[GRAPHIC OMITTED]
FINANCIAL INSTITUTION BOND
STANDARD FORM NO. 14, REVISED TO OCTOBER, 1987
Hartford Fire Insurance Company
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Hartford Plaza
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Hartford, CT 06115
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(Herein called Underwriter)
BOND NO. 72 FI 0231536
DECLARATIONS
ITEM 1. Name of Insured (herein called Insured): Flaherty & Crumrine Preferred Income Fund Incorporated
Principal Address: 301 E. Colorado Blvd., Suite 720, Pasadena CA 91101
ITEM 2. Bond Period: from 12:01 a.m. on May 15, 2006 to 12:01 a.m. on May 15, 2007
standard time. (MONTH, DAY, YEAR) (MONTH, DAY, YEAR)
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ITEM 3. The Aggregate Liability of the Underwriter during the Bond Period shall be Six Hundred Thousand 00/100
$600,000.
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ITEM 4. Subject to Sections 4 and 11 hereof,
the Single Loss Limit of Liability is $600,000
and the Single Loss Deductible is $0
Provided, however, that if any amounts are inserted below opposite
specified Insuring Agreements or Coverage, those amounts shall be
controlling. Any amount set forth below shall be part of and not
in addition to amounts set forth above. (If an Insuring Agreement
or Coverage is to be deleted, insert "Not Covered.")
Amount applicable to: Single Loss Single Loss
Limit of Liability Deductible
Insuring Agreement (D) -- FORGERY OR ALTERATION $ Not Covered $ N/A
Insuring Agreement (E) -- SECURITIES $ Not Covered $ N/A
Coverage on Partners $ Not Covered $ N/A
Optional Insuring Agreements and Coverages:
$ Not Covered $ N/A
$ $
$ $
If "Not Covered" is inserted above opposite any specified insuring
Agreement or Coverage, such Insuring Agreement or Coverage and any
other reference thereto in this bond shall be deemed to be deleted
therefrom.
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ITEM 5 The liability of the Underwriter is subject to the terms of the
following riders attached hereto:
F-4017-1, F-4009-1, F-3402-1, Rider 34, Rider 135 Rider 144, Rider 145, Rider 146, Rider 147
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ITEM 6 The Insured by the acceptance of this bond gives notice to the
Underwriter terminating or canceling prior bond(s) or policy(ies)
No.(s) 72SSB KE4661
such termination or cancellation to be effective as of the time this bond becomes effective.
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Signed, sealed and dated this 11th day of May, 2006
Attest: By: /S/ CURT MCFAUL
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, Attorney-in-Fact Curt McFaul, Attorney-in-Fact
FORM F-4061-1 Printed in U.S.A. (SAA TSB 5062b) Page 1
The Underwriter, in consideration of an agreed premium, and in reliance upon all
statements made and information furnished to the Underwriter by the Insured in
applying for this bond, and subject to the Declarations, Insuring Agreements,
General Agreements, Conditions and Limitations and other terms hereof, agrees to
indemnify the Insured for:
INSURING AGREEMENTS
(A) Loss resulting directly from dishonest or fraudulent acts committed by
an Employee acting alone or in collusion with others.
Such dishonest or fraudulent acts must be committed by the Employee with
the manifest intent:
(a) to cause the Insured to sustain such loss; and
(b) to obtain financial benefit for the Employee and which, in fact, result
in obtaining such benefit.
As used in this Insuring Agreement, financial benefit does not include any
employee benefits earned in the normal course of employment, including:
salaries, commissions, fees, bonuses, promotions, awards, profit sharing or
pensions.
ON PREMISES
(B) (1) Loss of Property resulting directly from
(a) robbery, burglary, misplacement, mysterious unexplainable
disappearance and damage thereto or destruction thereof, or
(b) theft, false pretenses, common-law or statutory larceny,
committed by a person present in an office or on the premises
of the Insured
while the Property is lodged or deposited within offices or
premises located anywhere.
(2) Loss of or damage to
(a) furnishings fixtures, supplies or equipment within an office
of the Insured covered under this bond resulting directly from
larceny or theft in, or by burglary or robbery of, such office
or attempt thereat, or by vandalism or malicious mischief, or
(b) such office resulting from larceny or theft in, or by burglary
or robbery of such office or attempt thereat, or to the
interior of such office by vandalism or malicious mischief,
provided that
(i) the Insured is the owner of such furnishings, fixtures,
supplies, equipment, or office or is liable for such loss
or damage, and
(ii)the loss is not caused by fire.
IN TRANSIT
(C) Loss of Property resulting directly from robbery, common-law or
statutory larceny, theft, misplacement, mysterious unexplainable
disappearance, being lost or made away with, and damage thereto or
destruction thereof, while the Property is in transit anywhere in the
custody of
(a) a natural person acting as a messenger of the Insured (or another
natural person acting as messenger or custodian during an emergency
arising from the incapacity of the original messenger), or
(b) a Transportation Company and being transported in an armored motor
vehicle, or
(c) a Transportation Company and being transported in a conveyance other
than an armored motor vehicle provided that covered Property
transported in such manner is limited to the following:
(i) records, whether recorded in writing or electronically, and
(ii) Certificated Securities issued in registered form and not
endorsed, or with restrictive endorsements, and
(iii) Negotiable Instruments not payable to bearer, or not endorsed, or
with restrictive endorsements.
Coverage under this Insuring Agreement begins immediately upon the receipt
of such Property by the natural person or Transportation Company and ends
immediately upon delivery to the designated recipient or its agent.
FORGERY OR ALTERATION
(D) Loss resulting directly from
(1) Forgery or alteration of, on or in any Negotiable Instrument
(except an Evidence of Debt), Acceptance, Withdrawal Order, receipt for the
withdrawal of Property, Certificate of Deposit or Letter of Credit,
(2) transferring, paying or delivering any funds or Property or
establishing any credit or giving any value on the faith of any written
instructions or advices directed to the Insured and authorizing or
acknowledging the transfer, payment, delivery or receipt of funds or
Property, which instructions or advices purport to have been signed or
endorsed by any customer to the Insured or by any financial institution but
which instructions or advices either bear a signature which is a Forgery or
have been altered without the knowledge and consent of such customer or
financial institution.
A mechanically reproduced facsimile signature is treated the same as a
handwritten signature.
SECURITIES
(E) Loss resulting directly from the Insured having, in good faith, for its
own account or for the account of others
(1) acquired, sold or delivered, or given value, extended credit or
assumed liability, on the faith of, any original
(a) Certificated Security,
(b) deed, mortgage or other instrument conveying title to, or
creating or discharging a lien upon, real property,
(c) Evidence of Debt,
(d) Instruction to a Federal Reserve Bank of the United States, or
(e) Statement of Uncertificated Security of any Federal Reserve
Bank of the United States
which
(i) bears a signature of any maker, drawer, issuer, endorser,
assignor, lessee, transfer agent, registrar, acceptor,
surety, guarantor, or of any person signing in any other
capacity which is a Forgery, or
(ii) is altered, or
(iii)is lost or stolen;
FORM F-4061-1 Page 2
INSURING AGREEMENTS (CONTINUED)
(2) guaranteed in writing or witnessed any signature upon any transfer,
assignment, bill of sale, power of attorney. Guarantee, or any items listed in
(a) through (c) above;
(3) acquired, sold or delivered, or given value, extended credit or
assumed liability, on the faith of any item listed in (a) and (b) above which is
a Counterfeit.
A mechanically reproduced facsimile signature is treated the same as a
handwritten signature.
COUNTERFEIT CURRENCY
(F) Loss resulting directly from the receipt by the Insured in good faith,
of any Counterfeit Money of the United States of America, Canada or of any other
country in which the Insured maintains a branch office.
GENERAL AGREEMENTS
FORM F-4061-1 Printed in U.S.A. (SAA TSB 5062b)
NOMINEES
A. Loss sustained by any nominee organized by the Insured for the purpose
of handling certain of its business transactions and composed exclusively of its
Employees shall, for all the purposes of this bond and whether or not any
partner of such nominee is implicated in such loss, be deemed to be loss
sustained by the Insured.
ADDITIONAL OFFICES OR EMPLOYEES
CONSOLIDATION, MERGER OR PURCHASE
OF ASSETS - NOTICE
B. If the Insured shall, while this bond is in force, establish any
additional offices, other than by consolidation or merger with, or purchase or
acquisition of assets or liabilities of, another institution, such offices shall
be automatically covered hereunder from the date of such establishment without
the requirement of notice to the Underwriter or the payment of additional
premium for the remainder of the premium period.
If the Insured shall, while this bond is in force, consolidate or merge
with, or purchase or acquire assets of liabilities of, another institution, the
Insured shall not have such coverage as is afforded under this bond for loss
which
(a) has occurred or will occur in offices or premises, or
(b) has been caused or will be caused by an employee or employees of such
institution, or
(c) has arisen or will arise out of the assets or liabilities acquired by
the Insured as a result of such consolidation, merger or purchase or acquisition
of assets or liabilities unless the Insured shall
(i) give the Underwriter written notice of the proposed consolidation,
merger or purchase or acquisition of assets or liabilities prior
to the proposed effective date of such action and
(ii) obtain the written consent of the Underwriter to extend the
coverage provided by this bond to such additional offices or
premises, Employees and other exposures, and
(iii)upon obtaining such consent, pay to the Underwriter an additional
premium.
CHANGE OF CONTROL - NOTICE
C. When the Insured learns of a change in control, it shall give written
notice to the Underwriter.
As used in this General Agreement, control means the power to determine the
management or policy of a controlling holding company or the Insured by virtue
of voting stock ownership. A change in ownership of voting stock which results
in direct or indirect ownership by a stockholder or an affiliated group of
stockholders of ten percent.
(10%) or more of such stock shall be presumed to result in a change of control
for the purpose of the required notice.
Failure to give the required notice shall result in termination of coverage
for any loss involving a transferee, to be
effective upon the date of the stock transfer.
REPRESENTATION OF INSURED
D. The Insured represents that the information furnished in the application
for this bond is complete, true and correct. Such application constitutes part
of this bond.
Any misrepresentation, omission, concealment or incorrect statement of a
material fact, in the application or otherwise, shall be grounds for the
rescission of this bond.
JOINT INSURED
E. If two or more Insureds are covered under this bond, the first named
Insured shall act for all Insureds. Payment by the Underwriter to the first
named Insured of loss sustained by any Insured shall fully release the
Underwriter on account of such loss. If the first named Insured ceases to be
covered under this bond, the Insured next named shall thereafter be considered
as the first named Insured. Knowledge possessed or discovery made by any Insured
shall constitute knowledge or discovery by all Insureds for all purposes of this
bond. The liability of the Underwriter for loss or losses sustained by all
Insureds shall not exceed the amount for which the Underwriter would have been
liable had all such loss of losses been sustained by one Insured.
NOTICE OF LEGAL PROCEEDINGS
AGAINST INSURED - ELECTION TO DEFEND
F. The Insured shall notify the Underwriter at the earliest practicable
moment, not to exceed 30 days after notice thereof, of any legal proceeding
brought to determine the Insured's liability for any loss, claim or damage,
which, if established, would constitute a collectible loss under this bond.
Concurrently, the Insured shall furnish copies of all pleadings and pertinent
papers to the Underwriter.
The Underwriter, at its sole option, may elect to conduct the defense of
such legal proceeding, in whole or in part. The defense by the Underwriter shall
be in the Insured's name through attorneys selected by the Underwriter. The
Insured shall provide all reasonable information and assistance required by the
Underwriter for such defense.
If the Underwriter elects to defend the Insured, in whole or in part, any
judgment against the Insured on those counts or causes of action which the
Underwriter defended on behalf of the Insured or any settlement in which the
Underwriter participates and all attorneys' fees, costs and expenses incurred by
the Underwriter in the defense of the litigation shall be a loss covered by this
bond.
FORM F-4061-1 Page 3
GENERAL AGREEMENTS (CONTINUED)
If the Insured does not give the notices required in subsection (a) of
Section 5 of this bond and in the first paragraph of this General Agreement, or
if the Underwriter elects not to defend any causes of action, neither a judgment
against the Insured, nor a settlement of any legal proceeding by the Insured,
shall determine the existence, extent or amount of coverage under this bond for
loss sustained by the Insured, and the Underwriter shall not be liable for any
attorneys' fees, costs and expenses incurred by the Insured.
With respect to this General Agreement, subsections (b) and (d) of Section
5 of this bond apply upon the entry of such judgment or the occurrence of such
settlement instead of upon discovery of loss. In addition, the Insured must
notify the Underwriter within 30 days after such judgment is entered against it
or after the Insured settles such legal proceeding, and, subject to subsection
(e) of Section 5, the Insured may not bring legal proceedings for the recovery
of such loss after the expiration of 24 months from the date of such final
judgment or settlement.
CONDITIONS AND LIMITATIONS
DEFINITIONS
Section 1. As used in this bond:
(a) Acceptance means a draft which the drawee has, by signature written
thereon, engaged to honor as presented.
(b) Certificate of Deposit means an acknowledgment in writing by a
financial institution of receipt of Money with an engagement to repay it.
(c) Certificated Security means a share, participation or other interest in
property of or an enterprise of the issuer or an obligation of the issuer, which
is:
(1) represented by an instrument issued in bearer or registered form;
(2) of a type commonly dealt in on securities exchanges or markets or
commonly recognized in any area in which it is issued or dealt in
as a medium for investment; and
(3) either one of a class or series or by its terms divisible into a
class or series of shares, participations, interests or
obligations.
(d) Counterfeit means an imitation of an actual valid original which is
intended to deceive and to be taken as the original.
(e) Employee means
(1) a natural person in the service of the Insured at any of the
Insured's offices or premises covered hereunder whom the Insured
compensates directly by salary or commissions and whom the
Insured has the right to direct and control while performing
services for the Insured;
(2) an attorney retained by the Insured and an employee of such
attorney while either is performing legal services for the
Insured;
(3) a person provided by an employment contractor to perform employee
duties for the Insured under the Insured's supervision at any of
the Insured's offices or premises covered hereunder; and a guest
student pursuing studies or duties in any of said offices or
premises;
(4) an employee of an institution merged or consolidated with the
Insured prior to the effective date of this bond;
(5) each natural person, partnership or corporation authorized by the
Insured to perform services as data processor of checks or other
accounting records of the Insured (not including preparation or
modification of computer software or programs), herein called
Processor. (Each such Processor, and the partners, officers and
employees of such Processor shall, collectively, be deemed to be
one Employee for all the purposes of this bond, excepting,
however, the second paragraph of Section 12. A Federal Reserve
Bank or clearing house shall not be construed to be a processor.)
and
(6) a Partner of the Insured, unless not covered as stated in Item 4
of the Declarations.
(f) Evidence of Debt means an instrument, including a Negotiable
Instrument, executed by a customer of the Insured and held by the Insured which
in the regular course of business is treated as evidencing the customer's debt
to the Insured.
(g) Financial Interest in the Insured of the Insured's general partner(s),
or limited partner(s), committing dishonest or fraudulent acts covered by this
bond or concerned or implicated there in means:
(1) as respects general partners the value of all right, title and
interest of such general partner(s), determined as of the close of
business on the date of discovery of loss covered by this bond, in
the aggregate of:
(a) the "net worth" of the Insured, which for the purposes of
this bond, shall be deemed to be the excess of its total
assets over its total liabilities, without adjustment to give
effect to loss covered by this bond, (except that credit
balances and equities in proprietary accounts of the Insured,
which shall include capital accounts of partners, investment
and trading accounts of the Insured, participations of the
Insured in joint accounts, and accounts of partners which are
covered by agreements providing for the inclusion of equities
therein as partnership property, shall not be considered as
liabilities) with securities, spot commodities, commodity
future contracts in such proprietary accounts and all other
assets marked to market or fair value and with adjustment for
profits and losses at the market of contractual commitments
for such proprietary accounts of the Insured; and
(b) the value of all other Money, securities and property
belonging to such general partner(s), or in which such
general partner(s) have a pecuniary interest, held by or in
the custody of and legally available to
FORM F-4061-1 Page 4
the Insured as set-off against loss covered by this bond;
provided, however, that if such "net worth" adjusted to give
effect to loss covered by this bond and such value of all
other Money, securities and property as set forth in
(g)(1)(b) preceding, plus the amount of coverage afforded by
this bond on account of such loss, is not sufficient to
enable the Insured to meet its obligations, including its
obligations to its partners other than to such general
partner(s), then the Financial Interest in the Insured, as
above defined, of such general partner(s) shall be reduced in
an amount necessary, or eliminated if need be, in order to
enable the Insured upon payment of loss under this bond to
meet such obligations, to the extent that such payment will
enable the Insured to meet such obligations, without any
benefit accruing to such general partner(s) from such
payment; and
(2) as respects limited partners the value of such limited
partner's investment in the Insured.
(h) Forgery means the signing of the name of another person or organization
with intent to deceive; it does not mean a signature which consists in whole or
in part of one's own name signed with or without authority, in any capacity, for
any purpose.
(i) Guarantee means a written undertaking obligating the signer to pay the
debt of another to the Insured or its assignee or to a financial institution
from which the Insured has purchased participation in the debt, if the debt is
not paid in accordance with its terms.
(j) Instruction means a written order to the issuer of an Uncertificated
Security requesting that the transfer, pledge, or release from pledge of the
Uncertificated Security specified be registered.
(k) Letter of Credit means an engagement in writing by a bank or other
person made at the request of a customer that the bank or other person will
honor drafts or other demands for payment upon compliance with the conditions
specified in the Letter of Credit.
(l) Money means a medium of exchange in current use authorized or adopted
by a domestic or foreign government as a part of its currency.
(m) Negotiable Instrument means any writing
(1) signed by the maker or drawer; and
(2) containing any unconditional promise or order to pay a sum certain
in Money and no other promise, order, obligation or power given by
the maker or drawer; and
(3) is payable on demand or at a definite time; and (4) is payable to
order or bearer.
(n) Partner means a natural person who
(1) is a general partner of the Insured, or
(2) is a limited partner and an Employee (as defined in Section 1 (e)
(1) of the bond) of the Insured.
(o) Property means Money, Certificated Securities, Uncertificated
Securities of any Federal Reserve Bank of the United States, Negotiable
Instruments, Certificates of Deposit, documents of title, Acceptances, Evidences
of Debt, security agreements, Withdrawal Orders, certificates of origin or
title, Letters of Credit, insurance policies, abstracts of title, deeds and
mortgages on real estate, revenue and other stamps, tokens, unsold state lottery
tickets, books of account and other records whether recorded in writing or
electronically, gems, jewelry, precious metals of all kinds and in any form, and
tangible items of personal property which are not hereinbefore enumerated.
(p) Statement of Uncertificated Security means a written statement of the
issuer of an Uncertificated Security containing:
(1) a description of the Issue of which the Uncertificated Security is
a part;
(2) the number of shares or units:
(a) transferred to the registered owner;
(b) pledged by the registered owner to the registered pledgee;
(c) released from pledge by the registered pledgee;
(d) registered in the name of the registered owner on the date of
the statement; or
(e) subject to pledge on the date of the statement;
(3) the name and address of the registered owner and registered
pledgee;
(4) a notation of any liens and restrictions of the issuer and any
adverse claims to which the Uncertificated Security is or may be
subject or a statement that there are none of those liens,
restrictions or adverse claims; and
(5) the date:
(a) the transfer of the shares or units to the new registered
owner of the shares or units was registered;
(b) the pledge of the registered pledgee was registered, or
(c) of the statement, if it is a periodic or annual statement.
(q) Transportation Company means any organization which provides its own or
leased vehicles for transportation or which provides freight forwarding or air
express services.
(r) Uncertificated Security means a share, participation or other interest
in property of or an enterprise of the issuer or an obligation of the issuer,
which is:
(1) not represented by an instrument and the transfer of which is
registered upon books maintained for that purpose by or on behalf
of the issuer;
(2) of a type commonly dealt in on securities exchanges or markets;
and
(3) either one of a class or series or by its terms divisible into a
class or series of shares, participations, interests or
obligations.
(s) Withdrawal Order means a non-negotiable instrument, other than an
Instruction, signed by a customer of the Insured authorizing the Insured to
debit the customer's account in the amount of funds stated therein.
FORM F-4061-1 Page 5
EXCLUSIONS
Section 2. This bond does not cover:
(a) loss resulting directly or indirectly from forgery or alteration,
except when covered under Insuring Agreements (A), (D) or (E); (b) loss due to
riot or civil commotion outside the United States of America and Canada; or loss
due to military, naval or usurped power, war or insurrection unless such loss
occurs in transit in the circumstances recited in Insuring Agreement (C), and
unless, when such transit was initiated, there was no knowledge of such riot,
civil commotion, military, naval or usurped power, war or insurrection on the
part of any person acting for the Insured in initiating such transit;
(c) loss resulting directly or indirectly from the effects of nuclear
fission or fusion or radioactivity; provided, however, that this paragraph shall
not apply to loss resulting from industrial uses of nuclear energy;
(d) loss resulting from any act or acts of any person who is a member of
the Board of Directors of the Insured or a member any equivalent body by
whatsoever name known unless such person is also an Employee or an elected
official of the Insured in some other capacity, nor, in any event, loss
resulting from the act or acts of any person while acting in the capacity of a
member of such Board or equivalent body;
(e) loss resulting directly or indirectly from the complete or partial
nonpayment of, or default upon, any loan or transaction involving the Insured as
a lender or borrower, or extension of credit, including the purchase,
discounting or other acquisition of false or genuine accounts, invoices, notes,
agreements or Evidences of Debt, whether such loan, transaction or extension was
procured in good faith or through trick, artifice, fraud or false pretenses;
except when covered under Insuring Agreements (A), (D) or (E);
(f) loss resulting from any violation by the Insured or by any Employee
(1) of law regulating (i) the issuance, purchase or sale of
securities, (ii) securities transactions upon security exchanges
or over the counter market, (iii) investment companies, or (iv)
investment advisers, or
(2) of any rule or regulation made pursuant to any such law, unless it
is established by the Insured that the act or acts which caused the said loss
involved fraudulent or dishonest conduct which would have caused a loss to the
Insured in a similar amount in the absence of such laws, rule or regulations;
(g) loss resulting directly or indirectly from the failure of a financial
or depository, institution, or its receiver or liquidator, to pay or deliver, on
demand of the Insured, funds or Property of the Insured held by it in any
capacity, except when covered under Insuring Agreements (A) or (B)(1)(a);
(h) loss caused by an Employee, except when covered under Insuring
Agreement (A) or when covered under Insuring Agreement (B) or (C) and resulting
directly from misplacement, mysterious unexplainable disappearance or
destruction of or damage to Property;
(i) loss resulting directly or indirectly from transactions in a customer's
account, whether authorized or unauthorized, except the unlawful withdrawal and
conversion of Money, securities or precious metals, directly from a customer's
account by an Employee provided such unlawful withdrawal and conversion is
covered under Insuring Agreement (A);
(j) damages resulting from any civil, criminal or other legal proceeding in
which the Insured is alleged to have engaged in racketeering activity except
when the Insured establishes that the act or acts giving rise to such damages
were committed by an Employee under circumstances which result directly in a
loss to the Insured covered by Insuring Agreement (A). For the purposes of this
exclusion, "racketeering activity" is defined in 18 United States Code 1961 et
seq., as amended;
(k) loss resulting directly or indirectly from the use or purported use of
credit, debit, charge, access, convenience, identification, cash management or
other cards
(1) in obtaining credit or funds, or
(2) in gaining access to automated mechanical devices which, on behalf
of the Insured, disburse Money, accept deposits, cash checks,
drafts or similar written instruments or make credit card loans,
or
(3) in gaining access to point of sale terminals, customer-bank
communication terminals, or similar electronic terminals of
electronic funds transfer systems,
whether such cards were issued, or purport to have been issued, by the Insured
or by anyone other than the Insured, except when covered under Insuring
Agreement (A);
(l) loss involving automated mechanical devices which, on behalf of the
Insured, disburse Money, accept deposits, cash checks, drafts or
similar written instruments or make credit card loans, except when
covered under Insuring Agreement (A);
(m) loss through the surrender of Property away from an office of the
Insured as a result of a threat
(1) to do bodily harm to any person, except loss of Property in
transit in the custody of any person acting as messenger provided
that when such transit was initiated there was no knowledge by the
Insured of any such threat, or
(2) to do damage to the premises or property of the Insured, except
when covered under Insuring Agreement (A);
(n) loss resulting directly or indirectly from payments made or withdrawals
from a depositor's or customer's account involving erroneous credits to
such accounting unless such payments or withdrawals are physically
received by such depositor or customer or representative of such
depositor or customer who is within the office of the Insured at the
time of such payment or withdrawal, or except when covered under
Insuring Agreement (A);
(o) loss involving items of deposit which are not finally paid for any
reason, including but not limited to Forgery or any other fraud, except
when covered under Insuring Agreement (A);
(p) loss resulting directly or indirectly from counterfeiting, except when
covered under Insuring Agreements (A), (E) or (F);
FORM F-4061-1 Page 6
(q) loss of any tangible item of personal property which is not
specifically enumerated in the paragraph defining Property if such
property is specifically insured by other insurance of any kind and in
any amount obtained by the Insured, and in any event, loss of such
property occurring more than 60 days after the Insured takes possession
of such property, except when covered under Insuring Agreements (A) or
(B)(2);
(r) loss of Property while
(1) in the mail, or
(2) in the custody of any Transportation Company, unless covered under
Insuring Agreement(C),
except when covered under Insuring Agreement (A);
(s) potential income, including but not limited to interest and dividends,
not realized by the Insured or by any customer of the Insured;
(t) damages of any type for which the Insured is legally liable, except
compensatory damages, but not multiples thereof, arising directly from a loss
covered under this bond;
(u) all fees, costs and expenses incurred by the Insured
(1) in establishing the existence of or amount of loss covered under
this bond, or
(2) as a party to any legal proceeding whether or not such legal
proceeding exposes the Insured to loss covered by this bond;
(v) indirect or consequential loss of any nature;
(w) loss involving any Uncertificated Security except an Uncertificated
Security of any Federal Reserve Bank of the United States or when covered under
Insuring Agreement (A);
(x) loss resulting directly or indirectly from any dishonest or fraudulent
act or acts committed by any non-Employee who is a securities, commodities,
money, mortgage, real estate, loan, insurance, property management, investment
banking broker, agent or other representative of the same general character;
(y) loss caused directly or indirectly by a Partner of the Insured unless
the amount of such loss exceeds the Financial Interest in the Insured of such
Partner and the Deductible Amount applicable to this bond, and then for the
excess only;
(z) loss resulting directly or indirectly from any actual or alleged
representation, advice, warranty or guarantee as to the performance of any
investments;
(aa)loss due to liability imposed upon the Insured as a result of the
unlawful disclosure of non-public material information by the Insured or any
Employee, or as a result of any Employee acting upon such information, whether
authorized or unauthorized.
DISCOVERY
Section 3. This bond applies to loss discovered by the Insured during the
Bond Period. Discovery occurs when the Insured first becomes aware of facts
which would cause a reasonable person to assume that a loss of a type covered by
this bond has been or will be incurred, regardless of
when the act or acts causing or contributing to such loss occurred, even
though the exact amount or details of loss may not then be known.
Discovery also occurs when the Insured receives notice of an actual or
potential claim in which it is alleged that the Insured is liable to a third
party under circumstance which if true, would constitute a loss under this bond.
LIMIT OF LIABILITY
Section 4.
Aggregate Limit of Liability
The Underwriter's total liability for all losses discovered during the Bond
Period shown in Item 2 of the Declarations shall not exceed the Aggregate Limit
of Liability shown in Item 3 of the Declarations. The Aggregate Limit of
Liability shall be reduced by the amount of any payment made under the terms of
this bond.
Upon exhaustion of the Aggregate Limit of Liability by such payments:
(a) The Underwriter shall have no further liability for loss or losses
regardless of when discovered and whether or not previously reported to
the Underwriter, and
(b) The Underwriter shall have no obligation under General Agreement F to
continue the defense of the Insured, and upon notice by the Underwriter
to the Insured that the Aggregate Limit of Liability has been
exhausted, the Insured shall assume all responsibility for its defense
at its own cost.
The Aggregate Limit of Liability shall not be increased or reinstated by
any recovery made and applied in accordance with subsections (a), (b) and (c) of
Section 7. In the event that a loss of Property is settled by the Underwriter
through the use of a lost instrument bond, such loss shall not reduce the
Aggregate Limit of Liability.
Single Loss Limit of Liability
Subject to the Aggregate Limit of Liability, the Underwriter's liability
for each Single Loss shall not exceed the applicable Single Loss Limit of
Liability shown in Item 4 of the Declarations. If a Single Loss is covered under
more than one Insuring Agreement or Coverage, the maximum payable shall not
exceed the largest applicable Single Loss Limit of Liability.
Single Loss Defined
Single Loss means all covered loss, including court costs and attorneys'
fees incurred by the Underwriter under General Agreement F, resulting from
(a) any one act or series of related acts of burglary, robbery or attempt
thereat, in which no Employee is implicated, or
(b) any one act or series of related unintentional or negligent acts or
omissions on the part of any person (whether an Employee or not)
resulting in damage to or destruction or misplacement of Property, or
(c) all acts or omissions other than those specified in (a) and (b)
preceding, caused by any person (whether an Employee or not) or in
which such person is implicated, or
FORM F-4061-1 Page 7
(d) any on casualty or event not specified in (a),(b) or (c) preceding.
NOTICE/PROOF-LEGAL
PROCEEDINGS AGAINST UNDERWRITER
Section 5.
(a) At the earliest practicable moment, not to exceed 30 days, after
discovery of loss, the Insured shall give the Underwriter notice thereof.
(b) Within 6 months after such discovery, the Insured shall furnish to the
Underwriter proof of loss, duly sworn to, with full particulars.
(c) Lost Certificated Securities listed in a proof of loss shall be
identified by certificate or bond numbers if such securities were issued
therewith.
(d) Legal proceedings for the recovery of any loss hereunder shall not be
brought prior to the expiration of 60 days after the original proof of loss is
filed with the Underwriter or after the expiration of 24 months from the
discovery of such loss.
(e) If any limitation embodied in this bond is prohibited by any law
controlling the construction hereof, such limitation shall be deemed to be
amended so as to equal the minimum period of limitation provided by such law.
(f) This bond affords coverage only in favor of the Insured. No suit,
action or legal proceedings shall be brought hereunder by any one other than the
named Insured.
VALUATION
Section 6. Any loss of Money, or loss payable in Money, shall be paid, at
the option of the Insured, in the Money of the country in which the loss was
sustained or in the United States of America dollar equivalent thereof
determined at the rate of exchange at the time of payment of such loss.
Securities
The Underwriter shall settle in kind its liability under this bond on
account of a loss of any securities or, at the option of the Insured, shall pay
to the Insured the cost of replacing such securities, determined by the market
value thereof at the time of such settlement. However, if prior to such
settlement the Insured shall be compelled by the demands of a third party or by
market rules to purchase equivalent securities, and gives written notification
of this to the Underwriter, the cost incurred by the Insured shall be taken as
the value of those securities. In case of a loss of subscription, conversion or
redemption privileges through the misplacement or loss of securities, the amount
of such loss shall be the value of such privileges immediately preceding the
expiration thereof. If such securities cannot be replaced or have no quoted
market value, or if such privileges have no quoted market value, their value
shall be determined by agreement or arbitration.
If the applicable coverage of this bond is subject to a Deductible Amount
and/or is not sufficient in amount to indemnify the Insured in full for the loss
of securities for which claim is made hereunder, the liability of the
Underwriter under this bond is limited to the payment for, or the duplication
of, so much of such securities as has a value equal to the amount of such
applicable coverage.
Books of Account and Other Records
In case of loss of, or damage to, any books of account or other records
used by the Insured in its business, the Underwriter shall be liable under this
bond only of such books or records are actually reproduced and then for not more
than the cost of the blank books, blank pages or other materials plus the cost
of labor for the actual transcription or copying of data which shall have been
furnished by the Insured in order to reproduce such books and other records.
Property other than Money, Securities or Records
In case of loss of, or damage to, any Property other than Money,
securities, books of account or other records, or damage covered under Insuring
Agreement (B)(2), the Underwriter shall not be liable for more than the actual
cash value of such Property, or of items covered under Insuring Agreement
(B)(2). The Underwriter may, at its election, pay the actual cash value of,
replace or repair such property. Disagreement between the Underwriter and the
Insured as to the cash value or as to the adequacy of repair or replacement
shall be resolved by arbitration.
Set-Off
Any loss covered under this bond shall be reduced by a set-off consisting
of any amount owed to the Employee causing the loss if such loss is covered
under Insuring Agreement (A).
ASSIGNMENT-SUBROGATION-RECOVERY-
COOPERATION
Section 7.
(a) In the event of payment under this bond, the Insured shall deliver, if
so requested by the Underwriter, an assignment of such of the Insured's
rights, title and interest and causes of action as it has against any
person or entity to the extent of the loss payment.
(b) In the event of payment under this bond, the Underwriter shall be
subrogated to all of the Insured's rights of recovery therefor against
any person or entity to the extent of such payment.
(c) Recoveries, whether effected by the Underwriter or by the Insured,
shall be applied net of the expense of such recovery first to the
satisfaction of the Insured's loss which would otherwise have been paid
but for the fact that it is in excess of either the Single or Aggregate
Limit of Liability, secondly, to the Underwriter as reimbursement of
amounts paid in settlement of the Insured's claim, and thirdly, to the
Insured in satisfaction of any Deductible Amount. Recovery on account
of loss of securities as set forth in the second paragraph of Section 6
or recovery from reinsurance and/or indemnity of the Underwriter shall
not be deemed a recovery as used herein.
(d) Upon the Underwriter's request and at reasonable times and places
designated by the Underwriter the Insured shall
(1) submit to examination by the Underwriter and subscribe to the same
under oath; and
(2) produce for the Underwriter's examination all pertinent records;
and
FORM F-4061-1 Page 8
(3) cooperate with the Underwriter in all matters pertaining to the
loss.
(e) The Insured shall execute all papers and render assistance to secure to
the Underwriter the rights and causes of action provided for herein. The Insured
shall do nothing after discovery of loss to prejudice such rights or causes of
action.
LIMIT OF LIABILITY UNDER THIS BOND AND
PRIOR INSURANCE
Section 8. With respect to any loss set forth in subsection (c) of Section
4 of this bond which is recoverable or recovered in whole or in part under any
other bonds or policies issued by the Underwriter to the Insured or to any
predecessor in interest of the Insured and terminated or canceled or allowed to
expire and in which the period for discovery has not expired at the time any
such loss thereunder is discovered, the total liability of the Underwriter under
this bond and under such other bonds or policies shall not exceed, in the
aggregate, the amount carried hereunder on such loss or the amount available to
the Insured under such other bonds or policies, as limited by the terms and
conditions thereof, for any such loss if the latter amount be the larger.
If the coverage of this bond supersedes in whole or in part the coverage of
any other bond or policy of insurance issued by an Insurer other than the
Underwriter and terminated, canceled or allowed to expire, the Underwriter, with
respect to any loss sustained prior to such termination, cancellation or
expiration and discovered within the period permitted under such other bond or
policy for the discovery of loss thereunder, shall be liable under this bond
only for that part of such loss covered by this bond as is in excess of the
amount recoverable or recovered on account of such loss under such other bond or
policy, anything to the contrary in such other bond or policy notwithstanding.
OTHER INSURANCE OR INDEMNITY
Section 9. Coverage afforded hereunder shall apply only as excess over any
valid and collectible insurance or indemnity obtained by the Insured, or by one
other than the Insured on Property subject to exclusion (p) or by a
Transportation Company, or by another entity on whose premises the loss occurred
or which employed the person causing the loss or the messenger conveying the
Property involved.
OWNERSHIP
Section 10. This bond shall apply to loss of Property (1)
owned by the Insured, (2) held by the Insured in any capacity, or (3) for which
the Insured is legally liable. This bond shall be for the sole use and benefit
of the Insured named in the Declarations.
DEDUCTIBLE AMOUNT
Section 11. The Underwriter shall be liable hereunder only for the amount
by which any single loss, as defined in Section 4, exceeds the Single Loss
Deductible amount for the Insuring Agreement or coverage applicable to such
loss, subject to the Aggregate Limit of Liability and the applicable Single Loss
Limit of Liability.
The Insured shall, in the time and in the manner prescribed in this bond,
give the Underwriter notice of any loss of the kind covered by the terms of this
bond, whether or not the Underwriter is liable therefor, and upon the request of
the Underwriter shall file with it a brief statement giving the particulars
concerning such loss.
TERMINATION OR CANCELATION
Section 12. This bond terminates as an entirety upon occurrence of any of
the following: - (a) 60 days after the receipt by the Insured of a written
notice from the Underwriter of its desire to cancel this bond, or (b)
immediately upon the receipt by the Underwriter of a written notice from the
Insured of its desire to cancel this bond, or (c) immediately upon the taking
over of the Insured by a receiver or other liquidator or by State or Federal
officials, or (d) immediately upon the taking over of the Insured by another
institution, or (e) immediately upon exhaustion of the Aggregate Limit of
Liability, or (f) immediately upon expiration of the Bond Period as set forth in
Item 2 of the Declarations.
This bond terminates as to any Employee or any partner officer or employee
of any Processor - (a) as soon as an Insured, or any director or officer not in
collusion with such person, learns of any dishonest or fraudulent act committed
by such person at any time, whether in the employment of the Insured or
otherwise, whether or not of the type covered under Insuring Agreement (A),
against the Insured or any other person or entity, without prejudice to the loss
of any Property then in transit in the custody of such person, or (b) 15 days
after the receipt by the Insured of a written notice from the Underwriter of its
desire to cancel this bond as to such person.
Termination of the bond as to any Insured terminates liability for any loss
sustained by such Insured which is discovered after the effective date of such
termination.
In witness whereof, the Underwriter has caused this bond to be
executed on the Declarations page.
[GRAPHIC OMITTED]
RIDER
To be attached to and form part of Financial Institution Bond, Standard
Form No. 14, No. 72FI0231536 in favor of Flaherty & Crumrine Preferred Income
Fund Incorporated
It is agreed that:
1. Item 3. of the Declarations is deleted in its entirety and replaced by
the following:
Item 3. The Annual Aggregate Limit of Liability of the Underwriter
applicable to each consecutive one year term of the Bond Period shown
in Item 2. of the Declarations shall be $600,000.
2. The "Aggregate Limit of Liability" wording, in Section 4. "LIMIT OF
LIABILITY," is deleted and replaced by the following:
ANNUAL AGGREGATE LIMIT OF LIABILITY
The Underwriter's total liability for all losses discovered during each
consecutive one year term of the Bond Period shown in Item 2 of the Declarations
shall not exceed the Annual Aggregate Limit of Liability shown in Item 3 of the
Declarations. The Annual Aggregate Limit of Liability applicable to each
consecutive one year term shall be reduced by the amount of any payment made for
such losses under the terms of this bond.
Upon exhaustion of the Annual Aggregate Limit of Liability by such
payments:
(a) The Underwriter shall have no further liability for loss or losses
discovered during the one year term to which such Annual Aggregate
Limit of Liability applies.
(b) The Underwriter shall have no obligation under General Agreement F
to continue the defense of the Insured, and upon notice by the
Underwriter to the Insured that the Annual Aggregate Limit of
Liability has been exhausted, the Insured shall assume all
responsibility for its defense at its own cost.
The Annual Aggregate Limit of Liability shall not be increased or
reinstated by any recovery made and applied in accordance with subsections
(a), (b) and (c) of Section 7. In the event that a loss of Property is
settled by the Underwriter through the use of a lost instrument bond, such
loss shall not reduce the Annual Aggregate Limit of Liability.
3. The "Single Loss Limit of Liability" wording, in Section 4. "LIMIT OF
LIABILITY," is deleted and replaced by the following
SINGLE LOSS LIMIT OF LIABILITY
Subject to the Annual Aggregate Limit of Liability, the Underwriter's
liability for each Single Loss shall not exceed the applicable Single Loss
Limit of Liability shown in Item 4 of the Declarations. If a Single Loss is
covered under more than one Insuring Agreement or Coverage, the maximum
payable shall not exceed the largest applicable Single Loss Limit of
Liability.
4. Section 12. "TERMINATION OR CANCELLATION" is amended by deleting (e) of
paragraph 1 and substituting the following:
(e) immediately upon exhaustion of the Annual Aggregate Limit of
Liability applicable to the final one year term of the Bond Period
as set forth in Item 2 of the Declarations.
5. The phrase "Aggregate Limit of Liability," wherever it appears in
Section 7. "ASSIGNMENT -- SUBROGATION -- RECOVERY -- COOPERATION,"
Section II. "DEDUCTIBLE AMOUNT," is deleted and replaced by the phrase
"Annual Aggregate Limit of Liability".
6. This rider applies to loss sustained at any time but discovered after
12:01 a.m. on May 15, 2006 standard time as specified in the attached
bond.
Accepted:
/S/ CURT MCFAUL
----------------------------------- -------------------------------
Curt McFaul, Attorney-in-Fact
AMENDATORY RIDER -- FINANCIAL INSTITUTION
BOND STANDARD FORMS NO. 14 AND 24.
FORM F-4017-1 Printed in U.S.A. (NS) (Ed. 10-87)
Hartford Fire Insurance Company, Copyright, 1987
RIDER/ENDORSEMENT [GRAPHIC OMITTED]
To be attached to and form part of Bond/Policy No. 72FI0231536
in favor of Flaherty & Crumrine Preferred Income Fund Incorporated
It is agreed that:
1. Section 12. Termination or Cancellation, is amended by adding the
following provision:
In addition, the UNDERWRITER/COMPANY may nonrenew or terminate this
BOND/POLICY by mailing written notice to the Insured, at the address
shown on this BOND/POLICY, sixty (60) days prior to any annual
anniversary date of the inception of the BOND/POLICY. The date of
inception is the date stated in Item 2 of the Declarations.
2. This rider/endorsement shall become effective as of 12:01a.m. on
May 15, 2006 standard time as specified in the attached bond/policy.
Authenticated by /S/ CURT MCFAUL
----------------------------------------------
Curt Mcfaul, ATTORNEY-IN-FACT
NONRENEWAL - TERMINATION PROVISION FOR USE WITH ANY STANDARD BLANKET
FIDELITY BOND /POLICY FORM (EXCEPT PUBLIC EMPLOYEES BLANKET BOND) AND ANY
STANDARD FINANCIAL INSTITUTION BOND/POLICY FORM.
FORM F-4009-1 Printed in U.S.A. (NS)
Copyright Hartford Fire Insurance Company, 1986, 1988
[GRAPHIC OMITTED]
CALIFORNIA PREMIUM RIDER
To be attached to and form part of Bond No.72FI0231536
in favor of Flaherty & Crumrine Preferred Income Fund Incorporated
It is agreed that:
1. In compliance with the ruling of the Commissioner of Insurance of the State
of California and the Opinion of the Attorney - General of that State
requiring that the premium for all bonds or policies be endorsed thereon,
the basic premium charged for the attached bond for the period.
from MAY 15, 2006
to May 15 2007
is Three Thousand Five Hundred Three 00/100 Dollars $3,503
2. This rider is effective as of 12:01 A.M. May 15, 2006
Accepted: Signature Waived Hartford Fire Insurance Company
/S/ CURT MCFAUL
---------------------------------------------
Curt McFaul, Authorized Representative
CALIFORNIA PREMIUM RIDER For use with all forms of Standard Bonds,
to comply with rulings of the Insurance Commissioner and the Attorney - General.
Revised to August, 1968.
FORM F - 3402-1 PRINTED IN U.S.A. (SAA: SR5862)
[OBJECT OMITTED]
RIDER 34
ADD AGENTS COVERAGE
To be attached to and form part of Financial Institution Bond, Standard Form No.
14, NO. SSBKE4661 in favor of FLAHERTY & CRUMRINE PREFERRED INCOME FUND
INCORPORATED.
It is agreed that:
1. DEFINITIONS Section 1. (e) "Employee" is amended by adding the Following:
(7) any person, partnership or corporation listed by name as an Agent in
the Schedule below and any employee, partner or officer thereof. Such
person, partnership or corporation must be duly elected or appointed by
the Insured to serve as its Agent in the capacity of
administrator/investment advisor to the Flaherty & Crumrine Preferred
Income Fund, Inc.
In the event of loss caused by an Agent listed below, or in which such
Agent is involved, the total limit of liability of the Underwriter is
limited to the Amount of Coverage set forth for that Agent, it being
understood, however, that such liability shall be part of and not in
addition to the Amount of Insurance applicable to Insuring Agreement
(A), subject, nevertheless, to Section 7.
SCHEDULE
AGENT AMOUNT OF COVERAGE
First Data Investor Services $600,000.00
2. TERMINATION OR CANCELLATION, Section 12. is amended by adding the following
paragraph:
This bond terminates as to any Employee or any partner, officer or
employee of any Agent- (a) as soon as any Insured, or any director or officer of
the Agent not in collusion with such person, learns of any dishonest or
fraudulent act committed by such person at any time, whether in the employment
of the Insured or otherwise, whether or not of the type covered under Insuring
Agreement (A), against the Insured or any other person or entity, without
prejudice to the loss any Property then in transit in the custody of such
person, or (b) 15 days after the receipt by the Insured of a written notice from
the Underwriter of its desire to cancel this bond as to such person.
3. Except where herein modified, the Bond to which this rider attaches remains
subject to all of its conditions, exclusions and limitations.
4. This rider shall become effective as of 12:01 a.m. on May 15, 2006.
/S/ CURT MCFAUL
-------------------------------
Curt McFaul, Attorney in Fact
[GRAPHIC OMITTED]
RIDER 135
AMEND DEDUCTIBLE FOR INVESTMENT COMPANY
To be attached to and form part of Financial Institution Bond, Standard
Form No. 14, No. 72 FI 0231536 in favor of Flaherty & Crumrine Preferred Income
Fund Incorporated.
It is agreed that:
1. Section 11., DEDUCTIBLE AMOUNT, of the CONDITIONS AND LIMITATIONS is amended
by adding the following:
There shall be no deductible applicable to any loss under INSURING
AGREEMENT (A), Fidelity, sustained by any Investment Company.
2. Section 1., DEFINITIONS, of the CONDITIONS AND LIMITATIONS is amended by
adding the following:
(t) Investment Company means an investment company registered under the
Investment Company Act of 1940 and as listed under the Named Insured on the
Declarations.
3. Except where herein modified, the Bond to which this rider attaches remains
subject to all of its Conditions, Exclusions and Limitations.
4. This rider shall become effective as of 12:01 a.m. on May 15, 2006.
/S/ CURT MCFAUL
-------------------------------
Curt McFaul, Attorney in Fact
RIDER 135 - AMEND DEDUCTIBLE PAGE 1 OF 1
(C) 2001, The Hartford
[GRAPHIC OMITTED]
RIDER 144
AMEND INSURING AGREEMENT (A) FIDELITY
To be attached to and form part of Financial Institution Bond, Standard
Form No. 14, No. 72 FI 0231536
in favor of F&C Preferred Income Fund Incorporated.
It is agreed that:
1. Insuring Agreement (A) FIDELITY is amended to include the following:
(A1) Loss resulting directly from Larceny or Embezzlement committed by any
Employee, acting alone or in collusion with others.
2. Except where herein modified, the Bond to which this rider attaches to
subject to all of its Conditions, Exclusions and Limitations.
3. This rider shall become effective as of 12:01 a.m. on May 15, 2006 .
/S/ CURT MCFAUL
-------------------------------
Curt McFaul, Attorney in Fact
Accepted: __________________________________
[GRAPHIC OMITTED]
RIDER 145
AMEND DEFINITIONS, SECTION 1.
To be attached to and form part of Financial Institution Bond, Standard
Form No. 14, No.72 FI 0231536
in favor of Flaherty & Crumrine Preferred Income Fund Incorporated.
It is agreed that:
1. DEFINITIONS, Section 1. is amended to include the following:
(bb) Larceny or Embezzlement means "Larceny or Embezzlement" as set forth
in Section 37 of the Investment Company Act of 1940.
2. Except where herein modified, the Bond to which this rider attaches to
subject to all of its Conditions, Exclusions and Limitations.
3. This rider shall become effective as of 12:01 a.m. on May 15, 2006.
/S/ CURT MCFAUL
-------------------------------
Curt McFaul, Attorney in Fact
Accepted: __________________________________
[GRAPHIC OMITTED]
RIDER 146
AMEND DEFINITION (E) EMPLOYEE
To be attached to and form part of Financial Institution Bond, Standard
Form No. 14, No. 72 FI 0231536 in favor of Flaherty & Crumrine Preferred Income
Fund Incorporated.
It is agreed that:
1. DEFINITION (e) Employee is amended by adding the following:
(7) an officer of the Insured;
(8) a director or trustee of the Insured, but only while performing acts within
the scope of the customary and usual duties of any officer or Employee of
the Insured, or while acting as a member of any committee duly elected or
appointed to examine or audit or have custody of or access to Property of
the Insured;
(9) any partner, officer or Employee of an investment advisor, an underwriter
(distributor), a transfer agent or shareholder accounting recordkeeper, or
an administrator, for an Investment Company while performing acts coming
within the scope of the customary and usual duties of an officer or
Employee of an Investment Company or acting as a member of any committee
duly elected or appointed to examine, audit or have custody of or access to
Property of an Investment Company.
2. Except where herein modified, the Bond to which this rider attaches remains
subject to all of its Conditions, Exclusions and Limitations.
3. This rider shall become effective as of 12:01 a.m. on May 15, 2006.
/S/ CURT MCFAUL
-------------------------------
Curt McFaul, Attorney in Fact
Accepted: __________________________________
[GRAPHIC OMITTED]
RIDER 147
CANCELLATION RIDER - SECURITIES AND EXCHANGE COMMISSION
To be attached to and form part of Financial Institution Bond, Standard Form No.
14, No. 72 FI 0231536
in favor of Flaherty & Crumrine Preferred Income Fund Incorporated
It is agreed that:
1. The Underwriter will mark its records to indicate that the Securities
and Exchange Commission is to be notified not less than 60 day prior to the
effective date of cancellation or substantial modification of the attached bond,
whether at the request of the Insured or the Underwriter, and will use its best
efforts to so notify said Association but failure to so notify said Association
shall not impair or delay the effectiveness of any such cancellation or
modification.
2. This rider is effective as of 12:01 a.m. on May 15, 2006
/S/ CURT MCFAUL
-------------------------------
Curt McFaul, Attorney in Fact
Accepted: __________________________________
THE FOLLOWING RESOLUTIONS WERE ADOPTED AT THE APRIL 21, 2006 MEETING OF THE
BOARD OF DIRECTORS OF FLAHERTY & CRUMRINE PREFERRED INCOME FUND INCORPORATED:
RESOLVED: That the renewal of the fidelity bond coverage for the
period from May 15, 2006 to May 15, 2007, which provides
coverage in the aggregate amount of $600,000, is hereby
approved; and further
RESOLVED: That it is the finding of the Directors at this Meeting
that the fidelity bond (the "Bond") in the amount of
$600,000 covering officers and employees of the Fund, in
accordance with the requirements of Rule 17g-1 under the
Investment Company Act of 1940, as amended (the "1940
Act"), is reasonable in form and amount, after having
given due consideration to, among other things, the value
of the aggregate assets of the Fund to which any person
covered under the Bond may have access, the custody and
safekeeping of the assets of the Fund's portfolio, and
the nature of the securities in the Fund's portfolio; and
further
RESOLVED: That the premium in the amount of $3,503 paid by the Fund
under the Bond is hereby authorized; and further
RESOLVED: That the appropriate officers of the Fund be, and they
hereby are, authorized and directed to prepare, execute,
and file such amendments and supplements to the aforesaid
agreement, and to take such other action as may from time
to time be necessary or appropriate in order to conform
to the provisions of the 1940 Act and the rules and
regulations under that Act; and further
RESOLVED: That the Secretary or Assistant Secretary of the Fund
shall make such filings concerning the Bond with the
Securities and Exchange Commission and give such notices
as required under paragraph (g) of Rule 17g-1 promulgated
by the Securities and Exchange Commission under the 1940
Act.