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Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
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<SEC-DOCUMENT>0000935069-02-000350.txt : 20020425
<SEC-HEADER>0000935069-02-000350.hdr.sgml : 20020425
ACCESSION NUMBER:		0000935069-02-000350
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 OPPORTUNITY FUND INC
		CENTRAL INDEX KEY:			0000882071
		IRS NUMBER:				954355600
		STATE OF INCORPORATION:			MD
		FISCAL YEAR END:			1130

	FILING VALUES:
		FORM TYPE:		N-30D
		SEC ACT:		1940 Act
		SEC FILE NUMBER:	811-06495
		FILM NUMBER:		02621447

	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>pfo.txt
<DESCRIPTION>PREFERRED OPP QTRLY REPORT 02/28/02
<TEXT>
PREFERRED INCOME OPPORTUNITY 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  Opportunity Fund reflected the
lull.  The Fund's total return on net asset value  ("NAV")  "broke even" for the
three months ending  February 28, 2002.  For the trailing  twelve months through
February, the total return on NAV of 10.8% 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.

     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.

     We have a birthday to celebrate. The Fund turned ten years old in February.
As a result,  services  such as  Morningstar  and Lipper now  include the Fund's
ten-year track record.  With an annualized  total return on NAV of 10.2% for the
ten years  through  February  28, 2002,  this can't hurt!  Check our web site at
WWW.PREFERREDINCOME.COM for more of the numbers.

                                                  Sincerely,
                                                  /S/ SIGNATURE

                                                  Robert T. Flaherty
                                                  CHAIRMAN OF THE BOARD

March 21, 2002


<PAGE>

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

SUMMARY OF INVESTMENTS
FEBRUARY 28, 2002 (UNAUDITED)
- --------------------------------
                                                                       PERCENT
                                                         VALUE        OF TOTAL
                                                        (000'S)      NET ASSETS
                                                        --------    ------------
ADJUSTABLE RATE PREFERRED SECURITIES
     Utilities ..................................      $ 19,929          10.1%
     Banking ....................................         6,396           3.3
     Financial Services .........................         1,056           0.5
                                                       --------        ------
         Total Adjustable Rate ..................        27,381          13.9
                                                       --------        ------

FIXED RATE PREFERRED SECURITIES
     Utilities ..................................        67,618          34.3
     Banking ....................................        28,110          14.2
     Financial Services .........................        29,605          15.0
     Insurance ..................................        16,678           8.4
     Oil and Gas ................................        11,803           6.0
     Miscellaneous Industries ...................         6,878           3.5
                                                       --------        ------
         Total Fixed Rate .......................       160,692          81.4
                                                       --------        ------

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

TOTAL PREFERRED SECURITIES ......................       190,196          96.4
MONEY MARKET FUNDS ..............................         4,964           2.5
PURCHASED PUT OPTIONS ...........................         1,372           0.7
                                                       --------        ------
TOTAL INVESTMENTS ...............................       196,532          99.6
OTHER ASSETS AND LIABILITIES (NET) ..............           840           0.4
                                                       --------        ------
     TOTAL NET ASSETS ...........................      $197,372         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       $0.1360       $11.49        $11.85            $11.49
January 31, 2002         0.0680        11.43         12.05             11.49
February 28, 2002        0.0680        11.33         12.00             11.40
- --------------------
(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 Opportunity Fund Incorporated
                                           STATEMENT OF CHANGES IN NET ASSETS(1)
                                THREE MONTHS ENDED FEBRUARY 28, 2002 (UNAUDITED)
                               -------------------------------------------------
<TABLE>
<CAPTION>

OPERATIONS:
<S>                                                                                              <C>
     Net investment income ................................................................      $  3,128,965
     Net realized loss on investments sold ................................................          (721,431)
     Net unrealized depreciation of investments during the period .........................        (2,036,504)
                                                                                                 ------------
         Net increase in net assets from operations .......................................           371,030

DISTRIBUTIONS:
     Dividends paid  from  netinvestment income to MMP* Shareholders ......................          (626,661)
     Distributions paid from net realized capital gains to MMP*  Shareholders .............                --
      Dividends paid from net investment income to Common Stock Shareholders ..............    (2) (3,048,348)
     Distributions paid from  net realized capital gains to Common Stock Shareholders .....                --
                                                                                                 ------------
     Total Distributions ..................................................................        (3,675,009)
                                                                                                 ------------
FUND SHARE TRANSACTIONS:
     Increase from Common Stock transactions ..............................................           447,992

NET DECREASE IN NET ASSETS: ...............................................................        (2,855,987)

NET ASSETS:
     Beginning of period ..................................................................       200,227,991
                                                                                                 ------------
     End of period ........................................................................      $197,372,004
                                                                                                 ------------
</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 ........................................................    $        11.60
                                                                                                      --------------
     Net investment income .......................................................................              0.28
     Net realized loss and unrealized depreciation on investments ................................             (0.25)
                                                                                                      --------------
     Net increase in net asset value resulting from investment operations ........................              0.03

DISTRIBUTIONS:
     Dividends paid  from  net investment  income to  MMP* Shareholders ..........................             (0.06)
     Distributions paid from net realized  capital gains to MMP* Shareholders ....................                --
     Dividends paid from  net investment  income  to   Common Stock Shareholders (2) .............             (0.27)
     Distributions  paid  from  net  realized  capital gains to Common Stock Shareholders ........                --
     Change in accumulated undeclared dividends  on   MMP* .......................................              0.03
                                                                                                      --------------
     Total distributions .........................................................................             (0.30)
                                                                                                      --------------
     Net asset value, end of period ..............................................................    $        11.33
                                                                                                      ==============
     Market value, end of period .................................................................    $        12.00
                                                                                                      ==============
     Common shares outstanding, end of period ....................................................        11,228,061
                                                                                                      ==============
RATIOS TO AVERAGE NET ASSETS AVAILABLE TO COMMON STOCK SHAREHOLDERS:
     Net investment income .......................................................................              8.90%**
     Operating expenses ..........................................................................              1.50%**
- --------------------------------------------------------

SUPPLEMENTAL DATA:++
     Portfolio turnover rate fiscal year to date .................................................                 6%
     Net assets, end of period (in 000's) ........................................................      $    197,372
     Ratio of operating expenses to total average net assets including MMP* ......................              0.97%**

</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 heading 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 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  OPPORTUNITY  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 INCOME OPPORTUNITY LOGO

                                    QUARTERLY
                                     REPORT

                                FEBRUARY 28, 2002

                        web site: www.preferredincome.com

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