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Dear Mr. Berko:

H.G., Frisco, Colo.

Dear H.G.:

Yep, there are some closed-end funds trading at steep discounts that look like bargains. And there are some trading at steep discounts that look like bargains but are not.

Closed-end funds usually get cheaper toward the end of December, the month in which most investors take profits, take losses and balance their portfolios. Many of these CEFs have taken some huge hits and trade significantly below their net asset values (NAVs). Several CEF gurus say the current discounts to NAV may present one of the best buying opportunities in 10 years.

The following six issues meet very strict guidelines for the Portfolio in the Sunshine (PITS) rule; well-managed portfolios that pay good dividends are always in high demand.

BlackRock Enhanced Dividend Achievers Trust (BDJ-$11.44) owns common stocks with good dividends and strong dividend growth. Over 40 percent of the portfolio is composed of bank stocks. BDJ trades at a 13 percent discount to NAV, and the $1.22 dividend yields 10.7 percent. During the past 12 months, the fund’s shares traded between $10.64 and $15.60. I think BDJ could trade between $13.25 and $13.75 in the coming 12 months.

Dreman/Claymore Dividend & Income Fund (DCS-$15.94): Bank stocks, energy issues and consumer staples make up 78 percent of this portfolio. DCS trades at a 16 percent discount to NAV and the $1.30 dividend yields 8.2 percent. In the past year, DCS traded between $23 and $14.50, and I think it could trade up to the $20 level during 2008.

I like the high-yield bond fund issues, especially if interest rates continue to decline during the next 12 months. For example:

MFS Intermediate High Income Fund (CIF-$3.13). Some 73 percent of CIF’s very diversified portfolio is rated BBB or lower with an average maturity of 8.3 years. The 29-cent dividend yields 9.3 percent and the shares trade at a 14 percent discount to NAV. During the past 12 months the fund’s shares had a high of $3.68 and a low price of $2.70. During the next year, CIF could trade between $3.28 and $3.35 a share.

Dreyfus High Yield Strategies Fund (DHF-$3.77) has a hugely diversified $487 million portfolio of bonds with an average weighted maturity of 8.89 years, and none of its myriad issues are better than BBB. The monthly 2.9-cent dividend yields 9.2 percent. This CEF trades at a 14 percent discount to NAV, and during the past year DHF’s share price ranged between $4.48 and $3.06. In the next 12 months it could reach $4 a share.

Closed-end municipal bond funds may have a double bounce in 2008 if interest rates continue lower and if Congress raises the personal income tax rate. So take a look at:

BlackRock Long-Term Municipal Advantage Trust (BTA-$12.44). This fund trades at a huge 11 percent discount to NAV, and the current monthly 5.5-cent dividend yields a sweet tax-free 5.3 percent. About 45 percent of its portfolio is rated A or better, and the remaining issues are BBB and lower. During the past dozen months, BTA traded between $15.10 and $11.14 a share. I think BTA could reach $13.20 a share in the coming 12 months.