Press Release

Year End Dividends, Special Dividend Declared
(For Release 4 p.m. EDT October 20, 1999)

Toronto, October 20, 1999: Premium Income Corporation (the "Company") has declared quarterly dividends of $0.223867 on each of its Preferred shares and $0.30 on each of its Class A shares payable on October 29, 1999 to shareholders of record on that date. The Preferred Share dividend represents an annual yield of 5.75% on the original issue price of $15.00. The Class A Share distribution is comprised of a regular $0.20 distribution (an annual yield of 8% based on the original issue price of $10.00) plus a special distribution of $0.10. The purpose of the special dividend is to ensure that the Company distributes a sufficient amount of its net income and net realized capital gains for 1999 so that it will not be liable for income tax on such amounts. The amount of the special dividend may therefore be subject to minor adjustment.

Premium Income Corporation is a mutual fund corporation which invests in the common shares of Bank of Montreal, The Bank of Nova Scotia, Canadian Imperial Bank of Commerce, Royal Bank of Canada, and The Toronto-Dominion Bank. To generate additional returns above the dividend income earned on the Portfolio, the Company from time to time writes covered call options in respect to all or part of the common shares in the portfolio.

The Companyıs investment portfolio is managed by its investment manager, Mulvihill Capital Management Inc. The Companyıs Preferred and Class A shares are listed on The Toronto Stock Exchange and the Montreal Exchange under the symbols PIC.PR.A and PIC.A.

Dividend Details:

Dividend per Preferred Share: $ 0.223867
Regular Dividend per Class A Share:: $ 0.200000
Special Dividend per Class A Share:: $ 0.100000
Payable Date: October 29, 1999
Record Date: October 29, 1999
Ex-Dividend Date: October 27, 1999

For further information contact:
John Mulvihill, President, Mulvihill Capital Management
Don Biggs, Vice President Structured Products, Mulvihill Capital Management

Premium Income Corporation
121 King Street West, Suite 2600
Toronto, Ontario M5H 3T9
(416) 681-3966   (800) 725-7172