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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 811-06179

 

Flaherty & Crumrine Preferred and Income 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: May 31, 2024

 

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 20549-1090. 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.

 

www.preferredincome.com

Semi-Annual Report
May 31, 2024

Flaherty & Crumrine Preferred and Income Fund

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

The preferred market recovery that began in late 2023 continued throughout the first half of the fiscal year, resulting in strong performance during the period. Total return1 on net asset value (“NAV”) was 2.9% for the second fiscal quarter2 and 11.0% for the first half of the fiscal year. Total return on market price of Fund shares over the same periods was 2.1% and 8.6%, respectively.

 

TOTAL RETURN ON NET ASSET VALUE
For Periods Ended May 31, 2024

 

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 Fund

2.9%

11.0%

18.6%

-0.9%

3.8%

5.5%

8.8%

Bloomberg US Aggregate Bond Index(2)

0.0%

2.1%

1.3%

-3.1%

-0.2%

1.3%

4.9%

S&P 500 Index(3)

3.9%

16.3%

28.2%

9.5%

15.8%

12.7%

10.7%

  

(1)Since inception on January 31, 1991.

(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.

 

Lower interest rates, better inflation data, continued economic strength, and a softening Federal Reserve policy stance together served as a strong tailwind for asset prices, including preferred and contingent capital (CoCo) markets. Investor sentiment shifted from fear to optimism, as many believe interest rates peaked in October 2023, a soft landing for the economy will be achieved, and the Fed will deliver rate cuts later in 2024. This change in sentiment comes at a time when cash balances (money market funds) are high because of defensive positioning for much of 2023 while net supply in the preferred securities market has been nearly flat, pushing prices higher.

Fixed income dramatically outperformed Treasuries as credit spreads tightened. Investment-grade (IG) corporate bond spreads are nearing decade tights, and high-yield (HY) isn’t far off its respective mark. Preferreds and CoCos have stood out on a relative-value basis, and their higher yield once again drew more traditional fixed-income investors into our market. We believe this broadening investor base has had a meaningful impact on preferred demand and spread tightening, given that the relative size of the IG investor base is much larger than dedicated preferred-market investors like the Funds.

While it has not been a straight-line recovery, regional bank preferreds improved materially during the period. Loan loss provisions – while increasing at the margin – have remained at manageable levels, resulting in continued healthy earnings and capital generation for most banks. The Treasury rally (lower rates), along with another year of organic portfolio runoff, has improved unrealized loss positions. Banks have also taken steps to stabilize funding risks, reduce risk in loan portfolios, and manage net interest margins to sustainable levels.


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

2March 1, 2024 – May 31, 2024

2

Commercial real estate (CRE) has been a topic for several years, but it is also a slow-moving train that is likely to take years to be fully resolved. Results will vary widely by institution, and data on CRE’s impact on bank earnings and loan performance will come piecemeal over time. Investors will have to determine how broadly to apply bank-specific results, occurring at different times and from different exposures, across the bank universe. We believe the banks to which the Fund has exposure have manageable CRE exposures and that problem loans will be absorbed by earnings. However, it is an area we are monitoring closely, and volatility may remain elevated.

As mentioned before, net supply in preferreds and CoCos has been nearly flat so far in 2024 as some issuers have redeemed securities without full replacement. This has created a technical bid as investors rely on the secondary market to help reinvest both call proceeds and renewed inflows. Lack of issuance is especially notable in the $25-par (retail) segment, as most recent issuance has been structured as $1K-par (institutional) securities. On the other hand, the IG market has experienced record issuance this year, and it appears likely to continue at a healthy pace in the near term. This broad rally in fixed-income assets, even in the face of record IG supply, is indicative of investor repositioning as discussed above.

Relative to IG and HY, preferreds continue to look attractive as a carry trade. New-issue coupons are at levels not seen in years, and investors are happy to receive the higher income—much of which continues to be tax-advantaged. However, spreads have tightened to a point where lower Treasury rates are likely necessary to see continued upside in prices. Investors have fully embraced a Fed “pivot” and, although timing remains uncertain, many industry commentators expect one or two rate cuts in 2024. To the extent the economy, inflation, and the Fed deliver as expected, it is likely to be a very strong year for preferreds and CoCos. However, disappointment in any of those areas could cause some retracement in coming months.

The Fund’s distributable income has improved this fiscal year, as favorable call experience and higher reinvestment rates improved top line income and allowed for two modest increases in distribution rates. Leverage costs remain steady, but at the high levels we have experienced for quite some time. The timing and magnitude of Fed cuts, if any, remains uncertain, but slower inflation and the Fed’s most recent economic projections 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 as sustainable distribution rates increase.

Sincerely,

The Flaherty & Crumrine Portfolio Management Team

June 30, 2024

3

DISCUSSION TOPICS

(Unaudited)

Fund Performance

The table below presents a breakdown of the components that comprise the Fund’s total return on NAV over the recent six months. 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 (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 PFD’s Total Return on NAV
for the Six Months Ended May 31, 2024
1

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

8.2%

Impact of Leverage (including leverage expense)

3.5%

Expenses (excluding leverage expense)

-0.7%

1Actual, not annualizedTotal Return on NAV

11.0%

For the six-months ended May 31, 2024 the Benchmark Index1,2 returned 7.7%. 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 5/31/24

 

Average Annual

 

1-Year

5-Year

10-Year

PFD at NAV

18.6%

3.8%

5.5%

PFD at Market Price

12.4%

0.1%

3.5%

Benchmark Index

12.5%

3.3%

4.5%

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.

4

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.

5

U.S. Economic & Credit Outlook

After expanding by an unexpectedly strong 3.1% in 2023 (Q4/Q4), U.S. gross domestic product after inflation (real GDP) grew by 1.4% in the first quarter and is expected to rise 2.0% and 1.6% in the second quarter and second half of 2024, respectively.1 Slower—but not too slow—economic growth should help put inflation on a path back toward 2%, allow the Federal Reserve to begin cutting interest rates later this year, and improve the odds of the economy achieving a “soft landing.” While it is not our central forecast, if a recession does arrive, we expect it will be a mild one.

Nonfarm payroll employment averaged just under 248,000 monthly gains in 2024 through May, although the household survey of employment, which uses a different methodology, posted a small decline in jobs over the same period. The truth is probably somewhere between the two surveys, though it will take more detailed data to resolve their divergent signals. Unemployment edged up, helping slow growth in average hourly earnings to 4.1% YoY in May, about 0.5% lower than a year ago but still a little higher than the Fed would wish. Job vacancies also have increased, bringing the ratio of openings to unemployed persons back near its pre-pandemic level, and jobless claims have been moving higher. Labor market conditions appear to be loosening. We expect job and wage growth to slow in the second half of 2024, which should dampen gains in nominal personal income. If inflation gradually slows, however, real income growth should improve modestly.

As inflation picked up, real personal consumption expenditure (PCE) slowed to 1.5% in the first quarter and is running slightly below that so far in Q2. Goods spending remained sluggish. Services rose strongly in Q1 but slowed in April and May. After a long slide, the saving rate picked up in April and May. It appears that excess savings accumulated during the pandemic have been largely spent, driving households to slow spending relative to income and boost savings. We think this is a healthy development that should reduce the risk of a rapid downshift in PCE later.

Real residential investment jumped 16.0% in the first quarter, but it remains down more than 15% from its peak in 1Q2021 and appears poised for another slowdown. Higher mortgage rates and elevated home prices sharply reduced housing affordability over the past several years. New and existing home sales fell from over 7 million in 2021 to just 4.7 million units (annualized) in May, and multifamily housing starts are down roughly 50% as record supply helped lower rents and curtail new investment. We expect significantly lower growth in residential investment over the remainder of the year, although both activity and prices could rebound quickly if the Fed cuts rates significantly next year.

Business investment expanded by 4.4% in Q1, but results by sector remain mixed. Real business equipment spending rose just 1.6% in Q1and, given weak orders and shipments of core capital goods, appear set for several more quarters of tepid growth. After surging in 2023 as companies moved production from overseas and took advantage of incentives authorized in the Inflation Reduction Act (IRA) and CHIPS and Science Act of 2022 (CHIPS), real investment in business structures slowed to just 3.4% in Q1 and is likely to remain in low single digits this year. Investment in intellectual property has accelerated, however, and should remain elevated. Overall, we continue to expect modest growth in business investment in 2024.

Government consumption rose 1.8% in Q1, less than half the 2023 pace, as federal spending turned slightly negative and state and local government (S&L) spending moderated. A slower-growing economy should weigh on tax receipts and curtail S&L spending in 2024, especially after a strong period of hiring last year. With a presidential election coming in November, major new spending legislation appears unlikely until 2025, and we expect little real growth in federal government spending in 2024. We expect tepid growth in government spending this year.

Of course, the federal government continues to run a large deficit (about 6% of GDP in Q1) that must be financed with Treasury bill, note, and bond sales. A combination of higher taxes and lower spending could reduce budget deficits in the future, albeit with uncertain implications for economic growth. However, an aging population, low birth rate, volatile immigration situation, and rising defense vulnerabilities—among other fiscal challenges—do not offer easy solutions. While this is not news, we think it will keep risk premiums above their pre-pandemic levels for some time.

  

1Source for all economic data in this discussion topic is Macrobond. Calculations by Flaherty & Crumrine.

6

After falling significantly in the second half of 2023, inflation jumped in the first quarter. The PCE deflator excluding food and energy was up 4.5% in the first quarter and 2.6% over 12 months ending in May 2024. For the second half of 2023, it was up just 1.9%. The Consumer Price Index (CPI) reported a similar jump in Q1. Housing inflation, which economists expected would follow lower apartment rent increases with a 6–12-month lag, has remained sticky, although core services prices have started to recede from their Q1 bump. We continue to anticipate that inflation will slow over the next several quarters, although base effects from low inflation in the second half of 2023 will make it difficult for year-over-year inflation data to show material reductions after June or July this year.

As inflation reversed higher in Q1, market expectations for an early start to rate cuts by the Fed were dashed. We believe inflation will fall enough to prompt one or two 25 bp rate cuts in 2024 beginning as early as September (though November is a stronger bet). That is fully priced into current yields, however, and the rate outlook is more about what happens in 2025 than 2024. For now, we think forward curves look about right, although economic and political developments could easily alter those views. There is ample potential for the trajectory of federal debt to push Treasury yields and term premiums higher, and it is difficult to know when those fears may ignite.

Credit spreads mostly marched tighter in the first half of 2024. While economic growth has slowed, private sector borrowing continued to fall relative to GDP, and corporate profits and liquidity remain solid. Bank loan performance deteriorated, with the biggest increases in charge offs and delinquencies in consumer credit card loans. Commercial office loans remain under stress from low occupancy rates, and some multifamily loans are strained by slowing rent growth and lower building valuations. Other commercial real estate loans generally are performing well. Commercial and industrial loans also show little strain. For more than two years, banks increased both loan-loss reserves and common equity capital 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 growth slowdown that started in the first quarter to extend through year end. Gradually falling inflation should prompt one or two rate cuts in late Q3 or Q4 and would offer some relief on high leverage cost. We expect intermediate- and long-term Treasury yields to end 2024 modestly below current levels. Short-term rates should closely follow cuts to the fed funds target, leaving the yield curve less inverted—although a positive yield curve is likely a 2025 proposition. Slower economic growth should push credit spreads wider, but strong private sector balance sheets should limit any widening. This leaves us broadly optimistic for preferred and contingent capital securities and the prospects for the Fund.

A Review of 2024 Dodd-Frank Bank Stress Tests

On June 26, the Federal Reserve released its 2024 large-bank Dodd-Frank Act stress test results. They were mostly as expected, and all 31 banks “passed” the 2024 stress test (only 23 banks took the test last year). The 2024 “severely adverse scenario” modeled banks’ financial performance assuming unemployment peaking at 10% (unchanged from the 2023 test), real GDP down 8.5%, equities down 55% (versus 45% in last year’s test), house prices down 36%, and commercial real estate down 40% (unchanged from the 2023 test) from their levels at the end of 2023, among other factors. Under this scenario, the average minimum common equity Tier 1 (CET1) capital ratio for this year’s 31 bank participants was 9.9% versus 10.1% in the June 2023 test. The results of this year’s stress test demonstrate that large U.S. banks remain “well-capitalized,” and no bank breached minimum capital requirements during the two-year stress period.2 Under all scenarios, the 31 large banks maintained capital buffers that were significantly above the Fed’s required minimum, after capital actions. Large U.S. banks appear well prepared for a recession, should one arrive, over the next several years.

  

2For stress test purposes, the benchmark for a “well-capitalized” bank remains CET1 of 4.5% of risk-weighted assets plus a specific Global Systemically Important Bank Holding Company (GSIB) surcharge, where applicable. To pass the stress test, a bank’s projected CET1 ratio must remain above that benchmark by a certain amount, called the Stress Capital Buffer (SCB). The Fed sets the SCB requirement for each of the banks annually. For quarterly reporting purposes, minimum CET1 for a “well-capitalized” bank remains the sum of the 4.5%, a GSIB surcharge, if any, and the specific SCB assigned to each bank.

7

The Fed also conducted its 2024 Comprehensive Capital Analysis and Review (CCAR) to evaluate bank capital plans considering the stress tests results. Our main CCAR takeaway is that banks should continue to exercise discipline regarding common shareholder returns given Basel III “Endgame” proposals that are expected to increase large-bank capital requirements and are due to be announced later this year. Projected Commercial Real Estate (CRE) losses remained unchanged from last year’s exam as higher projected office loan losses were offset by lower loss rates in retail and hotel loans. Unsecured loan portfolios experienced the biggest stress under this year’s test, notably credit cards and, to a lesser extent, commercial and industrial (C&I) loans. Credit card deterioration was a major driver of the larger Stress Capital Buffer (SCB) increases following the 2024 stress test.

Since the results were published, most of the U.S. banks announced moderately higher common stock dividends (peer group average increase was ~6%) while some left them unchanged. Most U.S. banks did not announce big share repurchases or left existing buyback programs in place. Higher SCB requirements are effective on October 1, 2024, and should limit more aggressive share repurchases as banks continue to build capital organically in anticipation of the final Basel 3 Endgame rules.

This year, the Fed also tested exploratory market shock scenarios that included funding stress scenarios (e.g. rapid repricing of a large proportion of deposits) and market disruption scenarios (e.g. failure of each bank’s five largest hedge fund counterparties). The Fed concluded the banks were able to withstand these shocks. Note that this exploratory analysis does not currently contribute to or impact bank capital requirements.

Given ongoing restrictive monetary policy and potential for slower economic growth ahead, we expect all banks to build/maintain robust capital levels and loan-loss reserves over coming quarters, which should help support preferred investors.

8

 

Flaherty & Crumrine Preferred and Income Fund Incorporated

PORTFOLIO OVERVIEW

May 31, 2024 (Unaudited)

 

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

Fund Statistics

 

Net Asset Value

$11.78

Market Price

$10.31

Discount

12.48%

Yield on Market Price†

6.79%

Common Stock Shares Outstanding

12,852,556

May 2024 dividend of $0.0583 per share,
annualized, divided by Market Price.

Security Ratings*

% of Managed Assets

A

0.7%

BBB

48.1%

BB

31.5%

Below “BB”

1.6%

Not Rated**

15.5%

Portfolio Ratings Guidelines

% of Managed Assets

Security Rated Below
Investment Grade by All***

25.1%

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

6.5%

*Ratings are from Moody’s Investors Service, Inc.

**“Not Rated” securities are those with no ratings available from Moody’s. Excludes common stock and money market fund investments and net other assets and liabilities of 2.6%.

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

****Security rating and issuer’s senior unsecured debt or issuer rating are below investment grade by all of Moody’s, S&P, and Fitch. The Fund’s investment policy currently limits such securities to 15% of Net Assets.

Industry Categories

% of Managed Assets

Top 10 Holdings by Issuer

% of Managed Assets

MetLife Inc

3.2%

Morgan Stanley

3.1%

Bank of America Corporation

3.1%

BNP Paribas

3.0%

Liberty Mutual Group

2.8%

Banco Santander SA

2.7%

Societe Generale SA

2.3%

Unum Group

2.3%

Fifth Third Bancorp

2.2%

Banco Bilbao Vizcaya Argentaria SA

2.1%


 

% of Managed Assets*****

Holdings Generating Qualified Dividend Income (QDI) for Individuals

68

%

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

45

%

*****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.

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

 

Flaherty & Crumrine Preferred and Income Fund Incorporated

PORTFOLIO OF INVESTMENTS

May 31, 2024 (Unaudited)

 

Shares/$ Par

Value

Preferred Stock & Hybrid Preferred Securities§ — 76.1%

 

Banking — 37.2%

$500,000

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

$ 477,500

*(1)

 

Bank of America Corporation:

$3,400,000

4.375% to 01/27/27 then T5Y + 2.76%, Series RR

 3,187,818

*(1)(2)(3)

$2,060,000

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

 2,025,037

*(1)(2)(3)

$1,800,000

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

 1,799,990

*(1)(2)(3)

$400,000

6.30% to 03/10/26 then TSFR3M + 4.81461%, Series DD

 403,749

*(1)(2)

23,100

Cadence Bank, 5.50%, Series A

 501,732

*(1)(2)

 

Capital One Financial Corporation:

13,875

5.00%, Series I

 277,222

*(1)

$880,000

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

 793,068

*(1)(2)

 

Citigroup, Inc.:

$450,000

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

 424,484

*(1)(2)

$200,000

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

 191,626

*(1)

$350,000

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

 324,897

*(1)

$460,000

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

 456,959

*(1)(2)

$1,010,000

7.125% to 08/15/29 then T5Y + 2.693%, Series CC

 1,010,273

*(1)

$1,400,000

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

 1,436,457

*(1)(2)(3)

$1,250,000

7.625% to 11/15/28 then T5Y + 3.211%, Series AA

 1,302,110

*(1)(2)(3)

 

Citizens Financial Group, Inc.:

29,000

7.375%, Series H

 726,450

*(1)

$1,820,000

TSFR3M + 3.41861%, 8.72045%(4), Series C

 1,795,944

*(1)(2)(3)

34,300

TSFR3M + 3.90361%, 9.20545%(4), Series D

 873,278

*(1)(2)

 

CoBank ACB:

10,000

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

 999,561

*(1)(2)

$447,000

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

 442,842

*(1)(2)(3)

$5,075,000

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

 4,979,751

*(1)(2)

$250,000

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

 240,000

*(1)

35,800

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

 724,950

*(1)

29,000

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

 523,450

*(1)

 

Fifth Third Bancorp:

48,650

6.00%, Series A

1,137,924

*(1)(2)

164,935

TSFR3M + 3.97161%, 9.27352%(4), Series I

 4,227,284

*(1)(2)

104,600

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

 2,280,280

*(1)(2)

 

First Horizon Corporation:

15,600

6.50%, Series E

 372,216

*(1)

1

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

 1,127,000

795

First Horizon Bank, TSFR3M + 1.11161%, min 3.75%, 6.40884%(4),
Series A, 144A****

 516,750

*(1)

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

 

Flaherty & Crumrine Preferred and Income Fund Incorporated

PORTFOLIO OF INVESTMENTS (Continued)

May 31, 2024 (Unaudited)

 

Shares/$ Par

Value

8,300

Fulton Financial Corporation, 5.125%, Series A

$ 161,103

*(1)

 

Goldman Sachs Group:

$250,000

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

246,778

*(1)

$600,000

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

 599,714

*(1)(2)

$325,000

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

 339,388

*(1)

$1,275,000

7.50% to 05/10/29 then T5Y + 2.809%, Series X

 1,313,142

*(1)(2)(3)

31,600

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

 799,480

*(1)(2)

 

HSBC Holdings PLC:

$800,000

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

 971,749

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

 

Huntington Bancshares, Inc.:

$300,000

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

 277,562

*(1)

$875,000

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

 817,464

*(1)(2)

34,920

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

 884,174

*(1)(2)

$1,000,000

TSFR3M + 3.14161%, 8.47017%(4), Series E

 979,590

*(1)(2)(3)

 

JPMorgan Chase & Company:

$1,825,000

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

 1,717,543

*(1)(2)

$1,200,000

6.875% to 06/01/29 then T5Y + 2.737%, Series NN

 1,241,264

*(1)(2)(3)

 

KeyCorp:

83,910

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

 2,026,427

*(1)(2)

29,000

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

 656,850

*(1)(2)

 

M&T Bank Corporation:

$575,000

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

 474,564

*(1)

$355,000

5.125% to 11/01/26 then TSFR3M + 3.78161%, Series F

 334,580

*(1)

17,600

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

 420,464

*(1)

$2,790,000

TSFR3M + 3.87161%, 9.19399%(4), Series E

 2,821,921

*(1)(2)(3)

15,700

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

389,674

*(1)

 

Morgan Stanley:

68,380

5.85%, Series K

 1,673,942

*(1)(2)

154,665

6.875%, Series F

 3,914,571

*(1)(2)

58,216

7.125%, Series E

 1,476,358

*(1)(2)

$476,000

TSFR3M + 3.42161%, 8.75088%(4), Series N

 495,548

*(1)(2)

183,628

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

 3,268,578

*(1)

50,000

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

 1,197,215

*(1)

 

PNC Financial Services Group, Inc.:

$310,000

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

  276,320

*(1)

$3,155,000

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

 3,078,206

*(1)(2)(3)

$605,000

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

 595,949

*(1)(2)

$1,093,000

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

 1,045,817

*(1)(2)(3)

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

 

Flaherty & Crumrine Preferred and Income Fund Incorporated

PORTFOLIO OF INVESTMENTS (Continued)

May 31, 2024 (Unaudited)

 

Shares/$ Par

Value

 

Regions Financial Corporation:

117,980

5.70% to 08/15/29 then TSFR3M + 3.40961%, Series C

$2,707,641

*(1)(2)

$575,000

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

570,449

*(1)(2)

27,400

6.375% to 09/15/24 then TSFR3M + 3.79761%, Series B

 699,796

*(1)(2)

$800,000

State Street Corporation, 6.70% to 03/15/29 then T5Y + 2.613%, Series I

 810,327

*(1)(2)

 

Synchrony Financial:

41,500

5.625%, Series A

 766,505

*(1)(2)

50,500

8.25% to 05/15/29 then T5Y + 4.044%, Series B

 1,277,650

*(1)

92,727

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

 2,340,430

*(1)(2)

60,200

Texas Capital Bancshares Inc., 5.75%, Series B

 1,184,134

*(1)(2)

 

Truist Financial Corporation:

$810,000

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

794,638

*(1)(2)

$440,000

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

 410,013

*(1)(2)

29,400

Valley National Bancorp, TSFR3M + 3.8396%, 9.14903%(4), Series B

 714,420

*(1)(2)

18,000

Washington Federal, Inc., 4.875%, Series A

 289,620

*(1)

8,494

Webster Financial Corporation, 6.50%, Series G

 197,401

*(1)

 

Wells Fargo & Company:

28,800

4.25%, Series DD

 537,408

*(1)(2)

30,000

4.70%, Series AA

 610,200

*(1)(2)

241

7.50%, Series L

 280,813

*(1)

$700,000

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

662,010

*(1)(2)

$1,920,000

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

 2,026,589

*(1)(2)(3)

36,500

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

 900,090

*(1)(2)

18,900

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

 348,516

*(1)

35,500

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

 885,370

*(1)(2)

$1,225,000

Zions Bancorporation, TSFR3M + 4.7016%, 10.03088%(4), Series J

 1,180,853

*(1)(2)(3)

 

 90,271,410

 

Financial Services — 4.1%

$660,000

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

 659,235

(2)(5)

$2,165,000

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

 2,151,800

**(2)(3)(5)

24,000

Affiliated Managers Group, Inc., 6.75% 03/30/64

 616,320

 

Ally Financial, Inc.:

$1,030,000

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

 909,985

*(1)(2)(3)

$700,000

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

 561,552

*(1)

$575,000

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

525,577

*(1)(2)(3)

11,500

Carlyle Finance LLC, 4.625% 05/15/61

 208,840

$650,000

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

 647,830

*(1)(2)

 

General Motors Financial Company:

$600,000

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

 565,713

*(1)(2)

$192,000

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

 181,465

*(1)

$775,000

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

 749,603

*(1)(2)

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

 

Flaherty & Crumrine Preferred and Income Fund Incorporated

PORTFOLIO OF INVESTMENTS (Continued)

May 31, 2024 (Unaudited)

 

Shares/$ Par

Value

5,094

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

$126,076

17,700

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

 447,810

*(1)(2)

 

Stifel Financial Corp.:

16,000

4.50%, Series D

 290,400

*(1)

21,500

6.25%, Series B

 538,360

*(1)(2)

24,300

TPG Operating Group II LP, 6.95% 03/15/64

 642,978

 

 9,823,544

 

Insurance — 17.7%

$1,610,000

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

 1,748,966

(2)(3)

50,000

American National Group, Inc., 5.95% to 12/01/24 then T5Y + 4.322%, Series A

 1,216,500

*(1)(2)

10,500

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

235,410

**(1)(5)

13,100

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

 275,493

 

Athene Holding Ltd.:

21,200

4.875%, Series D

406,828

**(1)(2)

97,070

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

 2,352,006

**(1)(2)

12,800

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

 320,000

**(1)(2)

30,920

7.25% to 03/30/29 then T5Y + 2.986%, 03/30/64

 789,079

17,500

Axis Capital Holdings Ltd., 5.50%, Series E

 371,350

**(1)(2)(5)

$655,000

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

 595,654

(2)(5)

 

Chubb Ltd.:

$975,000

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

 1,160,249

(2)(3)

12,500

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

 245,625

139,279

Delphi Financial Group, TSFR3M + 3.45161%, 8.77399%(4), 05/15/37

 3,374,034

(2)

 

Enstar Group Ltd.:

45,000

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

 1,129,950

**(1)(2)(5)

$560,000

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

 547,177

(5)

$425,000

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

 418,154

(5)

$125,000

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

 123,000

*(1)

$885,000

Everest Reinsurance Holdings, TSFR3M + 2.6466%, 7.96899%(4), 05/15/37

 848,869

(2)

$1,180,000

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

1,067,847

(2)(3)

12,700

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

 339,090

*(1)

$750,000

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

 751,875

*

 

Liberty Mutual Group:

$3,736,000

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

 3,943,109

(2)(3)

$700,000

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

 647,938

(2)

 

Lincoln National Corporation:

16,900

9.00%, Series D

 470,665

*(1)(2)

$420,000

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

 453,521

*(1)(2)

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

 

Flaherty & Crumrine Preferred and Income Fund Incorporated

PORTFOLIO OF INVESTMENTS (Continued)

May 31, 2024 (Unaudited)

 

Shares/$ Par

Value

 

MetLife, Inc.:

$3,600,000

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

$ 4,177,573

(2)(3)

$2,703,000

10.75% 08/01/39

 3,601,521

(2)(3)

 

Prudential Financial, Inc.:

$845,000

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

826,538

(2)(3)

$590,000

6.50% to 03/15/34 then T5Y + 2.404%, 03/15/54

 592,967

$321,000

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

 329,011

(2)(3)

43,520

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

 1,136,307

(2)

 

RenaissanceRe Holdings Ltd.:

24,900

4.20%, Series G

 432,762

**(1)(2)(5)

7,332

5.75%, Series F

 166,216

**(1)(5)

 

SBL Holdings, Inc.:

$1,100,000

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

 877,250

*(1)(2)(3)

$975,000

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

 848,250

*(1)(2)

 

Unum Group:

$5,160,000

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

 5,567,438

(2)(3)

25,000

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

 617,500

*(1)(2)

 

 43,005,722

 

Utilities — 9.0%

$785,000

AES Corporation, 7.60% to 01/15/30 then T5Y + 3.201%, 01/15/55

791,973

 

Algonquin Power & Utilities Corporation:

$1,700,000

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

 1,532,068

(2)(3)(5)

48,175

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

 1,228,463

(2)(5)

$1,060,000

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

 970,939

(2)(3)

 

Commonwealth Edison:

$2,327,000

COMED Financing III, 6.35% 03/15/33

 2,311,504

(2)

 

Dominion Energy, Inc.:

$565,000

4.35% to 04/15/27 then T5Y + 3.195%, Series C

536,729

*(1)(2)

$1,325,000

7.00% to 06/01/34 then T5Y + 2.511%, 06/01/54, Series B

 1,368,452

 

Edison International:

$1,351,000

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

 1,289,600

*(1)(2)(3)

$420,000

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

 410,425

*(1)

$2,180,000

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

 2,164,297

(2)(5)

$1,090,000

Entergy Corporation, 7.125% to 12/01/29 then T5Y + 2.67%, 12/01/54

 1,086,598

 

NextEra Energy:

$400,000

NextEra Energy Capital Holdings, Inc., 6.70% to 09/01/29 then
T5Y + 2.364%, 09/01/54, Series Q

400,210

$595,000

NiSource, Inc., 6.95% to 11/30/29 then T5Y + 2.451%, 11/30/54

 596,500

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

 

Flaherty & Crumrine Preferred and Income Fund Incorporated

PORTFOLIO OF INVESTMENTS (Continued)

May 31, 2024 (Unaudited)

 

Shares/$ Par

Value

 

PECO Energy:

$500,000

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

$ 517,062

(2)(3)

 

Sempra:

$1,200,000

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

 1,108,479

(2)(3)

$1,020,000

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

 997,857

*(1)(2)(3)

$645,000

6.875% to 10/01/29 then T5Y + 2.789%, 10/01/54

 639,477

 

Southern California Edison:

$625,000

TSFR3M + 4.46061%, 9.78742%(4), Series E

 626,286

*(1)

132

SCE Trust II, 5.10%, Series G

 2,585

*(1)

32,270

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

 805,782

*(1)(2)

34,900

SCE Trust VII, 7.50%, Series M

 933,575

*(1)

23,200

SCE Trust VIII, 6.95%, Series N

 584,640

*(1)

$700,000

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

 652,394

(2)(3)

$150,000

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

 149,034

*(1)

 

 21,704,929

 

Energy — 3.6%

 

Enbridge, Inc.:

$292,000

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

 272,469

(5)

$1,120,000

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

 1,083,708

(2)(3)(5)

$800,000

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

 861,762

(5)

 

Energy Transfer LP:

$1,275,000

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

 1,250,773

(1)(2)(3)

$900,000

8.00% to 05/15/29 then T5Y + 4.02%, 05/15/54

 937,633

$500,000

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

 478,849

(2)(3)

33,700

NuStar Logistics LP, TSFR3M + 6.99561%, 12.32417%(4), 01/15/43

 857,328

 

Transcanada Pipelines, Ltd.:

$1,700,000

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

1,561,000

(2)(3)(5)

$1,400,000

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

 1,371,688

(2)(3)(5)

 

 8,675,210

 

Communication — 1.0%

$540,000

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

485,341

(2)(3)(5)

$1,470,000

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

 1,341,071

(2)(3)

$700,000

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

 722,305

(2)(5)

 

 2,548,717

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

 

Flaherty & Crumrine Preferred and Income Fund Incorporated

PORTFOLIO OF INVESTMENTS (Continued)

May 31, 2024 (Unaudited)

 

Shares/$ Par

Value

 

Real Estate Investment Trust (REIT) — 1.5%

3,440

Annaly Capital Management, Inc., TSFR3M + 5.25461%, 10.55284%(4), Series F

$ 88,855

(1)

 

Arbor Realty Trust, Inc.:

4,576

6.375%, Series D

 82,825

(1)

61,614

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

 1,256,926

(1)(2)

71,000

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

1,366,750

(1)(2)

23,000

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

 456,780

(1)

21,700

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

 372,589

(1)

 

 3,624,725

 

Miscellaneous Industries — 2.0%

38,400

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

 1,017,600

$325,000

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

 317,437

 

Land O’ Lakes, Inc.:

$260,000

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

 212,550

*(1)

$3,900,000

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

 3,393,000

*(1)(2)

 

 4,940,587

 

Total Preferred Stock & Hybrid Preferred Securities
(Cost $191,940,298)

 184,594,844

 

Contingent Capital Securities — 19.8%

 

Banking — 19.6%

 

Banco Bilbao Vizcaya Argentaria SA:

$2,400,000

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

 2,209,622

**(1)(2)(5)

$800,000

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

 795,494

**(1)(2)(5)

$1,600,000

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

 1,711,243

**(1)(5)

 

Banco Mercantil del Norte SA:

$600,000

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

539,359

**(1)(5)

$455,000

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

 448,392

**(1)(5)

$530,000

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

 528,027

**(1)(2)(5)

 

Banco Santander SA:

$5,600,000

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

 5,029,670

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

$1,400,000

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

 1,539,109

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

$755,000

Bank of Montreal, 7.70% to 05/26/29 then T5Y + 3.452%, 05/26/84, Series 4

 765,464

**(5)

$840,000

Bank of Nova Scotia, 8.00% to 01/27/29 then T5Y + 4.017%, 01/27/84, Series 5

 858,314

**(2)(5)

 

Barclays Bank PLC:

$350,000

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

293,247

**(1)(5)

$1,805,000

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

 1,757,510

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

$1,600,000

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

 1,602,724

**(1)(5)

$385,000

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

 385,337

**(1)(5)

$630,000

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

 673,112

**(1)(5)

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

 

Flaherty & Crumrine Preferred and Income Fund Incorporated

PORTFOLIO OF INVESTMENTS (Continued)

May 31, 2024 (Unaudited)

 

Shares/$ Par

Value

$500,000

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

$ 468,888

(2)(3)(5)

 

BNP Paribas:

$350,000

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

 289,541

**(1)(5)

$5,315,000

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

 5,331,971

**(1)(2)(5)

$770,000

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

 789,915

**(1)(2)(5)

$500,000

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

523,523

**(1)(5)

$420,000

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

 449,691

**(1)(2)(5)

$370,000

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

 323,833

**(1)(5)

$400,000

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

 383,859

**(1)(5)

 

HSBC Holdings PLC:

$350,000

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

 335,396

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

$3,710,000

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

 3,596,952

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

$575,000

ING Groep NV, 3.875% to 11/16/27 then T5Y + 2.862%

 492,732

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

 

Lloyds Banking Group PLC:

$200,000

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

 199,641

**(1)(5)

$1,940,000

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

 1,961,788

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

$540,000

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

 530,828

**(1)(2)(5)

 

NatWest Group PLC:

$300,000

4.60% to 12/28/31 then T5Y + 3.10%

238,884

**(1)(5)

$230,000

8.125% to 05/10/34 then T5Y + 3.752%

 233,802

**(1)(5)

$755,000

Royal Bank of Canada, 7.50% to 05/02/29 then T5Y + 2.887%, 05/02/84, Series 4

 770,120

**(5)

 

Societe Generale SA:

$750,000

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

 689,695

**(1)(2)(5)

$750,000

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

 630,241

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

$1,100,000

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

 1,016,648

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

$3,230,000

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

 3,332,459

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

 

Standard Chartered PLC:

$350,000

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

 286,923

**(1)(5)

$1,920,000

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

 1,942,055

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

$400,000

Toronto-Dominion Bank, 8.125% to 10/31/27 then
T5Y + 4.075%, 10/31/82, Series 3, 144A****

 415,575

**(5)

 

UBS Group AG:

$500,000

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

 406,743

**(1)(5)

$2,700,000

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

 2,475,890

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

$200,000

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

 223,080

**(1)(5)

 

 47,477,297

 

Insurance — 0.2%

$500,000

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

 494,527

**(1)(2)(5)

 

 494,527

 

Total Contingent Capital Securities
(Cost $49,498,080)

 47,971,824

 

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

 

Flaherty & Crumrine Preferred and Income Fund Incorporated

PORTFOLIO OF INVESTMENTS (Continued)

May 31, 2024 (Unaudited)

 

Shares/$ Par

Value

Corporate Debt Securities§ — 1.5%

 

Banking — 0.2%

18,000

Zions Bancorporation, TSFR3M + 4.1516%, 9.48088%(4), 09/15/28, Sub Notes

$ 455,580

(2)

 

 455,580

 

Insurance — 1.1%

$2,000,000

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

2,220,310

(2)(3)

$375,000

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

 355,616

 

 2,575,926

 

Communication — 0.2%

 

Qwest Corporation:

22,170

6.50% 09/01/56

229,681

28,330

6.75% 06/15/57

 310,780

(2)

 

 540,461

 

Total Corporate Debt Securities
(Cost $3,838,128)

 3,571,967

 

Money Market Fund — 2.1%

 

BlackRock Liquidity Funds:

5,163,706

T-Fund, Institutional Class

 5,163,706

 

 

Total Money Market Fund
(Cost $5,163,706)

 5,163,706

 

Total Investments (Cost $250,440,212***)

99.5

%

 241,302,341

Other Assets and Liabilities, excluding Loan Payable (net)

0.5

%

1,173,650

Total Managed Assets

100.0

%‡

$242,475,991

Loan Principal Balance

(91,100,000

)

Net Assets Available To Common Stock

$151,375,991

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

 

Flaherty & Crumrine Preferred and Income Fund Incorporated

PORTFOLIO OF INVESTMENTS (Continued)

May 31, 2024 (Unaudited)

 

  

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

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

**Securities distributing Qualified Dividend Income only.

***Aggregate cost of securities held.

****Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration to qualified institutional buyers. At May 31, 2024, these securities amounted to $53,232,734 or 22.0% 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 $176,756,546 at May 31, 2024.

(3)All or a portion of this security has been rehypothecated. The total value of such securities was $87,623,424 at May 31, 2024.

(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:

3ML

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

ISDA5

5-year USD ICE Swap Semiannual 30/360

SOFR5Y

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

SW5

5-year USD Swap Semiannual 30/360

T5Y

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

T7Y

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

T10Y

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

TSFR3M

Chicago 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.
19

 

Flaherty & Crumrine Preferred and Income Fund Incorporated

STATEMENT OF ASSETS AND LIABILITIES

May 31, 2024 (Unaudited)

 

ASSETS:

Investments, at value (Cost $250,440,212)

$241,302,341

Dividends and interest receivable

2,185,601

Prepaid expenses

100,590

Total Assets

243,588,532

 

LIABILITIES:

Loan payable

$91,100,000

Interest expense payable

481,464

Payable for investments purchased

405,389

Dividends payable to Common Stock Shareholders

50,425

Investment advisory fees payable

113,126

Administration, Transfer Agent and Custodian fees payable

28,258

Professional fees payable

33,879

Total Liabilities

92,212,541

NET ASSETS AVAILABLE TO COMMON STOCK

$151,375,991

 

NET ASSETS AVAILABLE TO COMMON STOCK consist of:

Total distributable earnings (loss)

$(30,489,014

)

Par value of Common Stock

128,526

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

181,736,479

Net Assets Available to Common Stock

$151,375,991

 

NET ASSET VALUE PER SHARE OF COMMON STOCK:

Common Stock (12,852,556 shares outstanding)

$11.78

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

 

Flaherty & Crumrine Preferred and Income Fund Incorporated

STATEMENT OF OPERATIONS

For the Six Months Ended May 31, 2024 (Unaudited)

 

INVESTMENT INCOME:

Dividends

$2,673,663

Interest

5,498,809

Rehypothecation Income

25,524

Total Investment Income

8,197,996

 

EXPENSES:

Investment advisory fees

$661,818

Interest expense

2,873,675

Administrator’s fees

117,119

Offering costs expense (Note 5)

92,232

Professional fees

66,780

Insurance expense

51,123

Transfer Agent fees

12,810

Directors’ fees

27,450

Custodian fees

13,053

Compliance fees

17,568

Other

44,354

Total Expenses

3,977,982

NET INVESTMENT INCOME

4,220,014

 

REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS

Net realized loss on investments sold during the period

(359,758

)

Change in unrealized appreciation/(depreciation) of investments

11,007,179