FLAHERTY & CRUMRINE PREFERRED INCOME FUND
EXHIBIT TO ITEM 77D

INVESTMENT POLICY MODIFICATION

      On February 3, 2011, the Fund announced the
following changes to its investment policies. These
changes were effective on April 4, 2011.

      Old Policy: At time of purchase, at least 75% of the
securities that the Fund will acquire will be rated
investment grade by either Moody's Investors Services,
Inc. ("Moody's") or Standard & Poor's Corporation
("S&P"), or, if unrated, judged to be comparable in
quality. In addition, the Fund may invest up to 25% of
its assets at the time of purchase in securities rated
below investment grade by both Moody's and S&P, if (a)
such securities are rated at least "Ba3" by Moody's or
"BB-" by S&P and (b) such securities are issued by an
issuer having an outstanding class of senior debt rated
investment grade at the time of purchase. Thus, the Fund
may not invest in securities rated below "Ba3" by Moody's
and below "BB-" by S&P.

      New Policy: At time of purchase, at least 75% of the
securities that the Fund will acquire will be rated
investment grade by any one of Moody's, S&P or Fitch
Ratings Group ("Fitch"). In addition, the Fund may invest
up to 25% of its assets at the time of purchase in
securities rated below investment grade by all of
Moody's, S&P and Fitch, provided that (a) such securities
are rated at least "Ba3" by Moody's, "BB-" by S&P, or
"BB-" by Fitch or (b) such securities are issued by an
issuer having an outstanding class of senior debt rated
investment grade by any one of Moody's, S&P, or Fitch at
the time of purchase. Thus, the Fund may invest in
securities rated below "Ba3" by Moody's, "BB-" by S&P and
"BB-" by Fitch if the issuer has investment grade senior
debt outstanding.

Impact of Changes:

(1)	Fitch is now one of the approved ratings
agencies for determining whether a security meets
the definition of "investment grade" for purposes of
the Fund's policy of investing at least 75% of its
assets in securities rated investment grade at the
time of purchase or in securities of equivalent
quality;

(2)	The Fund may now purchase securities rated below
Ba3/BB-/BB- by each of Moody's, S&P and Fitch,
respectively, as long as the senior debt of the same
issuer is rated investment grade by any one of
Moody's, S&P or Fitch at the time of purchase; and

(3)	If the senior debt of an issuer is unrated or it
has no outstanding senior debt, the Fund may now
purchase its preferred securities if they are rated
at least Ba3/BB-/BB- by any one of Moody's, S&P or
Fitch, respectively.

   As a result of these changes, a security would be
counted as investment grade if it had an investment grade
rating by any one of Moody's, S&P or Fitch, even if the
other two rating agencies rated it below investment
grade.  The effect of this change would be to reduce the
Fund's holdings deemed below investment grade purchases,
as of January 31, 2011, from 15.9% to 12.4%.  In
addition, the Fund would be authorized to purchase below
Ba or BB securities of investment grade issuers, subject
to an overall 25% limit on purchasing below investment
grade securities.  While this change would permit the
Fund to acquire securities rated B and below, the Fund's
adviser has no current intention of doing so.

   As before, the Fund will apply the ratings criteria at
the time of purchase and the Fund will not be required to
dispose of securities if, after purchase, they are
downgraded, although the adviser may take this into
account in determining whether to retain the security.
As a result, more than 25% of the Fund's holdings at any
time may be rated below investment grade or in equivalent
securities. In addition, as before, the Fund may invest
in unrated securities that the Fund's investment adviser
deems to be comparable in quality to rated issues in
which the Fund is authorized to invest.

Risks of Investing in Securities Rated Below Ba3/BB

      The Fund can purchase below-investment grade
securities with ratings of at least Ba3 by Moody's and
BB- by S&P and Fitch; such ratings generally indicate an
issuer that is less vulnerable to non-payment of its
obligations than other speculative issuers. The issuer,
however, faces major ongoing uncertainty or exposure to
adverse business, financial or economic conditions that
could lead to inadequate capacity to meet its financial
commitments. Under the Fund's new investment policy with
respect to the investment grade rating of securities, the
Fund may invest in securities with ratings below Ba3/BB-
so long as the issuer of such securities has an
outstanding class of senior debt rated investment grade
by any one of Moody's, S&P or Fitch.  Although a
company's senior debt rating may be investment grade, an
underlying security issued by such company in which the
Fund may invest may have a lower than investment grade
rating. A security with a rating below Ba3/BB- generally
indicates the issuer of such security has a high degree
of vulnerability of not paying its financial obligations.
A security rated B1 to B3 by Moody's, or B+ to B- by S&P
or Fitch, for example, indicates an issuer that is more
vulnerable to not paying its obligations than a Ba3 or
BB- issuer; the issuer, however, currently has the
capacity to meet its financial commitments, although
adverse business, financial, or economic conditions will
likely impair the issuer's capacity or willingness to
meet its financial commitments.  Securities rated Caa by
Moody's or CCC by S&P or Fitch indicate an issuer that is
highly speculative and likely to be in, or very near
default with some prospects of recovery of principal and
interest, although the issuer is dependent upon favorable
business, financial, and economic conditions to meet its
financial commitments.  Securities rated below Caa or CCC
generally indicate an issuer that is highly vulnerable to
not paying its obligations or that has defaulted on an
obligation.