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Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
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<SEC-DOCUMENT>0000935069-01-000245.txt : 20010421
<SEC-HEADER>0000935069-01-000245.hdr.sgml : 20010421
ACCESSION NUMBER:		0000935069-01-000245
CONFORMED SUBMISSION TYPE:	N-30D
PUBLIC DOCUMENT COUNT:		1
CONFORMED PERIOD OF REPORT:	20010228
FILED AS OF DATE:		20010419

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			PREFERRED INCOME OPPORTUNITY FUND INC
		CENTRAL INDEX KEY:			0000882071
		STANDARD INDUSTRIAL CLASSIFICATION:	 []
		IRS NUMBER:				954355600
		STATE OF INCORPORATION:			MD
		FISCAL YEAR END:			1130

	FILING VALUES:
		FORM TYPE:		N-30D
		SEC ACT:		
		SEC FILE NUMBER:	811-06495
		FILM NUMBER:		1606552

	BUSINESS ADDRESS:	
		STREET 1:		301 E COLORADO BLVD STE 720
		STREET 2:		C/O FLAHERTY & CRUMRINE INC
		CITY:			PASADENA
		STATE:			CA
		ZIP:			91101
		BUSINESS PHONE:		8187957300

	MAIL ADDRESS:	
		STREET 1:		301 COLORADO BLVD
		STREET 2:		STE 720
		CITY:			PASADENA
		STATE:			CA
		ZIP:			91101
</SEC-HEADER>
<DOCUMENT>
<TYPE>N-30D
<SEQUENCE>1
<FILENAME>0001.txt
<DESCRIPTION>PREFERRED INCOME OPPORTUNITY FUND QUARTERLY REPORT
<TEXT>



PREFERRED INCOME OPPORTUNITY FUND INCORPORATED

Dear Shareholder:

     The  Preferred  Income  Opportunity  Fund is off to a good  start in Fiscal
2001.  The total  return on net asset value in the fiscal  first  quarter  ended
February 28th was 5.56%.  These strong  results helped the Fund achieve a return
of 13.23% for the trailing twelve months through February.

     It is nice to see this progress  also  reflected in the market price of the
Fund's  shares.  The  discount of the market  price from the net asset value has
typically  been rather  erratic.  However,  the discount has generally  narrowed
recently,  and it has virtually  disappeared on several occasions.  As a result,
total  returns on market  value have  exceeded  the  returns on net asset  value
stated above.

     The Fund has done well in a market  environment  that most investors  would
like to  forget.  The  common  stock  market  has taken it on the chin,  and the
overall economy appears to be feeling some sympathetic  pains. As Washington has
debated the merits of tax cuts, the Federal  Reserve Bank has moved to stimulate
the economy by lowering  interest  rates.  Lower  interest  rates are  generally
helpful to investors in bonds and preferreds, and that includes us.

     Falling  interest  rates  helped  the Fund in a couple  of ways.  The Fed's
actions most directly affected  short-term interest rates. That brought down the
cost of the Fund's  leverage,  which is determined every 49 days. As the decline
spilled  over to  long-term  interest  rates,  the  market  value of the  Fund's
portfolio of preferreds appreciated. So far, that's two for two.

     As we should expect,  falling  interest  rates also produced  losses on the
Fund's  hedges.  As usual,  we hedged  the  portfolio  in an effort to limit the
Fund's  exposure  to the risk of  interest  rates  going up and the value of the
portfolio  declining.  We did this by  purchasing  put options on Treasury  bond
futures contracts,  which created something of a "safety net" below the level of
the market.  When interest rates went down and preferred prices  increased,  the
hedges were simply unneeded "insurance". However, the cost of acquiring them was
easily absorbed in a strong market.

     Within the portfolio,  hybrid preferreds led the performance  parade in the
last quarter,  while traditional  preferreds lagged behind.  Hybrids appeared to
benefit,  both directly and  indirectly,  from increased  interest by individual
investors  abandoning the common stock market in search of income and safety. In
contrast,  corporate investors, who typically buy traditional preferreds because
of their tax advantages,  generally overlooked  exceptionally  attractive values
(in our opinion) in that sector. In the absence of a crystal ball,  diversifying
the Fund's portfolio over various types of preferreds has definite advantages.

     Don't forget the Fund's web site at WWW.PREFERREDINCOME.COM.  It is an easy
way to keep up to date on the  recent  progress  of the  Fund.  We  invite  your
comment and suggestions for improving the web site.

                                Sincerely,

                                /S/ ROBERT T FLAHERTY

                                Robert T. Flaherty
                                CHAIRMAN OF THE BOARD

March 19, 2001

<PAGE>
- --------------------------------------------------------------------------------
Preferred Income Opportunity Fund Incorporated
SUMMARY OF INVESTMENTS
FEBRUARY 28, 2001 (UNAUDITED)
- ----------------------------------------------
                                                                      PERCENT
                                                        VALUE         OF TOTAL
                                                       (000'S)       NET ASSETS
                                                       -------       ----------
ADJUSTABLE RATE PREFERRED STOCKS
     Utilities ....................................   $ 10,260            5.3%
     Banking ......................................     11,522            6.0
                                                      --------          -----
         Total Adjustable Rate ....................     21,782           11.3
                                                      --------          -----
FIXED RATE PREFERRED STOCKS AND SECURITIES
     Utilities ....................................     61,612           31.8
     Banking ......................................     36,573           18.9
     Financial Services ...........................     30,178           15.6
     Insurance ....................................     20,325           10.5
     Oil and Gas ..................................     13,716            7.1
     Miscellaneous Industries .....................      5,382            2.8
                                                      --------          -----
         Total Fixed Rate .........................    167,786           86.7
                                                      --------          -----
TOTAL PREFERRED STOCKS  AND SECURITIES ............    189,568           98.0
COMMON STOCKS
     Utilities ....................................        604            0.3
COMMERCIAL PAPER ..................................      1,730            0.9
PURCHASED PUT OPTIONS .............................        389            0.2
                                                      --------          -----
TOTAL INVESTMENTS .................................    192,291           99.4
OTHER ASSETS AND LIABILITIES (NET) ................      1,202            0.6
                                                      --------          -----
     TOTAL NET ASSETS .............................   $193,493          100.0%
                                                      ========          =====

FINANCIAL DATA
PER SHARE OF COMMON STOCK (UNAUDITED)
- -------------------------------------
<TABLE>
<CAPTION>
                                                                                                        DIVIDEND
                                                      DISTRIBUTION      NET ASSET        NYSE         REINVESTMENT
                                                          PAID            VALUE      CLOSING PRICE      PRICE (1)
                                                      ------------      ---------    -------------    ------------
<S>                                                     <C>              <C>           <C>               <C>
December 31, 2000 .................................     $0.0680          $10.67        $10.38            $10.34
January 31, 2001 ..................................      0.0680           10.93         10.65             10.58
February 28, 2001 .................................      0.0680           11.06         10.50             10.92
- --------------------
<FN>
(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 payment 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.
</FN>
</TABLE>

                                        2
<PAGE>

- --------------------------------------------------------------------------------
                                  Preferred Income Opportunity Fund Incorporated
                                           STATEMENT OF CHANGES IN NET ASSETS(1)
                                THREE MONTHS ENDED FEBRUARY 28, 2001 (UNAUDITED)
                                ------------------------------------------------
<TABLE>
<CAPTION>
<S>                                                                                                     <C>
OPERATIONS:
     Net investment income .....................................................................        $  3,047,203
     Net realized loss on investments sold .....................................................          (1,115,555)
     Net unrealized appreciation of investments during the period ..............................           5,563,144
                                                                                                        ------------
         Net increase in net assets from operations ............................................           7,494,792

DISTRIBUTIONS:
     Dividends paid from net investment income to MMP* shareholders ............................          (1,392,776)
     Distributions  paid from net realized capital gains to MMP* shareholders ..................                  --
     Dividends paid from net investment income to Common Stock  shareholders (2) ...............          (2,274,863)
     Distributions  paid from net realized  capital gains to Common Stock Shareholders .........                  --
                                                                                                        ------------
     Total Distributions .......................................................................          (3,667,639)
                                                                                                        ------------
NET INCREASE IN NET ASSETS: ....................................................................           3,827,153

NET ASSETS:
     Beginning of period .......................................................................         189,666,278
                                                                                                        ------------
     End of period .............................................................................        $193,493,431
                                                                                                        ============
</TABLE>

                                                         FINANCIAL HIGHLIGHTS(1)
                                THREE MONTHS ENDED FEBRUARY 28, 2001 (UNAUDITED)
                           FOR A COMMON SHARE OUTSTANDING THROUGHOUT THE PERIOD.
                           -----------------------------------------------------
<TABLE>
<CAPTION>
<S>                                                                                                     <C>
OPERATING PERFORMANCE:
     Net asset value, beginning of period ......................................................        $      10.68
                                                                                                        ------------
     Net investment income .....................................................................                0.27
     Net realized loss and unrealized appreciation on investments ..............................                0.40
                                                                                                        ------------
     Net increase in net asset value resulting from investment operations ......................                0.67

DISTRIBUTIONS:
     Dividends  paid  from net  investment  income to MMP*  Shareholders .......................               (0.13)
     Distributions  paid from net realized capital gains to MMP* Shareholders ..................                  --
     Dividends paid from net investment income to Common Stock  Shareholders (2) ...............               (0.20)
     Distributions  paid from net realized capital gains to Common Stock Shareholders ..........                  --
     Change in accumulated undeclared dividends on MMP* ........................................                0.04
                                                                                                        ------------
     Total distributions .......................................................................               (0.29)
                                                                                                        ------------
     Net asset value, end of period ............................................................        $      11.06
                                                                                                        ============
     Market value, end of period ...............................................................        $      10.50
                                                                                                        ============
     Common shares outstanding, end of period ..................................................          11,151,287
                                                                                                        ============
RATIOS TO AVERAGE NET ASSETS AVAILABLE TO COMMON STOCK SHAREHOLDERS:
     Net investment income .....................................................................                7.01%**
     Operating expenses ........................................................................                1.65%**

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

SUPPLEMENTAL DATA:++
     Portfolio turnover rate fiscal year to date ...............................................                   7%
     Net assets, end of period (in 000's) ......................................................        $    193,493
     Ratio of operating expenses to total average net assets including MMP* ....................                1.03%**

<FN>
(1) These tables summarize the three months ended February 28, 2001 and should
    be read in conjunction with the Fund's audited financial statements,
    including footnotes, in its Annual Report dated November 30, 2000.
(2) Includes income earned, but not paid out, in prior fiscal year.
*   Money Market Cumulative Preferred TM Stock.
**  Annualized.
++ Information presented under heading Supplemental Data includes MMP*.
</FN>
</TABLE>

                                        3
<PAGE>

DIRECTORS
   Martin Brody
   Donald F. Crumrine, CFA
   Robert T. Flaherty, CFA
   David Gale
   Morgan Gust
   Robert F. Wulf, CFA

OFFICERS
   Robert T. Flaherty, CFA
     Chairman of the Board
     and President
   Donald F. Crumrine, CFA
     Vice President
     and Secretary
   Robert M. Ettinger, CFA
     Vice President
   Peter C. Stimes, CFA
     Vice President
     and Treasurer

INVESTMENT ADVISER
   Flaherty & Crumrine Incorporated
   e-mail: flaherty@fin-mail.com


QUESTIONS CONCERNING YOUR SHARES OF PREFERRED
   INCOME OPPORTUNITY FUND?
   o If your shares are held in a Brokerage
     Account, contact your Broker.
   o If you have physical possession of your shares
     in certificate form, contact the Fund's Transfer
     Agent & Shareholder Servicing Agent --
               PFPC Inc.
               P.O. Box 1376
               Boston, MA  02104
               1-800-331-1710

THIS REPORT IS SENT TO SHAREHOLDERS OF PREFERRED
INCOME 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.

                                (GRAPHIC OMITTED: PREFERRED LOGO)
                                PREFERRED
                                INCOME
                                OPPORTUNITY
                                ----
                                FUND
                                ----

                                Quarterly
                                  Report


                            February 28, 2001

                        web site: www.preferredincome.com


</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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