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

                                   FORM N-CSR

              CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
                              INVESTMENT COMPANIES

                  Investment Company Act file number 811-21129
                                                    ----------------------------

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

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

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

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

                      Date of fiscal year end: NOVEMBER 30
                                              ------------

                     Date of reporting period: MAY 31, 2005
                                              -------------


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

A registrant  is required to disclose the  information  specified by Form N-CSR,
and the  Commission  will make this  information  public.  A  registrant  is not
required to respond to the  collection  of  information  contained in Form N-CSR
unless the Form  displays a  currently  valid  Office of  Management  and Budget
("OMB")  control number.  Please direct comments  concerning the accuracy of the
information  collection  burden  estimate and any  suggestions  for reducing the
burden to Secretary,  Securities and Exchange Commission,  450 Fifth Street, NW,
Washington,  DC 20549-0609.  The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.






ITEM 1. REPORTS TO STOCKHOLDERS.

The Report to Shareholders is attached herewith.


                                [GRAPHIC OMITTED]

                                   LIGHTHOUSE

                          Flaherty & Crumrine/Claymore
                          ============================
                              PREFERRED SECURITIES
                                   INCOME FUND

                                   SEMI-ANNUAL
                                     REPORT

                                  MAY 31, 2005

                          web site: www.fcclaymore.com



FLAHERTY & CRUMRINE/CLAYMORE PREFERRED SECURITIES INCOME FUND

Dear Shareholder:

      During the first half of fiscal  2005,  the  Flaherty &  Crumrine/Claymore
Preferred Securities Income Fund performed well under challenging conditions for
investing.  For the first two fiscal quarters of 2005, the Fund produced a total
return on net asset value ("NAV") of +4.0%(1).  In the three month period ending
May 31, 2005, the total return on NAV for the Fund was -0.4%(1).  As can be seen
from the table below,  over the longer term, the Fund has outpaced the return on
the Lipper Domestic Investment Grade Bond Funds.

--------------------------------------------------------------------------------
                   TOTAL RETURN PER YEAR ON NET ASSET VALUE(1)
                         FOR PERIODS ENDING MAY 31, 2005



                                                                          ONE   LIFE OF
                                                                          YEAR  FUND(2)
                                                                          ----  -------
                                                                           
      Flaherty & Crumrine/Claymore Preferred Securities Income Fund ..    9.0%   10.1%
      Lipper Domestic Investment Grade Bond Funds(3) .................    8.1%    6.9%


----------
(1)   Based on monthly data provided by Lipper Inc. Distributions are assumed to
      be reinvested at NAV in accordance with Lipper's  practice,  which differs
      from the procedures used elsewhere in this report.

(2)   Since inception on January 31, 2003.

(3)   Includes  all U.S.  Government  bond,  mortgage  bond and term  trust  and
      investment  grade bond funds in Lipper's  closed-end fund database at each
      point in time.

--------------------------------------------------------------------------------

      Along  with  Federal  Reserve  Chairman  Alan  Greenspan,  we  share  some
confusion about the "conundrum" of falling LONG-TERM  interest rates in the face
of steady  increases in SHORT-TERM  rates. In the twelve month period ending May
31, 2005, short-term rates have climbed almost 200 basis points. During the same
period,  long-term  rates have FALLEN  over 100 basis  points.  We discuss  some
reasons  for the  flattening  yield  curve in the  Question  and Answer  ("Q&A")
section  that  follows,  but,  suffice it to say,  these yield curve  shifts are
without  precedent  for  this  phase of an  economic  cycle.  (For an even  more
in-depth  analysis,  we invite you to read the 2ND  QUARTER  REVIEW OF  ECONOMIC
CONDITIONS on the Fund's website.)

      The  flattening  yield curve has impacted the Fund in different  ways.  As
we've discussed in the past,  rising  short-term  interest rates have the direct
and  immediate  effect of  increasing  the rate  (cost) the Fund must pay on its
Auction Market Preferred Stock ("AMPS")  leverage.  Falling  long-term  interest
rates contribute to appreciation in the investment portfolio,  but also increase
the likelihood that some of the higher-yielding securities in the portfolio will
be redeemed by the issuer,  forcing us to replace them with  lower-yielding  new
issues. These were the main factors behind the dividend reduction in April.

      Market  conditions will always have a big impact on the dividend rate, and
the dividend rate on the Fund can change from time to time.  What makes the Fund
unusual, however, is the use of strategies



which are  expected  to result in the  Fund's  income  increasing  as  long-term
interest rates rise significantly,  while being relatively resistant to declines
in long-term interest rates. Nevertheless, it is important to be realistic about
the dividend.  When  long-term  interest  rates are hovering  around 4%, as they
presently  are, the  portfolio  cannot  produce the same level of income as when
these rates are at 5 or 6%.

      We resolutely avoid predicting  interest rates, but it is difficult for us
to believe that long-term interest rates can remain this low if the U.S. economy
continues to grow at the current pace.  If rates do increase,  the Fund's hedges
should  appreciate  in value and a portion of those gains could be reinvested in
additional  income-producing  securities.  In  addition,  issuers  would be less
inclined  to call  some of  their  higher-yielding  issues,  since  the  cost of
refinancing presumably also would go up.

      Of course, our investment  approach will remain the same regardless of the
direction of long-term  interest rates.  We'll identify companies with stable or
improving  fundamental  credit  quality,  and  invest  in  the  most  attractive
securities we can find at the best prices obtainable (more on this in the Q&A).

      For one of the few  times in  recent  memory,  the  size of the  preferred
market is growing by a meaningful  amount (more on this in the Q&A). We're still
assessing the implications,  but one thing is certain -- over the long run, this
is a very good thing.  In our  experience,  new supply has stimulated  preferred
market  activity and enhanced our ability to add value to the performance of the
Fund.

      It is basic  economic  theory  that prices will fall to absorb new supply,
unless  demand also  increases.  During the past  quarter,  new supply seemed to
outstrip demand by a bit, as, broadly speaking,  preferred prices underperformed
most other fixed-income market segments. The Fund's preferred holdings, however,
bucked the trend and made money during the quarter. Our returns still lagged the
performance of long-term U.S.  Treasury bonds,  but, thanks to the  "safety-net"
hedging  strategy,  the  loss  on our  hedges  was  contained  and  the  overall
performance was very respectable.

      There  are a  number  of  interesting  developments  in the  Fund  and the
preferred market.  We've addressed these in greater detail in the following Q&A.
We   also   encourage   you  to   take   advantage   of  the   Fund's   website,
WWW.FCCLAYMORE.COM.   It  contains  a  wide  range  of  useful  and   up-to-date
information about the Fund.  Finally, if you'd like to learn more about specific
preferred  issues,  visit  WWW.PREFERREDSTOCKGUIDE.COM,  a site  created  by the
Fund's manager, Flaherty & Crumrine.

      Sincerely,


      /S/DONALD F. CRUMRINE              /S/ROBERT M. ETTINGER

      Donald F. Crumrine                 Robert M. Ettinger
      Chairman of the Board              President

      July 12, 2005


                                       2


                               QUESTIONS & ANSWERS

1.    HOW DID THE FUND'S PREFERRED SECURITIES PERFORM DURING THE QUARTER?

      Broadly speaking, the Fund's preferred portfolio performed satisfactorily,
although to some extent the answer depends on which measure we use for comparing
performance.  The total return (principal change plus income) on this portion of
the Fund was +1.6% during the  quarter(1).  This compares to +5.4% for long-term
U.S. Treasury Bonds(2), +1.2% for intermediate-term corporate bonds(3) and -0.6%
for the S&P 500.

      The Fund's preferred  portfolio also  outperformed the Merrill Lynch Index
of DRD Eligible  Preferred Stock and the Merrill Lynch Index of Hybrid Preferred
Securities.   The  total   returns  on  these  indices  were  -0.3%  and  -1.4%,
respectively.

      As the numbers indicate, it is important to own the right preferreds.  The
three key  components  of our  investment  decision-making  process  are  credit
quality,  issue terms,  and price.  We spend most of our time thinking about all
three, and then fine-tuning the portfolio to reflect our best judgment.

2.    WHAT CAUSED THE OVERALL PREFERRED MARKET TO WEAKEN DURING THE QUARTER?

      The market for preferred  securities  has been  experiencing  some growing
pains recently. In contrast to the past few years when the size of the preferred
market  changed very little,  during the past few months there has been a steady
supply of new issues  brought to market.  For the market to absorb this  supply,
yields on  preferred  securities  have risen in relation  to other  fixed-income
investments,  and,  as a result,  the  broader  market of  preferred  securities
underperformed other segments of the fixed-income market.

3.    WHAT FACTORS ARE DRIVING THE GROWTH IN THE PREFERRED MARKET?

      One obvious  reason is that  issuers  find the current low  interest  rate
environment attractive.  In addition,  Moody's Investors Service ("Moody's") has
made changes which could induce some companies to issue preferred  stock. In the
esoteric  world of credit  rating,  the  treatment of  preferred  stock has been
somewhat inconsistent.  Moody's has attempted to clarify their ratings approach,
and several issuers have already responded.

      One  important  aspect  of the new  approach  at  Moody's  is to  treat an
issuer's  dividend-paying  preferred stock (with certain  characteristics)  less
like debt and more like equity than in the past. As a result, some companies may
find that  substituting  debt with  preferred can improve the "quality" of their
balance sheet and thus lower overall financing costs. Others may issue preferred
stock and use the  proceeds  for a common stock  buyback  program;  substituting
preferred  stock for common stock,  which means the company's  income and market
value are split among fewer common shares.  Preferred stock is also likely to be
used more prominently in merger and acquisition financing packages.

      We expect  the supply of new issues to  continue  at a steady,  manageable
rate over the next few quarters,  and possibly much longer.  Many companies will
now be inclined to issue preferred  securities as a bigger part of their overall
financing strategy.

----------
(1)   The return here differs  from those in the  Shareholder  letter  primarily
      because it excludes the impact of the Fund's hedging instruments.

(2)   Lehman Bros. Long U.S. Treasury Index

(3)   Lehman Bros. Intermediate U.S. Credit Index


                                       3


4.    HOW DID THE FUND'S HEDGE PERFORM DURING THE QUARTER?

      The hedge  produced a drag on  overall  performance  during  the  quarter;
however,  the put option  strategy  helped  contain the extent of the loss.  The
yield on long-term  U.S.  Treasury  bonds  declined 40 basis  points  during the
period,  from  4.72% to 4.32%.  The  Fund's  "safety-net"  hedging  strategy  is
designed to mitigate  the impact from a move of this  magnitude,  and during the
period the strategy worked as expected.

      We are asked from time to time why we continue hedging when interest rates
are falling. In hindsight,  this seems like a reasonable question,  but actually
the future  direction of interest rates is always a mystery.  Consequently,  the
Fund always employs a hedge against substantial  increases in long-term interest
rates. This is a core component of the Fund's overall investment strategy and we
have no intention of changing it.

5.    HOW DOES THE FUND'S MANAGER SELECT THE HOLDINGS IN THE PORTFOLIO?

      Owning  the best  issues  at the best  prices  sounds a lot like  favoring
motherhood  and apple pie.  To us,  however,  it means much more.  We begin with
credit quality.  Our analysts dissect the balance sheet and income statements of
every company we invest in. As investors in the preferred and debt securities of
a company,  we think more as lenders than as owners;  we're more concerned about
stability than growth.

      The next  step for us is to  understand  the  nuances  of each  particular
security we buy. If we drew a continuum  of ways to invest in a company,  common
stock would be at one end and senior  borrowing (e.g.  corporate bonds) would be
at the  other.  The area in the  middle  is  occupied  by the  various  types of
"hybrid"  securities  the Fund may invest in. The terms and  covenants for these
issues  can vary  quite a bit,  and  these  variances  affect  the  value of the
security.

      The final  step is  valuation.  We take  apart all of the pieces and use a
combination of experience and analytic tools to value each part, and then we add
them all up. With this price in hand,  we simply try to be a good neighbor -- if
someone  wants to sell below our price or buy above our price,  we'll make every
effort to accommodate them!

6.    WHAT IS THE OUTLOOK FOR THE FUND'S  DIVIDEND RATE FOR THE REMAINDER OF THE
      FISCAL YEAR?

      When the Fund reduced the monthly  dividend in April, we anticipated  that
the new rate would be sustainable  throughout the fiscal year. While we can make
no guarantees, based on our current projections, the Fund is expected to produce
sufficient income to continue the dividend at the present rate for the remainder
of the fiscal year ending November 30th.

7.    WHAT IS THE BREAKDOWN BETWEEN DIVIDENDS AND INTEREST THIS YEAR?

      Recall  that  dividends  may be taxed at lower  rates than other  types of
income for  individual  and corporate  investors  (approximately  15% and 10.5%,
respectively).   Producing   preferentially-taxed  dividend  income  is  not  an
objective of the Fund, but such dividends  comprised a meaningful portion of the
distributions in 2004 (26% for individual investors and 19% for corporate).

      Since some investors may benefit from lower tax rates on dividend  income,
we realize this is a very important question;  unfortunately, the composition of
distributions  made by the Fund cannot be determined until the end of the fiscal
year on  November  30th.  Once the books are  closed,  we add up  dividends  and
interest earned,  short and long-term  realized gains (or losses),  and subtract
the  expenses  incurred by the Fund.  Only then are we able to compute the exact
breakdown between  qualified  dividend income (eligible for lower tax treatment)
and other income.


                                       4


      A review of the  portfolio  holdings in this  report  shows that as of May
31st, 28% of the portfolio's  value was in issues that pay qualified  dividends.
THIS IS NOT THE PERCENTAGE OF INCOME THAT IS QUALIFIED DIVIDENDS.  The amount of
dividend-paying  securities  held in the  portfolio  correlates  well  with  the
composition  of the  portfolio's  income,  but there are a number of  additional
things (such as realized  gains and losses) that factor into the  breakdown.  Of
course,  the composition of the portfolio's  holdings is sure to change over the
balance of the year.

8.    WHAT IS THE OUTLOOK FOR THE FUND'S DIVIDEND RATE OVER THE LONGER TERM?

      The further we look into the future,  the hazier our crystal ball becomes.
Forecasting  the  dividend  beyond  periods  of six to  twelve  months is tricky
because the projections  must be based on assumptions  that become  increasingly
less reliable.

      An alternative  approach is to remember the primary factors that influence
the dividend:

      o     The income earned on the Fund's investment portfolio;

      o     The rate the Fund must pay on its leverage; and,

      o     The cost of the Fund's hedging strategy.

      The income earned on the Fund's  investment  portfolio  will be determined
primarily  by two things -- the level of  long-term  interest  rates  (typically
measured by the yield on 30 year U.S.  Treasury bonds),  and the relationship of
yields on  preferred  securities  to the yield on 30 year U.S.  Treasury  bonds.
Recently,  the yield on the 30 year U.S.  Treasury bond has been hovering around
historically low levels,  AND yields on preferred  securities also appear low by
historical standards.  If these conditions persist for long, we'll start to feel
the pinch on our investment  income, as issuers accelerate the redemption of our
higher-yielding securities.

      The rate the Fund  pays on its  shares  of AMPS  (the  securities  used to
leverage  the  Fund)  is  closely  correlated  to  short-term  rates.  The  much
publicized  increases in short-term  interest rates  orchestrated by the Federal
Reserve have  materially  increased  the Fund's cost of leverage.  In the months
leading up to the Fed's policy change last year,  the Fund was paying roughly 1%
on its leverage. Recently, the rate has been closer to 3%!

      The  cost  of  the  Fund's  hedging  strategy  is  the  third  major  item
influencing the dividend rate. We like to use the analogy of an insurance policy
-- the fund pays  premiums  to buy  "insurance",  and we  collect  if  long-term
interest  rates rise  significantly.  The cost of the insurance is determined by
many things,  but a key item is the  differential  between  short- and long-term
interest rates. As a general rule, when this  differential is large, the cost of
hedging is high.  Since  short-term  rates have been rising and long-term  rates
have been falling, the cost of the Fund's hedges has been falling.

      Put it all together and we have a three-legged  dividend  stool,  and each
leg can move up or down for different reasons. Trying to forecast changes in one
leg is difficult enough, let alone all three. Having said that, we can make some
general  observations about how the legs of the stool relate to one another.  We
have already noted that falling  long-term  interest rates and rising short-term
interest  rates tend to lower  income.  At the same time, a flatter  yield curve
(i.e. a smaller  difference  between  long and short  rates)  lowers the cost of
hedging, potentially improving returns going forward. Although far from perfect,
over the long run there is some  degree of  balance  among the three legs of the
stool.


                                       5


      As mentioned in the letter, the dividend rate on the Fund does change from
time to time.  The Fund's  hedging  strategy is  intended to make the  increases
larger and more frequent, but cuts will be made occasionally.  Market conditions
have a big impact on the  dividend  rate,  but over time we  believe  the Fund's
strategy  (and our  ability to execute  it) should  deliver  more income for our
investors.

9.    HOW DOES THE FUND SET THE DIVIDEND?

      The  Fund's  Board of  Directors  must  declare  each and  every  dividend
distribution.  The distribution  amounts are based upon projections  provided to
the Board by management,  and are based on  considerations  like those discussed
above.

      Early in the life of the  Fund,  the  Board  adopted  the  procedure  of a
"Standing  Dividend  Resolution",  declaring a continuing  monthly dividend at a
specified  rate.   Unless  the  Board  acts  to  change  the  Standing  Dividend
Resolution,  the Fund will continue to pay the dividend at the prevailing  rate.
If and when conditions  warrant,  management will request a meeting of the Board
and recommend a different  rate, and a new Standing  Dividend  Resolution may be
adopted.

10.   WHY HAVE LONG AND SHORT RATES MOVED IN OPPOSITE  DIRECTIONS  AND WILL THIS
      PATTERN PERSIST GOING FORWARD?

      Normally  during periods of Federal  Reserve  tightening,  the yield curve
"flattens" as short rates rise more than long rates.  However, in this period of
Fed  tightening  the yield curve has flattened  dramatically  because long rates
have fallen even as short rates have increased -- an unprecedented development.

      There are a number of  reasons  why long  rates have  fallen  during  this
period.  Analysts  have cited foreign  trade  policy,  shifts in global  savings
patterns, subdued inflation, and increased demand for long-duration assets. More
recently,  concerns over slowing  economic  growth  outside the U.S. have pushed
global yields lower, particularly in Europe. Finally, technical factors probably
contributed to lower yields as well:  many investors  correctly  anticipated Fed
tightening,  but not the decline in long rates,  causing some to cover shorts in
long-term bonds at higher prices and lower yields.

      The second part of the question,  will this pattern persist going forward,
is more difficult to answer, but we believe the answer is no. Put simply, if the
Fed keeps  tightening and bonds keep rallying,  soon investors would earn higher
yields on less volatile  short-term  instruments than on more volatile long-term
bonds.   Foreign  investors  in  particular  then  might  shift  investments  to
short-term   instruments   as  their   yields   rise  above   those  of  current
longer-duration holdings. In addition,  business investment remains sturdy while
corporate  profit  growth  has  slowed,  suggesting  that  corporate  demand for
borrowing and hence bond issuance may increase in coming quarters.

      There are many, many pieces to the yield-curve  puzzle, but putting it all
together,  we expect that  short-term and long-term rates will move more closely
together - and in the same  direction!  - going  forward,  which should  benefit
either our cost of leverage if rates fall or our hedges if rates increase.


                                       6


--------------------------------------------------------------------------------
Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
PORTFOLIO OVERVIEW
MAY 31, 2005 (UNAUDITED)
--------------------------------------------------------------------------

FUND STATISTICS ON 05/31/05
--------------------------------------------------------------------------------

Net Asset Value                                                  $        23.88

Market Price                                                     $        22.72

Discount                                                                   4.86%

Yield on Market Price                                                      8.19%

Common Shares Outstanding                                            42,573,295

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

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

Banks                                                                        36%
Utilities                                                                    26%
Insurance                                                                    15%
Financial Services                                                           13%
REITs                                                                         5%
Other                                                                         3%
Oil and Gas                                                                   2%

MOODY'S RATINGS                                                   % OF PORTFOLIO
--------------------------------------------------------------------------------
AAA                                                                         1.1%

AA                                                                          4.9%

A                                                                          35.0%

BBB                                                                        44.9%

BB                                                                          7.2%

Not Rated                                                                   4.6%
--------------------------------------------------------------------------------

Below Investment Grade*                                                     6.4%

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

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

Lehman Brothers                                                           4.5%

Wachovia Corp                                                             4.2%

J.P. Morgan Chase                                                         3.8%

Bank of America                                                           3.3%

Zurich RegCaPS                                                            3.0%

Duke Energy                                                               3.0%

Ace Ltd.                                                                  2.9%

North Fork Bancorporation                                                 2.9%

HSBC                                                                      2.7%

Countrywide Financial                                                     2.6%



                                                                                          % OF PORTFOLIO**
----------------------------------------------------------------------------------------------------------
                                                                                              
Holdings Generating Qualified Dividend Income (QDI) for Individuals                              28%
Holdings Generating Income Eligible for the Corporate Dividend 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.


                                       7


--------------------------------------------------------------------------------
Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
PORTFOLIO OF INVESTMENTS
MAY 31, 2005 (UNAUDITED)
--------------------------------------------------------------------------



SHARES/$ PAR                                                                                            VALUE
------------                                                                                          ---------
                                                                                             
PREFERRED SECURITIES -- 80.1%
                 BANKING -- 36.0%
------------------------------------------------------------------------------------------------------------------------
       108,197   Abbey National Group, 7.375% Pfd., Series C ....................................  $      2,842,876**(1)
        15,000   ABN AMRO Capital Fund Trust VII, 6.08% Pfd. ....................................           376,950**(1)
                 ABN AMRO North America, Inc.:
         2,015     6.46% Pfd., 144A**** .........................................................         2,124,032*
        12,301     6.59% Pfd., 144A**** .........................................................        12,911,130*
$   18,000,000   Astoria Capital Trust I, 9.75% 11/01/29 Capital Security, Series B .............        22,431,420
        40,000   BAC Capital Trust I, 7.00% Pfd. 12/15/31 .......................................         1,047,800
        19,500   BAC Capital Trust III, 7.00% Pfd. ..............................................           513,435
       753,400   BAC Capital Trust IV, 5.875% Pfd. ..............................................        18,782,262
           600   BAC Capital Trust V, 7.00% Pfd. ................................................            15,669
$    1,240,000   BankBoston Capital Trust I, 8.25% 12/15/26 Capital Security ....................         1,357,564
$   16,155,000   BankBoston Capital Trust II, 7.75% 12/15/26 Capital Security, Series B .........        17,501,358
         1,800   Bank of New York Capital IV, 6.875% Pfd., Series E .............................            45,540
       468,100   Bank of New York Capital V, 5.95% Pfd. .........................................        11,688,457
        51,000   Bank One Capital Trust VI, 7.20% Pfd. ..........................................         1,327,530
$      500,000   BT Capital Trust B, 7.90% 01/15/27 Capital Security ............................           540,035(1)
$    1,000,000   BT Preferred Capital Trust II, 7.875% 02/25/27 Capital Security ................         1,085,605(1)
$    6,500,000   Chase Capital I, 7.67% 12/01/26 Capital Security ...............................         6,969,040
       175,450   Chase Capital XI, 5.875% Pfd. 06/15/33 .........................................         4,280,980
        18,800   Citigroup, Inc., 6.231% Pfd., Series H .........................................           989,726*
       105,000   Cobank, ACB, 7.00% Pfd., 144A**** ..............................................         6,042,750*
        27,900   Comerica (Imperial) Capital Trust I, 7.60% Pfd. ................................           729,306
$      800,000   CoreStates Capital Trust I, 8.00% 12/15/26 Capital Security, 144A**** ..........           869,940
$   11,000,000   Cullen/Frost Capital Trust I, 8.42% 02/01/27 Capital Security, Series A ........        12,092,520
$    2,500,000   Dime Capital Trust I, 9.33% 05/06/27 Capital Security, Series A ................         2,819,775
$    5,600,000   First Chicago NBD Capital A, 7.95% 12/01/26 Capital Security, 144A**** .........         6,046,152
$      875,000   First Chicago NBD Capital B, 7.75% 12/01/26 Capital Security, 144A**** .........           940,761
$    3,000,000   First Midwest Capital Trust I, 6.95% 12/01/33 Capital Security .................         3,402,585
       400,000   First Republic Bank, 6.25% Pfd. ................................................        10,456,000*
         2,400   First Tennessee Bank, Adj. Rate Pfd., 144A**** .................................         2,376,000*
$    3,500,000   First Tennessee Capital Trust II, 6.30% 04/15/34 Capital Security, Series B ....         3,560,672
$    3,000,000   Fleet Capital Trust II, 7.92% 12/11/26 Capital Security ........................         3,256,995
        62,600   Fleet Capital Trust VII, 7.20% Pfd. ............................................         1,640,120
        86,500   Fleet Capital Trust VIII, 7.20% Pfd. ...........................................         2,287,492
           600   Fleet Capital Trust IX, 6.00% Pfd. .............................................            15,072
             3   FT Real Estate Securities Company, 9.50% Pfd., 144A**** ........................         4,362,076
$   37,550,000   GreenPoint Capital Trust I, 9.10% 06/01/27 Capital Security ....................        42,279,986


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


                                       8


--------------------------------------------------------------------------------
      Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
                                            PORTFOLIO OF INVESTMENTS (CONTINUED)
                                                        MAY 31, 2005 (UNAUDITED)
      --------------------------------------------------------------------------



SHARES/$ PAR                                                                                            VALUE
------------                                                                                          ---------
                                                                                             
PREFERRED SECURITIES -- (CONTINUED)
                 BANKING -- (CONTINUED)
------------------------------------------------------------------------------------------------------------------------
$   23,725,000   HBOS Capital Funding LP, 6.85% Pfd. ............................................  $     24,262,371(1)
         6,300   Household Capital Trust VI, 8.25% Pfd. .........................................           162,981
       280,062   HSBC USA, Inc., Adj. Rate Pfd., Series F .......................................         6,910,530*
$   14,357,000   J.P. Morgan Capital Trust I, 7.54% 01/15/27 Capital Security ...................        15,405,133
$   11,271,000   J.P. Morgan Capital Trust II, 7.95% 02/01/27 Capital Security ..................        12,196,236
       282,800   J.P. Morgan Chase Capital XIV, 6.20% Pfd., 10/15/34 ............................         7,084,140
       215,000   J.P. Morgan Chase Capital XVI, 6.35% Pfd., 06/01/35 ............................         5,413,700
        23,800   Keycorp Capital V, 5.875% Pfd., Series A .......................................           580,720
$   14,295,000   Keycorp Institutional Capital A, 7.826% 12/01/26 Capital Security, Series A ....        15,430,309
$    4,000,000   Lloyds TSB Bank PLC, Tier I, 6.90% 10/22/49 ....................................         4,148,200(1)
$   25,280,000   Marshall & Ilsley Capital Trust A, 7.65% 12/01/26 Capital Security .............        27,284,325
            20   Marshall & Ilsley Investment II, 8.875% Pfd., 144A**** .........................         2,145,704
$    4,000,000   NB Capital Trust IV, 8.25% Capital Security ....................................         4,416,160
$    3,000,000   North Fork Capital Trust I, 8.70% 12/15/26 Capital Security ....................         3,304,485
       265,000   PFGI Capital Corporation, 7.75% Pfd. ...........................................         7,254,375
$   13,750,000   RBS Capital Trust B, 6.80% Pfd. ................................................        14,012,556**(1)
$   15,600,000   Republic New York Capital I, 7.75% 11/15/26 Capital Security ...................        16,824,834(1)
$   17,127,000   Republic New York Capital II, 7.53% 12/04/26 Capital Security ..................        18,437,901(1)
                 Roslyn Real Estate:
            40     8.95% Pfd., Pvt., Series C, 144A**** .........................................         4,464,165
           135     Adj. Rate Pfd., Series D, 144A**** ...........................................        13,736,250
                 Royal Bank of Scotland Group PLC:
       597,500     5.75% Pfd., Series L .........................................................        14,549,125**(1)
       129,500     6.35% Pfd., Series N .........................................................         3,272,465**(1)
       110,000     6.40% Pfd., Series M .........................................................         2,845,700**(1)
$   14,167,000   Union Planters Capital Trust, 8.20% 12/15/26 Capital Security ..................        15,434,238
            60   Union Planters Preferred Funding, 7.75% Pfd., Series 144A**** ..................         7,164,494
        23,500   VNB Capital Trust I, 7.75% Pfd. ................................................           611,117
$      300,000   Wachovia Capital Trust V, 7.965% 06/01/27 Capital Security, 144A**** ...........           330,631
     2,217,200   Wachovia Preferred Funding, 7.25% Pfd., Series A ...............................        64,154,682
$   20,750,000   Washington Mutual, Inc., 8.36% 12/01/26 Capital Security, 144A**** .............        22,511,779
$    8,000,000   Webster Capital Trust II, 10.00% 04/01/27 Capital Security .....................         9,071,600
       306,050   Wells Fargo Capital Trust VII, 5.85% Pfd. ......................................         7,666,553
-------------------------------------------------------------------------------------------------------------------
                                                                                                        561,097,070
                                                                                                   ----------------


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


                                       9


--------------------------------------------------------------------------------
Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
PORTFOLIO OF INVESTMENTS (CONTINUED)
MAY 31, 2005 (UNAUDITED)
--------------------------------------------------------------------------



SHARES/$ PAR                                                                                            VALUE
------------                                                                                          ---------
                                                                                             
PREFERRED SECURITIES -- (CONTINUED)
                 FINANCIAL SERVICES -- 10.5%
---------------------------------------------------------------------------------------------------------------------
        30,000   Corporate-Backed Trust Certificates, 7.75% Pfd., Series CIT ....................  $        822,150
$   15,459,000   Countrywide Capital I, 8.00% 12/15/26 Capital Security .........................        16,278,018
       960,100   Countrywide Capital IV, 6.75% Pfd. .............................................        24,972,201
        96,300   Fannie Mae, 5.125% Pfd. ........................................................         4,336,389*
                 Freddie Mac:
        20,000     5.00% Pfd., Series F .........................................................           878,700*
        19,900     5.30% Pfd. ...................................................................           926,743*
       435,452   General Electric Capital Corporation, 5.875% Pfd. ..............................        11,071,367
                 Lehman Brothers Holdings, Inc.:
       277,000     5.67% Pfd., Series D .........................................................        13,784,905*
        85,000     5.94% Pfd., Series C .........................................................         4,373,675*
     1,349,750     6.50% Pfd., Series F .........................................................        35,356,701*
        35,000   Lehman Capital Trust III, 6.375% Pfd. Series K .................................           887,250
         5,000   Lehman Capital Trust V, 6.00% Pfd., Series M ...................................           122,950
        31,400   Lehman Capital Trust VI, 6.24% Pfd., Series N ..................................           782,174
       138,975   Merrill Lynch Capital Trust V, 7.28% Pfd. ......................................         3,746,071
        10,000   Merrill Lynch Preferred Capital Trust IV, 7.12% Pfd. ...........................           267,400
        64,300   Morgan Stanley Capital Trust II, 7.25% Pfd. ....................................         1,655,725
     1,101,398   Morgan Stanley Capital Trust III, 6.25% Pfd. ...................................        27,424,810
       202,000   Morgan Stanley Capital Trust IV, 6.25% Pfd. ....................................         5,060,100
         9,000   Morgan Stanley Capital Trust V, 5.75% Pfd. .....................................           214,110
        40,000   National Rural Utility CFC, 5.95% Pfd. 02/15/45 ................................           971,200
       160,000   SLM Corporation, 6.97% Pfd., Series A ..........................................         9,182,400*
-------------------------------------------------------------------------------------------------------------------
                                                                                                        163,115,039
                                                                                                   ----------------
                 INSURANCE -- 14.0%
---------------------------------------------------------------------------------------------------------------------
     1,719,980   ACE Ltd., 7.80% Pfd., Series C .................................................        45,674,069**(1)
       370,900   Aegon NV, 6.375% Pfd. ..........................................................         9,283,627**(1)
$   16,551,000   AON Capital Trust A, 8.205% 01/01/27 Capital Security ..........................        19,391,979
        48,100   Corporate-Backed Trust Certificates, 8.00% Pfd., Series AON ....................         1,245,309
       106,000   Corts-AON Capital, 8.205% Pfd. .................................................         2,880,550
        37,000   Corts-UnumProvident Corporation, 8.50% Pfd. ....................................           937,395
       154,300   Everest Re Capital Trust II, 6.20% Pfd., Series B ..............................         3,683,912(1)
                 ING Groep NV:
        36,000     7.05% Pfd. ...................................................................           941,580**(1)
       489,000     7.20% Pfd. ...................................................................        12,887,595**(1)
$   10,000,000   Mangrove Bay Passthru Trust, 6.102% 07/15/33 Capital Security, 144A**** ........        10,231,150(1)


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


                                       10


--------------------------------------------------------------------------------
      Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
                                            PORTFOLIO OF INVESTMENTS (CONTINUED)
                                                        MAY 31, 2005 (UNAUDITED)
      --------------------------------------------------------------------------



SHARES/$ PAR                                                                                            VALUE
------------                                                                                          ---------
                                                                                             
PREFERRED SECURITIES -- (CONTINUED)
                 INSURANCE -- (CONTINUED)
---------------------------------------------------------------------------------------------------------------------
$    2,200,000   MMI Capital Trust I, 7.625% 12/15/27 Capital Security, Series B ................  $      2,558,941
        50,000   PartnerRe Capital Trust I, 7.90% 12/31/31 Pfd. .................................         1,320,000**(1)
       220,989   PartnerRe Ltd., 6.75% Pfd., Series C ...........................................         5,561,188**(1)
$    8,000,000   Provident Financing Trust I, 7.405% 03/15/38 Capital Security ..................         7,637,560
                 Renaissancere Holding:
        20,000     6.08% Pfd., Series C .........................................................           475,700**(1)
       332,235     7.30% Pfd., Series B .........................................................         8,767,682**(1)
        94,900   Saturns-AON 2003-3, 8.00% Pfd., Series AON .....................................         2,493,972
        56,000   Saturns-SAFC 2001-7, 8.25% Pfd., Series SAFC ...................................         1,500,240
        22,390   St. Paul Capital Trust I, 7.60% Pfd. ...........................................           584,155
$    8,075,000   USF&G Capital, 8.312% 07/01/46 Capital Security, 144A**** ......................        10,432,052
$   17,000,000   USF&G Capital I, 8.50% 12/15/45 Capital Security, 144A**** .....................        22,413,990
        15,000   XL Capital Ltd., 7.625% Pfd., Series B .........................................           399,900**(1)
                 Zurich RegCaPS Funding Trust:
         9,400     6.01% Pfd., 144A**** .........................................................         9,488,971*
        35,900     6.58% Pfd., 144A**** .........................................................        37,882,937*
-------------------------------------------------------------------------------------------------------------------
                                                                                                        218,674,454
                                                                                                   ----------------
                 UTILITIES -- 13.1%
---------------------------------------------------------------------------------------------------------------------
$    3,750,000   AGL Capital Trust, 8.17% 06/01/37 Capital Security .............................         4,129,312
       175,000   Alabama Power Company, 5.30% Pfd. ..............................................         4,529,875*
        10,000   Baltimore Gas & Electric Company, 6.70% Pfd., Series 1993 ......................         1,044,200*
        50,000   Baltimore Gas & Electricity, 7.125% Pfd., Series 1993 ..........................         5,237,000*
        35,000   Central Maine Power, 5.25% Pfd., Pvt. ..........................................         3,673,250*
$    8,700,000   COMED Financing II, 8.50% 01/15/27 Capital Security, Series B ..................         9,637,642
$   10,395,000   COMED Financing III, 6.35% 03/15/33 Capital Security ...........................        11,246,506
        23,883   Delmarva Power & Light, 5.00% Pfd. .............................................         2,520,373*
        50,000   Dominion CNG Cap Trust I, 7.80% Pfd. ...........................................         1,308,250
$    8,082,000   Dominion Resources Capital Trust I, 7.83% 12/01/27 Capital Security ............         8,919,659
                 Duke Energy Corporation:
        49,343     4.50% Pfd., Series C, Pvt. ...................................................         4,721,878*
        59,662     7.04% Pfd., Series Y .........................................................         6,156,522*
        51,331     7.85% Pfd., Series S .........................................................         5,319,688*
        96,450   Duquesne Light Company, 6.50% Pfd. .............................................         5,198,655*
        67,700   Energy East Capital Trust I, 8.25% Pfd. ........................................         1,771,709


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


                                       11


--------------------------------------------------------------------------------
Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
PORTFOLIO OF INVESTMENTS (CONTINUED)
MAY 31, 2005 (UNAUDITED)
--------------------------------------------------------------------------



SHARES/$ PAR                                                                                            VALUE
------------                                                                                          ---------
                                                                                             
PREFERRED SECURITIES -- (CONTINUED)
                 UTILITIES -- (CONTINUED)
---------------------------------------------------------------------------------------------------------------------
                 Entergy Arkansas, Inc.:
        10,240     4.56% Pfd., Series 1965 ......................................................  $        919,296*
         5,692     7.40% Pfd. ...................................................................           592,110*
        11,675   Entergy Louisiana, Inc., 8.00% Pfd., Series 92 .................................           294,443*
                 Florida Power Company:
        49,750     4.40% Pfd. ...................................................................         4,687,943*
        37,088     4.58% Pfd. ...................................................................         3,657,619*
        21,585     4.60% Pfd. ...................................................................         2,126,446*
        60,000   FPC Capital I, 7.10% Pfd., Series A ............................................         1,510,800
        12,442   Great Plains Energy, Inc., 4.20% Pfd. ..........................................         1,010,539*
         5,000   Gulf Power Capital Trust III, 7.375% Pfd. ......................................           130,200
$   17,262,000   Houston Light & Power, Capital Trust II, 8.257% 02/01/37 Capital Security ......        18,900,164
       119,805   Indianapolis Power & Light Company, 5.65% Pfd. .................................        11,633,665*
                 Interstate Power & Light Company:
       110,000     7.10% Pfd., Series C .........................................................         3,094,300*
        11,000     8.375% Pfd., Series B ........................................................           370,865*
        15,017   Kentucky Energy Corp., 4.75% Pfd. ..............................................         1,452,369*
        32,300   Laclede Capital Trust I, 7.70% Pfd. ............................................           861,441
         5,000   Northern Indiana Public Service Company, Adj. Rate Pfd., Series A ..............           254,375*
                 Pacific Enterprises:
         4,550     $4.40 Pfd. ...................................................................           413,277*
         4,510     $4.50 Pfd. ...................................................................           418,979*
        23,085     $4.75 Pfd., Series 53 ........................................................         2,263,600*
         3,500   PacifiCorp, $7.48 Sinking Fund Pfd. ............................................           372,663*
$    2,337,000   PECO Energy Capital Trust III, 7.38% 04/06/28 Capital Security, Series D .......         2,829,651
$   27,000,000   PECO Energy Capital Trust IV, 5.75% 06/15/33 Capital Security ..................        27,130,815
        13,061   Portland General Electric, 7.75% Sinking Fund Pfd. .............................         1,339,144*
       215,750   PSEG Funding Trust II, 8.75% Pfd. ..............................................         5,901,841
$    8,200,000   Puget Capital Trust, 8.231% 06/01/27 Capital Security, Series B ................         9,029,758
        50,000   Puget Sound Energy Capital Trust, 8.40% 06/30/41 ...............................         1,311,500
       200,000   San Diego Gas & Electric Company, $1.70 Pfd. ...................................         5,214,000*
       264,700   Southern Union Company, 7.55% Pfd. .............................................         7,358,660*
        34,252   TXU US Holdings Company, $4.00 Pfd., Series TES ................................         2,494,231*
$    2,500,000   Union Electric Company, 7.69% 12/15/36 Capital Security, Series A ..............         2,713,125
                 Virginia Electric & Power Company:
        14,985     $4.12 Pfd. ...................................................................         1,361,387*
        21,684     $4.80 Pfd. ...................................................................         2,295,143*
        78,700   Virginia Power Capital Trust, 7.375% Pfd. 07/30/42 .............................         2,074,139
        15,000   Wisconsin Power & Light Company, 6.20% Pfd. ....................................         1,539,225*


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


                                       12


--------------------------------------------------------------------------------
      Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
                                            PORTFOLIO OF INVESTMENTS (CONTINUED)
                                                        MAY 31, 2005 (UNAUDITED)
      --------------------------------------------------------------------------



SHARES/$ PAR                                                                                            VALUE
------------                                                                                          ---------
                                                                                             
PREFERRED SECURITIES -- (CONTINUED)
                 UTILITIES -- (CONTINUED)
---------------------------------------------------------------------------------------------------------------------
                 Xcel Energy, Inc.:
         7,110     $4.10 Pfd., Series C .........................................................  $        598,271*
        10,210     $4.11 Pfd., Series D .........................................................           861,214*
-------------------------------------------------------------------------------------------------------------------
                                                                                                        204,431,717
                                                                                                   ----------------
                 OIL AND GAS -- 1.9%
---------------------------------------------------------------------------------------------------------------------
        13,200   EOG Resources, Inc., 7.195% Pfd., Series B .....................................        14,313,750*
$   13,315,000   Phillips 66 Capital Trust II, 8.00% 01/15/37 Capital Security ..................        14,546,038
-------------------------------------------------------------------------------------------------------------------
                                                                                                         28,859,788
                                                                                                   ----------------
                 REAL ESTATE INVESTMENT TRUST (REIT) -- 4.0%
---------------------------------------------------------------------------------------------------------------------
                 BRE Properties, Inc.:
        80,000     6.75% Pfd., REIT, Series C ...................................................         2,029,200
        70,000     6.75% Pfd., REIT, Series D ...................................................         1,769,250
       228,250   Duke Realty Corporation, 6.60% Pfd., REIT, Series L ............................         5,686,849
        19,100   Equity Office Property Trust, 7.75% Pfd., REIT, Series G .......................           509,779
        51,000   Equity Residential Properties, 8.29% Pfd., REIT, Series K ......................         3,234,930
                 PS Business Parks, Inc.:
       167,640     6.875% Pfd., REIT, Series I ..................................................         4,081,196
        32,464     7.00% Pfd., REIT, Series H ...................................................           799,426
       502,000     7.20% Pfd., REIT, Series M ...................................................        12,497,290
       203,400     7.60% Pfd., REIT, Series L ...................................................         5,195,853
        60,000     7.95% Pfd., REIT, Series K ...................................................         1,557,300
                 Public Storage, Inc.:
        19,900     6.18% Pfd., REIT, Series D ...................................................           472,724
        62,700     6.75% Pfd., REIT, Series E ...................................................         1,578,473
        14,700     7.625% Pfd., REIT, Series U ..................................................           382,347
        18,000     8.00% Pfd., REIT, Series R ...................................................           471,240
       440,000   Realty Income Corporation, 7.375% Pfd., REIT, Series D .........................        11,435,600
       263,000   Regency Centers Corporation, 7.25% Pfd., REIT ..................................         6,705,185
       162,000   Weingarten Realty Investment, 6.95% Pfd., REIT .................................         4,286,520
-------------------------------------------------------------------------------------------------------------------
                                                                                                         62,693,162
                                                                                                   ----------------


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


                                       13


--------------------------------------------------------------------------------
Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
PORTFOLIO OF INVESTMENTS (CONTINUED)
MAY 31, 2005 (UNAUDITED)
--------------------------------------------------------------------------



SHARES/$ PAR                                                                                            VALUE
------------                                                                                          ---------
                                                                                             
PREFERRED SECURITIES -- (CONTINUED)
                 MISCELLANEOUS INDUSTRIES -- 0.6%
---------------------------------------------------------------------------------------------------------------------
       100,000   Ocean Spray Cranberries, Inc., 6.25% Pfd., 144A**** ............................  $      9,377,500*
-------------------------------------------------------------------------------------------------------------------
                                                                                                          9,377,500
                                                                                                   ----------------
                   TOTAL PREFERRED SECURITIES
                   (Cost $1,192,403,633) ........................................................     1,248,248,730
                                                                                                   ----------------
CORPORATE DEBT SECURITIES -- 16.9%
                 BANKING -- 0.2%
---------------------------------------------------------------------------------------------------------------------
$    2,500,000   Citigroup, Inc., 5.85% 12/11/34 ................................................         2,731,775
-------------------------------------------------------------------------------------------------------------------
                                                                                                          2,731,775
                                                                                                   ----------------
                 FINANCIAL SERVICES -- 2.5%
---------------------------------------------------------------------------------------------------------------------
        41,100   Corp-Backed Trust Certificates, 5.80% Series Goldman Sachs .....................         1,018,458
$   25,000,000   General Motors Acceptance Corporation, 8.00% 11/01/31, Senior Bonds ............        21,222,125
                 Lehman Brothers:
$    4,993,500     Guaranteed Note, Variable Rate, 12/16/16, 144A**** ...........................         5,087,128
$    9,129,000     Guaranteed Note, Variable Rate, 10/15/15, 144A**** ...........................         9,870,732
$    2,200,000   Morgan Stanley Finance, 8.03% 02/28/17, Capital Units ..........................         2,428,844
-------------------------------------------------------------------------------------------------------------------
                                                                                                         39,627,287
                                                                                                   ----------------
                 INSURANCE -- 1.0%
---------------------------------------------------------------------------------------------------------------------
       239,000   Delphi Financial, 8.00% 05/15/33, Senior Notes .................................         6,317,965
$    1,000,000   Liberty Mutual Group, 6.50% 03/15/35, 144A**** .................................           990,125
$    6,400,000   OneAmerica Financial Partners, 7.00% 10/15/33 144A**** .........................         7,387,776
$    1,000,000   UnumProvident Corporation, 7.25% 03/15/28, Senior Notes ........................           984,540
-------------------------------------------------------------------------------------------------------------------
                                                                                                         15,680,406
                                                                                                   ----------------
                 OIL AND GAS -- 0.4%
---------------------------------------------------------------------------------------------------------------------
       238,261   Nexen, Inc., 7.35% Subordinated Notes ..........................................         6,336,551(1)
-------------------------------------------------------------------------------------------------------------------
                                                                                                          6,336,551
                                                                                                   ----------------


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


                                       14


--------------------------------------------------------------------------------
      Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
                                            PORTFOLIO OF INVESTMENTS (CONTINUED)
                                                        MAY 31, 2005 (UNAUDITED)
      --------------------------------------------------------------------------



SHARES/$ PAR                                                                                            VALUE
------------                                                                                          ---------
                                                                                             
CORPORATE DEBT SECURITIES -- (CONTINUED)
                 UTILITIES -- 11.3%
---------------------------------------------------------------------------------------------------------------------
$   31,000,000   AEP Texas Central Company, 6.65% 02/15/33, Senior Notes, Series E ..............  $     35,671,080
$   19,000,000   Constellation Energy Group, 7.60% 04/01/32, Senior Notes .......................        23,836,260
$    1,000,000   DTE Energy Company, 6.375% 04/15/33, Senior Notes ..............................         1,086,950
                 Duke Capital Corporation:
$   11,179,000     6.75% 02/15/32, Senior Notes .................................................        12,504,270
$   10,000,000     8.00% 10/01/19 Senior Notes ..................................................        12,375,150
$    5,000,000   Entergy Gulf States, Inc., 6.20% 07/01/33, 1st Mortgage ........................         5,229,000
        16,500   Entergy Mississippi, Inc., 7.25% Pfd., 1st Mortgage ............................           432,713
                 Georgia Power Company:
       567,015     5.90% 04/15/33, Senior Notes .................................................        14,328,469
        24,900     6.00% 08/15/44, Senior Notes, FGIC Insured ...................................           640,055
$    3,000,000   Indianapolis Power & Light Company, 6.60% 01/01/34, 1st Mortgage, 144A**** .....         3,499,125
        40,000   Northern States Power Company, 8.00% ...........................................         1,078,800
$   10,000,000   Oncor Electric Delivery Company, 7.25% 01/15/33, Secured .......................        12,263,750
$    6,000,000   Potomac Electric Power Company, 5.40% 06/01/35, 1st Mortgage ...................         6,031,200
$   18,268,000   PSEG Power LLC, 8.625% 04/15/31 ................................................        25,213,859
$    6,300,000   TXU Corporation, 6.50% 11/15/24, 144A**** ......................................         6,097,455
$    7,250,000   TXU Energy Company, 7.00% 03/15/13 .............................................         7,992,690
$    6,000,000   Wisconsin Electric Power Company, 6.875% 12/01/95 ..............................         7,389,450
-------------------------------------------------------------------------------------------------------------------
                                                                                                        175,670,276
                                                                                                   ----------------
                 REAL ESTATE INVESTMENT TRUST (REIT) -- 0.5%
---------------------------------------------------------------------------------------------------------------------
$    2,780,000     EOP Operating LP, 7.875% 07/15/31, REIT ......................................         3,449,063
$    3,500,000     Realty Income Corporation, 5.875% 03/15/35, REIT .............................         3,499,877
-------------------------------------------------------------------------------------------------------------------
                                                                                                          6,948,940
                                                                                                   ----------------
                 MISCELLANEOUS -- 1.0%
---------------------------------------------------------------------------------------------------------------------
$      390,000   BellSouth Telecommunication, 7.00% 12/01/95 ....................................           453,572
$    5,000,000   Ford Motor Company, 7.45% 07/16/31 .............................................         4,224,625
        47,000   Maytag Corporation, 7.875% 08/01/31 ............................................         1,067,605
$    8,000,000   Pulte Homes, Inc., 6.375% 05/15/33, Senior Notes ...............................         7,999,640
$    1,945,000   Verizon Maryland, 7.15% 05/01/23 ...............................................         2,195,253
-------------------------------------------------------------------------------------------------------------------
                                                                                                         15,940,695
                                                                                                   ----------------
                   TOTAL CORPORATE DEBT SECURITIES
                   (Cost $243,582,269) ..........................................................       262,935,930
                                                                                                   ----------------


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


                                       15


--------------------------------------------------------------------------------
Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
PORTFOLIO OF INVESTMENTS (CONTINUED)
MAY 31, 2005 (UNAUDITED)
--------------------------------------------------------------------------



SHARES/$ PAR                                                                                            VALUE
------------                                                                                          ---------
                                                                                             
COMMON STOCKS AND CONVERTIBLE SECURITIES -- 2.2%
                 INSURANCE -- 0.2%
---------------------------------------------------------------------------------------------------------------------
        45,000   UnumProvident Corporation, 8.25% Mandatory Convertible, 05/16/06 ...............  $      1,623,375
        54,000   XL Capital Ltd., 6.50% Mandatory Convertible, 05/15/07 .........................         1,293,030(1)
-------------------------------------------------------------------------------------------------------------------
                                                                                                          2,916,405
                                                                                                   ----------------
                 UTILITIES -- 2.0%
---------------------------------------------------------------------------------------------------------------------
        91,563   Ameren Corporation .............................................................         5,015,363*
        75,000   American Electric Power, 9.25% Mandatory Convertible, 08/16/05 .................         3,292,125
       200,000   Duke Energy Corporation ........................................................         5,515,000*
       314,254   FPL Group, Inc. ................................................................        12,829,420*(2)
       131,809   KeySpan Corporation ............................................................         5,229,522*
-------------------------------------------------------------------------------------------------------------------
                                                                                                         31,881,430
                                                                                                   ----------------
                   TOTAL COMMON STOCKS AND CONVERTIBLE SECURITIES
                   (Cost $28,485,711) ...........................................................        34,797,835
                                                                                                   ----------------
OPTION CONTRACTS -- 0.4%
         1,500   September Call Options on September U.S. Treasury Bond Futures,
                   Expiring 08/26/05 ............................................................         3,867,187+
        10,000   September Put Options on September U.S. Treasury Bond Futures,
                   Expiring 08/26/05 ............................................................         2,937,500+
-------------------------------------------------------------------------------------------------------------------
                   TOTAL OPTION CONTRACTS
                   (Cost $9,127,048) ............................................................         6,804,687
                                                                                                   ----------------


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


                                       16


--------------------------------------------------------------------------------
      Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
                                            PORTFOLIO OF INVESTMENTS (CONTINUED)
                                                        MAY 31, 2005 (UNAUDITED)
      --------------------------------------------------------------------------



SHARES/$ PAR                                                                                            VALUE
------------                                                                                          ---------
                                                                                             
MONEY MARKET FUND -- 0.4%
     6,090,413   BlackRock Provident Institutional, TempFund ....................................  $      6,090,413
-------------------------------------------------------------------------------------------------------------------
                   TOTAL MONEY MARKET FUND
                   (Cost $6,090,413) ............................................................         6,090,413
                                                                                                   ----------------

 TOTAL INVESTMENTS (Cost $1,479,689,074***) ..........................................   100.0%       1,558,877,595
 OTHER ASSETS AND LIABILITIES (Net) ..................................................     0.0%            (391,406)
                                                                                         -----     ----------------
 TOTAL NET ASSETS AVAILABLE TO COMMON STOCK AND PREFERRED STOCK ......................   100.0%++  $  1,558,486,189
                                                                                         -----     ----------------
 AUCTION MARKET PREFERRED STOCK (AMPS) REDEMPTION VALUE .........................................      (542,000,000)
                                                                                                   ----------------
 TOTAL NET ASSETS AVAILABLE TO COMMON STOCK .....................................................  $  1,016,486,189
                                                                                                   ================


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

 (1)  Foreign Issuer.

 (2)  All or a portion  of this  security  has been  pledged as  collateral  for
      written option positions.

   +  Non-income producing.

  ++  The percentage  shown for each  investment  category is the total value of
      that  category  as a  percentage  of net  assets  available  to Common and
      Preferred Stock.

         ABBREVIATIONS:
REIT  -- Real Estate Investment Trust
PFD.  -- Preferred Securities
PVT.  -- Private Placement Securities

OPEN OPTION CONTRACTS WRITTEN



CONTRACTS        CONTRACT DESCRIPTION                                                                   VALUE
--------------   --------------------                                                                 ---------
                                                                                             
         1,500   September Call Options on September U.S. Treasury Bond Futures,
                 Expiring 8/26/2005 Strike Price: 112 ...........................................  $     (8,554,688)
-------------------------------------------------------------------------------------------------------------------
                   TOTAL OPEN OPTION CONTRACTS WRITTEN (premiums received: $2,805,375) ..........        (8,554,688)
                                                                                                   ----------------


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


                                       17


--------------------------------------------------------------------------------
Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 2005 (UNAUDITED)
--------------------------------------------------------------------------


                                                                                                 
ASSETS:
   Investments, at value (Cost $1,479,689,074)
      (See accompanying Portfolio of Investments) .............................                     $   1,558,877,595
   Receivable for Investments sold ............................................                             4,987,124
   Dividends and interest receivable ..........................................                            20,846,632
   Prepaid expenses ...........................................................                               213,930
                                                                                                    -----------------
           Total Assets .......................................................                         1,584,925,281

LIABILITIES:
   Payable for securities purchased ...........................................     $ 16,006,360
   Dividends payable to Common Shareholders ...................................          673,369
   Investment advisory fee payable ............................................          561,248
   Administration, Transfer Agent and Custodian fees and
     expenses payable .........................................................           56,182
   Servicing agent fees payable ...............................................          163,756
   Professional fees payable ..................................................           47,946
   Directors' fees payable ....................................................            5,202
   Accrued expenses and other payables ........................................           69,958
   Accumulated undeclared distributions to Auction Market Preferred
     Stock Shareholders .......................................................          300,383
   Outstanding options written, at value (premiums received $2,805,375) .......        8,554,688
                                                                                    ------------
           Total Liabilities ..................................................                            26,439,092
                                                                                                    -----------------

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

NET ASSETS AVAILABLE TO COMMON STOCK ..........................................                     $   1,016,486,189
                                                                                                    =================

NET ASSETS AVAILABLE TO COMMON STOCK consist of:
   Distributions in excess of net investment income ...........................                     $      (3,862,100)
   Accumulated net realized loss on investments sold ..........................                           (63,583,467)
   Unrealized appreciation of investments .....................................                            73,439,208
   Par value of Common Stock ..................................................                               425,733
   Paid-in capital in excess of par value of Common Stock .....................                         1,010,066,815
                                                                                                    -----------------
           Total Net Assets Available to Common Stock .........................                     $   1,016,486,189
                                                                                                    =================

NET ASSET VALUE PER SHARE OF COMMON STOCK:
     Common Stock (42,573,295 shares outstanding) .............................                     $           23.88
                                                                                                    =================


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


                                       18


--------------------------------------------------------------------------------
      Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
                                                         STATEMENT OF OPERATIONS
                               FOR THE SIX MONTHS ENDED MAY 31, 2005 (UNAUDITED)
      --------------------------------------------------------------------------


                                                                                                    
INVESTMENT INCOME:
     Dividends++ ..................................................................                    $   26,034,063
     Interest .....................................................................                        22,471,037
                                                                                                       --------------
          Total Investment Income .................................................                        48,505,100

EXPENSES:
     Investment advisory fee ......................................................   $3,332,306
     Servicing agent fee ..........................................................      975,368
     Administrator's fee ..........................................................      294,021
     Auction Market Preferred broker commissions and auction
        agent fees ................................................................      712,128
     Professional fees ............................................................       75,243
     Insurance expense ............................................................      108,017
     Transfer agent fees and expenses .............................................      129,999
     Directors' fees and expenses .................................................       39,130
     Custodian fees and expenses ..................................................       61,519
     Chief Compliance Officer fees and expenses ...................................       19,694
     Other ........................................................................      282,955
          Total Expenses ..........................................................                         6,030,380
                                                                                                       --------------
NET INVESTMENT INCOME .............................................................                        42,474,720
                                                                                                       --------------
REALIZED AND UNREALIZED (LOSS)/GAIN ON INVESTMENTS:
     Net realized loss on investments sold during the period ......................                       (11,769,553)
     Change in net unrealized appreciation of investments held
        during the period .........................................................                        16,270,556
                                                                                                       --------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS ...................................                         4,501,003
                                                                                                       --------------
DISTRIBUTIONS TO AUCTION MARKET PREFERRED STOCK
  SHAREHOLDERS:
     From net investment income (including changes in accumulated
        undeclared distributions) .................................................                        (7,225,160)
                                                                                                       --------------
NET INCREASE IN NET ASSETS TO COMMON STOCK RESULTING
   FROM OPERATIONS ................................................................                    $   39,750,563
                                                                                                       ==============


++    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.


                                       19


--------------------------------------------------------------------------------
Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE TO COMMON STOCK(1)
--------------------------------------------------------------------------



                                                                                SIX MONTHS ENDED
                                                                                  MAY 31, 2005          YEAR ENDED
                                                                                   (UNAUDITED)       NOVEMBER 30, 2004
                                                                                ----------------     -----------------
                                                                                                
OPERATIONS:
     Net investment income ...............................................      $    42,474,720       $    86,314,881
     Net realized loss on investments sold during the period .............          (11,769,553)          (31,687,416)
     Change in net unrealized appreciation of investments held
        during the period ................................................           16,270,556             8,318,636
     Distributions to AMPS* Shareholders from net investment income,
        including changes in accumulated undeclared distributions ........           (7,225,160)           (7,744,632)
                                                                                ---------------       ---------------
     NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ................           39,750,563            55,201,469

DISTRIBUTIONS:
     Dividends paid from net investment income to Common
        Stock Shareholders(1) ............................................          (49,431,452)          (88,448,688)
     Distributions paid from net realized capital gains to Common
        Stock Shareholders ...............................................                   --           (35,768,960)
                                                                                ---------------       ---------------
     TOTAL DISTRIBUTIONS TO COMMON STOCK SHAREHOLDERS ....................          (49,431,452)         (124,217,648)

FUND SHARE TRANSACTIONS:
     Increase from Common Stock transactions .............................            4,082,974            32,597,981
     Decrease due to Cost of AMPS* Issuance(2) ...........................                   --                50,000
                                                                                ---------------       ---------------
     NET INCREASE IN NET ASSETS AVAILABLE TO COMMON STOCK RESULTING
        FROM FUND SHARE TRANSACTIONS .....................................            4,082,974            32,647,981

NET DECREASE IN NET ASSETS AVAILABLE TO COMMON                                  ---------------       ---------------
    STOCK FOR THE PERIOD .................................................      $    (5,597,915)      $   (36,368,198)
                                                                                ===============       ===============
---------------------------------------------------------------------------------------------------------------------
NET ASSETS AVAILABLE TO COMMON STOCK:
     Beginning of period .................................................      $ 1,022,084,104       $ 1,058,452,302
     Net decrease during the period ......................................           (5,597,915)          (36,368,198)
                                                                                ---------------       ---------------
     End of period (including distributions in excess of net investment
        income of ($3,862,100) and undistributed net investment income
        of $10,319,792, respectively) ....................................      $ 1,016,486,189       $ 1,022,084,104
                                                                                ===============       ===============


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

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

(2)   Reduction to cost of AMPS  issuance due to adjustment of cost estimate for
      the fiscal year ended November 30, 2004.

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


                                       20


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

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



                                                                        SIX MONTHS               YEAR        FOR THE PERIOD FROM
                                                                          ENDED                 ENDED        JANUARY 31, 2003(1)
                                                                       MAY 31, 2005          NOVEMBER 30,          THROUGH
                                                                       (UNAUDITED)               2004         NOVEMBER 30, 2003
                                                                       ------------          ------------    -------------------
                                                                                                       
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ............................      $     24.10           $     25.74        $     23.82(2)
                                                                       -----------           -----------        -----------
INVESTMENT OPERATIONS:
Net investment income ...........................................             1.00                  2.05               1.46
Net realized and unrealized gain/(loss) on investments ..........             0.11                 (0.53)              2.07
DISTRIBUTIONS TO AMPS* SHAREHOLDERS:
From net investment income ......................................            (0.17)                (0.19)             (0.06)
From net realized capital gains .................................               --                    --              (0.03)
                                                                       -----------           -----------        -----------
Total from investment operations ................................             0.94                  1.33               3.44
                                                                       -----------           -----------        -----------
COST OF ISSUANCE OF AMPS* .......................................               --                    --              (0.14)
DISTRIBUTIONS TO COMMON SHAREHOLDERS:
From net investment income ......................................            (1.16)                (2.10)             (1.38)
From net realized capital gains .................................               --                 (0.87)                --
                                                                       -----------           -----------        -----------
Total distributions to Common Shareholders ......................            (1.16)                (2.97)             (1.38)
                                                                       -----------           -----------        -----------
Net asset value, end of period ..................................      $     23.88           $     24.10        $     25.74
                                                                       ===========           ===========        ===========
Market value, end of period .....................................      $     22.72           $     25.30        $     26.66
                                                                       ===========           ===========        ===========
Total investment return based on net asset value**** ............             4.02%***              5.41%             14.15%***(3)
                                                                       ===========           ===========        ===========
Total investment return based on market value **** ..............            (5.73%)***             6.84%             12.65%***(3)
                                                                       ===========           ===========        ===========
RATIOS TO AVERAGE NET ASSETS AVAILABLE
  TO COMMON STOCK SHAREHOLDERS:
     Total net assets, end of period (in 000's) .................      $ 1,016,486           $ 1,022,084        $ 1,058,452
     Operating expenses .........................................             1.17%**               1.15%              1.01%**
     Net investment income + ....................................             6.86%**               7.57%              6.65%**
----------
SUPPLEMENTAL DATA:++
     Portfolio turnover rate ....................................               12%***                23%               101%***
     Total net assets available to Common and Preferred Stock,
       end of period (in 000's) .................................      $ 1,558,486           $ 1,564,084        $ 1,600,452
     Ratio of operating expenses to total average net assets
       available to Common and Preferred Stock ..................             0.77%**               0.75%              0.72%**


   *  Auction Market Preferred Stock.

  **  Annualized.

 ***  Not annualized.

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

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

  ++  Information presented under heading Supplemental Data includes AMPS.

 (1)  Commencement of operations.

 (2)  Net asset value at beginning of period reflects the deduction of the sales
      load of $1.125 per share and offering costs of $0.05 per share paid by the
      shareholder from the $25.00 offering price.

 (3)  Total return on net asset value is  calculated  assuming a purchase at the
      offering  price of $25.00 less the sales load of $1.125 and offering costs
      of $0.05 and the ending net asset value per share.  Total return on market
      value is calculated assuming a purchase at the offering price of $25.00 on
      the  inception  date of  trading  (January  29,  2003) and the sale at the
      current  market  price on the last day of the period.  Total return on net
      asset  value and  total  return on  market  value are not  computed  on an
      annualized basis.

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


                                       21


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



                                          TOTAL                                  DIVIDEND
                                        DIVIDENDS    NET ASSET       NYSE      REINVESTMENT
                                           PAID        VALUE    CLOSING PRICE    PRICE (1)
                                        ---------    ---------  -------------  ------------
                                                                      
December 31, 2004 - EXTRA .........      $0.1625      $ 24.32      $ 26.00        $ 24.70
December 31, 2004 .................       0.1725        24.32        26.00          24.70
January 31, 2005 ..................       0.1725        24.56        25.58          24.56
February 28, 2005 .................       0.1725        24.46        25.54          24.46
March 31, 2005 ....................       0.1725        23.81        22.22          22.51
April 30, 2005 ....................       0.1550        23.81        22.68          23.05
May 31, 2005 ......................       0.1550        23.88        22.72          22.95


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

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


                                       22


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

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

                                                    INVOLUNTARY      AVERAGE
                                        ASSET       LIQUIDATING       MARKET
                   TOTAL SHARES       COVERAGE       PREFERENCE       VALUE
        DATE      OUTSTANDING (1)   PER SHARE (2)    PER SHARE   PER SHARE(1)(3)
        ----      ---------------   -------------    ---------   ---------------
      05/31/05*       21,680           $71,900        $25,000        $25,000
      11/30/04        21,680            72,153         25,000         25,000
      11/30/03        21,680            73,827         25,000         25,000

----------
(1)   See note 6.

(2)   Calculated by  subtracting  the Fund's total  liabilities  (excluding  the
      AMPS) from the Fund's total assets and dividing  that amount by the number
      of AMPS shares outstanding.

(3)   Excludes accumulated undeclared dividends.

*     Unaudited.

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


                                       23


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

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

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

      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 those fixed income securities,
such as capital


                                       24


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

securities and bonds, which trade and are quoted on an "accrual income" basis.

      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.

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

      DIVIDENDS AND  DISTRIBUTIONS TO SHAREHOLDERS:  The Fund expects to declare
dividends on a monthly basis to shareholders  of Common Stock  ("Shareholders").
The  Shareholders  of AMPS are entitled to receive  cumulative cash dividends at
the  applicable  rate  for  such  series  as  declared  by the  Fund's  Board of
Directors.  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 gains may be used by the Fund's Shareholders as a credit against their
own tax liabilities.

      FEDERAL  INCOME  TAXES:  The Fund  intends  to  continue  to  qualify as a
regulated investment company


                                       25


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

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.

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

      Distributions  from net  realized  gains  for book  purposes  may  include
short-term capital gains, which are included as ordinary income for tax purposes
and may exclude  amortization of premium on "accrued income"  securities,  which
are not  reflected in ordinary  income for tax  purposes.  The tax  character of
distributions paid, including changes in accumulated undeclared distributions to
AMPS Shareholders, during 2005 and 2004 was as follows:



              DISTRIBUTIONS PAID IN FISCAL YEAR 2005      DISTRIBUTIONS PAID IN FISCAL YEAR 2004
              --------------------------------------      --------------------------------------
            ORDINARY INCOME    LONG-TERM CAPITAL GAINS   ORDINARY INCOME   LONG-TERM CAPITAL GAINS
            ---------------    -----------------------   ---------------   -----------------------
                                                                     
Common            N/A                     N/A              $104,559,450          $ 19,658,198
Preferred         N/A                     N/A              $  7,744,632          $          0


      As of November 30, 2004, 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)
---------------------------    ---------------    --------------    ---------------------------
                                                                
       $(39,676,341)             $15,003,406            $0                  $45,031,077


      At November 30, 2004, the Fund had accumulated  realized capital losses of
$39,676,341.  These losses may be carried  forward and offset against any future
capital gains through 2012.

      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 $196,222 of Federal excise taxes  attributable to
calendar year 2004 in March 2005.

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.


                                       26


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

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

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

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

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

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

      The Fund  currently  pays each Director who is not a director,  officer or
employee of the Adviser or the Servicing  Agent a fee of $9,000 per annum,  plus
$500 for each  in-person  meeting of the Board of


                                       27


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

      On July 23,  2004,  the Board of Directors  designated  Peter C. Stimes as
Chief  Compliance  Officer  ("CCO")  of the Fund.  The Fund  currently  pays Mr.
Stimes,   in  his  capacity  as  CCO,  $37,500  per  annum  and  reimburses  his
out-of-pocket expenses incurred in connection with his role as CCO.

4.    PURCHASES AND SALES OF SECURITIES

      For the six  months  ended May 31,  2005,  the cost of  purchases  of U.S.
Government and other securities,  excluding short-term  investments,  aggregated
$20,520,848  and  $160,112,584,   respectively.  Proceeds  from  sales  of  U.S.
Government and other securities,  excluding short-term  investments,  aggregated
$20,588,672 and $182,516,982, respectively.

      At May 31, 2005,  the aggregate  cost of securities for federal income tax
purposes was $1,467,551,500, the aggregate gross unrealized appreciation for all
securities  in which there is an excess of value over tax cost was  $101,841,663
and the aggregate  gross  unrealized  depreciation  for all  securities in which
there is an excess of tax cost over value was $10,515,568.

5.    COMMON STOCK

      At May 31, 2005,  240,000,000  shares of $0.01 par value Common Stock were
authorized.

      Common Stock transactions were as follows:



                                                SIX MONTHS ENDED                YEAR ENDED
                                                    5/31/05                      11/30/04
                                            -----------------------      --------------------------
                                            SHARES         AMOUNT          SHARES          AMOUNT
                                            ------         ------          ------          ------
                                                                            
Shares issued under the Dividend
   Reinvestment and Cash Purchase Plan      166,722      $4,082,974      1,292,825      $32,647,981
                                            -------      ----------      ---------      -----------


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 consist 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 AMPS are cumulative.

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


                                       28


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

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

      At May 31,  2005,  3,200 shares for each Series M7, T7, W7, Th7 and F7 and
2,840  shares for Series T28 and W28 of Auction  Market  Preferred  Shares  were
outstanding at the annualized rate of 3.07%, 3.04%, 3.05%, 3.09%, 3.07%, 3.089%,
3.088% for Series M7, T7, W7, Th7, F7, T28 and W28,  respectively.  The dividend
rate,  as set by the  auction  process,  is  generally  expected  to  vary  with
short-term  interest  rates.  These rates may vary in a manner  unrelated to the
income  received on the Fund's  assets,  which could have either a beneficial or
detrimental  impact on net investment income and gains available to Common Stock
Shareholders.  While the Fund expects to structure  its  portfolio  holdings and
hedging  transactions to lessen such risks to Common Stock  Shareholders,  there
can be no assurance that such results will be attained.

7.    PORTFOLIO INVESTMENTS, CONCENTRATION AND INVESTMENT QUALITY

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

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

      The Fund may invest up to 15% of its total assets in common stocks,  which
total includes those convertible  securities that trade in close relationship to
the underlying common stock of an issuer,  and, under normal market  conditions,
may  invest up to 20% of its total  assets in debt  securities.  Certain  of its
investments  in hybrid,  i.e.,  fully  taxable,  preferred  securities,  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 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  outside the
United States.  All foreign  securities  held by the Fund will be denominated in
U.S. dollars.


                                       29


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Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
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8.    SPECIAL INVESTMENT TECHNIQUES

      The Fund may employ certain  investment  techniques in accordance with its
fundamental  investment  policies.  These may include the use of when-issued and
delayed delivery transactions.  Securities purchased or sold on a when-issued or
delayed  delivery  basis may be  settled  within  45 days  after the date of the
transaction.  Such  transactions  may  expose  the  Fund to  credit  and  market
valuation  risk  greater than that  associated  with  regular  trade  settlement
procedures.  The Fund may also enter into  transactions,  in accordance with its
investment policies, involving any or all of the following: lending of portfolio
securities, short sales of securities,  futures contracts,  interest rate swaps,
options on futures  contracts,  options on  securities,  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.


                                       30


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

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

      Plan participants are not subject to any charge for reinvesting  dividends
or capital gains  distributions.  Each Plan participant  will,  however,  bear a
proportionate  share of  brokerage  commissions  incurred  with  respect to PFPC
Inc.'s open market purchases in connection with the reinvestment of dividends or
capital gains  distributions.  For the six months ended May 31, 2005,  $1,921 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.


                                       31


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Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
ADDITIONAL INFORMATION (UNAUDITED) (CONTINUED)
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      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  PFPC  Inc.  in
writing,  by completing  the form on the back of the Plan account  statement and
forwarding  it to PFPC Inc.,  or by calling PFPC Inc.,  directly.  A termination
will be effective  immediately  if notice is received by PFPC Inc. not less than
10 days  before  any  dividend  or  distribution  record  date.  Otherwise,  the
termination will be effective, and only with respect to any subsequent dividends
or  distributions,  on the first day after the dividend or distribution has been
credited to the  participant's  account in additional  shares of the Fund.  Upon
termination and according to a participant's instructions, PFPC Inc. will either
(a) issue  certificates for the whole shares credited to the shareholder's  Plan
account and a check representing 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  PFPC  Inc.   at
1-800-331-1710.

ADDITIONAL COMPENSATION AGREEMENT

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

PROXY VOTING POLICIES 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 initial Form N-PX with the  Securities  and Exchange  Commission  ("SEC") on
August 18, 2004.  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,   (ii)   on  the   Fund's   website   at
WWW.FCCLAYMORE.COM and (iii) on the SEC's website at WWW.SEC.GOV.

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 28, 2005. 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.

PORTFOLIO MANAGEMENT TEAM

      In managing the  day-to-day  operations of the Fund, the Adviser relies on
the  expertise  of its team of money  management  professionals,  consisting  of
Messrs. Crumrine, Ettinger, Stimes, Stone and


                                       32


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

Chadwick. The professional backgrounds of each member of the management team are
included in the "Information  about Fund Directors and Officers" section of this
report beginning on page 34.

CERTIFICATIONS

      Donald F. Crumrine,  as the Fund's Chief Executive Officer,  has certified
to the New York Stock Exchange that, as of May 18, 2005, 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
30a-2(a) under the 1940 Act.

MEETING OF SHAREHOLDERS

      On April 21, 2005, the Fund held its Annual Meeting of  Shareholders  (the
"Meeting")  for the  following  purposes:  election  of  directors  of the  Fund
("Proposal 1"),  approval of an amendment to the Fund's  Articles  Supplementary
Establishing  an Fixing the Rights and  Preferences of Auction Market  Preferred
Stock  ("Articles  Supplementary")  relating  to the term of office  of  certain
Directors  ("Proposal  2") and approval of an  amendment to the Fund's  Articles
Supplementary  relating to the Force  Majeure  Provision to regulate the auction
process  following an  extraordinary  event  ("Proposal  3"). All proposals were
approved by Shareholders and the results of the proposals are as follows:

PROPOSAL 1: ELECTION OF DIRECTORS.

NAME                                                     FOR           WITHHELD
----                                                     ---           --------
PREFERRED STOCK
      David Gale ................................       13,091            59

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

PROPOSAL 2:  AMENDMENT  TO THE  ARTICLES  SUPPLEMENTARY  RELATING TO THE TERM OF
      OFFICE OF CERTAIN DIRECTORS.

                                                    FOR       AGAINST   WITHHELD
                                                    ---       -------   --------
COMMON STOCK ...............................    32,694,204    422,749    624,885
PREFERRED STOCK ............................        12,974         44        132

PROPOSAL  3:  AMENDMENT  TO THE  ARTICLES  SUPPLEMENTARY  RELATING  TO THE FORCE
      MAJEURE PROVISION TO REGULATE THE AUCTION PROCESS FOLLOWING AN
      EXTRAORDINARY EVENT.

                                                    FOR       AGAINST   WITHHELD
                                                    ---       -------   --------
COMMON STOCK ...............................    32,692,949    414,694    634,195
PREFERRED STOCK ............................        12,974         44        132


                                       33


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Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
ADDITIONAL INFORMATION (UNAUDITED) (CONTINUED)
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INFORMATION ABOUT FUND DIRECTORS AND OFFICERS

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



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

MARTIN BRODY                Director    Class II Director  Retired                    2        Director, Jaclyn, Inc.
c/o HMK Associates                            since                                            (luggage and
30 Columbia Turnpike                      January 2003                                         accessories). Director,
Florham Park, NJ 07932                                                                         Emeritus, Smith Barney
Age: 83                                                                                        Mutual Funds (18 Funds);
                                                                                               Director, Flaherty &
                                                                                               Crumrine/Claymore
                                                                                               Total Return Fund.

DAVID GALE+                 Director    Class I Director   President & CEO of         4        Director, Metromedia
Delta Dividend Group, Inc.                    since        Delta Dividend                      International Group, Inc.
220 Montgomery Street                     January 2003     Group, Inc.                         (telecommunications);
Suite 426                                                  (investments).                      Director, Flaherty &
San Francisco, CA 94104                                                                        Crumrine Preferred Income
Age: 56                                                                                        Fund, Flaherty & Crumrine
                                                                                               Preferred Income
                                                                                               Opportunity Fund and
                                                                                               Flaherty & Crumrine/
                                                                                               Claymore Total Return
                                                                                               Fund.


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

                  CLASS I DIRECTORS  - one year term  expires at the Fund's 2008
                  Annual  Meeting of  Shareholders;  directors  may  continue in
                  office until their successors are duly elected and qualified.

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

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

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


                                       34


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



                                                               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:

MORGAN GUST+                Director    Class II Director  Since March 2002,                4        Director, Flaherty &
Giant Industries, Inc.                        since        President of Giant                        Crumrine Preferred
23733 N. Scottsdale Road                  January 2003     Industries, Inc. (petroleum               Income Fund, Flaherty &
Scottsdale, AZ 85255                                       refining and marketing)                   Crumrine Preferred Income
Age: 58                                                    and for more than five                    Opportunity Fund and
                                                           years prior thereto,                      Flaherty & Crumrine/
                                                           Executive Vice President,                 Claymore Total Return
                                                           and various other Vice                    Fund.
                                                           President positions at
                                                           Giant Industries, Inc.

ROBERT F. WULF              Director   Class III Director  Financial Consultant;            4        Director, Flaherty &
3560 Deerfield Drive South                    since        Trustee, University of                    Crumrine Preferred Income
Salem, OR 97302                           January 2003     Oregon Foundation;                        Fund, Flaherty & Crumrine
Age: 68                                                    Trustee, San Francisco                    Preferred Income
                                                           Theological Seminary.                     Opportunity Fund and
                                                                                                     Flaherty & Crumrine/
                                                                                                     Claymore Total Return
                                                                                                     Fund.


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

                  CLASS I DIRECTORS  - one year term  expires at the Fund's 2008
                  Annual  Meeting of  Shareholders;  directors  may  continue in
                  office until their successors are duly elected and qualified.

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

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

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


                                       35


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



                                                                   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
-------                    --------------     ------------         ----------              -----------       ----------------
                                                                                          
INTERESTED
DIRECTOR:

DONALD F. CRUMRINE++         Director,     Class III Director  Chairman of the Board            4        Director, Flaherty &
301 E. Colorado Boulevard     Chairman            since        and Director of Flaherty                  Crumrine Preferred
Suite 720                   of the Board      January 2003     & Crumrine Incorporated.                  Income Fund, Flaherty &
Pasadena, CA 91101           and Chief                                                                   Crumrine Preferred Income
Age: 57                      Executive                                                                   Opportunity Fund and
                              Officer                                                                    Flaherty & Crumrine/
                                                                                                         Claymore Total Return
                                                                                                         Fund.


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

                  CLASS I DIRECTORS  - one year term  expires at the Fund's 2008
                  Annual  Meeting of  Shareholders;  directors  may  continue in
                  office until their successors are duly elected and qualified.

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

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

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


                                       36


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      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
301 E. Colorado Boulevard                           January 2003        Flaherty & Crumrine
Suite 720                                                               Incorporated.
Pasadena, CA 91101
Age: 46

R. ERIC CHADWICK            Chief Financial             Since           Vice President of
301 E. Colorado Boulevard    Officer, Vice          January 2003        Flaherty & Crumrine
Suite 720                     President,                                Incorporated since
Pasadena, CA 91101           Treasurer and                              August 2001, and
Age: 30                         Secretary                               portfolio manager
                                                                        of Flaherty & Crumrine
                                                                        Incorporated.

PETER C. STIMES             Chief Compliance            Since           Vice President of
301 E. Colorado Boulevard      Officer and          January 2003        Flaherty & Crumrine
Suite 720                    Vice President                             Incorporated.
Pasadena, CA 91101
Age: 49

BRADFORD S. STONE            Vice President             Since           Since May 2003, Vice
392 Springfield Avenue        and Assistant           July 2003         President of Flaherty &
Mezzanine Suite                 Treasurer                               Crumrine Incorporated; from
Summit, NJ 07901                                                        June 2001 to April 2003,
Age: 45                                                                 Director of US Market Strategy
                                                                        at Barclays Capital; from
                                                                        February 1987 to June 2001,
                                                                        Vice President of Goldman,
                                                                        Sachs & Company as
                                                                        Director of US Interest Rate
                                                                        Strategy and, previously,
                                                                        Vice President of Interest
                                                                        Rate Product Sales.

NICHOLAS DALMASO             Vice President             Since           Director of Claymore
2455 Corporate West Drive     and Assistant         January 2003        Group, LLC since
Lisle, IL 60532                 Secretary                               January 2002. Senior
Age: 40                                                                 Managing Director
                                                                        and General Counsel of
                                                                        Claymore Securities, Inc.
                                                                        since November, 2001 and
                                                                        Claymore Advisors, LLC
                                                                        since October 2003. Partner
                                                                        of DBN Group since April
                                                                        2001. Associate General
                                                                        Counsel of Nuveen
                                                                        Investments from July 1999
                                                                        to November 2001.



                                       37


--------------------------------------------------------------------------------
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:

CHRISTOPHER D. RYAN           Vice President          Since April        Since February 2004, Vice
301 E. Colorado Boulevard                                2005            President of Flaherty &
Suite 720                                                                Crumrine Incorporated;
Pasadena, CA 91101                                                       October 2002 to February
Age: 37                                                                  2004, Product Analyst of
                                                                         Flaherty & Crumrine
                                                                         Incorporated.

LAURIE C. LODOLO                 Assistant              Since            Since August 2004,
301 E. Colorado Boulevard       Compliance             July 2004         Assistant Compliance
Suite 720                   Officer, Assistant                           Officer of Flaherty &
Pasadena, CA 91101            Treasurer and                              Crumrine Incorporated;
Age: 41                     Assistant Secretary                          since February 2004,
                                                                         Secretary of Flaherty &
                                                                         Crumrine Incorporated;
                                                                         Account Administrator of
                                                                         Flaherty & Crumrine
                                                                         Incorporated.



                                       38


--------------------------------------------------------------------------------
      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, 2005,  the Board of Directors of
the Fund approved the continuation of the investment advisory agreement with the
Adviser (the  "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.

NATURE, EXTENT AND QUALITY OF SERVICES

      The Board members 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 Board members noted that these services  included managing
the Fund's investment program, as well as providing  significant  administrative
services  beyond what the Agreement  required.  The Board members 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 Board 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 Board members evaluated the
Adviser's provision of services based on their direct experience over many years
as Fund  Directors  of funds  advised  by the  Adviser  and  focused  on (i) the
Adviser's   knowledge  of  the   preferred   stock  market   generally  and  the
sophisticated  hedging  strategies  the Fund  employs  and (ii) its  culture  of
compliance.  The Board members reviewed the personnel  responsible for providing
services to the Fund and observed,  based on their  experience  and  interaction
with the Adviser,  that (1) the  Adviser's  personnel  exhibited a high level of
diligence and attention to detail in carrying out their  responsibilities  under
the  Agreement,  (2) the Adviser was responsive to requests of the Board and its
personnel  were  available   between  Board  meetings  to  answer  Board  member
questions,  and (3) the  Adviser  had kept the Board  apprised  of  developments
relating to the Fund. The Board members  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,  the level of services provided by the Adviser, and the
quality of service, which continued to be high.

INVESTMENT PERFORMANCE

      The Board members  considered  the Fund's  performance  from inception and
more recently to determine  whether the Fund had met its  investment  objective.
The Board  determined that the Fund had done so. In so doing,  the Board members
reviewed performance compared to relevant indices and funds thought generally to
be  comparable  to the Fund,  considered  the costs and  benefits  of the Fund's
hedging strategy and examined the differences between the Fund and certain funds
in the  comparison  group,  including  the  significant  positions  a number  of
preferred stock funds had in common equities. The Board members noted the Fund's
longer-term  performance and  specifically  recognized that the Fund had been in
existence a relatively short time and that recent relative  underperformance was
attributable  largely to the Fund's stated hedging  strategies,  which over time
are expected to benefit the Fund,  and the Fund's  adherence  to its  respective
investment mandate.


                                       39



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

      The Board members 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 Board concluded that the
profitability  to the  Adviser  was  not  excessive  based  on the  considerable
services it provides to the Fund, the Fund's relative performance over time, its
success in meeting the Fund's investment objective and the Fund's relatively low
expense ratio. The Board members also considered the Adviser's  provision,  at a
lower cost,  of 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
Board 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 Board members 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 Board members  considered whether economies
of scale could be realized because the Adviser advises other similar funds, and,
based on their experience,  accepted the Adviser's  explanation that significant
economies of scale would not be realized  because of the nature of the preferred
securities  market in which the Fund  invests.  Nonetheless,  the Board  members
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
scale arising from increased assets. Accordingly,  the Board determined that the
existing advisory fee levels reflect possible economies of scale.

      Based on their  discussions and  considerations  as described  above,  the
Board made the following conclusions and determinations as to the Fund:

      o     The Board  concluded  that the  nature,  extent  and  quality of the
            services provided by the Adviser are adequate and appropriate.

      o     The Board was satisfied with the Fund's overall performance.

      o     The Board  concluded that the fee paid to the Adviser was reasonable
            in light of  comparative  performance  and expense and  advisory fee
            information,  costs  of the  services  provided  and  profits  to be
            realized and  benefits  derived or to be derived by the Adviser from
            the relationship with the Fund.

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

      o     The  Board  members   considered  these  factors,   conclusions  and
            determinations   in  their  totality  and,  without  any  one  being
            dispositive, the Board determined that approval of the Agreement was
            in the best interests of the Fund and its shareholders.


                                       40


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

AMENDMENTS TO CHARTER AND BYLAWS

      In  addition to the changes to the Fund's  Charter  that were  approved by
Shareholders at the April 21, 2005 Annual Meeting of Shareholders,  the Board of
Directors approved Articles  Supplementary to the Fund's Charter and Amended and
Restated  Bylaws  ("Bylaws")  at its April 21, 2005  meeting.  Among the changes
reflected  in the  Fund's  Bylaws are a bylaw  amendment  and  related  Articles
Supplementary  reflecting  the  Board's  determination  to  opt  in  to  certain
provisions of the Maryland  Unsolicited  Takeover Act. Such action provides that
(1) the  number of  directors  can be fixed only by the Board and (2) a director
elected by the Board to fill a Board  vacancy  holds office until the end of the
term of the class to which the director has been elected  (rather than until the
next annual meeting).

      The Board also  approved  an  amendment  to the Bylaws to clarify  certain
aspects of the calling of a Special Meeting of Shareholders.  Specifically, such
bylaw  amendment  clarifies that if a Shareholder or group of  Shareholders  has
requested and paid for a Special Meeting of  Shareholders,  another  Shareholder
cannot add an additional  proposal to the proxy statement for that meeting.  The
Board   determined  that  the  changes  to  the  Bylaws  and  related   Articles
Supplementary  provide the Fund with certain additional  protections in the case
of a hostile  takeover bid to gain control of the Fund and change the  objective
to the detriment of long-term  shareholders.  However,  the Board is aware of no
such hostile takeover bid at the present time.


                                       41


                      [This page intentionally left blank]






                      [This page intentionally left blank]

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

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

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

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

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

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

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

THIS REPORT IS SENT TO  SHAREHOLDERS OF FLAHERTY &  CRUMRINE/CLAYMORE  PREFERRED
SECURITIES  INCOME  FUND  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.



ITEM 2. CODE OF ETHICS.

Not applicable.



ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.

Not applicable.



ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Not applicable.



ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.

Not applicable.



ITEM 6. SCHEDULE OF INVESTMENTS.

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.



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.

Not yet applicable.





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  7(d)(2)(ii)(G)  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 18, 2005
    ----------------------------------------------------------------------------


Pursuant to the  requirements  of the  Securities  Exchange  Act of 1934 and the
Investment  Company  Act of  1940,  this  report  has been  signed  below by the
following  persons on behalf of the  registrant and in the capacities and on the
dates indicated.


By (Signature and Title)*  /S/ DONALD F. CRUMRINE
                         -------------------------------------------------------
                           Donald F. Crumrine, Director, Chairman  of  the Board
                           and Chief Executive Officer
                           (principal executive officer)

Date              JULY 18, 2005
    ----------------------------------------------------------------------------


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

Date              JULY 18, 2005
    ----------------------------------------------------------------------------



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