SCHEDULE 14A
                                 PROXY STATEMENT
        PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934

Filed by Registrant [X]
Filed by Party other than the Registrant

Check the appropriate box:
[X] Preliminary Proxy Statement

[ ] Confidential for Use of the Commission Only as permitted by Rule 14a-6(e)(2)
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11c or Rule 14a-12

       FLAHERTY & CRUMRINE PREFERRED INCOME OPPORTUNITY FUND INCORPORATED
       ------------------------------------------------------------------
                (Name of Registrant as Specified in Its Charter)

                     ---------------------------------------
                   (Name of Person(s) Filing Proxy Statement)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required

[ ]  Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1)  Title  of  each  class  of   securities  to  which
     transaction   applies: ____________________________________________________
(2)  Aggregate  number of  securities to which transaction applies: ____________
(3)  Per unit price or other underlying value of transaction  computed  pursuant
     to Exchange Act Rule 0-11. (Set forth the amount on which the filing fee is
     calculated and state how it was determined):_______________________________
(4)  Proposed maximum aggregate value of transaction:___________________________
(5)  Total fee paid:____________________________________________________________

[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange  Act Rule
0-11(a)(2)  and  identify  the  filing  for  which the  offsetting  fee was paid
previously.  Identify the previous filing by registration  statement  number, or
the Form or Schedule and the date of its filing.

(1)      Amount previously paid:________________________________________________
(2)      Form, Schedule or Registration Statement No.:__________________________
(3)      Filing Party: _________________________________________________________
(4)      Date Filed: ___________________________________________________________






       FLAHERTY & CRUMRINE PREFERRED INCOME FUND INCORPORATED (NYSE: PFD)
 FLAHERTY & CRUMRINE PREFERRED INCOME OPPORTUNITY FUND INCORPORATED (NYSE: PFO)
                      301 E. Colorado Boulevard, Suite 720
                           Pasadena, California 91101

                    NOTICE OF ANNUAL MEETINGS OF SHAREHOLDERS
                          To Be Held on April 21, 2005

To the Shareholders:

      Notice is  hereby  given  that the  Annual  Meetings  of  Shareholders  of
Flaherty & Crumrine  Preferred Income Fund  Incorporated and Flaherty & Crumrine
Preferred Income Opportunity Fund Incorporated (each a "Fund" and, collectively,
the "Funds"), each a Maryland corporation, will be held at the Board Room of the
Radisson Bridge Resort, 999 East Camino Real, Boca Raton, Florida 33432 at  8:30
a.m., on April 21, 2005, for the following purposes:

      1.    To elect Directors of each Fund (PROPOSAL 1).

      2.    To approve an amendment to the Articles  Supplementary  Creating and
            Fixing the Rights of Money Market Cumulative  Preferred(TM) Stock of
            each of PFD and PFO (each,  the "Articles Supplementary"),  relating
            to the term of office of certain Directors  (as more fully set forth
            in the Joint Proxy Statement) (PROPOSAL 2).

      3.    To  approve  an  amendment  to each  Fund's  Articles  Supplementary
            adding a  Force  Majeure  Provision  which  regulates  the   auction
            process following an extraordinary event (as more fully set forth in
            the Joint Proxy Statement) (PROPOSAL 3).

      4.    To  transact  such other  business as may  properly  come before the
            Meetings or any adjournments thereof.

      Your vote is important!

      The Board of  Directors  of each Fund has fixed the close of  business  on
January 28, 2005 as the record date for the  determination  of  shareholders  of
each Fund entitled to notice of and to vote at the Annual Meetings.

                                        By Order of the Boards of Directors,


                                        R. ERIC CHADWICK
                                        SECRETARY

February   , 2005

--------------------------------------------------------------------------------
SEPARATE  PROXY  CARDS  ARE  ENCLOSED  FOR EACH  FUND IN WHICH  YOU OWN  SHARES.
SHAREHOLDERS  WHO DO NOT EXPECT TO ATTEND THE ANNUAL  MEETINGS ARE  REQUESTED TO
COMPLETE,  SIGN AND DATE THE ENCLOSED PROXY CARD(S). THE PROXY CARD(S) SHOULD BE
RETURNED  IN THE  ENCLOSED  ENVELOPE,  WHICH  NEEDS NO  POSTAGE IF MAILED IN THE
CONTINENTAL UNITED STATES.  INSTRUCTIONS FOR THE PROPER EXECUTION OF PROXIES ARE
SET FORTH ON THE INSIDE COVER.
--------------------------------------------------------------------------------



                      INSTRUCTIONS FOR SIGNING PROXY CARDS

      The  following  general rules for signing proxy cards may be of assistance
to you and may avoid the time and expense to the Fund(s)  involved in validating
your vote if you fail to sign your proxy card(s) properly.

      1.  Individual  Accounts:  Sign your name  exactly  as it  appears  in the
registration on the proxy card(s).

      2.  Joint  Accounts:  Either  party  may  sign,  but the name of the party
signing should conform exactly to a name shown in the registration.

      3. All Other  Accounts:  The capacity of the individual  signing the proxy
card should be indicated unless it is reflected in the form of registration. For
example:

            REGISTRATION                                  VALID SIGNATURE
            ------------                                  ---------------

            CORPORATE ACCOUNTS

            (1)  ABC Corp.                                ABC Corp.
            (2)  ABC Corp.                                John Doe, Treasurer
            (3)  ABC Corp. c/o John Doe, Treasurer        John Doe
            (4)  ABC Corp. Profit Sharing Plan            John Doe, Trustee

            TRUST ACCOUNTS

            (1)  ABC Trust                                Jane B. Doe, Trustee
            (2)  Jane B. Doe, Trustee                     Jane B. Doe
                 u/t/d 12/28/78

            CUSTODIAN OR ESTATE ACCOUNTS

            (1)  John B. Smith, Cust.,                    John B. Smith
                 f/b/o John B. Smith, Jr. UGMA
            (2)  John B. Smith, Executor,                 John B. Smith, Jr.,
                 estate of Jane Smith                     Executor



       FLAHERTY & CRUMRINE PREFERRED INCOME FUND INCORPORATED (NYSE: PFD)
 FLAHERTY & CRUMRINE PREFERRED INCOME OPPORTUNITY FUND INCORPORATED (NYSE: PFO)

                      301 E. Colorado Boulevard, Suite 720
                           Pasadena, California 91101

                         ANNUAL MEETINGS OF SHAREHOLDERS
                                 April 21, 2005

                              JOINT PROXY STATEMENT

      This document is a joint proxy  statement  ("Joint Proxy  Statement")  for
Flaherty & Crumrine Preferred Income Fund Incorporated  ("PREFERRED INCOME FUND"
OR "PFD") and Flaherty & Crumrine Preferred Income Opportunity Fund Incorporated
("PREFERRED INCOME OPPORTUNITY FUND" OR "PFO") (EACH A "FUND" AND, COLLECTIVELY,
THE "FUNDS").  This Joint Proxy  Statement is furnished in  connection  with the
solicitation  of proxies by each Fund's Board of  Directors  (each a "Board" and
collectively,  the "Boards") for use at the Annual  Meeting of  Shareholders  of
each Fund to be held on April 21,  2005,  at 8:30 a.m., at the Board Room of the
Radisson Bridge Resort, 999 East Camino Real, Boca Raton, Florida 33432  and  at
any   adjournments thereof (each a "Meeting" and, collectively, the "Meetings").
A Notice of Annual Meetings  of  Shareholders  and  proxy  card for each Fund of
which you  are  a  shareholder  accompany  this  Joint  Proxy  Statement.  Proxy
solicitations  will be  made,  beginning  on or  about February, 2005, primarily
by mail, but proxy  solicitations may also be made by  telephone,  telegraph  or
personal  interviews  conducted by officers of each Fund,  Flaherty  &  Crumrine
Incorporated ("Flaherty & Crumrine" or the "Adviser"), the  investment   adviser
of each Fund,  and PFPC Inc.,  the  transfer  agent and  administrator  of  each
Fund  and  a  member  of  The   PNC  Financial  Services  Group, Inc. The  costs
of    proxy     solicitation   and   expenses   incurred  in   connection   with
the  preparation of this Joint Proxy Statement and its enclosures will be shared
proportionally by the Funds.  Each Fund also will reimburse  brokerage firms and
others for their expenses in forwarding  solicitation material to the beneficial
owners of its shares.

      THE ANNUAL REPORT OF EACH FUND, INCLUDING AUDITED FINANCIAL STATEMENTS FOR
THE FISCAL YEAR ENDED  NOVEMBER 30, 2004,  IS AVAILABLE  UPON  REQUEST,  WITHOUT
CHARGE, BY WRITING TO PFPC INC., P.O. BOX 43027, PROVIDENCE,  RI 02940-3027,  OR
CALLING  1-800-331-1710.  Each  Fund's  Annual  Report  is also available on the
Funds'  website  (www.preferredincome.com)  and   the  Securities  and  Exchange
Commission's website (www.sec.gov).

      If the enclosed proxy card is properly executed and returned in time to be
voted at the relevant Meeting, the Shares (as defined below) represented thereby
will be voted  in  accordance  with  the  instructions  marked  thereon.  Unless
instructions to the contrary are marked thereon, a proxy will be voted "FOR" the
election of the nominees for Director and "FOR" the other matters (as applicable
to  each  Fund)  listed  in  the  accompanying  Notice  of  Annual  Meetings  of
Shareholders. Any shareholder who has given a proxy has the right to  revoke  it
at any time prior to its exercise either by attending the relevant  Meeting  and
voting his or her  Shares in person or by  submitting  a letter of revocation or
a later-dated proxy to the appropriate Fund delivered at the above address prior
to the date of the Meeting.

      In the event that a quorum is not present at  a  Meeting  or  in the event
that a quorum is present but sufficient votes to approve any  of  the  proposals
are not received,  the  persons  named  as  proxies  may  propose  one  or  more
adjournments of the Meeting to permit further solicitation of proxies.  Any such
adjournment will require the affirmative vote of  a  majority  of  those  shares
represented at the Meeting in person or by proxy. If a quorum  is  present,  the
persons  named as proxies  will vote those  proxies which  they  are entitled to
vote  "FOR" a  proposal  in  favor  of  such an adjournment with respect to that
proposal and will vote those proxies  required  to be voted "AGAINST" a proposal
against  any  such adjournment with respect to that proposal. A shareholder vote
may be taken on the proposal in the Joint Proxy Statement  prior  to   any  such
adjournment  if  sufficient  votes  have  been received  for approval. Under the
By-Laws of each Fund, a quorum is constituted by the  presence  in person  or by
proxy of the holders  of  a  majority  of  the outstanding  shares  of  the Fund
entitled to vote at the  Meeting.  If a proposal is to be voted upon by only one
class of a Fund's shares, a quorum of that  class  of  shares  must  be  present
at the  Meeting  in  order  for  the  proposal  to  be considered.

      Each Fund has two classes of capital stock:  common stock, par value $0.01
per share (the "Common Stock"); and Money Market Cumulative Preferred(TM) Stock,
par  value  $0.01 per share  ("MMP(R)";  together  with the  Common  Stock,  the
"Shares").  Each Share is  entitled  to one vote at the  Meeting,  with pro rata
voting rights for any fractional  Shares. On the record date,  January 28, 2005,
the following number of Shares of each Fund were issued and outstanding:


                                       1


                                                   COMMON STOCK         MMP(R)
      NAME OF FUND                                  OUTSTANDING      OUTSTANDING
      ------------                                  -----------      -----------

      Preferred Income Fund (PFD)                   10,291,805           800

      Preferred Income Opportunity Fund (PFO)       11,612,153           700

      To the knowledge of each Fund and its Board, the following  shareholder(s)
or "group",  as that term is defined in Section 13(d) of the Securities Exchange
Act of 1934 (the "1934 Act"), is the beneficial owner or owner of record of more
than 5% of the relevant Fund's outstanding shares as of January 28, 2005*:



      NAME AND ADDRESS OF                                  AMOUNT AND NATURE
      BENEFICIAL/RECORD OWNER         TITLE OF CLASS          OF OWNERSHIP         PERCENT OF CLASS
      -----------------------         --------------          ------------         ----------------
                                                                                
      Cede & Co.**                        Common           PFD -  9,768,545            94.92%
      Depository Trust Company             Stock           (record)
      55 Water Street, 25th Floor                          PFO - 11,084,383            95.46%
      New York, NY                                         (record)
      10041
                                           MMP(R)          PFD - 800 (record)            100%
                                                           PFO - 700 (record)            100%


----------
*     As of January 28, 2005, the Directors and officers, as a group, owned less
      than 1% of each class of Shares.

**    A nominee partnership of The Depository Trust Company.

      This  Joint  Proxy  Statement  is  being  used  in  order  to  reduce  the
preparation,  printing, handling and postage expenses that would result from the
use of a separate proxy statement for each Fund.  Shareholders of each Fund will
vote as a single  class except as described  below under Proposal 1 and Proposal
3 and will vote separately on each proposal on which  shareholders  of that Fund
are entitled to vote.  Separate proxy cards are  enclosed for each Fund in which
a shareholder is a record owner of Shares. Thus,  if  a  proposal is approved by
shareholders of one Fund and  disapproved  by  shareholders  of  the other Fund,
the proposal will be implemented  for the Fund  that  approved the  proposal and
will not be implemented for the Fund that  did  not approve the proposal.  It is
therefore  essential  that  shareholders  complete,  date and sign EACH enclosed
proxy card.  SHAREHOLDERS OF EACH FUND ARE ENTITLED  TO  VOTE  ON  THE  PROPOSAL
PERTAINING TO THAT FUND.

      In order that your  Shares may be  represented  at the  Meetings,  you are
requested to vote on the following matter:

                   SUMMARY OF VOTING RIGHTS ON PROXY PROPOSALS



---------------------------------------------------------------------------------------------------------------------
PREFERRED INCOME FUND (PFD)
---------------------------------------------------------------------------------------------------------------------
PROPOSAL                                      COMMON STOCKHOLDERS                        MMP(R) STOCKHOLDERS
---------------------------------------------------------------------------------------------------------------------
                                                                          
1. Election of Directors             Common Shareholders as a single class      MMP(R) Shareholders as a single class
                                     elect one Director: David Gale             elect one Director: Karen H. Hogan
---------------------------------------------------------------------------------------------------------------------
2. Amendment to Articles             Common and MMP(R) Shareholders voting together as a single class
Supplementary - Term of Office
of Certain Directors Provision
---------------------------------------------------------------------------------------------------------------------
3. Amendment to Articles             Common and MMP(R) Shareholders voting      o   MMP(R) Shareholders voting as a
Supplementary - Force                together as a single class                     separate class
Majeure Provision                                                               o   Common and MMP(R) Shareholders
                                                                                    voting as a single class
---------------------------------------------------------------------------------------------------------------------
4. Other Business                    Common and MMP(R) Shareholders, voting together as a single class
---------------------------------------------------------------------------------------------------------------------



                                       2





PREFERRED INCOME OPPORTUNITY FUND (PFO)
---------------------------------------------------------------------------------------------------------------------
PROPOSAL                                      COMMON STOCKHOLDERS                        MMP(R) STOCKHOLDERS
---------------------------------------------------------------------------------------------------------------------
                                                                          
1. Election of Directors             Common Shareholders as a single class      MMP(R) Shareholders as a single class
                                     elect one Director: Morgan Gust            elect one Director: Karen H. Hogan
---------------------------------------------------------------------------------------------------------------------
2. Amendment to Articles             Common and MMP(R) Shareholders voting together as a single class
Supplementary - Term of Office
of Certain Directors Provision
---------------------------------------------------------------------------------------------------------------------
3. Amendment to Articles             Common and MMP(R) Shareholders voting      o   MMP(R) Shareholders voting as a
Supplementary - [Force               together as a single class                     separate class
Majeure Provision]                                                              o   Common and MMP(R) Shareholders
                                                                                    voting as a single class
---------------------------------------------------------------------------------------------------------------------
4. Other Business                    Common and MMP(R) Shareholders, voting together as a single class
---------------------------------------------------------------------------------------------------------------------


                        PROPOSAL 1: ELECTION OF DIRECTORS

      At the Meetings,  shareholders are being asked to consider the election of
Directors of each Fund.  The Board of each Fund is divided  into three  classes,
each  class  having a term of three  years.  Each year the term of office of one
class expires and the  individuals  elected to such class serve for a three-year
term or until their successors are duly elected and qualified.

      At the  Regular  Meeting  of the Board of  Directors  of each Fund held on
January 21, 2005 (the "January Board Meetings"),  the Board of Directors of each
respective Fund accepted the resignation of a Director of the Fund. The Board of
Directors of PFD accepted the resignation of Robert M. Ettinger as a Director of
PFD,  effective  April 21,  2005.  The Board of Directors of  PFO  accepted  the
resignation of Martin Brody as a Director of PFO, effective  April 21, 2005.  In
addition,  based upon a recommendation  from each Fund's  respective  Nominating
Committee,  each Board separately determined to decrease the number of Directors
on the Board from six to five effective April 21, 2005. This  determination  was
made in connection with each Board's  consideration  of  the  recently   adopted
Securities  and Exchange Commission ("SEC") rule amendments under the Investment
Company Act of 1940, as amended  (the "1940 Act"), relating  to fund  governance
practices.  Each Board specifically  considered the requirement  under  the  SEC
amendments that at least 75% of a fund's board be not "interested" (as such term
is  defined in the 1940 Act) in order for such fund to rely on certain exemptive
rules  under the 1940 Act (the "75%  Requirement").  After full consideration of
the options available to  each  Fund to comply with the  75%  Requirement,  each
Board  separately determined  that a  reduction in the size of the Board was the
optimal  manner in which to comply with the 75% Requirement.  Accordingly,  such
reduction  in the size of each Board effectively eliminates a Class III Director
seat for PFD and a Class I Director seat for  PFO,  effective  as  of  April 21,
2005.

      In addition,  at the January  Board  Meetings,  the Board of PFD discussed
that Mr.  Brody  would not stand for  re-election  as a Class I Director  of PFD
after the  expiration  of his current term at the 2005 Annual  Meeting,  and the
Board of PFO discussed that Mr.  Ettinger  would not stand for  re-election as a
Class III Director of PFO after the  expiration  of his current term at the 2005
Annual  Meeting.  Accordingly,  based  upon a  recommendation  from each  Fund's
respective Nominating Committee, it was separately determined by each respective
Board that Karen H. Hogan be  nominated as a Class I Director of PFD and a Class
III Director of PFO for approval by each Fund's  respective  shareholders at the
Meetings.

NOMINEES FOR THE BOARD OF DIRECTORS

      Each nominee  named below has  consented to serve as a Director if elected
at the relevant Meeting.  If a designated  nominee declines or otherwise becomes
unavailable for election,  however, the proxy confers discretionary power on the
persons named therein to vote in favor of a substitute nominee or nominees.

      Mr.  Gale,  a Class I Director  of PFD, and Ms. Hogan,  a Class I Director
nominee of PFD, have each  been  nominated  for  a  three-year term to expire at
PFD's 2008 Annual Meeting of  Shareholders  and  until their successors are duly
elected and qualified. Mr. Gust, a Class III Director of PFO, and Ms.  Hogan,  a
Class III Director  nominee of  PFO, have each been  nominated  for a three-year
term to expire at PFO's  2008  Annual  Meeting  of Shareholders  and until their
successors are duly elected and qualified. Messrs. Crumrine and  Wulf  are Class
II Directors  of  PFD  and  will  serve  until  the  Fund's  Annual  Meeting  of
Shareholders  in 2006. They also are Class II Directors of PFO  and  will  serve
until the Fund's Annual Meeting of Shareholders  in 2007.  Mr.  Gust is a  Class
III Director  of  PFD  and will  serve  until  the  Fund's  Annual   Meeting  of
Shareholders in 2007 and until his successor is duly elected and qualified.  Mr.
Gale is a Class I Director  of  PFO and


                                       3


will serve until the Fund's Annual Meeting of Shareholders in 2006 and until his
successor is duly elected and qualified.  Except for Mr. Gale (who has served as
a Director of each Fund since January 24, 1997) and Mr. Ettinger (who has served
as a Director of each Fund since October 18, 2002), each  current  Director  has
served in such capacity since each Fund's commencement of operations.

      Under each Fund's Articles of  Incorporation,  Articles  Supplementary and
the 1940 Act,  holders of MMP(R),  voting as a single class, will be entitled to
elect two Directors,  and holders of the Common Stock will be entitled to  elect
the  remaining  Directors. However,  subject to the  provisions of the 1940  Act
and the Fund's  Articles of Incorporation, the holders of MMP(R), when dividends
are in arrears for two full years, are able  to  elect  the  minimum  number  of
additional  Directors,  that when combined with the two Directors elected by the
holders of MMP(R), would give the holders of MMP(R) a majority of the Directors.
Donald F.  Crumrine  and Morgan Gust,  as Directors, currently represent holders
of MMP(R) of each Fund.  Ms. Hogan, as a Director nominee of each Fund, has been
nominated by each Fund's respective Board as a Director to represent the holders
of MMP(R).  If   elected, Ms.  Hogan  would  replace  Mr.  Gust  as  a  Director
representing  the holders of MMP(R), and Mr. Gust would represent the holders of
Common Stock of each Fund. A quorum of the MMP(R)  shareholders  must be present
at the Meeting of  Preferred Income Fund and Preferred  Income  Opportunity Fund
in order for each respective proposal to elect Ms. Hogan to be considered.

                     FUND (CLASS)                 NOMINEE FOR DIRECTOR

                  PFD (Common Stock)                      Gale
                  PFD (MMP(R))                            Hogan

                  PFO (Common Stock)                      Gust
                  PFO (MMP(R))                            Hogan

INFORMATION ABOUT DIRECTORS AND OFFICERS

      Set forth in the table below are the existing  Directors  and nominees for
election to the Boards of Directors of the Funds, including information relating
to their  respective  positions held with each Fund, a brief  statement of their
principal  occupations  during the past five years and other  directorships,  if
any. Each Director serves in the same capacity for each Fund.



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

MARTIN BRODY                     Director         Class I Director*           Retired                4        Director, Jaclyn, Inc.
c/o HMK Associates                                PFD - since inception                                         (luggage and
30 Columbia Turnpike                              PFO - since inception                                        accessories);
Florham Park, NJ 07932                                                                                        Director Emeritus,
Age: 83                                                                                                       Smith Barney Mutual
                                                                                                               Funds (18 funds);
                                                                                                             Director, Flaherty &
                                                                                                               Crumrine/Claymore
                                                                                                               Preferred Securities
                                                                                                                    Income Fund
                                                                                                                   Incorporated
                                                                                                                  and Flaherty &
                                                                                                                 Crumrine/Claymore
                                                                                                                 Total Return Fund
                                                                                                                   Incorporated

DAVID GALE                       Director         Class I Director       President and CEO           4         Director, Metromedia
Delta Dividend Group, Inc.                        PFD - since 1997      of Delta Dividend                      International Group,
220 Montgomery Street,                            PFO - since 1997         Group, Inc.                                 Inc.
Suite 426                                                                  (investments)                      (telecommunications);
San Francisco, CA 94104                                                                                         Director, Flaherty
Age: 56                                                                                                         & Crumrine/Claymore
                                                                                                               Preferred Securities
                                                                                                                    Income Fund
                                                                                                                 Incorporated and
                                                                                                               Flaherty & Crumrine/
                                                                                                                  Claymore Total
                                                                                                                    Return Fund
                                                                                                                   Incorporated



                                       4




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

MORGAN GUST (1)                  Director        Class III Director      Since March 2002,           4         Director, Flaherty &
Giant Industries, Inc.                         PFD - since inception    President of Giant                       Crumrine/Claymore
23733 N. Scottsdale Road                       PFO - since inception     Industries, Inc.                      Preferred Securities
Scottsdale, AZ 85255                                                    (petroleum refining                         Income Fund
Age: 57                                                                 and marketing) and,                        Incorporated
                                                                        for more than five                        and Flaherty &
                                                                       years prior thereto,                      Crumrine/Claymore
                                                                          Executive Vice                         Total Return Fund
                                                                      President, and various                       Incorporated
                                                                       other Vice President
                                                                        positions at Giant
                                                                         Industries, Inc.

KAREN H. HOGAN(2)                Director        Director Nominee*           Retired;                2                 --
905 North Bedford Drive           Nominee        PFD - Class I         Community Volunteer;
Beverly Hills, CA 90210                          PFO - Class III       From September 1985
Age: 43                                                                to January 1997,
                                                                       Senior Vice President
                                                                       of Preferred Stock
                                                                       Origination at
                                                                       Lehman Brothers and,
                                                                       previously, Vice
                                                                        President of New
                                                                        Product Development.

ROBERT F. WULF                   Director        Class II Director    Financial Consultant;          4         Director, Flaherty &
3560 Deerfield Drive South                    PFD - since inception    Trustee, University of                     Crumrine/Claymore
Salem, OR 97302                               PFO - since inception      Oregon Foundation;                     Preferred Securities
Age: 67                                                               Trustee, San Francisco                        Income Fund
                                                                       Theological Seminary                        Incorporated
                                                                                                                  and Flaherty &
                                                                                                                 Crumrine/Claymore
                                                                                                                 Total Return Fund
                                                                                                                   Incorporated

INTERESTED
DIRECTORS:
----------

DONALD F. CRUMRINE (1),(3)       Director,       Class II Director    Chairman of the Board          4         Director, Flaherty &
301 E. Colorado Boulevard       Chairman of   PFD - since inception      and Director of                        Crumrine/Claymore
Suite 720                      the Board and  PFO - since inception     Flaherty & Crumrine                     Preferred Securities
Pasadena, CA 91101            Chief Executive                                                                       Income Fund
Age: 57                           Officer                                                                          Incorporated
                                                                                                                  and Flaherty &
                                                                                                                 Crumrine/Claymore
                                                                                                                 Total Return Fund
                                                                                                                   Incorporated

ROBERT M. ETTINGER (3)         Director and      Class III Director*      President and              2                  --
301 E. Colorado Boulevard       President         PFD - since 2002    Director of Flaherty &
Suite 720                                         PFO - since 2002           Crumrine
Pasadena, CA 91101
Age: 46



                                       5




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

R. ERIC CHADWICK              Chief Financial          Officer             Vice President of         N/A                N/A
301 E. Colorado Boulevard     Officer, Vice         PFD - since 2002      Flaherty & Crumrine
Suite 720                  President, Treasurer     PFO - since 2002      since August 2001,
Pasadena, CA 91101             and Secretary                             and previously (since
Age: 29                                                                 January 1999) portfolio
                                                                         manager of Flaherty &
                                                                         Crumrine. Prior to
                                                                          that, portfolio
                                                                          manager of Koch
                                                                          Industries, Inc.

PETER C. STIMES              Chief Compliance          Officer          Vice President of            N/A                N/A
301 E. Colorado Boulevard       Officer and     PFD - since inception  Flaherty & Crumrine
Suite 720                           Vice        PFO - since inception
Pasadena, CA 91101               President
Age: 49

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

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


----------
*     Effective as of the Meetings,  Mr.  Ettinger has resigned as a Director of
      PFD and Mr.  Brody has  resigned as a Director of PFO.  In  addition,  the
      Board of Directors of each Fund  determined  to  decrease  the size of the
      Board of each Fund from six to five  Directors  effective  April 21, 2005,
      thereby  effectively  eliminating  a Class III Director seat for PFD and a
      Class  I  Director  seat  for  PFO.  Mr. Brody's current term as a Class I
      Director of PFD will expire at the Meeting and he will not stand  for  re-
      election.  Mr. Ettinger's current term as a Class III Director of PFO will
      expire at the Meeting and he will not stand for re-election.  Accordingly,
      Ms. Hogan has been nominated as a Class I Director for PFD and a Class III
      Director for PFO.  The Class I Director and Class I  Director  Nominee  of
      PFD and the Class III Director and Class III Director  Nominee of PFO  all
      have  been  nominated  for a three-year term to expire at each Fund's 2008
      Annual Meeting of Shareholders and until their successors are duly elected
      and qualified.  The Class II Directors of PFD and the Class I Director  of
      PFO serve until each  Fund's  Annual Meeting of  Shareholders  in 2006 and
      until their successors are duly elected and qualified.


                                       6


      The Class III Directors of PFD and Class II Directors of PFO  serve  until
      each Fund's  Annual  Meeting  of  Shareholders  in  2007 and  until  their
      successors are duly elected and qualified.

**    The funds in the fund complex are:  Flaherty & Crumrine  Preferred  Income
      Fund  Incorporated,  Flaherty & Crumrine Preferred Income Opportunity Fund
      Incorporated,  Flaherty &  Crumrine/Claymore  Preferred  Securities Income
      Fund  Incorporated,  and  Flaherty &  Crumrine/Claymore  Total Return Fund
      Incorporated (together, the "Flaherty & Crumrine Fund Family").

(1)   As a  Director,  currently  represents  holders  of shares  of the  Funds'
      MMP(R).  As of the 2005  Annual  Meeting of  Shareholders,  Mr.  Gust will
      represent the holders of Common Stock of PFD and PFO.

(2)   As a Director, nominated to represent holders of the Funds' MMP(R).

(3)   "Interested  person"  of the Funds as  defined  in the 1940  Act.  Messrs.
      Crumrine and Ettinger are each  considered an "interested  person" because
      of their  affiliation with Flaherty & Crumrine,  which acts as each Fund's
      investment adviser.

BENEFICIAL  OWNERSHIP OF SHARES IN FUNDS AND FUND COMPLEX FOR EACH  DIRECTOR AND
NOMINEE FOR ELECTION AS DIRECTOR

      Set forth in the table below is the dollar range of equity  securities  in
each Fund and the aggregate dollar range of equity  securities in the Flaherty &
Crumrine Fund Family beneficially owned by each Director.



                                                                                  AGGREGATE DOLLAR RANGE OF EQUITY
                                                                              SECURITIES IN ALL REGISTERED INVESTMENT
                                             DOLLAR RANGE OF EQUITY              COMPANIES OVERSEEN BY DIRECTOR IN
NAME OF DIRECTOR OR NOMINEE              SECURITIES HELD IN FUND* (1)(2)        FAMILY OF INVESTMENT COMPANIES* (3)
---------------------------              -------------------------------        -----------------------------------

                                         PFD                        PFO                        TOTAL
                                         ---                        ---                        -----
                                                                                       
NON-INTERESTED DIRECTORS:

Martin Brody (5)                         C                          C                           E

David Gale                               C                          C                           E

Morgan Gust                              C                          C                           E

Karen H. Hogan                           A                          A                           A

Robert F. Wulf                           C                          C                           E

INTERESTED DIRECTORS:

Donald F. Crumrine                       E(4)                       E(4)                        E(4)

Robert M. Ettinger (5)                   E(4)                       E(4)                        E(4)


----------
*     Key to Dollar Ranges

A.    None

B.    $1 - $10,000

C.    $10,001 -$50,000

D.    $50,001 - $100,000

E.    over $100,000

      All shares were valued as of December 31, 2004.

(1)   No  Director or officer of the Funds owned any shares of MMP(R) on January
      28, 2005.

(2)   This  information  has been  furnished by each  Director as of January 28,
      2005.  "Beneficial  Ownership"  is  determined  in  accordance  with  Rule
      16a-1(a)(2) of the 1934 Act.

(3)   As a group, less than 1%.

(4)   Includes  shares of PFD and PFO held by  Flaherty & Crumrine  of which the
      reporting person is a shareholder and director.

(5)   As described  earlier in the Joint Proxy Statement,  as of April 21, 2005,
      Messrs.,  Brody and  Ettinger  will cease to be  Directors of PFD and PFO,
      respectively.

      Each  Director of each Fund who is not a director,  officer or employee of
Flaherty  &  Crumrine  or any of their  affiliates  receives a fee of $9,000 per
annum plus $500 for each in-person meeting, and $150 for each telephone meeting.
In addition,  the Audit  Committee  Chairman  receives an annual fee per Fund of
$2,500. Each Director of each Fund is reimbursed


                                       7


for  travel and  out-of-pocket  expenses  associated  with  attending  Board and
committee  meetings.  The Board of  Directors  of PFD held eight  meetings (3 of
which were held by telephone  conference call) and the Board of Directors of PFO
held eight meetings (3 of which were held by telephone  conference  call) during
the fiscal year ended  November 30, 2004, and each of the Directors of each Fund
then serving in such capacity attended at least 75% of the meetings of Directors
and any Committee of which he is a member with the exception of Martin Brody. In
addition,  one meeting of a special "ad hoc" committee of the Board of Directors
was held for each Fund.  The  aggregate  remuneration  paid to the Directors and
officers of each Fund for the fiscal year ended  November  30, 2004 is set forth
below:

--------------------------------------------------------------------------------
                                             BOARD MEETING           TRAVEL AND
                       ANNUAL                    AND               OUT-OF-POCKET
                   DIRECTORS FEES       COMMITTEE MEETING FEES        EXPENSES*
--------------------------------------------------------------------------------
PFD                    $38,500               $24,150                  $16,675
PFO                    $38,500               $24,150                  $16,675
--------------------------------------------------------------------------------

----------
*     Includes  reimbursement  for travel and  out-of-pocket  expenses  for both
      "interested" and "non-interested" Directors ("Independent Directors").

AUDIT COMMITTEE REPORT

      The  role of each  Fund's  Audit  Committee  is to  assist  the  Board  of
Directors  in its  oversight  of (i)  the  integrity  of each  Fund's  financial
statements and the  independent  audit therof;  (ii) each Fund's  accounting and
financial  reporting  policies  and  practices,  its internal  controls  and, as
appropriate,  the internal  controls of certain  service  providers;  (iii) each
Fund's  compliance  with  legal  and  regulatory  requirements;   and  (iv)  the
independent auditor's qualifications,  independence and performance. Each Fund's
Audit Committee is also required to prepare an audit  committee  report pursuant
to the rules of the Securities and Exchange Commission (the "SEC") for inclusion
in each Fund's annual proxy statement. Each Audit Committee operates pursuant to
a Charter that was most recently reviewed and approved by the Board of Directors
of each Fund on January 21,  2005 and which is available on the  Funds'  website
(www.preferredincome.com).  As   set  forth   in   the  Charter,  management  is
responsible  for (i)  preparation,  presentation  and  integrity  of each Fund's
financial  statements,  (ii)  the  maintenance  of  appropriate  accounting  and
financial  reporting  principles  and  policies  and  (iii) the  maintenance  of
internal  controls and procedures  designed to assure compliance with accounting
standards and applicable laws and regulations.  The independent  accountants are
responsible  for planning  and  carrying  out proper  audits and reviews of each
Fund's  financial  statements and  expressing an opinion as to their  conformity
with accounting principles generally accepted in the United States of America.

      In  performing  its oversight  function,  at a meeting held on January 21,
2005, the Audit  Committee  reviewed and discussed with  management of each Fund
and the  independent  accountants,  KPMG LLP  ("KPMG"),  the  audited  financial
statements  of each Fund as of and for the fiscal year ended  November 30, 2004,
and  discussed  the  audit of such  financial  statements  with the  independent
accountants.

      In  addition,   the  Audit   Committee   discussed  with  the  independent
accountants  the  accounting  principles  applied  by each  Fund and such  other
matters  brought to the  attention  of the Audit  Committee  by the  independent
accountants  required by Statement of Auditing Standards No. 61,  COMMUNICATIONS
WITH  AUDIT  COMMITTEES,  as  currently  modified  or  supplemented.  The  Audit
Committee also received from the independent accountants the written disclosures
and  statements   required  by  the  SEC's   independence   rules,   delineating
relationships  between the  independent  accountants and each Fund and discussed
the  impact  that any  such  relationships  might  have on the  objectivity  and
independence of the independent accountants.

      As set forth  above,  and as more  fully set  forth in each  Fund's  Audit
Committee Charter,  the Audit Committee has significant duties and powers in its
oversight  role with  respect  to the  Fund's  financial  reporting  procedures,
internal control systems, and the independent audit process.

      The  members  of the  Audit  Committee  are  not,  and  do  not  represent
themselves  to  be,  professionally  engaged  in the  practice  of  auditing  or
accounting  and  are  not  employed  by  each  Fund  for  accounting,  financial
management or internal  control.  Moreover,  the Audit  Committee  relies on and
makes  no   independent   verification   of  the  facts   presented   to  it  or
representations  made by management or the independent accountants. Accordingly,
the Audit Committee's  oversight  does  not  provide  an  independent  basis  to
determine  that  management  has maintained appropriate accounting and financial
reporting principles and policies, or internal controls and procedures, designed
to assure  compliance  with  accounting   standards  and  applicable   laws  and
regulations.   Furthermore, the Audit Committee's considerations and discussions
referred to above do not provide


                                       8


assurance  that the audit of each Fund's  financial  statements has been carried
out in  accordance  with  generally  accepted  accounting  standards or that the
financial  statements  are  presented  in  accordance  with  generally  accepted
accounting principles.

      Based on its  consideration  of the audited  financial  statements and the
discussions  referred to above with management and the independent  accountants,
and subject to the  limitations  on the  responsibilities  and role of the Audit
Committee  set  forth in the  Charter  and  those  discussed  above,  the  Audit
Committee of each Fund  recommended  to the Board of Directors of each Fund that
the audited  financial  statements  be included in each Fund's Annual Report for
the fiscal year ended November 30, 2004.

THIS  REPORT  WAS  SUBMITTED  BY THE AUDIT  COMMITTEE  OF EACH  FUND'S  BOARD OF
DIRECTORS

Martin Brody
David Gale
Morgan Gust
Robert Wulf (Chairman)

January 21, 2005

Each Audit Committee met four times in connection with their regularly scheduled
meetings during the fiscal year ended  November 30, 2004.  Each  Audit Committee
is  composed  entirely  of each Fund's independent  (as such term is  defined by
the New York  Stock  Exchange,  Inc.'s  listing  standards applicable to closed-
end funds  (the  "NYSE  Listing Standards"))  Directors,  namely  Messrs. Brody,
Gale, Gust and Wulf.

NOMINATING COMMITTEE

      Each Board of Directors has a Nominating  Committee  composed  entirely of
each Fund's  independent (as such term is defined by the NYSE Listing Standards)
Directors,  namely Messrs.  Brody, Gale, Gust and Wulf. The Nominating Committee
of each Fund met three times during the fiscal year ended November 30, 2004. The
Nominating  Committee is responsible for identifying  individuals believed to be
qualified to become Board members and for recommending to the Board of Directors
such nominees to stand for election as directors at each Fund's  annual  meeting
of shareholders,  and to fill any vacancies on the Board. Each Fund's Nominating
Committee   has  a  charter   which  is   available   on  the   Funds'   website
(www.preferredincome.com).

      Each Fund's Nominating  Committee believes that it is in the best interest
of the Fund and its shareholders to obtain highly qualified  candidates to serve
as  members  of the  Board of  Directors.  The  Nominating  Committees  have not
established a formal process for identifying  candidates  where a vacancy exists
on the Board. In nominating candidates, the Nominating Committee shall take into
consideration  such factors as it deems  appropriate.  These factors may include
judgment,  skill,  diversity,  experience  with  investment  companies and other
organizations  of comparable  purpose,  complexity,  size and subject to similar
legal  restrictions and oversight,  the interplay of the candidate's  experience
with  the  experience  of other  Board  members,  and the  extent  to which  the
candidate would be a desirable addition to the Board and any committees thereof.

      Each  Fund's  Nominating   Committee  will  consider  director  candidates
recommended by shareholders  and submitted in accordance with applicable law and
procedures  as  described in this Joint Proxy  Statement.  (See  "Submission  of
Shareholder Proposals" below.)

OTHER BOARD-RELATED MATTERS

      Shareholders who wish to send communications to the Board should send them
to the  address  of  the  Fund  and to the  attention  of the  Board.  All  such
communications will be directed to the Board's attention.

      The Funds do not have a formal policy regarding Board member attendance at
the Annual Meeting of Shareholders.  However,  all of the Directors of each Fund
attended the April 23, 2004 Annual Meeting of Shareholders.

COMPENSATION

      The  following  table  sets  forth  certain   information   regarding  the
compensation  of each Fund's  Directors  for the fiscal year ended  November 30,
2004.  No  executive  officer  or  person  affiliated  with  the  Fund  received
compensation  from the Fund  during the fiscal year ended  November  30, 2004 in
excess of $60,000.  Directors and executive officers of the Funds do not receive
pension or retirement benefits from the Funds.


                                       9


                               COMPENSATION TABLE

               NAME OF                AGGREGATE         TOTAL COMPENSATION FROM
             PERSON AND             COMPENSATION          THE FUNDS AND FUND
              POSITION             FROM EACH FUND     COMPLEX PAID TO DIRECTORS*
              --------             --------------     --------------------------

DONALD F. CRUMRINE                      $0                       $0 (4)
Director, Chairman of the Board
and Chief Executive Officer

ROBERT M. ETTINGER                      $0                       $0 (2)
Director and President

MARTIN BRODY                       $12,600 - PFD              $49,650 (4)
Director                           $12,600 - PFO

DAVID GALE                         $15,600 - PFD              $61,650 (4)
Director                           $15,600 - PFO

MORGAN GUST                        $15,900 - PFD              $62,700 (4)
Director                           $15,900 - PFO

ROBERT F. WULF                     $18,550 - PFD              $73,903 (4)
Director                           $18,550 - PFO

----------
*     Represents  the total  compensation  paid to such persons by the Funds and
      the other funds in the Flaherty & Crumrine Fund Family for the fiscal year
      ended  November  30,  2004,  which are  considered  part of the same "fund
      complex"  because they have a common  adviser.  The  parenthetical  number
      represents the total number of investment  company  directorships  held by
      the director or nominee in such fund complex as of November 30, 2004.

REQUIRED VOTE

      The  election  of Mr.  Gale as a Director  of  Preferred  Income Fund will
require the affirmative  vote of a plurality of the votes cast by holders of the
shares of Common  Stock of such Fund at the  Meeting in person or by proxy.  The
election of Ms.  Hogan as a Director of  Preferred  Income Fund will require the
affirmative  vote of a  plurality  of the votes cast by holders of the shares of
MMP(R) of such Fund at the  Meeting in person or by proxy.  The  election of Mr.
Gust as a  Director  of  Preferred  Income  Opportunity  Fund will  require  the
affirmative  vote of a  plurality  of the votes cast by holders of the shares of
Common Stock of such Fund at the Meeting in person or by proxy.  The election of
Mr. Hogan as a Director of Preferred  Income  Opportunity  Fund will require the
affirmative  vote of a  plurality  of the votes cast by holders of the shares of
MMP(R) of such Fund at the Meeting in person or by proxy.

EACH BOARD OF DIRECTORS, INCLUDING ALL OF THE INDEPENDENT DIRECTORS, UNANIMOUSLY
RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" EACH NOMINEE AS DIRECTOR.

                  PROPOSAL 2: APPROVAL OF AN AMENDMENT TO EACH
                  FUND'S ARTICLES SUPPLEMENTARY RELATING TO THE
                       TERM OF OFFICE OF CERTAIN DIRECTORS

      The second  proposal  to be  considered  at the  Meeting is  amending  the
Articles Supplementary Creative and Fixing the Rights of Money Market Cumulative
Preferred(TM) Stock of each of PFD and PFO (each, the "Articles  Supplementary")
as set  forth  in the proposed Articles of  Amendment  for  each  of PFD and PFO
("Proposed  Amendment  A")  described  below and  attached  to this  Joint Proxy
Statement as Proposed Amendments A-1 and A-2, respectively.

      As discussed in connection with Proposal 1,  under  each  Fund's  Articles
of  Incorporation,  Articles  Supplementary and the 1940 Act, holders of MMP(R),
voting as a single class,  are entitled to elect two  Directors,  and holders of
the Common Stock are  entitled to elect the  remaining  Directors.  In addition,
subject  to  the  provisions  of  the  1940  Act  and  each Fund's  Articles  of
Incorporation, the holders of MMP(R), when dividends are in arrears for two full
years,  are able to elect the  minimum  number  of  additional  directors which,
when combined with the two Directors elected by the holders of the MMP(R), would
give the holders of MMP(R) a majority of  the  Directors.  However,  the  Funds'
Articles of Incorporation and Articles Supplementary are silent on the status of
directors  elected by  holders  of MMP(R) in the event all of the MMP(R)  shares
were to be redeemed in full. Therefore, in the event of a redemption in full the
directors  elected by holders of the MMP(R) could be  entitled  to  continue  to
serve as  directors until their terms of office expire.


                                       10


      The purpose of Proposed  Amendment A  is to specifically set forth in each
Fund's Articles  Supplementary a provision that the term  of  certain  directors
elected by a  single  series  of  preferred  stock,  such  as  the  MMP(R), will
terminate  automatically  upon redemption in full of the holders of  the  stock.
In the event of such redemption in  full,   all  obligations  to  those  holders
will  cease  and separate representatives for them would serve no real function.
In that circumstance,  the 1940 Act provision requiring separate representatives
for holders of preferred stock would no longer apply or have any relevance.

      REASONS  FOR  PROPOSED   AMENDMENT   A .   Proposed   Amendment  A   would
specifically  set forth in each Fund's  Articles  Supplementary a provision that
the term of any Director (other than a Continuing Director)  elected by a single
series of preferred  stock  of  the  Fund  would  terminate  automatically  upon
redemption in full of the holders of that series of preferred stock.  As applied
to the Funds,  the  holders  of the MMP (R) in the aggregate would be considered
a single series so that,  upon  a  redemption in full of the MMP(R), the term of
office of any  director elected by the MMP(R) who was not a  Continuing Director
would  automatically  terminate. As  a  result,    Proposed  Amendment  A  would
give the Board of Directors of each Fund the flexibility to indirectly cause the
directorship  of a preferred  director to terminate by redeeming  the  preferred
stock  the  director   represents.   Taking  this  action  may  be  particularly
appropriate  where a person or group  acquires  a large  position  in  preferred
shares  immediately  prior to the record date with a view of obtaining a seat on
the board to serve as a platform  for  initiating  and  instigating  action that
would be contrary to the interest  of  the  preferred  shareholders  or  of  the
relevant Fund as a whole.  Neither  Fund is aware of an intention on the part of
any third party to seek to obtain a seat  on  the  board  or  to  recommend  any
business combination, open-ending  or  other  corporate  action  to  change  the
manner  in which a Fund operates. Nevertheless, the Board of each Fund considers
it prudent to have the flexibility Proposed Amendment A would afford. Of course,
there  would be costs and other  implications  associated  with any  decision to
redeem the preferred  stock which would be evaluated in full by the Fund's Board
of Directors at the time that any such  action  is  contemplated.   Because  the
automatic   termination  provision  would  not  apply  to  persons considered to
be  Continuing  Directors,  Proposed  Amendment  A  would  enable  the  Fund  to
retain  the  services  of  persons  who  do  not  have sizable  shareholdings or
strategic  proposals  that  could  place  them in a posture  adverse  to a Fund.
"Continuing  Director"  is  defined in each  Fund's  Articles  of  Incorporation
generally as a Director who (a) is not an Interested Party or an Affiliate or an
Associate  (as  these  terms  are  defined  in the  Articles  of  Incorporation;
generally,  an  Interested  Party is a person  who has  entered  into a business
combination with the Fund or individually or together with other persons owns or
is  deemed  to own,  directly  or  indirectly,  more than 5% of any class of the
Fund's  securities) of an Interested Party and has been a member of the Board of
Directors  for a period  of at  least  12  months;  or (b) is a  successor  of a
Continuing  Director  who is not  an  Interested  Party  or an  Affiliate  or an
Associate  of an  Interested  Party and is  recommended  to succeed a Continuing
Director  by a  majority  of the  Continuing  Directors  then  on the  Board  of
Directors;  or (c) is  elected  to the  Board of  Directors  to be a  Continuing
Director  by a  majority  of the  Continuing  Directors  then  on the  Board  of
Directors and who is not an Interested  Party or an Affiliate or Associate of an
Interested Party.

      At the  January  Board  Meetings,  the  Board of  Directors  of each  Fund
separately  approved Proposed  Amendment A, subject to shareholder  approval and
subject to receipt of certain  written  confirmations  from the rating  agencies
rating  the  MMP(R).   The  Board   considered   a  number  of  factors  in  its
deliberations, including  (i)  that  in  the  event of a redemption in full of a
single series of preferred stock of the Fund,  separate  representatives for the
preferred  stock would  serve  no  real  function;  (ii) that  closed-end  funds
continue to be subject to  action  by  parties  with  agendas  contrary  to  the
interest of Fund  shareholders as a whole that are disruptive to Fund operations
and involve significant costs; (iii) that Proposed  Amendment  A  would give the
Board of each Fund  flexibility in certain circumstances  to  take   appropriate
action in a situation where a person or group obtains a Board  seat  through  an
investment in a Fund's preferred stock action considered to be contrary  to  the
interests of the preferred holders or the Fund as a whole; and (iv) the  benefit
of retaining the knowledge and expertise of representing preferred shares in the
event a decision is made to redeem a series of preferred  stock  and/or  replace
that series with another series.

If adopted,  Proposal 2 would render more difficult or discourage the assumption
of control by a holder of a large block of a Fund's MMP(R),  a proxy contest,  a
merger, a tender offer or the removal of incumbent management.

REQUIRED VOTE

      Approval of the Articles of Amendment will require the affirmative vote of
a majority of the votes of the outstanding shares of stock entitled to  be  cast
by holders of each Fund's Common Stock and MMP(R),  voting  together as a single
class. The Funds have had conversations with both Moody's Investor Service, Inc.
("Moody's") and Fitch Ratings  ("Fitch"),  the rating agencies  currently rating
the MMP(R),  about Proposed Amendment A. They have indicated  preliminarily that
the changes would not impair the current ratings on the MMP(R) ("Aaa" and "AAA,"
respectively). In any event, Proposed Amendment A will not be implemented unless
Moody's and Fitch confirm that it would not impair their current  ratings on the
MMP(R).

           THE BOARD OF DIRECTORS OF EACH FUND UNANIMONSLY RECOMMENDS
                    THAT SHAREHOLDERS VOTE "FOR" PROPOSAL 2.

                    PROPOSAL 3: APPROVAL OF AN AMENDMENT TO
       EACH FUND'S ARTICLES SUPPLEMENTARY ADDING A FORCE MAJEURE PROVISION

      The third  proposal  to  be  considered  at the  Meeting is  amending  the
Articles  Supplementary  of each Fund as set forth in the  proposed  Articles of
Amendment for each of PFD and PFO ("Proposed  Amendment B")  described below and
attached  to  this  Joint  Proxy  Statement  as Proposed Amendments B-1 and B-2,
respectively.  For ease  of  reference,  the  Articles of Amendment in  Proposed
Amendments B-1 and B-2  have  been  marked  to  show  the  proposed  changes  by
underlining the new language and putting it in bold typeface.

      The Articles  Supplementary of each Fund establish  procedures for regular
periodic  auctions for each Fund's MMP(R).  The auctions  establish the dividend
rate to be paid to the  holders of the MMP(R) for the next  dividend  period and
are held by each Fund's auction agent at the times and in the manner provided in
the Articles Supplementary.  Proposed Amendment B  would add a provision to each
Fund's Articles Supplementary designed to establish procedures to be followed in
those instances where an auction for the applicable  Fund's  outstanding  MMP(R)
cannot be held,  or the  auction  agent for the Fund is not able to  conduct  an
auction in  accordance  with the auction  procedures  set forth in the  Articles
Supplementary,  or the dividend  payable on such date cannot be paid because the
date on which the auction normally would


                                       11


be  held   (or  the  dividend   would   be  paid)   pursuant  to   the  Articles
Supplementary  is not a business day because the New York Stock  Exchange,  Inc.
("NYSE")  is  closed  for  certain  specific  reasons.  These  reasons  are  the
following:  an act of God, natural disaster,  extreme weather, act of war, civil
or  military  disturbance,  act of  terrorism,  sabotage,  riots  or a  loss  or
malfunction  of utilities or  communications  services  (each an  "Extraordinary
Event").  As described in more detail below, the Proposed  Amendment B  (a) sets
forth how the  dividend  rate to be paid to the  holders  of shares of MMP(R) is
determined by stating a distinction  between situations where the NYSE is closed
due to an  Extraordinary  Event for (i) more than  three  calendar  days or (ii)
three or fewer calendar days; (b) sets forth when the dividend will be paid, and
how a dividend period will be established if an Extraordinary  Event occurs; and
(c) provides that if an Extraordinary  Event occurs,  existing holders of shares
of MMP(R) of a Fund will  continue to hold their shares of MMP(R) until the next
auction for the MMP(R) is held.

      The  purpose  of  Proposed  Amendment  B  is to  provide a  procedure  for
auctions  for  certain  situations  outside the control of a Fund that force the
NYSE to close.

      Under the current provisions of the Articles  Supplementary for each Fund,
if a regularly  scheduled  auction  cannot be held FOR ANY REASON,  including an
Extraordinary Event, the dividend rate for the next dividend period would be the
"Maximum Rate," which could be expected to be significantly higher than the rate
which  would have been  determined  pursuant  to auction  under  normal  auction
procedures.  The  Maximum  Rate is  generally  defined in each  Fund's  Articles
Supplementary  as the  greater  of (A) the  product  of (1) the  "AA"  Composite
Commercial  Paper  Rate on such  Auction  Date for the next Rate  Period of such
shares and (2) the Rate  Multiple on such  Auction  Date and (b) the  applicable
spread (as  determined  pursuant  to the chart  below)  plus the "AA"  Composite
Commercial  Paper  Rate on such  Auction  Date for the next Rate  Period of such
shares. Rate Multiple means the percentage  determined as set forth below, based
on the prevailing rating of the MMP(R) in effect at the close of business on the
business day next preceding the auction date.

               PREVAILING RATINGS        RATE MULTIPLE     APPLICABLE SPREAD
               ------------------        -------------     -----------------

               "Aa3" or higher               175%               2.5%

               "A3"                          225%               3.0%

               "Baa3"                        275%               3.5%

               Below "Baa3"                  325%               4.0%

      As of ________ __, 2005, based on this formula the Maximum Rate would have
been _____%.

      DIVIDEND RATE PROVISION. Proposed Amendment B  provides that if an auction
date is not a  business  day  because  the NYSE is closed  for MORE  THAN  THREE
CONSECUTIVE  CALENDAR  DAYS  (excluding  Saturdays  and Sundays  and  previously
announced  NYSE  holidays),  or the auction  agent cannot  conduct an auction in
accordance with the auction procedures,  due to an Extraordinary Event, then the
dividend rate to be paid to the holders of shares of MMP(R) will be the dividend
rate  determined  on the  previous  auction  date.  If an auction  date is not a
business  day  because  the  NYSE is  closed  for  THREE  OR  FEWER  THAN  THREE
CONSECUTIVE  CALENDAR DAYS, or if the auction agent cannot conduct an auction in
accordance with the auction procedure,  due to an Extraordinary  Event, then the
dividend  rate to be paid to the  holders  of the  shares of MMP(R)  will be the
dividend rate  determined by auction on the first business day (i.e.,  the first
day on which the NYSE is open) following such auction date.

      DIVIDEND PAYMENT PROVISION.  Proposed Amendment B  also provides that if a
dividend  payment date is not a business  day (i.e.,  a day on which the NYSE is
open), or if the dividend payable on such date can not be paid, because the NYSE
is closed for business for more than three  consecutive  calendar days due to an
Extraordinary  Event,  then  (a) the  dividend  payment  date  for the  affected
dividend  period will be the next business day on which the Fund and the auction
agent are able to cause the  dividend to be paid using  commercially  reasonable
best efforts, (b) the affected dividend period will end on the day it would have
ended had such event not occurred and the dividend payment date had remained the
scheduled date; and (c) the next dividend period will begin and end on the dates
on which it would  have  begun  and ended had such  event not  occurred  and the
dividend payment date remained the scheduled date.

      HOLD OVER PROVISION.  Finally, Proposed Amendment B  also provides that in
the event an auction cannot be held due to an Extraordinary Event, each existing
holder of shares of MMP(R)  will  continue  to hold all of his or her  shares of
MMP(R)  until the next auction for the shares of MMP(R) is held (unless a holder
sells his or her shares of MMP(R)  outside of an auction in a secondary  trading
market). THIS  MEANS  THAT  A  HOLDER  OF  SHARES  OF  MMP(R) WOULD, UNDER THESE
CIRCUMSTANCES, BE REQUIRED TO HOLD HIS  OR  HER  SHARES  OF  MMP(R) FOR  ANOTHER
DIVIDEND PERIOD (WHICH WOULD ORDINARILY BE 49 DAYS) IN ORDER TO SELL THROUGH  AN
AUCTION.


                                       12


      REASONS FOR PROPOSED AMENDMENT  B.  Proposed  Amendment B  is  designed to
prevent a Fund from having to pay the Maximum Rate on its MMP(R), and to provide
that  holders of shares of MMP(R)  will be  required  to  continue to hold their
shares of MMP(R)  until an auction is held  following  an  Extraordinary  Event,
which would  occur due to events   not under the  control of a Fund.  Payment of
the Maximum  Rate is not a desirable  outcome for the Funds or their  holders of
common stock,  as it would have the effect of reducing a Fund's net asset value.
Without the revised procedures set forth in the Proposed Amendment, a Fund would
almost certainly be forced to redeem the MMP(R) and the holders of the shares of
MMP(R)  would  lose  their  opportunity  to invest in the Fund.  At the time the
Funds'  Articles  Supplementary  were  initially  approved,  the  effect of such
Extraordinary Events on auctions for the Funds were not foreseen;  the provision
in the Funds' Articles  Supplementary which provides that the dividend rate will
be the  Maximum  Rate if an auction is not held  contemplated  situations  which
would be within a Fund's control,  not the sorts of situations  specified above.
Proposed  Amendment  B  is  consistent  with  current  market  practice  for new
issuances of auction market  preferred stock and is designed to deal with a very
limited set of  circumstances  outside the Funds' control;  if an auction is not
held for any reason other than those specified in Proposed Amendment B,  current
provisions of the Articles Supplementary will apply.

      At a meeting held on January 21, 2005, the Board of Directors of each Fund
approved Proposed  Amendment B,  subject to shareholder  approval and subject to
receipt of certain  written  confirmations  from the rating  agencies  rating to
MMP(R). The Board considered a number of factors in its deliberations, including
that (i) the current Articles  Supplementary  for each Fund might cause the Fund
to be forced to pay a  dividend  rate on its shares of MMP(R)  higher  than that
which would normally be set at auction if an Extraordinary  Event were to occur;
(ii) that in that  event,  the Fund  would  likely  seek to redeem its shares of
MMP(R) and the  holders  of the  MMP(R)  would then not be able to invest in the
Fund at all;  (iii) that the effect of  Proposed  Amendment B  to  the  Articles
Supplementary is to ensure that, if an Extraordinary  Event were to occur,  each
Fund's auction for its MMP(R) can be conducted  pursuant to clear procedures set
forth in its  Articles  Supplementary  and without  detriment to the Fund or its
holders of common stock;  (iv) that  Proposed  Amendment B  is  consistent  with
current market practice for new issuances of auction market  preferred stock and
is designed to deal with a very limited set  of  circumstances  outside  of  the
Funds' control; and (v) that Proposed Amendment B might be deemed to  materially
adversely  affect the  contract  rights of the holders of the MMP(R)  since they
would no longer be entitled to receive the Maximum Rate under the  circumstances
described  above and would be required to hold their  shares of MMP(R) until the
next auction can be held but also that, pursuant to the Articles  Supplementary,
the separate vote of the MMP(R) holders approving  Proposed Amendment B  will be
obtained.

REQUIRED VOTE

      Approval of the Articles of Amendment for PFD will require the affirmative
vote of (a) a majority of the  votes of the outstanding shares of stock entitled
to be cast by the holders of PFD's Common Stock and MMP(R), voting together as a
single class and (b) 80% of the outstanding shares of MMP(R) entitled to be cast
by the holders of the MMP(R), voting as a separate class.

      Approval of the Articles of Amendment for PFO will require the affirmative
vote of (a) a majority of  the votes of the outstanding shares of stock entitled
to be cast by the holders of PFO's Common Stock and MMP(R), voting together as a
single class and (b) a majority of the outstanding  shares of MMP(R) entitled to
be cast by the holders of the MMP(R), voting as a separate class.

      The Funds have had conversations with both Moody's and Fitch,  the  rating
agencies  currently rating the MMP(R),  about Proposed  Amendment  B. They  have
indicated  preliminarily that the changes would not impair  the  current ratings
on the MMP(R) ("Aaa" and "AAA," respectively). In any event, Proposed  Amendment
B will not be implemented unless Moody's and Fitch confirm  that  it  would  not
impair their current  ratings on the MMP(R).


           THE BOARD OF DIRECTORS OF EACH FUND UNANIMONSLY RECOMMENDS
                    THAT SHAREHOLDERS VOTE "FOR" PROPOSAL 3.

                       SUBMISSION OF SHAREHOLDER PROPOSALS

      All  proposals  by  shareholders  of each  Fund  that are  intended  to be
presented at each Fund's next Annual Meeting of  Shareholders to be held in 2006
must be received by the relevant  Fund for  consideration  for  inclusion in the
relevant  Fund's proxy  statement  relating to the meeting no later than October
  , 2005 and must satisfy the requirements of federal securities laws.

      Each Fund's By-laws require  shareholders wishing to nominate Directors or
make  proposals to be voted on at the Fund's  annual  meeting to provide  timely
notice of the proposal in writing. To be considered timely, any such notice must
be delivered to or mailed and received at the principal executive offices of the
Fund not later than 60 days prior to the date of the meeting;  provided however,
that if less than 70 days notice or prior public  disclosure  of the date of the
meeting is given or made to shareholders, any such notice by a shareholder to be
timely must be so received  not later than the close of business on the 10th day
following the day on which notice of the date of the annual meeting was given or
such public disclosure was made.

      Any such notice by a shareholder shall set forth the information  required
by the Fund's  By-laws with respect to each matter the  shareholder  proposes to
bring before the annual meeting.


                                       13


                             ADDITIONAL INFORMATION

INDEPENDENT ACCOUNTANTS

      KPMG, 99 High Street, Boston,  Massachusetts 02110-2371, has been selected
to serve as each Fund's  independent  accountants  for each  Fund's  fiscal year
ending  November 30, 2005.  KPMG acted as the  independent  accountants for each
Fund for the fiscal year ended  November 30,  2004.  The Funds know of no direct
financial  or  material  indirect  financial  interest  of KPMG in the Funds.  A
representative of KPMG will not be present at the Meeting, but will be available
by telephone and will have an  opportunity  to make a statement,  if asked,  and
will be available to respond to appropriate questions.

      Set forth in the table  below are audit fees and  non-audit  related  fees
billed to each Fund by KPMG for  professional  services  received during and for
each Fund's fiscal years ended November 30, 2003 and 2004, respectively.



              FISCAL YEAR ENDED                    AUDIT-RELATED
FUND             NOVEMBER 30        AUDIT FEES         FEES*          TAX FEES**      ALL OTHER FEES
----             -----------        ----------         -----          ----------      --------------
                                                                             
PFD                  2003             $34,500         $11,200           $6,000              --
                     2004             $36,500         $12,400           $6,400              --

PFO                  2003             $34,500         $11,200           $6,000              --
                     2004             $36,500         $12,400           $6,400              --


----------
*     "Audit-Related  Fees"  are  those  fees  billed  to  each  Fund by KPMG in
      connection  with  their  agreed-upon  procedures  reports  on each  Fund's
      Articles  Supplementary.  Such reports are  required  quarterly by Moody's
      Investor Service,  Inc. in connection with maintaining  public ratings for
      each Fund's MMP(R).

**    "Tax Fees" are those fees billed to each Fund by KPMG in  connection  with
      tax  consulting  services,  including  primarily the review of each Fund's
      income tax returns.

      Each Fund's Audit  Committee  Charter  requires  that the Audit  Committee
pre-approve  all audit and non-audit  services to be provided by the auditors to
the Fund,  and all  non-audit  services to be  provided  by the  auditors to the
Fund's  investment   adviser   and   any   entity   controlling,  controlled  by
or under common control with the Funds' investment adviser  ("affiliates")  that
provide  on-going  services to each Fund, if the engagement  relates directly to
the  operations and financial  reporting of each Fund, or to establish  detailed
pre-approval  policies  and  procedures  for such  services in  accordance  with
applicable  laws.  All of the audit,  audit-related  and tax services  described
above for which KPMG billed  each Fund fees for the fiscal years ended  November
30, 2003 and November 30, 2004 were pre-approved by the Audit Committee.

      For each Fund's fiscal year ended  November 30, 2004, KPMG did not provide
any  non-audit  services  (or bill any fees  for such  services)  to the  Funds'
investment adviser or any affiliates thereof that provide services to the Funds.

INVESTMENT ADVISER AND ADMINISTRATOR

      Flaherty & Crumrine serves as the investment  adviser to each Fund and its
business address is 301 E. Colorado Boulevard,  Suite 720, Pasadena,  California
91101.  PFPC Inc. acts as the  administrator to each Fund and is located at 4400
Computer Drive, Westborough, Massachusetts 01581.

COMPLIANCE WITH THE SECURITIES EXCHANGE ACT OF 1934

      Section  16(a) of the 1934 Act and  Section  30(h) of the 1940 Act require
each Fund's directors and officers,  certain persons  affiliated with Flaherty &
Crumrine and persons who beneficially own more than 10% of a registered class of
each Fund's  securities,  to file reports of ownership  and changes of ownership
with the SEC,  the NYSE  and each Fund. Directors, officers and greater-than-10%
shareholders  are required by SEC regulations to furnish  each Fund with  copies
of such forms they file.  Based  solely upon its review of  the  copies  of such
forms  received by it and  written representations from certain of such persons,
each Fund  believes  that during 2004,  all such filing requirements  applicable
to such persons were met.

BROKER NON-VOTES AND ABSTENTIONS

      A  proxy  which  is  properly   executed  and  returned   accompanied   by
instructions to withhold authority to vote represents a broker "non-vote" (i.e.,
shares held by brokers or nominees  as to which (i)  instructions  have not been
received from the beneficial owners or the persons entitled to vote and (ii) the
broker or  nominee  does not have  discretionary  voting  power on a  particular
matter).  Proxies that reflect  abstentions  or broker  non-votes (collectively,
"abstentions") will be


                                       14


counted  as shares  that are  present  and  entitled  to vote on the  matter for
purposes  of  determining the presence of a quorum.  With respect to Proposal 1,
abstentions  do not  constitute  a vote "for" or  "against" a matter and will be
disregarded in determining the  "votes  cast"  on  a  matter.  With  respect  to
Proposal 2 and Proposal 3, abstentions  will  count  as a vote against a matter.

                    OTHER MATTERS TO COME BEFORE THE MEETING

      Each Fund does not intend to present any other  business  at the  relevant
Meeting,  nor is either  Fund aware that any  shareholder  intends to do so. If,
however,  any other matters are properly brought before the Meeting, the persons
named in the  accompanying  form of proxy will vote thereon in  accordance  with
their judgment.

IT IS  IMPORTANT  THAT  PROXIES BE RETURNED  PROMPTLY.  SHAREHOLDERS  WHO DO NOT
EXPECT TO ATTEND THE MEETINGS ARE THEREFORE  URGED TO COMPLETE,  SIGN,  DATE AND
RETURN  ALL  PROXY  CARDS  AS  SOON AS  POSSIBLE  IN THE  ENCLOSED  POSTAGE-PAID
ENVELOPE.


                                       15


                             PROPOSED AMENDMENT A-1

                              ARTICLES OF AMENDMENT
                                       OF
             FLAHERTY & CRUMRINE PREFERRED INCOME FUND INCORPORATED

                  Flaherty & Crumrine  Preferred  Income  Fund  Incorporated,  a
Maryland  corporation  (hereinafter the "Corporation"),  hereby certifies to the
State Department of Assessments and Taxation that:

FIRST: Part I  of the Articles  Supplementary  Creating and Fixing the Rights of
Money Market Cumulative  Preferred Stock(TM) of the Corporation,  filed with the
Maryland State of Department of Assessments  and Taxation  ("SDAT") on April 12,
1991,  as amended by Articles of Amendment  filed with SDAT on July 25, 1994 (as
amended,  the "Original  Articles  Supplementary")  is hereby further amended as
follows: By adding the following subsection 5(h) to Part I thereof, accordingly:

                  "(h)  TERMS OF  OFFICE  OF  CERTAIN  DIRECTORS  TO  TERMINATE.
Simultaneously  with and at the time that none of the issued  shares  of  MMP(R)
are  "outstanding"  as  set  forth in  subsection  (d)(ii)  of  this  Section 5,
i.e., the redemption  price  for  the  redemption  of  such  shares  of   MMP(R)
has been  deposited  in trust with the MMP Paying Agent for that purpose and the
requisite  Notice  of   Redemption  with  respect  to  such  shares  of   MMP(R)
has been given as  provided  in Section 3 of this Part I, the terms of office of
any  directors  elected  solely  by  the  holders  of  such  shares  of   MMP(R)
shall  automatically  terminate and the remaining directors shall constitute the
directors of the Corporation; provided, however, that the terms of office of any
such  directors  who  meet  the  definition  of  "Continuing  Directors"  in the
Corporation's Articles of Amendment and Restatement, as amended, shall  continue
and shall not terminate."

                  SECOND:  The  Articles  Supplementary  Creating and Fixing the
Rights of Money Market Cumulative  Preferred Stock ("MMP(R)") of the Corporation
filed with the SDAT on May 31, 2002 (the  "Additional  Articles  Supplementary")
are amended to  incorporate  by reference the  provisions of Article FIRST above
and any future amendment to the Original Articles  Supplementary by amending the
second  sentence of Article FIRST of the Additional  Articles  Supplementary  to
read, "The Corporation's  Articles  Supplementary Creating and Fixing the Rights
of Money  Market  Cumulative  Preferred  Stock  ("MMP(R)")  filed with the State
Department  of  Assessments  and Taxation on April 12,  1991,  as amended by the
Articles of  Amendment of the  Corporation  filed with the State  Department  of
Assessments  and Taxation on July 25, 1994, and as further  amended from time to
time, are referred to together herein as the "Initial Articles Supplementary".

                  THIRD:  The amendments to the Charter of the  Corporation  set
forth in Articles  FIRST and SECOND above were advised by the Board of Directors
and approved by the stockholders.






                  IN  WITNESS   WHEREOF,   the   undersigned   officers  of  the
Corporation have executed these Articles of Amendment and do hereby  acknowledge
that these  Articles of Amendment  are the act and deed of the  Corporation  and
that, to the best of their  knowledge,  information and belief,  the matters and
facts contained  herein with respect to  authorization  and approval are true in
all material respects, under the penalties of perjury.

DATE:  _____________ ___, 2005                      ____________________________
                                                        Donald F. Crumrine
                                                        Chief Executive Officer
WITNESS:

______________________________
R. Eric Chadwick
Secretary

                                      A-1


                             PROPOSED AMENDMENT A-2

                              ARTICLES OF AMENDMENT
                                       OF
       FLAHERTY & CRUMRINE PREFERRED INCOME OPPORTUNITY FUND INCORPORATED

                  Flaherty  &  Crumrine   Preferred   Income   Opportunity  Fund
Incorporated,  a Maryland  corporation  (hereinafter the "Corporation"),  hereby
certifies to the State Department of Assessments and Taxation that::

FIRST: Part I  of the Articles  Supplementary  Creating and Fixing the Rights of
Money Market Cumulative  Preferred(TM) Stock of the Corporation,  filed with the
Maryland  State of Department of Assessments  and Taxation  ("SDAT") on April 6,
1992 (the "Articles  Supplementary") is hereby amended as follows: By adding the
following subsection 5(h) to Part I thereof, accordingly:

                  "(h)  TERMS OF  OFFICE  OF  CERTAIN  DIRECTORS  TO  TERMINATE.
Simultaneously  with and at the time that none of the issued  shares  of  MMP(R)
are  "outstanding"  as  set forth  in  subsection  (d)(ii) of  this  Section  5,
i.e., the  redemption  price  for  the  redemption  of  such  shares  of  MMP(R)
has been  deposited  in trust with the MMP Paying Agent for that purpose and the
requisite   Notice  of  Redemption  with  respect  to  such  shares   of  MMP(R)
has been given as  provided  in Section 3 of this Part I, the terms of office of
any   directors  elected  solely  by  the  holders  of  such  shares  of  MMP(R)
shall  automatically  terminate and the remaining directors shall constitute the
directors of the Corporation; provided, however, that the terms of office of any
such  directors  who  meet  the  definition  of  "Continuing  Directors"  in the
Corporation's Articles of Amendment and Restatement,  as amended, shall continue
and shall not terminate."

                  SECOND:  The amendments to the Charter of the  Corporation set
forth in the Article  FIRST  above were  advised by the Board of  Directors  and
approved by the stockholders.



                  IN  WITNESS   WHEREOF,   the   undersigned   officers  of  the
Corporation have executed these Articles of Amendment and do hereby  acknowledge
that these  Articles of Amendment  are the act and deed of the  Corporation  and
that, to the best of their  knowledge,  information and belief,  the matters and
facts contained  herein with respect to  authorization  and approval are true in
all material respects, under the penalties of perjury.

DATE:  _____________ ___, 2005                      ____________________________
                                                      Donald F. Crumrine
                                                      Chief Executive Officer
WITNESS:

_________________________
R. Eric Chadwick
Secretary


                                       A-2


                             PROPOSED AMENDMENT B-1

                              ARTICLES OF AMENDMENT

                                       OF

             FLAHERTY & CRUMRINE PREFERRED INCOME FUND INCORPORATED

                  Flaherty & Crumrine  Preferred  Income  Fund  Incorporated,  a
Maryland  corporation  (hereinafter the "Corporation"),  hereby certifies to the
State Department of Assessments and Taxation that:

FIRST: Part II of the Articles  Supplementary  Creating and Fixing the Rights of
Money Market Cumulative  Preferred Stock(TM) of the Corporation,  filed with the
Maryland State of Department of Assessments  and Taxation  ("SDAT") on April 12,
1991,  as amended by Articles of Amendment  filed with SDAT on July 25, 1994 (as
amended,  the "Original  Articles  Supplementary")  is hereby further amended as
follows:  By  inserting  the  following  new Section 7 in Part II  thereof,  and
renumbering the existing Section 7 of Part II as Section 8, accordingly:

"7.      Force Majeure.

                (a)        Notwithstanding anything else set forth herein,

                           (i)      if an Auction Date is  not  a  Business  Day
                                    because  the  New  York  Stock  Exchange  is
                                    closed  for  business  for  more  than three
                                    consecutive   calendar    days    (excluding
                                    Saturdays   and   Sundays   and   previously
                                    announced New York Stock Exchange  holidays)
                                    due to an  act  of  God,  natural  disaster,
                                    extreme  weather,  act  of  war,  civil   or
                                    military  disturbance,  act  of   terrorism,
                                    sabotage, riots or a loss or  malfunction of
                                    utilities or communications  services, or if
                                    the Auction Agent is  not able to conduct an
                                    Auction   in  accordance  with  the  Auction
                                    Procedures for  any  such  reason, then  the
                                    Applicable Rate for the next Dividend Period
                                    shall be the Applicable Rate  determined  on
                                    the previous Auction Date; and
                           (ii)     if  an  Auction  Date  is not a Business Day
                                    because the  New  York  Stock  Exchange   is
                                    closed for business for three or  fewer than
                                    three consecutive calendar  days  (excluding
                                    Saturdays  and   Sundays    and   previously
                                    announced New York Stock  Exchange holidays)
                                    due to an  act  of  God,  natural  disaster,
                                    extreme  weather,  act  of  war,  civil   or
                                    military   disturbance,  act  of  terrorism,
                                    sabotage, riots  or a loss or malfunction of
                                    utilities or communications services, or  if
                                    the Auction Agent is not able to conduct  an
                                    Auction  in  accordance  with  the   Auction
                                    Procedures for any  such  reason,  then  the
                                    Applicable Rate for the next Dividend Period
                                    shall be the Applicable Rate  determined  by
                                    auction on the first Business Day  following
                                    such Auction Date.
                (b)        Notwithstanding  anything else set forth herein, if a
                           Dividend  Payment  Date is not a Business Day because
                           the New York Stock  Exchange  is closed for  business
                           for more than three consecutive  calendar days due to
                           an act of God, natural disaster, extreme weather, act
                           of  war,  civil  or  military  disturbance,   act  of
                           terrorism,  sabotage,  riots or a loss or malfunction
                           of utilities or  communications  services,  or if the
                           dividend payable on such date can not be paid for any
                           such reason, then:



                           (i)      The  Dividend  Payment Date for the affected
                                    Dividend Period  shall be the next  Business
                                    Day on which the Fund and the Auction  Agent
                                    are  able to cause  the dividend  to be paid
                                    using  commercially reasonable best efforts;

                           (ii)     The affected  Dividend  Period  shall end on
                                    the day it would have ended had  such  event
                                    not  occurred and the Dividend  Payment Date
                                    had  remained  the  scheduled date; and

                           (iii)    The next  Dividend Period will begin and end
                                    on the dates on which it  would  have  begun
                                    and ended had such event not  occurred   and
                                    the   Dividend  Payment  Date  remained  the
                                    scheduled date.

                (c)        In the event that either provision (a) or (b) of this
                           Section 7 is  applicable  for the MMP,  each Existing
                           Holder of the MMP shall hold all of the shares of MMP
                           held by such  Existing  Holder until the next Auction
                           Date for the MMP (unless the Existing  Holder of such
                           shares of MMP sells his or her shares of MMP  outside
                           of an Auction in a secondary trading market)."

                  SECOND:  The   Original   Articles   Supplementary   of    the
Corporation are further amended as follows:
                  By revising the second sentence of Part I, Section 2(c)(i)  by
inserting at the end of the words "PROVIDED, HOWEVER, that if an Auction for any
Subsequent  Rate Period is not held for  any  reason"  the  phrase  "(except  as
provided  in  Section 7 of Part II of these  Articles Supplementary)".

                  THIRD:  The  Articles  Supplementary  Creating  and Fixing the
Rights of Money Market Cumulative  Preferred Stock ("MMP(R)") of the Corporation
filed with the SDAT on May 31, 2002 (the  "Additional  Articles  Supplementary")
are amended to  incorporate  by reference the  provisions of Articles  FIRST and
SECOND above and any future amendment to the Original Articles  Supplementary by
amending  the  second  sentence  of  Article  FIRST of the  Additional  Articles
Supplementary to read, "The Corporation's  Articles  Supplementary  Creating and
Fixing the Rights of Money Market  Cumulative  Preferred Stock  ("MMP(R)") filed
with the State  Department  of  Assessments  and Taxation on April 12, 1991,  as
amended by the  Articles of Amendment  of the  Corporation  filed with the State
Department of Assessments  and Taxation on July 25, 1994, and as further amended
from time to time,  are  referred to together  herein as the  "Initial  Articles
Supplementary".

                  FOURTH:  The amendments to the Charter of the  Corporation set
forth in Articles  FIRST,  SECOND and THIRD  above were  advised by the Board of
Directors and approved by the stockholders.





                  IN  WITNESS   WHEREOF,   the   undersigned   officers  of  the
Corporation have executed these Articles of Amendment and do hereby  acknowledge
that these  Articles of Amendment  are the act and deed of the  Corporation  and
that, to the best of their  knowledge,  information and belief,  the matters and
facts contained  herein with respect to  authorization  and approval are true in
all material respects, under the penalties of perjury.

DATE:  _____________ ___, 2005                      ____________________________
                                                        Donald F. Crumrine
                                                        Chief Executive Officer

WITNESS:

_____________________________
R. Eric Chadwick
Secretary

                                      B-2


                             PROPOSED AMENDMENT B-2

                              ARTICLES OF AMENDMENT
                                       OF
       FLAHERTY & CRUMRINE PREFERRED INCOME OPPORTUNITY FUND INCORPORATED

                  Flaherty  &  Crumrine   Preferred   Income   Opportunity  Fund
Incorporated,  a Maryland  corporation  (hereinafter the "Corporation"),  hereby
certifies to the State Department of Assessments and Taxation that::

FIRST: Part II of the Articles  Supplementary  Creating and Fixing the Rights of
Money Market Cumulative  Preferred(TM) Stock of the Corporation,  filed with the
Maryland  State of Department of Assessments  and Taxation  ("SDAT") on April 6,
1992 (the "Articles  Supplementary") is hereby amended as follows:  By inserting
the following  new Section 7 in Part II thereof,  and  renumbering  the existing
Section 7 of Part II as Section 8, accordingly:

"7.       Force Majeure.
                (a)        Notwithstanding anything else set forth herein,
                           (i) if an Auction Date is not a Business Day because
                               the New York Stock Exchange is closed for
                               business for more than three consecutive calendar
                               days (excluding Saturdays and Sundays and
                               previously announced New York Stock Exchange
                               holidays) due to an act of God, natural disaster,
                               extreme weather, act of war, civil or military
                               disturbance, act of terrorism, sabotage, riots or
                               a loss or malfunction of utilities or
                               communications services, or if the Auction Agent
                               is not able to conduct an Auction in accordance
                               with the Auction Procedures for any such reason,
                               then the Applicable Rate for the next Dividend
                               Period shall be the Applicable Rate determined on
                               the previous Auction Date; and

                           (ii)if an Auction Date is not a Business Day because
                               the New York Stock Exchange is closed for
                               business for three or fewer than three
                               consecutive calendar days (excluding Saturdays
                               and Sundays and previously announced New York
                               Stock Exchange holidays) due to an act of God,
                               natural disaster, extreme weather, act of war,
                               civil or military disturbance, act of terrorism,
                               sabotage, riots or a loss or malfunction of
                               utilities or communications services, or if the
                               Auction Agent is not able to conduct an Auction
                               in accordance with the Auction Procedures for any
                               such reason, then the Applicable Rate for the
                               next Dividend Period shall be the Applicable Rate
                               determined by auction on the first Business Day
                               following such Auction Date.

                (b)        Notwithstanding  anything else set forth herein, if a
                           Dividend  Payment  Date is not a Business Day because
                           the New York Stock  Exchange  is closed for  business
                           for more than three consecutive  calendar days due to
                           an act of God, natural disaster, extreme weather, act
                           of  war,  civil  or  military  disturbance,   act  of
                           terrorism,  sabotage,  riots or a loss or malfunction
                           of utilities or  communications  services,  or if the
                           dividend payable on such date can not be paid for any
                           such reason, then:



                        (i)The Dividend  Payment Date for the affected  Dividend
                           Period  shall be the next  Business  Day on which the
                           Fund and the  Auction  Agent  are  able to cause  the
                           dividend  to be paid  using  commercially  reasonable
                           best efforts;

                       (ii)The affected  Dividend Period shall end on the day it
                           would have ended had such event not  occurred and the
                           Dividend  Payment  Date had  remained  the  scheduled
                           date; and

                      (iii)The next  Dividend  Period  will begin and end on the
                           dates on which it would have begun and ended had such
                           event not  occurred  and the  Dividend  Payment  Date
                           remained the scheduled date.

                (c)        In the event that either provision (a) or (b) of this
                           Section 7 is  applicable  for the MMP,  each Existing
                           Holder of the MMP shall hold all of the shares of MMP
                           held by such  Existing  Holder until the next Auction
                           Date for the MMP (unless the Existing  Holder of such
                           shares of MMP sells his or her shares of MMP  outside
                           of an Auction in a secondary trading market)."

                  SECOND:  The Articles Supplementary of the Corporation are
further amended as follows:
                  By revising the second sentence of Part I, Section 2(c)(i) by
inserting at the end of the words "PROVIDED,  HOWEVER,  that if an Auction for
any  Subsequent  Rate Period is not held for any reason" the phrase  "(except as
provided in Section 7 of Part II of these Articles Supplementary)".

                  THIRD:  The amendments to the Charter of the  Corporation  set
forth in the  Articles  FIRST and  SECOND  above  were  advised  by the Board of
Directors and approved by the stockholders.






                  IN  WITNESS   WHEREOF,   the   undersigned   officers  of  the
Corporation have executed these Articles of Amendment and do hereby  acknowledge
that these  Articles of Amendment  are the act and deed of the  Corporation  and
that, to the best of their  knowledge,  information and belief,  the matters and
facts contained  herein with respect to  authorization  and approval are true in
all material respects, under the penalties of perjury.

DATE:  _____________ ___, 2005                      ____________________________
                                                       Donald F. Crumrine
                                                       Chief Executive Officer
WITNESS:

______________________________
R. Eric Chadwick
Secretary


                                      B-3



                               DETACH HERE                                ZFCI22

       FLAHERTY & CRUMRINE PREFERRED INCOME OPPORTUNITY FUND INCORPORATED

                   PROXY SOLICITED BY THE BOARD OF DIRECTORS

        THE UNDERSIGNED HOLDER OF SHARES OF COMMON STOCK OF FLAHERTY &  CRUMRINE
PREFERRED INCOME  OPPORTUNITY  FUND  INCORPORATED,  A MARYLAND  CORPORATION (THE
"FUND"), HEREBY APPOINTS DONALD F. CRUMRINE, ROBERT M. ETTINGER AND TERESA M. R.
HAMLIN,  ATTORNEYS  AND  PROXIES  FOR  THE  UNDERSIGNED,  WITH  FULL  POWERS  OF
SUBSTITUTION AND REVOCATION,  TO REPRESENT THE UNDERSIGNED AND TO VOTE ON BEHALF
OF THE UNDERSIGNED ALL SHARES OF COMMON STOCK, WHICH THE UNDERSIGNED IS ENTITLED
TO  VOTE  AT THE  ANNUAL  MEETING  OF  SHAREHOLDERS  OF THE  FUND  TO BE HELD AT
THE BOARD ROOM OF THE RADISSON BRIDGE RESORT, 999 EAST CAMINO REAL, BOCA  RATON,
FL 33432 AT 8:30 A.M., ON APRIL 21, 2005,  AND  ANY  ADJOURNMENTS  THEREOF.  THE
UNDERSIGNED   HEREBY ACKNOWLEDGES  RECEIPT OF THE NOTICE OF ANNUAL  MEETING  AND
PROXY  STATEMENT AND HEREBY  INSTRUCTS  SAID  ATTORNEYS AND PROXIES TO VOTE SAID
SHARES AS  INDICATED HEREON.  IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO
VOTE UPON SUCH OTHER  BUSINESS  AS MAY  PROPERLY  COME  BEFORE THE  MEETING.   A
MAJORITY OF THE PROXIES PRESENT  AND  ACTING  AT  THE  MEETING  IN  PERSON OR BY
SUBSTITUTE  (OR,  IF  ONLY  ONE SHALL  BE SO PRESENT,  THEN THAT ONE) SHALL HAVE
AND MAY EXERCISE  ALL OF THE  POWER  AND  AUTHORITY  OF SAID  PROXIES HEREUNDER.
THE UNDERSIGNED HEREBY REVOKES ANY PROXY PREVIOUSLY GIVEN.

-------------                                                      -------------
 SEE REVERSE         CONTINUED AND TO BE SIGNED ON REVERSE SIDE     SEE REVERSE
    SIDE                                                               SIDE
-------------                                                      -------------



FLAHERTY & CRUMRINE
PREFERRED INCOME OPPORTUNITY FUND
C/O PFPC INC.
P.O. BOX 8586
EDISON, NJ 08818-8586

                            DETACH HERE                                   ZFCI21

---  PLEASE MARK                                                            3202
 X   VOTES AS IN
---  THIS EXAMPLE.

THIS PROXY,  IF PROPERLY  EXECUTED,  WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED  SHAREHOLDER.  IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
THE  ELECTION OF THE NOMINEE AS  DIRECTOR,  FOR  PROPOSAL 2, AND FOR PROPOSAL 3.

PLEASE REFER TO THE PROXY STATEMENT FOR A DISCUSSION OF THE PROPOSALS.

1. ELECTION OF DIRECTOR
   NOMINEE: (01) MORGAN GUST
        FOR       WITHHELD

                                                           FOR  AGAINST  ABSTAIN
2. TO APPROVE AN AMENDMENT  TO THE FUND'S
   ARTICLES  SUPPLEMENTARY  CREATING AND
   FIXING THE RIGHTS OF MONEY MARKET
   CUMULATIVE  PREFERRED(TM) STOCK --
   TERM OF OFFICE OF CERTAIN DIRECTORS.

3. TO APPROVE AN AMENDMENT  TO THE FUND'S
   ARTICLES  SUPPLEMENTARY  CREATING AND
   FIXING THE RIGHTS OF MONEY MARKET
   CUMULATIVE  PREFERRED(TM) STOCK --
   FORCE MAJEURE PROVISION.

THE BOARD OF DIRECTORS  RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE ELECTION
OF THE NOMINEE AS  DIRECTOR,  "FOR" THE  APPROVAL OF AN  AMENDMENT TO THE FUND'S
ARTICLES SUPPLEMENTARY CREATING AND FIXING THE RIGHTS OF MONEY MARKET CUMULATIVE
PREFERRED(TM) STOCK -- TERM OF  OFFICE  OF  CERTAIN  DIRECTORS,  AND  "FOR"  THE
APPROVAL  OF  AN  AMENDMENT  TO  THE  FUND'S ARTICLES SUPPLEMENTARY CREATING AND
FIXING THE RIGHTS  OF  MONEY  MARKET  CUMULATIVE  PREFERRED(TM)  STOCK --  FORCE
MAJEURE  PROVISION.

MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT

PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE

NOTE:  PLEASE SIGN EXACTLY AS YOUR NAME APPEARS ON THIS PROXY.  IF JOINT OWNERS,
EITHER MAY SIGN THIS PROXY. WHEN SIGNING AS ATTORNEY,  EXECUTOR,  ADMINISTRATOR,
TRUSTEE, GUARDIAN OR CORPORATE OFFICER, PLEASE GIVE YOUR FULL TITLE.

SIGNATURE:_____________ DATE:___________ SIGNATURE:______________ DATE:_________



                               DETACH HERE                                ZFC022

       FLAHERTY & CRUMRINE PREFERRED INCOME OPPORTUNITY FUND INCORPORATED

                   PROXY SOLICITED BY THE BOARD OF DIRECTORS

        THE UNDERSIGNED HOLDER OF SHARES OF MONEY  MARKET  CUMULATIVE  PREFERRED
(TM) STOCK ("MMP(R)") OF FLAHERTY & CRUMRINE PREFERRED  INCOME  OPPORTUNITY FUND
INCORPORATED, A MARYLAND CORPORATION (THE "FUND"),  HEREBY  APPOINTS  DONALD  F.
CRUMRINE,  ROBERT M. ETTINGER AND TERESA M. R. HAMLIN, ATTORNEYS AND PROXIES FOR
THE UNDERSIGNED, WITH FULL POWERS OF SUBSTITUTION  AND REVOCATION,  TO REPRESENT
THE UNDERSIGNED AND TO VOTE ON  BEHALF  OF THE UNDERSIGNED ALL SHARES OF MMP(R),
WHICH  THE UNDERSIGNED IS ENTITLED TO VOTE AT THE ANNUAL MEETING OF SHAREHOLDERS
OF THE FUND TO BE HELD AT THE BOARD ROOM OF THE RADISSON BRIDGE RESORT, 999 EAST
CAMINO REAL, BOCA RATON, FL 33432 AT  8:30  A.M.,   ON  APRIL  21, 2005, AND ANY
ADJOURNMENTS  THEREOF.  THE UNDERSIGNED  HEREBY  ACKNOWLEDGES  RECEIPT  OF   THE
NOTICE OF  ANNUAL  MEETING   AND  PROXY  STATEMENT  AND  HEREBY  INSTRUCTS  SAID
ATTORNEYS AND  PROXIES  TO  VOTE  SAID  SHARES  AS  INDICATED  HEREON. IN  THEIR
DISCRETION,  THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH  OTHER BUSINESS AS MAY
PROPERLY  COME  BEFORE THE  MEETING.  A MAJORITY  OF  THE  PROXIES  PRESENT  AND
ACTING AT THE  MEETING  IN PERSON OR BY SUBSTITUTE  (OR, IF ONLY ONE SHALL BE SO
PRESENT,  THEN THAT ONE) SHALL HAVE AND MAY  EXERCISE   ALL  OF  THE  POWER  AND
AUTHORITY  OF  SAID  PROXIES  HEREUNDER.  THE  UNDERSIGNED  HEREBY  REVOKES  ANY
PROXY PREVIOUSLY GIVEN.

-------------                                                      -------------
 SEE REVERSE         CONTINUED AND TO BE SIGNED ON REVERSE SIDE     SEE REVERSE
    SIDE                                                               SIDE
-------------                                                      -------------



FLAHERTY & CRUMRINE PREFERRED
INCOME OPPORTUNITY FUND INCORPORATED
C/O PFPC INC.
P.O. BOX 8586
EDISON, NJ 08818-8586

                               DETACH HERE                                ZFC021

---  PLEASE MARK                                                            3202
 X   VOTES AS IN
---  THIS EXAMPLE.

THIS PROXY,  IF PROPERLY  EXECUTED,  WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED  SHAREHOLDER.  IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
THE  ELECTION OF THE NOMINEE AS  DIRECTOR,  FOR  PROPOSAL 2, AND FOR PROPOSAL 3.

PLEASE REFER TO THE PROXY STATEMENT FOR A DISCUSSION OF THE PROPOSALS.

1. ELECTION OF DIRECTOR
   NOMINEE: (01) KAREN H. HOGAN
                FOR        WITHHELD

                                                        FOR   AGAINST   ABSTAIN
2. TO APPROVE AN AMENDMENT  TO THE FUND'S
   ARTICLES  SUPPLEMENTARY  CREATING AND
   FIXING THE RIGHTS OF MONEY MARKET
   CUMULATIVE  PREFERRED(TM) STOCK --
   TERM OF OFFICE OF CERTAIN DIRECTORS.

3. TO APPROVE AN AMENDMENT  TO THE FUND'S
   ARTICLES  SUPPLEMENTARY  CREATING AND
   FIXING THE RIGHTS OF MONEY MARKET
   CUMULATIVE  PREFERRED(TM) STOCK --
   FORCE MAJEURE PROVISION.

THE BOARD OF DIRECTORS  RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE ELECTION
OF THE NOMINEE AS  DIRECTOR,  "FOR" THE  APPROVAL OF AN  AMENDMENT TO THE FUND'S
ARTICLES SUPPLEMENTARY CREATING AND FIXING THE RIGHTS OF MONEY MARKET CUMULATIVE
PREFERRED(TM)  STOCK -- TERM OF OFFICE  OF  CERTAIN  DIRECTORS,  AND  "FOR"  THE
APPROVAL OF  AN  AMENDMENT  TO  THE  FUND'S  ARTICLES SUPPLEMENTARY CREATING AND
FIXING THE  RIGHTS  OF  MONEY  MARKET  CUMULATIVE  PREFERRED(TM)  STOCK -- FORCE
MAJEURE  PROVISION.

MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT

PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE

NOTE:  PLEASE SIGN EXACTLY AS YOUR NAME APPEARS ON THIS PROXY.  IF JOINT OWNERS,
EITHER MAY SIGN THIS PROXY. WHEN SIGNING AS ATTORNEY,  EXECUTOR,  ADMINISTRATOR,
TRUSTEE, GUARDIAN OR CORPORATE OFFICER, PLEASE GIVE YOUR FULL TITLE.

SIGNATURE:____________ DATE:____________ SIGNATURE:_____________ DATE:__________