PFO ANNOUNCES EXTRA YEAR-END DIVIDEND OF 10.7 CENTS AND

REGULAR MONTHLY DIVIDEND RATE OF 7.3 CENTS

Business Editors

PASADENA, Calif. – December 16, 2002 – Preferred Income Opportunity Fund (NYSE: PFO) today announced an extra year-end dividend distribution of 10.7 cents per share of common stock.

In addition, the Fund will pay its shareholders the regular monthly dividend rate of 7.3 cents per share.

Both regular and extra dividends consist entirely of net investment income and will be treated as ordinary income for Federal tax purposes. No capital gains are included in these distributions.

The extra year-end dividend reflects the accumulation of additional income for common shareholders attributable in large part to low short-term interest rates and the corresponding savings to the Fund on the cost of its leverage.

Both dividends will be paid on December 31, 2002, to shareholders of record as of December 26, 2002. The expected ex-dividend date is December 20, 2002.

For additional information, contact the Fund’s investment adviser, Flaherty & Crumrine Incorporated, at 626-795-7300.

Contact person: Peter C. Stimes, Treasurer

626/795-7300