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Dear Mr. Berko:

Dear C.L.:

Consider investing $6,000 in each of the following six issues:

Bank Of America Corp. 7.25 percent Convertible Preferred (BAC+L) trades at $652 and has a par value of $1,000. This global powerhouse owns Merrill Lynch, Countrywide Financial, FleetBoston Financial, MBNA and LaSalle Bank. I believe BAC will make a good recovery in the coming four to seven years. So I’m recommending the above convertible preferred. It has a swell 11.1 percent current return, is eligible for the 15 percent dividend tax rate and is convertible into 20 shares of common stock at the owner’s discretion after January 2013. It’s rated A-plus, but I have no confidence in the veracity of Standard & Poor’s or Moody’s ratings.

Citigroup Inc., another huge bank with more than 200 million customers in 100 countries, owns Smith Barney, CIT Financial, Primerica and a few other choice subsidiaries. Like BAC, Citigroup was clobbered by the mortgage mess, which created some excellent investment opportunities. Because I believe Citigroup will recover well in the coming four to seven years, I’m recommending the Citigroup 7.125 percent TruPs Preferred (C-V) trading at $14.57. This issue is callable anytime at $25, matures in July 2031, and the $1.78 dividend provides a 12.2 percent yield at the current price. The dividend doesn’t qualify for the 15 percent tax rate.

I also like Regions Financial Corp. 8.875 percent Trust Preferred Securities (RF-Z) trading at $20.11, callable in 2013 at $25 and rated AAA by Moody’s. The $2.22 divided, which is not eligible for the 15 percent tax rate, has an 11 percent current return. This Birmingham, Ala., bank has more than $80 billion in assets and is the 15th-largest bank in the nation. I think it will recover nicely in the coming four to seven years.

Now I’d like you to consider the following non-leveraged, tax-free, closed-end funds. I don’t think there’s any doubt that tax rates will move much higher in the coming years, and there’s talk the IRS might place a limit on the amount of tax-free income Americans can earn. The talk places that limit at $40,000. Those lucky folks who have more than that today will be grandfathered in, but new investors will have that limit imposed on them. Tax-free yields are about the highest I’ve seen in 25 years, and the following issues appeal to me.

Blackrock Municipal Income Trust Fund (BFK-$9.23) has a 6.86 cent monthly dividend that yields 8.9 percent, which is equivalent to an 12.3 percent taxable yield.

Van Kampen Municipal Trust Fund (VKQ-$9.34) provides a 7 cent monthly dividend that yields 9 percent, which is equivalent to an 12.5 percent taxable yield.

And finally, Morgan Stanley Municipal Income Trust (OIB-$6.08) with its 4.25 cent monthly dividend yields 8.4 percent, which is equivalent to an 11.7 percent taxable return.

Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or e-mail him at malber@adelphia.net. © Copley News Service