N-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-Q

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED

MANAGEMENT INVESTMENT COMPANY

Investment Company Act file number            811-06495                                  

Flaherty & Crumrine Preferred Income Opportunity Fund Incorporated

(Exact name of registrant as specified in charter)

301 E. Colorado Boulevard, Suite 720

Pasadena, CA 91101

(Address of principal executive offices) (Zip code)

R. Eric Chadwick

Flaherty & Crumrine Incorporated

301 E. Colorado Boulevard, Suite 720

Pasadena, CA 91101

(Name and address of agent for service)

Registrant’s telephone number, including area code:      626-795-7300            

Date of fiscal year end:   November 30         

Date of reporting period:    February 29, 2016

Form N-Q is to be used by management investment companies, other than small business investment companies registered on Form N-5 (§§ 239.24 and 274.5 of this chapter), to file reports with the Commission, not later than 60 days after the close of the first and third fiscal quarters, pursuant to rule 30b1-5 under the Investment Company Act of 1940 (17 CFR 270.30b1-5). The Commission may use the information provided on Form N-Q in its regulatory, disclosure review, inspection, and policymaking roles.

A registrant is required to disclose the information specified by Form N-Q, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-Q unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to the Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.

Item 1. Schedule of Investments.

The Schedule(s) of Investments is attached herewith.

FLAHERTY & CRUMRINE PREFERRED INCOME OPPORTUNITY FUND

To the Shareholders of Flaherty & Crumrine Preferred Income Opportunity Fund (“PFO”):

Increased volatility was a common theme in most markets during the first fiscal quarter¹, and the preferred securities market was no exception. Total return² on net asset value (“NAV”) was -2.1% for the quarter, while total return on market price was 4.7%.

As we mentioned in our last letter, markets entered a new phase with “liftoff” in December. The Federal Reserve’s 0.25% hike in short-term interest rates was its first step in slowly removing unprecedented levels of monetary accommodation. However, other parts of the world, notably Europe and Japan, are still easing monetary policy by increasing quantitative easing (QE) programs and pushing short-term interest rates into negative territory. With concerns over economic growth in China adding to the equation, investors are struggling to figure out how all the pieces fit together going forward. Understandably, markets are factoring in a possibility of policy mistakes along the way, as these are uncharted territories for everyone. The result has been increased volatility in most markets, including commodities (oil, natural gas, and metals), stocks, U.S. Treasuries, corporate bonds, and preferred securities.

Reduced probabilities for future rate increases in the U.S., and negative rates in some regions, triggered an absolute rout in bank common stocks—with the average U.S. bank stock returning -20% during the fiscal period. Preferred securities fared much better but cheapened in sympathy (as did more-senior bank securities). Bank earnings should benefit from higher interest rates, but any upside to future earnings that investors had been hoping for (and pricing into stock prices) has been scaled back from earlier projections.

European bank common stocks were among the worst performers, and this had a related impact on the contingent capital securities market (these “CoCos” are the non-U.S. version of preferreds). Deutsche Bank was in the headlines yet again—this time with concerns about its ability to pay coupons on CoCos and preferred securities. The market reacted very negatively, and CoCo prices were dragged down substantially across the board. Once again, U.S. preferreds fared better but still cheapened in sympathy.

There is a lot for investors in all markets to consider, but as it relates to preferreds, we suggest taking a step back to reflect on a longer-term view of favorable fundamentals.

Bank earnings are certainly important to investors, since dividends are paid out of earnings and profits. However, growth in earnings, while critical to common stock valuation, is not a critical determinant of creditworthiness and preferred-stock valuation. We focus much more on a bank’s capital—on its ability to absorb losses while still being able to pay preferred dividends—than on earnings growth. On this front, the news is positive as the common equity capital at banks in which we invest continues to build, which supports debt and preferred stock that are senior to common equity.

¹  December 1, 2015—February 29, 2016

²  Following the methodology required by the Securities and Exchange Commission, total return assumes dividend reinvestment.

Low interest rates will have mixed implications for both issuers of and investors in preferred securities, but overall they should benefit prices of preferred securities as a global search for yield continues. We also believe recent concerns around CoCos (which represented 1.5% of the Fund as of period end) will turn out to be noise, as issuers and regulators consider CoCos a necessary market that they are loath to damage by not paying coupons.

Global economic recovery will be slow, and policy mistakes are likely to be made. As we have said before, income (coupons) can make up for quite a bit of principal change over time—and preferreds continue to offer higher yields than many other fixed-income securities. While volatility may be with us for some time, and the ride may be bumpy, we believe total returns will be competitive over time for preferred investors.

As always, we encourage you to visit the Fund’s website, www.preferredincome.com for timely and important information.

Sincerely,

The Flaherty & Crumrine Portfolio Management Team

March 31, 2016

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Flaherty & Crumrine Preferred Income Opportunity Fund Incorporated

PORTFOLIO OVERVIEW

February 29, 2016 (Unaudited)

Fund Statistics
Net Asset Value	$	10.72
Market Price	$	11.10
Premium		3.54	%
Yield on Market Price		7.89	%
Common Stock Shares Outstanding		12,376,412

Moody’s Ratings* % of Net Assets†

A	2.4%
BBB	66.2%
BB	20.4%
Below “BB”	1.3%
Not Rated**	8.0%
Below Investment Grade***	24.1%

* Ratings are from Moody’s Investors Service, Inc. “Not Rated” securities are those with no ratings available from Moody’s.

** Does not include net other assets and liabilities of 1.7%.

*** Below investment grade by all of Moody’s, S&P, and Fitch.

Industry Categories % of Net Assets†

Top 10 Holdings by Issuer	% of Net Assets†
JPMorgan Chase		4.9%
Liberty Mutual Group		4.6%
HSBC PLC		4.5%
MetLife		4.3%
Wells Fargo & Company		4.3%
Fifth Third Bancorp		3.8%
PNC Financial Services Group		3.3%
M&T Bank Corporation		3.3%
Morgan Stanley		3.0%
Axis Capital Holdings Ltd.		2.4%

% of Net Assets****†
Holdings Generating Qualified Dividend Income (QDI) for Individuals	61%
Holdings Generating Income Eligible for the Corporate Dividends Received Deduction (DRD)	49%

**** This does not reflect year-end results or actual tax categorization of Fund distributions. These percentages can, and do, change, perhaps significantly, depending on market conditions. Investors should consult their tax advisor regarding their personal situation.

† Net Assets includes assets attributable to the use of leverage.

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Flaherty & Crumrine Preferred Income Opportunity Fund Incorporated

PORTFOLIO OF INVESTMENTS

February 29, 2016 (Unaudited)

Shares/$ Par			Value
	Preferred Securities — 93.2%
		Banking — 46.6%
	16,773	Astoria Financial Corp., 6.50%, Series C	$	437,146	*
		Bank of America Corporation:
$	1,340,000	8.00%, Series K		1,341,675	*(1)
$	920,000	8.125%, Series M		921,150	*(1)
		Barclays Bank PLC:
	56,000	7.10%, Series 3		1,400,000	**(3)
	4,700	7.75%, Series 4		119,756	**(3)
$	3,200,000	BNP Paribas, 7.375%, 144A****		2,996,000	**(3)
	6,333	Capital One Financial Corporation, 6.70%, Series D		168,220	*
		Citigroup, Inc.:
	81,200	6.875%, Series K		2,161,950	*(1)
	74,694	7.125%, Series J		1,991,066	*(1)
$	299,000	8.40%, Series E		326,284	*
		CoBank ACB:
	18,100	6.125%, Series G, 144A****		1,715,542	*
	9,000	6.20%, Series H, 144A****		902,812	*
	10,000	6.25%, Series F, 144A****		1,031,250	*(1)
$	4,500,000	Colonial BancGroup, 7.114%, 144A****		6,750	(4)(5)††
	6,400	Cullen/Frost Bankers, Inc., 5.375%, Series A		158,200	*
	271,600	Fifth Third Bancorp, 6.625%, Series I		7,698,176	*(1)
		First Horizon National Corporation:
	750	First Tennessee Bank, Adj. Rate, 3.75%(6), 144A****		499,852	*(1)
	1	FT Real Estate Securities Company, 9.50%, 144A****		1,302,500
	104,000	First Niagara Financial Group, Inc., 8.625%, Series B		2,749,500	*(1)
	29,050	First Republic Bank, 6.70%, Series A		768,009	*(1)
		Goldman Sachs Group:
$	195,000	5.70%, Series L		186,956	*
	50,000	6.375%, Series K		1,329,000	*(1)
		HSBC PLC:
$	800,000	HSBC Capital Funding LP, 10.176%, 144A****		1,161,160	(1)(3)
	142,000	HSBC Holdings PLC, 8.00%, Series 2		3,652,070	**(1)(3)
	128,733	HSBC USA, Inc., 6.50%, Series H		3,230,400	*(1)
		ING Groep NV:
	30,000	7.05%		777,189	**(3)
	21,700	7.20%		565,556	**(3)

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Flaherty & Crumrine Preferred Income Opportunity Fund Incorporated

PORTFOLIO OF INVESTMENTS (Continued)

February 29, 2016 (Unaudited)

Shares/$ Par			Value
	Preferred Securities — (Continued)
		Banking — (Continued)
		JPMorgan Chase & Company:
$	300,000	6.00%, Series R	$	297,750	*
	54,650	6.70%, Series T		1,484,841	*(1)
$	4,167,000	6.75%, Series S		4,422,229	*(1)
$	3,750,000	7.90%, Series I		3,745,313	*(1)
		M&T Bank Corporation:
$	2,240,000	6.450%, Series E		2,363,200	*(1)
$	4,393,000	6.875%, Series D, 144A****		4,412,329	*(1)
		Morgan Stanley:
	148,000	6.875%, Series F		3,998,960	*(1)
	77,200	7.125%, Series E		2,173,666	*(1)
		PNC Financial Services Group, Inc.:
	216,500	6.125%, Series P		6,143,187	*(1)
$	625,000	6.75%, Series O		669,375	*
$	1,775,000	RaboBank Nederland, 11.00%, 144A****		2,101,529	(1)(3)
	35,000	Regions Financial Corporation, 6.375%, Series B		902,345	*
		Royal Bank of Scotland Group PLC:
	15,000	6.60%, Series S		364,050	**(3)
	94,800	7.25%, Series T		2,377,584	**(1)(3)
		Sovereign Bancorp:
	2,600	Sovereign REIT, 12.00%, Series A, 144A****		3,259,750
	83,700	State Street Corporation, 5.90%, Series D		2,207,587	*(1)
	10,000	Texas Capital Bancshares Inc., 6.50%, Series A		240,625	*
	35,000	US Bancorp, 6.50%, Series F		1,013,908	*
	59,300	Webster Financial Corporation, 6.40%, Series E		1,541,800	*(1)
		Wells Fargo & Company:
	56,200	5.85%, Series Q		1,438,372	*(1)
$	2,075,000	5.875%, Series U		2,199,604	*(1)(2)
	34,400	6.625%, Series R		979,368	*
$	1,139,000	7.98%, Series K		1,173,170	*
	104,500	8.00%, Series J		2,919,469	*(1)
		Zions Bancorporation:
$	1,000,000	7.20%, Series J		1,022,500	*
	85,200	7.90%, Series F		2,256,096	*(1)
				95,306,776

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Flaherty & Crumrine Preferred Income Opportunity Fund Incorporated

PORTFOLIO OF INVESTMENTS (Continued)

February 29, 2016 (Unaudited)

Shares/$ Par			Value
	Preferred Securities — (Continued)
		Financial Services — 0.6%
		HSBC PLC:
	46,081	HSBC Finance Corporation, 6.36%, Series B	$	1,154,905	*(1)
				1,154,905
		Insurance — 23.7%
	73,000	Allstate Corp., 6.625%, Series E		2,009,785	*(1)
$	375,000	Aon Corporation, 8.205% 01/01/27		456,562	(1)(2)
	105,000	Arch Capital Group, Ltd., 6.75%, Series C		2,825,161	**(1)(3)
		AXA SA:
$	1,453,000	6.379%, 144A****		1,513,227	**(1)(3)
$	500,000	8.60% 12/15/30		651,250	(3)
	187,000	Axis Capital Holdings Ltd., 6.875%, Series C		4,932,125	**(1)(3)
		Chubb Ltd.:
$	1,200,000	Ace Capital Trust II, 9.70% 04/01/30		1,707,600	(1)(2)(3)
	95,000	Delphi Financial Group, 7.376% 05/15/37		2,369,062	(1)(2)
		Endurance Specialty Holdings:
	14,000	6.35%, Series C		367,780	**(3)
	27,250	7.50%, Series B		692,322	**(3)
$	2,305,000	Everest Re Holdings, 6.60% 05/15/37		1,988,062	(1)
	10,000	Hartford Financial Services Group, Inc., 7.875%		319,375
$	4,943,000	Liberty Mutual Group, 10.75% 06/15/58, 144A****		7,179,708	(1)(2)
		MetLife:
$	2,704,000	MetLife, Inc., 10.75% 08/01/39		4,001,920	(1)(2)
$	350,000	MetLife Capital Trust IV, 7.875% 12/15/37, 144A****		400,750	(1)
$	3,350,000	MetLife Capital Trust X, 9.25% 04/08/38, 144A****		4,363,375	(1)(2)
		PartnerRe Ltd.:
	23,350	5.875%, Series F		607,100	**(3)
	78,200	7.25%, Series E		2,253,137	**(1)(3)
$	241,000	Prudential Financial, Inc., 5.625% 06/15/43		238,409
		QBE Insurance:
$	2,965,000	QBE Capital Funding III Ltd., 7.25% 05/24/41, 144A****		3,239,263	(1)(3)
		Unum Group:
$	2,750,000	Provident Financing Trust I, 7.405% 03/15/38		3,173,250	(1)(2)
		XL Group PLC:
$	4,750,000	XL Capital Ltd., 6.50%, Series E		3,336,875	(1)(3)
				48,626,098

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Flaherty & Crumrine Preferred Income Opportunity Fund Incorporated

PORTFOLIO OF INVESTMENTS (Continued)

February 29, 2016 (Unaudited)

Shares/$ Par			Value
	Preferred Securities — (Continued)
		Utilities — 12.8%
		Baltimore Gas & Electric Company:
	6,579	6.70%, Series 1993	$	670,030	*(1)
	2,500	7.125%, Series 1993		253,906	*
		Commonwealth Edison:
$	2,350,000	COMED Financing III, 6.35% 03/15/33		2,465,566	(1)
$	2,300,000	Dominion Resources, Inc., 7.50% 06/30/66		1,932,000	(1)
	80,000	Entergy Mississippi, Inc., 6.25%		2,027,504	*
	16,937	Georgia Power Company, 6.50%, Series 2007A		1,776,798	*(1)
	15,035	Gulf Power Company, 6.00%, Series 1		1,506,692	*(1)
	24,000	Indianapolis Power & Light Company, 5.65%		2,455,500	*(1)
	77,100	Integrys Energy Group, Inc., 6.00%		1,970,869	(1)
		Nextera Energy:
$	1,600,000	FPL Group Capital, Inc., 6.65% 06/15/67, Series C		1,208,000	(1)
$	750,000	FPL Group Capital, Inc., 7.30% 09/01/67, Series D		716,250	(1)
		PECO Energy:
$	1,500,000	PECO Energy Capital Trust III, 7.38% 04/06/28, Series D		1,696,884	(1)
		PPL Corp:
	35,000	PPL Capital Funding, Inc., 5.90%, Series B		926,408	(1)
$	1,250,000	PPL Capital Funding, Inc., 6.70% 03/30/67, Series A		938,334	(1)(2)
$	3,350,000	Puget Sound Energy, Inc., 6.974% 06/01/67, Series A		2,437,125	(1)(2)
	31,000	Southern California Edison Co., 6.50%, Series D		3,187,187	*(1)
				26,169,053
		Energy — 3.5%
$	6,295,000	Enbridge Energy Partners LP, 8.05% 10/01/37		4,296,337	(1)(2)
$	400,000	Enterprise Products Operating L.P., 8.375% 08/01/66, Series A		301,000
	57,980	Kinder Morgan, Inc., 9.75%, Series A		2,630,553	*
				7,227,890
		Real Estate Investment Trust (REIT) — 2.5%
		National Retail Properties, Inc.:
	40,000	5.70%, Series E		1,022,500	(1)(2)
	19,460	6.625%, Series D		504,744
		PS Business Parks, Inc.:
	8,243	5.70%, Series V		212,257
	46,120	6.45%, Series S		1,194,799	(1)

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Flaherty & Crumrine Preferred Income Opportunity Fund Incorporated

PORTFOLIO OF INVESTMENTS (Continued)

February 29, 2016 (Unaudited)

Shares/$ Par			Value
	Preferred Securities — (Continued)
		Real Estate Investment Trust (REIT) — (Continued)
	10,400	Public Storage, 6.375%, Series Y	$	290,876
	44,295	Realty Income Corporation, 6.625%, Series F		1,149,012	(1)
	25,777	Regency Centers Corporation, 6.625%, Series 6		676,646
				5,050,834
		Miscellaneous Industries — 3.5%
		BHP Billiton Limited:
$	400,000	BHP Billiton Finance U.S.A., Ltd., 6.75% 10/19/75, 144A****		387,000	(3)
$	802,000	General Electric Company, 5.00%, Series D		815,033	*(1)
$	3,150,000	Land O’ Lakes, Inc., 8.00%, 144A****		3,256,313	*(1)
	32,700	Ocean Spray Cranberries, Inc., 6.25%, 144A****		2,800,961	*
				7,259,307
		Total Preferred Securities (Cost $190,790,422)		190,794,863
	Corporate Debt Securities — 5.1%
		Banking — 2.6%
$	1,970,000	Regions Financial Corporation, 7.375% 12/10/37, Sub Notes		2,545,242	(1)(2)
	90,000	Texas Capital Bancshares Inc., 6.50% 09/21/42, Sub Notes		2,179,692	(1)(2)
	20,000	Zions Bancorporation, 6.95% 09/15/28, Sub Notes		557,500
				5,282,434
		Financial Services — 0.3%
	17,682	Affiliated Managers Group, Inc., 6.375% 08/15/42		459,180
	5,048	Raymond James Financial, 6.90% 03/15/42		136,454
				595,634
		Insurance — 1.1%
$	1,850,000	Liberty Mutual Insurance, 7.697% 10/15/97, 144A****		2,308,595	(1)
				2,308,595
		Energy — 0.5%
$	904,000	Energy Transfer Partners LP, 8.25% 11/15/29		936,275	(1)(2)
				936,275

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Flaherty & Crumrine Preferred Income Opportunity Fund Incorporated

PORTFOLIO OF INVESTMENTS (Continued)

February 29, 2016 (Unaudited)

Shares/$ Par			Value
	Corporate Debt Securities — (Continued)
		Communication — 0.5%
	36,102	Qwest Corporation, 7.375% 06/01/51	$	912,705
				912,705
		Miscellaneous Industries — 0.1%
	10,000	eBay, Inc., 6.00% 02/01/56		248,500
				248,500
		Total Corporate Debt Securities (Cost $9,047,283)		10,284,143
	Common Stock — 0.1%
		Energy — 0.1%
	9,940	Kinder Morgan, Inc.		179,815	*
				179,815
		Insurance — 0.0%
	17,907	WMI Holdings Corporation, 144A****		43,693	*†
				43,693
		Total Common Stock (Cost $1,050,094)		223,508
	Money Market Fund — 0.6%
		BlackRock Liquidity Funds:
	1,263,254	T-Fund, Institutional Class		1,263,254
		Total Money Market Fund (Cost $1,263,254)		1,263,254

Total Investments (Cost $202,151,053***)	99.0%			202,565,768
Other Assets And Liabilities (Net)	1.0%			2,120,674
Total Managed Assets	100.0%	‡	$	204,686,442
Loan Principal Balance				(72,000,000	)
Total Net Assets Available To Common Stock			$	132,686,442

9

Flaherty & Crumrine Preferred Income Opportunity Fund Incorporated

PORTFOLIO OF INVESTMENTS (Continued)

February 29, 2016 (Unaudited)

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

** Securities distributing Qualified Dividend Income only.

*** Aggregate cost of securities held.

**** Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration to qualified institutional buyers. At February 29, 2016, these securities amounted to $44,882,359 or 21.9% of total managed assets.

⁽¹⁾  All or a portion of this security is pledged as collateral for the Fund’s loan. The total value of such securities was $134,222,552 at February 29, 2016.

⁽²⁾  All or a portion of this security has been rehypothecated. The total value of such securities was $30,524,655 at February 29, 2016.

⁽³⁾  Foreign Issuer.

⁽⁴⁾  lliquid security (designation is unaudited).

⁽⁵⁾  Valued at fair value as determined in good faith by or under the direction of the Board of Directors as of February 29, 2016.

⁽⁶⁾  Represents the rate in effect as of the reporting date.

† Non-income producing.

†† The issuer has filed for bankruptcy protection. As a result, the Fund may not be able to recover the principal invested and also does not expect to receive income on this security going forward.

‡ The percentage shown for each investment category is the total value of that category as a percentage of total managed assets.

10

Flaherty & Crumrine Preferred Income Opportunity Fund Incorporated

STATEMENT OF CHANGES IN NET ASSETS AVAILABLE TO COMMON STOCK⁽¹⁾

For the period from December 1, 2015 through February 29, 2016 (Unaudited)

	Value
OPERATIONS:
Net investment income	$	2,604,834
Net realized gain/(loss) on investments sold during the period		62,385
Change in net unrealized appreciation/(depreciation) of investments		(5,632,475	)
Net decrease in net assets resulting from operations		(2,965,256	)
DISTRIBUTIONS:
Dividends paid from net investment income to Common Stock Shareholders(2)		(2,710,434	)
Total Distributions to Common Stock Shareholders		(2,710,434	)
NET DECREASE IN NET ASSETS AVAILABLE TO COMMON STOCK
FOR THE PERIOD	$	(5,675,690	)
NET ASSETS AVAILABLE TO COMMON STOCK:
Beginning of period	$	138,362,132
Net decrease in net assets during the period		(5,675,690	)
End of period	$	132,686,442

⁽¹⁾  These tables summarize the three months ended February 29, 2016 and should be read in conjunction with the Fund’s audited financial statements, including notes to financial statements, in its Annual Report dated November 30, 2015.

⁽²⁾  May include income earned, but not paid out, in prior fiscal year.

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Flaherty & Crumrine Preferred Income Opportunity Fund Incorporated

FINANCIAL HIGHLIGHTS⁽¹⁾

For the period from December 1, 2015 through February 29, 2016 (Unaudited)

For a Common Stock share outstanding throughout the period

PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period	$	11.18
INVESTMENT OPERATIONS:
Net investment income		0.21
Net realized and unrealized gain/(loss) on investments		(0.45	)
Total from investment operations		(0.24	)
DISTRIBUTIONS TO COMMON STOCK SHAREHOLDERS:
From net investment income		(0.22	)
Total distributions to Common Stock Shareholders		(0.22	)
Net asset value, end of period	$	10.72
Market value, end of period	$	11.10
Common Stock shares outstanding, end of period		12,376,412
RATIOS TO AVERAGE NET ASSETS AVAILABLE TO COMMON STOCK SHAREHOLDERS:
Net investment income†		7.78	%*
Operating expenses including interest expense		2.18	%*
Operating expenses excluding interest expense		1.53	%*
SUPPLEMENTAL DATA: ††
Portfolio turnover rate		2	%**
Total managed assets, end of period (in 000’s)	$	204,686
Ratio of operating expenses including interest expense to total managed assets		1.42	%*
Ratio of operating expenses excluding interest expenseto total managed assets		0.99	%*

⁽¹⁾  These tables summarize the three months ended February 29, 2016 and should be read in conjunction with the Fund’s audited financial statements, including notes to financial statements, in its Annual Report dated November 30, 2015.

* Annualized.

** Not annualized.

† The net investment income ratio reflects income net of operating expenses, including interest expense.

†† Information presented under heading Supplemental Data includes loan principal balance.

12

Flaherty & Crumrine Preferred Income Opportunity Fund Incorporated

FINANCIAL HIGHLIGHTS (Continued)

Per Share of Common Stock (Unaudited)

	Total Dividends Paid		Net Asset Value		NYSE Closing Price		Dividend Reinvestment Price(1)
December 31, 2015	$	0.0730	$	11.06	$	10.67	$	10.70
January 29, 2016		0.0730		10.91		10.72		10.72
February 29, 2016		0.0730		10.72		11.10		10.72

⁽¹⁾ Whenever the net asset value per share of the Fund’s Common Stock is less than or equal to the market price per share on the reinvestment date, new shares issued will be valued at the higher of net asset value or 95% of the then current market price. Otherwise, the reinvestment shares of Common Stock will be purchased in the open market.

13

Flaherty & Crumrine Preferred Income Opportunity Fund Incorporated

NOTES TO FINANCIAL STATEMENTS (Unaudited)

1. Aggregate Information for Federal Income Tax Purposes

At February 29, 2016, the aggregate cost of securities for federal income tax purposes was $206,990,112, the aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost was $12,128,292 and the aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value was $16,552,636.

2. Additional Accounting Standards

Fair Value Measurements: The Fund has analyzed all existing investments to determine the significance and character of all inputs to their fair value determination. The levels of fair value inputs used to measure the Fund’s investments are characterized into a fair value hierarchy. Where inputs for an asset or liability fall into more than one level in the fair value hierarchy, the investment is classified in its entirety based on the lowest level input that is significant to that investment’s valuation. The three levels of the fair value hierarchy are described below:

•	Level 1 –	quoted prices in active markets for identical securities
•	Level 2 –	other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)
•	Level 3 –	significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. Transfers in and out of levels are recognized at market value at the end of the period.

14

Flaherty & Crumrine Preferred Income Opportunity Fund Incorporated

NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)

A summary of the inputs used to value the Fund’s investments as of February 29, 2016 is as follows:

	Total Value at February 29, 2016		Level 1 Quoted Price		Level 2 Significant Observable Inputs		Level 3 Significant Unobservable Inputs
Preferred Securities
Banking	$	95,306,776	$	77,564,518	$	17,735,508	$	6,750
Financial Services		1,154,905		1,154,905		—		—
Insurance		48,626,098		26,348,114		22,277,984		—
Utilities		26,169,053		5,759,861		20,409,192		—
Energy		7,227,890		2,931,553		4,296,337		—
Real Estate Investment Trust (REIT)		5,050,834		5,050,834		—		—
Miscellaneous Industries		7,259,307		1,202,033		6,057,274		—
Corporate Debt Securities
Banking		5,282,434		2,737,192		2,545,242		—
Financial Services		595,634		595,634		—		—
Insurance		2,308,595		—		2,308,595		—
Energy		936,275		—		936,275		—
Communication		912,705		912,705		—		—
Miscellaneous Industries		248,500		248,500		—		—
Common Stock
Energy		179,815		179,815		—		—
Insurance		43,693		43,693		—		—
Money Market Fund		1,263,254		1,263,254		—		—
Total Investments	$	202,565,768	$	125,992,611	$	76,566,407	$	6,750

During the reporting period, there were no transfers into Level 1 from Level 2 or into Level 2 from Level 1.

The fair values of the Fund’s investments are generally based on market information and quotes received from brokers or independent pricing services that are approved by the Board of Directors and are unaffiliated with the Adviser. To assess the continuing appropriateness of security valuations, management, in consultation with the Adviser, regularly compares current prices to prior prices, prices across comparable securities, actual sale prices for securities in the Fund’s portfolio, and market information obtained by the Adviser as a function of being an active market participant.

Securities with quotes that are based on actual trades or actionable bids and offers with a sufficient level of activity on or near the measurement date are classified as Level 1. Securities that are priced using quotes derived from implied values, indicative bids and offers, or a limited number of actual trades—or the same information for securities that are similar in many respects to those being valued—are classified as Level 2. If market information is not available for securities being valued, or materially-comparable securities, then those securities are classified as Level 3. In considering market information, management evaluates changes in liquidity, willingness of a broker to execute at the quoted price, the depth and consistency of prices from pricing services, and the existence of observable trades in the market.

15

Flaherty & Crumrine Preferred Income Opportunity Fund Incorporated

NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)

The following is a reconciliation of Level 3 investments for which significant unobservable inputs were used to determine fair value:

			Preferred Securities
	Total Investments		Banking
Balance as of 11/30/15	$	6,750	$	6,750
Accrued discounts/premiums		—		—
Realized gain/(loss)		—		—
Change in unrealized appreciation/(depreciation)		—		—
Purchases		—		—
Sales		—		—
Transfer in		—		—
Transfer out		—		—
Balance as of 02/29/16	$	6,750	$	6,750

For the three months ended February 29, 2016, total change in unrealized gain/(loss) on Level 3 securities still held at period-end and included in the change in net assets was $0.

The following table summarizes the valuation techniques used and unobservable inputs developed to determine the fair value of Level 3 investments:

Category	Fair Value at 02/29/16		Valuation Technique		Unobservable Input	Input Range (Wgt Avg)
Preferred Securities
(Banking)	$	6,750		Bankruptcy recovery	Credit/Structure-specific recovery	0.00% - 0.50% (0.15%)

The significant unobservable inputs used in the fair value measurement technique for bankruptcy recovery are based on recovery analysis that is specific to the security being valued, including the level of subordination and structural features of the security, and the current status of any bankruptcy or liquidation proceedings. Observable market trades in bankruptcy claims are utilized by management, when available, to assess the appropriateness of valuations, although the frequency of trading depends on the specific credit and seniority of the claim. Expected recoveries in bankruptcy by security type and industry do not tend to deviate much from historical recovery rates, which are very low (sometimes zero) for preferred securities and more moderate for senior debt. Significant changes in these inputs would result in a significantly higher or lower fair value measurement.

16

Directors

R. Eric Chadwick, CFA

Chairman of the Board

David Gale

Morgan Gust

Karen H. Hogan

Robert F. Wulf, CFA

Officers

R. Eric Chadwick, CFA

Chief Executive Officer and

President

Chad C. Conwell

Chief Compliance Officer,

Vice President and Secretary

Bradford S. Stone

Chief Financial Officer,

Vice President and Treasurer

Roger Ko

Assistant Treasurer

Laurie C. Lodolo

Assistant Compliance Officer,

Assistant Treasurer and

Assistant Secretary

Linda M. Puchalski

Assistant Treasurer

Investment Adviser

Flaherty & Crumrine Incorporated e-mail: flaherty@pfdincome.com

Questions concerning your shares of Flaherty & Crumrine Preferred Income Opportunity Fund?

• If your shares are held in a Brokerage Account, contact your Broker.

• If you have physical possession of your shares in certificate form, contact the Fund’s Transfer Agent & Shareholder Servicing Agent —

BNY Mellon c/o Computershare

P.O. Box 30170

College Station, TX 77842-3170

1-866-351-7446

This report is sent to shareholders of Flaherty & Crumrine Preferred Income Opportunity Fund Incorporated for their information. It is not a Prospectus, circular or representation intended for use in the purchase or sale of shares of the Fund or of any securities mentioned in this report.

    

Quarterly

Report

February 29, 2016

www.preferredincome.com

Item 2. Controls and Procedures.

(a) The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”) (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)).

(b) There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d))) that occurred during the registrant’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.

Item 3. Exhibits.

Certifications pursuant to Rule 30a-2(a) under the 1940 Act are attached hereto.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

(Registrant)     Flaherty & Crumrine Preferred Income Opportunity Fund Incorporated

By (Signature and Title)*	/s/ R. Eric Chadwick
	R. Eric Chadwick, Chief Executive Officer and President (principal executive officer)

Date      4/25/2016

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By (Signature and Title)*	/s/ R. Eric Chadwick
	R. Eric Chadwick, Chief Executive Officer and President
	(principal executive officer)

Date      4/25/2016

By (Signature and Title)*	/s/ Bradford S. Stone
	Bradford S. Stone, Chief Financial Officer, Treasurer and Vice President
	(principal financial officer)

Date      4/25/2016

^* Print the name and title of each signing officer under his or her signature.

EX-99.CERT

Certifications

I, R. Eric Chadwick, certify that:

1. I have reviewed this report on Form N-Q of Flaherty & Crumrine Preferred Income Opportunity Fund Incorporated;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the schedules of investments included in this report fairly present in all material respects the investments of the registrant as of the end of the fiscal quarter for which the report is filed;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report, based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:     4/25/2016	/s/ R. Eric Chadwick
	R. Eric Chadwick, Chief Executive Officer and President
	(principal executive officer)

Certifications

I, Bradford S. Stone, certify that:

1. I have reviewed this report on Form N-Q of Flaherty & Crumrine Preferred Income Opportunity Fund Incorporated;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the schedules of investments included in this report fairly present in all material respects the investments of the registrant as of the end of the fiscal quarter for which the report is filed;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report, based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:     4/25/2016	/s/ Bradford S. Stone
	Bradford S. Stone, Chief Financial Officer, Treasurer and Vice President
	(principal financial officer)