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By Jeremy Glaser | 01-27-2011 03:46 PM

A Tour of Our New Closed-End Fund Reports

Morningstar closed-end fund strategist Mike Taggart discusses the legwork behind our new CEF analysis and Qualitative Rating.

Jeremy Glaser: For Morningstar.com, I'm Jeremy Glaser.

We recently launched our Premium closed-end fund Analyst Reports. I'm here with closed-end fund strategist, Mike Taggart, to take a look at what goes into making these new reports and what investors can expect in the future.

Mike, thanks for taking the time today.

Mike Taggart: Yeah, thanks for inviting me.

Glaser: So, can you give us a quick overview of how we're launching our new closed-end fund research?

Taggart: Yes, certainly, well, we've been covering closed-end funds just, in general, more educational, topical type pieces, looking at the closed-end fund universe as a whole for about nine months now. And alongside that effort in the background, our closed-end fund analyst Cara Scatizzi and myself have also been working on putting together these closed-end fund reports, which are going to be reports on individual closed-end funds.

Glaser: So, let's talk a little bit about what you can expect to see in these reports. What are some of the major sections that are in there?

Taggart: Well, there are a lot of sections. We think all of them are important, but they're very lengthy reports.

So, we do have a Morningstar opinion, which we think that people considering a closed-end fund would want to start there, and that's going to be on the top. Those are basically the three items that anybody that's looking to invest in this particular closed-end fund, would want to know before they invested and dug any deeper.

Then after that, we have things such as the portfolio process. How does this portfolio management team kind of go about selecting securities for their portfolio. Then we look at, how is the portfolio positioned? Does the positioning of that portfolio actually mirror what they are telling us or is it something completely different? We look at NAV performance historically. Things that are related to closed-end funds, specifically, like discounts, leverage, those sorts of topics.

We also take a pretty good look at the people who are running the fund, the parent company of the fund and also the board of directors. So, under the board of directors, it's not only like who are these people, but also what kind of stewards are they being. Is there discount control mechanism in place for the closed-end funds? How are they doing with the distributions on the closed-end funds? Is this a fund that is returning too much distribution and bad return of capital to shareholders or are they doing a good job with the cash flow control?

Glaser: When you are crafting these reports, how do you do your research? How do you get the information that feeds into your opinion?

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