30% Pfd., Series C .................... 1,289,925* (1)
248,100 Sovereign Capital Trust V, 7.75% Pfd. 05/22/36 ............. 5,374,466

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, 2008 (UNAUDITED)

SHARES/$ PAR VALUE
------------ ----------------

PREFERRED SECURITIES -- (CONTINUED)
BANKING -- (CONTINUED)

$ 18,435,000 Sovereign Capital Trust VI, 7.908% 06/13/36 ......................... $ 15,044,803 (1)
152,000 U.S. Bancorp, 7.875% Pfd., Series D ................................. 3,921,600* (1)
U.S. Bancorp, Auction Pass-Through Trust, Cl. B:
65 Series 2006-5, Variable Rate Pfd., 144A**** ....................... 1*+
65 Series 2006-6, Variable Rate Pfd., 144A**** ....................... 1*+
60 Union Planters Preferred Funding, 7.75% Pfd., Series 144A**** ....... 5,458,580
18,800 VNB Capital Trust I, 7.75% Pfd. ..................................... 467,791 (1)
Wachovia Corporation:
$ 6,400,000 7.98% ............................................................. 6,178,560* (1)
258,300 8.00% Pfd., Series J .............................................. 6,403,257* (1)
1,753,100 Wachovia Preferred Funding, 7.25% Pfd., Series A .................... 41,197,850 (1)
Washington Mutual:
$ 5,100,000 Preferred Funding IV, 9.75%, 144A**** ............................. 4,433,940
$ 10,050,000 Preferred Funding, 6.534%, 144A**** ............................... 5,857,140
$ 11,067,000 Webster Capital Trust IV, 7.65% 06/15/37 ............................ 7,451,411 (1)
$ 7,500,000 Wells Fargo Capital XIII, 7.70% ..................................... 7,516,500 (1)
-------------
477,225,166
-------------
FINANCIAL SERVICES -- 7.3%
CIT Group, Inc.:
30,000 5.189% Pfd., Series B ............................................. 1,518,750* (1)
$ 13,000,000 6.10% 03/15/67 .................................................... 7,022,600 (1)
413,712 6.35% Pfd., Series A .............................................. 5,668,889* (1)
729,995 Countrywide Capital IV, 6.75% Pfd. . ................................ 13,572,432
46,305 Countrywide Capital V, 7.00% Pfd. 11/01/36 .......................... 839,278
30,000 First Republic Bank, 7.25% Pfd. ..................................... 624,375 (1)
7,850 First Republic Preferred Capital Corporation, 10.50% Pfd., 144A**** . 8,561,916 (1)
Goldman Sachs:
157,450 Cabco Trust Capital I, Adj. Rate Pfd. 02/15/34 .................... 2,819,347 (1)
3,600 STRIPES Custodial Receipts, Pvt. .................................. 1,378,800*
$ 7,000,000 Gulf Stream-Compass 2005 Composite Notes, 144A**** .................. 5,735,380
Lehman Brothers Holdings, Inc.:
34,000 5.67% Pfd., Series D .............................................. 1,173,000* (1)
471,500 7.95% Pfd. ........................................................ 10,844,500* (1)

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, 2008 (UNAUDITED)

SHARES/$ PAR VALUE
------------ -------------

PREFERRED SECURITIES -- (CONTINUED)
FINANCIAL SERVICES -- (CONTINUED)

Merrill Lynch:
400,000 6.25% Pfd ........................................................... $ 8,176,000* (1)
100,000 8.625% Pfd., Series 8 ............................................... 2,488,000* (1)
143,920 Adj. Rate Pfd., Series G ............................................ 2,203,775* (1)
172,000 Adj. Rate Pfd., Series 5 ............................................ 2,746,634* (1)
76,000 Fixed Income Pass-Through 2007-A, Cl. B, Adj. Rate Pfd., 144A**** ... 760*+
4,000 Series II STRIPES Custodial Receipts, Pvt. .......................... 40*+
36,800 Morgan Stanley Capital Trust III, 6.25% Pfd. ......................... 782,000 (1)
$ 10,000,000 RACERS(R) Series 2005 AMMC V Trust, 144A**** ......................... 6,290,388
SLM Corporation:
160,000 6.97% Pfd., Series A ................................................ 6,580,800* (1)
48,500 Adj. Rate Pfd., Series B ............................................ 2,803,906* (1)
--------------
91,831,570
--------------

INSURANCE -- 17.4%

1,663,580 ACE Ltd., 7.80% Pfd., Series C ....................................... 41,745,544** (2)
$ 7,000,000 AMBAC Financial Group, Inc., 6.15% 02/15/37 .......................... 2,299,500
AON:
$ 25,650,000 Capital Trust A, 8.205% 01/01/27 .................................... 24,600,915 (1)
101,900 Corts-Capital, 8.205% Pfd. .......................................... 2,607,876 (1)
94,900 Saturns-2003-3, 8.00% Pfd., Series AON Corp. ........................ 2,339,883 (1)
Arch Capital Group Ltd.:
167,650 7.875% Pfd., Series B ............................................... 4,144,107** (1)(2)
94,321 8.00% Pfd., Series A ................................................ 2,372,409** (1)(2)
Axis Capital Holdings:
273,800 7.25% Pfd., Series A ................................................ 6,434,300** (1)(2)
241,505 7.50% Pfd., Series B ................................................ 21,561,566 (1)(2)
52,400 Berkley W.R. Capital Trust II, 6.75% Pfd. 07/26/45 ................... 1,222,623 (1)
558,000 Delphi Financial Group, 7.376% Pfd. 05/15/37 ......................... 11,351,840 (1)
$ 16,541,000 Everest Re Holdings, 6.60% 05/15/37 .................................. 13,181,523 (1)
Liberty Mutual Group:
$ 26,200,000 7.80% 03/15/37, 144A**** ............................................ 20,627,260 (1)
$ 7,600,000 10.75% 06/15/58, 144A**** ........................................... 7,543,760
$ 4,000,000 MetLife Capital Trust X, 9.25% 04/08/38, 144A**** .................... 4,430,400 (1)
$ 5,000,000 PartnerRe Finance II, 6.44% 12/01/66 ................................. 4,122,000 (1)(2)
37,000 Provident Financing Trust I, Corts-Unum, 8.50% Pfd. .................. 898,408 (1)

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, 2008 (UNAUDITED)

SHARES/$ PAR VALUE
------------ ------------

PREFERRED SECURITIES -- (CONTINUED)
INSURANCE -- (CONTINUED)

Renaissancere Holdings Ltd.:
106,400 6.08% Pfd., Series C ..................................................... $ 2,029,048** (1)(2)
372,300 6.60% Pfd., Series D ..................................................... 7,788,516** (1)(2)
96,835 7.30% Pfd., Series B ..................................................... 2,214,859** (1)(2)
407,200 Scottish Re Group Ltd., 7.25% Pfd. ........................................ 2,163,250** (2)+
$ 7,425,000 USF&G Capital, 8.312% 07/01/46, 144A**** .................................. 7,885,350 (1)
$ 13,000,000 USF&G Capital I, 8.50% 12/15/45, 144A**** ................................. 14,099,800 (1)
$ 10,000,000 XL Capital Ltd., Mangrove Bay Passthru Trust, 6.102% 07/15/33, 144A**** ... 6,621,000 (2)
$ 6,400,000 ZFS Finance USA Trust V, 6.50% 05/09/37, 144A**** ......................... 5,653,760 (1)
------------
219,939,497
------------

UTILITIES -- 22.2%

Baltimore Gas & Electric Company:
10,000 6.70% Pfd., Series 1993 .................................................. 990,200* (1)
50,000 7.125% Pfd., Series 1993 ................................................. 5,048,000* (1)
1,384,179 Calenergy Capital Trust III, 6.50% Pfd. 09/01/27 .......................... 60,599,357 (1)
35,000 Central Maine Power, 5.25% Pfd., Pvt. ..................................... 3,049,900*
$ 17,645,000 COMED Financing III, 6.35% 03/15/33 ....................................... 14,128,351
$ 25,175,000 Dominion Resources Capital Trust I, 7.83% 12/01/27 ........................ 24,938,355 (1)
$ 11,000,000 Dominion Resources, Inc., 7.50% ........................................... 10,259,700 (1)
625,000 Entergy Arkansas, Inc., 6.45% Pfd. ........................................ 15,012,500*
85,000 Entergy Louisiana, Inc., 6.95% Pfd. ....................................... 8,361,450*
140,600 FPC Capital I, 7.10% Pfd., Series A . ..................................... 3,418,338 (1)
FPL Group Capital, Inc.:
$ 3,400,000 6.35% 10/01/66 ........................................................... 3,021,199 (1)
$ 4,100,000 6.65% 06/15/67 ........................................................... 3,694,604 (1)
$ 3,000,000 7.30% 09/01/67, Series D ................................................. 2,897,787 (1)
11,640 Georgia Power Company, 6.50% Pfd., Series 07-A ............................ 1,143,979* (1)
5,000 Indiana Michigan Power, 4.56% Pfd. ........................................ 386,500*
119,805 Indianapolis Power & Light Company, 5.65% Pfd. ............................ 10,238,535*
Interstate Power & Light Company:
110,000 7.10% Pfd., Series C ..................................................... 2,774,200* (1)
11,000 8.375% Pfd., Series B .................................................... 311,080* (1)
4,510 Pacific Enterprises, $4.50 Pfd. ........................................... 351,690* (1)
$ 2,386,000 PECO Energy Capital Trust III, 7.38% 04/06/28, Series D ................... 2,326,350 (1)
$ 27,000,000 PECO Energy Capital Trust IV, 5.75% 06/15/33 .............................. 21,762,000 (1)

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, 2008 (UNAUDITED)

SHARES/$ PAR VALUE
------------ -------------

PREFERRED SECURITIES -- (CONTINUED)
UTILITIES -- (CONTINUED)

$ 30,500,000 Puget Sound Energy, Inc., 6.974% 06/01/67 ...................... $ 26,406,900
200,000 San Diego Gas & Electric Company, $1.70 Pfd. ................... 5,250,000* (1)
Southern California Edison:
120,000 6.00% Pfd., Series C .......................................... 10,862,400* (1)
20,000 6.125% Pfd. ................................................... 1,858,000* (1)
Southern Union Company:
$ 6,900,000 7.20% 11/01/66 ................................................ 5,743,560
64,600 7.55% Pfd. .................................................... 1,643,263* (1)
$ 4,200,000 Union Electric Company, 7.69% 12/15/36, Series A. .............. 4,054,680
35,000 Virginia Electric & Power Company, $6.98 Pfd. .................. 3,563,700* (1)
$ 27,125,000 Wisconsin Energy Corporation, 6.25% 05/15/67 ................... 23,620,450 (1)
Xcel Energy, Inc.
10,210 4.11% Pfd., Series D .......................................... 760,441* (1)
100,000 7.60% Pfd. .................................................... 2,531,250 (1)
-------------
281,008,719
-------------

ENERGY -- 3.0%

$ 17,860,000 Enbridge Energy Partners LP, 8.05% 10/01/37 .................... 16,830,692
$ 22,000,000 Enterprise Products Partners, 7.034% 01/15/68 .................. 19,224,634
2,000 Kinder Morgan GP, Inc., 8.33% Pfd., 144A**** ................... 2,036,880*
-------------
38,092,206
-------------

REAL ESTATE INVESTMENT TRUST (REIT) -- 2.3%

35,400 BRE Properties, Inc., 6.75% Pfd., Series C ..................... 788,758 (1)
330,400 Duke Realty Corporation, 8.375% Pfd., Series O ................. 8,299,648 (1)
4,980 Prologis Trust, 8.54% Pfd., Series C ........................... 257,093 (1)
PS Business Parks, Inc.:
75,500 6.70% Pfd., Series P .......................................... 1,590,219
5,200 6.875% Pfd., Series I ......................................... 111,638 (1)
6,100 7.00% Pfd., Series H .......................................... 135,496 (1)
56,200 7.20% Pfd., Series M .......................................... 1,278,550 (1)
17,500 7.375% Pfd., Series O ......................................... 396,594 (1)
178,000 7.60% Pfd., Series L .......................................... 4,166,321 (1)

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, 2008 (UNAUDITED)

SHARES/$ PAR VALUE
------------ ---------------

PREFERRED SECURITIES -- (CONTINUED)
REAL ESTATE INVESTMENT TRUST (REIT) -- (CONTINUED)

Public Storage, Inc.:
33,100 6.45% Pfd., Series X ................................................... $ 713,719 (1)
364,400 6.625% Pfd., Series M .................................................. 7,982,656 (1)
82,000 6.75% Pfd., Series E ................................................... 1,857,817 (1)
30,000 6.85% Pfd., Series Y ................................................... 647,400
18,820 7.25% Pfd., Series K ................................................... 458,150
---------------
28,684,059
---------------

MISCELLANEOUS INDUSTRIES -- 1.0%

2,245 Centaur Funding Corporation, 9.08% Pfd. 04/21/20, 144A**** .............. 2,253,149
112,750 Ocean Spray Cranberries, Inc., 6.25% Pfd., 144A**** ..................... 10,065,193*
---------------
12,318,342
---------------
TOTAL PREFERRED SECURITIES
(Cost $1,328,384,496) .................................................. 1,149,099,559
---------------

CORPORATE DEBT SECURITIES -- 7.4%
BANKING -- 0.1%

23,000 Colonial Bancgroup, Inc., 8.875% Pfd. 03/15/38 .......................... 503,470 (3)
---------------
503,470
---------------

FINANCIAL SERVICES -- 0.6%

200,000 Ford Motor Credit Company, 7.375% 10/15/31 .............................. 3,400,500 (1)
$ 4,769,497 Lehman Brothers, Guaranteed Note, Variable Rate, 12/16/16, 144A**** ..... 3,846,599
---------------
7,247,099
---------------

INSURANCE -- 1.7%

$ 24,921,000 Liberty Mutual Insurance, 7.697% 10/15/97, 144A**** ..................... 20,083,834 (1)
$ 1,000,000 UnumProvident Corporation, 7.25% 03/15/28, Senior Notes ................. 876,800 (1)
---------------
20,960,634
---------------

UTILITIES -- 3.2%

$ 6,315,000 Duke Capital Corporation, 8.00% 10/01/19, Senior Notes .................. 6,971,406 (1)
$ 5,000,000 Entergy Gulf States, Inc., 6.20% 07/01/33, 1st Mortgage ................. 4,463,000 (1)

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, 2008 (UNAUDITED)

SHARES/$ PAR VALUE
------------ -----------

CORPORATE DEBT SECURITIES -- (CONTINUED)
UTILITIES -- (CONTINUED)

Entergy Louisiana LLC:
$ 5,270,000 6.30% 09/01/35, 1st Mortgage ....................................... $ 4,814,909 (1)
5,750 7.60% 04/01/32, 1st Mortgage ....................................... 145,547 (1)
$ 7,070,000 Oncor Electric Delivery Company, 7.25% 01/15/33 ..................... 6,814,773 (1)
Southern Union Company:
$ 5,300,000 7.60% 02/01/24, Senior Notes ....................................... 5,241,006 (1)
$ 6,047,000 8.25% 11/15/29, Senior Notes ....................................... 6,378,605 (1)
$ 6,020,000 Wisconsin Electric Power Company, 6.875% 12/01/95 ................... 5,976,656 (1)
-----------
40,805,902
-----------

ENERGY -- 1.2%

296,911 Nexen, Inc., 7.35% Subordinated Notes ............................... 7,320,727 (1)(2)
$ 8,500,000 Noble Energy, Inc., 7.25% 08/01/97 .................................. 8,134,500 (1)
-----------
15,455,227
-----------

REAL ESTATE INVESTMENT TRUST (REIT) -- 0.2%

$ 3,500,000 Realty Income Corporation, 5.875% 03/15/35 .......................... 2,683,800 (1)
-----------
2,683,800
-----------

MISCELLANEOUS INDUSTRIES -- 0.4%

17,700 CBS Corporation, 6.75% 03/27/56 ..................................... 399,910 (1)
3,450 Comcast Corp., 6.625%, 05/15/56 ..................................... 77,517 (1)
16,500 Corp-Backed Trust Certificates, 7.00% 11/15/28, Series Sprint ....... 284,130 (1)
Pulte Homes, Inc.:
58,240 7.375% 06/01/46 .................................................... 1,124,760 (3)
$ 3,550,000 7.875% 06/15/32 .................................................... 3,246,830
-----------
5,133,147
-----------

TOTAL CORPORATE DEBT SECURITIES
(Cost $ 104,708,906) ............................................... 92,789,279
-----------

OPTION CONTRACTS -- 0.4%

2,600 September Put Options on September U.S. Treasury Bond Futures,
Expiring 08/23/08 ................................................. 4,550,000+
-----------

TOTAL OPTION CONTRACTS
(Cost $2,734,238) .................................................. 4,550,000
-----------

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, 2008 (UNAUDITED)

SHARES/$ PAR VALUE
------------ ---------------

MONEY MARKET FUND -- 0.2%

2,873,565 BlackRock Provident Institutional, TempFund ............. $ 2,873,565
---------------
TOTAL MONEY MARKET FUND
(Cost $2,873,565) ...................................... 2,873,565
---------------

SECURITIES LENDING COLLATERAL -- 0.0%

601,520 BlackRock Institutional Money Market Trust .............. 601,520
---------------
TOTAL SECURITIES LENDING COLLATERAL
(Cost $601,520) ........................................ 601,520
---------------

TOTAL INVESTMENTS (Cost $1,439,302,725***) ................................. 99.0% 1,249,913,923
OTHER ASSETS AND LIABILITIES (Net) ......................................... 1.0% 12,545,391
----- ---------------

TOTAL NET INVESTMENTS ...................................................... 100.0%++ $ 1,262,459,314
----- ---------------
LOAN PRINCIPAL BALANCE ..................................................... (327,625,000)
AUCTION MARKET PREFERRED STOCK (AMPS) REDEMPTION VALUE ..................... (214,375,000)
---------------
TOTAL NET ASSETS AVAILABLE TO COMMON STOCK ................................. $ 720,459,314
===============

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

** Securities distributing Qualified Dividend Income only.

*** Aggregate cost of securities held.

**** Securities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration to qualified institutional buyers. These securities have been
determined to be liquid under the guidelines established by the Board of
Directors.

(1) All or a portion of this security is pledged as collateral for the Fund's
loan. (See Note 7). The total value of such securities was $906,548,990 at
May 31, 2008.

(2) Foreign Issuer.

(3) A portion of this security is on loan.

+ Non-income producing.

++ The percentage shown for each investment category is the total value of
that category as a percentage of total net investments.

ABBREVIATIONS:

PFD. -- Preferred Securities

PVT. -- Private Placement Securities

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, 2008 (UNAUDITED)

ASSETS:
Investments, at value (Cost $1,439,302,725) including $591,689 of
securities on loan. ............................................ $ 1,249,913,923
Receivable for investments sold ...................................... 4,613,907
Dividends and interest receivable .................................... 17,228,702
Prepaid expenses ..................................................... 923,240
----------------
Total Assets .................................................. 1,272,679,772

LIABILITIES:
Payable for securities lending collateral ............................ $ 601,520
Loan Payable ......................................................... 327,625,000
Payable for investments purchased .................................... 8,015,569
Dividends payable to Common Stock Shareholders ....................... 311,734
Investment advisory fee payable ...................................... 465,885
Administration, Transfer Agent and Custodian fees payable ............ 75,969
Servicing agent fees payable ......................................... 128,122
Professional fees payable ............................................ 100,928
Directors' fees payable .............................................. 3,970
Accrued expenses and other payables .................................. 198,620
Accumulated undeclared distributions to Auction Market Preferred
Stock Shareholders .............................................. 318,141
---------------
Total Liabilities ............................................. 337,845,458
----------------

AUCTION MARKET PREFERRED STOCK (8,575 SHARES OUTSTANDING)
REDEMPTION VALUE ..................................................... 214,375,000
----------------
NET ASSETS AVAILABLE TO COMMON STOCK .................................... $ 720,459,314
================

NET ASSETS AVAILABLE TO COMMON STOCK consist of:
Distributions in excess of net investment income ..................... $ (1,899,178)
Accumulated net realized loss on investments sold .................... (100,130,845)
Unrealized depreciation of investments ............................... (189,388,802)
Par value of Common Stock ............................................ 426,017
Paid-in capital in excess of par value of Common Stock ............... 1,011,452,122
----------------
Total Net Assets Available to Common Stock .................... $ 720,459,314
================
NET ASSET VALUE PER SHARE OF COMMON STOCK:
Common Stock (42,601,719 shares outstanding) ....................... $ 16.91
================

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, 2008 (UNAUDITED)

INVESTMENT INCOME:
Dividends+ ...................................................... $ 26,685,016
Interest ........................................................ 25,585,997
----------------
Total Investment Income .................................... 52,271,013

EXPENSES:
Investment advisory fee ......................................... $ 2,815,260
Servicing agent fee ............................................. 780,722
Administrator's fee ............................................. 267,593
Auction Market Preferred Stock broker commissions and auction
agent fees .................................................. 702,342
Professional fees ............................................... 107,361
Insurance expense ............................................... 80,793
Transfer Agent fees ............................................. 116,811
Directors' fees ................................................. 39,345
Custodian fees .................................................. 56,448
Compliance fees ................................................. 19,802
Interest expense ................................................ 418,789
Other ........................................................... 381,807
Total Expenses ............................................. 5,787,073
----------------
NET INVESTMENT INCOME ................................................... 46,483,940
----------------

REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized gain/(loss) on investments sold during the period .. (21,844,754)
Net realized gain/(loss) from written options during the period . (434,664)
Change in unrealized appreciation/depreciation of investments ... (77,503,200)
----------------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS ......................... (99,782,618)
----------------
DISTRIBUTIONS TO AUCTION MARKET PREFERRED STOCK SHAREHOLDERS:
From net investment income (including changes in accumulated
undeclared distributions) ..................................... (13,550,694)
----------------

NET DECREASE IN NET ASSETS TO COMMON STOCK RESULTING FROM OPERATIONS .... $ (66,849,372)
================

----------
+ For Federal income tax purposes, a significant portion of this amount may
not qualify for the inter-corporate dividends received deduction ("DRD")
or as qualified dividend income ("QDI") for individuals.

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 AVAILABLE TO COMMON STOCK

SIX MONTHS ENDED
MAY 31, 2008 YEAR ENDED
(UNAUDITED) NOVEMBER 30, 2007
---------------- -----------------

OPERATIONS:
Net investment income .............................................. $ 46,483,940 $ 95,288,383
Net realized loss on investments sold during the period ............ (22,279,418) (10,274,657)
Change in net unrealized depreciation of investments ............... (77,503,200) (168,932,352)
Distributions to AMPS* Shareholders from net investment income,
including changes in accumulated undeclared distributions ....... (13,550,694) (28,922,214)
------------- --------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ............... (66,849,372) (112,840,840)

DISTRIBUTIONS:
Dividends paid from net investment income to Common Stock
Shareholders (1) ................................................ (33,868,367) (65,180,630)
------------- --------------
TOTAL DISTRIBUTIONS TO COMMON STOCK SHAREHOLDERS ................... (33,868,367) (65,180,630)

FUND SHARE TRANSACTIONS:
Increase from shares issued under the Dividend Reinvestment and
Cash Purchase Plan ............................................. -- --
------------- --------------
NET INCREASE IN NET ASSETS AVAILABLE TO COMMON STOCK RESULTING FROM
FUND SHARE TRANSACTIONS ........................................ -- --
------------- --------------
NET DECREASE IN NET ASSETS AVAILABLE TO COMMON STOCK FOR THE PERIOD .... $(100,717,739) $ (178,021,470)
============= ==============

NET ASSETS AVAILABLE TO COMMON STOCK:
Beginning of period ................................................ $ 821,177,053 $ 999,198,523
Net decrease in net assets during the period ....................... (100,717,739) (178,021,470)
------------- --------------
End of period (including distributions in excess of net investment
income of ($1,899,178) and ($964,057), respectively) ............ $ 720,459,314 $ 821,177,053
============= ==============

----------
* Auction Market Preferred Stock.

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

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

Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED MAY 31, 2008 (UNAUDITED)

INCREASE (DECREASE) IN CASH
CASH FLOWS FROM OPERATING ACTIVITIES:
Net decrease in net assets resulting from operations ...................... $ (66,849,372)
ADJUSTMENTS TO RECONCILE NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS
TO NET CASH USED IN OPERATING ACTIVITIES:
Purchase of investment securities ......................................... (358,629,652)
Proceeds from disposition of investment securities ........................ 360,291,520
Purchase of purchased option securities ................................... (4,759,005)
Proceeds from disposition of purchased option securities .................. 1,166,571
Purchase of written option securities ..................................... 3,152,799
Proceeds from disposition of written option securities .................... (3,587,463)
Purchase of short-term investment securities, net ......................... (1,545,177)
Decrease in receivable for securities lending collateral .................. 1,681,280
Increase in dividends and interest receivable ............................. (666,691)
Increase in receivable for investments sold ............................... (1,623,437)
Increase in Prepaid expenses .............................................. (819,785)
Net amortization/(accretion) of premium/(discount) ........................ 326,317
Increase in payable for investments purchased ............................. 7,049,481
Decrease in payable for securities lending collateral ..................... (1,681,280)
Increase in accrued expenses and other liabilities ........................ 69,321
Unrealized depreciation on securities ..................................... 77,503,200
Net realized loss from investments and written options .................... 22,279,418
-----------------
Net cash provided in operating activities ............................ 33,358,045
-----------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in Loan payable .................................................. 327,625,000
Decrease in Auction Market Preferred Stock (AMPS) ......................... (327,625,000)
Decrease in payable for AMPS .............................................. (186,826)
Decrease in dividend payable to common stock shareholders ................. (72,474)
Distributions to common stock shareholders from net investment income ..... (33,868,367)
-----------------
Net cash used by financing activities ................................ (34,127,667)
-----------------
Net decrease in cash ................................................. (769,622)
CASH:
Beginning of the period ................................................. 769,622
-----------------
End of the period ....................................................... $ --
=================

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid during the period ........................................... 327,028
-----------------

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

Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
FINANCIAL HIGHLIGHTS
FOR A COMMON STOCK 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 FROM
ENDED YEAR ENDED NOVEMBER 30, JANUARY 31, 2003 (1)
MAY 31, 2008 ----------------------------------------------------- THROUGH
(UNAUDITED) 2007 2006 2005 2004 NOVEMBER 30, 2003
------------ ---------- ---------- ---------- ---------- --------------------

PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning
of period .................. $ 19.28 $ 23.45 $ 22.64 $ 24.10 $ 25.74 $ 23.82 (2)
------------ ---------- ---------- ---------- ---------- ------------
INVESTMENT OPERATIONS:
Net investment income ........ 1.09 2.24 2.04 1.96 2.05 1.46
Net realized and unrealized
gain/(loss) on investments .. (2.34) (4.20) 0.95 (0.94) (0.53) 2.07
DISTRIBUTIONS TO AMPS*
SHAREHOLDERS:
From net investment income ... (0.32) (0.68) (0.61) (0.39) (0.19) (0.06)
From net realized capital
gains ...................... -- -- -- -- -- (0.03)
Total from investment ------------ ---------- ---------- ---------- ---------- ------------
operations ................. (1.57) (2.64) 2.38 0.63 1.33 3.44
------------ ---------- ---------- ---------- ---------- ------------
COST OF ISSUANCE OF AMPS* .... -- -- -- -- -- (0.14)
DISTRIBUTIONS TO COMMON STOCK
SHAREHOLDERS: ------------ ---------- ---------- ---------- ---------- ------------
From net investment income ... (0.80) (1.53) (1.57) (2.09) (2.10) (1.38)
From return of capital ....... -- -- -- 0.00 (3) -- --
From net realized capital
gains ...................... -- -- -- -- (0.87) --
Total distributions to Common ------------ ---------- ---------- ---------- ---------- ------------
Stock Shareholders ......... (0.80) (1.53) (1.57) (2.09) (2.97) (1.38)
Net asset value, end of ------------ ---------- ---------- ---------- ---------- ------------
period ..................... $ 16.91 $ 19.28 $ 23.45 $ 22.64 $ 24.10 $ 25.74
============ ========== ========== ========== ========== ============
Market value, end of period .. $ 15.93 $ 17.17 $ 21.89 $ 20.03 $ 25.30 $ 26.66
Total investment return based
on net asset value** ....... (7.92%)**** (11.33%) 11.78% 2.81% 5.41% 14.15%**** (4)
Total investment return based
on market value ** ......... (2.59%)**** (15.40%) 17.94% (13.36%) 6.84% 12.65%**** (4)
RATIOS TO AVERAGE NET ASSETS
AVAILABLE TO COMMON STOCK
SHAREHOLDERS:
Total net assets, end of
period (in 000's) ........ $ 720,459 $ 821,177 $ 999,199 $ 964,419 $1,022,084 $ 1,058,452
Operating expenses (5) ..... 1.51%*** 1.18% 1.15% 1.16% 1.15% 1.01%***
Net investment income + .... 8.61%*** 7.05% 6.32% 6.59% 7.57% 6.65%***
SUPPLEMENTAL DATA:++
Portfolio turnover rate .... 28%**** 60% 55% 25% 23% 101%****
Total net investments,
end of period (in 000's) . $ 1,262,459 $1,363,177 $1,541,199 $1,506,419 $1,564,084 $ 1,600,452
Ratio of operating
expenses (5) to total
net investments .......... 0.89%*** 0.75% 0.74% 0.75% 0.75% 0.72%***

-----------
* Auction Market Preferred Stock.

** Assumes reinvestment of distributions at the price obtained by the Fund's
Dividend Reinvestment and Cash Purchase Plan.

*** Annualized.

**** Not annualized.

+ The net investment income ratios reflect income net of operating expenses,
including interest expense, and payments to AMPS Shareholders.

++ Information presented under heading Supplemental Data includes AMPS and
loan principal balance.

(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) Return of capital applicable to 2005 only and per share amount was less
than $0.005.

(4) 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.

(5) Includes interest expense (see Note 7).

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

Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
FINANCIAL HIGHLIGHTS (CONTINUED)
PER SHARE OF COMMON STOCK

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

December 31, 2007 .............. $ 0.1325 $ 18.51 $ 16.16 $ 16.48
January 31, 2008 ............... 0.1325 19.09 17.84 17.93
February 29, 2008 .............. 0.1325 18.62 16.42 16.61
March 31, 2008 ................. 0.1325 16.88 14.84 15.22
April 30, 2008 ................. 0.1325 17.27 15.32 15.76
May 31, 2008 ................... 0.1325 16.91 15.93 15.81

----------
(1) Whenever the net asset value per share of the Fund's Common Stock is less
than or equal to the market price per share on the reinvestment date, new
shares issued will be valued at the higher of net asset value or 95% of
the then current market price. Otherwise, the reinvestment shares of
common stock will be purchased in the open market.

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

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
ASSET LIQUIDATION
TOTAL SHARES COVERAGE PREFERENCE
DATE OUTSTANDING (1) PER SHARE (2) PER SHARE
-------- --------------- ------------- -----------

05/31/08* 8,575 $ 109,056 $ 25,000
11/30/07 21,680 62,900 25,000
11/30/06 21,680 71,112 25,000
11/30/05 21,680 69,502 25,000
11/30/04 21,680 72,153 25,000
11/30/03 21,680 73,827 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.

* 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") 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
"1940 Act"). 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 the financial statements is in conformity with the U.S. generally
accepted accounting principles ("US GAAP") 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.

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 available 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 and (ii) the aggregate liquidation value of its Auction
Market Preferred Stock ("AMPS").

The Fund's preferred and debt securities are valued on the basis of
current market quotations provided by independent pricing services or dealers
approved by the Board of Directors of the Fund. Each quotation is based on the
mean of the bid and asked prices of a security. In determining the value of a
particular preferred or debt security, a pricing service or dealer may use
information with respect to transactions in such investments, quotations, market
transactions in comparable investments, various relationships observed in the
market between investments, and/or calculated yield measures based on valuation
technology commonly employed in the market for such investments. Common stocks
that are traded on stock exchanges are valued at the last sale price or official
close price on the exchange, as of the close of business on the day the
securities are being valued or, lacking any sales, at the last available mean
price. Futures contracts and option contracts on futures contracts are valued on
the basis of the settlement price for such contracts on the primary exchange on
which they trade. Investments in over-the-counter derivative instruments, such
as interest rate swaps and options thereon ("swaptions"), are valued using
prices supplied by a pricing service, or if such prices are unavailable, prices
provided by a single broker or dealer that is not the counterparty or, if no
such prices are available, at a price at which the counterparty to the contract
would repurchase the instrument or terminate the contract. 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.

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

Investments in money market instruments and all debt and preferred
securities 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.

In September 2006, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 157 "Fair Value
Measurements" ("SFAS 157") effective for fiscal years beginning after November
15, 2007. This standard clarifies the definition of fair value for financial
reporting, establishes a framework for measuring fair value and requires
additional disclosures about the use of fair value measurements. The Fund has
adopted SFAS 157 as of December 1, 2007. The three levels of the fair value
hierarchy under SFAS 157 are described below:

- Level 1 - quoted prices in active markets for identical securities

- Level 2 - other significant observable inputs (including quoted
prices for similar securities, interest rates, prepayment speeds,
credit risk, etc.)

- Level 3 - significant unobservable inputs (including the Fund's own
assumptions in determining the fair value of investments)

The inputs or methodology used for valuing securities are not necessarily
an indication of the risk associated with investing in those securities. A
summary of the inputs used to value the Fund's net assets as of May 31, 2008 is
as follows:

OTHER FINANCIAL
INSTRUMENTS
INVESTMENTS (UNREALIZED
IN SECURITIES APPRECIATION/
VALUATION INPUTS (MARKET VALUE) DEPRECIATION)*
---------------------------------------------- --------------- ---------------

Level 1 - Quoted Prices - Investments ........... $ 369,825,329 $ --
Level 2 - Other Significant Observable Inputs .... 863,614,706 --
Level 3 - Significant Unobservable Inputs ........ 15,872,368 --
--------------- ---------------
TOTAL ............................................ $ 1,249,312,403 $ --

------------
* Other financial instruments are derivative instruments not reflected in
the Schedule of Investments, such as futures, forwards and swaps which are
valued at the unrealized appreciation/depreciation on the investment. As
of May 31, 2008 the Fund does not have any other financial instruments.

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

Following is a reconciliation of Level 3 investments for which significant
unobservable inputs were used to determine fair value:

OTHER FINANCIAL
INSTRUMENTS
INVESTMENTS (UNREALIZED
IN SECURITIES APPRECIATION/
(MARKET VALUE) DEPRECIATION)
-------------- ---------------

BALANCE AS OF 11/30/07 ................................... $ 18,329,730 $ --
Accrued discounts/premiums ............................... 85,310 --
Realized gain (loss) ..................................... -- --
Change in unrealized appreciation (depreciation) ......... (2,542,672) --
Net purchases (sales) .................................... -- --
Transfers in and/or out of Level 3 ....................... -- --
-------------- ---------------
BALANCE AS OF 05/31/08 ................................... $ 15,872,368 $ --

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 the accrual basis. The Fund
also amortizes premiums and accretes discounts on fixed income securities using
the effective yield method.

OPTIONS: Purchases of options are recorded as an investment, the value of
which is marked-to-market at each valuation date. 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.

When the Fund writes an option, an amount equal to the premium received by
the Fund is recorded as a liability, the value of which is marked-to-market at
each valuation date. When a written option expires, the Fund realizes a gain
equal to the amount of the premium originally received. When the Fund enters
into a closing purchase transaction, the Fund realizes a gain (or loss if the
cost of the closing purchase transaction exceeds the premium received when the
option was written) without regard to any unrealized gain or loss on the
underlying security, and the liability related to such option is eliminated.
When a call option is exercised, the Fund realizes a gain or loss from the sale
of the underlying security and the proceeds from such sale are increased by the
amount of the premium originally received. When a put option is exercised, the
amount of the premium originally received will reduce the cost of the security
which the Fund purchased upon exercise.

The risk in writing a call option is that the Fund may forego the
opportunity for profit if the market price of the underlying security increases
and the option is exercised. The risk in writing a put option is that the Fund
may incur a loss if the market price of the underlying security decreases and
the option is exercised.

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

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.

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 will be required.

In June 2006, the FASB issued FASB Interpretation 48 ("FIN 48"),
"Accounting for Uncertainty in Income Taxes." This standard defines the
threshold for recognizing the benefits of tax-return positions in the financial
statements as "more-likely-than-not" to be sustained by the taxing authority and
requires measurement of a tax position meeting the more-likely-than-not
criterion, based on the largest benefit that is more than 50 percent likely to
be realized. FIN 48 became effective as of the beginning of the first fiscal
year beginning after December 15, 2006, with early application permitted if no
interim financial statements have been issued. At adoption, companies must
adjust their financial statements to reflect only those tax positions that are
more-likely-than-not to be sustained as of the adoption date. As of May 31,
2008, the Fund has evaluated the adoption of FIN 48 and determined that there is
no material impact on the financial statements.

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 will be 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 capital gains may be used by the Fund's Shareholders as a credit
against their own tax liabilities. The Fund may pay distributions in excess of
the Fund's net investment company taxable income and this excess would be a
tax-free return of capital distributed from the Fund's assets.

Income and capital gain distributions are determined and characterized in
accordance with income tax regulations which may differ from US GAAP. 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 certain fixed 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 2008 and 2007 were as follows:

DISTRIBUTIONS PAID IN FISCAL YEAR 2008 DISTRIBUTIONS PAID IN FISCAL YEAR 2007
-------------------------------------- --------------------------------------
ORDINARY LONG-TERM ORDINARY LONG-TERM
INCOME CAPITAL GAINS INCOME CAPITAL GAINS
-------- ------------- ------------ -------------

Common N/A N/A $ 65,180,630 $ 0
Preferred N/A N/A $ 28,922,214 $ 0

As of November 30, 2007, 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 NET UNREALIZED
CAPITAL (LOSS) CARRYFORWARD ORDINARY INCOME LONG-TERM GAIN APPRECIATION/(DEPRECIATION)
--------------------------- --------------- -------------- ---------------------------

($76,185,892) $ 4,161,601 $ 0 ($113,551,137)

At November 30, 2007, the composition of the Fund's $76,185,892
accumulated realized capital losses was $39,515,188, $17,502,863 and $19,167,841
incurred in 2004, 2005 and 2007, respectively. These losses may be carried
forward and offset against any future capital gains through 2012, 2013 and 2015,
respectively.

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 $107,901 of Federal excise taxes attributable to
calendar year 2007 and $5,185 attributable to calender year 2006 in March 2008.

ADDITIONAL ACCOUNTING STANDARDS: In March 2008, the FASB issued Statement
of Financial Accounting Standards No. 161, "Disclosures about Derivative
Instruments and Hedging Activities" ("SFAS 161"). SFAS 161 is effective for
fiscal years and interim periods beginning after November 15, 2008. SFAS 161
requires enhanced disclosures about the Fund's derivative and hedging
activities. Management is currently evaluating the impact the adoption of SFAS
161 will have on the Fund's financial statement disclosures.

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

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.

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

For purposes of calculating the fees payable to the Adviser, Servicing
Agent, Administrator and Custodian, the Fund's average weekly total managed
assets means the total assets of the Fund (including any assets attributable to
any Fund auction market preferred stock that may be outstanding or otherwise
attributable to the use of leverage) minus the sum of accrued liabilities (other
than debt, if any, representing financial leverage). For purposes of determining
total managed assets, the liquidation preference of any preferred shares issued
by the Fund is not treated as a liability.

Claymore Securities, Inc. (the "Servicing Agent") serves as the Fund's
shareholder servicing agent. 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.

PNC Global Investment Servicing (U.S.) Inc. ("PNC"), formerly known as
PFPC Inc., serves as the Fund's Administrator. As Administrator, PNC calculates
the net asset value of the Fund's shares attributable to Common Stock and
generally assists in all aspects of the Fund's administration and operation. As
compensation for PNC's services as Administrator, the Fund pays PNC 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.

PNC also serves as the Fund's Common Stock dividend-paying agent and
registrar (Transfer Agent). As compensation for PNC's services, the Fund pays
PNC 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, 0.0075% of the next $350
million of the Fund's average weekly net assets attributable to Common Stock,
and 0.0025% of the Fund's average weekly net assets attributable to Common Stock
above $500 million, plus certain out-of-pocket expenses. For purpose of
calculating such fee, the Fund's average weekly net assets attributable to the
Common Stock are deemed to be the average weekly value of the Fund's total
assets minus the sum of the Fund's liabilities. For this calculation, the Fund's
liabilities are deemed to include the aggregate liquidation preference of any
outstanding Fund preferred shares and the loan principal balance.

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)

The Fund currently pays the Adviser a fee of $37,500 per annum for Chief
Compliance Officer services and reimburses out-of-pocket expenses incurred in
connection with providing services in this role.

4. PURCHASES AND SALES OF SECURITIES

For the six months ended May 31, 2008, the cost of purchases and proceeds
from sales of securities excluding short-term investments, aggregated
$358,677,719 and $359,952,781, respectively.

At May 31, 2008, the aggregate cost of securities for federal income tax
purposes was $1,440,968,259 the aggregate gross unrealized appreciation for all
securities in which there is an excess of value over tax cost was $7,370,761 and
the aggregate gross unrealized depreciation for all securities in which there is
an excess of tax cost over value was $198,425,097.

Written option transactions during the six months ended May 31, 2008, are
summarized as follows:

CONTRACT PREMIUMS
AMOUNTS RECEIVED
-------- ------------

Written options outstanding at beginning of period..................... 0 $ 0
-------- -----------

Options Opened ........................................................ 1,800 3,152,799
Options Exercised ..................................................... 0 0
Options Expired ....................................................... 0 0
Options Closed ........................................................ (1,800) (3,152,799)
-------- -----------
Written options outstanding at end of period .......................... 0 $ 0

5. COMMON STOCK

At May 31, 2008, 240,000,000 shares of $0.01 par value Common Stock were
authorized. Common Stock transactions were as follows:

SIX MONTHS ENDED YEAR ENDED
05/31/08 11/30/07
--------------- ---------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------

Shares issued under the Dividend Reinvestment and Cash
Purchase Plan ......................................... -- $ -- -- $ --
------ ------ ------ ------

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
result in the financial leveraging of the Common Stock. Such leveraging tends to
magnify both the risks and opportunities to Common Stock Shareholders. Dividends
on shares of AMPS are cumulative.

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

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, if any, between auction dates. Since mid-February 2008, the normal
functioning of the market for auction market preferred shares of U.S. closed-end
funds, including the Fund, has been disrupted, and the Fund's AMPS holders have
not been able to sell their shares through the auction process.

On May 1, 2008, the Fund announced the redemption of approximately 70% of
each series of its outstanding AMPS at a redemption price equal to the
liquidation preference of $25,000 per share, plus the amount of accumulated but
unpaid dividends. Redemptions of 2,226 shares for each of Series T7, W7, Th7,
and F7 were completed on May 21, May 22, May 23, and May 27, respectively.
Redemption of 1,975 shares of Series T28 was completed on May 21, redemption of
2,226 shares of Series M7 was completed on May 27, and redemption of 1,975
shares of Series W28 was completed after the end of the fiscal quarter on June
5. Total consideration for the liquidation preference of the redemptions was
$377 million (See Note 7).

At May 31, 2008, 974 shares for each of Series M7, T7, W7, Th7 and F7, 865
shares for Series T28 and 2,840 shares for Series W28 of AMPS were outstanding
at the annualized rate of 4.73%, 4.49%, 4.53%, 4.55%, 4.63%, 4.76% and 4.80% for
Series M7, T7, W7, Th7, F7, T28 and W28, respectively. As a result of the
redemption after the end of the fiscal quarter, Series W28 had 865 shares
outstanding as of June 5. The dividend rate, as set by the auction process, is
generally expected to vary with short-term interest rates. As a result of
ongoing disruptions in the auction market, the Fund is paying a dividend rate
equal to the maximum rate, as defined in the Fund's Articles Supplementary. The
maximum rate is equal to the greater of (i) 175% of the reference rate and (ii)
2.50% plus the reference rate. "Reference Rate" means the applicable "AA"
Financial Composite Commercial Paper Rate. 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. COMMITTED FINANCING AGREEMENT

The Fund entered into a committed financing agreement ("Financing
Agreement") on May 1, 2008 which allows the Fund to borrow up to $389 million on
a secured basis. The primary use of the proceeds was to redeem a portion of the
outstanding shares of AMPS (See Note 6), although the balance may be utilized by
the Fund in the normal course of business as financial leverage. As of May 31,
2008, the amount borrowed under the Financing Agreement was $327.625 million.
Subsequent to the end of the fiscal quarter, another $49.375 million was drawn
on June 4, 2008.

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

Under the terms of the Financing Agreement, the lender will charge an
annualized rate of 0.60% on the undrawn (committed) balance ("Commitment Fee"),
and the Overnight London Interbank Offered Rate (LIBOR) plus 0.70% on the drawn
(borrowed) balance. For the period beginning on May 20, 2008 (initial use of the
facility) and ending on May 31, 2008, the daily weighted average annualized
interest rate on the drawn balance was 2.97%. In addition, the Fund paid the
Lender an arrangement fee equal to 0.25% of the committed amount of $389
million. The arrangement fee will be amortized to expenses over a period of six
months. LIBOR 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.

The Fund is required to meet certain asset coverage requirements under the
Financing Agreement and under the 1940 Act. In accordance with the asset
coverage requirements, approximately two-thirds of the Fund's assets are
expected to be pledged as collateral assuming the full committed amount is
drawn. Securities pledged as collateral are identified in the portfolio of
investments. If the Fund fails to meet these requirements, or maintain other
financial covenants required under the Financing Agreement, the Fund may be
required to repay immediately, in part or in full, the amount borrowed under the
Financing Agreement. Additionally, failure to meet the foregoing requirements or
covenants could restrict the Fund's ability to pay dividends to Common Stock
Shareholders and could necessitate sales of portfolio securities at inopportune
times. The Financing Agreement has no stated maturity, but may be terminated by
either party without cause with six months' advance notice.

8. PORTFOLIO INVESTMENTS, CONCENTRATION AND INVESTMENT QUALITY

The Fund invests primarily in a diversified portfolio of preferred
securities. This includes fully taxable 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. Also, 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. The Fund's
portfolio may therefore be subject to greater risk and market fluctuation than a
portfolio of securities representing a broader range of investment alternatives.

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, if unrated,
judged to be comparable in quality by the Adviser, in any 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, will be
subject to the foregoing 20% limitation to the extent that, in the opinion of
the Adviser, such investments are deemed to be debt-like

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

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.

In addition to foreign money market securities, the Fund may invest up to
30% of its total assets in the 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.

9. 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
investment policies, involving any or all of the following: short sales of
securities, purchases of securities on margin, futures contracts, interest rate
swaps, swap futures, options on futures contracts, options on securities,
swaptions, and certain credit derivative transactions including, but not limited
to, the purchase and sale of credit protection. As in the case of when-issued
securities, the use of over-the-counter derivatives, such as interest rate
swaps, swaptions, and credit default swaps may expose the Fund to greater
credit, operations, liquidity, and valuation risk than is the case with
regulated, exchange traded futures and options. These transactions are used for
hedging or other appropriate risk-management purposes, or, under certain other
circumstances, to increase return. 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.

10. SECURITIES LENDING

The Fund may lend up to 15% of its total assets (including the value of
the loan collateral) to certain qualified brokers in order to earn additional
income. The Fund receives compensation in the form of fees or interest earned on
the investment of any cash collateral received. The Fund also continues to
receive interest and dividends on the securities loaned. The Fund receives
collateral in the form of cash or securities with a market value at least equal
to the market value of the securities on loan, including accrued interest. In
the event of default or bankruptcy by the borrower, the Fund could experience
delays and costs in recovering the loaned securities or in gaining access to the
collateral. The Fund has the right under the lending agreement to recover the
securities from the borrower on demand. As of May 31, 2008, the market value of
securities loaned by the Fund was $591,689. The loans were secured with
collateral of $601,520. Income from securities lending for the six months ended
May 31, 2008, was $61,278 and is included in interest income on the Statement of
Operations.

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 PNC 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, PNC will buy shares of the Fund's Common Stock
in the open market, on the New York Stock Exchange ("NYSE") 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 PNC 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, PNC 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 PNC's open
market purchases in connection with the reinvestment of dividends or capital
gains distributions. For the six months ended May 31, 2008, $3,877 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 dividend
payment date, a dividend or distribution in an amount equal to the cash that the
participant could have received instead of shares.

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

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.

A shareholder whose Common Stock is registered in his or her own name may
terminate participation in the Plan at any time by notifying PNC in writing, by
completing the form on the back of the Plan account statement and forwarding it
to PNC, or by calling PNC, directly. A termination will be effective immediately
if notice is received by PNC 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, PNC will either (a) issue certificates for the whole
shares credited to the shareholder's Plan account and a check representing and
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 PNC 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 AND PROXY VOTING RECORD ON FORM N-PX

The Fund files Form N-PX with its complete proxy voting record for the 12
months ended June 30th no later than August 31st of each year. The Fund filed
its latest Form N-PX with the Securities and Exchange Commission ("SEC") on
August 27, 2007. This filing as well as 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 and (ii) on the SEC's website at www.sec.gov.
In addition, the Fund's proxy voting policies and procedures are available on
the Fund's website at www.fcclaymore.com.

PORTFOLIO SCHEDULE ON FORM N-Q

The Fund files a complete schedule of portfolio holdings with the SEC for
the first and third fiscal quarters on Form N-Q, the latest of which was filed
for the quarter ended February 29, 2008. The Fund's Form N-Q is available on the
SEC's website at www.sec.gov or may be viewed and obtained from the SEC's Public
Reference Room in Washington D.C. Information on the operation of the Public
Reference Section may be obtained by calling 1-800-SEC-0330.

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

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, 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.

CERTIFICATIONS

Included in the Annual Written Affirmation submitted to the NYSE, Donald
F. Crumrine, as the Fund's Chief Executive Officer, has certified that, as of
May 16, 2008, he was not aware of any violation by the Fund of applicable NYSE
corporate governance listing standards. The Fund's reports to the SEC on Forms
N-CSR and N-Q contain certifications by the Fund's principal executive officer
and principal financial officer that relate to the Fund's disclosure in such
reports and that are required by Rule 30a2(a) under the 1940 Act.

MEETING OF SHAREHOLDERS

On April 18, 2008, the Fund held its Annual Meeting of Shareholders (the
"Annual Meeting") for the following purpose: election of Directors of the Fund
("Proposal 1"). The proposal was approved by the Common Stock and Preferred
Stock Shareholders, voting together as a single class and the results of the
voting are as follows:

PROPOSAL 1: ELECTION OF DIRECTORS.

NAME FOR WITHHELD
------------------------------------------------- ---------- --------

David Gale ...................................... 39,520,990 627,695

Donald F. Crumrine, Morgan Gust, Karen H. Hogan and Robert F. Wulf
continue to serve in their capacities as Directors of the Fund.

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

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:

DAVID GALE Director Class I Director President and CEO of 4 Metromedia
Delta Dividend Group, Inc since Delta Dividend International Group, Inc.
220 Montgomery Street January 2003 Group, Inc. (investments) (telecommunications)
Suite 426
San Francisco, CA 94104
Age: 59

MORGAN GUST Director Class II Director Owner and operator of 4 CoBiz Financial, Inc.
301 E. Colorado Boulevard since various entities engaged (financial services)
Suite 720 January 2003 in agriculture and real
Pasadena, CA 91101 estate; Former President
Age: 61 of Giant Industries, Inc.
(petroleum refining and
marketing) from March 2002
through May 2007

KAREN H. HOGAN+ Director Class II Director Retired; Community 4
301 E. Colorado Boulevard since Volunteer; from September
Suite 720 July 2005 1985 to January 1997,
Pasadena, CA 91101 Senior Vice President of
Age: 47 Preferred Stock Origination
at Lehman Brothers and
previously, Vice President
of New Product Development

----------
* 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 three year term for each class expires as follows:

CLASS I DIRECTOR - three year term expires at the Fund's 2011 Annual
Meeting of Shareholders; director may continue in office until his
successor is duly elected and qualified.

CLASS II DIRECTORS - three year term expires at the Fund's 2009
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 2010
Annual Meeting of Shareholders; directors may continue in office
until their successors are duly elected and qualified.

** Each Director also serves as a Director for Flaherty & Crumrine Preferred
Income Fund, Flaherty & Crumrine 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.

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

NON-INTERESTED DIRECTORS:

ROBERT F. WULF Director; and Class III Financial Consultant; 4
P.O. Box 753 Audit Director since Trustee, University of
Neskowin, OR 97149 Committee January 2003 Oregon Foundation;
Age: 71 hairman Trustee, San Francisco
Theological Seminary

INTERESTED DIRECTOR:

DONALD F. CRUMRINE+, ++ Director, Class III Chairman of the Board 4
301 E. Colorado Boulevard Chairman of Director since and Director of Flaherty &
Suite 720 the Board January 2003 Crumrine Incorporated
Pasadena, CA 91101 and Chief
Age: 60 Executive
Officer

CLASS I DIRECTOR - three year term expires at the Fund's 2011 Annual
Meeting of Shareholders; director may continue in office until his
successor is duly elected and qualified.

CLASS II DIRECTORS - three year term expires at the Fund's 2009
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 2010
Annual Meeting of Shareholders; directors may continue in office
until their successors are duly elected and qualified.

** Each Director also serves as a Director for Flaherty & Crumrine Preferred
Income Fund, Flaherty & Crumrine 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.

++ "Interested person" of the Fund as defined in the 1940 Act. Mr. Crumrine
is considered an "interested person" because of his affiliation with
Flaherty & Crumrine Incorporated, which acts as the Fund's investment
adviser.

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

PRINCIPAL
TERM OF OFFICE OCCUPATION(S)
NAME, ADDRESS, POSITION(S) AND LENGTH OF DURING PAST
AND AGE HELD WITH FUND TIME SERVED FIVE YEARS
-------------------------------- ------------------ -------------- ------------------------------------

OFFICERS:

ROBERT M. ETTINGER President Since President and Director of Flaherty &
301 E. Colorado Boulevard January 2003 Crumrine Incorporated
Suite 720
Pasadena, CA 91101
Age: 49

R. ERIC CHADWICK Chief Financial Since Director of Flaherty & Crumrine
301 E. Colorado Boulevard Officer, Vice January 2003 Incorporated since June 2006;
Suite 720 President and Vice President of Flaherty &
Pasadena, CA 91101 Treasurer Crumrine Incorporated
Age: 33

CHAD C. CONWELL Chief Compliance Since Chief Compliance Officer of
301 E. Colorado Boulevard Officer, Vice July 2005 Flaherty & Crumrine Incorporated
Suite 720 President and since September 2005; Vice
Pasadena, CA 91101 Secretary President of Flaherty & Crumrine
Age: 35 Incorporated since July 2005;
Attorney with Paul, Hastings,
Janofsky & Walker LLP from
September 1998 to June 2005

BRADFORD S. STONE Vice President Since Director of Flaherty & Crumrine
392 Springfield Avenue and Assistant July 2003 Incorporated since June 2006;
Mezzanine Suite Treasurer Vice President of Flaherty &
Summit, NJ 07901 Crumrine Incorporated since May
Age: 48 2003; Director of U.S. Market
Strategy at Barclays Capital from
June 2001 to April 2003

LAURIE C. LODOLO Assistant Since Assistant Compliance Officer of
301 E. Colorado Boulevard Compliance July 2004 Flaherty & Crumrine Incorporated
Suite 720 Officer, Assistant since August 2004; Secretary of
Pasadena, CA 91101 Treasurer and Flaherty & Crumrine Incorporated
Age: 44 Assistant since February 2004; Account
Secretary Administrator of Flaherty & Crumrine
Incorporated

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

BOARD CONSIDERATION AND APPROVAL OF CONTINUANCE OF INVESTMENT ADVISORY AGREEMENT

During the six month period ended May 31, 2008, the Board of Directors of
the Fund approved, on January 29, 2008, the continuation of the existing
investment advisory agreement with the Adviser (the "Investment Advisory
Agreement"). The following paragraphs summarize the material information and
factors considered by the Board, including the Independent Directors, as well as
their conclusions relative to such factors.

In considering whether to approve the Fund's Investment Advisory
Agreement, the Directors considered and discussed a substantial amount of
information and analysis provided, at the Board's request, by the Adviser. The
Directors also considered detailed information regarding performance and
expenses of other investment companies thought to be generally comparable to the
Fund. The Directors discussed with management this and other information
relating to the Investment Advisory Agreement during the Special Meeting held on
January 15, 2008 for that specific purpose and requested additional information
about comparative expenses and performance, among other matters. On January 29,
2008, the Directors approved the continuance of the Investment Advisory
Agreement. In reaching their determinations relating to continuance of the
Investment Advisory Agreement, the Directors considered these discussions and
all other factors they believed relevant, including the factors discussed below.
In their deliberations, the Directors did not identify any particular
information that was all-important or controlling, and Directors may have
attributed different weights to the various factors. The Directors evaluated
this information, and all other information available to them, for the Fund, and
their determinations were made separately in respect of each other fund advised
by the Adviser. In particular, the Directors focused on the following with
respect to the Fund.

NATURE, EXTENT AND QUALITY OF SERVICES.

The Directors reviewed in detail the nature and extent of the services
provided by the Adviser and the quality of those services over the past year and
since inception. The Directors noted that these services included managing the
Fund's investment program, as well as providing significant administrative
services beyond what the Investment Advisory Agreement required. The Directors
noted that the Adviser also provided, generally at its expense: office
facilities for use by the Fund; personnel responsible for supervising the
performance of administrative, accounting and related services; and investment
compliance monitoring. The Directors also considered the Adviser's sound
financial condition and the Adviser's commitment to its business, as evidenced
by its hiring of additional personnel as the business has grown. The Directors
evaluated the Adviser's services based on their direct experience serving as
Directors for many years, focusing on (i) the Adviser's knowledge of the
preferred securities market generally and the sophisticated hedging strategies
the Fund employs and (ii) the Adviser's culture of compliance. The Directors
reviewed the personnel responsible for providing services to the Fund and
observed that, based on their experience and interaction with the Adviser: (1)
the Adviser's personnel exhibited a high level of personal integrity, diligence
and attention to detail in carrying out their responsibilities under the
Investment Advisory Agreement; (2) the Adviser was responsive to requests of the
Board and its personnel were available between Board meetings to answer

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

questions from Directors; and (3) the Adviser had kept the Board apprised of
developments relating to the Fund. The Directors also considered the continued
efforts undertaken by the Adviser to maintain an effective compliance program.
The Directors concluded that the nature and extent of the services provided were
reasonable and appropriate in relation to the Fund's investment goals and
strategies, the corporate and regulatory environment in which the Fund operates,
and the level of services provided by the Adviser, and that the quality of the
Adviser's service continues to be high.

INVESTMENT PERFORMANCE.

The Directors took note of the extraordinary market conditions prevailing
over the past year and at the time of the meetings, and expressed their
confidence in the Adviser's investment strategies despite recent disappointing
absolute performance during this period of unprecedented and frequently frantic
behavior of market participants. The Directors considered the Fund's relative
performance since inception, including its performance in recent fiscal periods,
to determine whether the Fund had met its investment objective. The Directors
determined that the Fund had done so. In reaching this conclusion, the Directors
reviewed the Fund's performance compared to relevant indices and funds thought
to be generally comparable to the Fund, considered the costs and benefits of the
Fund's hedging strategy in the relevant market environment and examined the
differences between the Fund and certain funds in the comparison group. The
Directors were assured of the Fund's adherence to its respective investment
mandate and, based on their understanding of the Adviser's investment approach
and market conditions, expressed their belief that the Adviser's absolute
performance would improve as markets normalized.

PROFITABILITY.

The Directors considered the Adviser's methodology for determining its
profitability with respect to the Fund, and the Adviser's profit margin on an
after-tax basis attributable to managing the Fund. The Directors concluded that
the profitability to the Adviser was not excessive based on the considerable
services it has regularly provided to the Fund and its success in meeting the
Fund's investment objective over time. The Directors also considered that the
Adviser provided, at a lower cost, services to separate account clients and
determined that the difference was justified in light of the additional services
and costs associated with managing registered investment companies, such as the
Fund. The Directors accepted the Adviser's statement that it did not realize
material indirect benefits from its relationship with the Fund and did not
obtain soft dollar credits from securities trading.

ECONOMIES OF SCALE.

The Directors noted that the Fund, as a closed-end investment company, was
not expected to increase materially in size; thus, the Adviser would not benefit
from economies of scale. The Directors considered whether economies of scale
could be realized because the Adviser advises other similar funds. Based on
their experience, the Directors accepted the Adviser's explanation that
significant economies of scale would not be realized because of the complexity
of managing preferred securities for separate funds and other portfolios.
Nonetheless, the Directors noted that the Fund's advisory fee schedule declines
as assets increase beyond a certain level (commonly known as a "breakpoint"),
and that breakpoints provide for a sharing with shareholders of benefits derived
as a result of economies of

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

scale arising from increased assets. Accordingly, the Directors determined that
the existing advisory fee levels reflect possible economies of scale.

In light of their discussions and considerations as described above, the
Directors made the following determinations as to the Fund:

- the nature and extent and quality of the services provided by the
Adviser are reasonable and appropriate and the quality of the
services is high;

- the Fund's overall performance over time has been satisfactory and
its performance for the recent period is reflective of market
conditions, given the Adviser's portfolio management strategy;

- the fee paid to the Adviser was reasonable in light of (i)
comparative performance and expense and advisory fee information,
considered over relevant time periods, (ii) the cost of the services
provided and profits to be realized, and (iii) the benefits derived
or to be derived by the Adviser from the relationship with the Fund;
and

- there were not at this time significant economies of scale to be
realized by the Adviser in managing the Fund's assets, and the fee
was structured to provide for a sharing of the benefits of economies
of scale.

Based on these conclusions, the Directors determined that approval of the
Investment Advisory Agreement was in the best interests of the Fund and its
shareholders.

[This page intentionally left blank]

DIRECTORS
Donald F. Crumrine, CFA
Chairman of the Board
David Gale
Morgan Gust
Karen H. Hogan
Robert F. Wulf, CFA

OFFICERS
Donald F. Crumrine, CFA
Chief Executive Officer
Robert M. Ettinger, CFA
President
R. Eric Chadwick, CFA
Chief Financial Officer,
Vice President and Treasurer
Chad C. Conwell
Chief Compliance Officer,
Vice President and Secretary
Bradford S. Stone
Vice President and
Assistant Treasurer
Laurie C. Lodolo
Assistant Compliance Officer,
Assistant Treasurer and
Assistant Secretary

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

SERVICING AGENT
Claymore Securities, Inc.
1-866-233-4001

QUESTIONS CONCERNING YOUR SHARES OF FLAHERTY & CRUMRINE/CLAYMORE PREFERRED
SECURITIES INCOME FUND?

- If your shares are held in a Brokerage Account, contact your Broker.

- If you have physical possession of your shares in certificate form,
contact the Fund's Transfer Agent --

PNC Global Investment Servicing (U.S.) Inc.
1-800-331-1710

THIS REPORT IS SENT TO SHAREHOLDERS OF FLAHERTY & CRUMRINE/CLAYMORE PREFERRED
SECURITIES INCOME FUND INCORPORATED FOR THEIR INFORMATION. IT IS NOT A
PROSPECTUS, CIRCULAR OR REPRESENTATION INTENDED FOR USE IN THE PURCHASE OR SALE
OF SHARES OF THE FUND OR OF ANY SECURITIES MENTIONED IN THIS REPORT.

(FLAHERTY&CRUMRINE/CLAYMORE LOGO)

Semi-Annual
Report

May 31, 2008

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. INVESTMENTS.

(a) Schedule of Investments in securities of unaffiliated issuers as of the
close of the reporting period is included as part of the report to
shareholders filed under Item 1 of this form.

(b) Not applicable.

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

Not applicable.

ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

There has been no change, as of the date of this filing, in any of the portfolio
managers identified in response to paragraph (a)(1) of this Item in the
registrant's most recently filed annual report on Form N-CSR.

ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.

Not applicable.

ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

There have been no material changes to the procedures by which the shareholders
may recommend nominees to the registrant's board of directors, where those
changes were implemented after the registrant last provided disclosure in
response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR
229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)),
or this Item.

ITEM 11. CONTROLS AND PROCEDURES.

(a) The registrant's principal executive and principal financial officers, or
persons performing similar functions, have concluded that the
registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940, as amended (the "1940
Act") (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days
of the filing date of the report that includes the disclosure required by
this paragraph, based on their evaluation of these controls and
procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR
270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities
Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)).

(b) There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR
270.30a-3(d)) that occurred during the registrant's second fiscal quarter
of the period covered by this report that has materially affected, or is
reasonably likely to materially affect, the registrant's internal control
over financial reporting.

ITEM 12. 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 30, 2008
----------------------------------------------------------------------------

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 30, 2008
----------------------------------------------------------------------------

By (Signature and Title)* /S/ R. ERIC CHADWICK
-------------------------------------------------------
R. Eric Chadwick, Chief Financial Officer,Treasurer and
Vice President (principal financial officer)

Date JULY 30, 2008
----------------------------------------------------------------------------

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