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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 Preferred and Income Securities Fund Incorporated

 

(Exact name of registrant as specified in charter)

 

301 E. Colorado Boulevard, Suite 800 

Pasadena, CA 91101  

 

(Address of principal executive offices) (Zip code)

 

R. Eric Chadwick
Flaherty & Crumrine Incorporated
301 E. Colorado Boulevard, Suite 800 

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, 2023

 

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

 

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

 

 

 

 

 

 

Item 1. Reports to Stockholders.

 

(a)The Report to Shareholders is attached herewith.

 

Annual Report
November 30, 2023

www.preferredincome.com

Flaherty & Crumrine Preferred and Income Securities Fund

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

Fiscal 2023 came to an end on November 30, 2023, closing out a year marked by historically high volatility for preferred and contingent capital (CoCo) securities. Fortunately, we ended the fiscal year (and calendar year) on a very positive note, but it was anything but a smooth ride. Total return1 on net asset value (“NAV”) was 2.1% for the fourth fiscal quarter2 and 1.6% for the full fiscal year. Total return on market price of Fund shares over the same periods was 4.5% and -4.7%, respectively.

 

TOTAL RETURN ON NET ASSET VALUE
For Periods Ended November 30, 2023

(Unaudited)

 

Actual Returns

Average Annualized Returns

 

Three Months

Six Months

One Year

Three Years

Five Years

Ten Years

Life of Fund(1)

Flaherty & Crumrine Preferred and
Income Securities Fund

2.1%

7.1%

1.6%

-2.6%

4.0%

6.0%

6.9%

Bloomberg US Aggregate Bond Index(2)

0.3%

-0.8%

1.2%

-4.5%

0.7%

1.4%

3.1%

S&P 500 Index(3)

1.7%

10.2%

13.8%

9.7%

12.5%

11.8%

10.5%

  

(1)Since inception on January 29, 2003.

(2)The Bloomberg US Aggregate Bond Index is a broad-based index that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government-related and corporate securities, MBS (agency fixed-rate pass-throughs), ABS and CMBS (agency and non-agency).

(3)The S&P 500 is a capitalization-weighted index of 500 common stocks. The index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. In addition, NAV performance will vary from market price performance, and you may have a taxable gain or loss when you sell your shares.

 

Preferred and CoCo markets began 2023 with a strong rally, reversed course in fiscal Q2 into deep negative territory as a banking crisis and higher interest rates unfolded, and spent the rest of the year in recovery mode as banks slowly demonstrated with each earnings release that the crisis wasn’t expanding and interest rates stopped their relentless march higher. Treasury bills and money funds provided investors with nearly risk-free alternatives at attractive yields, which contributed to the challenges facing a credit market recovery.

Investors have spent the better part of two years trying to anticipate the Federal Reserve’s next move, and notably the timing of a “pivot” to rate cuts rather than increases. The Fed hiked rates five times during the fiscal year (including December 2022) for a total of 1.5%, and a cumulative total of 5.25% since the first tightening in March 2022. Markets initially met increases with skepticism as indicated by the near-record levels of Treasury yield-curve inversion, an indication that markets believed the Fed was likely to overshoot with rate hikes and push the economy into a recession. Investors finally relented in mid-2023 and adopted a “higher-for-longer” outlook, resulting in 10- and 30-year Treasury yields above 5% and a much less-inverted yield curve by mid-October.


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

2September 1, 2023 - November 30, 2023

2

The Fed’s rhetoric had begun to soften a bit by this point, along with modestly favorable inflation data, but it was the Federal Open Market Committee (FOMC) meeting on November 1 that gave investors hope for a near-term pivot. That outlook was solidified in mid-December when the FOMC projected larger than expected rate cuts in 2024. The result was a fierce Treasury rally (lower interest rates) over the last two calendar months of 2023 and a corresponding rally in nearly all risk assets (including preferreds and CoCos). From October 19 to calendar year end, 5-, 10-, and 30-year Treasury yields dropped by 111, 111, and 107 basis points to 3.85%, 3.88%, and 4.03%, respectively.

The fixed-reset coupon structure prevalent in preferred and CoCo securities, and corresponding “intermediate” average portfolio duration, was expected to dampen the effects of interest rate changes over an interest rate cycle. However, the sheer magnitude and speed of the moves in Treasury yields in 2022 and 2023 (from a very low starting point) resulted in much higher volatility, along with some unintended consequences in the economy. Fed policy is a tool used to influence the economy and investors have been laser-focused on it, but it is a blunt instrument at best, and longer-term market direction will be determined by a broader array of economic factors, including the effects of positive market reactions to a possible Fed pivot.

The regional banking panic was certainly an unintended consequence of this interest rate cycle, and banks with severe problems were quickly exposed. Preferred and CoCo markets are heavily concentrated in financials, and negative performance reflected the strong risk-off move related to banks in fiscal Q2. While most banks experienced some level of stress, notably on a mark-to-market basis for assets and higher funding costs for liabilities, we have consistently held that mismanagement was bank-specific and that the global banking system was strong and able to adjust to these disruptions. Regulatory actions to provide liquidity, along with bank-specific changes to sourcing deposits, have stabilized banking markets. It is also worth noting that the 100+ basis point drop in Treasury yields to end the calendar year should substantially improve the mark-to-market issues that have plagued banks throughout the year.

Insurance companies have experienced their own challenges, especially property and casualty underwriters, as worldwide weather events remained elevated and high inflation boosted claim costs. Broadly speaking, however, insurers have benefited from this interest rate cycle, and earnings have continued to be healthy. Insurance companies struggled in the low-rate environment that persisted for years, as they were unable to invest at attractive levels and net spread was squeezed. Although they too experienced some mark-to-market asset decline from the increase in interest rates, they also have benefited by investing incoming premiums at substantially better levels, and their liabilities have improved as discount rates increased.

Energy/Pipeline companies benefited from relative stability in commodity markets, along with improvements in system volume metrics. Earlier in this economic cycle they were forced to retrench as capital became more expensive and COVID disrupted their ability to launch new projects. The result was a sharp pullback in expenditure and improvement in cash flow and leverage metrics. While most would have enjoyed a continuation of pre-COVID growth trends, the discipline exhibited during this difficult time has improved credit metrics for fixed-income investors.

3

The Fund’s distributable income stabilized in the second half of the fiscal year as short-term rates steadied around current levels and reinvestment yields increased. The pace and size of rate hikes have caused leverage costs to increase materially and quickly over the last two fiscal years, but any move lower in short-term rates should similarly have an immediate positive effect on distributable income. The timing of Fed cuts remains uncertain, but slower inflation and the Fed’s most recent forecast are reasons for optimism. We believe the Fund’s current market discount to net asset value (NAV) is primarily driven by the distribution rate, so any increase in distributions should assist in narrowing those discounts. The Fund’s market price has traditionally traded significantly closer to NAV than it does currently, and we believe there is a path to return to those improved trading levels.

There is no question the last few years have been very challenging for investors, and we should not lose sight of the unique and material impact of the COVID pandemic on every aspect of the economy and markets. This economic cycle has been different than others, and there has been much on-the-job training (learning) required to address the widely varied consequences of COVID-era reactions and policies. Economic supply-demand imbalances have been new and unpredictable, while policymakers have been forced to rely mostly on traditional tools for guiding the economy. We are hopeful the policy choices in recent years, both good and bad, have brought us back to a more balanced economic state. Reducing the fear and uncertainty prevalent in recent years is critical to reducing market volatility moving forward.

Preferred and CoCo security yields have increased with interest rates over the past several years and provide an attractive level of income – much of which is qualified dividend income (QDI) that benefits from reduced tax rates. Although risks to the outlook remain, we believe there is opportunity in preferred and CoCo markets for long-term investors seeking income and solid credit quality and we are optimistic about the coming year.

Please read the discussion topics that follow for a broader discussion of our economic and credit outlook, and other matters of interest to shareholders.

Sincerely,

The Flaherty & Crumrine Portfolio Management Team

December 31, 2023

4

DISCUSSION TOPICS

(Unaudited)

Fund Performance

The table below presents a breakdown of the components that comprise the Fund’s total return on NAV over both the recent six months and the Fund’s fiscal year. These components include: (a) total return on the Fund’s portfolio of securities; (b) the impact of utilizing leverage to enhance returns to shareholders and accretive impact of the Fund’s at-the-market program (“ATM Program”); and (c) Fund operating expenses. When these components are added together, they comprise total return on NAV. Past performance does not predict future results. Performance shown in the graphs and tables herein does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the sale of Fund shares.

Components of FFC’s Total Return on NAV
for Periods Ended November 30, 2023

 

Six Months1

One Year

Total Return on Unleveraged Securities Portfolio (including principal change
and income)

5.5%

3.6%

Impact of Leverage (including leverage expense) and ATM Program

2.1%

-1.0%

Expenses (excluding leverage expense)

-0.5%

-1.0%

1Actual, not annualizedTotal Return on NAV

7.1%

1.6%

For the six-month and one-year periods ended November 30, 2023, the ICE BofA 8% Constrained Core West Preferred & Jr Subordinated Securities Index (P8JC)1,2 returned 4.4% and 4.8%, respectively. This index reflects various segments of the preferred securities market constituting the Fund’s primary focus. Since this index return excludes all expenses and the impact of leverage, it compares most directly to the top line in the Fund’s performance table above (Total Return on Unleveraged Securities Portfolio).

While our focus is primarily on managing the Fund’s investment portfolio, a shareholder’s actual return is comprised of the Fund’s monthly dividend payments plus changes in the market price of Fund shares. The table and chart below depict total return on net asset value and total return on market price over the preceding 10 fiscal years.

Average Annual Total Returns as of 11/30/23

 

Average Annual

 

1-Year

5-Year

10-Year

FFC at NAV

1.6%

4.0%

6.0%

FFC at Market Price

-4.7%

3.9%

5.4%

Benchmark Index

4.8%

3.5%

4.7%

Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. In addition, NAV performance will vary from market price performance, and you may have a taxable gain or loss when you sell your shares and taxable income when you receive distributions.


1The Fund’s Benchmark Index is the ICE BofA 8% Constrained Core West Preferred & Jr Subordinated Securities Index (P8JC), which includes U.S. dollar-denominated investment-grade or below investment-grade, fixed rate, floating rate or fixed-to-floating rate, retail or institutionally structured preferred securities of U.S. and foreign issuers with issuer concentration capped at 8%. Index returns include interest and dividend income, and, unlike the Fund’s returns, are unmanaged and do not reflect any expenses.

2The benchmarks from ICE Data Indices, LLC (“ICE Data”) are used with permission. ICE Data, its affiliates and their respective third-party suppliers disclaim any and all warranties and representations, express and/or implied, including any warranties of merchantability or fitness for a particular purpose or use, including the indices, index data and any data included in, related to, or derived therefrom. Neither ICE Data, its affiliates nor their respective third-party providers shall be subject to any damages or liability with respect to the adequacy, accuracy, timeliness or completeness of the indices or the index data or any component thereof, and the indices and index data and all components thereof are provided on an “as is” basis and your use is at your own risk. ICE Data, its affiliates and their respective third-party suppliers do not sponsor, endorse, or recommend Flaherty & Crumrine Incorporated, or any of its products or services.

5

In a more perfect world, the market price of Fund shares and its NAV would track more closely. If so, any premium or discount (calculated as the difference between these two inputs and expressed as a percentage) would remain relatively close to zero. However, as can be seen in the chart below, this often has not been the case.

Although divergence between NAV and market price of a closed-end fund is generally driven by supply/demand imbalances affecting its market price, we can only speculate about why the relationship between the Fund’s market price and NAV hasn’t been closer.

6

U.S. Economic & Credit Outlook

The U.S. economy proved remarkably resilient in 2023 as it weathered higher interest rates and avoided a widely predicted recession. While fourth-quarter data is not yet available, Gross Domestic Product after inflation (real GDP) is expected to have grown about 2.6% in 2023 (Q4/Q4). That compares to just 0.7% in 2022, and it easily outpaced economists’ consensus forecast from a year ago for near-zero growth in 2023. Admittedly, we were among those expecting a mild recession in 2023. While we think it is too soon to conclude that the U.S. economy will escape recession entirely given uncertain lags in monetary policy, the odds of a soft landing have improved considerably. If a recession does arrive, we continue to expect a mild one.

Nonfarm payroll employment expanded solidly in 2023, posting an average monthly gain of 232,000 jobs over 11 months ending in November. The unemployment rate remained low, but higher labor participation helped slow growth in average hourly earnings to 4% YoY in November, about 1% lower than a year ago. Moreover, labor productivity surged, reducing unit labor cost and helping restrain inflation. More jobs, higher wages, and lower inflation drove sizable gains in real personal income in 2023.

Consumers responded by increasing spending, partly at the expense of saving. Real personal consumption expenditure (PCE) rose by 2.7% over 12 months ending in November, up from 0.9% a year earlier. Goods spending gave way to services spending as remaining COVID restrictions ended, which supported strong growth in services employment and allowed global supply chains for goods to catch up with demand. The saving rate rose slightly but remains below pre-pandemic levels, and it appears that excess savings accumulated in 2020-2021 have been largely spent. A low saving rate raises risk of a rapid pullback in spending should employment start to weaken.

Real residential investment rose in 3Q2023, but it remains down more than 19% from its peak in 1Q2021. As mortgage rates soared from under 3% in early 2021 to over 8% in October 2023 (they ended the year around 7%), housing affordability got crushed. New and existing home sales fell from over 7 million in 2021 to just 4.4 million units (annualized) in November, not far from the lows during the 2008-2009 housing bust. However, in a reversal from 2022’s drop in home prices, the Case-Shiller 20-city home price index is up almost 6% in 2023 through October. If interest rates fall further, home sales should rebound and prices could move considerably higher, which might reignite inflation in the second half of 2024.

Business investment was mixed in 2023. After a strong start, real business equipment spending slipped in Q3, and Q4 appears soft as well. In contrast, real investment in business structures surged in 2023 as manufacturers constructed facilities to “re-shore” production from overseas and took advantage of incentives authorized in the Inflation Reduction Act (IRA) and CHIPS and Science Act of 2022 (CHIPS). While structures investment should remain elevated, its pace of growth has already slowed substantially. Overall, we expect only modest growth in business investment in 2024.

Government consumption accelerated in 2023 on higher defense spending and faster payroll growth at state and local governments. Through the first three quarters of 2024, real government consumption rose by an average of 4.5%, outpacing overall GDP. With a presidential election coming in November and Congress narrowly divided, major new spending legislation appears unlikely until 2025, and we expect slower growth in government spending in 2024.

Nonetheless, the federal government continues to run large deficits (about 6.3% of GDP in fiscal year 2023) that must be financed with ever-increasing Treasury bill, note, and bond sales. An aging population, low birth rate, volatile immigration situation, and rising defense vulnerabilities—among other fiscal challenges—leave the current path of U.S. federal debt both unsustainable and without easy solutions. While this is not news, we think it will keep risk premiums above their pre-pandemic levels for some time.

Inflation slowed significantly in the second half of 2023. The PCE deflator excluding food and energy was up 3.2% over 12 months ending in November, compared to 5.5% a year earlier, and it was up just 1.9% over the past six months, in line with the Fed’s 2% target. The Consumer Price Index (CPI) is running 0.8-1.0% higher, but it too has been falling. There are many reasons why inflation has slowed, but we think chief among them are higher labor participation, stronger productivity growth, rapidly normalizing supply chains, waning fiscal stimulus, shrinking money supply, and, of course, significantly tighter monetary policy. While the first three supply-side factors may have further to run, we may already have reaped much of the inflation benefit from them. Likewise, the downturn in money supply started to reverse in mid-2023, and with the Fed contemplating a pivot in 2024, monetary policy could soon turn less restrictive.

7

We anticipate that inflation will continue to slow over the next several quarters, but we see risk from rising home prices and still-tight labor markets that could cause inflation to reverse course in the second half of 2024. It is too soon for the Fed to declare victory over inflation just yet.

The Federal Reserve first slowed the pace of rate hikes, paused in June, and made its final 2023 hike in July, bringing the current fed funds target to 5.25-5.50%. As inflation slowed, real short-term rates rose, further tightening financial conditions, which peaked just prior to the November 1 FOMC meeting. Since then, the Fed’s tone softened and inflation slowed, which sparked strong rallies in both stocks and bonds and reversed the tightening in financial conditions since July. As noted above, we think that inflation remains a risk and the easing in financial conditions has run too far. We expect the Fed to cut rates in 2024, but later and more cautiously than markets currently anticipate. A resilient economy, rising Treasury supply, ongoing balance sheet reduction by the Fed, and renewed issuance of corporate bonds in response to the decline in interest rates in late 2023 should put moderate upward pressure on intermediate- and long-term yields, at least in the opening months of 2024.

Credit spreads were volatile in 2023, tightening in January and February until bank failures in March and April pushed spreads sharply wider. As those worries receded, spreads narrowed through the summer before widening again as interest rates surged and risk premiums rose. Lower inflation and prospects for a Fed pivot pushed spreads tighter in Q4. They ended 2023 back around summer lows, modestly tighter than at the beginning of the year.

Fundamental credit metrics remain healthy. Aggregate nonfinancial corporate balance sheets show good liquidity, modest interest expense relative to earnings, and cash flow exceeding investment spending. However, bank loan performance has deteriorated in recent quarters. Charge-offs and delinquencies increased modestly in most loan categories, but there are areas of sharper deterioration. Not surprisingly, commercial office loans are under stress from low occupancy rates, although other commercial real estate loans generally are performing well. Commercial and industrial loans also show little strain. However, consumer loan delinquencies and charge-offs are up considerably. Although higher delinquencies and charge-offs always merit attention, they are up from unusually low levels, and banks have been expecting them. For the past two years, banks increased loan-loss reserves in anticipation of a possible recession. We think they are well prepared to manage a possible downturn in the credit cycle.

Looking ahead, we expect the U.S. economy to experience a growth slowdown and gradually falling inflation that results in rate cuts beginning around mid-2024. However, ongoing inflation pressure from a tight labor market and rising home prices should limit rate cuts to 0.50-1.00%, not the 1.25-1.50% that markets currently anticipate. We expect intermediate- and long-term Treasury yields to end 2024 near current levels. Short-term rates should closely follow cuts to the fed funds target, leaving the yield curve less inverted or slightly positive. Slower economic growth should push credit spreads modestly wider. If that is right, 2024 probably will not see a major preferred market rally, but it should be a good year. And if Fed rate cuts cause the Fund’s cost of leverage to decline sooner or by more than we expect, it could be a very good year.

Federal Tax Advantages of 2023 Calendar Year Distributions

In calendar year 2023, approximately 99.0% of distributions made by the Fund was eligible for treatment as qualified dividend income, or QDI. Depending on an individual’s level of income, QDI can be taxed at a rate of 0%, 15% or 20%.

For an individual in the 32% marginal tax bracket, this means that the Fund’s total distributions will only be taxed at a blended 15.2% rate versus the 32% rate which would apply to distributions by a fund investing in traditional corporate bonds. This tax advantage means that, all other things being equal, for every $100 distribution that such individual receives from the Fund for the calendar year, the same individual would have had to receive approximately $125 in distributions from a fully-taxable bond fund to net the same after-tax amount as the distributions paid by the Fund.

For detailed information about tax treatment of 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 43.9% of distributions that were eligible for the inter-corporate dividends received deduction, or DRD.

It is important to remember that composition of the portfolio and income distributions can change from one year to the next, and that the QDI or DRD portions of 2024’s distributions may not be the same (or even similar) to 2023.

8

 

Flaherty & Crumrine Preferred and Income Securities Fund Incorporated

PORTFOLIO OVERVIEW

November 30, 2023 (Unaudited)

 

Additional portfolio information of interest to shareholders is available on the Fund’s website at www.preferredincome.com

Fund Statistics

 

 

Net Asset Value

$

15.18

Market Price

$

13.84

Discount

8.83

%

Yield on Market Price†

7.07

%

Common Stock Shares Outstanding

48,177,896

November 2023 dividend of $0.0815 per share,
annualized, divided by Market Price.

Security Ratings*

% of Managed Assets

A

0.7%

BBB

41.8%

BB

36.4%

Below “BB”

0.7%

Not Rated**

14.8%

Portfolio Ratings Guidelines

% of Managed Assets

Security Rated Below
Investment Grade by All***

31.5%

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

5.2%

*Ratings are from Moodys Investors Service, Inc.

**“Not Rated” securities are those with no ratings available from Moodys. Excludes common stock and money market fund investments and net other assets and liabilities of 5.6%.

***Security rating below investment grade by all of Moodys, S&P Global Ratings, and Fitch Ratings.

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

Industry Categories

% of Managed Assets

Top 10 Holdings by Issuer

% of Managed Assets

Morgan Stanley

3.5%

MetLife Inc

3.5%

Liberty Mutual Group

3.3%

BNP Paribas

3.1%

Energy Transfer LP

3.1%

Societe Generale SA

3.0%

Wells Fargo & Company

2.9%

Fifth Third Bancorp

2.6%

Citigroup Inc

2.6%

Banco Santander SA

2.3%

 


 

% of Managed Assets*****

Holdings Generating Qualified Dividend Income (QDI) for Individuals

64

%

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

43

%

*****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 financial statements for tax characterization of 2023 distributions.

The accompanying notes are an integral part of the financial statements.
9

 

Flaherty & Crumrine Preferred and Income Securities Fund Incorporated

PORTFOLIO OF INVESTMENTS

November 30, 2023

 

Shares/$ Par

Value

Preferred Stock & Hybrid Preferred Securities§ — 74.1%

 

Banking — 34.9%

$2,800,000

American AgCredit Corporation, 5.25% to 06/15/26 then
T5Y + 4.50%, Series A, 144A****

$2,604,000

*(1)

 

Bank of America Corporation:

$12,470,000

5.875% to 03/15/28 then TSFR3M + 3.19261%, Series FF

 11,425,881

*(1)(2)(3)

$9,700,000

6.125% to 04/27/27 then T5Y + 3.231%, Series TT

 9,453,568

*(1)(2)(3)

130,900

Cadence Bank, 5.50%, Series A

 2,445,212

*(1)

 

Capital One Financial Corporation:

78,800

5.00%, Series I

 1,429,432

*(1)(2)

$4,950,000

3.95% to 09/01/26 then T5Y + 3.157%, Series M

 3,754,985

*(1)(2)(3)

 

Citigroup, Inc.:

$2,575,000

3.875% to 02/18/26 then T5Y + 3.417%, Series X

 2,247,150

*(1)

$1,200,000

4.00% to 12/10/25 then T5Y + 3.597%, Series W

 1,077,860

*(1)

$1,950,000

4.15% to 11/15/26 then T5Y + 3.00%, Series Y

 1,615,650

*(1)

$1,850,000

4.70% to 01/30/25 then TSFR3M + 3.4956%, Series V

 1,684,773

*(1)(2)(3)

$4,590,000

5.95% to 05/15/25 then TSFR3M + 4.16661%, Series P

 4,438,653

*(1)(2)(3)

$6,900,000

7.375% to 05/15/28 then T5Y + 3.209%, Series Z

 6,840,661

*(1)(2)(3)

554,457

TSFR3M + 4.30161%, 9.69643%(4), Series J

 14,304,991

*(1)(2)

 

Citizens Financial Group, Inc.:

161,500

6.35% to 04/06/24 then TSFR3M + 3.90361%, Series D

 3,895,380

*(1)(2)

$5,700,000

6.375% to 04/06/24 then TSFR3M + 3.41861%, Series C

 4,904,776

*(1)(2)(3)

 

CoBank ACB:

104,000

6.20% to 01/01/25 then TSFR3M + 4.0056%, Series H, 144A****

 10,049,000

*(1)(2)

$2,498,000

6.25% to 10/01/26 then TSFR3M + 4.9216%, Series I, 144A****

 2,378,745

*(1)(2)

$4,750,000

Comerica, Inc., 5.625% to 10/01/25 then T5Y + 5.291%, Series A

 4,336,840

*(1)(2)(3)

$1,150,000

Compeer Financial ACA, 4.875% to 08/15/26 then T5Y + 4.10%, Series B-1, 144A****

 1,063,750

*(1)

201,500

ConnectOne Bancorp, Inc., 5.25% to 09/01/26 then T5Y + 4.42%, Series A

 3,695,510

*(1)

165,000

Dime Community Bancshares, Inc., 5.50%, Series A

 2,904,000

*(1)

 

Fifth Third Bancorp:

287,450

6.00%, Series A

 6,904,549

*(1)(2)

1,019,596

6.625% to 12/31/23 then TSFR3M + 3.97161%, Series I

 25,602,056

*(1)(2)

82,000

First Citizens BancShares, Inc., 5.375%, Series A

 1,660,500

*(1)

The accompanying notes are an integral part of the financial statements.
10

 

Flaherty & Crumrine Preferred and Income Securities Fund Incorporated

PORTFOLIO OF INVESTMENTS (Continued)

November 30, 2023

 

Shares/$ Par

Value

 

First Horizon Corporation:

87,500

6.50%, Series E

$1,837,500

*(1)

9

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

 10,530,000

3,730

First Horizon Bank, TSFR3M + 1.11161%, min 3.75%, 6.51781%(4), Series A, 144A****

 2,312,600

*(1)

47,330

Fulton Financial Corporation, 5.125%, Series A

 756,333

*(1)

 

Goldman Sachs Group:

$1,350,000

4.95% to 02/10/25 then T5Y + 3.224%, Series R

 1,277,555

*(1)

$3,460,000

5.50% to 08/10/24 then T5Y + 3.623%, Series Q

 3,424,652

*(1)(2)

117,642

6.375% to 05/10/24 then TSFR3M + 3.81161%, Series K

 2,970,461

*(1)(2)

$2,420,000

7.50% to 02/10/29 then T5Y + 3.156%, Series W

 2,461,266

*(1)

178,400

Heartland Financial USA, Inc., 7.00% to 07/15/25 then T5Y + 6.675%, Series E

 4,381,504

*(1)

 

HSBC Holdings PLC:

$4,400,000

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

5,368,317

(1)(2)(3)(5)

 

Huntington Bancshares, Inc.:

$1,690,000

4.45% to 10/15/27 then T7Y + 4.045%, Series G

 1,440,262

*(1)

$4,950,000

5.625% to 07/15/30 then T10Y + 4.945%, Series F

 4,346,375

*(1)(2)(3)

186,800

6.875% to 04/15/28 then T5Y + 2.704%, Series J

 4,479,464

*(1)(2)

$5,800,000

TSFR3M + 3.14161%, 8.53548%(4), Series E

 5,214,685

*(1)(2)(3)

 

JPMorgan Chase & Company:

$2,875,000

3.65% to 06/01/26 then T5Y + 2.85%, Series KK

 2,595,402

*(1)(2)

$5,000,000

6.125% to 04/30/24 then TSFR3M + 3.59161%, Series U

 4,990,353

*(1)

$13,386,000

6.75% to 02/01/24 then TSFR3M + 4.04161%, Series S

 13,393,059

*(1)(2)(3)

$5,450,000

TSFR3M + 3.56161%, 8.93873%(4), Series R

 5,489,305

*(1)(2)(3)

 

KeyCorp:

464,253

6.125% to 12/15/26 then TSFR3M + 4.15361%, Series E

 10,037,150

*(1)(2)

156,100

6.20% to 12/15/27 then T5Y + 3.132%, Series H

 3,167,269

*(1)(2)

 

M&T Bank Corporation:

$3,075,000

3.50% to 09/01/26 then T5Y + 2.679%, Series I

 2,200,512

*(1)

89,600

5.625% to 12/15/26 then TSFR3M + 4.2816%, Series H

 2,190,720

*(1)

$16,750,000

6.45% to 02/15/24 then TSFR3M + 3.87161%, Series E

 16,320,736

*(1)(2)(3)

92,000

Merchants Bancorp, 6.00% to 10/01/24 then 3ML + 4.569%, Series B

 2,035,960

*(1)

The accompanying notes are an integral part of the financial statements.
11

 

Flaherty & Crumrine Preferred and Income Securities Fund Incorporated

PORTFOLIO OF INVESTMENTS (Continued)

November 30, 2023

 

Shares/$ Par

Value

 

Morgan Stanley:

879,089

5.85%, Series K

$20,641,010

*(1)(2)

94,182

6.50%, Series P

 2,429,895

*(1)(2)

519,272

6.875%, Series F

13,137,582

*(1)(2)

181,737

7.125%, Series E

 4,587,042

*(1)(2)

$2,600,000

TSFR3M + 3.42161%, 8.83104%(4), Series N

 2,644,509

*(1)(2)(3)

980,018

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

 22,707,017

*(1)(2)

280,000

Northpointe Bancshares, Inc., 8.25% to 12/30/25 then TSFR3M + 7.99%, Series A

 6,783,000

*(1)

 

PNC Financial Services Group, Inc.:

$1,700,000

3.40% to 09/15/26 then T5Y + 2.595%, Series T

 1,307,182

*(1)

$6,000,000

6.00% to 05/15/27 then T5Y + 3.00%, Series U

 5,390,507

*(1)(2)(3)

$3,255,000

6.20% to 09/15/27 then T5Y + 3.238%, Series V

 3,082,266

*(1)(2)

$5,833,000

6.25% to 03/15/30 then T7Y + 2.808%, Series W

 5,100,976

*(1)(2)(3)

 

Regions Financial Corporation:

562,640

5.70% to 08/15/29 then TSFR3M + 3.4096%, Series C

 11,174,031

*(1)(2)

$1,885,000

5.75% to 09/15/25 then T5Y + 5.426%, Series D

 1,784,367

*(1)

233,000

Synchrony Financial, 5.625%, Series A

 3,879,450

*(1)(2)

385,013

Synovus Financial Corporation, 5.875% to 07/01/24 then T5Y + 4.127%, Series E

 8,990,054

*(1)(2)(3)

147,500

Texas Capital Bancshares Inc., 5.75%, Series B

 2,691,875

*(1)

 

Truist Financial Corporation:

$4,350,000

4.95% to 12/01/25 then T5Y + 4.605%, Series P

 4,125,008

*(1)(2)

$2,450,000

5.10% to 09/01/30 then T10Y + 4.349%, Series Q

 2,119,250

*(1)(2)(3)

161,650

Valley National Bancorp, TSFR3M + 3.8396%, 9.22969%(4), Series B

 3,688,853

*(1)(2)

100,000

Washington Federal, Inc., 4.875%, Series A

 1,426,000

*(1)

59,724

Webster Financial Corporation, 6.50%, Series G

 1,322,887

*(1)

 

Wells Fargo & Company:

222,000

4.25%, Series DD

3,860,580

*(1)(2)

170,000

4.70%, Series AA

 3,287,800

*(1)(2)

1,353

7.50%, Series L

 1,512,654

*(1)

$3,825,000

3.90% to 03/15/26 then T5Y + 3.453%, Series BB

 3,453,199

*(1)(2)

$3,000,000

5.875% to 06/15/25 then 9.865%, Series U

 2,962,639

*(1)(2)

402,925

6.625% to 03/15/24 then 10.315%, Series R

 10,065,066

*(1)(2)

$10,230,000

7.625% to 09/15/28 then T5Y + 3.606%, Series EE

 10,511,417

*(1)

204,400

WesBanco, Inc., 6.75% to 11/15/25 then T5Y + 6.557%, Series A

 4,834,060

*(1)(2)

The accompanying notes are an integral part of the financial statements.
12

 

Flaherty & Crumrine Preferred and Income Securities Fund Incorporated

PORTFOLIO OF INVESTMENTS (Continued)

November 30, 2023

 

Shares/$ Par

Value

106,500

Western Alliance Bancorp, 4.25% to 09/30/26 then T5Y + 3.452%, Series A

 $1,745,535

*(1)

200,000

Wintrust Financial Corporation, 6.875% to 07/15/25 then T5Y + 6.507%, Series E

4,914,000

*(1)(2)

$10,265,000

Zions Bancorporation, TSFR3M + 4.7016%, 10.11104%(4), Series J

 9,793,532

*(1)(2)

 

 429,892,605

 

Financial Services — 3.3%

$2,540,000

AerCap Global Aviation Trust, 6.50% to 06/15/25 then
TSFR3M + 4.56161%, 06/15/45, 144A****

 2,540,716

(5)

$8,000,000

AerCap Holdings NV, 5.875% to 10/10/24 then T5Y + 4.535%, 10/10/79

 7,738,302

**(2)(3)(5)

 

Ally Financial, Inc.:

$5,790,000

4.70% to 05/15/26 then T5Y + 3.868%, Series B

 4,093,288

*(1)(2)(3)

$3,875,000

4.70% to 05/15/28 then T7Y + 3.481%, Series C

 2,507,419

*(1)

$3,300,000

American Express Company, 3.55% to 09/15/26 then T5Y + 2.854%, Series D

 2,790,249

*(1)(2)

64,400

Carlyle Finance LLC, 4.625% 05/15/61

 1,156,624

$253,000

Charles Schwab Corporation, 5.375% to 06/01/25 then T5Y + 4.971%, Series G

 245,722

*(1)

$3,700,000

Discover Financial Services, 6.125% to 09/23/25 then T5Y + 5.783%, Series D

 3,442,692

*(1)(2)(3)

 

General Motors Financial Company:

$3,375,000

5.70% to 09/30/30 then T5Y + 4.997%, Series C

 2,971,425

*(1)(2)

$2,625,000

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

 2,205,000

*(1)

$4,400,000

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

 3,842,833

*(1)(2)

29,574

National Rural Utilities Cooperative Finance Corporation, 5.50% 05/15/64

 695,285

87,000

Raymond James Financial, Inc., 6.375% to 07/01/26 then TSFR3M + 4.3496%, Series B

 2,169,780

*(1)(2)(3)

 

Stifel Financial Corp.:

94,000

4.50%, Series D

 1,569,800

*(1)

122,000

6.25%, Series B

 2,865,780

*(1)(2)

 

 40,834,915

 

Insurance — 18.3%

65,942

AEGON Funding Company LLC, 5.10% 12/15/49

 1,382,804

(5)

282,000

American Equity Investment Life Holding Company, 5.95% to 12/01/24 then
T5Y + 4.322%, Series A

 6,364,740

*(1)(2)

$9,020,000

American International Group, Inc., 8.175% to 05/15/38 then
3ML + 4.195%, 05/15/58, Series A-6

 9,914,080

56,500

Arch Capital Group, Ltd., 5.45%, Series F

 1,275,205

**(1)(5)

 

Aspen Insurance Holdings Ltd.:

65,962

5.625%

1,348,263

**(1)(5)

54,462

3ML + 4.06%, 9.59343%(4)

 1,406,754

**(1)(5)

The accompanying notes are an integral part of the financial statements.
13

 

Flaherty & Crumrine Preferred and Income Securities Fund Incorporated

PORTFOLIO OF INVESTMENTS (Continued)

November 30, 2023

 

Shares/$ Par

Value

87,200

Assurant, Inc., 5.25% 01/15/61

 $1,706,504

 

Athene Holding Ltd.:

114,400

4.875%, Series D

1,963,104

**(1)(2)(3)(5)

510,000

6.35% to 06/30/29 then 3ML + 4.253%, Series A

 12,153,300

**(1)(2)(5)

99,300

6.375% to 09/30/25 then T5Y + 5.97%, Series C

 2,459,661

**(1)(2)(5)

36,301

Axis Capital Holdings Ltd., 5.50%, Series E

 771,033

**(1)(2)(5)

$3,679,000

AXIS Specialty Finance LLC, 4.90% to 01/15/30 then T5Y + 3.186%, 01/15/40

 3,040,242

(2)(5)

 

Chubb Ltd.:

$4,566,000

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

 5,235,362

(2)(3)

67,400

CNO Financial Group, Inc., 5.125% 11/25/60

 1,176,130

805,950

Delphi Financial Group, TSFR3M + 3.45161%, 8.83133%(4), 05/15/37

 18,033,131

(2)(3)

 

Enstar Group Ltd.:

254,000

7.00% to 09/01/28 then 3ML + 4.015%, Series D

 6,281,420

**(1)(2)(5)

$3,060,000

Enstar Finance LLC, 5.50% to 01/15/27 then T5Y + 4.006%, 01/15/42

 2,517,961

(5)

$2,400,000

Enstar Finance LLC, 5.75% to 09/01/25 then T5Y + 5.468%, 09/01/40

 2,236,006

(5)

$700,000

Equitable Holdings, Inc., 4.95% to 12/15/25 then T5Y + 4.736%, Series B

 661,522

*(1)

$7,310,000

Everest Reinsurance Holdings, TSFR3M + 2.6466%, 8.02633%(4), 05/15/37

 6,195,213

(2)(3)

$6,640,000

Global Atlantic Fin Company, 4.70% to 10/15/26 then
T5Y + 3.796%, 10/15/51, 144A****

 5,519,841

(2)(3)

67,900

Jackson Financial, Inc., 8.00% to 03/30/28 then T5Y + 3.728%, Series A

 1,698,858

*(1)

$4,200,000

Kuvare US Holdings, Inc., 7.00% to 05/01/26 then
T5Y + 6.541%, 02/17/51, Series A, 144A****

 4,252,500

*

 

Liberty Mutual Group:

$24,634,000

7.80% 03/15/37, 144A****

 23,998,324

(2)(3)

$3,950,000

4.125% to 12/15/26 then T5Y + 3.315%, 12/15/51, 144A****

 3,223,978

(2)(3)

 

Lincoln National Corporation:

90,600

9.00%, Series D

 2,373,720

*(1)(2)

$2,265,000

9.25% to 03/01/28 then T5Y + 5.318%, Series C

 2,369,867

*(1)(2)

 

MetLife, Inc.:

$18,250,000

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

 20,248,974

(2)(3)

$15,807,000

10.75% 08/01/39

 20,544,042

(2)(3)

$2,250,000

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

 2,360,290

(2)

 

Prudential Financial, Inc.:

$4,550,000

6.00% to 09/01/32 then T5Y + 3.234%, 09/01/52

4,306,936

(2)(3)

$1,720,000

6.75% to 03/01/33 then T5Y + 2.848%, 03/01/53

 1,714,741

The accompanying notes are an integral part of the financial statements.
14

 

Flaherty & Crumrine Preferred and Income Securities Fund Incorporated

PORTFOLIO OF INVESTMENTS (Continued)

November 30, 2023

 

Shares/$ Par

Value

233,490

Reinsurance Group of America, Inc., 7.125% to 10/15/27 then T5Y + 3.456%, 10/15/52

 $6,110,433

(2)(3)

 

RenaissanceRe Holdings Ltd.:

140,000

4.20%, Series G

 2,336,600

**(1)(2)(5)

39,537

5.75%, Series F

 917,654

**(1)(2)(5)

 

SBL Holdings, Inc.:

$6,300,000

6.50% to 11/13/26 then T5Y + 5.62%, Series B, 144A****

 3,796,916

*(1)(2)(3)

$5,450,000

7.00% to 05/13/25 then T5Y + 5.58%, Series A, 144A****

 3,481,256

*(1)(2)

 

Unum Group:

$26,660,000

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

 26,892,388

(2)(3)

138,000

Voya Financial, Inc., 5.35% to 09/15/29 then T5Y + 3.21%, Series B

 3,283,020

*(1)(2)

 

 225,552,773

 

Utilities — 7.3%

 

Algonquin Power & Utilities Corporation:

$5,750,000

4.75% to 04/18/27 then T5Y + 3.249%, 01/18/82, Series 2022-B

4,733,860

(2)(3)(5)

315,910

6.20% to 07/01/24 then 3ML + 4.01%, 07/01/79, Series 2019-A

 7,897,750

(2)(5)

$6,010,000

American Electric Power Company, Inc., 3.875% to 02/15/27 then
T5Y + 2.675%, 02/15/62

 4,972,351

(2)(3)

 

Commonwealth Edison:

$14,240,000

COMED Financing III, 6.35% 03/15/33

 14,214,584

(2)(3)

$3,250,000

Dominion Energy, Inc., 4.35% to 04/15/27 then T5Y + 3.195%, Series C

 2,799,677

*(1)(2)(3)

 

Edison International:

$7,744,000

5.00% to 03/15/27 then T5Y + 3.901%, Series B

 7,101,729

*(1)

$2,350,000

5.375% to 03/15/26 then T5Y + 4.698%, Series A

 2,179,055

*(1)

$12,170,000

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

 11,814,310

(2)(5)

 

NextEra Energy:

$717,000

NextEra Energy Capital Holdings, Inc., TSFR3M + 2.38661%, 7.79604%(4),
06/15/67, Series C

 633,543

(2)(3)

166,000

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

 4,171,580

*(1)(2)

 

PECO Energy:

$2,386,000

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

 2,484,660

(2)(3)

 

Sempra:

$6,000,000

4.125% to 04/01/27 then T5Y + 2.868%, 04/01/52

 4,892,449

(2)(3)

$5,900,000

4.875% to 10/15/25 then T5Y + 4.55%, Series C

 5,667,966

*(1)(2)(3)

The accompanying notes are an integral part of the financial statements.
15

 

Flaherty & Crumrine Preferred and Income Securities Fund Incorporated

PORTFOLIO OF INVESTMENTS (Continued)

November 30, 2023

 

Shares/$ Par

Value

 

Southern California Edison:

$3,500,000

TSFR3M + 4.46061%, 9.83773%(4), Series E

 $3,514,000

*(1)(2)(3)

737

SCE Trust II, 5.10%, Series G

 14,438

*(1)

195,025

SCE Trust V, 5.45% to 03/15/26 then TSFR3M + 4.05161%, Series K

 4,575,286

*(1)(2)

185,800

SCE Trust VII, 7.50%, Series M

 4,658,006

*(1)

$3,925,000

Southern Company, 3.75% to 09/15/26 then T5Y + 2.915%, 09/15/51, Series 2021-A

 3,446,520

(2)(3)

$820,000

Vistra Corporation, 7.00% to 12/15/26 then T5Y + 5.74%, Series B, 144A****

 779,623

*(1)

 

 90,551,387

 

Energy — 5.6%

 

Enbridge, Inc.:

$1,600,000

5.75% to 07/15/30 then T5Y + 5.314%, 07/15/80, Series 2020-A

 1,393,320

(5)

$6,200,000

6.00% to 01/15/27 then TSFR3M + 4.15161%, 01/15/77, Series 2016-A

 5,637,858

(2)(3)(5)

$4,210,000

8.50% to 01/15/34 then T5Y + 4.431%, 01/15/84, Series 2023-B

 4,233,896

(2)(5)

 

Energy Transfer LP:

$5,569,000

7.125% to 05/15/30 then T5Y + 5.306%, Series G

 4,945,107

(1)(2)(3)

836,400

7.60% to 05/15/24 then TSFR3M + 5.4226%, Series E

 21,010,368

(1)(2)(3)

460,467

TSFR3M + 4.7916%, 10.17133%(4), Series C

 11,829,397

(1)(2)(3)

8,600

TSFR3M + 4.9996%, 10.37933%(4), Series D

 221,364

(1)

$3,700,000

Enterprise Products Operating L.P., 5.25% to 08/16/27 then
TSFR3M + 3.29461%, 08/16/77, Series E

 3,400,240

(2)(3)

191,783

NuStar Logistics LP, TSFR3M + 6.99561%, 12.38948%(4), 01/15/43

 5,149,373

(2)

 

Transcanada Pipelines, Ltd.:

$9,450,000

5.50% to 09/15/29 then TSFR3M + 4.41561%, 09/15/79

7,911,500

(2)(3)(5)

$3,000,000

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

 2,814,204

(2)(3)(5)

 

 68,546,627

 

Communication — 1.0%

$2,565,000

British Telecommunications PLC, 4.875% to 11/23/31 then
T5Y + 3.493%, 11/23/81, 144A****

 2,127,279

(2)(3)(5)

$7,900,000

Paramount Global, 6.375% to 03/30/27 then T5Y + 3.999%, 03/30/62

 6,364,833

(2)(3)

$4,000,000

Vodafone Group PLC, 7.00% to 04/04/29 then SW5 + 4.873%, 04/04/79

 4,050,065

(2)(3)(5)

 

 12,542,177

 

Real Estate Investment Trust (REIT) — 1.5%

19,210

Annaly Capital Management, Inc., TSFR3M + 5.2546%, 10.64943%(4), Series F

480,058

(1)

 

Arbor Realty Trust, Inc.:

58,799

6.375%, Series D

 973,711

(1)

315,025

6.25% to 10/30/26 then TSFR3M + 5.44%, Series F

 5,985,475

(1)(2)

The accompanying notes are an integral part of the financial statements.
16

 

Flaherty & Crumrine Preferred and Income Securities Fund Incorporated

PORTFOLIO OF INVESTMENTS (Continued)

November 30, 2023

 

Shares/$ Par

Value

412,300

KKR Real Estate Finance Trust, Inc., 6.50%, Series A

 $7,442,015

(1)(2)

130,000

New York Mortgage Trust, Inc., 6.875% to 10/15/26 then TSFR3M + 6.13%, Series F

 2,434,900

(1)

120,700

TPG RE Finance Trust, Inc., 6.25%, Series C

 1,674,109

(1)

 

 18,990,268

 

Miscellaneous Industries — 2.2%

204,360

Apollo Global Management, Inc., 7.625% to 12/15/28 then T5Y + 3.226%, 09/15/53

 5,358,319

$1,850,000

Apollo Management Holdings LP, 4.95% to 12/17/24 then
T5Y + 3.266%, 01/14/50, 144A****

 1,672,263

(2)(3)

 

Land O’ Lakes, Inc.:

$6,800,000

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

 5,066,000

*(1)(2)

$7,900,000

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

 6,201,500

*(1)(2)

$9,500,000

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

 8,312,500

*(1)(2)

 

 26,610,582

 

Total Preferred Stock & Hybrid Preferred Securities
(Cost $999,419,851)

 913,521,334

 

Contingent Capital Securities — 18.5%

 

Banking — 18.3%

 

Banco Bilbao Vizcaya Argentaria SA:

$12,800,000

6.125% to 11/16/27 then SW5 + 3.87%

 10,894,922

**(1)(2)(3)(5)

$4,000,000

6.50% to 03/05/25 then T5Y + 5.192%, Series 9

 3,837,179

**(1)(2)(5)

$8,600,000

9.375% to 09/19/29 then T5Y + 5.099%, Series 12

 8,773,935

**(1)(5)

 

Banco Mercantil del Norte SA:

$3,400,000

6.625% to 01/24/32 then T10Y + 5.034%, 144A****

 2,825,400

**(1)(5)

$2,501,000

7.50% to 06/27/29 then T10Y + 5.47%, 144A****

 2,284,764

**(1)(5)

$2,970,000

7.625% to 01/10/28 then T10Y + 5.353%, 144A****

 2,775,399

**(1)(5)

 

Banco Santander SA:

$30,400,000

4.75% to 05/12/27 then T5Y + 3.753%, 144A****

23,761,908

**(1)(2)(3)(5)

$4,600,000

9.625% to 11/21/33 then T5Y + 5.298%, 144A****

 4,812,750

**(1)(5)

 

Barclays Bank PLC:

$1,975,000

4.375% to 09/15/28 then T5Y + 3.41%

1,460,290

**(1)(5)

$9,764,000

6.125% to 06/15/26 then T5Y + 5.867%

 9,068,057

**(1)(2)(3)(5)

$8,040,000

8.00% to 06/15/24 then T5Y + 5.672%

 7,929,124

**(1)(2)(5)

$2,070,000

8.00% to 09/15/29 then T5Y + 5.431%

 1,936,720

**(1)(5)

$3,350,000

9.625% to 06/15/30 then SOFR5Y + 5.775%

 3,365,075

**(1)(5)

The accompanying notes are an integral part of the financial statements.
17

 

Flaherty & Crumrine Preferred and Income Securities Fund Incorporated

PORTFOLIO OF INVESTMENTS (Continued)

November 30, 2023

 

Shares/$ Par

Value

$2,800,000

BBVA Bancomer SA, 5.875% to 09/13/29 then T5Y + 4.308%, 09/13/34, 144A****

 $2,518,741

(2)(5)

 

BNP Paribas:

$2,050,000

4.625% to 02/25/31 then T5Y + 3.34%, 144A****

 1,555,155

**(1)(5)

$28,790,000

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

 28,652,611

**(1)(2)(5)

$4,135,000

7.75% to 08/16/29 then T5Y + 4.899%, 144A****

 4,078,447

**(1)(2)(3)(5)

$1,859,000

8.50% to 08/14/28 then T5Y + 4.354%, 144A****

 1,891,261

**(1)(5)

$2,340,000

9.25% to 11/17/27 then T5Y + 4.969%, 144A****

 2,462,562

**(1)(5)

 

Credit Agricole SA:

$2,040,000

4.75% to 09/23/29 then T5Y + 3.237%, 144A****

 1,638,094

**(1)(5)

$1,630,000

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

 1,632,852

**(1)(5)

$1,600,000

Deutsche Bank AG, 6.00% to 04/30/26 then T5Y + 4.524%

 1,408,240

**(1)(5)

 

HSBC Holdings PLC:

$2,100,000

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

 1,914,455

**(1)(2)(3)(5)

$20,770,000

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

 18,961,138

**(1)(2)(3)(5)

 

ING Groep NV:

$3,275,000

3.875% to 11/16/27 then T5Y + 2.862%

 2,480,612

**(1)(5)

$3,000,000

7.50% to 11/16/28 then T5Y + 3.711%

 2,827,764

**(1)(5)

 

Lloyds Banking Group PLC:

$475,000

7.50% to 09/27/25 then SW5 + 4.496%

 458,924

**(1)(5)

$10,350,000

8.00% to 03/27/30 then T5Y + 3.913%

 9,828,135

**(1)(2)(3)(5)

$3,000,000

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

 2,714,830

**(1)(2)(5)

$1,700,000

NatWest Group PLC, 4.60% to 12/28/31 then T5Y + 3.10%

 1,196,847

**(1)(5)

 

Societe Generale SA:

$4,150,000

4.75% to 05/26/26 then T5Y + 3.931%, 144A****

 3,523,933

**(1)(2)(5)

$4,150,000

5.375% to 11/18/30 then T5Y + 4.514%, 144A****

 3,169,194

**(1)(2)(3)(5)

$17,750,000

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

 14,987,514

**(1)(2)(3)(5)

$15,640,000

9.375% to 05/22/28 then T5Y + 5.385%, 144A****

 15,691,409

**(1)(2)(3)(5)

 

Standard Chartered PLC:

$1,900,000

4.75% to 07/14/31 then T5Y + 3.805%, 144A****

1,453,036

**(1)(5)

$10,355,000

7.75% to 02/15/28 then T5Y + 4.976%, 144A****

 10,287,049

**(1)(2)(3)(5)

 

UBS Group AG:

$2,800,000

4.375% to 02/10/31 then T5Y + 3.313%, 144A****

 2,097,075

**(1)(5)

$3,600,000

4.875% to 02/12/27 then T5Y + 3.404%, 144A****

 3,122,725

**(1)(2)(5)

$890,000

9.25% to 11/13/33 then T5Y + 4.758%, 144A****

 945,559

**(1)(5)

 

225,223,685

The accompanying notes are an integral part of the financial statements.
18

 

Flaherty & Crumrine Preferred and Income Securities Fund Incorporated

PORTFOLIO OF INVESTMENTS (Continued)

November 30, 2023

 

Shares/$ Par

Value

 

Insurance — 0.2%

$2,800,000

QBE Insurance Group Ltd., 5.875% to 05/12/25 then T5Y + 5.513%, 144A****

$2,700,080

**(1)(2)(5)

 

 2,700,080

 

Total Contingent Capital Securities
(Cost $250,683,355)

 227,923,765

 

Corporate Debt Securities§ — 1.9%

 

Banking — 0.0%

14,963

Zions Bancorporation, TSFR3M + 4.1516%, 9.56104%(4), 09/15/28, Sub Notes

 377,367

 

 377,367

 

Insurance — 1.3%

$13,500,000

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

 13,700,824

(2)(3)

$2,150,000

Universal Insurance Holdings, Inc., 5.625% 11/30/26

 1,920,069

 

 15,620,893

 

Communication — 0.3%

 

Qwest Corporation:

127,729

6.50% 09/01/56

 1,355,205

155,921

6.75% 06/15/57

 1,727,604

 

 3,082,809

 

Miscellaneous Industries — 0.3%

$3,550,000

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

 4,015,807

(2)(3)

 

 4,015,807

 

Total Corporate Debt Securities
(Cost $24,971,908)

 23,096,876

 

Money Market Fund — 4.8%

 

BlackRock Liquidity Funds:

59,717,303

T-Fund, Institutional Class

59,717,303

 

 

Total Money Market Fund
(Cost $59,717,303)

 59,717,303

The accompanying notes are an integral part of the financial statements.
19

 

Flaherty & Crumrine Preferred and Income Securities Fund Incorporated

PORTFOLIO OF INVESTMENTS (Continued)

November 30, 2023

 

 

Value

Total Investments (Cost $1,334,792,417***)

99.3

%

$1,224,259,278

 

Other Assets and Liabilities, excluding Loan Payable (net)

0.7

%

9,023,075

 

Total Managed Assets

100.0

%‡

$1,233,282,353

 

Loan Principal Balance

(502,000,000

)

 

Net Assets Available To Common Stock

$731,282,353

  

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

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

**Securities distributing Qualified Dividend Income only (unaudited).

***Aggregate cost of securities held.

****Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration to qualified institutional buyers. At November 30, 2023, these securities amounted to $283,171,544 or 23.0% of total managed assets.

(1)Perpetual security with no stated maturity date.

(2)All or a portion of this security is pledged as collateral for the Fund’s loan. The total value of such securities was $894,931,526 at November 30, 2023.

(3)All or a portion of this security has been rehypothecated. The total value of such securities was $490,050,747 at November 30, 2023.

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

(5)Foreign Issuer.

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

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

ABBREVIATIONS:

3ML3-Month Intercontinental Exchange (ICE) London Interbank Offered Rate (LIBOR) USD A/360

ISDA55-year USD ICE Swap Semiannual 30/360

SOFR5Y5-year USD ICE Secured Overnight Financing Rate (SOFR) Swap

SW55-year USD Swap Semiannual 30/360

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

T7YFederal Reserve H.15 7-Yr Constant Maturity Treasury Semiannual yield

T10YFederal Reserve H.15 10-Yr Constant Maturity Treasury Semiannual yield

TSFR3MChicago Mercantile Exchange Inc. (CME) Term SOFR 3-Month

The administrator of U.S. dollar LIBOR, ICE, ceased publication of daily U.S. dollar LIBOR panels after June 30, 2023. For securities where (i) issuers have announced replacement reference rates or (ii) the Adjustable Interest Rate (LIBOR) Act of 2022 was determined by the Adviser to apply, the new reference rate (usually Term SOFR) has been listed as the benchmark. The spread over that benchmark includes any tenor spread adjustment applicable upon benchmark transition. For all other securities, the original reference rate and spread continue to be listed.

The accompanying notes are an integral part of the financial statements.
20

 

Flaherty & Crumrine Preferred and Income Securities Fund Incorporated

STATEMENT OF ASSETS AND LIABILITIES

November 30, 2023

 

ASSETS:

Investments, at value (Cost $1,334,792,417)

$1,224,259,278

Dividends and interest receivable

12,197,812

Prepaid expenses

329,292

Total Assets

1,236,786,382

 

LIABILITIES:

Loan Payable

$502,000,000

Interest expense payable

2,601,336

Dividends payable to Common Stock Shareholders

249,205

Investment advisory fees payable

432,861

Administration, Transfer Agent and Custodian fees payable

63,506

Servicing Agent fees payable

46,026

Professional fees payable

73,923

Accrued expenses and other payables

37,172

Total Liabilities

505,504,029

NET ASSETS AVAILABLE TO COMMON STOCK

$731,282,353

 

NET ASSETS AVAILABLE TO COMMON STOCK consist of:

Total distributable earnings (loss)

$(241,322,086

)

Par value of Common Stock

481,779

Paid-in capital in excess of par value of Common Stock

972,122,660

Net Assets Available to Common Stock

$731,282,353

 

NET ASSET VALUE PER SHARE OF COMMON STOCK:

Common Stock (48,177,896 shares outstanding)

$15.18

The accompanying notes are an integral part of the financial statements.
21

 

Flaherty & Crumrine Preferred and Income Securities Fund Incorporated

STATEMENT OF OPERATIONS

For the Year Ended November 30, 2023

 

 

INVESTMENT INCOME:

Dividends

$32,289,095

Interest

52,974,297

Rehypothecation Income

252,835

Total Investment Income

85,516,227

 

EXPENSES:

Investment advisory fees

$5,358,118

Interest expense

29,422,271

Servicing Agent fees

571,494

Administrator’s fees

534,781

Professional fees

132,477

Insurance expense

120,492

Transfer Agent fees

21,430

Directors’ fees

54,200

Custodian fees

88,361

Compliance fees

35,000

Other

186,285

Total Expenses

36,524,909

NET INVESTMENT INCOME

48,991,318

 

REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS 

Net realized loss on investments sold during the year

(37,402,047

)

Change in unrealized appreciation/(depreciation) of investments

(4,864,081

)

NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS

(42,266,128

)

 

NET INCREASE IN NET ASSETS TO COMMON STOCK
RESULTING FROM OPERATIONS

$6,725,190

  

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.
22

 

Flaherty & Crumrine Preferred and Income Securities Fund Incorporated

STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE TO COMMON STOCK

 

 

Year Ended
November 30, 2023

Year Ended
November 30, 2022

OPERATIONS:

Net investment income

$48,991,318

$64,533,975

Net realized (loss) on investments sold during the year

(37,402,047

)

(252,264

)

Change in net unrealized appreciation/(depreciation) of investments

(4,864,081

)

(218,916,586

)

Net increase/(decrease) in net assets resulting from operations

6,725,190

(154,634,875

)

 

DISTRIBUTIONS:

Dividends paid from distributable earnings to Common Stock
Shareholders
(1)

(51,340,909

)

(66,512,756

)

Total Distributions

(51,340,909

)

(66,512,756

)

 

FUND SHARE TRANSACTIONS:

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

342,668

3,603,434

Increase from shares issued under the at-the-market program(2)

1,108,909

11,008,576

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

1,451,577

14,612,010

 

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

$(43,164,142

)

$(206,535,621

)

 

NET ASSETS AVAILABLE TO COMMON STOCK:

Beginning of year

$774,446,495

$980,982,116

Net decrease in net assets during the year

(43,164,142

)

(206,535,621

)

End of year

$731,282,353

$774,446,495

  

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

(2)Net of offering costs of $9,949 and $101,187 for the years ended November 30, 2023 and November 30, 2022, respectively.

The accompanying notes are an integral part of the financial statements.
23

 

Flaherty & Crumrine Preferred and Income Securities Fund Incorporated

STATEMENT OF CASH FLOWS

For the Year Ended November 30, 2023