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Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
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<SEC-DOCUMENT>0000935069-02-000349.txt : 20020425
<SEC-HEADER>0000935069-02-000349.hdr.sgml : 20020425
ACCESSION NUMBER:		0000935069-02-000349
CONFORMED SUBMISSION TYPE:	N-30D
PUBLIC DOCUMENT COUNT:		1
CONFORMED PERIOD OF REPORT:	20020228
FILED AS OF DATE:		20020425

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			PREFERRED INCOME FUND INC
		CENTRAL INDEX KEY:			0000868578
		IRS NUMBER:				954305694
		STATE OF INCORPORATION:			MD
		FISCAL YEAR END:			1130

	FILING VALUES:
		FORM TYPE:		N-30D
		SEC ACT:		1940 Act
		SEC FILE NUMBER:	811-06179
		FILM NUMBER:		02621442

	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>pfd.txt
<DESCRIPTION>PREFERRED INCOME FUND QUARTERLY REPORT  02/28/02
<TEXT>
PREFERRED INCOME FUND INCORPORATED

Dear Shareholder:

     The bond and preferred  securities  markets  paused for a rest in the first
quarter of fiscal 2002,  and the Preferred  Income Fund  reflected the lull. The
Fund's total return on net asset value  ("NAV") of -0.4% almost "broke even" for
the three  months  ending  February 28, 2002.  For the  trailing  twelve  months
through February, the total return on NAV of 10.6% was considerably more robust.

     The recent  steady  stream of upbeat  economic  reports  suggests  that the
economic slump in this country may have hit bottom.  So far, the Federal Reserve
has held  short-term  interest  rates steady at very low levels,  reflecting the
tentative nature of a potential  business  recovery.  The Fed also appears to be
taking  comfort  from the  lack of  visible  inflationary  pressures  (with  the
possible exception of oil prices).

     Low short-term  interest  rates hold down the cost of the Fund's  leverage,
which boosts our net income.  This is the same phenomenon that recently  allowed
the  Fund  to pay a  year-end  extra  dividend.  It is  entirely  possible  that
increases in  short-term  rates in upcoming  months could cut into this "surplus
income". For the moment, however, income is starting to accumulate again.

     We are working on a possible  increase in the Fund's  leverage.  The Fund's
assets have grown over time, but the amount of its leverage has stayed the same.
It now appears that we may be able to overcome some of the  obstacles  that have
kept us from  adjusting the leverage in the past.  One  possibility  would be to
increase the proportion of the Fund's assets  represented by leverage to roughly
the level where the Fund's sister fund,  Preferred Income  Opportunity Fund, has
operated very  successfully for years. Of course,  there is no guarantee at this
point what may happen.

     Long-term  interest  rates  seem to be  anticipating  stronger  demand  for
capital as the economy  recovers.  Long-term  Treasury yields edged up just over
1/8% in the first fiscal quarter, which was not enough to make the Fund's hedges
"pay off".  However, a more dramatic jump in long-term rates so far in March has
since put those hedges "in-the-money".  The Fund's hedges are a key component of
its strategy  that is  generally  expected to result in income  increasing  when
interest  rates rise  significantly,  while being  relatively  resistant  to the
impact of significant declines in rates.

     Despite  signs  of a  possible  economic  recovery,  many  sectors  of  the
securities  markets are still  feeling the effects of the binge that the economy
enjoyed before its fall. The  Enron/Arthur  Andersen debacle is the most obvious
example.  The  bottom  line  is that  financial  excess  is  "out",  and  fiscal
conservatism  and full  disclosure  are making a  comeback.  The  adjustment  is
painful for some, but it is good medicine for the future.

                                              Sincerely,
                                              /S/ SIGNATURE

                                              Robert T. Flaherty
                                              CHAIRMAN OF THE BOARD

March 21, 2002

- --------------------------------------------------------------------------------
Preferred Income Fund Incorporated

SUMMARY OF INVESTMENTS
FEBRUARY 28, 2002 (UNAUDITED)
- -----------------------------------
                                                                     PERCENT
                                                      VALUE         OF TOTAL
                                                     (000'S)       NET ASSETS
                                                     --------     ------------
ADJUSTABLE RATE PREFERRED SECURITIES
     Utilities .................................    $  6,877            3.5%
     Banking ...................................      28,038           14.1
     Financial Services ........................       1,056            0.5
                                                    --------         ------
         Total Adjustable Rate .................      35,971           18.1
                                                    --------         ------

FIXED RATE PREFERRED SECURITIES
     Utilities .................................      61,340           30.8
     Banking ...................................      34,276           17.2
     Financial Services ........................      28,418           14.3
     Insurance .................................      16,722            8.4
     Oil and Gas ...............................       6,616            3.3
     Miscellaneous Industries ..................       6,385            3.2
                                                    --------         ------
         Total Fixed Rate ......................     153,757           77.2
                                                    --------         ------

INVERSE FLOATING RATE PREFERRED SECURITIES .....      2,123             1.1

TOTAL PREFERRED SECURITIES .....................     191,851           96.4
MONEY MARKET FUNDS .............................       5,050            2.5
PURCHASED PUT OPTIONS ..........................       1,378            0.7
                                                    --------         ------
TOTAL INVESTMENTS ..............................     198,279           99.6
OTHER ASSETS AND LIABILITIES (NET) .............         713            0.4
                                                    --------         ------
     TOTAL NET ASSETS ..........................    $198,992          100.0%
                                                    ========         ======

FINANCIAL DATA
PER SHARE OF COMMON STOCK (UNAUDITED)
- -------------------------------------
                                                                     DIVIDEND
                        DIVIDEND     NET ASSET        NYSE         REINVESTMENT
                          PAID         VALUE      CLOSING PRICE      PRICE (1)
                       ----------  ------------   -------------   --------------
DECEMBER 31, 2001 ....  $0.1640       $14.46         $14.70           $14.46
January 31, 2002 .....   0.0820        14.40          15.20            14.77
February 28, 2002 ....   0.0820        14.24          15.50            15.20
- --------------------
(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.

                                        2


<PAGE>

- --------------------------------------------------------------------------------
                                              Preferred Income Fund Incorporated
                                           STATEMENT OF CHANGES IN NET ASSETS(1)
                                THREE MONTHS ENDED FEBRUARY 28, 2002 (UNAUDITED)
                               -------------------------------------------------
<TABLE>
<CAPTION>

OPERATIONS:
<S>                                                                                                    <C>
     Net investment income ........................................................................    $   3,132,570
     Net realized loss on investments sold ........................................................         (975,019)
     Net unrealized depreciation of investments during the period .................................       (2,368,526)
                                                                                                       -------------
         Net decrease in net assets from operations ...............................................         (210,975)

DISTRIBUTIONS:
     Dividends paid from net investment income to  MMP* shareholders ..............................         (486,554)
     Distributions paid from net realized capital gains to MMP* shareholders ......................               --
     Dividends paid from net investment income to Common Stock shareholders (2) ...................       (3,252,060)
     Distributions paid from  net realized  capital gains to Common Stock Shareholders ............               --
                                                                                                       -------------
         Total Distributions ......................................................................       (3,738,614)
                                                                                                       -------------
FUND SHARES TRANSACTIONS:
     Increase from Common Stock Transactions ......................................................          529,722

NET DECREASE IN NET ASSETS: .......................................................................       (3,419,867)
NET ASSETS:

     Beginning of period ..........................................................................      202,412,035
                                                                                                       -------------
     End of period ................................................................................    $ 198,992,168
                                                                                                       =============
</TABLE>

                                                         FINANCIAL HIGHLIGHTS(1)
                                THREE MONTHS ENDED FEBRUARY 28, 2002 (UNAUDITED)
                          FOR A COMMON  SHARE OUTSTANDING THROUGHOUT THE PERIOD.
                          ------------------------------------------------------

<TABLE>
<CAPTION>

OPERATING PERFORMANCE:
<S>                                                                                                   <C>
     Net asset value, beginning of period .........................................................   $        14.62
                                                                                                      --------------
     Net investment income ........................................................................             0.32
     Net realized loss and unrealized depreciation on investments .................................            (0.34)
                                                                                                      --------------
     Net decrease in net asset value resulting from investment operations .........................            (0.02)

DISTRIBUTIONS:
     Dividends paid from net investment income to  MMP* Shareholders ..............................            (0.05)
     Distributions paid from net realized capital gains  to MMP*  Shareholders ....................               --
     Dividends paid from  net investment income to Common Stock Shareholders (2) ..................            (0.33)
     Distributions paid  from  net realized capital gains to Common Stock Shareholders ............               --
     Change in accumulated  undeclared dividends on MMP* ..........................................             0.02
                                                                                                      --------------
     Total distributions ..........................................................................           (0.36)
                                                                                                      --------------
     Net asset value, end of period ...............................................................   $        14.24
                                                                                                      ==============
     Market value, end of period ..................................................................   $        15.50
                                                                                                      ==============
     Common shares outstanding, end of period .....................................................        9,933,387
                                                                                                      ==============
RATIOS TO AVERAGE NET ASSETS AVAILABLE TO COMMON STOCK SHAREHOLDERS:
     Net investment income ........................................................................             8.14%**
     Operating expenses ...........................................................................             1.33%**
- --------------------------------------------------------
SUPPLEMENTAL DATA:++
     Portfolio turnover rate fiscal year to date ..................................................                5%
     Net assets, end of period (in 000's) .........................................................    $     198,992
     Ratio of operating expenses to total average net assets including MMP* .......................             0.95%**

</TABLE>

(1) These tables  summarize the three months ended  February 28, 2002 and should
    be read  in  conjunction  with  the  Fund's  audited  financial  statements,
    including footnotes, in its Annual Report dated November 30, 2001.

(2) Includes dividends earned, but not paid out, in prior fiscal year.
*   Money Market Cumulative Preferred(TM)Stock.
**  Annualized.
++  Information presented under Supplemental Data includes MMP*.

                                        3

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 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

                                    QUARTERLY
                                     REPORT

                                FEBRUARY 28, 2002

                        web site: www.preferredincome.com

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