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

             Flaherty & Crumrine Preferred Income 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)
   FLAHERTY & CRUMRINE/CLAYMORE PREFERRED SECURITIES INCOME FUND INCORPORATED
                                   (NYSE: FFC)
     FLAHERTY & CRUMRINE/CLAYMORE TOTAL RETURN FUND INCORPORATED (NYSE: FLC)
                      301 E. Colorado Boulevard, Suite 720
                           Pasadena, California 91101

                    NOTICE OF ANNUAL MEETINGS OF SHAREHOLDERS
                          To Be Held on April 18, 2008

To the Shareholders:

      Notice is  hereby  given  that the  Annual  Meetings  of  Shareholders  of
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  (each a "Fund" and  collectively,  the "Funds"),
each a Maryland  corporation,  will be held at the  offices  of  Willkie  Farr &
Gallagher LLP, 787 Seventh  Avenue,  New York, New York 10019,  Conference  Room
38D-E at 8:30 a.m. ET, on April 18, 2008, for the following purposes:

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

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

      YOUR  VOTE IS IMPORTANT!

      The  proposal  set forth in this  proxy  statement  is a routine  item.  A
routine item is one which occurs  annually and makes no  fundamental or material
changes to a Fund's investment objectives,  policies or restrictions,  or to the
investment management contracts.

      The Board of  Directors  of each Fund has fixed the close of  business  on
January 25, 2008 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,

February 19, 2008                           CHAD C. CONWELL
                                            SECRETARY

--------------------------------------------------------------------------------
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  minimize  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., Executor
               estate of Jane Smith



       FLAHERTY & CRUMRINE PREFERRED INCOME FUND INCORPORATED (NYSE: PFD)
 FLAHERTY & CRUMRINE PREFERRED INCOME OPPORTUNITY FUND INCORPORATED (NYSE: PFO)
   FLAHERTY & CRUMRINE/CLAYMORE PREFERRED SECURITIES INCOME FUND INCORPORATED
                                   (NYSE:FFC)
     FLAHERTY & CRUMRINE/CLAYMORE TOTAL RETURN FUND INCORPORATED (NYSE: FLC)

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

                         ANNUAL MEETINGS OF SHAREHOLDERS
                                 April 18, 2008

                              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"),   Flaherty  &  Crumrine  Preferred  Income  Opportunity  Fund
Incorporated   ("PREFERRED  INCOME  OPPORTUNITY  FUND"  OR  "PFO"),  Flaherty  &
Crumrine/Claymore  Preferred  Securities  Income Fund  Incorporated  ("PREFERRED
SECURITIES INCOME FUND" OR "FFC") and Flaherty & Crumrine/Claymore  Total Return
Fund   Incorporated   ("TOTAL   RETURN  FUND"  OR  "FLC")  (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 18, 2008, at 8:30 a.m. ET, at the
offices of Willkie Farr & Gallagher LLP, 787 Seventh Avenue,  New York, New York
10019,  Conference Room 38D-E 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 19, 2008,  primarily
by mail,  but proxy  solicitations  may also be made by  telephone,  telefax  or
personal  interviews  conducted  by officers  of each Fund,  Flaherty & Crumrine
Incorporated ("Flaherty & Crumrine" or the "Adviser"), the investment adviser of
each Fund,  Claymore  Securities,  Inc. (the "Servicing  Agent"),  the servicing
agent  of  FFC  and  FLC,  and  PFPC  Inc.  ("PFPC"),  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.  This proxy  statement  and form of proxy are first being
sent to shareholders on or about February 19, 2008.

      THE ANNUAL REPORT OF EACH FUND, INCLUDING AUDITED FINANCIAL STATEMENTS FOR
THE FISCAL YEAR ENDED  NOVEMBER 30, 2007,  IS AVAILABLE  UPON  REQUEST,  WITHOUT
CHARGE,  BY WRITING TO PFPC INC.,  P.O.  BOX  43027,  PROVIDENCE,  RHODE  ISLAND
02940-3027,  OR  CALLING  1-800-331-1710.  EACH  FUND'S  ANNUAL  REPORT  IS ALSO
AVAILABLE ON THE FUNDS' WEB-SITES - WWW.PREFERREDINCOME.COM  FOR PFD AND PFO AND
WWW.FCCLAYMORE.COM  FOR FFC AND FLC - THE SECURITIES  AND EXCHANGE  COMMISSION'S
("SEC")  WEBSITE  (WWW.SEC.GOV)  OR, FOR FFC AND FLC ONLY,  BY CALLING  CLAYMORE
SECURITIES, INC. AT 1-866-233-4001.

      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. 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.

      Under the Bylaws of each Fund,  the  presence in person or by proxy of the
holders of a majority  of the  outstanding  shares of the Fund  entitled to vote
shall be necessary and sufficient to constitute a quorum for the  transaction of
business (a "Quorum") at that Fund's 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.  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


                                        1



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 a  proposal  in the  Joint  Proxy  Statement  prior to any such
adjournment  if  sufficient  votes  have  been  received  for  approval  of that
proposal.

      Each Fund has two classes of capital stock  including  common  stock,  par
value $0.01 per share (the "Common  Stock") and preferred  stock (the "Preferred
Stock" and together with the Common Stock,  the "Shares").  PFD and PPO each has
one  series of  Preferred  Stock  outstanding  which is  classified  as  Auction
Preferred  Stock  (formerly  known as,  "Money Market  Cumulative  Preferred(TM)
Stock"  (MMP(R))).  FFC and FLC each have  multiple  series of  Preferred  Stock
outstanding  which are classified as Auction Market Preferred Stock.  Each Share
is entitled to one vote at the Meeting with respect to matters to be voted on by
the class to which  such  Share  belongs,  with pro rata  voting  rights for any
fractional Shares. On the record date, January 25, 2008, the following number of
Shares of each Fund were issued and outstanding:



                                                                  COMMON STOCK                       PREFERRED STOCK
      NAME OF FUND                                                 OUTSTANDING                         OUTSTANDING
      ------------                                                ------------                       ---------------
                                                                                               
      Preferred Income Fund (PFD)                                  10,550,676                                            800

      Preferred Income Opportunity Fund (PFO)                      11,764,165                                            700

      Preferred Securities Income Fund (FFC)                       42,601,719                         Series M7    -   3,200
                                                                                                      Series T7    -   3,200
                                                                                                      Series W7    -   3,200
                                                                                                      Series Th7   -   3,200
                                                                                                      Series F7    -   3,200
                                                                                                      Series T28   -   2,840
                                                                                                      Series W28   -   2,840

      Total Return Fund (FLC)                                       9,776,333                         Series T7    -   2,570
                                                                                                      Series W28   -   2,570


      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, as amended (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
25, 2008*:



      NAME AND ADDRESS OF                                         AMOUNT AND NATURE
      BENEFICIAL/RECORD OWNER                    TITLE OF CLASS      OF OWNERSHIP                    PERCENT OF CLASS
      ---------------------------               ---------------   -----------------                  ----------------
                                                                                                
      Cede & Co.**                              Common Stock      PFD - 10,060,836                       95.36%
      Depository Trust Company                                    (record)
      55 Water Street, 25th Floor                                 PFO - 11,300,994                       96.06%
      New York, NY 10041                                          (record)
                                                                  FFC - 42,523,093                       99.82%
                                                                  (record)
                                                                  FLC - 9,768,006                        99.91%
                                                                  (record)

                                                Preferred Stock   PFD - 800 (record)                       100%
                                                                  PFO - 700 (record)                       100%

                                                Preferred Stock   FFC
                                                                  Series M7  - 3,200 (record)              100%
                                                                  Series T7  - 3,200 (record)              100%
                                                                  Series W7  - 3,200 (record)              100%
                                                                  Series Th7 - 3,200 (record)              100%
                                                                  Series F7  - 3,200 (record)              100%
                                                                  Series T28 - 2,840 (record)              100%
                                                                  Series W28 - 2,840 (record)              100%

                                                                  FLC
                                                                  Series T7  - 2,570 (record)              100%
                                                                  Series W28 - 2,570 (record)              100%



                                        2





      NAME AND ADDRESS OF                                         AMOUNT AND NATURE
      BENEFICIAL/RECORD OWNER                   TITLE OF CLASS       OF OWNERSHIP                    PERCENT OF CLASS
      ---------------------------------------   --------------    -----------------                  ----------------
                                                                                                
      Claymore Securities Defined Portfolios,   Common Stock       FLC - 802,611                          8.21%
      Series 305, 311, 320, 324, 335, 349,                         (beneficial)
      355, 357, 358, 374, 375, 384, 390,
      394, 398, 407, 423, 426, 434, 438
      and 453+
      2455 Corporate West Drive
      Lisle, IL 60532

      Spectrum Asset Management, Inc++          Common Stock       FLC - 985,950                         10.08%
      2 High Ridge Park                                            (beneficial)
      Stamford, CT 06905

      Principal Financial Group, Inc.++
      711 High Street
      Des Moines, IA 50392-0088

      Morgan Stanley+++                         Common Stock       FLC - 725,204                           7.4%
      1585 Broadway                                                (beneficial)
      New York, NY 10036

      Van Kampen Funds Inc.+++
      Harborside Financial Center II
      Floor 2
      Jersey City, New Jersey 07311


----------
*     As of January 25, 2008, the Directors and officers, as a group, owned less
      than 1% of each class of Shares of each Fund.

**    A nominee partnership of The Depository Trust Company.

+     Information  obtained  from a Schedule  13G filed by Claymore  Securities,
      Inc. with the SEC reporting share ownership as of December 31, 2007. Based
      on that filing, each of the Claymore Securities Defined Portfolios has the
      sole power to vote or direct the vote or dispose or direct the disposition
      of the 802,611 shares of Common Stock.

++    Information   obtained  from  a  Schedule  13G  filed  by  Spectrum  Asset
      Management,  Inc. with the SEC reporting  share  ownership as of March 23,
      2007. Based on that filing,  Spectrum Asset Management,  Inc and Principal
      Financial Group,  Inc. have the shared power to vote or direct the vote or
      dispose or direct the  disposition  of the 985,950 shares of Common Stock.

+++   Information  obtained from a Schedule 13G filed by Morgan Stanley with the
      SEC  reporting  share  ownership as of December  31,  2007.  Based on that
      filing,  each of Morgan  Stanley  and Van Kampen  Funds Inc.  has the sole
      power to vote or direct the vote or dispose or direct the  disposition  of
      the 725,204 shares of Common Stock.

      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 for PFD and
PFO and will vote  separately for each of PFD, PFO, FFC and FLC 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 or more Funds and not
approved  by  shareholders  of one or more other  Funds,  the  proposal  will be
implemented  for the Fund or Funds that  approved  the  proposal and will not be
implemented  for any 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  PROPOSALS  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 STOCK SHAREHOLDERS                     PREFERRED STOCK SHAREHOLDERS
-----------------------------------------------------------------------------------------------------------------
                                                                   
1. Election of Directors   Common Stock Shareholders as a single class   Preferred Stock Shareholders as a single
                           elect one Director: David Gale                class elect one Director: Karen H. Hogan
-----------------------------------------------------------------------------------------------------------------
2. Other Business          Common Stock and Preferred Stock Shareholders, voting together as a single class
-----------------------------------------------------------------------------------------------------------------



                                        3



PREFERRED INCOME OPPORTUNITY FUND (PFO)



-----------------------------------------------------------------------------------------------------------------
PROPOSAL                   COMMON STOCK SHAREHOLDERS                     PREFERRED STOCK SHAREHOLDERS
-----------------------------------------------------------------------------------------------------------------
                                                                   
1. Election of Directors   Common Stock Shareholders as a single class   Preferred Stock Shareholders as a
                           elect one Director: Morgan Gust               single class elect one Director:
                                                                         Karen H. Hogan
-----------------------------------------------------------------------------------------------------------------
2. Other Business          Common Stock and Preferred Stock Shareholders, voting together as a single class
-----------------------------------------------------------------------------------------------------------------


PREFERRED SECURITIES FUND (FFC)



-----------------------------------------------------------------------------------------------------------------
PROPOSAL                   COMMON STOCK SHAREHOLDERS AND PREFERRED STOCK SHAREHOLDERS
-----------------------------------------------------------------------------------------------------------------
                        
1. Election of Director    Common Stock and Preferred Stock Shareholders, voting together as a single class
                           elect one Director: David Gale
-----------------------------------------------------------------------------------------------------------------
2. Other Business          Common Stock and Preferred Stock Shareholders, voting together as a single class
-----------------------------------------------------------------------------------------------------------------


TOTAL RETURN FUND (FLC)



-----------------------------------------------------------------------------------------------------------------
PROPOSAL                   COMMON STOCK SHAREHOLDERS AND PREFERRED STOCK SHAREHOLDERS
-----------------------------------------------------------------------------------------------------------------
                        
1. Election of Director    Common Stock and Preferred Stock Shareholders, voting together as a single class
                           elect one Director: David Gale
-----------------------------------------------------------------------------------------------------------------
2. Other Business          Common Stock and Preferred Stock 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 successor or successors  elected to such class serve for a
three-year term and until their successors are duly elected and qualified.

NOMINEES FOR THE BOARDS 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 and Ms.  Hogan,  each a Class I Director  of PFD,  have each been
nominated  for a  three-year  term to expire at PFD's  2011  Annual  Meeting  of
Shareholders and until their successors are duly elected and qualified. Mr. Gust
and Ms. Hogan,  each a Class III Director of PFO, have each been nominated for a
three-year term to expire at PFO's 2011 Annual Meeting of Shareholders and until
their successors are duly elected and qualified.

      Mr.  Gale,  a Class I Director of FFC and FLC,  has been  nominated  for a
three-year term to expire at each Fund's 2011 Annual Meeting of Shareholders and
until his successor is duly elected and qualified.

      Under the Articles of Incorporation and Articles Supplementary, as amended
to date, of PFD and PFO,  holders of each Fund's  Preferred  Stock,  voting as a
single class,  are entitled to elect two  Directors,  and holders of each Fund's
Common  Stock.  voting as a single  class,  are entitled to elect the  remaining
Directors.  Under the Articles of Incorporation and Articles  Supplementary,  as
amended to date, of FFC and FLC, holders of each Fund's Preferred Stock,  voting
as a single  class,  are  entitled  to elect two  Directors  and holders of each
Fund's Common Stock and Preferred Stock,  voting together as a single class, are
entitled to elect the remaining Directors. However, subject to the provisions of
the Investment Company Act of 1940, as amended (the "1940 Act"), and each Fund's
Articles of Incorporation and Articles  Supplementary,  the holders of Preferred
Stock,  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 Preferred Stock,  would give the holders of
Preferred  Stock each a majority of the Directors.  Donald F. Crumrine and Karen
H. Hogan, as Directors,  currently  represent holders of Preferred Stock for PFD
and PFO.  Ms.  Hogan,  as a Director of PFD and PFO,  has been  nominated by the
Board of PFD and PFO,  respectively,  as a Director to represent  its holders of
Preferred Stock. A Quorum of the Preferred Stock shareholders must be present at
the Meeting of each of PFD and PFO,  respectively,  in order for the proposal to
elect Ms. Hogan to be considered for that Fund.  Donald F. Crumrine and Karen H.
Hogan, as Directors,  currently represent holders of Preferred Stock for FFC and
FLC.


                                        4



      FUND (CLASS)                                  NOMINEE FOR DIRECTOR
      ------------                                  --------------------
      PFD (Common Stock)                                    Gale
      PFD (Preferred Stock)                                 Hogan

      PFO (Common Stock)                                    Gust
      PFO (Preferred Stock)                                 Hogan

      FFC (Common and Preferred Stock)                      Gale

      FLC (Common Stock and Preferred Stock)                Gale

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.



                                                                                                  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:

DAVID GALE                      Director        CLASS I DIRECTOR        President and CEO             4             Metromedia
Delta Dividend Group, Inc.                    PFD - since 1997          of Delta Dividend                          International
220 Montgomery Street,                        PFO - since 1997             Group, Inc.                              Group, Inc.
Suite 426                                     FFC - since inception       (investments)                        (telecommunications)
San Francisco, CA 94104                       FLC - since inception
Age: 58

MORGAN GUST                     Director       CLASS III DIRECTOR       Owner and operator            4             CoBiz, Inc.
301 E. Colorado Boulevard         and         PFD - since inception    of various entities                     (financial services)
Suite 720                      Nominating     PFO - since inception         engaged in
Pasadena, CA 91101             Committee        CLASS II DIRECTOR        agriculture and
Age: 60                         Chairman      FFC - since inception        real estate;
                                              FLC - since inception     President of Giant
                                                                         Industries, Inc.
                                                                       (petroleum refining
                                                                          and marketing)
                                                                         from March 2002
                                                                        through April 2007

KAREN H. HOGAN (1)              Director        CLASS I DIRECTOR             Retired;                 4                 None
301 E. Colorado Boulevard                     PFD - since 2005         Community Volunteer;
Suite 720                                      CLASS III DIRECTOR      From September 1985
Pasadena, CA 91101                            PFO - since 2005           to January 1997,
Age: 46                                         CLASS II DIRECTOR     Senior Vice President
                                              FFC - since 2005          of Preferred Stock
                                              FLC - since 2005        Origination at Lehman
                                                                      Brothers and previously,
                                                                      Vice President of New
                                                                       Product Development

ROBERT F. WULF                  Director        CLASS II DIRECTOR      Financial Consultant;          4                 None
P.O. Box 753                   and Audit      PFD - since inception   Trustee, University of
Neskowin, OR 97149             Committee      PFO - since inception    Oregon Foundation;
Age: 70                         Chairman        CLASS III DIRECTOR     Trustee, San Franc isco
                                              FFC - since inception    Theological Seminary
                                              FLC - since inception



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

DONALD F. CRUMRINE (1), (2)     Director,        CLASS II DIRECTOR     Chairman of the Board          4                 None
301 E. Colorado Boulevard     Chairman of     PFD - since inception       and Director of
Suite 720                     the Board and   PFO - since inception     Flaherty & Crumrine
Pasadena, CA 91101          Chief Executive    CLASS III DIRECTOR
Age: 60                          Officer      FFC - since inception
                                              FLC - since inception

OFFICERS:

ROBERT M. ETTINGER              President     PFD - since 2002              President and           N/A                  N/A
301 E. Colorado Boulevard                     PFO - since 2002         Director of Flaherty &
Suite 720                                     FFC - since inception           Crumrine
Pasadena, CA 91101                            FLC - since inception
Age: 49

R. ERIC CHADWICK             Chief Financial  PFD - since 2002         Director of Flaherty &       N/A                  N/A
301 E. Colorado Boulevard     Officer, Vice   PFO - since 2002            Crumrine since
Suite 720                      President and  FFC - since inception      June 2006; Vice
Pasadena, CA 91101              Treasurer     FLC - since inception       President of
Age: 32                                                                Flaherty & Crumrine

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

BRADFORD S. STONE           Vice President    PFD - since 2003        Director of Flaherty &        N/A                  N/A
392 Springfield Avenue       and Assistant    PFO - since 2003            Crumrine since
Mezzanine Suite               Treasurer       FFC - since 2003            June 2006; Vice
Summit, NJ 07901                              FLC - since inception        President of
Age: 48                                                                  Flaherty & Crumrine
                                                                           since May 2003;
                                                                       Director of U.S. Market
                                                                        Strategy at Barclays
                                                                          Capital from June
                                                                         2001 to April 2003



                                        6





                                                                                                 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:

NICHOLAS DALMASO             Vice President   FFC - since inception     Director of Claymore        N/A                  N/A
2455 Corporate West Drive    and Assistant    FLC - since inception       Group, LLC since
Lisle, IL 60532                Secretary                                    January 2002;
Age: 42                         (FFC and                                   Senior Managing
                               FLC only)                                    Director and
                                                                       Chief Administrative
                                                                       Officer of Claymore
                                                                             Securities,
                                                                        Inc. since November
                                                                          2001 and Claymore
                                                                        Advisors, LLC since
                                                                             October 2003

LAURIE C. LODOLO               Assistant      PFD - since 2004          Assistant Compliance        N/A                  N/A
301 E. Colorado Boulevard      Compliance     PFO - since 2004         Officer of Flaherty &
Suite 720                       Officer,      FFC - since 2004             Crumrine since
Pasadena, CA 91101             Assistant      FLC - since 2004        August 2004; Secretary
Age: 44                      Treasurer and                             of Flaherty & Crumrine
                               Assistant                                since February 2004;
                               Secretary                                Account Administrator
                                                                       of Flaherty & Crumrine


----------
*     The Class I Directors of PFD, FFC and FLC and the Class III Directors of
      PFO have each been nominated for a three-year term to expire at each
      Fund's 2011 Annual Meeting of Shareholders and until their successors are
      duly elected and qualified. The Class II Directors of PFD, FFC and FLC and
      the Class I Director of PFO will serve until each Fund's Annual Meeting of
      Shareholders in 2009 and until their successors are duly elected and
      qualified. The Class III Director of PFD, the Class III Directors of FFC
      and FLC and the Class II Directors of PFO will serve until each Fund's
      Annual Meeting of Shareholders in 2010 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 Preferred Stock.

(2)   "Interested person" of the Funds as defined in the 1940 Act. M r.
      Crumrine is considered an "interested person" because of his 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)(3)     FAMILY OF INVESTMENT COMPANIES* (4)
---------------------------   ----------------------------------   ---------------------------------------
                                PFD      PFO      FFC      FLC                      TOTAL
                              -------  -------  -------  -------                    -----
                                                                       
NON-INTERESTED DIRECTORS:

David Gale                       C        C        C        C                         E

Morgan Gust                      C        C        C        C                         E

Karen H. Hogan                   A        A        A        A                         A



                                        7





                                                                       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)(3)     FAMILY OF INVESTMENT COMPANIES* (4)
---------------------------   ----------------------------------   ---------------------------------------
                                PFD      PFO      FFC      FLC                      TOTAL
                              -------  -------  -------  -------                    -----
                                                                      
NON-INTERESTED DIRECTORS:

Robert F. Wulf                  C        C        C        C                         D

INTERESTED DIRECTOR:

Donald F. Crumrine              E(5)     E(5)     E(5)     E(5)                      E(5)


----------
*     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 January 25, 2008.

(1)   No Director or officer of PFD or PFO owned any shares of Preferred Stock
      on January 25, 2008.

(2)   No Director or officer of FFC or FLC owned any shares of Preferred Stock
      on January 25, 2008.

(3)   This information has been furnished by each Director as of January 25,
      2008. "Beneficial Ownership" is determined in accordance with Rule
      16a-1(a)(2) of the 1934 Act.

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

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

      Each  Director of each Fund who is not a director,  officer or employee of
Flaherty & Crumrine or any of its  affiliates  receives  from each Fund a fee of
$9,000 per annum plus $500 for each  in-person  meeting  attended,  and $150 for
each telephone  meeting  attended.  In addition,  the Audit  Committee  Chairman
receives  from each Fund an annual fee of $2,500.  Each Director of each Fund is
reimbursed for travel and out-of-pocket expenses associated with attending Board
and committee meetings.  The Board of Directors of each Fund held seven meetings
(three of which were held by telephone  conference  call) during the fiscal year
ended  November  30, 2007,  and each  Director of each Fund then serving in such
capacity attended at least 75% of the meetings of Directors and of any Committee
of which he or she is a member. The aggregate remuneration paid to the Directors
of each Fund for the fiscal year ended November 30, 2007 is set forth below:

--------------------------------------------------------------------------------
                                            BOARD MEETING          TRAVEL AND
                          ANNUAL                AND              OUT-OF-POCKET
                      DIRECTORS FEES   COMMITTEE MEETING FEES       EXPENSES*
--------------------------------------------------------------------------------
PFD                      $36,000               $24,900               $7,444
--------------------------------------------------------------------------------
PFO                      $36,000               $24,900               $7,444
--------------------------------------------------------------------------------
FFC                      $36,000               $24,900               $7,851
--------------------------------------------------------------------------------
FLC                      $36,000               $24,900               $ 7,851
--------------------------------------------------------------------------------

----------
*     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 thereof;  (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 SEC for  inclusion in each Fund's  annual  proxy  statement.
Each Audit Committee operates pursuant to a charter (the "Audit


                                        8



Committee Charter" or "Charter") that was most recently reviewed and approved by
the Board of  Directors  of each Fund on January 29, 2008 and which is available
on PFD and PFO's website at www.preferredincome.com and FFC and FLC's website at
www.fcclaymore.com.  As set forth in the Charter,  management is responsible for
the  (i)  preparation,  presentation  and  integrity  of each  Fund's  financial
statements,  (ii) maintenance of appropriate  accounting and financial reporting
principles  and  policies  and  (iii)   maintenance  of  internal  controls  and
procedures   designed  to  assure  compliance  with  accounting   standards  and
applicable  laws and  regulations.  The  Funds'  independent  registered  public
accounting  firm, KPMG LLP, (the  "independent  accountants") is 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 28,
2008, the Audit  Committee  reviewed and discussed with  management of each Fund
and the independent  accountants,  the audited financial statements of each Fund
as of and for the fiscal year ended  November 30, 2007,  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  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, 2007.

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

David Gale
Morgan Gust
Karen H. Hogan
Robert F. Wulf (Chairman)

January 28, 2008

      Each  Audit   Committee  was   established  in  accordance   with  Section
3(a)(58)(A)  of the 1934 Act. Each Audit  Committee met four times in connection
with its Board of Directors' regularly scheduled meetings during the fiscal year
ended  November 30,  2007.  Each Audit  Committee  is composed  entirely of each
Fund's  Independent  (as such term is  defined  by the New York  Stock  Exchange
("NYSE") listing standards applicable to closed-end funds, as may be modified or
supplemented  (the "NYSE Listing  Standards"))  Directors,  namely Ms. Hogan and
Messrs. 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 Ms. Hogan and Messrs.  Gale,  Gust and Wulf.  The  Nominating
Committee of each Fund met twice during the fiscal year ended November 30, 2007.
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


                                        9



Board. Each Fund's Nominating  Committee has a charter which is available on its
website.  PFD and PFO's website address is  www.preferredincome.com  and FFC and
FLC's website address is www.fcclaymore.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 their  Fund(s)  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 20, 2007 Annual Meetings 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,
2007.  No  executive   officer  or  person   affiliated  with  a  Fund  received
compensation  from a Fund  during the fiscal  year ended  November  30,  2007 in
excess of $120,000. Directors and executive officers of the Funds do not receive
pension or retirement benefits from the Funds.

                               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

DAVID GALE                                                      $14,600 - PFD              $58,400(4)
Director                                                        $14,600 - PFO
                                                                $14,600 - FFC
                                                                $14,600 - FLC

MORGAN GUST                                                     $14,600 - PFD              $58,400(4)
Director; Nominating Committee Chairman                         $14,600 - PFO
                                                                $14,600 - FFC
                                                                $14,600 - FLC

KAREN H. HOGAN                                                  $14,450 - PFD              $57,800(4)
Director                                                        $14,450 - PFO
                                                                $14,450 - FFC
                                                                $14,450 - FLC

ROBERT F. WULF                                                  $17,250 - PFD              $69,000(4)
Director; Audit Committee Chairman                              $17,250 - PFO
                                                                $17,250 - FFC
                                                                $17,250 - FLC


----------
*     Represents the total  compensation paid for the fiscal year ended November
      30, 2007, to such persons by the Funds and the other funds in the Flaherty
      & Crumrine  Fund   Family,  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 the fund complex as of November 30, 2007.

REQUIRED VOTE

      The  election  of  Mr.  Gale  as a  Director  of  PFD,  will  require  the
affirmative  vote of a  plurality  of the votes cast by holders of the shares of
Common  Stock of PFD at the meeting in person or by proxy.  The  election of Mr.
Gust as a Director of PFO will  require the  affirmative  vote of a plurality of
the votes cast by holders of the shares of Common Stock of PFO at the Meeting in
person or by proxy.  The  election  of Mr. Gale as a Director of each of FFC and
FLC will require the affirma-


                                       10



tive vote of a  plurality  of the votes  cast by holders of the Shares of Common
Stock and Preferred  Stock,  voting as a single class,  of each such Fund at the
Meeting in person or by proxy.  The  election of Ms. Hogan as a Director of each
of PFD and PFO will  require the  affirmative  vote of a plurality  of the votes
cast by  holders  of the  shares  of  Preferred  Stock of each  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.

                       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 2009
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
22, 2008, and must satisfy the requirements of federal securities laws.

      Each Fund's Bylaws 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 at the  address  set forth on the first  page of this proxy  statement  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  Bylaws with  respect to each matter the  shareholder  proposes to
bring before the annual meeting.

                             ADDITIONAL INFORMATION

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

      KPMG, 99 High Street, Boston,  Massachusetts 02110-2371, has been selected
to serve as each Fund's  independent  registered public accounting firm for each
Fund's  fiscal year ending  November  30,  2008.  KPMG acted as the  independent
registered  public  accounting  firm for each  Fund for the  fiscal  year  ended
November 30, 2007.  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  to  respond to
appropriate  questions  and will have an  opportunity  to make a  statement,  if
asked.

      Set forth in the table  below are audit fees and  non-audit  related  fees
billed to each Fund by KPMG for professional services for the fiscal years ended
November 30, 2006 and 2007, respectively.

      FISCAL YEAR ENDED              AUDIT-RELATED
FUND     NOVEMBER 30     AUDIT FEES      FEES       TAX FEES*  ALL OTHER FEES**
----     -----------     ----------      ----       ---------  ----------------

PFD         2006          $38,700         $0          $6,800       $13,300
            2007          $40,600         $0          $7,300       $15,100

PFO         2006          $38,700         $0          $6,800       $13,300
            2007          $40,600         $0          $7,300       $15,100

FFC         2006          $40,800         $0          $7,700       $14,900
            2007          $42,800         $0          $7,300       $15,500

FLC         2006          $40,800         $0          $7,700       $14,900
            2007          $42,800         $0          $7,300       $15,500

----------
----------
*     " 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.

**    "All Other Fees" are those fees billed to each Fund by KPMG in  connection
      with the preparation of a quarterly  agreed-upon-procedures  report. These
      Agreed-Upon-Procedures  ("AUP")  are  required  pursuant  to  each  Fund's
      Articles Supplementary. Specifically, Moody's Investors Service and Fitch,
      Inc. each require that such AUP be undertaken  and a report be provided in
      order to maintain their rating on the Preferred Stock.

      Each Fund's Audit  Committee  Charter  requires  that the Audit  Committee
pre-approve  all audit and non-audit  services to be provided by the independent
accountants  to the Fund,  and all  non-audit  services  to be  provided  by the
independent  accountants  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


                                       11



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 and non-audit  services  described  above for
which KPMG billed each Fund fees for the fiscal  years ended  November  30, 2006
and November 30, 2007 were pre-approved by the Audit Committee.

      For each Fund's fiscal year ended November 30, 2007,  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, ADMINISTRATOR AND SERVICING AGENT

      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  acts as the  administrator  to each  Fund and is  located  at 4400
Computer Drive, Westborough, Massachusetts 01581. Claymore Securities, Inc. acts
as the  servicing  agent to FFC and FLC and is  located at 2455  Corporate  West
Drive, Lisle, Illinois 60532.

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 2007, all such filing requirements  applicable to such
persons were met.

BROKER NON-VOTE 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 counted as shares that are present and  entitled to vote
at the  meeting for  purposes  of  determining  the  presence of a Quorum.  With
respect to Proposal 1,  abstentions  do not constitute a vote "for" or "against"
the  proposal and will be  disregarded  in  determining  the "votes cast" on the
proposal.

                    OTHER MATTERS TO COME BEFORE THE MEETING

      Each Fund does not intend to present any other  business  at the  relevant
Meeting,  nor is any 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.

                         EXPENSES OF PROXY SOLICITATION

      The total expenses of the Annual  Meetings,  including the solicitation of
proxies and the expenses  incurred in connection  with the  preparation  of this
Joint Proxy Statement, are approximately $15,000.

                                 VOTING RESULTS

      Each Fund will  advise  its  shareholders  of the  voting  results  of the
matters  voted  upon  at  its  Meeting  in  its  next   Semi-Annual   Report  to
Shareholders.

      NOTICE TO BANKS, BROKER/DEALERS AND VOTING TRUSTEES AND THEIR NOMINEES

      Please advise the Funds whether other persons are the beneficial owners of
Fund shares for which  proxies  are being  solicited  from you,  and, if so, the
number of copies of the joint proxy statement and other soliciting  material you
wish to  receive  in order to  supply  copies to the  beneficial  owners of Fund
shares.

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.


                                       12



                      This Page Left Blank Intentionally.




                 o PLEASE FOLD ALONG THE PERFORATION, DETACH AND
              RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. o
--------------------------------------------------------------------------------

FLAHERTY & CRUMRINE PREFERRED INCOME FUND INCORPORATED

--------------------------------------------------------------------------------
PROXY -- FLAHERTY & CRUMRINE PREFERRED INCOME FUND INCORPORATED
--------------------------------------------------------------------------------

PROXY SOLICITED BY BOARD OF DIRECTORS

The  undersigned  holder  of  shares  of Common  Stock of  Flaherty  &  Crumrine
Preferred Income Fund Incorporated,  a Maryland corporation (the "Fund"), hereby
appoints Donald F. Crumrine, Robert M. Ettinger, Teresa M.R. Hamlin and Emily H.
Harris,  attorneys  and  proxies for the  undersigned,  each 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
offices of Willkie Farr & Gallagher LLP, 787 Seventh Avenue,  New York, New York
10019,  Conference  Room  38D-E at 8:30  a.m.  ET, on April  18,  2008,  and any
adjournments  or  postponements  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                                                          SEE REVERSE
   SIDE            CONTINUED AND TO BE SIGNED ON REVERSE SIDE           SIDE
-----------                                                          -----------






                                                                                           
                                                                              [BAR CODE]

            FLAHERTY & CRUMRINE PREFERRED
            INCOME FUND INCORPORATED

                                                                              [BAR CODE]                                  C123456789

                                                                  000004      000000000.000000 ext      000000000.000000 ext
                                                                              000000000.000000 ext      000000000.000000 ext
[BAR CODE]  MR A SAMPLE                                                       000000000.000000 ext      000000000.000000 ext
            DESIGNATION (IF ANY)
            ADD 1
            ADD 2
            ADD 3
            ADD 4
            ADD 5
            ADD 6

            [IMAGE]

Using a BLACK INK pen, mark your votes with an X
as shown in this example. Please do not write outside
the designated areas.                                            [X]

------------------------------------------------------------------------------------------------------------------------------------
ANNUAL MEETING PROXY CARD
------------------------------------------------------------------------------------------------------------------------------------
                o PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. o
------------------------------------------------------------------------------------------------------------------------------------

A  ELECTION OF DIRECTOR -- THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEE LISTED.

1. Nominee:                FOR    WITHHOLD                                                                                       +

   01 - David Gale         [ ]      [ ]

   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.

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

B  NON-VOTING ITEMS

CHANGE OF ADDRESS -- Please print new address below.
------------------------------------------------------------------------------------------------------------------------------------

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

C  AUTHORIZED SIGNATURES -- THIS SECTION MUST BE COMPLETED FOR YOUR VOTE TO BE COUNTED. -- DATE AND SIGN BELOW

Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator,
corporate officer, trustee, guardian, or custodian, please give full title.

Date (mm/dd/yyyy) -- Please print     Signature 1 -- Please keep signature     Signature 2 -- Please keep signature
date below.                           within the box.                          within the box.
-----------------------------------   --------------------------------------   -----------------------------------------------------
               /           /
-----------------------------------   --------------------------------------   -----------------------------------------------------

                                      C 1234567890                     J N T   MR A SAMPLE (THIS AREA IS SET UP TO ACCOMMODATE
                                                                               140 CHARACTERS) MR A SAMPLE AND MR A SAMPLE AND
                                                                               MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND
[IMAGE]          [BAR CODE]           1 0 A V                  0 1 6 3 8 4 1   MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND   +


(STOCK#)           00U5AC




                 o PLEASE FOLD ALONG THE PERFORATION, DETACH AND
              RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. o
--------------------------------------------------------------------------------

FLAHERTY & CRUMRINE PREFERRED INCOME FUND INCORPORATED

--------------------------------------------------------------------------------
PROXY -- FLAHERTY & CRUMRINE PREFERRED INCOME FUND INCORPORATED
--------------------------------------------------------------------------------

PROXY SOLICITED BY BOARD OF DIRECTORS

The  undersigned  holder of shares of  Preferred  Stock of  Flaherty  & Crumrine
Preferred Income Fund Incorporated,  a Maryland corporation (the "Fund"), hereby
appoints Donald F. Crumrine,  Robert M. Ettinger,  Teresa M. R. Hamlin and Emily
H. Harris,  attorneys and proxies for the undersigned,  each with full powers of
substitution and revocation,  to represent the undersigned and to vote on behalf
of the  undersigned  all shares of  Preferred  Stock  which the  undersigned  is
entitled to vote at the Annual Meeting of Shareholders of the Fund to be held at
the offices of Willkie Farr & Gallagher LLP, 787 Seventh  Avenue,  New York, New
York 10019,  Conference  Room 38D-E at 8:30 a.m. ET, on April 18, 2008,  and any
adjournments  or  postponements  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                                                          SEE REVERSE
   SIDE            CONTINUED AND TO BE SIGNED ON REVERSE SIDE           SIDE
-----------                                                          -----------





                                                                                            
                                                                              [BAR CODE]

            FLAHERTY & CRUMRINE PREFERRED
            INCOME FUND INCORPORATED
                                                                              [BAR CODE]                                  C123456789

                                                                  000004      000000000.000000 ext      000000000.000000 ext
                                                                              000000000.000000 ext      000000000.000000 ext
[BAR CODE]  MR A SAMPLE                                                       000000000.000000 ext      000000000.000000 ext
            DESIGNATION (IF ANY)
            ADD 1
            ADD 2
            ADD 3
            ADD 4
            ADD 5
            ADD 6

            [IMAGE]

Using a BLACK INK pen, mark your votes with an X
as shown in this example. Please do not write outside
the designated areas.                                      [X]

------------------------------------------------------------------------------------------------------------------------------------
ANNUAL MEETING PROXY CARD
------------------------------------------------------------------------------------------------------------------------------------
                o PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. o
------------------------------------------------------------------------------------------------------------------------------------

A  ELECTION OF DIRECTOR -- THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEE LISTED.

1. Nominee:                FOR    WITHHOLD                                                                                       +

   01 - Karen H. Hogan     [ ]      [ ]

   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.

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

B  NON-VOTING ITEMS

CHANGE OF ADDRESS -- Please print new address below.
------------------------------------------------------------------------------------------------------------------------------------

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

C  AUTHORIZED SIGNATURES -- THIS SECTION MUST BE COMPLETED FOR YOUR VOTE TO BE COUNTED. -- DATE AND SIGN BELOW

Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator,
corporate officer, trustee, guardian, or custodian, please give full title.

Date (mm/dd/yyyy) -- Please print     Signature 1 -- Please keep signature     Signature 2 -- Please keep signature
date below.                           within the box.                          within the box.
-----------------------------------   --------------------------------------   -----------------------------------------------------
          /           /
-----------------------------------   --------------------------------------   -----------------------------------------------------

                                      C 1234567890                     J N T   MR A SAMPLE (THIS AREA IS SET UP TO ACCOMMODATE
                                                                               140 CHARACTERS) MR A SAMPLE AND MR A SAMPLE AND
                                                                               MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND
[IMAGE]          [BAR CODE]           1 0 A V                  0 1 6 3 8 4 2   MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND   +


(STOCK#)           00U5BD