EX-99.77Q1 OTHR EXHB

EXHIBIT 77Q1(a)
FLAHERTY & CRUMRINE PREFERRED INCOME FUND INCORPORATED
(the "Fund")


Use of Credit Derivatives

	The Fund may invest up to 10% of its total net assets
in credit derivatives and/or premiums paid therefore as a
"buyer" of credit protection. Also, Flaherty & Crumrine
Incorporated ("F&C") as the investment adviser to the Fund
is authorized to enter into credit derivative transactions
as a buyer with such entities as F&C deems creditworthy and
on such terms as F&C considers to be reasonable and
appropriate. This change in investment policy was
instituted by the Fund's Board of Directors at its regular
board meeting on July 23, 2004.
G:\Clients\Preferred\PFD\N-SAR\113004\PFD Exhibit 77Q1(a) - 113004.doc

EX-99.77B ACCT LTTR

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders
Flaherty and Crumrine Preferred Income Fund Incorporated
In planning and performing our audits of the financial
statements of Flaherty and Crumrine Preferred Income Fund
Incorporated, for the year ended November 30 2004, we
considered its internal control, including control
activities for safeguarding securities, in order to
determine our auditing procedures for the purpose of
expressing our opinion on the financial statements and to
comply with the requirements of Form N-SAR, not to provide
assurance on internal control.
The management of Flaherty and Crumrine Preferred Income
Fund Incorporated is responsible for establishing and
maintaining internal control.  In fulfilling this
responsibility, estimates and judgments by management are
required to assess the expected benefits and related costs
of controls.  Generally, controls that are relevant to an
audit pertain to the entity's objective of preparing
financial statements for external purposes that are fairly
presented in conformity with accounting principles
generally accepted in the United States of America.  Those
controls include the safeguarding of assets against
unauthorized acquisition, use, or disposition.
Because of inherent limitations in internal control, error
or fraud may occur and not be detected.  Also, projection
of any evaluation of internal control to future periods is
subject to the risk that it may become inadequate because
of changes in conditions or that the effectiveness of the
design and operation may deteriorate.
Our consideration of internal control would not necessarily
disclose all matters in internal control that might be
material weaknesses under the standards of the Public
Company Accounting Oversight Board (United States).  A
material weakness is a significant deficiency, or
combination of significant deficiencies, that results in
more than a remote likelihood that a material misstatement
of the annual or interim financial statements will not be
prevented or detected.  However, we noted no matters
involving internal control and its operation, including
controls for safeguarding securities, which we consider to
be material weaknesses as defined above as of November 30,
2004.
This report is intended solely for the information and use
of management and the Board of Directors of Flaherty and
Crumrine Preferred Income Fund Incorporated and the
Securities and Exchange Commission and is not intended to
be and should not be used by anyone other than these
specified parties.

Boston, Massachusetts
January 21, 2005