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

                                   FORM N-CSR

              CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
                              INVESTMENT COMPANIES

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

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

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

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

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

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

                   Date of reporting period: November 30, 2007
                                             -----------------


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

A registrant  is required to disclose the  information  specified by Form N-CSR,
and the  Commission  will make this  information  public.  A  registrant  is not
required to respond to the  collection  of  information  contained in Form N-CSR
unless the Form  displays a  currently  valid  Office of  Management  and Budget
("OMB")  control number.  Please direct comments  concerning the accuracy of the
information  collection  burden  estimate and any  suggestions  for reducing the
burden to  Secretary,  Securities  and Exchange  Commission,  100 F Street,  NE,
Washington,  DC 20549. The OMB has reviewed this collection of information under
the clearance requirements of 44 U.S.C. ss. 3507.






ITEM 1. REPORTS TO STOCKHOLDERS.

The Report to Shareholders is attached herewith.


FLAHERTY & CRUMRINE/CLAYMORE PREFERRED SECURITIES INCOME FUND

      To  the  Shareholders  of  the  Flaherty  &  Crumrine/Claymore   Preferred
Securities Income Fund ("FFC" or the "Fund"):

      During the second half of 2007,  conditions in U.S.  preferred  securities
markets deteriorated dramatically, resulting in significant negative performance
for the Fund.  While some companies in the Fund's  portfolio have  challenges to
manage,  we believe those  companies and the Fund's other holdings will continue
to deliver high current income to the Fund's shareholders. No one knows when the
preferred and overall credit markets will  stabilize,  but eventually they will.
The road to  stabilization  is  likely  to be bumpy  for some  time,  so we will
continue to navigate diligently with our disciplined,  credit-focused investment
strategy.

      Since yields rise when prices of fixed income  securities fall, one of the
silver  linings in the current market  environment is the Fund's income.  During
this period,  we have been able to  re-position a portion of the portfolio  into
higher-yielding  investment-grade  securities.  Along with other  factors,  this
allowed us to raise our dividend modestly, effective in December.

      The following table  summarizes the Fund's  performance in its most recent
fiscal quarter and over longer time periods, compared with the average return of
a group of  closed-end  funds  that  invest in other  types of  securities  than
preferred securities (as outlined in footnote (3) below):

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

                       TOTAL RETURN ON NET ASSET VALUE(1)
                       FOR PERIODS ENDED NOVEMBER 30, 2007



                                                                    AVERAGE ANNUALIZED
                                              ACTUAL RETURNS              RETURNS
                                         ------------------------   ------------------
                                          THREE     SIX      ONE     THREE    LIFE OF
                                         MONTHS   MONTHS    YEAR     YEARS    FUND(2)
                                         ------   ------   ------   ------   ---------
                                                                
Flaherty & Crumrine/Claymore
Preferred Securities Income Fund .....    -5.9%   -11.5%   -11.9%     0.1%     4.0%
Lipper Domestic Investment Grade
Funds(3) .............................     2.2%     2.0%     3.9%     5.0%     5.8%


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

(2)   Since inception on January 29, 2003.

(3)   Includes all closed-end funds in Lipper's U.S. Government, U.S. Mortgage
      and Corporate Debt BBB Rated categories in each month during the period.
      Although the investment strategies used by the Fund differ significantly
      from the strategies used by these other fixed-income funds, the Fund seeks
      to accomplish a similar objective.

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

      As the table  reflects,  the  Fund's  relative  performance  over all time
periods was  dramatically  impacted  by the last six months of the fiscal  year.
Since July 2007, U.S. markets have suffered from a severe credit crunch. Sparked
by the problems in the subprime mortgage market, the credit crunch expanded into
a complete  re-evaluation by investors and lenders of prices associated with the
extension  of  credit  and  liquidity,  in  other  words,  the  "risk  premium."
Rationally or irrationally, lenders and investors became afraid of the



greater risk that their  borrowers  might  default,  and demanded  significantly
higher risk  premiums for making loans or owning  preferred or debt  securities.
Many investors  fled to the safest credit  instrument  they knew -U.S.  Treasury
securities.

      Widening  risk  premiums  played  out in a number of market  sectors.  For
consumers,  mortgage rates jumped  significantly  in the first few months of the
crunch and banks tightened lending  standards.  For  institutions,  credit fears
became so widespread  that banks even worried about lending to other banks;  the
cost of interbank borrowing surged. For the Fund, leverage became more expensive
and yields on  preferred  securities  increased  dramatically,  driving down the
value of the Fund's portfolio.

      In some  asset  classes,  lenders  and  investors  simply  retreated  from
extending credit to borrowers at any risk premium.  Left unchecked,  this credit
contraction  could have had severe negative  repercussions  on both asset values
and the economy. In response,  the Federal Reserve cut the fed funds rate by one
percentage point and the discount rate by one and a half percentage points, with
the  likelihood  of further cuts to come.  In addition,  the Fed and other major
global  central  banks  flooded  markets  with  liquidity   through   repurchase
operations. Preferred securities and other credit-market instruments, which were
falling  sharply in price  prior to the Fed's  actions,  have  since  stabilized
somewhat.  Although we cannot say that prices of credit-market  instruments have
reached a bottom, the Fed's actions have clearly helped provide liquidity to the
market. In the discussion topics that follow this letter, we write further about
our  thoughts on the future of the current  credit  crunch,  the outlook for the
U.S. economy and the possible response by the Fed. It's likely that the behavior
of the preferred securities market these past months will one day be the subject
of business school dissertations.  From our vantage point, we'd observe that the
market was impacted  by, among other  things,  issues of  liquidity,  a flood of
supply from financial  issuers desperate to replenish their capital and concerns
over the creditworthiness of the financial  institutions that constitute a large
part of the preferred securities market.

      Early on, losses by investors in mortgage securities prompted  liquidation
of their holdings in preferred  securities to meet their funding needs. Too many
willing  sellers,  and too few buyers,  then had an adverse impact on valuations
throughout the secondary preferred  securities market.  Subsequently,  companies
directly  impacted by credit-related  losses - especially banks,  broker-dealers
and the  government-sponsored  housing  lenders,  Fannie Mae and  Freddie  Mac -
turned largely to the preferred  market to raise  much-needed  capital to offset
their losses.  The pricing of these new issues came at substantial  discounts to
outstanding  preferred  securities,  which  further  drove  down  prices  in the
secondary preferred market (including for preferred  securities of non-financial
companies).

      Although  many types of companies  have  experienced  some strain from the
current credit crunch,  those most affected  include banks,  financial  services
companies and broker-dealers - the industries with direct and indirect exposures
to problems in the housing market. Preferred securities issued by these types of
companies have consequently suffered the greatest declines in value. In the more
detailed  discussion that follows this letter, we talk about credit fundamentals
of the financial  services  companies we own. In short,  we believe that current
market values of most securities we own are more reflective of the credit crunch
and associated fears and illiquidity than the overall  creditworthiness of these
issuers. Consequently, we remain cautiously optimistic that a more normal market
will bring about positive returns for our preferred-securities  investments this
year. On a longer-term horizon, we are all but certain of it.

      Following  this letter is discussion on a variety of subjects,  including:
an  attribution  of total  returns on net asset value;  the Fund's  market price
performance;  the economy and our views on monetary policy;  credit fundamentals
of financial services companies;  and tax treatment of the Fund's dividends. The
Questions and


                                        2



Answers on the Fund's website at WWW.FCCLAYMORE.COM  have additional comments on
a number of topics that may interest you. We believe an informed shareholder can
be one of the strongest assets of any company,  and we encourage you to read the
remainder of this report and explore the website for a wide range of  additional
information about your Fund.

      Sincerely,

      /s/ Donald F. Crumrine                 /s/ Robert M. Ettinger

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

      January 18, 2008


                                        3



                                DISCUSSION TOPICS

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

      The  preferred  securities  market has  suffered one of its worst years in
modern U.S.  financial  history.  While no index  comprehensively  reflects  the
investment  universe  for the Fund,  Merrill  Lynch  publishes  three  different
indices   which  attempt  to  measure   performance   of  some  sectors  of  the
investment-grade  preferred  securities  market: the Merrill Lynch 8% Capped DRD
Preferred  Stock Index  (which  includes  traditional  tax-advantaged  preferred
stocks);  the Merrill Lynch Hybrid  Preferred  Securities  Index (which includes
fully-taxable,  exchange-traded  preferred  securities)  and the  Merrill  Lynch
Adjustable   Preferred   Stock,  7%  Constrained   Index  (which  includes  both
tax-advantaged and taxable preferred securities with adjustable dividends).  Set
forth below are the six month and twelve month total returns of these indices:

          TOTAL RETURNS OF MERRILL LYNCH PREFERRED SECURITIES INDICES*
                       FOR PERIODS ENDED NOVEMBER 30, 2007



------------------------------------------------------------------------------------------------
                                                                           SIX MONTHS   ONE YEAR
------------------------------------------------------------------------------------------------
                                                                                   
Merrill Lynch 8% Capped DRD Preferred Stock Index(SM) ..................      (8.7)%      (6.9)%
Merrill Lynch Hybrid Preferred Securities Index(SM) ....................      (9.2)%      (7.8)%
Merrill Lynch Adjustable Preferred Stock, 7% Constrained Index(SM) .....     (15.6)%     (13.7)%


*     The Merrill Lynch 8% Capped DRD Preferred Stock Index(SM) includes
      investment grade preferred securities issued by both corporations and
      government agencies that qualify for the corporate dividends received
      deduction with issuer concentration capped at a maximum of 8%. The Merrill
      Lynch Hybrid Preferred Securities Index(SM) includes taxable, fixed-rate,
      U.S. dollar-denominated investment-grade, preferred securities listed on a
      U.S. exchange. The Merrill Lynch Adjustable Preferred Stock, 7%
      Constrained Index(SM) includes adjustable rate preferred securities issued
      by US corporations and government agencies with issuer concentration
      capped at a maximum of 7%. All index returns include interest and dividend
      income and, unlike the Fund's returns on net asset value, are unmanaged
      and do not reflect any expenses.

      While we realize  it's only small  consolation,  as set forth in the table
below, the Fund's total return on its securities portfolio was better than these
indices.  Unfortunately,  as one might  expect,  the  Fund's  strategy  of using
leverage  amplified  its  negative  returns  and,  coupled with its expenses and
hedging  strategy,  caused the NAV of the Fund to perform  worse than two of the
indices.

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

                     COMPONENTS OF FFC'S TOTAL RETURN ON NAV
                       FOR PERIODS ENDED NOVEMBER 30, 2007



------------------------------------------------------------------------------------------------
                                                                           SIX MONTHS   ONE YEAR
------------------------------------------------------------------------------------------------
                                                                                   
Total Return on Unleveraged Securities Portfolio
(including principal and income) .......................................      (5.4)%      (4.4)%
Return from Interest Rate Hedging Strategy .............................      (0.7)%      (0.7)%
Impact of Leverage .....................................................      (4.8)%      (5.6)%
Expenses ...............................................................      (0.6)%      (1.2)%
------------------------------------------------------------------------------------------------
                                                     Total Return on NAV     (11.5)%     (11.9)%



                                        4



MARKET TOTAL RETURN

      While  our  focus is  primarily  on  managing  the  Fund's  portfolio,  an
investor's  actual return is comprised of monthly dividend payments plus changes
in the Fund's  market  price.  For the year ended  November 30, 2007,  the total
return on MARKET  VALUE for the  Fund's  common  shares was  -15.4%.  During the
fourth quarter alone, total return on MARKET VALUE was -5.7%.

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

       FLAHERTY & CRUMRINE/CLAYMORE PREFERRED SECURITIES INCOME FUND (FFC)
            PREMIUM/DISCOUNT OF MARKET PRICE TO NAV THROUGH 12/31/07

 [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]

      Date         Mkt Price         NAV        Prem/Disc
    1/4/2008         16.73          18.91        -0.1153
   12/28/2007        16.04          18.36        -0.1264
   12/21/2007        15.97          18.28        -0.1264
   12/14/2007        16.30          18.58        -0.1227
   12/7/2007         17.06          18.99        -0.1016
   11/30/2007        17.17          19.28        -0.1094
   11/23/2007        16.36          19.35        -0.1545
   11/16/2007        16.69          19.68        -0.1519
   11/9/2007         17.04          20.02        -0.1489
   11/2/2007         17.82          20.81        -0.1437
   10/26/2007        18.30          20.99        -0.1282
   10/19/2007        18.19          21.3         -0.1460
   10/12/2007        18.33          21.17        -0.1342
   10/5/2007         18.45          21.01        -0.1218
   9/28/2007         18.22          20.98        -0.1316
   9/21/2007         18.46          20.68        -0.1074
   9/14/2007         18.84          20.65        -0.0877
    9/7/2007         18.75          21.07        -0.1101
   8/31/2007         18.59          20.87        -0.1092
   8/24/2007         18.32          20.73        -0.1163
   8/17/2007         17.65          20.48        -0.1382
   8/10/2007         18.76          20.96        -0.1050
    8/3/2007         19.05          21.23        -0.1027
   7/27/2007         19.20          21.15        -0.0922
   7/20/2007         19.75          21.91        -0.0986
   7/13/2007         20.40          22.08        -0.0761
    7/6/2007         20.38          22.05        -0.0757
   6/29/2007         20.42          22.18        -0.0794
   6/22/2007         20.03          22.18        -0.0969
   6/15/2007         20.87          22.31        -0.0645
    6/8/2007         20.83          22.29        -0.0655
    6/1/2007         21.56          22.52        -0.0426
   5/25/2007         21.29          22.58        -0.0571
   5/18/2007         22.11          22.83        -0.0315
   5/11/2007         21.99          23.01        -0.0443
    5/4/2007         22.05          23.05        -0.0434
   4/27/2007         22.19          22.9         -0.0310
   4/20/2007         21.98          22.93        -0.0414
   4/13/2007         22.01          22.87        -0.0376
    4/5/2007         22.45          22.89        -0.0192
   3/30/2007         22.30          22.95        -0.0283
   3/23/2007         22.37          23.04        -0.0291
   3/16/2007         21.87          23.34        -0.0630
    3/9/2007         21.91          23.35        -0.0617
    3/2/2007         21.99          23.49        -0.0639
   2/23/2007         21.80          23.33        -0.0656
   2/16/2007         21.65          23.33        -0.0720
    2/9/2007         21.70          22.99        -0.0561
    2/2/2007         21.78          23.17        -0.0600
   1/26/2007         21.70          22.99        -0.0561
   1/19/2007         21.72          23.23        -0.0650
   1/12/2007         21.85          23.18        -0.0574
    1/5/2007         21.72          23.28        -0.0670
   12/29/2006        21.41          23.15        -0.0752
   12/22/2006        21.74          23.18        -0.0621
   12/15/2006        22.05          23.28        -0.0528
   12/8/2006         21.98          23.35        -0.0587
   12/1/2006         21.94          23.47        -0.0652
   11/24/2006        21.62          23.26        -0.0705
   11/17/2006        21.59          23.3         -0.0734
   11/10/2006        21.27          23.24        -0.0848
   11/3/2006         20.88          23.01        -0.0926
   10/27/2006        21.30          22.99        -0.0735
   10/20/2006        21.15          22.76        -0.0707
   10/13/2006        20.89          22.74        -0.0814
   10/6/2006         20.73          22.81        -0.0912
   9/29/2006         20.67          22.88        -0.0966
   9/22/2006         20.41          22.84        -0.1064
   9/15/2006         20.60          22.63        -0.0897
    9/8/2006         20.46          22.59        -0.0943
    9/1/2006         20.80          22.66        -0.0821
   8/25/2006         20.45          22.47        -0.0899
   8/18/2006         20.56          22.53        -0.0874
   8/11/2006         20.26          22.23        -0.0886
    8/4/2006         19.98          22.3         -0.1040
   7/28/2006         19.91          22.2         -0.1032
   7/21/2006         19.47          22.17        -0.1218
   7/14/2006         19.57          22.24        -0.1201
    7/7/2006         19.28          22.13        -0.1288
   6/30/2006         19.50          22.02        -0.1144
   6/23/2006         19.60           22          -0.1091
   6/16/2006         19.72          22.18        -0.1109
    6/9/2006         19.67          22.32        -0.1187
    6/2/2006         19.87          22.36        -0.1114
   5/26/2006         19.59          22.31        -0.1219
   5/19/2006         19.52          22.46        -0.1309
   5/12/2006         19.61          22.41        -0.1249
    5/5/2006         19.50          22.34        -0.1271
   4/28/2006         19.76          22.34        -0.1155
   4/21/2006         19.45          22.36        -0.1301
   4/14/2006         19.17          22.55        -0.1499
    4/7/2006         19.69          22.54        -0.1264
   3/31/2006         19.81          22.66        -0.1258
   3/24/2006         20.27          22.72        -0.1078
   3/17/2006         20.13          22.83        -0.1183
   3/10/2006         19.81          22.81        -0.1315
    3/3/2006         21.07          22.78        -0.0751
   2/24/2006         21.27          22.84        -0.0687
   2/17/2006         21.45          22.82        -0.0600
   2/10/2006         21.38          22.94        -0.0680
    2/3/2006         21.00           22.9         -0.0830
   1/27/2006         21.05          22.76        -0.0751
   1/20/2006         21.02          22.75        -0.0760
   1/13/2006         20.69          22.9         -0.0965
    1/6/2006         20.59          22.85        -0.0989
   12/30/2005        19.30          22.82        -0.1543
   12/23/2005        19.42          22.76        -0.1467
   12/16/2005        19.00           22.73        -0.1641
   12/9/2005         19.65          22.65        -0.1325
   12/2/2005         20.12          22.64        -0.1113
   11/25/2005        20.11          22.61        -0.1106
   11/18/2005        20.04          22.78        -0.1203
   11/11/2005        20.90          22.87        -0.0861
   11/4/2005         20.92          22.89        -0.0861
   10/28/2005        20.86          22.71        -0.0815
   10/21/2005        21.03          22.8         -0.0776
   10/14/2005        20.61          22.86        -0.0984
   10/7/2005         21.15          23.01        -0.0808
   9/30/2005         21.44          23.06        -0.0703
   9/23/2005         22.51          23.14        -0.0272
   9/16/2005         23.11          23.42        -0.0132
    9/9/2005         23.55          23.57        -0.0008
    9/2/2005         23.41          23.7         -0.0122
   8/26/2005         23.19          23.64        -0.0190
   8/19/2005         23.35          23.78        -0.0181
   8/12/2005         23.60          23.78        -0.0076
    8/5/2005         23.29          23.66        -0.0156
   7/29/2005         23.80          23.78         0.0008
   7/22/2005         23.25          23.74        -0.0206
   7/15/2005         23.15          23.83        -0.0285
    7/8/2005         23.45          23.82        -0.0155
    7/1/2005         23.05          23.87        -0.0344
   6/24/2005         23.10          23.92        -0.0343
   6/17/2005         23.21          23.86        -0.0272
   6/10/2005         23.36          23.93        -0.0238
    6/3/2005         23.13          24.02        -0.0371
   5/27/2005         22.66          23.74        -0.0455
   5/20/2005         22.46          23.7         -0.0523
   5/13/2005         22.40          23.78        -0.0580
    5/6/2005         22.99          23.66        -0.0283
   4/29/2005         22.68          23.81        -0.0475
   4/22/2005         22.31          23.76        -0.0610
   4/15/2005         21.91          23.75        -0.0775
    4/8/2005         21.71          23.83        -0.0890
    4/1/2005         22.08          23.85        -0.0742
   3/25/2005         22.53          23.75        -0.0514
   3/18/2005         23.20          24.2         -0.0413
   3/11/2005         24.45          24.4          0.0020
    3/4/2005         25.38          24.53         0.0347
   2/25/2005         25.38          24.49         0.0363
   2/18/2005         25.26          24.42         0.0344
   2/11/2005         25.62          24.77         0.0343
    2/4/2005         26.10          24.8          0.0524
   1/28/2005         25.35          24.47         0.0360
   1/21/2005         25.41          24.38         0.0422
   1/14/2005         25.44          24.4          0.0426
    1/7/2005         25.74          24.21         0.0632
   12/31/2004        26.00           24.32         0.0691
   12/24/2004        25.55          24.21         0.0553
   12/17/2004        25.34          24.55         0.0322
   12/10/2004        25.34          24.55         0.0322
   12/3/2004         25.22          24.3          0.0379
   11/26/2004        25.90          24.36         0.0632
   11/19/2004        25.86          24.3          0.0642
   11/12/2004        25.73          24.36         0.0562
   11/5/2004         25.40          24.33         0.0440
   10/29/2004        25.86          24.38         0.0607
   10/22/2004        25.49          24.34         0.0472
   10/15/2004        25.82          24.55         0.0517
   10/8/2004         25.68          24.47         0.0494
   10/1/2004         25.35          24.34         0.0415
   9/24/2004         25.26          24.64         0.0252
   9/17/2004         25.40          24.55         0.0346
   9/10/2004         25.37          24.32         0.0432
    9/3/2004         25.20          24.08         0.0465
   8/27/2004         25.21          24.11         0.0456
   8/20/2004         24.90          24.02         0.0366
   8/13/2004         25.01          24.14         0.0360
    8/6/2004         24.84          24.04         0.0333
   7/30/2004         24.67          23.86         0.0339
   7/23/2004         24.30          23.85         0.0189
   7/16/2004         24.70          24.11         0.0245
    7/9/2004         24.28          23.83         0.0189
    7/2/2004         24.06          23.72         0.0143
   6/25/2004         23.74          23.67         0.0030
   6/18/2004         24.22          23.85         0.0155
   6/11/2004         24.39          23.89         0.0209
    6/4/2004          24.4           24           0.0167
   5/28/2004         24.490        24.000         0.0204
   5/21/2004         23.890        23.800         0.0038
   5/14/2004         24.250        23.680         0.0241
    5/7/2004         23.520        23.720        -0.0084
   4/30/2004         24.450        24.490        -0.0016
   4/23/2004         24.450        24.540        -0.0037
   4/16/2004         25.890        24.930         0.0385
    4/9/2004         26.630        25.250         0.0547
    4/2/2004         27.310        25.390         0.0756
   3/26/2004         27.760        25.610         0.0840
   3/19/2004         27.590        25.940         0.0636
   3/12/2004         27.270        25.870         0.0541
    3/5/2004         27.130        25.840         0.0499
   2/27/2004         27.070        25.610         0.0570
   2/20/2004         26.910        25.360         0.0611
   2/13/2004         26.990        25.550         0.0564
    2/6/2004         26.980        25.500         0.0580
   1/30/2004         26.670        25.490         0.0463
   1/23/2004         26.900        25.590         0.0512
   1/16/2004         27.000        25.680         0.0514
    1/9/2004         26.820        25.470         0.0530
    1/2/2004         26.840        25.010         0.0732
   12/26/2003        26.940        25.230         0.0678
   12/19/2003        26.770        25.200         0.0623
   12/12/2003        26.620        24.850         0.0712
   12/5/2003         26.640        25.980         0.0254
   11/28/2003        26.660        25.740         0.0357
   11/21/2003        26.140        25.880         0.0100
   11/14/2003        26.300        25.720         0.0226
   11/7/2003         26.400        25.310         0.0431
   10/31/2003        25.990        25.720         0.0105
   10/24/2003        26.000        25.690         0.0121
   10/17/2003        25.930        25.630         0.0117
   10/10/2003        25.620        25.500         0.0047
   10/3/2003         25.500        25.780        -0.0109
   9/26/2003         25.280        25.870        -0.0228
   9/19/2003         25.100        25.630        -0.0207
   9/12/2003         25.080        25.280        -0.0079
    9/5/2003         25.090        25.140        -0.0020
   8/29/2003         25.170        25.240        -0.0028
   8/22/2003         24.960        25.060        -0.0040
   8/15/2003         24.850        24.950        -0.0040
    8/8/2003         24.930        24.750         0.0073
    8/1/2003         24.900        25.000        -0.0040
   7/25/2003         24.950        25.000        -0.0020
   7/18/2003         25.150        25.110         0.0016
   7/11/2003         25.380        25.350         0.0012
    7/4/2003         25.610        25.540         0.0027
   6/27/2003         25.480        25.610        -0.0051
   6/20/2003         25.410        25.760        -0.0136
   6/13/2003         25.120        26.200        -0.0412
    6/6/2003         25.080        25.710        -0.0245
   5/30/2003         25.250        25.850        -0.0232
   5/23/2003         24.860        25.970        -0.0427
   5/16/2003         24.980        25.380        -0.0158
    5/9/2003         24.930        24.680         0.0101
    5/2/2003         24.900        24.260         0.0264
   4/25/2003         24.860        24.170         0.0285
   4/18/2003         24.960        23.980         0.0409
   4/11/2003         25.000        23.770         0.0517
    4/4/2003         24.950        23.660         0.0545
   3/28/2003         25.000        23.810         0.0500
   3/21/2003         24.750        23.520         0.0523
   3/14/2003         25.060        23.950         0.0463
    3/7/2003         25.000        24.000         0.0417
   2/28/2003         25.030        23.960         0.0447
   2/21/2003         25.040        23.820         0.0512
   2/14/2003         25.030        23.760         0.0535
    2/7/2003         25.080        23.850         0.0516
   1/31/2003         25.050        23.820         0.0516
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   12/28/1990

      Over the past six months,  investors  have been  indiscriminately  selling
many types of corporate securities, including closed-end funds. The discounts of
closed-end  funds of all  stripes,  including  the Fund's,  widened  materially.
Toward the end of the year,  the  Fund's  decline  in market  price was  further
compounded by tax-loss selling pressure. Throughout the period, the market price
of the Fund's  shares has  almost  traded  without  apparent  relation  to their
underlying net asset value (NAV),  and we have seen  near-historic  discounts in
the Fund's market prices to their NAVs.

      As discussed in greater detail on the Fund's website,  fundamentally,  the
market prices of the Fund's shares are subject to the laws of supply and demand,
which became substantially  imbalanced.  We believe that the fundamentals of FFC
continue to be strong and that this supply/demand  imbalance is unjustified when
one  considers  the  Fund's  current  dividend  levels  and the  quality  of its
portfolio.

THE U.S. ECONOMY AND FEDERAL RESERVE MONETARY POLICY

      The U.S.  economy  has  performed  remarkably  well to date in the face of
significant  deterioration  in housing and credit  markets.  Real gross domestic
product  grew by 4.9%  at an  annual  rate in the  third  quarter,  the  fastest
quarterly growth pace in four years.  However,  prospects for future growth have
clearly dimmed.


                                        5



Today,  the key question for the economy - and for investors - is to what extent
housing and credit headwinds affect economic growth over coming quarters. On one
hand,  if the impact is only  modest,  then the economy  probably can regain its
footing after a couple quarters of slow (sub-2%)  growth.  On the other hand, if
the  housing  downturn  becomes  even worse than  expected,  generating  further
sizable losses in the financial sector,  then credit  contraction in combination
with already-slowing consumer spending could result in recession.

      Without  repeating  the  detailed  analysis  we present  in our  Quarterly
Economic Update (which is available on the Fund's website), we continue to think
that the economy will narrowly  avoid  recession.  However,  we now believe that
additional monetary easing will be needed, and the downside risks have increased
as credit market strains have intensified.

      The housing market remains the weakest part of the economy,  and we expect
it to weaken  through 2008 as a large  inventory  of unsold  homes  continues to
weigh on both prices and  construction  activity.  Many mortgage  borrowers with
little home equity will  default,  others  will  struggle  with higher  mortgage
payments as their rates reset,  and fewer and fewer  homeowners  will be able to
extract home equity to finance  current  consumption.  The result will be slower
growth in consumer  spending,  although we think that steady,  if unspectacular,
gains in employment will prevent consumption from falling outright.

      Falling home prices and poor loan  underwriting  have  resulted in surging
delinquency and default rates and rising loss severity.  Mortgage investors must
anticipate  how many loans will  default  and how much of the loan value will be
recovered in foreclosure. Thus, mortgage prices need to reflect not only current
losses,  but also expectations of all future losses.  As a result,  the price of
many  mortgage-backed  securities,  particularly those backed by subprime loans,
have fallen  dramatically  - even in cases  where  securities  have  suffered no
defaults on principal or interest to date. In turn,  prices of securities issued
by companies with exposure to mortgage securities also have fallen sharply.

      The  distinction  between  current and expected losses is an important one
for investors.  First, because prices have fallen on many securities,  financial
institutions  who hold them have taken sizable  mark-to-market  losses that have
reduced earnings and capital. But these write downs already incorporate expected
future losses. In the case of subprime mortgages (and many other assets), market
prices incorporate quite dire loss estimates. Although it's possible that losses
ultimately will exceed market expectations,  it's also possible that losses will
be less.  If in fact losses are less than current  market prices  reflect,  then
holders  of  those   securities   ultimately  will  report  gains  from  current
(depressed) prices.  Thus,  investors in these securities may well avoid further
losses (or even have gains) even as defaults  increase,  as long as defaults and
losses  arising  from those  defaults  are less than what is baked into  current
prices.  Second,  although  market prices  reflect severe loss  expectations  on
mortgages,  the vast majority of those losses have not yet  occurred.  Normally,
changes in wealth (in this case,  mark-to-market  losses)  have a  significantly
smaller economic impact than realized losses (actual defaults). As a result, the
economic  impact of  defaults  will  probably  take some time to play out.  That
offers  the  possibility  that the  economy  can avoid  recession,  despite  the
magnitude of the losses that ultimately may be incurred in the mortgage  market.
At the same time,  it also means  growth  may be  sluggish  for more than just a
couple of quarters. Right now, we just can't say which way the economy is likely
to  turn:  toward  recession,  an  extended  period  of  sluggish  growth,  or a
two-quarter pause before resuming normal growth. However, even the best of those
three  scenarios  points to slow growth in early 2008,  so our economic  outlook
remains cautious.


                                        6



      In response to the gloomier  economic  outlook and the credit crunch,  the
Federal  Reserve cut the fed funds rate by a total of one percentage  point from
September through December 2007. However,  just as it increased the rate further
than normal due to declining risk premiums from 2004-06, the Fed may now have to
lower the fed funds rate by more than normal due to elevated risk premiums.  The
credit  crunch,  which has raised risk  premiums,  has  reduced the  stimulative
effect of the Fed's  rate cuts.  Although  recent  coordinated  actions by major
central banks to provide term financing are starting to improve the pass-through
of lower official rates to market rates, it is clear that whatever set of market
rates  needed to keep the economy out of  recession  is likely to be  associated
with a lower-than-normal fed funds rate.

      In addition to the cost of credit, the Fed needs to be concerned about the
availability of credit.  Securitization  markets are  essentially  shut down for
mortgages other than U.S. government agency-eligible conforming loans; ditto for
many other forms of collateral.  This is forcing  borrowers to turn to banks and
finance  companies  for funds,  expanding  their  balance  sheets at a time when
capital is being squeezed due to mark-to-market losses and higher charge-offs on
existing loans.  Thus,  financial  institutions are tightening lending standards
and raising  loan rates,  which  likely will  constrain  economic  growth in the
absence of easier monetary policy.

      With the bulk of the  economic  impact of rising loan  defaults  yet to be
felt, we believe that the Fed will err on the side of  additional  rate cuts, at
least until market rates come down meaningfully.

FUNDAMENTAL CREDIT TRENDS FOR FINANCIAL SERVICES COMPANIES

      Although the  economic  outlook is  uncertain,  we believe that the credit
outlook is positive overall. The corporate  nonfinancial sector remains healthy,
with low leverage,  strong interest coverage,  and good liquidity.  However, the
corporate  financial  sector,  which  constitutes  the  largest  sector  of  the
preferred market and where  consequently the Fund has significant  holdings,  is
both  more  strained  and  more  variable.   Funding  costs  for  all  financial
institutions  have increased  meaningfully,  and many companies have taken large
write-downs  on subprime  mortgages  and other assets  whose market  prices have
fallen  substantially.  Life  insurance  and  property  and  casualty  insurance
companies have  generally  avoided most of the problems  facing other  financial
companies, but banks, finance companies, financial guarantors and broker-dealers
have been  significantly  affected because of their direct and indirect exposure
to problems in housing markets.  These companies all face a difficult  operating
environment  over the next several  years,  especially if the economy slips into
recession.

      Recognizing   these  risks,   we  remain   confident   about  the  overall
creditworthiness  of the Fund's  holdings  of  financial  issuers.  Overall,  we
believe  that the issuers  (a) are well  capitalized,  (b) have strong  business
franchises,  (c) are well managed, and (d) have access to additional capital, if
needed. We believe that they have the ability to absorb sizable losses and still
navigate a difficult credit landscape. Because most of these financial companies
operate in a mark-to-market environment,  their write downs already reflect both
current and expected future losses.  Although we admit that we worry about a few
holdings  more than  others,  we  believe  that  overall  credit  quality of the
portfolio remains sound. Put simply, we think that current preferred  securities
prices  more  accurately  reflect  the fear and  illiquidity  of today's  credit
markets than the fundamental  creditworthiness  of the issuers. It may take some
time, but we are confident that preferred securities prices will reflect more of
their creditworthiness eventually.


                                        7



TAX ADVANTAGES OF 2007 CALENDAR YEAR DISTRIBUTIONS

      In 2007,  the Fund passed on a portion of its income to individuals in the
form of  qualified  dividend  income or QDI.  QDI is taxed at a maximum 15% rate
instead of an  individual's  ordinary  income tax rate.  In calendar  year 2007,
approximately  26.1% of  distributions  made by the Fund  was  eligible  for QDI
treatment.  For an individual in the 28% tax bracket, this means that the Fund's
total  distributions  will only be taxed at a blended  24.6% rate versus the 28%
rate  which  would  apply  to  distributions  by a fund  containing  traditional
corporate bonds. This tax advantage means that, all other things being equal, an
individual  in the 28% tax  bracket  who held 100 shares of Common  Stock of the
Fund for the  calendar  year  would have had to  receive  approximately  $161 in
distributions  from a traditional  corporate bond fund to net the same after-tax
amount as the $154 in distributions paid by the Fund.

      For  detailed  information  about  the  tax  treatment  of the  particular
distributions  received from the Fund, please see the Form 1099 you receive from
either the Fund or your broker.

      Corporate  shareholders  also receive a federal tax benefit from the 14.8%
of distributions that were eligible for the  inter-corporate  dividends received
deduction or DRD.

      It is important to remember that the  composition of the portfolio and the
income  distributions  can change from one year to the next,  and the QDI or DRD
portions of next year's  distributions  may not be the same (or even similar) to
this year's.


                                        8



--------------------------------------------------------------------------------
      Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
                                                              PORTFOLIO OVERVIEW
                                                   NOVEMBER 30, 2007 (UNAUDITED)
      --------------------------------------------------------------------------

FUND STATISTICS ON 11/30/07
--------------------------------------------------------------------------------
Net Asset Value                                                   $       19.28

Market Price                                                      $       17.17

Discount                                                                  10.94%

Yield on Market Price                                                      8.91%

Common Stock Shares Outstanding                                      42,601,719

MOODY'S RATINGS                                                   % OF PORTFOLIO
--------------------------------------------------------------------------------
AAA                                                                         0.2%

AA                                                                          8.0%

A                                                                          18.1%

BBB                                                                        53.6%

BB                                                                         14.4%

Below "BB"                                                                  0.9%

Not Rated                                                                   3.5%
--------------------------------------------------------------------------------
Below Investment Grade*                                                    13.1%

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

  [THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]

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

Banking                                                                      32%

Utilities                                                                    26%

Insurance                                                                    20%

Financial Services                                                           11%

Energy                                                                        6%

REITs                                                                         3%

Other                                                                         2%

TOP 10 HOLDINGS BY ISSUER                                         % OF PORTFOLIO
--------------------------------------------------------------------------------
Midamerican Energy                                                          4.8%

Banco Santander                                                             4.3%

Wachovia Corp                                                               3.7%

Liberty Mutual Group                                                        3.6%

ACE Ltd                                                                     3.1%

Dominion Resources                                                          2.6%

Enterprise Products Partners                                                2.5%

AON Corp                                                                    2.4%

Wisconsin Energy                                                            2.4%

HBOS Plc                                                                    2.3%

                                                                % OF PORTFOLIO**
--------------------------------------------------------------------------------
Holdings Generating Qualified Dividend Income (QDI) for
Individuals                                                                  27%

Holdings Generating Income Eligible for the Corporate
Dividends Received Deduction (DRD)                                           14%
--------------------------------------------------------------------------------

**    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. SEE ACCOMPANYING
      NOTES TO THE FINANCIAL STATEMENTS FOR THE TAX CHARACTERIZATION OF 2007
      DISTRIBUTIONS.


                                        9



--------------------------------------------------------------------------------
Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 2007
--------------------------------------------------------------------------



SHARES/$ PAR                                                                                                       VALUE
------------                                                                                                  ---------------
                                                                                                        
PREFERRED SECURITIES -- 85.7%
               BANKING -- 31.7%
----------------------------------------------------------------------------------------------------------------------------------
$ 19,000,000   Astoria Capital Trust I, 9.75% 11/01/29, Series B ..........................................   $    21,002,600
       3,620   BAC Capital Trust I, 7.00% Pfd. 12/15/31 ...................................................            88,237
               Banco Santander:
   1,646,000      6.50% Pfd., 144A**** ....................................................................        34,286,180**(1)
   1,141,600      6.80% Pfd. ..............................................................................        24,508,781**(1)
     531,775   Bank of America Corp., 6.625% Pfd. .........................................................        12,700,115*
       1,800   Bank of New York Capital IV, 6.875% Pfd. Series E ..........................................            43,312
$ 34,344,000   Capital One Capital III, 7.686% 08/15/36 ...................................................        28,567,338
$ 27,600,000   CBG Florida REIT Corporation, 7.114%, 144A**** .............................................        26,315,800
     240,000   Citigroup Capital VIII, 6.95% Pfd. 09/15/31 ................................................         5,430,000
     112,000   Citizens Funding Trust I, 7.50% Pfd. 09/15/66 ..............................................         2,241,400
     105,000   Cobank, ACB, 7.00% Pfd., 144A**** ..........................................................         5,351,850*
      18,000   Colonial Capital Trust IV, 7.875% Pfd. .....................................................           425,700
$ 23,740,000   Comerica Capital Trust II, 6.576% 02/20/37 .................................................        19,323,031
$    800,000   CoreStates Capital Trust I, 8.00% 12/15/26, 144A**** .......................................           828,987
      28,800   FBOP Corporation, Adj. Rate Pfd., 144A**** .................................................        27,360,000*
$  2,635,000   First Midwest Capital Trust I, 6.95% 12/01/33 ..............................................         2,826,814
$  1,950,000   First Tennessee Capital I, 8.07% 01/06/27, Series A ........................................         2,030,537
           6   FT Real Estate Securities Company, 9.50% Pfd., 144A**** ....................................         7,352,668
$ 38,000,000   HBOS PLC, 6.657%, 144A**** .................................................................        31,901,000**(1)
       7,500   HSBC Series II, Variable Inverse Pfd., Pvt. ................................................         4,072,500*
               ING Groep NV:
      36,000      7.05% Pfd. ..............................................................................           825,750**(1)
     139,700      7.20% Pfd. ..............................................................................         3,256,756**(1)
$  2,000,000   JPMorgan Chase Capital XXI, Adj. Rate 02/02/37, Series U ...................................         1,590,406
$  8,850,000   JPMorgan Chase Capital XXIII, Adj. Rate 05/15/47 ...........................................         7,207,599
      23,800   Keycorp Capital V, 5.875% Pfd., Series A ...................................................           452,945
      20,000   Keycorp Capital VIII, 7.00% Pfd. 06/15/66 ..................................................           440,000
     617,000   Keycorp Capital IX, 6.75% Pfd. 12/15/66 ....................................................        13,304,063
      85,285   National City Capital Trust II, 6.625% Pfd. 11/15/36 .......................................         1,677,769
     295,000   PFGI Capital Corporation, 7.75% Pfd. .......................................................         6,855,800
$  3,300,000   Regions Financing Trust II, 6.625% 05/15/47 ................................................         2,772,330
$  7,200,000   Republic New York Capital I, 7.75% 11/15/26 ................................................         7,463,520(1)
               Roslyn Real Estate:

          40      8.95% Pfd., Series C, 144A**** ..........................................................         4,315,125
         135      Adj. Rate Pfd., Series D, 144A**** ......................................................        13,702,500
$  6,100,000   Royal Bank of Scotland Group PLC, 7.64% ....................................................         6,203,895**(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)
                                                               NOVEMBER 30, 2007
      --------------------------------------------------------------------------



SHARES/$ PAR                                                                                                       VALUE
------------                                                                                                  ---------------
                                                                                                        
PREFERRED SECURITIES -- (CONTINUED)
               BANKING -- (CONTINUED)
----------------------------------------------------------------------------------------------------------------------------------
      63,700   Sovereign Bancorp, 7.30% Pfd., Series C ....................................................   $     1,584,538*
     248,100   Sovereign Capital Trust V, 7.75% Pfd. 05/22/36 .............................................         5,721,806
$ 17,350,000   Sovereign Capital Trust VI, 7.908% 06/13/36 ................................................        17,009,940
          60   Union Planters Preferred Funding, 7.75% Pfd., Series 144A**** ..............................         6,439,373
               U.S Bancorp, Auction Pass-Through Trust, Cl. B:
          65      Series 2006-5, Variable Rate Pfd., 144A**** .............................................           893,750*
          65      Series 2006-6, Variable Rate Pfd., 144A**** .............................................           893,750*
     127,600   USB Capital VIII, 6.35% Pfd. 12/29/65 ......................................................         2,711,500
      59,600   USB Capital X, 6.50% Pfd. 04/12/66 .........................................................         1,314,925(2)
       5,000   USB Capital XII, 6.30% Pfd. 02/15/67 .......................................................           103,907
      18,800   VNB Capital Trust I, 7.75% Pfd. ............................................................           463,538
       5,550   Wachovia Capital Trust IX, 6.375% Pfd. .....................................................           117,764
   2,010,800   Wachovia Preferred Funding, 7.25% Pfd., Series A ...........................................        48,824,838
               Washington Mutual:
$ 10,050,000      Preferred Funding, 6.534%, 144A**** .....................................................         5,635,035
$  5,100,000      Preferred Funding IV, 9.75%, 144A**** ...................................................         4,074,390
$ 11,067,000   Webster Capital Trust IV, 7.65% 06/15/37 ...................................................         9,491,059
-----------------------------------------------------------------------------------------------------------------------------
                                                                                                                  432,005,421
                                                                                                              ---------------
               FINANCIAL SERVICES -- 7.3%
----------------------------------------------------------------------------------------------------------------------------------
               CIT Group, Inc.:
$ 18,800,000      6.10% 03/15/67 ..........................................................................        14,056,760
     203,712      6.35% Pfd., Series A ....................................................................         3,864,172*
     729,995   Countrywide Capital IV, 6.75% Pfd. .........................................................        10,594,052(2)
      46,305   Countrywide Capital V, 7.00% Pfd., 11/01/36 ................................................           661,351(2)
     260,000      Deutsche Bank Contingent Capital Trust II, 6.55% Pfd. ...................................         5,833,750**(1)
      30,000   First Republic Bank, 7.25% Pfd. ............................................................           669,374
       7,850   First Republic Preferred Capital Corporation, 10.50% Pfd., 144A**** ........................         8,754,006
               Goldman Sachs:
     202,500      Cabco Trust Capital I, Adj. Rate Pfd. 02/15/34 ..........................................         3,879,151
       3,600      STRIPES Custodial Receipts, Pvt. ........................................................         2,138,400*
$  7,000,000   Gulf Stream-Compass 2005 Composite Notes, 144A**** .........................................         6,289,500
      27,000   Merrill Lynch Cap Trust I, 6.45% Pfd., 12/15/66, Series K ..................................           576,788
               Merrill Lynch:
     400,000      6.25% Pfd. ..............................................................................         8,824,000*
     143,920      Adj. Rate Pfd., Series G ................................................................         2,740,597*
     172,000      Adj. Rate Pfd., Series 5 ................................................................         3,214,250*


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


                                       11



--------------------------------------------------------------------------------
Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
PORTFOLIO OF INVESTMENTS (CONTINUED)
NOVEMBER 30, 2007
--------------------------------------------------------------------------



SHARES/$ PAR                                                                                                       VALUE
------------                                                                                                  ---------------
                                                                                                        
PREFERRED SECURITIES -- (CONTINUED)
               FINANCIAL SERVICES -- (CONTINUED)
----------------------------------------------------------------------------------------------------------------------------------
      76,000      Fixed Income Pass-through 2007-A, Cl.B, Adj. Rate Pfd., 144A**** ........................   $           760*+
       4,000      Series II STRIPES Custodial Receipts, Pvt. ..............................................         1,028,000*
      60,067   Merrill Lynch Preferred Capital Trust IV, 7.12% Pfd. .......................................         1,390,101
       9,000   Morgan Stanley Capital Trust V, 5.75% Pfd. .................................................           173,363(2)
     336,100   Morgan Stanley Capital Trust VI, 6.60% Pfd. ................................................         7,253,878
$ 10,000,000   RACERS(R) Series 2005 AMMC V Trust, 144A**** ...............................................         7,790,176
               SLM Corporation:
     160,000      6.97% Pfd., Series A ....................................................................         6,680,000*
      48,500      Adj. Rate Pfd., Series B ................................................................         2,910,000*
-----------------------------------------------------------------------------------------------------------------------------
                                                                                                                   99,322,429
                                                                                                              ---------------
               INSURANCE -- 17.6%
----------------------------------------------------------------------------------------------------------------------------------
   1,703,580   ACE Ltd., 7.80% Pfd., Series C .............................................................        42,110,453**(1)
$  7,000,000   AMBAC Financial Group Inc., 6.15% 02/15/37 .................................................         4,752,860
               AON:
$ 25,650,000      Capital Trust A, 8.205% 01/01/27 ........................................................        28,205,612
     106,000      Corts-Capital, 8.205% Pfd. ..............................................................         2,739,443
      94,900      Saturns-2003-3, 8.00% Pfd., Series AON Corp. ............................................         2,396,225
               Arch Capital Group Ltd.:
     167,650      7.875% Pfd., Series B ...................................................................         3,918,400**(1)
      99,321      8.00% Pfd. ..............................................................................         2,325,353**(1)
               AXA SA:
$ 11,300,000      6.379%, 144A**** ........................................................................         9,596,401**(1)
$  2,000,000      6.463%, 144A**** ........................................................................         1,798,676**(1)
               Axis Capital Holdings:
     273,800      7.25% Pfd., Series A ....................................................................         5,929,495**(1)
     241,505      7.50% Pfd., Series B ....................................................................        23,551,568(1)
      75,000   Berkley W.R. Capital Trust II, 6.75% Pfd. 07/26/45 .........................................         1,603,125
     558,000   Delphi Financial Group, 7.376% Pfd. 05/15/37 ...............................................        11,466,900
      46,850   Everest Re Capital Trust II, 6.20% Pfd., Series B ..........................................           929,682
$ 14,816,000   Everest Re Holdings, 6.60% 05/15/37 ........................................................        13,510,192
$ 26,200,000   Liberty Mutual Group, 7.80% 03/15/37, 144A**** .............................................        23,879,833
$  4,250,000   PartnerRe Finance II, 6.44%, 12/01/66 ......................................................         3,857,700(1)
      37,000   Provident Financing Trust I, Corts-Unum, 8.50% Pfd. ........................................           931,013
               Renaissancere Holdings Ltd.:
      92,300      6.08% Pfd., Series C ....................................................................         1,639,248**(1)
     366,300      6.60% Pfd., Series D ....................................................................         7,047,612**(1)


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


                                       12



--------------------------------------------------------------------------------
      Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
                                            PORTFOLIO OF INVESTMENTS (CONTINUED)
                                                               NOVEMBER 30, 2007
      --------------------------------------------------------------------------



SHARES/$ PAR                                                                                                       VALUE
------------                                                                                                  ---------------
                                                                                                        
PREFERRED SECURITIES -- (CONTINUED)
               INSURANCE -- (CONTINUED)
----------------------------------------------------------------------------------------------------------------------------------
     107,935      7.30% Pfd., Series B ....................................................................   $     2,300,365**(1)
     407,200   Scottish Re Group Ltd., 7.25% Pfd. .........................................................         4,691,962**(1)
$  7,425,000   USF&G Capital, 8.312% 07/01/46, 144A**** ...................................................         9,214,180
$ 13,000,000   USF&G Capital I, 8.50% 12/15/45, 144A**** ..................................................        16,462,745
$ 10,000,000   XL Capital Ltd., Mangrove Bay Passthru Trust, 6.102% 07/15/33, 144A**** ....................         9,164,000(1)
$  6,400,000   ZFS Finance USA Trust V, 6.50% 05/09/37, 144A**** ..........................................         5,834,221(1)
-----------------------------------------------------------------------------------------------------------------------------
                                                                                                                  239,857,264
                                                                                                              ---------------
               UTILITIES -- 21.8%
----------------------------------------------------------------------------------------------------------------------------------
               Baltimore Gas & Electric Company:
      10,000      6.70% Pfd., Series 1993 .................................................................         1,037,500*
      50,000      7.125% Pfd., Series 1993 ................................................................         5,204,690*
   1,355,359   Calenergy Capital Trust III, 6.50% Pfd. 09/01/27 ...........................................        64,948,803
      35,000   Central Maine Power, 5.25% Pfd., Pvt. ......................................................         3,305,400*
$  2,600,000   COMED Financing II, 8.50% 01/15/27, Series B ...............................................         2,593,500
$ 17,645,000   COMED Financing III, 6.35% 03/15/33 ........................................................        14,168,935
$ 25,175,000   Dominion Resources Capital Trust I, 7.83% 12/01/27 .........................................        25,036,538
$ 11,000,000   Dominion Resources, Inc., 7.50% ............................................................        11,038,302
               Entergy Arkansas, Inc.:
      10,240      4.56% Pfd., Series 1965 .................................................................           792,678*
     625,000      6.45% Pfd. ..............................................................................        15,937,500*
      85,000   Entergy Louisiana, Inc., 6.95% Pfd. ........................................................         8,600,300*
     169,000   FPC Capital I, 7.10% Pfd., Series A ........................................................         4,087,688
               FPL Group Capital, Inc.:
$  3,400,000      6.35% 10/01/66 ..........................................................................         3,235,984
      50,000      6.60% Pfd. 10/01/66, Series A ...........................................................         1,234,375
$  4,100,000      6.65% 06/15/67 ..........................................................................         3,975,614
       6,000   Georgia Power Company, 6.50% Pfd., Series 07-A .............................................           606,720*
       5,000   Indiana Michigan Power, 4.56% Pfd. .........................................................           438,400*
     119,805   Indianapolis Power & Light Company, 5.65% Pfd. .............................................        10,777,658*
               Interstate Power & Light Company:
     110,000      7.10% Pfd., Series C ....................................................................         2,762,100*
      11,000      8.375% Pfd., Series B ...................................................................           321,750*
      32,300   Laclede Capital Trust I, 7.70% Pfd. ........................................................           794,380
               Pacific Enterprises:
       4,550      $4.40 Pfd. ..............................................................................           378,196*


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


                                       13



--------------------------------------------------------------------------------
Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
PORTFOLIO OF INVESTMENTS (CONTINUED)
NOVEMBER 30, 2007
--------------------------------------------------------------------------



SHARES/$ PAR                                                                                                       VALUE
------------                                                                                                  ---------------
                                                                                                        
PREFERRED SECURITIES -- (CONTINUED)
               UTILITIES -- (CONTINUED)
----------------------------------------------------------------------------------------------------------------------------------
       4,510      $4.50 Pfd. ..............................................................................   $       383,440*
$  2,386,000   PECO Energy Capital Trust III, 7.38% 04/06/28, Series D ....................................         2,527,967
$ 27,000,000   PECO Energy Capital Trust IV, 5.75% 06/15/33 ...............................................        24,084,513
     358,950   PSEG Funding Trust II, 8.75% Pfd. ..........................................................         9,085,922
$ 12,775,000   Puget Sound Energy, Inc., 6.974% 06/01/67 ..................................................        11,924,185
     200,000   San Diego Gas & Electric Company, $1.70 Pfd. ...............................................         5,243,760*
               Southern California Edison:
      45,000      6.00% Pfd. ..............................................................................         4,462,200*
      17,910      6.125% Pfd. .............................................................................         1,807,477*
               Southern Union Company:
$  5,100,000      7.20% 11/01/66 ..........................................................................         5,130,998
     228,700      7.55% Pfd. ..............................................................................         5,694,630*
$  4,200,000   Union Electric Company, 7.69% 12/15/36, Series A ...........................................         4,345,198
               Virginia Electric & Power Company:
      14,985      $4.12 Pfd. ..............................................................................         1,152,347*
      21,684      $4.80 Pfd. ..............................................................................         1,942,453*
      35,000      $6.98 Pfd. ..............................................................................         3,566,721*
     342,500   Virginia Power Capital Trust, 7.375% Pfd. 07/30/42 .........................................         8,359,158
$ 27,125,000   Wisconsin Energy Corporation, 6.25% 05/15/67 ...............................................        25,391,848
               Xcel Energy, Inc.:
       7,110      $4.10 Pfd., Series C ....................................................................           551,807*
      10,210      $4.11 Pfd., Series D ....................................................................           794,236*
-----------------------------------------------------------------------------------------------------------------------------
                                                                                                                  297,725,871
                                                                                                              ---------------
               ENERGY -- 4.0%
----------------------------------------------------------------------------------------------------------------------------------
$  3,500,000   Enbridge Energy Partners LP, 8.05% 10/01/37 ................................................         3,534,073
               Enterprise Products Partners:
$ 22,000,000      7.034% 01/15/68 .........................................................................        20,509,632
$ 12,500,000      8.375% 08/01/66 .........................................................................        13,069,600
      13,200   EOG Resources, Inc., 7.195% Pfd., Series B .................................................        14,271,576*
$  3,650,000   KN Capital Trust III, 7.63% 04/15/28 .......................................................         3,295,472
-----------------------------------------------------------------------------------------------------------------------------
                                                                                                                   54,680,353
                                                                                                              ---------------
               REAL ESTATE INVESTMENT TRUST (REIT) -- 2.4%
----------------------------------------------------------------------------------------------------------------------------------
      41,400   BRE Properties, Inc., 6.75% Pfd., Series C .................................................           855,171
      51,000   Equity Residential Properties, 8.29% Pfd., Series K ........................................         2,643,840


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


                                       14



--------------------------------------------------------------------------------
      Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
                                            PORTFOLIO OF INVESTMENTS (CONTINUED)
                                                               NOVEMBER 30, 2007
      --------------------------------------------------------------------------



SHARES/$ PAR                                                                                                       VALUE
------------                                                                                                  ---------------
                                                                                                        
PREFERRED SECURITIES -- (CONTINUED)
               REAL ESTATE INVESTMENT TRUST (REIT) -- (CONTINUED)
----------------------------------------------------------------------------------------------------------------------------------
       4,980   Prologis Trust, 8.54% Pfd., Series C .......................................................   $       264,251
               PS Business Parks, Inc.:
      45,500      6.70% Pfd., Series P ....................................................................           900,049
       5,200      6.875% Pfd., Series I ...................................................................           105,463
       6,100      7.00% Pfd., Series H ....................................................................           126,003
      56,200      7.20% Pfd., Series M ....................................................................         1,204,788
      18,700      7.375% Pfd., Series O ...................................................................           397,960
     178,000      7.60% Pfd., Series L ....................................................................         4,032,821
      54,800      7.95% Pfd., Series K ....................................................................         1,306,640
               Public Storage, Inc.:
     196,070      6.45% Pfd., Series F ....................................................................         3,994,926
     387,500      6.625% Pfd., Series M ...................................................................         7,919,531
      30,000      6.85% Pfd., Series Y ....................................................................           654,900
       4,900      6.95% Pfd., Series H ....................................................................           104,738
     297,800      7.25% Pfd., Series K ....................................................................         6,747,046
      70,000   Realty Income Corp., 6.75% Pfd., Series E ..................................................         1,505,875
-----------------------------------------------------------------------------------------------------------------------------
                                                                                                                   32,764,002
                                                                                                              ---------------
               MISCELLANEOUS INDUSTRIES -- 0.9%
----------------------------------------------------------------------------------------------------------------------------------
       2,245   Centaur Funding Corporation, 9.08% Pfd. 04/21/20, 144A**** .................................         2,599,991
     112,750   Ocean Spray Cranberries, Inc., 6.25% Pfd., 144A**** ........................................        10,197,110*
-----------------------------------------------------------------------------------------------------------------------------
                                                                                                                   12,797,101
                                                                                                              ---------------
               TOTAL PREFERRED SECURITIES
                  (Cost $1,274,905,476) ...................................................................     1,169,152,441
                                                                                                              ---------------
CORPORATE DEBT SECURITIES -- 12.8%
               FINANCIAL SERVICES -- 3.7%
----------------------------------------------------------------------------------------------------------------------------------
     200,000   Ford Motor Credit Company, 7.375% 10/15/31 .................................................         3,658,500
$ 25,000,000   General Motors Acceptance Corporation, 8.00% 11/01/31, Senior Bonds ........................        21,355,000
      80,000   HSBC Finance Corporation, 6.875% 01/30/33 ..................................................         1,832,504
$  4,817,563   Lehman Brothers, Guaranteed Note, Variable Rate, 12/16/16, 144A**** ........................         4,250,054
               Lehman Brothers Holdings:
$ 11,100,000      6.875% 07/17/37, Sub. Note ..............................................................        10,816,650
$  8,500,000      7.00% 09/27/27 ..........................................................................         8,625,758
-----------------------------------------------------------------------------------------------------------------------------
                                                                                                                   50,538,466
                                                                                                              ---------------


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


                                       15



--------------------------------------------------------------------------------
Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
PORTFOLIO OF INVESTMENTS (CONTINUED)
NOVEMBER 30, 2007
--------------------------------------------------------------------------



SHARES/$ PAR                                                                                                       VALUE
------------                                                                                                  ---------------
                                                                                                        
CORPORATE DEBT SECURITIES -- (CONTINUED)
               INSURANCE -- 2.2%
----------------------------------------------------------------------------------------------------------------------------------
$  4,000,000   Farmers Exchange Capital, 7.20% 07/15/48, 144A**** .........................................   $     3,879,600
$ 24,921,000   Liberty Mutual Insurance, 7.697% 10/15/97, 144A**** ........................................        24,635,929
$  1,000,000   UnumProvident Corporation, 7.25% 03/15/28, Senior Notes ....................................         1,050,898
-----------------------------------------------------------------------------------------------------------------------------
                                                                                                                   29,566,427
                                                                                                              ---------------
               UTILITIES -- 4.3%
----------------------------------------------------------------------------------------------------------------------------------
$  6,315,000   Duke Capital Corporation, 8.00% 10/01/19, Senior Notes .....................................         7,440,276
$  5,000,000   Entergy Gulf States, Inc., 6.20% 07/01/33, 1st Mortgage ....................................         4,735,640
               Entergy Louisiana LLC:
$ 14,458,000      6.30% 09/01/35, 1st Mortgage ............................................................        14,149,625
       9,400      7.60% 04/01/32, 1st Mortgage ............................................................           236,175
               Oncor Electric Delivery Company:
$  2,000,000      7.00% 09/01/22 ..........................................................................         2,083,402
$  7,070,000      7.25% 01/15/33 ..........................................................................         7,599,175
     137,900   PPL Capital Funding, Inc., 6.85% 07/01/47 ..................................................         3,313,737
               Southern Union Company:
$  5,300,000      7.60% 02/01/24, Senior Notes ............................................................         5,720,359
$  6,047,000      8.25% 11/15/29, Senior Notes ............................................................         6,975,535
$  6,020,000   Wisconsin Electric Power Company, 6.875% 12/01/95 ..........................................         6,690,514
-----------------------------------------------------------------------------------------------------------------------------
                                                                                                                   58,944,438
                                                                                                              ---------------
               ENERGY -- 1.9%
----------------------------------------------------------------------------------------------------------------------------------
$ 10,350,000   KN Energy, Inc., 7.45% 03/01/98 ............................................................         9,221,198
     296,911   Nexen, Inc., 7.35% Subordinated Notes ......................................................         7,107,307(1)
$  8,500,000   Noble Energy, Inc., 7.25% 08/01/97 .........................................................         9,284,525
-----------------------------------------------------------------------------------------------------------------------------
                                                                                                                   25,613,030
                                                                                                              ---------------
               REAL ESTATE INVESTMENT TRUST (REIT) -- 0.2%
----------------------------------------------------------------------------------------------------------------------------------
$  3,500,000   Realty Income Corporation, 5.875% 03/15/35 .................................................         2,891,700
-----------------------------------------------------------------------------------------------------------------------------
                                                                                                                    2,891,700
                                                                                                              ---------------
               MISCELLANEOUS INDUSTRIES -- 0.5%
----------------------------------------------------------------------------------------------------------------------------------
      26,000   CBS Corporation, 6.75% 03/27/56 ............................................................           555,425
               Comcast Corp.:
      11,500      6.625%, 05/15/56 ........................................................................           257,313


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


                                       16



--------------------------------------------------------------------------------
      Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
                                            PORTFOLIO OF INVESTMENTS (CONTINUED)
                                                               NOVEMBER 30, 2007
      --------------------------------------------------------------------------



SHARES/$ PAR                                                                                                       VALUE
------------                                                                                                  ---------------
                                                                                                        
CORPORATE DEBT SECURITIES -- (CONTINUED)
               MISCELLANEOUS INDUSTRIES -- (CONTINUED)
----------------------------------------------------------------------------------------------------------------------------------
      56,000      7.00% 09/15/55, Series B ................................................................   $     1,307,253
      20,000   Corp-Backed Trust Certificates, 7.00% 11/15/28, Series Sprint ..............................           383,800
               Pulte Homes, Inc.:
      58,240      7.375% 06/01/46 .........................................................................         1,117,771(2)
$  3,550,000      7.875% 06/15/32 .........................................................................         3,049,791
-----------------------------------------------------------------------------------------------------------------------------
                                                                                                                    6,671,353
                                                                                                              ---------------
               TOTAL CORPORATE DEBT SECURITIES
                  (Cost $180,172,581) .....................................................................       174,225,414
                                                                                                              ---------------
OPTION CONTRACTS -- 0.1%
----------------------------------------------------------------------------------------------------------------------------------
       5,150   March Put Options on March U.S. Treasury Bond Futures, Expiring 02/22/08 ...................           804,688+
-----------------------------------------------------------------------------------------------------------------------------
               TOTAL OPTION CONTRACTS
                  (Cost $990,088) .........................................................................           804,688
                                                                                                              ---------------
MONEY MARKET FUND -- 0.1%
----------------------------------------------------------------------------------------------------------------------------------
   1,328,388   BlackRock Provident Institutional, TempFund ................................................         1,328,388
-----------------------------------------------------------------------------------------------------------------------------
               TOTAL MONEY MARKET FUND
                  (Cost $1,328,388) .......................................................................         1,328,388
                                                                                                              ---------------


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


                                       17



--------------------------------------------------------------------------------
Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
PORTFOLIO OF INVESTMENTS (CONTINUED)
NOVEMBER 30, 2007
--------------------------------------------------------------------------



SHARES/$ PAR                                                                                                       VALUE
------------                                                                                                  ---------------
                                                                                                     
SECURITIES LENDING COLLATERAL -- 0.2%
-----------------------------------------------------------------------------------------------------------------------------
   2,282,800   BlackRock Institutional Money Market Trust .................................................   $     2,282,800
-----------------------------------------------------------------------------------------------------------------------------
               TOTAL SECURITIES LENDING COLLATERAL
                  (Cost $2,282,800) .......................................................................         2,282,800
                                                                                                              ---------------

TOTAL INVESTMENTS (Cost $1,459,679,333***) .....................................................    98.9%       1,347,793,731
OTHER ASSETS AND LIABILITIES (Net) .............................................................     1.1%          15,383,322
                                                                                                   -----      ---------------

TOTAL NET ASSETS AVAILABLE TO COMMON STOCK AND PREFERRED STOCK .................................   100.0%++   $ 1,363,177,053
                                                                                                   -----      ---------------

AUCTION MARKET PREFERRED STOCK (AMPS) REDEMPTION VALUE ....................................................      (542,000,000)
                                                                                                              ---------------
TOTAL NET ASSETS AVAILABLE TO COMMON STOCK ................................................................   $   821,177,053
                                                                                                              ===============


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

**    Securities distributing Qualified Dividend Income only.

***   Aggregate cost of securities held.

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

(1)   Foreign Issuer.

(2)   All or a portion of this security is on loan.

+     Non-income producing.

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

         ABBREVIATIONS:

PFD. --  Preferred Securities
PVT. --  Private Placement Securities

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


                                       18



--------------------------------------------------------------------------------
      Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
                                             STATEMENT OF ASSETS AND LIABILITIES
                                                               NOVEMBER 30, 2007
       -------------------------------------------------------------------------



                                                                                                  
ASSETS:
   Investments, at value (Cost $1,459,679,333) including $2,259,443 of
      securities on loan ............................................................                   $1,347,793,731
   Cash .............................................................................                          769,622
   Receivable for investments sold ..................................................                        2,990,470
   Dividends and interest receivable ................................................                       16,562,011
   Prepaid expenses .................................................................                          103,455
                                                                                                        --------------
         Total Assets ...............................................................                    1,368,219,289
LIABILITIES:
   Payable for securities lending collateral ........................................   $   2,282,800
   Payable for investments purchased ................................................         966,088
   Dividends payable to Common Stock Shareholders ...................................         384,208
   Investment advisory fee payable ..................................................         488,931
   Administration, Transfer Agent and Custodian fees payable ........................          89,130
   Servicing agent fees payable .....................................................         138,144
   Professional fees payable ........................................................          69,933
   Directors' fees payable ..........................................................           2,258
   Accrued expenses and other payables ..............................................         115,777
   Accumulated undeclared distributions to Auction Market
      Preferred Stock Shareholders ..................................................         504,967
                                                                                        -------------
         Total Liabilities ..........................................................                        5,042,236
                                                                                                        --------------
AUCTION MARKET PREFERRED STOCK (21,680 SHARES OUTSTANDING)
   REDEMPTION VALUE .................................................................                      542,000,000
                                                                                                        --------------
NET ASSETS AVAILABLE TO COMMON STOCK ................................................                   $  821,177,053
                                                                                                        ==============
NET ASSETS AVAILABLE TO COMMON STOCK consist of:
   Distributions in excess of net investment income .................................                   $     (964,057)
   Accumulated net realized loss on investments sold ................................                      (77,851,427)
   Unrealized depreciation of investments ...........................................                     (111,885,602)
   Par value of Common Stock ........................................................                          426,017
   Paid-in capital in excess of par value of Common Stock ...........................                    1,011,452,122
                                                                                                        --------------
         Total Net Assets Available to Common Stock .................................                   $  821,177,053
                                                                                                        ==============
NET ASSET VALUE PER SHARE OF COMMON STOCK:
   Common Stock (42,601,719 shares outstanding) .....................................                   $        19.28
                                                                                                        ==============


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


                                       19



--------------------------------------------------------------------------------
Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED NOVEMBER 30, 2007
--------------------------------------------------------------------------



                                                                                                  
INVESTMENT INCOME:
      Dividends+ ....................................................................                   $   55,207,869
      Interest ......................................................................                       51,217,501
                                                                                                        --------------
            Total Investment Income .................................................                      106,425,370
EXPENSES:
      Investment advisory fee .......................................................   $   6,346,270
      Servicing agent fee ...........................................................       1,829,852
      Administrator's fee ...........................................................         572,764
      Auction Market Preferred Stock broker commissions and auction agent fees ......       1,378,819
      Professional fees .............................................................         109,513
      Insurance expense .............................................................         162,738
      Transfer Agent fees ...........................................................         226,351
      Directors' fees ...............................................................          70,775
      Custodian fees ................................................................         123,157
      Compliance fees ...............................................................          38,585
      Other .........................................................................         278,163
            Total Expenses ..........................................................                       11,136,987
                                                                                                        --------------
NET INVESTMENT INCOME ...............................................................                       95,288,383
                                                                                                        --------------
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS
      Net realized gain/(loss) on investments sold during the year ..................                      (15,023,062)
      Net realized gain/(loss) from written options during the year .................                        4,748,405
      Change in unrealized appreciation/depreciation of investments .................                     (168,932,352)
                                                                                                        --------------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS .....................................                     (179,207,009)
                                                                                                        --------------
DISTRIBUTIONS TO AUCTION MARKET PREFERRED STOCK
   SHAREHOLDERS:
      From net investment income (including changes in accumulated
         undeclared distributions) ..................................................                      (28,922,214)
                                                                                                        --------------
NET DECREASE IN NET ASSETS AVAILABLE TO COMMON STOCK
   RESULTING FROM OPERATIONS ........................................................                   $ (112,840,840)
                                                                                                        ==============


----------
+     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.


                                       20



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



                                                                                     YEAR ENDED           YEAR ENDED
                                                                                 NOVEMBER 30, 2007    NOVEMBER 30, 2006
                                                                                 -----------------    -----------------
                                                                                                
OPERATIONS:
   Net investment income .....................................................   $      95,288,383    $      86,989,377
   Net realized gain/(loss) on investments sold during the year ..............         (10,274,657)           9,654,689
   Change in net unrealized appreciation/depreciation of investments .........        (168,932,352)          30,962,852
   Distributions to AMPS* Shareholders from net investment income,
      including changes in accumulated undeclared distributions ..............         (28,922,214)         (26,049,500)
                                                                                 -----------------    -----------------
   NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ...........        (112,840,840)         101,557,418

DISTRIBUTIONS:
   Dividends paid from net investment income to Common Stock
      Shareholders(1) ........................................................         (65,180,630)         (66,778,195)
                                                                                 -----------------    -----------------
   TOTAL DISTRIBUTIONS TO COMMON STOCK SHAREHOLDERS ..........................         (65,180,630)         (66,778,195)

FUND SHARE TRANSACTIONS:
   Increase from shares issued under the Dividend Reinvestment
      and Cash Purchase Plan .................................................                  --                   --
                                                                                 -----------------    -----------------
   NET INCREASE IN NET ASSETS AVAILABLE TO COMMON STOCK
      RESULTING FROM FUND SHARE TRANSACTIONS .................................                  --                   --

NET INCREASE/(DECREASE) IN NET ASSETS AVAILABLE TO
                                                                                 -----------------    -----------------
   COMMON STOCK FOR THE YEAR .................................................   $    (178,021,470)   $      34,779,223
                                                                                 =================    =================

-------------------------------------------------------------------------------------------------------------------------
NET ASSETS AVAILABLE TO COMMON STOCK:
   Beginning of year .........................................................   $     999,198,523    $     964,419,300
   Net increase/(decrease) in net assets during the year .....................        (178,021,470)          34,779,223
                                                                                 -----------------    -----------------
   End of year (including distributions in excess of net investment
      income of ($964,057) and ($3,915,422), respectively) ...................   $     821,177,053    $     999,198,523
                                                                                 =================    =================


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

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

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


                                       21



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

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



                                                                                                                 FOR THE PERIOD FROM
                                                                          YEAR ENDED NOVEMBER 30,                JANUARY 31, 2003(1)
                                                            --------------------------------------------------         THROUGH
                                                               2007         2006         2005          2004       NOVEMBER 30, 2003
                                                            ----------   ----------   ----------    ----------   -------------------
                                                                                                   
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period .....................  $    23.45   $    22.64   $    24.10    $    25.74    $    23.82(2)
                                                            ----------   ----------   ----------    ----------    ----------
INVESTMENT OPERATIONS:
Net investment income ....................................        2.24         2.04         1.96          2.05          1.46
Net realized and unrealized gain/(loss) on investments ...       (4.20)        0.95        (0.94)        (0.53)         2.07
DISTRIBUTIONS TO AMPS* SHAREHOLDERS:
From net investment income ...............................       (0.68)       (0.61)       (0.39)        (0.19)        (0.06)
From net realized capital gains ..........................          --           --           --            --         (0.03)
                                                            ----------   ----------   ----------    ----------    ----------
Total from investment operations .........................       (2.64)        2.38         0.63          1.33          3.44
                                                            ----------   ----------   ----------    ----------    ----------
COST OF ISSUANCE OF AMPS* ................................          --           --           --            --         (0.14)
DISTRIBUTIONS TO COMMON STOCK SHAREHOLDERS:
From net investment income ...............................       (1.53)       (1.57)       (2.09)        (2.10)        (1.38)
From return of capital ...................................          --           --         0.00(3)         --            --
From net realized capital gains ..........................          --           --           --         (0.87)           --
                                                            ----------   ----------   ----------    ----------    ----------
Total distributions to Common Stock Shareholders .........       (1.53)       (1.57)       (2.09)        (2.97)        (1.38)
                                                            ----------   ----------   ----------    ----------    ----------
Net asset value, end of period ...........................  $    19.28   $    23.45   $    22.64    $    24.10    $    25.74
                                                            ==========   ==========   ==========    ==========    ==========
Market value, end of period ..............................  $    17.17   $    21.89   $    20.03    $    25.30    $    26.66
                                                            ==========   ==========   ==========    ==========    ==========
Total investment return based on net asset value** .......      (11.33%)      11.78%        2.81%         5.41%        14.15%****(4)
                                                            ==========   ==========   ==========    ==========    ==========
Total investment return based on market value ** .........      (15.40%)      17.94%      (13.36%)        6.84%        12.65%****(4)
                                                            ==========   ==========   ==========    ==========    ==========
RATIOS TO AVERAGE NET ASSETS AVAILABLE
   TO COMMON STOCK SHAREHOLDERS:
      Total net assets, end of period (in 000's) .........  $  821,177   $  999,199   $  964,419    $1,022,084    $1,058,452
      Operating expenses .................................        1.18%        1.15%        1.16%         1.15%         1.01%***
      Net investment income + ............................        7.05%        6.32%        6.59%         7.57%         6.65%***
---------------------------------------------------
SUPPLEMENTAL DATA:++
      Portfolio turnover rate ............................          60%          55%          25%           23%          101%****
      Total net assets available to Common and Preferred
         Stock, end of period (in 000's) .................  $1,363,177   $1,541,199   $1,506,419    $1,564,084    $1,600,452
      Ratio of operating expenses to total average net
         assets available to Common and Preferred Stock ..        0.75%        0.74%        0.75%         0.75%         0.72%***


   *  Auction Market Preferred Stock.

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

 ***  Annualized.

****  Not annualized.

   +  The net investment income ratios reflect income net of operating expenses
      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)  Return of capital applicable to 2005 only and per share amount was less
      than $0.005.

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

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


                                       22



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



                                                  TOTAL                                   DIVIDEND
                                                DIVIDENDS   NET ASSET        NYSE       REINVESTMENT
                                                   PAID       VALUE     CLOSING PRICE     PRICE(1)
                                                ---------   ---------   -------------   ------------
                                                                               
December 31, 2006 ...........................    $0.1275      $23.15        $21.41         $21.54
January 31, 2007 ............................     0.1275       23.13         21.75          21.87
February 28, 2007 ...........................     0.1275       23.44         21.81          21.96
March 31, 2007 ..............................     0.1275       22.95         22.30          22.43
April 30, 2007 ..............................     0.1275       23.05         22.05          22.12
May 31, 2007 ................................     0.1275       22.60         21.38          21.56
June 30, 2007 ...............................     0.1275       22.18         20.42          20.62
July 31, 2007 ...............................     0.1275       21.26         19.18          19.15
August 31, 2007 .............................     0.1275       20.87         18.59          18.78
September 30, 2007 ..........................     0.1275       20.98         18.22          18.55
October 31, 2007 ............................     0.1275       20.81         18.15          18.18
November 30, 2007 ...........................     0.1275       19.28         17.17          17.23


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


                                       23



--------------------------------------------------------------------------------
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)
----------   ---------------   -------------   -----------   ----------------
 11/30/07         21,680         $ 62,900       $ 25,000         $ 25,000
 11/30/06         21,680           71,112         25,000           25,000
 11/30/05         21,680           69,502         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.

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


                                       24



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

1. ORGANIZATION

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

2. SIGNIFICANT ACCOUNTING POLICIES

      The following is a summary of significant accounting policies consistently
followed  by the  Fund  in the  preparation  of its  financial  statements.  The
preparation of the financial statements is in conformity with the U.S. generally
accepted  accounting  principles  ("US GAAP") and  requires  management  to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities in the financial  statements  and the reported  amounts of increases
and decreases in net assets from operations during the reporting period.  Actual
results could differ from those estimates.

      PORTFOLIO  VALUATION:  The net asset value of the Fund's  Common  Stock is
determined  by the  Fund's  Administrator  no less  frequently  than on the last
business day of each week and month.  It is  determined by dividing the value of
the Fund's net assets  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").

      The  Fund's  preferred  and debt  securities  are  valued  on the basis of
current market  quotations  provided by independent  pricing services or dealers
approved by the Board of Directors of the Fund.  Each  quotation is based on the
mean of the bid and asked prices of a security.  In  determining  the value of a
particular  preferred  or debt  security,  a pricing  service  or dealer may use
information with respect to transactions in such investments, quotations, market
transactions in comparable  investments,  various relationships  observed in the
market between investments,  and/or calculated yield measures based on valuation
technology  commonly employed in the market for such investments.  Common stocks
that are traded on stock exchanges are valued at the last sale price or official
close  price  on the  exchange,  as of the  close  of  business  on the  day the
securities  are being valued or,  lacking any sales,  at the last available mean
price. Futures contracts and option contracts on futures contracts are valued on
the basis of the settlement  price for such contracts on the primary exchange on
which they trade. Investments in over-the-counter  derivative instruments,  such
as  interest  rate swaps and options  thereon  ("swaptions"),  are valued  using
prices supplied by a pricing service, or if such prices are unavailable,  prices
provided  by a single  broker or dealer that is not the  counterparty  or, if no
such prices are available,  at a price at which the counterparty to the contract
would repurchase the instrument or terminate the contract. Investments for which
market quotations are not readily  available or for which management  determines
that the prices are not  reflective of current  market  conditions are valued at
fair value as determined in good faith by or under the direction of the Board of
Directors of the Fund,  including  reference to valuations  of other  securities
which are comparable in quality,  maturity and type. Investments in money market
instruments and all debt and preferred securities which mature in 60 days


                                       25



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Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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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 fixed income securities using
the effective yield method.

      OPTIONS:  Purchases of options are recorded as an investment, the value of
which is  marked-to-market  at each valuation  date. When the Fund enters into a
closing sale  transaction,  the Fund will record a gain or loss depending on the
difference  between the  purchase  and sale  price.  The risks  associated  with
purchasing  options and the maximum loss the Fund would incur are limited to the
purchase price originally paid.

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

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

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

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


                                       26



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

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

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

      Distributions  from net  realized  gains  for book  purposes  may  include
short-term capital gains, which are included as ordinary income for tax purposes
and may exclude  amortization  of premium on certain  fixed  income  securities,
which are not reflected in ordinary  income for tax purposes.  The tax character
of distributions paid, including changes in accumulated undeclared distributions
to AMPS Shareholders, during 2007 and 2006 were as follows:



                DISTRIBUTIONS PAID IN FISCAL YEAR 2007     DISTRIBUTIONS PAID IN FISCAL YEAR 2006
                --------------------------------------     --------------------------------------
                   ORDINARY               LONG-TERM            ORDINARY              LONG-TERM
                    INCOME              CAPITAL GAINS           INCOME             CAPITAL GAINS
                  -----------           -------------        -----------           -------------
                                                                             
Common            $65,180,630                $0              $66,778,195                 $0
Preferred         $28,922,214                $0              $26,049,500                 $0


      As of November 30, 2007, the components of  distributable  earnings (i.e.,
ordinary income and capital  gain/loss)  available to Common and Preferred Stock
shareholders, on a tax basis, were as follows:



                               UNDISTRIBUTED     UNDISTRIBUTED          NET UNREALIZED
CAPITAL (LOSS) CARRYFORWARD   ORDINARY INCOME   LONG-TERM GAIN   APPRECIATION/(DEPRECIATION)
---------------------------   ---------------   --------------   ---------------------------
                                                                
      ($76,185,892)              $4,161,601           $0                 ($113,551,137)


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


                                       27



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Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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      RECLASSIFICATION  OF  ACCOUNTS:  During the year ended  November 30, 2007,
reclassifications  were made in the  Fund's  capital  accounts  to report  these
balances on a tax basis,  excluding  temporary  differences,  as of November 30,
2007.  Additional  adjustments may be required in subsequent  reporting periods.
These  reclassifications  have no impact on the net asset value of the Fund. The
calculation  of net  investment  income  per share in the  financial  highlights
exclude these adjustments. Below are the reclassifications:

         PAID-IN         UNDISTRIBUTED         ACCUMULATED NET REALIZED
         CAPITAL     NET INVESTMENT INCOME       GAIN ON INVESTMENTS
         -------     ---------------------     ------------------------

         $60,998          $1,765,826                 ($1,826,824)

      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 is subject to a payment of an  estimated  $100,000 of
Federal excise taxes  attributable  to calendar year 2007. The Fund paid $40,458
of Federal excise taxes attributable to calendar year 2006 in March 2007.

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

      In September  2006,  the FASB issued  Statement  of  Financial  Accounting
Standards No. 157, Fair Value  Measurements  ("SFAS 157"). SFAS 157 defines fair
value,  sets out a framework  for measuring  fair value and requires  additional
disclosures  about  fair  value  measurements.  SFAS 157  applies  to fair value
measurements  already required or permitted by existing  standards.  SFAS 157 is
effective  for  financial  statements  issued for fiscal years  beginning  after
November 15, 2007 and interim periods within those fiscal years.

      Management is currently  evaluating  the impact the adoption of FIN 48 and
SFAS 157 will have on the Fund's financial statements.

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.


                                       28



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

      For purposes of  calculating  the fees  payable to the Adviser,  Servicing
Agent,  Administrator  and  Custodian,  the Fund's  average weekly total managed
assets means the total assets of the Fund minus the sum of accrued  liabilities.
For purposes of determining total managed assets, the liquidation  preference of
any preferred shares issued by the Fund is not treated as a liability.

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

      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
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,  0.0075% of the
next $350 million of the Fund's average weekly net assets attributable to Common
Stock,  and  0.0025% of the Fund's  average  weekly net assets  attributable  to
Common  Stock above $500  million,  plus  certain  out-of-pocket  expenses.  For
purpose  of  calculating   such  fee,  the  Fund's  average  weekly  net  assets
attributable  to the Common  Stock are deemed to be the average  weekly value of
the  Fund's  total  assets  minus the sum of the  Fund's  liabilities.  For this
calculation,  the  Fund's  liabilities  are  deemed  to  include  the  aggregate
liquidation preference of any outstanding Fund preferred shares.

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

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


                                       29



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

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

4. PURCHASES AND SALES OF SECURITIES

      For the year ended  November 30, 2007,  the cost of purchases and proceeds
from  sales  of  securities   excluding   short-term   investments,   aggregated
$885,371,869 and $900,632,495, respectively.

      At November 30, 2007,  the aggregate cost of securities for federal income
tax purposes was $1,461,344,867 the aggregate gross unrealized  appreciation for
all  securities  in  which  there  is an  excess  of  value  over  tax  cost was
$13,944,982 and the aggregate gross  unrealized  depreciation for all securities
in which there is an excess of tax cost over value was $127,496,119.

      Written  option  transactions  during the year ended November 30, 2007 are
summarized as follows:

                                                         CONTRACT     PREMIUMS
                                                          AMOUNTS     RECEIVED
                                                        ------------------------
   Written options outstanding at beginning of year ...     1,300   $ 2,450,858
   -----------------------------------------------------------------------------
   Options Opened .....................................     1,540     1,255,966
   Options Exercised ..................................         0             0
   Options Expired ....................................    (1,300)   (2,450,858)
   Options Closed .....................................    (1,540)   (1,255,966)
   -----------------------------------------------------------------------------
   Written options outstanding at end of year .........         0   $         0

5. COMMON STOCK

      At November 30, 2007,  240,000,000  shares of $0.01 par value Common Stock
were authorized.

      Common Stock transactions were as follows:



                                                         YEAR ENDED        YEAR ENDED
                                                          11/30/07          11/30/06
                                                      ---------------    --------------
                                                      SHARES   AMOUNT    SHARES  AMOUNT
                                                      ------   ------    ------  ------
                                                                     
   Shares issued under the Dividend Reinvestment
   and Cash Purchase Plan .........................      --    $  --        --   $ --
                                                      ------   ------    ------  ------


6. AUCTION MARKET PREFERRED STOCK (AMPS)

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


                                       30



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

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

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

      At November 30, 2007,  3,200 shares for each of Series M7, T7, W7, Th7 and
F7 and 2,840 shares for each of Series T28 and W28 of AMPS were  outstanding  at
the annualized rate of 5.08%,  5.25%,  5.45%,  5.48%, 5.55%, 5.20% and 5.25% 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  preferred  securities and  traditional
preferred stocks eligible for the  inter-corporate  dividends received deduction
("DRD"). Under normal market conditions, at least 80% of the value of the Fund's
total assets will be invested in preferred securities. Also, under normal market
conditions,  the Fund  invests  at least 25% of its total  assets in  securities
issued by companies in the utility industry and at least 25% of its total assets
in securities issued by companies in the banking industry.  The Fund's portfolio
may therefore be subject to greater risk and market fluctuation than a portfolio
of securities representing a broader range of investment alternatives.

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

      The Fund may invest up to 15% of its total assets in common stocks,  which
total includes those convertible  securities that trade in close relationship to
the underlying common stock of an issuer,  and, under normal market  conditions,
may  invest up to 20% of its total  assets in debt  securities.  Certain  of its
investments  in hybrid,  i.e.,  fully  taxable,  preferred  securities,  will be
subject to the  foregoing  20%  limitation to the extent that, in the opinion of
the Adviser, such investments are deemed to be debt-like


                                       31



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

in key characteristics.  Typically,  a security will not be considered debt-like
(a) if an issuer can defer payment of income for eighteen months or more without
triggering  an event of  default  and (b) if such  issue is a junior  and  fully
subordinated liability of an issuer or its ultimate guarantor.

      In addition to foreign money market securities,  the Fund may invest up to
30% of its total assets in the securities of companies organized or having their
principal place of business  outside the United States.  All foreign  securities
held by the Fund will be denominated in U.S. dollars.

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:  short  sales of
securities,  futures  contracts,  interest rate swaps, swap futures,  options on
futures  contracts,  options  on  securities,   swaptions,  and  certain  credit
derivative transactions including,  but not limited to, the purchase and sale of
credit  protection.  As in  the  case  of  when-issued  securities,  the  use of
over-the-counter derivatives, such as interest rate swaps, swaptions, and credit
default swaps may expose the Fund to greater credit, operations,  liquidity, and
valuation  risk than is the case with  regulated,  exchange  traded  futures and
options.   These   transactions  are  used  for  hedging  or  other  appropriate
risk-management  purposes,  or, under certain other  circumstances,  to increase
return.  No assurance  can be given that such  transactions  will achieve  their
desired purposes or will result in an overall reduction of risk to the Fund.

9. SECURITIES LENDING

      The Fund may lend up to 15% of its total  assets  (including  the value of
the loan  collateral) to certain  qualified  brokers in order to earn additional
income. The Fund receives compensation in the form of fees or interest earned on
the  investment  of any cash  collateral  received.  The Fund also  continues to
receive  interest and  dividends on the  securities  loaned.  The Fund  receives
collateral in the form of cash or securities  with a market value at least equal
to the market value of the securities on loan,  including accrued  interest.  In
the event of default or bankruptcy by the  borrower,  the Fund could  experience
delays and costs in recovering the loaned securities or in gaining access to the
collateral.  The Fund has the right under the lending  agreement  to recover the
securities  from the borrower on demand.  As of November  30,  2007,  the market
value of securities  loaned by the Fund was  $2,259,443.  The loans were secured
with collateral of $2,282,800. Income from securities lending for the year ended
November  30,  2007 was  $62,306  and is  included  in  interest  income  on the
Statement of Operations.


                                       32



             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders
Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated

      We have audited the  accompanying  statement of assets and  liabilities of
Flaherty & Crumrine/  Claymore  Preferred  Securities Income Fund  Incorporated,
including the portfolio of investments, as of November 30, 2007, and the related
statement of operations  for the year then ended,  the  statements of changes in
net assets for each of the years in the  two-year  period  then  ended,  and the
financial  highlights  for each of the years or periods in the five-year  period
then  ended.  These  financial  statements  and  financial  highlights  are  the
responsibility  of management.  Our  responsibility  is to express an opinion on
these financial statements and financial highlights based on our audits.

      We conducted  our audits in  accordance  with the  standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain  reasonable  assurance about whether the
financial statements and financial highlights are free of material misstatement.
An audit includes  examining,  on a test basis,  evidence supporting the amounts
and   disclosures  in  the  financial   statements.   Our  procedures   included
confirmation of securities owned as of November 30, 2007 by correspondence  with
the custodian and brokers,  or by other  appropriate  auditing  procedures where
replies from brokers were not  received.  An audit also  includes  assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation.  We believe that our
audits provide a reasonable basis for our opinion.

      In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated as of
November 30, 2007,  and the results of its  operations  for the year then ended,
the changes in its net assets for each of the years in the two-year  period then
ended,  and the  financial  highlights  for each of the years or  periods in the
five-year  period  then  ended,  in  conformity  with  U.S.  generally  accepted
accounting principles.

/s/ KPMG LLP

Boston, Massachusetts
January 18, 2008


                                       33



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

Distributions to Common Stock and AMPS Shareholders are characterized as follows
for purposes of Federal income taxes:

      FISCAL YEAR 2007
      ----------------
                               INDIVIDUAL SHAREHOLDER   CORPORATE SHAREHOLDER
                               ----------------------   ---------------------
                                            ORDINARY                ORDINARY
                                QDI          INCOME      DRD         INCOME
                               -----        --------    -----       --------
      AMPS and Common Stock    26.14%          73.86%   14.89%         85.11%

      CALENDAR YEAR 2007
      ------------------
                               INDIVIDUAL SHAREHOLDER   CORPORATE SHAREHOLDER
                               ----------------------   ---------------------
                                            ORDINARY                ORDINARY
                                QDI          INCOME      DRD         INCOME
                               -----        --------    -----       --------
      AMPS                     26.09%          73.91%   14.78%         85.22%
      Common Stock             26.09%          73.91%   14.81%         85.19%

      Qualified  Dividend Income ("QDI")  distributions are taxable at a maximum
      15% personal tax rate.


                                       34



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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 their 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 ("NYSE") or elsewhere,
on or  shortly  after the  payment  date of the  dividend  or  distribution  and
continuing until the ex-dividend date of the Fund's next distribution to holders
of the Common Stock or until it has expended for such  purchases all of the cash
that would  otherwise  be payable to the  participants.  The number of purchased
shares that will then be credited to the participants' accounts will be based on
the  average  per share  purchase  price of the shares so  purchased,  including
brokerage  commissions.  If 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 year ended  November 30, 2007,  $7,125 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.


                                       35



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

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

      A shareholder  whose Common Stock is registered in his or her own name may
terminate  participation  in the  Plan at any time by  notifying  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 latest Form N-PX with the  Securities  and  Exchange  Commission  ("SEC") on
August 27, 2007.  This filing as well as the Fund's  proxy  voting  policies and
procedures are available (i) without charge, upon request, by calling the Fund's
transfer agent at  1-800-331-1710  and (ii) on the SEC's website at WWW.SEC.GOV.
In addition,  the Fund's proxy voting  policies and  procedures are available on
the Fund's website at WWW.FCCLAYMORE.COM.

PORTFOLIO SCHEDULE ON FORM N-Q

      The Fund files a complete schedule of portfolio  holdings with the SEC for
the first and third  fiscal  quarters on Form N-Q, the latest of which was filed
for the quarter  ended August 31, 2007.  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.


                                       36



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

PORTFOLIO MANAGEMENT TEAM

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

CERTIFICATIONS

      Included in the Annual Written  Affirmation  submitted to the NYSE, Donald
F. Crumrine,  as the Fund's Chief Executive  Officer,  has certified that, as of
May 16, 2007, he was not aware of any  violation by the Fund of applicable  NYSE
corporate  governance listing standards.  The Fund's reports to the SEC on Forms
N-CSR and N-Q contain  certifications by the Fund's principal  executive officer
and  principal  financial  officer that relate to the Fund's  disclosure in such
reports and that are required by Rule 30a2(a) under the 1940 Act.

MODIFICATION TO NON-FUNDAMENTAL INVESTMENT POLICY

      In 2007,  the Board of Directors  approved a change  regarding  the Fund's
non-fundamental  investment  policy of investing in  securities  issued by other
investment  companies  (including  money market mutual funds).  The Fund may now
invest in shares of other investment companies subject to the limitations of the
Investment Company Act of 1940 and the rules and regulations thereunder.  To the
extent that investment  advisory or brokerage expenses or other fees or expenses
of any  investment  company are reflected in the price of its shares held in the
Fund's portfolio, there will be duplication of expenses.


                                       37



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

INFORMATION ABOUT FUND DIRECTORS AND OFFICERS

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



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

DAVID GALE                    Director      Class I Director   President and CEO of              4         Metromedia
Delta Dividend Group, Inc                        since         Delta Dividend                              International Group, Inc.
220 Montgomery Street                         January 2003     Group, Inc. (investments)                   (telecommunications)
Suite 426
San Francisco, CA 94104
Age: 58

MORGAN GUST                   Director     Class II Director   Owner and operator of             4         CoBiz Financial, Inc.
301 E. Colorado Boulevard                        since         various entities engaged                    (financial services)
Suite 720                                     January 2003     in agriculture and real
Pasadena, CA 91101                                             estate; Former President
Age: 60                                                        of Giant Industries, Inc
                                                               (petroleum refining and
                                                               marketing) since March
                                                               2002

KAREN H. HOGAN+               Director     Class II Director   Retired; Community                4
301 E. Colorado Boulevard                        since         Volunteer; from September
Suite 720                                      July 2005       1985 to January 1997,
Pasadena, CA 91101                                             Senior Vice President of
Age: 46                                                        Preferred Stock Origination
                                                               at Lehman Brothers and
                                                               previously, Vice President
                                                               of New Product
                                                               Development


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

           CLASS I DIRECTOR - three year term  expires at the Fund's 2008 Annual
           Meeting of Shareholders;
           director may  continue in office until his  successor is duly elected
           and qualified.

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

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

**    Each Director also serves as a Director for Flaherty & Crumrine  Preferred
      Income Fund,  Flaherty & Crumrine  Preferred Income  Opportunity Fund, and
      Flaherty & Crumrine/Claymore Total Return Fund.

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


                                       38



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

ROBERT F. WULF             Director; and   Class III Director  Financial Consultant;             4
P.O. Box 753                   Audit             since         Trustee, University of
Neskowin, OR 97149            Commitee        January 2003     Oregon Foundation;
Age: 70                       Chairman                         Trustee, San Francisco
                                                               Theological Seminary

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


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

           CLASS I DIRECTOR - three year term  expires at the Fund's 2008 Annual
           Meeting of Shareholders;
           director may  continue in office until his  successor is duly elected
           and qualified.

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

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

**    Each Director also serves as a Director for Flaherty & Crumrine  Preferred
      Income Fund,  Flaherty & Crumrine  Preferred Income  Opportunity Fund, and
      Flaherty & Crumrine/Claymore Total Return Fund.

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

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


                                       39



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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 Flaherty &
301 E. Colorado Boulevard                       January 2003    Crumrine Incorporated
Suite 720
Pasadena, CA 91101
Age: 49

R. ERIC CHADWICK             Chief Financial       Since        Director of Flaherty & Crumrine
301 E. Colorado Boulevard     Officer, Vice     January 2003    Incorporated since June 2006; Vice
Suite 720                     President and                     President of Flaherty & Crumrine
Pasadena, CA 91101              Treasurer                       Incorporated
Age: 32

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

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

NICHOLAS DALMASO             Vice President        Since        Director of Claymore Group, LLC
2455 Corporate West Drive     and Assistant     January 2003    since January 2002; Senior
Lisle, IL 60532                 Secretary                       Managing Director and Chief
Age: 42                                                         Administrative Officer of Claymore
                                                                Securities, Inc. since November 2001
                                                                and Claymore Advisors, LLC since
                                                                October 2003



                                       40



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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:
---------

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



                                       41



                      [This page intentionally left blank]



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

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

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

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

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

   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 --
                            PFPC Inc. 1-800-331-1710

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

                          Flaherty & Crumrine/Claymore
              [LOGO]    ================================
                        PREFERRED SECURITIES INCOME FUND

                                      Annual
                                      Report

                                 November 30, 2007

                                www.fcclaymore.com



ITEM 2. CODE OF ETHICS.

     (a)  The  registrant,  as of the end of the period  covered by this report,
          has  adopted  a code  of  ethics  that  applies  to  the  registrant's
          principal executive officer,  principal  financial officer,  principal
          accounting  officer  or  controller,  or  persons  performing  similar
          functions, regardless of whether these individuals are employed by the
          registrant or a third party.

     (c)  There  have been no  amendments,  during  the  period  covered by this
          report,  to a  provision  of the code of ethics  that  applies  to the
          registrant's principal executive officer, principal financial officer,
          principal  accounting  officer or  controller,  or persons  performing
          similar  functions,   regardless  of  whether  these  individuals  are
          employed by the  registrant or a third party,  and that relates to any
          element of the code of ethics description.

     (c)  The  registrant  has not granted any  waivers,  including  an implicit
          waiver,  from a provision  of the code of ethics  that  applies to the
          registrant's principal executive officer, principal financial officer,
          principal  accounting  officer or  controller,  or persons  performing
          similar  functions,   regardless  of  whether  these  individuals  are
          employed by the  registrant  or a third party,  that relates to one or
          more  of  the  items  set  forth  in  paragraph  (b)  of  this  item's
          instructions.


ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.

As of the end of the period  covered by the report,  the  registrant's  board of
directors has determined that David Gale,  Karen H. Hogan and Robert F. Wulf are
each qualified to serve as an audit  committee  financial  expert serving on its
audit  committee  and  that  they  all  are  "independent,"  as  defined  by the
Securities and Exchange Commission.


ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

AUDIT FEES

     (a)  The  aggregate  fees billed for each of the last two fiscal  years for
          professional  services  rendered by the principal  accountant  for the
          audit of the registrant's annual financial statements or services that
          are normally  provided by the accountant in connection  with statutory
          and  regulatory  filings or  engagements  for those  fiscal  years are
          $42,800 for 2007 and $40,800 for 2006.

AUDIT-RELATED FEES

     (b)  The  aggregate  fees  billed in each of the last two fiscal  years for
          assurance and related  services by the principal  accountant  that are
          reasonably related to the performance of the audit of the




          registrant's financial statements and are not reported under paragraph
          (a) of this Item are $0 for 2007 and $0 for 2006.

TAX FEES

     (c)  The  aggregate  fees  billed in each of the last two fiscal  years for
          professional  services  rendered by the principal  accountant  for tax
          compliance,  tax  advice,  and tax  planning  are  $7,300 for 2007 and
          $7,700 for 2006.

ALL OTHER FEES

     (d)  The  aggregate  fees  billed in each of the last two fiscal  years for
          products and services provided by the principal accountant, other than
          the services  reported in paragraphs  (a) through (c) of this Item are
          $15,500 for 2007 and $14,900 for 2006.  These services  consist of the
          principal  accountant  providing a  "Quarterly  Agreed-Upon-Procedures
          Report  on  Articles  Supplementary".   These   Agreed-Upon-Procedures
          ("AUP")  are  requirements  arising  from the  Articles  Supplementary
          creating the Fund's preferred stock.  Specifically,  the credit rating
          agencies  require  such AUP be  undertaken  in order to  maintain  the
          preferred stock's rating.

  (e)(1)  The Fund's Audit  Committee  Charter  states that the Audit  Committee
          shall have the duty and power to  pre-approve  all audit and non-audit
          services to be provided by the auditors to the Fund, and all non-audit
          services  to be  provided  by the  auditors  to the Fund's  investment
          adviser and any service providers controlling,  controlled by or under
          common control with the Fund's investment adviser that provide ongoing
          services  to the  Fund,  if the  engagement  relates  directly  to the
          operations and financial reporting of the Fund.


  (e)(2)  The percentage of services described in each of paragraphs (b) through
          (d) of this Item that were approved by the audit committee pursuant to
          paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X are as follows:

                           (b)  0%

                           (c)  0%

                           (d)  0%

     (f)  The  percentage  of  hours  expended  on  the  principal  accountant's
          engagement to audit the registrant's financial statements for the most
          recent fiscal year that were  attributed to work  performed by persons
          other than the principal accountant's  full-time,  permanent employees
          was 0%.

     (g)  The aggregate non-audit fees billed by the registrant's accountant for
          services rendered to the registrant,  and rendered to the registrant's
          investment  adviser  (not  including  any  sub-adviser  whose  role is
          primarily  portfolio  management and is subcontracted with or overseen
          by another investment adviser), and any entity controlling, controlled
          by, or under common  control with the adviser  that  provides  ongoing
          services to the  registrant  for each of the last two fiscal  years of
          the registrant was $0 for 2007 and $0 for 2006.

     (h)  Not applicable.




ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.

The registrant has a separately designated audit committee consisting of all the
independent directors of the registrant. The members of the audit committee are:
David Gale, Morgan Gust, Karen H. Hogan, and Robert F. Wulf.


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.

The Proxy Voting Policies are attached herewith.


                  ADVISER PROXY VOTING POLICIES AND PROCEDURES

Flaherty  &  Crumrine  Incorporated  ("F&C")  acts as  discretionary  investment
adviser for various  clients,  including  the  following  six pooled  investment
vehicles (the "Funds"):




                                 
As adviser to the "U.S. Funds"      Flaherty & Crumrine Preferred Income Fund
                                    Flaherty & Crumrine Preferred Income Opportunity Fund
                                    Flaherty & Crumrine/Claymore Preferred Securities Income Fund
                                    Flaherty & Crumrine/Claymore Total Return Fund

As sub-adviser
to the "Canadian Funds"             Flaherty & Crumrine Investment Grade Fixed Income Fund
                                    Flaherty & Crumrine Investment Grade Preferred Fund


F&C's  authority  to vote  proxies  for its clients is  established  through the
delegation of discretionary  authority under its investment  advisory  contracts
and the U.S. Funds have adopted these policies and procedures for themselves


PURPOSE

These policies and procedures are designed to satisfy F&C's duties of care and
loyalty to its clients with respect to monitoring corporate events and
exercising proxy authority in the best interests of such clients.

In connection with this objective, these policies and procedures are designed to
deal with potential complexities which may arise in cases where F&C's interests
conflict or appear to conflict with the interests of its clients.

These policies and procedures are also designed to communicate with clients the
methods and rationale whereby F&C exercises proxy voting authority.



This document is available to any client or Fund shareholder upon request and
F&C will make available to such clients and Fund shareholders the record of
F&C's votes promptly upon request and to the extent required by Federal law and
regulations.


FUNDAMENTAL STANDARD

F&C will be guided by the principle that, in those cases where it has proxy
voting authority, it will vote proxies, and take such other corporate actions,
consistent with the interest of its clients in a manner free of conflicts of
interest with the objective of client wealth maximization.


GENERAL

F&C has divided its discussion in this document into two major categories:
voting with respect to common stock and voting with respect to senior equity,
e.g., preferred stock and similar securities. In those events where F&C may have
to take action with respect to debt, such as in the case of amendments of
covenants or in the case of default, bankruptcy, reorganization, etc., F&C will
apply the same principles as would apply to common or preferred stock, mutatis
mutandis.

These policies and procedures apply only where the client has granted
discretionary authority with respect to proxy voting. Where F&C does not have
authority, it will keep appropriate written records evidencing that such
discretionary authority has not been granted.

F&C may choose not to keep written copies of proxy materials that are subject to
SEC regulation and maintained in the SEC's EDGAR database. In other instances,
F&C will keep appropriate written records in its files or in reasonably
accessible storage.

Similarly, F&C will keep in its files, or reasonably accessible storage, work
papers and other materials that were significant to F&C in making a decision how
to vote.

For purposes of decision making, F&C will assume that each ballot for which it
casts votes is the only security of an issuer held by the client. Thus, when
casting votes where F&C may have discretionary authority with regard to several
different securities of the same issuer, it may vote securities "in favor" for
those securities or classes where F&C has determined the matter in question to
be beneficial while, at the same time, voting "against" for those securities or
classes where F&C has determined the matter to be adverse. Such cases
occasionally arise, for example, in those instances where a vote is required by
both common and preferred shareholders, voting as separate classes, for a change
in the terms regarding preferred stock issuance.

F&C will reach its voting decisions independently, after appropriate
investigation. It does not generally intend to delegate its decision making or
to rely on the recommendations of any third party, although it may take such
recommendations into consideration. F&C may consult with such other experts,
such as CPA's, investment bankers, attorneys, etc., as it regards necessary to
help it reach informed decisions.

Absent good reason to the contrary, F&C will generally give substantial weight
to management recommendations regarding voting. This is based on the view that
management is usually in the best position to know which corporate actions are
in the best interests of common shareholders as a whole.

With regard to those shareholder-originated proposals which are typically
described as "social, environmental, and corporate responsibility" matters, F&C
will typically give weight to management's recommendations and vote against such
shareholder proposals, particularly if the adoption of such proposals would
bring about burdens or costs not borne by those of the issuer's competitors.



In cases where the voting of proxies would not justify the time and costs
involved, F&C may refrain from voting. From the individual client's perspective,
this would most typically come about in the case of small holdings, such as
might arise in connection with spin-offs or other corporate reorganizations.
From the perspective of F&C's institutional clients, this envisions cases (1) as
more fully described below where preferred and common shareholders vote together
as a class or (2) other similar or analogous instances.

Ultimately, all voting decisions are made on a case-by-case basis, taking
relevant considerations into account.


VOTING OF COMMON STOCK PROXIES

F&C categorizes matters as either routine or non-routine, which definition may
or may not precisely conform to the definitions set forth by securities
exchanges or other bodies categorizing such matters. Routine matters would
include such things as the voting for directors and the ratification of auditors
and most shareholder proposals regarding social, environmental, and corporate
responsibility matters. Absent good reason to the contrary, F&C normally will
vote in favor of management's recommendations on these routine matters.

Non-routine matters might include, without limitation, such things as (1)
amendments to management incentive plans, (2) the authorization of additional
common or preferred stock, (3) initiation or termination of barriers to takeover
or acquisition, (4) mergers or acquisitions, (5) changes in the state of
incorporation, (6) corporate reorganizations, and (7) "contested" director
slates. In non-routine matters, F&C, as a matter of policy, will attempt to be
generally familiar with the questions at issue. This will include, without
limitation, studying news in the popular press, regulatory filings, and
competing proxy solicitation materials, if any. Non-routine matters will be
voted on a case-by-case basis, given the complexity of many of these issues.


VOTING OF PREFERRED STOCK PROXIES

Preferred stock, which is defined to include any form of equity senior to common
stock, generally has voting rights only in the event that the issuer has not
made timely payments of income and principal to shareholders or in the event
that a corporation desires to effectuate some change in its articles of
incorporation which might modify the rights of preferred stockholders. These are
non-routine in both form and substance.

In the case of non-routine matters having to do with the modification of the
rights or protections accorded preferred stock shareholders, F&C will attempt,
wherever possible, to assess the costs and benefits of such modifications and
will vote in favor of such modifications only if they are in the bests interests
of preferred shareholders or if the issuer has offered sufficient compensation
to preferred stock shareholders to offset the reasonably foreseeable adverse
consequences of such modifications. A similar type of analysis would be made in
the case where preferred shares, as a class, are entitled to vote on a merger or
other substantial transaction.

In the case of the election of directors when timely payments to preferred
shareholders have not been made ("contingent voting"), F&C will cast its votes
on a case-by-case basis after investigation of the qualifications and
independence of the persons standing for election.

Routine matters regarding preferred stock are the exception, rather than the
rule, and typically arise when the preferred and common shareholders vote
together as a class on such matters as election of directors. F&C will vote on a
case-by-case basis, reflecting the principles set forth elsewhere in this




document. However, in those instances (1) where the common shares of an issuer
are held by a parent company and (2) where, because of that, the election
outcome is not in doubt, F&C does not intend to vote such proxies since the time
and costs would outweigh the benefits.


ACTUAL AND APPARENT CONFLICTS OF INTEREST

Potential conflicts of interest between F&C and F&C's clients may arise when
F&C's relationships with an issuer or with a related third party conflict or
appear to conflict with the best interests of F&C's clients.

F&C will indicate in its voting records available to clients whether or not a
material conflict exists or appears to exist. In addition, F&C will communicate
with the client (which means the independent Directors or Director(s) they may
so designate in the case of the U.S. Funds and the investment adviser in the
case of the Canadian Funds) in instances when a material conflict of interest
may be apparent. F&C must describe the conflict to the client and state F&C's
voting recommendation and the basis therefor. If the client considers there to
be a reasonable basis for the proposed vote notwithstanding the conflict or, in
the case of the Funds, that the recommendation was not affected by the conflict
(without considering the merits of the proposal), F&C will vote in accordance
with the recommendation it had made to the client.

In all such instances, F&C will keep reasonable documentation supporting its
voting decisions and/or recommendations to clients.


AMENDMENT OF THE POLICIES AND PROCEDURES

These policies and procedures may be modified at any time by action of the Board
of Directors of F&C but will not become effective, in the case of the U.S.
Funds, unless they are approved by majority vote of the non-interested directors
of the U.S. Funds. Any such modifications will be sent to F&C's clients by mail
and/or other electronic means in a timely manner. These policies and procedures,
and any amendments hereto, will be posted on the U.S. Funds' websites and will
be disclosed in reports to shareholders as required by law.


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

The following paragraphs provide certain information with respect to the
portfolio managers of the Fund and the material conflicts of interest that may
arise in connection with their management of the investments of the Fund, on the
one hand, and the investments of other client accounts for which they have
responsibility, on the other hand. Certain other potential conflicts of interest
with respect to personal trading and proxy voting are discussed above under
"Item 2 - Codes of Ethics" and "Item 7 - Proxy Voting Policies."

(a)(1)
PORTFOLIO MANAGERS

R. Eric Chadwick, Donald F. Crumrine, Robert M. Ettinger and Bradford S. Stone
jointly serve as the Portfolio Managers of the Fund. Additional biographical
information about the portfolio managers is available in the Annual Report
included in Response to Item 1 above.


(a)(2)
OTHER ACCOUNTS MANAGED BY PORTFOLIO MANAGERS



The tables below illustrate other accounts where each of the above-mentioned
four portfolio managers has significant day-to-day management responsibilities
as of November 30, 2007:



                                                                                                                   # of Accounts
                                                                                  Total                          Managed for which
       Name of Portfolio Manager or                                           # of Accounts    Total Assets       Advisory Fee is
                Team Member                      Type of Accounts                Managed            (mm)       Based on Performance
                -----------                      ----------------                -------            ----       --------------------
                                                                                                  
1.    Donald F. Crumrine                Other Registered Investment                 3                 718                0
                                        Companies:
                                        Other Pooled Investment Vehicles:           2                 341                0
                                        Other Accounts:                             21              1,391                0


2.    Robert M. Ettinger                Other Registered Investment                 3                 718                0
                                        Companies:
                                        Other Pooled Investment Vehicles:           2                 341                0
                                        Other Accounts:                             21              1,391                0

3.    R. Eric Chadwick                  Other Registered Investment                 3                 718                0
                                        Companies:
                                        Other Pooled Investment Vehicles:           2                 341                0
                                        Other Accounts:                             21              1,391                0

4.    Bradford S. Stone                 Other Registered Investment                 3                 718                0
                                        Companies:
                                        Other Pooled Investment Vehicles:           2                 341                0
                                        Other Accounts:                             21              1,391                0


POTENTIAL CONFLICTS OF INTEREST

In addition to the Fund,  the Portfolio  Managers  jointly  manage  accounts for
three  other  closed-end  funds,  two  Canadian  funds and  other  institutional
clients. As a result, potential conflicts of interest may arise as follows:

     o    ALLOCATION OF LIMITED TIME AND ATTENTION. The Portfolio Managers may
          devote unequal time and attention to the management of all accounts.
          As a result, the Portfolio Managers may not be able to formulate as
          complete a strategy or identify equally attractive investment
          opportunities for each of those accounts as might be the case if they
          were to devote substantially more attention to the management of one
          account.

     o    ALLOCATION OF LIMITED INVESTMENT OPPORTUNITIES. If the Portfolio
          Managers identify an investment opportunity that may be suitable for
          multiple accounts, the Fund may not be able to take full advantage of
          that opportunity because the opportunity may need to be allocated
          among other accounts.

     o    PURSUIT OF DIFFERING STRATEGIES. At times, the Portfolio Managers may
          determine that an investment opportunity may be appropriate for only
          some accounts or may decide that certain of these accounts should take
          differing positions (i.e., may buy or sell the particular security at
          different times or the same time or in differing amounts) with respect
          to a particular security. In these cases, the Portfolio Manager may
          place separate transactions for one or more accounts which may affect
          the market price of the security or the execution of the transaction,
          or both, to the detriment of one or more other accounts.

     o    VARIATION IN COMPENSATION. A conflict of interest may arise where the
          financial or other benefits available to the Portfolio Manager differ
          among accounts. While the Adviser only charges fees based on assets
          under management and does not receive a performance fee from any of
          its accounts, and while it strives to maintain uniform fee schedules,
          it does have different fee schedules based on the differing advisory
          services required by some accounts. Consequently, though the
          differences in such fee rates are



          slight, the Portfolio Managers may be motivated to favor certain
          accounts over others. In addition, the desire to maintain assets under
          management or to derive other rewards, financial or otherwise, could
          influence the Portfolio Managers in affording preferential treatment
          to those accounts that could most significantly benefit the Adviser.

The Adviser and the Fund have adopted compliance policies and procedures that
are designed to address the various conflicts of interest that may arise for the
Adviser and its staff members. However, there is no guarantee that such policies
and procedures will be able to detect and prevent every situation in which an
actual or potential conflict may arise.

(a)(3)
PORTFOLIO MANAGER COMPENSATION

Compensation is paid solely by the Adviser. Each Portfolio Manager receives the
same fixed salary. In addition, each Portfolio Manager receives a bonus based on
peer reviews of his performance and the total net investment advisory fees
received by Flaherty & Crumrine (which are in turn based on the value of its
assets under management). The Portfolio Managers do not receive deferred
compensation, but participate in a profit-sharing plan available to all
employees of the Adviser; amounts are determined as a percentage of the
employee's eligible compensation for a calendar year based on IRS limitations.
Each Portfolio Manager is also a shareholder of Flaherty & Crumrine and receives
quarterly dividends based on his equity interest in the company.

(a)(4)
DISCLOSURE OF SECURITIES OWNERSHIP

The following indicates the dollar range of beneficial ownership of shares by
each Portfolio Manager as of November 30, 2007:

          ------------------------------------------------------------
                                       Dollar Range of Fund Shares
                     Name                  Beneficially Owned*
          ------------------------------------------------------------
            Donald F. Crumrine             $100,001 to $500,000
          ------------------------------------------------------------
            Robert M. Ettinger             $100,001 to $500,000
          ------------------------------------------------------------
            R. Eric Chadwick               $100,001 to $500,000
          ------------------------------------------------------------
            Bradford S. Stone              $100,001 to $500,000
          ------------------------------------------------------------


*INCLUDES  4,346 SHARES HELD BY FLAHERTY & CRUMRINE  INCORPORATED  OF WHICH EACH
PORTFOLIO MANAGER HAS BENEFICIAL OWNERSHIP.



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

Not applicable.



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

There have been no material changes to the procedures by which the shareholders
may recommend nominees to the registrant's board of directors, where those
changes were implemented after the registrant last provided disclosure in
response to the requirements of Item 407(c)(2)(iv) of Regulation S-




K (17 CFR 229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR
240.14a-101)), or this Item.


ITEM 11. CONTROLS AND PROCEDURES.

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


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


ITEM 12. EXHIBITS.

  (a)(1)  Code of ethics,  or any  amendment  thereto,  that is the subject of
          disclosure required by Item 2 is attached hereto.

  (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              1/29/2008
    ----------------------------------------------------------------------------


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


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

Date              1/29/2008
    ----------------------------------------------------------------------------


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

Date              1/29/2008
    ----------------------------------------------------------------------------



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