PREFERRED INCOME FUND RAISES DIVIDEND ISSUES PREFERRED

Business Editors

PASADENA, Calif. - June 3, 2002 - Preferred Income Fund (NYSE: PFD) has increased the dividend on its common shares by 7.3% to a new regular monthly rate of 8.8 cents per share.

The higher rate will be effective with the dividend payable June 28, 2002 to shareholders of record on June 21, 2002.

The new rate represents a dividend yield of 7.23% based on the closing market price of PFD on Monday, June 3, 2002.

The Fund's Board has also approved the issuance of $22.5 million of additional Money Market Cumulative Preferred ™ stock ("New MMP™"). The shares of the New MMP will be fully interchangeable with the $57.5 million face value of MMP shares currently outstanding.

The registration statement for offering the New MMP shares through Lehman Brothers became effective with the Securities and Exchange Commission on Monday, June 3, 2002. The issuance of the New MMP is expected to be completed on Tuesday, June 4, 2002.

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