UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-22437
Guggenheim Build America Bonds Managed Duration Trust
(Exact name of registrant as specified in charter)
2455 Corporate West Drive, Lisle, IL 60532
(Address of principal executive offices) (Zip code)
Kevin M. Robinson
2455 Corporate West Drive, Lisle, IL 60532
(Name and address of agent for service)
Registrant's telephone number, including area code: (630) 505-3700
Date of fiscal year end: May 31
Date of reporting period: November 30, 2011
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549-1090. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. Section 3507.
Item 1. Reports to Stockholders.
The registrant's semi-annual report transmitted to shareholders pursuant to Rule 30e-1 under the Investment Company Act of 1940, as amended (the “Investment Company Act”), is as follows:
... your window to the LATEST,
most up-to-date information about the
Guggenheim Build America Bonds Managed Duration Trust
The shareholder report you are reading right now is just the beginning of the story. Online at www.guggenheimfunds.com/gbab, you will find:
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Daily, weekly and monthly data on share prices, net asset values, distributions and more
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Portfolio overviews and performance analyses
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Announcements, press releases and special notices
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Trust and adviser contact information
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Guggenheim Partners Asset Management, LLC and Guggenheim Funds Investment Advisors, LLC are continually updating and expanding shareholder information services on the Trust’s website, in an ongoing effort to provide you with the most current information about how your Trust’s assets are managed, and the results of our efforts. It is just one more small way we are working to keep you better informed about your investment in the Trust.
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GBAB l Guggenheim Build America Bonds Managed Duration Trust
Dear Shareholder l
We thank you for your investment in the Guggenheim Build America Bonds Managed Duration Trust (the “Trust”). This report covers the Trust’s performance for the semiannual period ended November 30, 2011.
The Trust is a diversified, closed-end management investment company. The Trust’s primary investment objective is to provide current income with a secondary objective of long-term capital appreciation. The Trust seeks to achieve its investment objectives by investing primarily in a diversified portfolio of taxable municipal securities known as “Build America Bonds” (“BABs”). BABs are taxable municipal securities issued by state and local governments, pursuant to the American Recovery and Reinvestment Act of 2009 (the “Act”).
For the six-month period ended November 30, 2011, the Trust provided a total return based on market price of 10.93% and a total return based on NAV of 9.98%. As of November 30, 2011, the Trust’s market price of $20.92 per share represented a discount of 4.78% to its NAV of $21.97 per share. The market value of the Trust’s shares fluctuates from time to time, and it may be higher or lower than the Trust’s NAV.
Guggenheim Funds Investment Advisors, LLC (“GFIA” or the “Adviser”) serves as the investment adviser to the Trust and is responsible for the management of the Trust. Guggenheim Partners Asset Management, LLC (“GPAM” or the “Sub-Adviser”) serves as the Trust’s investment sub-adviser and is responsible for the management of the Trust’s portfolio of investments. Each of the Adviser and the Sub-Adviser is an affiliate of Guggenheim Partners, LLC (“Guggenheim”), a global diversified financial services firm with more than $125 billion in assets under management.
In each month from June 2011 through October 2011, the Trust paid monthly dividends of $0.117 per share. On November 1, 2011, the Trust announced a 10.26% increase in its monthly dividend to $0.129 per share, effective with its November 2011 dividend. The most recent dividend represents an annualized distribution rate of 7.40% based on the Trust’s last closing market price of $20.92 as of November 30, 2011.
We encourage shareholders to consider the opportunity to reinvest their distributions from the Trust through the Dividend Reinvestment Plan (“DRIP”), which is described in detail on page 32 of this report. When shares trade at a discount to NAV, the DRIP takes advantage of the discount by reinvesting the monthly dividend distribution in common shares of the Trust purchased in the market at a price less than NAV. Conversely, when the market price of the Trust’s common shares is at a premium above NAV, the DRIP reinvests participants’ dividends in newly-issued common shares at NAV, subject to an Internal Revenue Service (“IRS”) limitation that the purchase price cannot be more than 5% below the market price per share. The DRIP provides a cost-effective means to accumulate additional shares and enjoy the benefits of compounding returns over time. Since the Trust endeavors to maintain a steady monthly distribution rate, the DRIP effectively provides an income averaging technique, which causes shareholders to accumulate a larger number of Trust shares when the share price is lower than when the price is higher.
We are honored that you have chosen the Guggenheim Build America Bonds Managed Duration Trust as part of your investment portfolio. For the most up-to-date information regarding your investment, please visit the Trust’s website at www.guggenheimfunds.com/gbab.
Sincerely,
Kevin M. Robinson
Chief Executive Officer
Guggenheim Build America Bonds Managed Duration Trust
December 30, 2011
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GBAB l Guggenheim Build America Bonds Managed Duration Trust
Questions & Answers l
The Guggenheim Build America Bonds Managed Duration Trust (the “Trust”) is managed by a team of seasoned professionals at Guggenheim Partners Asset Management, LLC (“GPAM” or the “Sub-Adviser”). This team includes B. Scott Minerd, Chief Executive Officer and Chief Investment Officer; Anne Bookwalter Walsh, CFA, JD, Senior Managing Director; and James E. Pass, Managing Director. In the following interview, the investment team discusses the market environment and the Trust’s strategy and performance for the semiannual fiscal period ended November 30, 2011.
Please describe the Trust’s objective and strategy.
The Trust’s primary investment objective is to provide current income with a secondary objective of long-term capital appreciation. The Trust cannot ensure investors that it will achieve its investment objectives.
The Trust seeks to achieve its investment objectives by investing primarily in a diversified portfolio of taxable municipal securities known as “Build America Bonds” (“BABs”). Under normal market conditions:
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The Trust will invest at least 80% of its Managed Assets in BABs.
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The Trust may invest up to 20% of its Managed Assets in securities other than BABs, including taxable municipal securities that do not qualify for federal subsidy payments under the American Reinvestment and Recovery Act of 2009 (the “Act”), municipal securities the interest income from which is exempt from regular federal income tax (sometimes referred to as “tax-exempt municipal securities”), asset-backed securities (“ABS”), senior loans and other income producing securities.
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At least 80% of the Trust’s Managed Assets will be invested in securities that, at the time of investment, are investment grade quality. The Trust may invest up to 20% of its Managed Assets in securities that, at the time of investment, are below investment grade quality. Securities of below investment grade quality are regarded as having predominately speculative characteristics with respect to capacity to pay interest and repay principal.
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The Trust will not invest more than 25% of its Managed Assets in municipal securities in any one state of origin.
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The Trust will not invest more than 15% of its Managed Assets in municipal securities that, at the time of investment, are illiquid.
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BABs are taxable municipal securities that include bonds issued by state and local governments to finance capital projects such as public schools, roads, transportation infrastructure, bridges, ports and public buildings, pursuant to the Act.
In contrast to traditional municipal bonds, interest received on BABs is subject to federal income tax and may be subject to state income tax. However, issuers of Direct Payment BABs are eligible to receive a subsidy from the U.S. Treasury of up to 35% of the interest paid on the bonds, allowing such issuers to issue BABs that pay interest rates that are competitive with the rates typically paid by private bond issuers in the taxable fixed-income market.
The Sub-Adviser employs investment and trading strategies to seek to maintain the leverage-adjusted duration of the Trust’s portfolio at approximately 10 years. (Duration is a measure of a bond’s price sensitivity to changes in interest rates, expressed in years. Duration is a weighted average of the times that interest payments and the final return of principal are received. The weights are the amounts of the payments discounted by the yield to maturity of the bond.) The Trust may invest up to 20% of its Managed Assets in securities other than BABs, which may consist of short-duration fixed-income securities, which may help to decrease the overall duration of the Trust’s portfolio while also potentially adding incremental yield. In addition, the Sub-Adviser may seek to manage the duration of the Trust’s portfolio through the use of derivative instruments, including U.S. treasury swaps, credit default swaps, total return swaps and futures contracts to reduce the overall volatility of the Trust’s portfolio to changes in market interest rates. The Sub-Adviser does not currently use derivative instruments to manage the duration of the Trust’s portfolio but may do so in the future. The Sub-Adviser may seek to manage the Trust’s duration in a flexible and opportunistic manner based primarily on then current market conditions and interest rate levels. The Trust may incur costs in implementing the duration management strategy, but such strategy will seek to reduce the volatility of the Trust’s portfolio.
Please provide an overview of the market for BABs during the period covered by this report.
BABs represented approximately 25% of the municipal bonds issued in 2010, and the success of the Build America Bond Program caused a substantial decline in the issuance of long-dated tax exempt bonds, causing prices to rise and yields to decline on tax-exempt bonds. As the end of December 2010 approached, there was much discussion about whether the BAB
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program would be extended beyond its scheduled expiration date of December 31, 2010, but the program was not extended by Congress.
There were two schools of thought about how the bonds would perform after the Build America Bond program ended. Some believed that BABs would become an orphan asset class, with prices in the secondary market suffering from illiquidity. Others believed that the scarcity value of the product would cause BABs to appreciate in value, a view shared by the Trust’s managers.
In fact, BABs performed very well during 2011, as strong demand pushed yields on BABs lower and prices higher. Besides the scarcity value, BABs, along with other municipal bonds, benefited from an improving credit picture for the municipal market, as revenue collection improved and governments of many states instituted budget cuts. For the period covered by this report, the six months ended November 30, 2011, the Bank of America Merrill Lynch Build America Bond Index (the “Index”), which measures return of BABs as an asset class, returned 9.86%, making BABs one of the best performing asset classes for this period.
How did the Trust perform during the semiannual period?
All Trust returns cited—whether based on net asset value (“NAV”) or market price—assume the reinvestment of all distributions. For the six-month period ended November 30, 2011, the Trust provided a total return based on market price of 10.93% and a total return based on NAV of 9.98%. The Trust’s NAV return surpassed the return of the Index, which measures return of BABs as an asset class, even though the Trust has operating expenses that affect performance, while the Index has no expenses.
As of November 30, 2011, the Trust’s market price of $20.92 per share represented a discount of 4.78% to its NAV of $21.97 per share. The market value of the Trust’s shares fluctuates from time to time and it may be higher or lower than the Trust’s NAV. Past performance is not a guarantee of future results.
In each month from June 2011 through October 2011, the Trust paid monthly dividends of $0.117 per share. On November 1, 2011, the Trust announced a 10.26% increase in its monthly dividend to $0.1290 per share, effective with its November 2011 dividend. The most recent dividend represents an annualized distribution rate of 7.40% based on the Trust’s last closing market price of $20.92 as of November 30, 2011.
How are the Trust’s assets invested, and what has that meant for performance?
As of November 30, 2011, approximately 83% of the Trust’s long-term investments were in BABs and Qualified School Construction Bonds (“QSCBs”), which are included as BABs for purposes of the Trust’s policy of investing at least 80% of its Managed Assets in BABs. QSCBs are taxable obligations issued by school districts, with proceeds used for the construction or renovation of schools. Interest expense (up to a certain amount) is reimbursable by the federal government through the American Recovery and Reinvestment Act of 2009. BABs performed well across the board, with no great differences among sectors within the BABs category.
The remainder of the Trust (approximately 17% of long-term investments as of November 30, 2011) was invested in non-BABs securities. With negative returns from high yield bonds, as measured by the -3.75% return of the Merrill Lynch High Yield Master II Index, a commonly used benchmark index for high yield corporate bonds, the high yield bonds held in the portfolio detracted from the Trust’s return.
Within the Trust’s BABs holdings, approximately 68% are revenue bonds and 26% are general obligation bonds. The largest category, school bonds, represented approximately 23% of BABs as of November 30, 2011, followed by university bonds, which represented approximately 19%. No BABs have been sold since the inception of the portfolio.
The high correlation between BABs and U.S. Treasury securities contributed to performance. U.S. Treasury securities rallied strongly during the period, as the financial crisis in Europe drove investors U.S. toward dollar-denominated assets. Rates on U.S. Treasury bonds plunged to nearly unprecedented levels, as liquidity sought a safe haven. Despite the August downgrade of U.S. credit, U.S. Treasury securities are generally regarded as the safest asset class in the world.
The portfolio is well diversified across industry groups and states. The top 10 holdings in the portfolio together represent less than 24% of the Trust’s long-term investments, and the largest position represents less than 3%. The weighted average duration of the portfolio as of November 30, 2011, is 10.58 years. The weighted average yield to maturity of the securities in the portfolio is 8.6%. The weighted average credit quality is A.
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GBAB l Guggenheim Build America Bonds Managed Duration Trust l Questions & Answers continued
What is the Trust’s leverage strategy?
Since leverage adds to performance when the cost of leverage is less than the total return generated by investments, the use of leverage contributed to the Trust’s total return during this period. The Trust utilizes leverage (borrowing) as part of its investment strategy, to finance the purchase of additional securities that provide increased income and potentially greater appreciation potential to common shareholders than could be achieved from a portfolio that is not leveraged. The Trust expects that leverage will not exceed 33% of its managed assets.
As of November 30, 2011, the Trust’s leverage is approximately 24% of managed assets. The Trust currently employs leverage through reverse repurchase agreements, which can be used for additional investments. Effective December 7, 2011, the Trust entered into a $125,000,000 credit facility agreement with Bank of America, N.A. to supplement these reverse repurchase agreements.
There is no guarantee that the Trust’s leverage strategy will be successful. The Trust’s use of leverage may cause the Trust’s NAV and market price of common shares to be more volatile and can magnify the effect of any losses.
What is the current outlook for the economy and securities markets, and how is the Trust positioned for this outlook?
For some time GPAM has been more optimistic than many investment managers about the U.S. economy, and recent data suggest improving economic momentum in the U.S. Problems in the banking system and with sovereign debt of several European nations, mean that a recession in Europe is likely, and world economic growth will likely be very modest in the coming months. Since there are currently no active proposals to revive the BABs program, scarcity will continue to be a positive factor for BABs valuation. This scarcity value, together with the strong correlation to U.S. Treasury securities, is likely to result in continued strong performance for BABs.
GPAM believes that BABs will continue to attract investors because of their value relative to other taxable fixed-income investments. In particular, there is value on a risk-adjusted basis for investors such as GPAM with the ability to select securities based on thorough independent credit analysis.
Risks and Other Considerations
The views expressed in this report reflect those of the portfolio managers only through the report period as stated on the cover. These views are subject to change at any time, based on market and other conditions and should not be construed as a recommendation of any kind. The material may also include forward looking statements that involve risk and uncertainty, and there is no guarantee that any predictions will come to pass. There can be no assurance that the Trust will achieve its investment objectives. The value of the Trust will fluctuate with the value of the underlying securities. Historically, closed-end funds often trade at a discount to their net asset value. There can be no assurance that the Trust will achieve its investment objective.
Build America Bonds Risk. The BABs market is smaller and less diverse than the broader municipal securities market. In addition, because BABs are a new form of municipal financing and because bonds issued after December 31, 2010, currently do not qualify as BABs, it is impossible to predict market conditions for such bonds, meaning that BABs may experience less liquidity than other types of municipal securities. Because the ability to issue BABs was not extended beyond December 31, 2010, the number of BABs available in the market is limited and there can be no assurance that BABs will continue to be actively traded. Reduced liquidity may negatively affect the value of the BABs. Because issuers of direct payment BABs held in the Trust’s portfolio receive reimbursement from the U.S. Treasury with respect to interest payments on bonds, there is a risk that those municipal issuers will not receive timely payment from the U.S. Treasury and may remain obligated to pay the full interest due on direct payment BABs held by the Trust. Furthermore, it is possible that a municipal issuer may fail to comply with the requirements to receive the direct pay subsidy or that a future Congress may terminate the subsidy altogether. In addition, the Internal Revenue Code of 1986, as amended (the “Code”) contains a general offset rule (the “IRS Offset Rule”) which allows for the possibility that subsidy payments to be received by issuers of BABs may be subject to offset against amounts owed by them to the federal government. Moreover, the Internal Revenue Service (the “IRS”) may audit the agencies issuing BABs and such audits may, among other things, examine the price at which BABs are initially sold to investors. If the IRS concludes that a BAB was mis-priced based on its audit, it could disallow all or a portion of the interest subsidy received by the issuer of the BAB. The IRS Offset Rule and the disallowance of any interest subsidy as a result of an IRS audit could potentially adversely affect a BABs issuer’s credit rating, and adversely affect the issuer’s ability to repay or refinance BABs. This, in turn, could adversely affect the ratings and value of the BABs held by the Trust and the Trust’s net asset value.
Expiration of BAB Program. Bonds issued after December 31, 2010, do not qualify as BABs. From time to time the Obama administration and Congress may consider a variety of proposals to reinstate the BAB program or establish other similar programs. No assurance can be given as to whether these proposals or other changes in the BABs program will be enacted, nor can it be predicted whether such proposals or changes, if enacted, will have a positive or negative effect on the Trust.
If there are no new issuances of BABs or other taxable municipal securities with interest payments subsidized by the U.S. Government through direct pay subsidies, the Board of Trustees intends to evaluate potential actions with respect to the Trust. In such event the
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Board of Trustees may consider, among other things, changes to the non-fundamental investment policies of the Trust to permit the Trust to broaden its investment focus, for example to taxable municipal securities generally, merger of the Trust into another fund or termination of the Trust. If the Trust were to be terminated, the Trust would distribute all of its net assets to shareholders of record as of the date of termination after providing for all obligations of the Trust. The Trust’s investment objectives and policies are not designed to seek to return the initial offering price of the common shares in the offering on any future termination date. Investors who purchase common shares may receive more or less than their original investment upon any termination of the Trust.
General Municipal Securities Market Risk. Investing in the municipal securities market involves certain risks. The municipal market is one in which dealer firms make markets in bonds on a principal basis using their proprietary capital, and during the recent market turmoil these firms’ capital was severely constrained. As a result, some firms were unwilling to commit their capital to purchase and to serve as a dealer for municipal bonds. Certain municipal securities may not be registered with the SEC or any state securities commission and will not be listed on any national securities exchange. The amount of public information available about municipal securities is generally less than for corporate equities or bonds, and the Trust’s investment performance may therefore be more dependent on the sub-adviser’s analytical abilities. The secondary market for municipal securities, particularly the below investment-grade bonds in which the Trust may invest, also tends to be less developed or liquid than many other securities markets, which may adversely affect the Trust’s ability to sell its municipal securities at attractive prices or at prices approximating those at which the Trust currently values them. Municipal securities may contain redemption provisions, which may allow the securities to be called or redeemed prior to their stated maturity, potentially resulting in the distribution of principal and a reduction in subsequent interest distributions. Many state and municipal governments are currently under significant economic and financial stress and may not be able to satisfy their obligations. The ability of municipal issuers to make timely payments of interest and principal may be diminished during general economic downturns and as governmental cost burdens are reallocated among federal, state and local governments. The taxing powers of any governmental entity may be limited by provisions of state constitutions or laws and an entity’s credit will depend on many factors, including the entity’s tax base, the extent to which the entity relies on federal or state aid, and other factors which are beyond the entity’s control. In addition, laws enacted in the future by Congress or state legislatures or referenda could extend the time for payment of principal and/or interest, or impose other constraints on enforcement of such obligations, or on the ability of municipalities to levy taxes. Issuers of municipal securities might seek protection under Chapter 9 of the U.S. Bankruptcy Code. Although similar to other bankruptcy proceedings in some respects, municipal bankruptcy is significantly different in that there is no provision in the law for liquidation of the assets of the municipality and distribution of the proceeds to creditors. Municipal bankruptcy is available to issuers in certain states. In states in which municipal bankruptcy is not presently available, new legislation would be required to permit a municipal issuer in such state to file for bankruptcy. Municipalities must voluntarily seek protection under the Bankruptcy Code; municipal bankruptcy proceedings cannot be commenced by creditors. Due to the severe limitations placed upon the power of the bankruptcy court in Chapter 9 cases, the bankruptcy court generally is not as active in managing a municipal bankruptcy case as it is in corporate reorganizations. The bankruptcy court cannot appoint a trustee nor interfere with the municipality’s political or governmental powers or with its properties or revenues, for example by ordering reductions in expenditures, increases in taxes, or sales of property, without the municipality’s consent. In addition, the municipality can continue to borrow in the ordinary course without bankruptcy court approval if it is able to do so without affecting the rights of existing creditors. Neither creditors nor courts may control the affairs of the municipality indirectly by proposing a readjustment plan that would effectively determine the municipality’s future tax and spending decisions, so the Trust’s influence over any bankruptcy proceedings would be very limited. In the event of bankruptcy of a municipal issuer, the Trust could experience delays in collecting principal and interest, and the Trust may not be able to collect all principal and interest to which it is entitled. There is no provision in municipal bankruptcy proceedings for liquidation of municipal assets in order to distribute proceeds to creditors such as the Trust.
Duration Management Risk. In connection with the Trust’s duration management strategy, the Trust may utilize certain strategies, including interest-rate swaps, in order to manage the duration of the Trust’s portfolio to reduce the interest-rate sensitivity of the Trust’s debt securities and decrease the Trust’s exposure to interest-rate risk. Certain aspects of the duration management strategy may not be implemented until after the full investment of the proceeds of the offering. Until the duration management strategy is fully implemented, the Trust may be more subject to interest-rate risk. There can be no assurance that the sub- adviser’s duration management strategy will be successful at any given time in managing the duration of the Trust’s portfolio or helping the Trust to achieve its investment objective.
Financial Leverage Risk. The Trust initially expects to employ Financial Leverage through Indebtedness and/or engaging in reverse repurchase agreements. The Adviser and the Sub-Adviser anticipate that the use of Financial Leverage will result in higher income to Common Shareholders over time. Use of Financial Leverage creates an opportunity for increased income and capital appreciation but, at the same time, creates special risks. There can be no assurance that a leveraging strategy will be utilized or will be successful. Financial Leverage is a speculative technique that exposes the Trust to greater risk and increased costs than if it were not implemented. Increases and decreases in the value of the Trust’s portfolio will be magnified when the Trust uses Financial Leverage. As a result, Financial Leverage may cause greater changes in the Trust’s net asset value and returns than if Financial Leverage had not been used. The Trust will also have to pay interest on its Indebtedness, if any, which may reduce the Trust’s return. This interest expense may be greater than the Trust’s return on the underlying investment, which would negatively affect the performance of the Trust. Certain types of Indebtedness subject the Trust to covenants in credit agreements relating to asset coverage and portfolio composition requirements. Certain Indebtedness issued by the Trust also may subject the Trust to certain restrictions on investments imposed by guidelines of one or more rating agencies, which may issue ratings for such Indebtedness. Such guidelines may impose asset coverage or portfolio composition requirements that are more stringent than those imposed by the 1940 Act. It is not anticipated that these covenants or guidelines will impede the Sub-Adviser from managing the Trust’s portfolio in accordance with the Trust’s
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investment objectives and policies. Reverse repurchase agreements involve the risks that the interest income earned on the investment of the proceeds will be less than the interest expense and Trust expenses, that the market value of the securities sold by the Trust may decline below the price at which the Trust is obligated to repurchase such securities and that the securities may not be returned to the Trust. There is no assurance that reverse repurchase agreements can be successfully employed. Dollar roll transactions involve the risk that the market value of the securities the Trust is required to purchase may decline below the agreed upon repurchase price of those securities. If the broker/dealer to whom the Trust sells securities becomes insolvent, the Trust’s right to purchase or repurchase securities may be restricted. Successful use of dollar rolls may depend upon the Sub-Adviser’s ability to correctly predict interest rates and prepayments. There is no assurance that dollar rolls can be successfully employed. Inverse floating rate securities represent beneficial interests in a special purpose trust (sometimes called a “tender option bond trust”) formed by a third party sponsor for the purpose of holding municipal bonds. Investing in such securities may expose the Trust to certain risks. In general, income on inverse floating rate securities will decrease when interest rates increase and increase when interest rates decrease. Investments in inverse floating rate securities may subject the Trust to the risks of reduced or eliminated interest payments and losses of principal. During the time in which the Trust is utilizing Financial Leverage, the amount of the fees paid to the Adviser and the Sub-Adviser for investment advisory services will be higher than if the Trust did not utilize Financial Leverage because the fees paid will be calculated based on the Trust’s Managed Assets, including proceeds of Financial Leverage. This may create a conflict of interest between the Adviser and the Sub-Adviser, on the one hand, and the Common Shareholders, on the other hand. Common Shareholders bear the portion of the investment advisory fee attributable to the assets purchased with the proceeds of Financial Leverage, which means that Common Shareholders effectively bear the entire advisory fee. In order to manage this conflict of interest, the maximum level of and types of Financial Leverage used by the Trust must be approved by the Board of Trustees, and the Board of Trustees will receive regular reports from the Adviser and the Sub-Adviser regarding the Trust’s use of Financial Leverage and the effect of Financial Leverage on the management of the Trust’s portfolio and the performance of the Trust. In addition the Trust may engage in certain derivative transactions, including swaps, that have characteristics similar to leverage. To the extent the terms of any such transaction obligate the Trust to make payments, the Trust intends to earmark or segregate cash or liquid securities in an amount at least equal to the current value of the amount then payable by the Trust under the terms of such transaction in accordance with applicable interpretations of the Staff of the SEC. To the extent the terms of any such transaction obligate the Trust to deliver particular securities to extinguish the Trust’s obligations under such transactions, the Trust may “cover” its obligations under such transaction by either (i) owning the securities or collateral underlying such transactions or (ii) having an absolute and immediate right to acquire such securities or collateral without additional cash consideration (or, if additional cash consideration is required, having earmarked or segregated cash or liquid securities). Securities so segregated or designated as “cover” will be unavailable for sale by the Sub-Adviser (unless replaced by other securities qualifying for segregation or cover requirements), which may adversely effect the ability of the Trust to pursue its investment objectives
Below Investment-Grade Securities Risk. Under normal market conditions, the Trust may invest up to 20% of its managed assets in securities that at the time of investment are below investment-grade quality, which are commonly referred to as “junk” bonds and are regarded as predominately speculative with respect to the issuer’s capacity to pay interest and repay principal. Below investment-grade securities may be particularly susceptible to economic downturns. It is likely that an economic recession could severely disrupt the market for such securities and may have an adverse impact on the value of such securities. In addition, it is likely that any such economic downturn could adversely affect the ability of the issuers of such securities to repay principal and pay interest thereon and increase the incidence of default for such securities. Lower grade securities, though high yielding, are characterized by high risk. They may be subject to certain risks with respect to the issuing entity and to greater market fluctuations than certain lower yielding, higher rated securities. The retail secondary market for lower grade securities may be less liquid than that for higher rated securities. Adverse conditions could make it difficult at times for the Trust to sell certain securities or could result in lower prices than those used in calculating the Trust’s net asset value. Because of the substantial risks associated with investments in lower grade securities, you could lose money on your investment in common shares of the Trust, both in the short-term and the long-term.
Special Risks Related to Certain Municipal Securities. The Trust may invest in municipal leases and certificates of participation in such leases. Municipal leases and certificates of participation involve special risks not normally associated with general obligations or revenue bonds. Leases and installment purchase or conditional sale contracts (which normally provide for title to the leased asset to pass eventually to the governmental issuer) have evolved as a means for governmental issuers to acquire property and equipment without meeting the constitutional and statutory requirements for the issuance of debt. The debt issuance limitations are deemed to be inapplicable because of the inclusion in many leases or contracts of “non-appropriation” clauses that relieve the governmental issuer of any obligation to make future payments under the lease or contract unless money is appropriated for such purpose by the appropriate legislative body on a yearly or other periodic basis. In addition, such leases or contracts may be subject to the temporary abatement of payments in the event the governmental issuer is prevented from maintaining occupancy of the leased premises or utilizing the leased equipment. Although the obligations may be secured by the leased equipment or facilities, the disposition of the property in the event of non-appropriation or foreclosure might prove difficult, time consuming and costly, and may result in a delay in recovering or the failure to fully recover the Trust’s original investment. In the event of non-appropriation, the issuer would be in default and taking ownership of the assets may be a remedy available to the Trust, although the Trust does not anticipate that such a remedy would normally be pursued. To the extent that the Trust invests in unrated municipal leases or participates in such leases, the credit quality and risk of cancellation of such unrated leases will be monitored on an ongoing basis. Certificates of participation, which represent interests in unmanaged pools of municipal leases or installment contracts, involve the same risks as the underlying municipal leases. In addition, the Trust may be dependent upon the municipal authority issuing the certificates of participation to exercise remedies with respect to the underlying securities. Certificates of participation entail a risk of default or bankruptcy not only of the issuer of the underlying lease but also of the municipal agency issuing the certificate of participation.
8 l Semiannual Report l November 30, 2011
GBAB l Guggenheim Build America Bonds Managed Duration Trust l Questions & Answers continued
Asset-Backed Securities Risk. Investing in asset-backed securities (“ABS”) entails various risks, including credit risks, liquidity risks, interest-rate risks, market risks and legal risks. ABS are subject to significant credit risks because of the credit risks inherent in the underlying collateral and because issuers are primarily private entities. The structure of ABS and the terms of the investors’ interest in the collateral can vary widely depending on the type of collateral, the desires of investors and the use of credit enhancements. Although the basic elements of all ABS are similar, individual transactions can differ markedly in both structure and execution. Important determinants of the risk associated with issuing or holding the securities include the process by which principal and interest payments are allocated and distributed to investors, how credit losses affect the issuing vehicle and the return to investors in such ABS, whether collateral represents a fixed set of specific assets or accounts, whether the underlying collateral assets are revolving or closed-end, under what terms (including the maturity of the ABS itself) any remaining balance in the accounts may revert to the issuing entity and the extent to which the entity that is the actual source of the collateral assets is obligated to provide support to the issuing vehicle or to the investors in such ABS. The Trust may invest in ABS that are subordinate in right of payment and rank junior to other securities that are secured by or represent an ownership interest in the same pool of assets. In addition, many of the transactions in which such securities are issued have structural features that divert payments of interest and/or principal to more senior classes when the delinquency or loss experience of the pool exceeds certain levels. As a result, such securities have a higher risk of loss as a result of delinquencies or losses on the underlying assets.
Senior and Second Lien Secured Loans Risk: The Trust’s investments in senior loans and second lien secured floating-rate loans are typically below investment grade and are considered speculative because of the credit risk of their issuers. The risks associated with senior loans of below investment-grade quality are similar to the risks of other lower-grade income securities. Second lien loans are second in right of payment to senior loans and therefore are subject to the additional risk that the cash flow of the borrower and any property securing the loan may be insufficient to meet scheduled payments after giving effect to the senior-secured obligations of the borrower. Second lien loans are expected to have greater price volatility and exposure to losses upon default than senior loans and may be less liquid.
Liquidity Risk. The Trust may invest up to 15% of its managed assets in municipal securities that are, at the time of investment, illiquid and certain other securities in which the Trust may invest may be illiquid. Illiquid securities are securities that cannot be disposed of within seven days in the ordinary course of business at approximately the value that the Trust values the securities. Illiquid securities may trade at a discount from comparable, more liquid securities and may be subject to wide fluctuations in market value. The Trust may be subject to significant delays in disposing of illiquid securities. Accordingly, the Trust may be forced to sell these securities at less than fair market value or may not be able to sell them when the sub-adviser believes it is desirable to do so. Illiquid securities also may entail registration expenses and other transaction costs that are higher than those for liquid securities. Restricted securities (i.e., securities subject to legal or contractual restrictions on resale) may be illiquid. However, some restricted securities (such as securities issued pursuant to Rule 144A under the Securities Act of 1933, as amended (the “1933 Act”) and certain commercial paper) may be treated as liquid for these purposes. Inverse floating-rate securities or the residual interest certificates of tender option bond trusts are not considered illiquid securities.
Volatility Risk. The use of financial leverage by the Trust will cause the net asset value, and possibly the market price, of the Trust’s common shares to fluctuate significantly in response to changes in interest rates and other economic indicators. In addition, the Trust may invest up to 20% of its managed assets in below investment-grade securities (i.e. “junk bonds”), which may be less liquid and therefore more volatile than investment-grade municipal securities. As a result, the net asset value and market price of the common shares of the Trust will be more volatile than those of a closed-end investment company that is not exposed to leverage or that does not invest in below investment-grade securities.
Government Intervention in the Financial Markets. The instability in the financial markets discussed above has led the U.S. Government to take a number of unprecedented actions designed to support certain financial institutions and segments of the financial markets that have experienced extreme volatility, and in some cases a lack of liquidity. Federal, state, and other governments, their regulatory agencies, or self regulatory organizations may take actions that affect the regulation of the instruments in which the Trust invests, or the issuers of such instruments. The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), which was signed into law in July 2010, is expected to result in a significant revision of the U.S. financial regulatory framework. The Dodd-Frank Act covers a broad range of topics, including, among many others: a reorganization of federal financial regulators; the creation of a process designed to ensure financial system stability and the resolution of potentially insolvent financial firms; the enactment of new rules for derivatives trading; the creation of a consumer financial protection watchdog; the registration and regulation of managers of private funds; the regulation of credit rating agencies; and the enactment of new federal requirements for residential mortgage loans. The regulation of various types of derivative instruments pursuant to the Dodd-Frank Act may adversely affect issuers of securities in which the Trust invests that utilize derivatives strategies for hedging or other purposes. The ultimate impact of the Dodd-Frank Act, and any resulting regulation, is not yet certain and issuers of securities in which the Trust invests may also be affected by the new legislation and regulation in ways that are currently unknown and unforeseeable. Governments or their agencies may also acquire distressed assets from financial institutions and acquire ownership interests in those institutions. The implications of government ownership and disposition of these assets are unclear, and such a program may have positive or negative effects on the liquidity, valuation and performance of the Trust’s portfolio holdings.
Strategic Transactions Risk. The Trust may engage in various portfolio strategies, including derivatives transactions involving interest rate and foreign currency transactions, swaps, options and futures (“strategic transactions”), for hedging and risk management purposes and to enhance total return. The use of strategic transactions to enhance total return may be particularly speculative. Strategic transactions involve risks, including the imperfect correlation between the value of such instruments and the underlying assets, the possible default of the other party to the transaction and illiquidity of the derivative instruments. Furthermore, the Trust’s ability to successfully use strategic transactions depends on the sub-adviser’s ability to predict pertinent market movements, which cannot
Semiannual Report l November 30, 2011 l 9
GBAB l Guggenheim Build America Bonds Managed Duration Trust l Questions & Answers continued
be assured. The use of strategic transactions may result in losses greater than if they had not been used, may require the Trust to sell or purchase portfolio securities at inopportune times or for prices other than current market values, may limit the amount of appreciation the Trust can realize on an investment or may cause the Trust to hold a security that it might otherwise sell. Additionally, amounts paid by the Trust as premiums and cash or other assets held in margin accounts with respect to strategic transactions are not otherwise available to the Trust for investment purposes.
Market Discount Risk. Shares of closed-end investment companies frequently trade at a discount from their net asset value, which is a risk separate and distinct from the risk that the Trust’s net asset value could decrease as a result of its investment activities. Although the value of the Trust’s net assets is generally considered by market participants in determining whether to purchase or sell common shares, whether investors will realize gains or losses upon the sale of common shares will depend entirely upon whether the market price of common shares at the time of sale is above or below the investor’s purchase price for common shares. Because the market price of common shares will be determined by factors such as net asset value, dividend and distribution levels (which are dependent, in part, on expenses), supply of and demand for common shares, stability of dividends or distributions, trading volume of common shares, general market and economic conditions and other factors beyond the control of the Trust, the Trust cannot predict whether common shares will trade at, below or above net asset value or at, below or above the initial public offering price. This risk may be greater for investors expecting to sell their common shares soon after the completion of the public offering, as the net asset value of the common shares will be reduced immediately following the offering as a result of the payment of certain offering costs. Common shares of the Trust are designed primarily for long-term investors; investors in common shares should not view the Trust as a vehicle for trading purposes.
Portfolio Turnover Risk. The Trust’s annual portfolio turnover rate may vary greatly from year to year. Portfolio turnover rate is not considered a limiting factor in the execution of investment decisions for the Trust. A higher portfolio turnover rate results in correspondingly greater brokerage commissions and other transactional expenses that are borne by the Trust. High portfolio turnover may result in an increased realization of net short-term capital gains by the Trust which, when distributed to common shareholders, will be taxable as ordinary income. Additionally, in a declining market, portfolio turnover may create realized capital losses. See “Taxation” in the Trust’s prospectus.
Market Disruption and Geopolitical Risk. Instability in the Middle East and terrorist attacks in the United States and around the world have contributed to increased market volatility, may have long-term effects on the U.S. and worldwide financial markets and may cause further economic uncertainties or deterioration in the United States and worldwide. The adviser and sub-adviser do not know how long the financial markets will continue to be affected by these events and cannot predict the effects of these or similar events in the future on the U.S. and global economies and securities markets.
The Trust’s common share price will fluctuate and, at the time of sale, common shares may be worth more or less than the original investment or the Trust’s then-current net asset value. The Trust cannot predict whether its common shares will trade at, above or below net asset value.
In addition to the risks described above, the Trust is also subject to: Income Securities Risk,
Foreign Currency Risk, Risks Associated with the Trust’s Covered Call Option Strategy, Risks of Real Property Asset Companies, Private Securities Risk, Investment Funds Risk, Private Investment Funds Risk, Affiliated Investment Funds Risk, Synthetic Investments Risk, Inflation/Deflation Risk, Anti-Takeover Provisions, Market Discount Risk, and Current Developments Risks.
Please see www.guggenheimfunds.com/gbab for a more detailed discussion about Trust risks and considerations.
10 l Semiannual Report l November 30, 2011
GBAB l Guggenheim Build America Bonds Managed Duration Trust
Trust Summary l As of November 30, 2011 (unaudited)
|
Trust Statistics
|
||
|
Share Price
|
$20.92
|
|
|
Common Share Net Asset Value
|
$21.97
|
|
|
Premium/Discount to NAV
|
-4.78%
|
|
|
Net Assets Applicable to Common Shares ($000)
|
$382,566
|
|
|
Total Returns
|
||
|
(Inception 10/28/10)
|
Market
|
NAV
|
|
Six Month
|
10.93%
|
9.98%
|
|
One Year
|
11.82%
|
22.78%
|
|
Since Inception - Average Annual
|
10.76%
|
20.36%
|
Performance data quoted represents past performance, which is no guarantee of future results and current performance may be lower or higher than the figures shown. For the most recent month-end performance figures, please visit www.guggenheimfunds.com/gbab. The investment return and principal value of an investment will fluctuate with changes in the market conditions and other factors so that an investor’s shares, when sold, may be worth more or less than their original cost.
|
% of Municipal
|
|
|
State/Territory Allocations
|
Bonds
|
|
California
|
18.6%
|
|
Illinois
|
12.1%
|
|
Washington
|
9.2%
|
|
New Jersey
|
5.9%
|
|
New York
|
5.6%
|
|
Texas
|
5.4%
|
|
Michigan
|
5.3%
|
|
Indiana
|
5.1%
|
|
Ohio
|
5.0%
|
|
Florida
|
3.9%
|
|
Pennsylvania
|
3.4%
|
|
West Virginia
|
3.2%
|
|
Colorado
|
2.9%
|
|
Alabama
|
2.7%
|
|
Vermont
|
2.6%
|
|
Nevada
|
2.6%
|
|
Mississippi
|
1.8%
|
|
South Carolina
|
1.4%
|
|
Georgia
|
1.3%
|
|
South Dakota
|
0.9%
|
|
Minnesota
|
0.8%
|
|
Louisiana
|
0.3%
|
Portfolio composition and holdings are subject to change daily. For more information, please visit www.guggenheimfunds.com/gbab. The above summaries are provided for informational purposes only and should not be viewed as recommendations. Past performance does not guarantee future results.
|
% of Total
|
|
|
Portfolio Breakdown
|
Net Assets
|
|
Municipal Bonds
|
106.4%
|
|
Corporate Bonds
|
9.5%
|
|
Asset Backed Securities
|
7.5%
|
|
Term Loans
|
3.1%
|
|
Preferred Stock
|
1.9%
|
|
Collateralized Mortgage Obligations
|
0.5%
|
|
Total Long-Term Investments
|
128.9%
|
|
Short-Term Investments
|
1.1%
|
|
Total Investments
|
130.0%
|
|
Other Assets in excess of Liabilities
|
2.1%
|
|
Reverse Repurchase Agreements
|
-32.1%
|
|
Total Net Assets
|
100.0%
|
Semiannual Report l November 30, 2011 l 11
|
GBAB l Guggenheim Build America Bonds Managed Duration Trust l
|
|||||||
|
Portfolio of Investments l November 30, 2011 (unaudited)
|
|||||||
|
Principal
|
Optional Call
|
||||||
|
Amount
|
Description
|
Rating*
|
Coupon
|
Maturity
|
Provisions**
|
Value
|
|
|
Long-Term Investments – 128.9%
|
|||||||
|
Municipal Bonds – 106.4%
|
|||||||
|
Alabama – 2.9%
|
|||||||
|
$ 3,000,000
|
Alabama State University, General Tuition and Fee Revenue Bonds, Taxable Direct-Pay
|
||||||
|
Build America Bonds, (Assured GTY)(a)(h)
|
AA-
|
7.10%
|
09/01/2035
|
09/01/20 @ 100
|
$ 3,310,830
|
||
|
5,000,000
|
Alabama State University, General Tuition and Fee Revenue Bonds, Taxable Direct-Pay
|
||||||
|
Build America Bonds, (Assured GTY)(a)(h)
|
AA-
|
7.20%
|
09/01/2038
|
09/01/20 @ 100
|
5,537,650
|
||
|
2,000,000
|
Alabama State University, General Tuition and Fee Revenue Bonds, Taxable Direct-Pay
|
||||||
|
Build America Bonds, (Assured GTY)(a)(h)
|
AA-
|
7.25%
|
09/01/2040
|
09/01/20 @ 100
|
2,205,900
|
||
|
11,054,380
|
|||||||
|
California – 20.0%
|
|||||||
|
500,000
|
Alhambra Unified School District, Elementary Schools Improvement District, Los Angeles
|
||||||
|
County, California, Election of 2008 General Obligation Bonds, Federally Taxable, Series B-1
|
A+
|
6.70%
|
02/01/2026
|
N/A
|
569,080
|
||
|
10,000,000
|
California, General Obligation Bonds, Various Purpose, Taxable Build America Bonds(a)
|
A-
|
7.70%
|
11/01/2030
|
11/01/20 @ 100
|
11,112,400
|
|
|
3,000,000
|
Culver City Redevelopment Agency, California, Taxable Tax Allocation Bonds, Culver City
|
||||||
|
Redevelopment Project, Series 2011B
|
A
|
8.00%
|
11/01/2020
|
N/A
|
3,197,010
|
||
|
340,000
|
Cypress Elementary School District (Orange County, California), General Obligation Bonds,
|
||||||
|
Direct Pay Qualified School Construction Bonds, 2008 Election, Series B-2(h)
|
A+
|
6.05%
|
08/01/2021
|
N/A
|
367,853
|
||
|
660,000
|
Cypress Elementary School District (Orange County, California), General Obligation Bonds,
|
||||||
|
Direct Pay Qualified School Construction Bonds, 2008 Election, Series B-2(h)
|
A+
|
6.65%
|
08/01/2025
|
N/A
|
723,776
|
||
|
7,500,000
|
Long Beach Unified School District, California, Qualified School Construction Bonds, Federally
|
||||||
|
Taxable, Election of 2008, General Obligation Bonds, Series B-1
|
AA-
|
5.91%
|
08/01/2025
|
N/A
|
8,426,175
|
||
|
10,000,000
|
Los Angeles, California, Department of Water & Power Revenue, Taxable Build America Bonds(a)
|
AA-
|
7.00%
|
07/01/2041
|
07/01/21 @ 100
|
11,285,000
|
|
|
10,000,000
|
Los Angeles, California, Department of Water & Power Revenue, Taxable Build America Bonds(a)
|
AA
|
7.00%
|
07/01/2041
|
07/01/20 @ 100
|
11,477,400
|
|
|
5,000,000
|
Metropolitan Water District, Southern California, Water Revenue Bonds, 2010 Authorization,
|
||||||
|
Taxable Build America Bonds, Series A(a)
|
AAA
|
6.95%
|
07/01/2040
|
07/01/20 @ 100
|
5,826,050
|
||
|
1,025,000
|
Monrovia Unified School District, Los Angeles County, California, Election of 2006 General
|
||||||
|
Obligation Bonds, Build America Bonds, Federally Taxable, Series C-1(a)(h)
|
A+
|
7.25%
|
08/01/2028
|
N/A
|
1,136,919
|
||
|
1,000,000
|
Placentia-Yorba Linda Unified School District (Orange County, California), General Obligation
|
||||||
|
Bonds, Federally Taxable Direct-Pay Qualified School Construction Bonds, Election of 2008, Series E
|
AA-
|
5.40%
|
02/01/2026
|
N/A
|
1,048,500
|
||
|
5,000,000
|
Riverside Community College District, Riverside County, California, Election of 2004 General
|
||||||
|
Obligation Bonds, Taxable Build America Bonds, Series 2010 D-1(a)
|
AA
|
7.02%
|
08/01/2040
|
08/01/20 @ 100
|
5,314,400
|
||
|
2,245,000
|
Santa Ana Unified School District, California, General Obligation Bonds, Federal Taxable
|
||||||
|
Build America Bonds(a)
|
Aa2
|
6.80%
|
08/01/2030
|
N/A
|
2,689,824
|
||
|
7,755,000
|
Santa Ana Unified School District, California, General Obligation Bonds, Federal Taxable
|
||||||
|
Build America Bonds(a)
|
Aa2
|
7.10%
|
08/01/2040
|
N/A
|
9,768,741
|
||
|
3,330,000
|
Sonoma Valley Unified School District, General Obligation, Federally Taxable Bonds
|
AA-
|
7.12%
|
08/01/2028
|
08/01/20 @ 100
|
3,568,961
|
|
|
76,512,089
|
|||||||
|
Colorado – 3.1%
|
|||||||
|
7,500,000
|
Colorado, Building Excellent Schools Today, Certificates of Participation, Taxable Build
|
||||||
|
America Bonds, Series 2010E(a)
|
AA-
|
7.02%
|
03/15/2031
|
03/15/21 @ 100
|
8,712,750
|
||
|
2,500,000
|
Colorado, Building Excellent Schools Today, Certificates of Participation, Taxable Qualified
|
||||||
|
School Construction, Series 2010-D
|
AA-
|
6.82%
|
03/15/2028
|
N/A
|
3,120,875
|
||
|
11,833,625
|
|||||||
|
Florida – 4.4%
|
|||||||
|
10,000,000
|
Miami-Dade County, Florida, Transit Sales Surtax Revenue, Taxable Build America Bonds, Series B(a)
|
AA
|
6.91%
|
07/01/2039
|
07/01/19 @ 100
|
11,048,600
|
|
|
5,000,000
|
Orlando, Florida, Community Redevelopment Agency, Taxable Tax Increment Revenue Build
|
||||||
|
America Bonds, Series 2010B(a)(h)
|
A
|
7.78%
|
09/01/2040
|
09/01/20 @ 100
|
5,608,550
|
||
|
16,657,150
|
|||||||
|
Georgia – 1.3%
|
|||||||
|
5,000,000
|
Georgia Municipal Association, Inc., Certificates of Participation, DeKalb County Public
|
||||||
|
Schools Project, (AGM)
|
AA-
|
5.21%
|
12/01/2022
|
N/A
|
5,142,600
|
||
See notes to financial statements.
12 l Semiannual Report l November 30, 2011
GBAB l Guggenheim Build America Bonds Managed Duration Trust l Portfolio of Investments (unaudited) continued
| Principal |
Optional Call
|
||||||
| Amount |
Description
|
Rating*
|
Coupon
|
Maturity
|
Provisions**
|
Value
|
|
|
Illinois – 13.0%
|
|||||||
|
$ 5,000,000
|
Chicago, Illinois, Board of Education, Unlimited Tax General Obligation Bonds, Dedicated
|
||||||
|
Revenues, Taxable Build America Bonds, Series 2010D(a)
|
AA-
|
6.52%
|
12/01/2040
|
N/A
|
$ 5,703,250
|
||
|
5,100,000
|
Chicago, Illinois, Second Lien Wastewater Transmission Revenue Project Bonds, Taxable
|
||||||
|
Build America Bonds, Series 2010B(a)(h)
|
A+
|
6.90%
|
01/01/2040
|
N/A
|
6,381,681
|
||
|
2,990,000
|
Chicago, Illinois, Second Lien Water Revenue Bonds, Taxable Build America Bonds, Series 2010B(a)
|
AA-
|
6.74%
|
11/01/2040
|
N/A
|
3,759,775
|
|
|
5,000,000
|
Illinois, General Obligation Bonds, Taxable Build America Bonds, Series 2010-5(a)
|
A+
|
7.35%
|
07/01/2035
|
N/A
|
5,450,850
|
|
|
7,140,000
|
Northern Illinois Municipal Power Agency, Power Project Taxable Revenue Bonds, Prairie
|
||||||
|
State Project Build America Bonds(a)
|
A2
|
7.62%
|
01/01/2030
|
N/A
|
8,384,645
|
||
|
2,860,000
|
Northern Illinois Municipal Power Agency, Power Project Taxable Revenue Bonds, Prairie
|
||||||
|
State Project Build America Bonds(a)
|
A2
|
7.82%
|
01/01/2040
|
N/A
|
3,579,576
|
||
|
4,500,000
|
Northern Illinois University, Auxiliary Facilities System Revenue Bonds, Build America
|
||||||
|
Program, Taxable, Series 2010, (AGM)(a)(h)
|
Aa3
|
7.95%
|
04/01/2035
|
04/01/20 @ 100
|
5,138,415
|
||
|
5,000,000
|
Northern Illinois University, Auxiliary Facilities System Revenue Bonds, Build America
|
||||||
|
Program, Taxable, Series 2010, (AGM)(a)
|
Aa3
|
8.15%
|
04/01/2041
|
04/01/20 @ 100
|
5,735,500
|
||
|
3,000,000
|
Southwestern Illinois, Development Authority, Taxable Local Government, Program
|
||||||
|
Revenue Bonds, Flood Prevention District Council Project, Recovery Zone Economic
|
|||||||
|
Development Bonds, Series 2010C(h)
|
AA
|
7.23%
|
10/15/2035
|
04/15/20 @ 100
|
3,325,980
|
||
|
2,000,000
|
Southwestern Illinois, Development Authority, Taxable Local Government, Program
|
||||||
|
Revenue Bonds, Flood Prevention District Project, Build America Bonds, Series 2010-B(a)(h)
|
AA
|
7.03%
|
04/15/2032
|
04/15/20 @ 100
|
2,108,840
|
||
|
49,568,512
|
|||||||
|
Indiana – 5.5%
|
|||||||
|
8,690,000
|
Evansville-Vanderburgh Independent School Building Corporation, Unlimited Taxable
|
||||||
|
Ad Valorem Property Tax First Mortgage Bonds, Series 2010E(a)
|
AA+
|
6.50%
|
01/15/2030
|
07/15/20 @ 100
|
9,732,279
|
||
|
10,000,000
|
Noblesville Multi-School Building Corporation, Hamilton County, Indiana, Taxable
|
||||||
|
Unlimited Ad Valorem Property Tax First Mortgage Bonds, Build America Bonds, Series 2010(a)
|
AA+
|
6.50%
|
07/15/2030
|
01/15/21 @ 100
|
11,334,800
|
||
|
21,067,079
|
|||||||
|
Louisiana – 0.3%
|
|||||||
|
1,055,000
|
Tangipahoa Parish Hospital Service District No. 1, Louisiana, Taxable Hospital Revenue
|
||||||
|
Bonds, North Oaks Health System Project, Build America Bonds, Series 2009A, (Assured GTY)(a)(h)
|
AA-
|
7.20%
|
02/01/2042
|
02/01/20 @ 100
|
1,127,521
|
||
|
Michigan – 4.5%
|
|||||||
|
415,000
|
Comstock Park Public Schools, Kent County, Michigan, 2011 School Building and Site Bonds,
|
||||||
|
General Obligation – Unlimited Tax, Federally Taxable – Qualified School Construction
|
|||||||
|
Bonds – Direct Payment, Series A
|
AA-
|
6.30%
|
05/01/2026
|
05/01/21 @ 100
|
445,623
|
||
|
690,000
|
Detroit, Michigan, School District, Build America Bonds(a)(h)
|
AA-
|
7.75%
|
05/01/2039
|
N/A
|
806,831
|
|
|
5,000,000
|
Detroit, Michigan, School District, School Building and Site Bonds, Unlimited Tax General
|
||||||
|
Obligation Bonds, Taxable Build America Bonds, Series, Series 2010B(a)(h)
|
AA-
|
6.85%
|
05/01/2040
|
05/01/20 @ 100
|
5,157,200
|
||
|
1,640,000
|
Detroit, Michigan, School District, School Building and Site Bonds, Unlimited Tax General
|
||||||
|
Obligation Bonds, Taxable Qualified School Construction Bonds, Series 2010A(h)
|
AA-
|
6.65%
|
05/01/2029
|
N/A
|
1,709,929
|
||
|
3,000,000
|
Fraser Public School District, Macomb County, Michigan, General Obligation Federally
|
||||||
|
Taxable School Construction Bonds, 2011 School Building and Site Bonds, Series B
|
AA-
|
6.05%
|
05/01/2026
|
05/01/21 @ 100
|
3,216,930
|
||
|
1,000,000
|
Oakridge, Michigan, Public Schools, Unlimited Tax General Obligation Bonds(h)
|
AA-
|
6.75%
|
05/01/2026
|
05/01/20 @ 100
|
1,072,420
|
|
|
2,500,000
|
Whitehall District Schools, Muskegon County, Michigan, 2010 School Building and
|
||||||
|
Site Bonds, General Obligation, Unlimited Tax Bonds, Taxable Qualified School
|
|||||||
|
Construction Bonds, Series A
|
AA-
|
6.10%
|
05/01/2026
|
05/01/20 @ 100
|
2,650,750
|
||
|
2,000,000
|
Whitehall District Schools, Muskegon County, Michigan, 2010 School Building
|
||||||
|
and Site Bonds, General Obligation, Unlimited Tax Bonds, Taxable Qualified School
|
|||||||
|
Construction Bonds, Series A
|
AA-
|
6.50%
|
05/01/2029
|
05/01/20 @ 100
|
2,126,880
|
||
|
17,186,563
|
|||||||
|
Minnesota – 0.9%
|
|||||||
|
1,660,000
|
St. Paul Housing & Redevelopment Authority, Federally Taxable Revenue Bonds
|
AA
|
7.25%
|
02/01/2035
|
02/01/21 @ 100
|
1,803,922
|
|
|
1,540,000
|
St. Paul Housing & Redevelopment Authority, Federally Taxable Revenue Bonds
|
AA
|
7.50%
|
02/01/2040
|
02/01/21 @ 100
|
1,670,946
|
|
|
3,474,868
|
See notes to financial statements.
Semiannual Report l November 30, 2011 l 13
GBAB l Guggenheim Build America Bonds Managed Duration Trust l Portfolio of Investments (unaudited) continued
| Principal |
Optional Call
|
||||||
| Amount |
Description
|
Rating*
|
Coupon
|
Maturity
|
Provisions**
|
Value
|
|
|
Mississippi – 1.9%
|
|||||||
|
$ 5,000,000
|
Medical Center Educational Building Corporation, Taxable Build America Bonds,
|
||||||
|
University of Mississippi Medical Center Facilities Expansion and Renovation Project, Series 2010A(a)(h)
|
AA-
|
6.84%
|
06/01/2035
|
06/01/20 @ 100
|
$ 5,427,600
|
||
|
1,000,000
|
Mississippi, Hospital Equipment and Facilities Authority, Taxable Build America
|
||||||
|
Revenue Bonds, Forrest County General Hospital Project, Series 2010(a)(h)
|
A2
|
7.27%
|
01/01/2032
|
01/01/20 @ 100
|
1,053,830
|
||
|
905,000
|
Mississippi, Hospital Equipment and Facilities Authority, Taxable Build America
|
||||||
|
Revenue Bonds, Forrest County General Hospital Project, Series 2010(a)(h)
|
A2
|
7.39%
|
01/01/2040
|
01/01/20 @ 100
|
948,512
|
||
|
7,429,942
|
|||||||
|
Nevada – 2.8%
|
|||||||
|
1,425,000
|
Clark County, Nevada, Airport Revenue Bonds, Build America Bonds, Series B(a)
|
AA-
|
6.88%
|
07/01/2042
|
07/01/19 @ 100
|
1,569,053
|
|
|
1,200,000
|
Las Vegas Valley Water District, Nevada, Limited Tax General Obligation Water Bonds,
|
||||||
|
Taxable Build America Bonds, Series 2009A(a)
|
AA+
|
7.10%
|
06/01/2039
|
06/01/19 @ 100
|
1,317,672
|
||
|
1,500,000
|
Nevada System of Higher Education University, Revenue Bonds, Build America Bonds(a)
|
AA-
|
7.60%
|
07/01/2030
|
07/01/20 @ 100
|
1,747,125
|
|
|
5,050,000
|
Nevada System of Higher Education University, Revenue Bonds, Build America Bonds(a)
|
AA-
|
7.90%
|
07/01/2040
|
07/01/20 @ 100
|
5,947,486
|
|
|
10,581,336
|
|||||||
|
New Jersey – 6.4%
|
|||||||
|
8,000,000
|
Camden County Improvement Authority, Camden County, New Jersey, Lease Revenue
|
||||||
|
Bonds, Cooper Medical School of Rowan University Project, Series 2010A(a)(h)
|
A+
|
7.75%
|
07/01/2034
|
07/01/20 @ 100
|
8,760,240
|
||
|
2,000,000
|
Camden County Improvement Authority, Camden County, New Jersey, Lease Revenue
|
||||||
|
Bonds, Cooper Medical School of Rowan University Project, Series 2010A(a)(h)
|
A+
|
7.85%
|
07/01/2035
|
07/01/20 @ 100
|
2,197,600
|
||
|
10,000,000
|
New Jersey Turnpike Authority, Turnpike Revenue Bonds, Federally Taxable Issuer
|
||||||
|
Subsidy, Build America Bonds, Series 2010A(a)
|
A+
|
7.10%
|
01/01/2041
|
N/A
|
13,413,400
|
||
|
24,371,240
|
|||||||
|
New York – 6.1%
|
|||||||
|
5,000,000
|
Metropolitan Transportation Authority, New York, Transportation Revenue Bonds,
|
||||||
|
Taxable Build America Bonds, Series 2010E(a)
|
A
|
7.13%
|
11/15/2030
|
11/15/20 @ 100
|
5,745,100
|
||
|
5,000,000
|
Metropolitan Transportation Authority, New York, Transportation Revenue Bonds,
|
||||||
|
Taxable Build America Bonds, Series 2010B-1(a)(h)
|
A
|
6.55%
|
11/15/2031
|
N/A
|
5,980,350
|
||
|
10,000,000
|
Westchester County Health Care Corporation, Revenue Bonds, Taxable Build America
|
||||||
|
Bonds, Series 2010(a)(h)
|
BBB
|
8.57%
|
11/01/2040
|
N/A
|
11,491,900
|
||
|
23,217,350
|
|||||||
|
Ohio – 5.3%
|
|||||||
|
5,000,000
|
American Municipal Power, Inc., Combined Hydroelectric Projects Revenue Bonds,
|
||||||
|
New Clean Renewable Energy Bonds, Series 2010C(h)
|
A
|
7.33%
|
02/15/2028
|
N/A
|
6,084,450
|
||
|
1,950,000
|
Cuyahoga County, Ohio, Hospital Revenue Bonds, The Metrohealth System, Build
|
||||||
|
America Bonds, Taxable, Series 2009B(a)(h)
|
A-
|
8.22%
|
02/15/2040
|
N/A
|
2,289,476
|
||
|
2,500,000
|
Madison Local School District, Richland County, Ohio, School Improvement, Taxable
|
||||||
|
Build America Bonds, Series 2010A(a)
|
AA
|
6.90%
|
12/01/2034
|
12/01/20 @ 100
|
2,666,375
|
||
|
2,500,000
|
Madison Local School District, Richland County, Ohio, School Improvement, Taxable
|
||||||
|
Build America Bonds, Series 2010A(a)
|
AA
|
7.15%
|
12/01/2039
|
12/01/20 @ 100
|
2,662,825
|
||
|
2,500,000
|
Madison Local School District, Richland County, Ohio, School Improvement, Taxable
|
||||||
|
Build America Bonds, Series 2010A(a)
|
AA
|
7.30%
|
12/01/2043
|
12/01/20 @ 100
|
2,661,775
|
||
|
2,500,000
|
Madison Local School District, Richland County, Ohio, School Improvement, Taxable
|
||||||
|
Qualified School Construction Bonds, Series 2010B
|
AA
|
6.65%
|
12/01/2029
|
12/01/20 @ 100
|
2,768,525
|
||
|
1,230,000
|
Toronto City School District, Ohio, Qualified School Construction Bonds General Obligation Bonds(h)
|
AA
|
7.00%
|
12/01/2028
|
12/01/20 @ 100
|
1,331,020
|
|
|
20,464,446
|
|||||||
|
Pennsylvania – 3.6%
|
|||||||
|
4,865,000
|
Lebanon, Pennsylvania, Sewer Revenue Bonds, Taxable Build America Bonds, Series B of 2010(a)
|
A+
|
7.14%
|
12/15/2035
|
06/15/20 @ 100
|
5,317,688
|
|
|
7,500,000
|
Pittsburgh, Pennsylvania, School District, Taxable Qualified School Construction Bonds, Series D
|
A
|
6.85%
|
09/01/2029
|
N/A
|
8,537,250
|
|
|
13,854,938
|
See notes to financial statements.
14 l Semiannual Report l November 30, 2011
GBAB l Guggenheim Build America Bonds Managed Duration Trust l Portfolio of Investments (unaudited) continued
|
Principal
|
Optional Call
|
||||||
| Amount |
Description
|
Rating*
|
Coupon
|
Maturity
|
Provisions**
|
Value
|
|
|
South Carolina – 1.5%
|
|||||||
|
$ 5,000,000
|
Horry County, South Carolina, Taxable Airport Revenue Bonds, Recovery Zone Economic
|
||||||
|
Development Bonds, Series 2010B(a)(h)
|
A-
|
7.33%
|
07/01/2040
|
N/A
|
$ 5,589,900
|
||
|
South Dakota – 1.0%
|
|||||||
|
3,490,000
|
Pierre, South Dakota, Taxable Electric Revenue Bonds, Recovery Zone Economic Development
|
||||||
|
Bonds, Series 2010C(a)(h)
|
A2
|
7.50%
|
12/15/2040
|
12/15/19 @ 100
|
3,820,747
|
||
|
Texas – 5.8%
|
|||||||
|
10,000,000
|
Dallas, Texas, Convention Center Hotel Development Corporation, Hotel Revenue Bonds,
|
||||||
|
Taxable Build America Bonds, Series 2009B(a)(h)
|
A+
|
7.09%
|
01/01/2042
|
N/A
|
11,109,200
|
||
|
10,000,000
|
El Paso, Texas, Combination Tax and Revenue Certification of Obligation, Taxable
|
||||||
|
Build America Bonds, Series 2010B(a)
|
AA
|
6.70%
|
08/15/2036
|
08/15/20 @ 100
|
11,220,900
|
||
|
22,330,100
|
|||||||
|
Vermont – 2.8%
|
|||||||
|
2,155,000
|
Vermont State Colleges, Revenue Bonds, Taxable Build America Bonds, Series 2010B(a)(h)
|
A+
|
6.10%
|
07/01/2025
|
07/01/20 @ 100
|
2,276,521
|
|
|
7,500,000
|
Vermont State Colleges, Revenue Bonds, Taxable Build America Bonds, Series 2010B(a)(h)
|
A+
|
7.21%
|
07/01/2040
|
07/01/20 @ 100
|
8,316,525
|
|
|
10,593,046
|
|||||||
|
Washington – 9.8%
|
|||||||
|
5,000,000
|
Anacortes, Washington, Utility System Improvement Revenue Bonds, Build America Bonds,
|
||||||
|
Series 2010B(a)(h)
|
AA-
|
6.48%
|
12/01/2030
|
12/01/20 @ 100
|
5,331,150
|
||
|
2,000,000
|
Auburn, Washington, Utility System Revenue Bonds, Taxable Build America Bonds,
|
||||||
|
Series 2010B(a)(h)
|
AA
|
6.40%
|
12/01/2030
|
12/01/20 @ 100
|
2,239,680
|
||
|
5,000,000
|
Central Washington University, System Revenue Bonds, 2010, Taxable Build America
|
||||||
|
Bonds, Series B(a)(h)
|
A1
|
6.50%
|
05/01/2030
|
N/A
|
5,417,100
|
||
|
5,800,000
|
Public Hospital District No. 1, King County, Washington, Valley Medical Center, Hospital
|
||||||
|
Facilities Revenue Bonds, Series 2010B(a)(h)
|
BBB+
|
8.00%
|
06/15/2040
|
06/15/20 @ 100
|
6,420,774
|
||
|
5,000,000
|
Washington State Convention Center Public Facilities District, Lodging Tax Bonds, Taxable
|
||||||
|
Build America Bonds, Series 2010B(a)
|
A+
|
6.79%
|
07/01/2040
|
N/A
|
6,039,200
|
||
|
3,325,000
|
Washington State University, Housing and Dining System Revenue Bonds, Taxable Build
|
||||||
|
America Bonds, Series 2010B(a)(h)
|
A+
|
7.10%
|
04/01/2032
|
N/A
|
3,994,256
|
||
|
6,675,000
|
Washington State University, Housing and Dining System Revenue Bonds, Taxable Build
|
||||||
|
America Bonds, Series 2010B(a)(h)
|
A+
|
7.40%
|
04/01/2041
|
N/A
|
8,249,099
|
||
|
37,691,259
|
|||||||
|
West Virginia – 3.5%
|
|||||||
|
10,000,000
|
State of West Virginia, Higher Education Policy Commission, Revenue Bonds, Federally
|
||||||
|
Taxable Build America Bonds 2010, Series B(a)
|
A+
|
7.65%
|
04/01/2040
|
N/A
|
13,317,400
|
||
|
Total Municipal Bonds – 106.4%
|
|||||||
|
(Cost $357,380,824)
|
406,886,091
|
||||||
|
Corporate Bonds – 9.5%
|
|||||||
|
Advertising – 0.0%
|
|||||||
|
150,000
|
inVentiv Health, Inc.(b)
|
CCC+
|
10.00%
|
08/15/2018
|
08/15/14 @ 105
|
142,125
|
|
|
Airlines – 1.2%
|
|||||||
|
2,335,090
|
Atlas Air 2000-1 Class A Pass Through Trust, Series 2000-1, Class A
|
NR
|
8.71%
|
07/02/2021
|
N/A
|
2,384,710
|
|
|
19,263
|
Atlas Air 1999-1 Class A-1 Pass-Through Trust, Series 991A, Class A-1
|
NR
|
7.20%
|
01/02/2019
|
N/A
|
17,915
|
|
|
130,540
|
Atlas Air 99-1 Class A-2 Pass Through Trust, Series 991A, Class A-2
|
NR
|
6.88%
|
04/02/2014
|
N/A
|
120,097
|
|
|
2,000,000
|
Delta Air Lines 2011-1 Pass-Through Trust, Series 1B, Class B(b)
|
BB
|
7.13%
|
10/15/2014
|
N/A
|
1,984,040
|
|
|
160,000
|
Global Aviation Holdings, Inc.
|
B-
|
14.00%
|
08/15/2013
|
08/15/12 @ 111
|
136,000
|
|
|
4,642,762
|
|||||||
|
Building Materials – 0.4%
|
|||||||
|
2,000,000
|
Cemex SAB de CV (Mexico)(b)
|
B-
|
9.00%
|
01/11/2018
|
01/11/15 @ 105
|
1,450,000
|
See notes to financial statements.
Semiannual Report l November 30, 2011 l 15
GBAB l Guggenheim Build America Bonds Managed Duration Trust l Portfolio of Investments (unaudited) continued
| Principal |
Optional Call
|
||||||
| Amount |
Description
|
Rating*
|
Coupon
|
Maturity
|
Provisions**
|
Value
|
|
|
Commercial Services – 0.8%
|
|||||||
|
$ 2,200,000
|
DynCorp International, Inc.
|
B-
|
10.38%
|
07/01/2017
|
07/01/14 @ 105
|
$ 1,914,000
|
|
|
1,140,000
|
NCO Group, Inc.
|
CCC-
|
11.88%
|
11/15/2014
|
11/15/12 @ 100
|
1,130,025
|
|
|
3,044,025
|
|||||||
|
Computers – 0.5%
|
|||||||
|
548,000
|
Compucom Systems, Inc.(b)
|
B
|
12.50%
|
10/01/2015
|
10/01/12 @ 103
|
558,960
|
|
|
1,260,000
|
iGate Corp.(b)
|
B+
|
9.00%
|
05/01/2016
|
05/01/14 @ 105
|
1,260,000
|
|
|
100,000
|
Stream Global Services, Inc.
|
B+
|
11.25%
|
10/01/2014
|
10/01/12 @ 106
|
102,000
|
|
|
1,920,960
|
|||||||
|
Distribution & Wholesale – 0.2%
|
|||||||
|
550,000
|
Baker & Taylor, Inc.(b)
|
CCC+
|
11.50%
|
07/01/2013
|
07/01/12 @ 100
|
429,688
|
|
|
175,000
|
Intcomex, Inc.
|
B-
|
13.25%
|
12/15/2014
|
12/15/12 @ 107
|
167,562
|
|
|
597,250
|
|||||||
|
Diversified Financial Services – 0.1%
|
|||||||
|
500,000
|
McGuire Air Force Base/Fort Dix Privatized Military Housing Project(b)
|
AA-
|
5.61%
|
09/15/2051
|
N/A
|
488,610
|
|
|
Engineering & Construction – 0.7%
|
|||||||
|
2,222,005
|
Alion Science and Technology Corp.(c)
|
B-
|
12.00%
|
11/01/2014
|
04/01/13 @ 105
|
2,010,915
|
|
|
1,000,000
|
Alion Science and Technology Corp.
|
CCC-
|
10.25%
|
02/01/2015
|
02/01/12 @ 103
|
595,000
|
|
|
2,605,915
|
|||||||
|
Entertainment – 1.1%
|
|||||||
|
1,600,000
|
Diamond Resorts Corp.
|
B-
|
12.00%
|
08/15/2018
|
08/15/14 @ 106
|
1,516,000
|
|
|
1,810,000
|
Lions Gate Entertainment, Inc.(b)
|
B-
|
10.25%
|
11/01/2016
|
11/01/13 @ 105
|
1,805,475
|
|
|
1,000,000
|
WMG Acquisition Corp.(b)
|
B-
|
11.50%
|
10/01/2018
|
10/01/14 @ 109
|
985,000
|
|
|
4,306,475
|
|||||||
|
Food – 0.6%
|
|||||||
|
2,125,000
|
Bumble Bee Acquisition Corp.(b)
|
B
|
9.00%
|
12/15/2017
|
12/15/14 @ 105
|
2,103,750
|
|
|
Health Care Services – 0.3%
|
|||||||
|
550,000
|
Apria Healthcare Group, Inc.
|
BB+
|
11.25%
|
11/01/2014
|
11/01/12 @ 103
|
541,750
|
|
|
325,000
|
OnCure Holdings, Inc.
|
B
|
11.75%
|
05/15/2017
|
05/15/14 @ 106
|
281,125
|
|
|
423,503
|
Symbion, Inc.(c)
|
CCC+
|
11.00%
|
08/23/2015
|
08/23/12 @ 103
|
425,621
|
|
|
1,248,496
|
|||||||
|
Internet – 1.0%
|
|||||||
|
4,250,000
|
GXS Worldwide, Inc.(h)
|
B
|
9.75%
|
06/15/2015
|
06/15/12 @ 105
|
3,920,625
|
|
|
Machinery-Diversified – 0.1%
|
|||||||
|
250,000
|
Tempel Steel Co.(b)
|
B
|
12.00%
|
08/15/2016
|
02/15/14 @ 109
|
235,000
|
|
|
Mining – 0.1%
|
|||||||
|
400,000
|
Midwest Vanadium Pty Ltd. (Australia)(b)
|
B-
|
11.50%
|
02/15/2018
|
02/15/15 @ 106
|
288,000
|
|
|
Packaging & Containers – 0.6%
|
|||||||
|
1,950,000
|
Pregis Corp.
|
CCC
|
12.38%
|
10/15/2013
|
01/5/12 @ 100
|
1,813,500
|
|
|
300,000
|
Pretium Packaging, LLC / Pretium Finance, Inc.(b)
|
B
|
11.50%
|
04/01/2016
|
04/01/14 @ 106
|
297,000
|
|
|
2,110,500
|
|||||||
|
Real Estate Investment Trusts – 0.2%
|
|||||||
|
750,000
|
Wells Operating Partnership II, LP
|
BBB-
|
5.88%
|
04/01/2018
|
N/A
|
761,981
|
See notes to financial statements.
16 l Semiannual Report l November 30, 2011
GBAB l Guggenheim Build America Bonds Managed Duration Trust l Portfolio of Investments (unaudited) continued
| Principal |
Optional Call
|
||||||
| Amount |
Description
|
Rating*
|
Coupon
|
Maturity
|
Provisions**
|
Value
|
|
|
Retail – 0.5%
|
|||||||
|
$ 250,000
|
CKE Restaurants, Inc.
|
B-
|
11.38%
|
07/15/2018
|
07/15/14 @ 106
|
$ 266,250
|
|
|
1,150,000
|
Liz Claiborne, Inc.(b)
|
B-
|
10.50%
|
04/15/2019
|
04/15/14 @ 105
|
1,219,000
|
|
|
475,000
|
Roadhouse Financing, Inc.
|
B-
|
10.75%
|
10/15/2017
|
10/15/13 @ 108
|
470,250
|
|
|
1,955,500
|
|||||||
|
Software – 0.1%
|
|||||||
|
400,000
|
Lawson Software, Inc.(b)
|
B-
|
11.50%
|
07/15/2018
|
07/15/15 @ 106
|
381,000
|
|
|
Textiles – 0.0%
|
|||||||
|
150,000
|
Empire Today, LLC / Empire Today Finance Corp.(b)
|
B-
|
11.38%
|
02/01/2017
|
02/01/14 @ 106
|
138,750
|
|
|
Transportation – 0.5%
|
|||||||
|
55,965
|
Atlas Air, Inc.(b)
|
NR
|
8.71%
|
01/02/2019
|
N/A
|
57,154
|
|
|
1,450,000
|
Marquette Transportation Company/Marquette Transportation Finance Corp.
|
B-
|
10.88%
|
01/15/2017
|
01/15/13 @ 108
|
1,421,000
|
|
|
600,000
|
United Maritime Group, LLC/United Maritime Group Finance Corp.
|
B
|
11.75%
|
06/15/2015
|
12/15/12 @ 106
|
606,000
|
|
|
2,084,154
|
|||||||
|
Trucking & Leasing – 0.5%
|
|||||||
|
1,808,000
|
AWAS Aviation Capital Ltd. (Ireland)(b)
|
BBB-
|
7.00%
|
10/15/2016
|
10/18/13 @ 104
|
1,808,000
|
|
|
Total Corporate Bonds – 9.5%
|
|||||||
|
(Cost $37,984,717)
|
36,233,878
|
||||||
|
Asset Backed Securities – 7.5%
|
|||||||
|
Automobile – 0.0%
|
|||||||
|
73,581
|
Bush Truck Leasing, LLC, Series 2011-AA, Class C(b)
|
NR
|
5.00%
|
09/25/2018
|
N/A
|
73,393
|
|
|
Collateralized Debt Obligation – 2.5%
|
|||||||
|
316,386
|
Commodore CDO I Ltd., Series 2005-3A, Class A1A (Cayman Islands)(b) (d)
|
CCC-
|
0.83%
|
03/06/2040
|
N/A
|
101,243
|
|
|
230,131
|
Diversified Asset Securitization Holdings II LP, Series 1X, Class A1L (Cayman Islands)(d)
|
A
|
0.84%
|
09/15/2035
|
N/A
|
199,664
|
|
|
115,369
|
G-Star Ltd., Series 2003-A, Class A1 (Cayman Islands)(b) (d)
|
A+
|
0.92%
|
03/13/2038
|
N/A
|
107,944
|
|
|
525,560
|
Independence I CDO Ltd., Series 1A, Class A (Cayman Islands)(b)(d)
|
BB+
|
0.76%
|
12/30/2030
|
N/A
|
461,058
|
|
|
8,847,503
|
Putnam Structured Product, Series 2003-1A, Class A1LB(b) (d)
|
B
|
0.70%
|
10/15/2038
|
N/A
|
7,378,110
|
|
|
756,986
|
Putnam Structured Product CDO, Series 2002-1A, Class A2 (Cayman Islands)(b)(d)
|
B+
|
0.93%
|
01/10/2038
|
N/A
|
580,388
|
|
|
121,540
|
Saturn Ventures Ltd., Series 2003-1A, Class A1 (Cayman Islands)(b)(d)
|
AA
|
0.93%
|
11/03/2038
|
N/A
|
111,846
|
|
|
500,000
|
TIAA Real Estate Ltd., Series 2002-1A, Class III(b) (e)
|
BBB+
|
7.60%
|
05/22/2037
|
N/A
|
464,470
|
|
|
9,404,723
|
|||||||
|
Collateralized Loan Obligation – 2.5%
|
|||||||
|
500,000
|
Alm Loan Funding, Series 2010-3A, Class C(b)(d)
|
BBB
|
4.48%
|
11/20/2020
|
N/A
|
436,115
|
|
|
1,000,000
|
CapitalSource Commercial Loan Trust, Series 2006-2A, Class D(b)(d)
|
B+
|
1.77%
|
09/20/2022
|
N/A
|
927,962
|
|
|
2,000,000
|
Churchill Financial Cayman Ltd., Series 2007-1A, Class C (Cayman Islands)(b)(d)(h)
|
A+
|
1.64%
|
07/10/2019
|
N/A
|
1,515,000
|
|
|
1,000,000
|
Churchill Financial Cayman Ltd., Series 2007-1A, Class D1 (Cayman Islands)(b)(d)
|
BBB+
|
2.99%
|
07/10/2019
|
N/A
|
681,650
|
|
|
1,000,000
|
Churchill Financial Cayman Ltd., Series 2007-1A, Class D2 (Cayman Islands)(b)
|
BBB+
|
8.37%
|
07/10/2019
|
N/A
|
929,900
|
|
|
300,000
|
Cratos CLO Ltd., Series 2007-1A, Class C (Cayman Islands)(b)(d)
|
AA-
|
1.58%
|
05/19/2021
|
N/A
|
222,978
|
|
|
500,000
|
DFR Middle Market CLO Ltd., Series 2007-1A, Class C(b) (d)
|
A
|
2.71%
|
07/20/2019
|
N/A
|
440,570
|
|
|
550,000
|
Eastland CLO Ltd., Series 2007-1A, Class A2B(b)(d)
|
A+
|
0.76%
|
05/01/2022
|
N/A
|
397,452
|
|
|
250,000
|
Emporia Preferred Funding (Cayman Islands)(b)(d)
|
A-
|
1.34%
|
10/12/2018
|
N/A
|
180,098
|
|
|
250,000
|
Genesis CLO Ltd., Series 2007-2A, Class D (Cayman Islands)(b) (d)
|
BBB
|
4.39%
|
01/10/2016
|
N/A
|
223,050
|
|
|
200,000
|
Katonah Ltd., Series 2006-9A, Class A3L (Cayman Islands)(b)(d)
|
BBB+
|
1.14%
|
01/25/2019
|
N/A
|
138,692
|
See notes to financial statements.
Semiannual Report l November 30, 2011 l 17
GBAB l Guggenheim Build America Bonds Managed Duration Trust l Portfolio of Investments (unaudited) continued
| Principal |
Optional Call
|
||||||
| Amount |
Description
|
Rating*
|
Coupon
|
Maturity
|
Provisions**
|
Value
|
|
|
Collateralized Loan Obligation (continued)
|
|||||||
|
$ 1,992,806
|
Newstar Trust, Series 2005-1A, Class C(b)(d)
|
B+
|
1.27%
|
07/25/2018
|
N/A
|
$ 1,763,633
|
|
|
514,262
|
Sargas CLO II Ltd., Series 2006-1A, Class E (Cayman Islands)(b) (d)
|
B+
|
4.41%
|
10/20/2018
|
N/A
|
448,590
|
|
|
1,500,000
|
Standard Chartered PLC
|
NR
|
0.29%
|
03/02/2014
|
N/A
|
1,469,055
|
|
|
9,774,745
|
|||||||
|
Commercial Receivables – 0.1%
|
|||||||
|
400,000
|
Leaf II Receivables Funding, LLC, Series 2010-4, Class D(b)
|
NR
|
5.00%
|
01/20/2019
|
02/20/13 @ 100
|
362,360
|
|
|
Insurance – 0.0%
|
|||||||
|
100,000
|
Insurance Note Capital Term, Series 1005-1R1A(b)(d)
|
A
|
0.57%
|
06/09/2033
|
N/A
|
85,396
|
|
|
Other ABS – 0.0%
|
|||||||
|
32,614
|
Aircraft Certificate Owner Trust(b)
|
BB
|
6.46%
|
09/20/2022
|
N/A
|
32,125
|
|
|
Timeshare – 0.2%
|
|||||||
|
666,428
|
Silverleaf Finance LLC, Series 2011-A, Class A(b)
|
NR
|
9.00%
|
06/15/2023
|
N/A
|
628,688
|
|
|
Transportation – 1.3%
|
|||||||
|
5,309,066
|
Airplanes Pass-Through Trust, Series 2001-1A, Class A9(d)(h)
|
CCC
|
0.80%
|
03/15/2019
|
N/A
|
3,371,643
|
|
|
1,880,560
|
Vega Containervessel PLC, Series 2006-1A, Class A(b)
|
Ba3
|
5.56%
|
02/10/2021
|
N/A
|
1,767,726
|
|
|
5,139,369
|
|||||||
|
Whole Business – 0.9%
|
|||||||
|
1,300,000
|
Adams Outdoor Advertising, LP, Series 2010-1, Class B(b)
|
Ba2
|
8.84%
|
12/20/2040
|
N/A
|
1,355,098
|
|
|
1,825,000
|
Adams Outdoor Advertising, LP, Series 2010-1, Class C(b)
|
B3
|
10.76%
|
12/20/2040
|
N/A
|
1,918,223
|
|
|
3,273,321
|
|||||||
|
Total Asset Backed Securities – 7.5%
|
|||||||
|
(Cost $29,505,904)
|
28,774,120
|
||||||
|
Collateralized Mortgage Obligations – 0.5%
|
|||||||
|
Commercial Mortgage Backed Security – Traditional – 0.5%
|
|||||||
|
2,000,000
|
GS Mortgage Securities Corp. II, Series 2007-EOP, Class H(b)(d)
|
BBB-
|
3.58%
|
03/06/2020
|
N/A
|
1,922,728
|
|
|
(Cost $1,797,321)
|
|||||||
|
Term Loans – 3.1%(f)
|
|||||||
|
Consumer Products – 0.1%
|
|||||||
|
349,125
|
Targus Group International, Inc.
|
B
|
11.00%
|
05/25/2016
|
N/A
|
330,796
|
|
|
Consumer Services – 0.2%
|
|||||||
|
932,250
|
NCO Group, Inc.
|
CCC+
|
8.00%
|
05/15/2013
|
N/A
|
928,176
|
|
|
Gaming – 0.8%
|
|||||||
|
3,001,245
|
MGM Mirage, Inc
|
Ba3
|
7.00%
|
02/21/2014
|
N/A
|
2,923,543
|
|
|
300,000
|
Rock Ohio Caesars LLC
|
BB-
|
8.50%
|
08/11/2017
|
N/A
|
300,750
|
|
|
3,224,293
|
|||||||
|
Oil Field Services – 0.8%
|
|||||||
|
2,977,500
|
Southern Pacific Resources 2nd Lien
|
CCC
|
10.75%
|
12/22/2016
|
N/A
|
2,996,124
|
|
|
Other Industrials – 0.1%
|
|||||||
|
500,000
|
Sirva Worldwide, Inc.
|
B
|
10.75%
|
03/17/2017
|
N/A
|
505,000
|
|
|
Retail – 0.4%
|
|||||||
|
1,500,000
|
Garden Ridge
|
B+
|
8.75%
|
10/04/2017
|
N/A
|
1,350,000
|
See notes to financial statements.
18 l Semiannual Report l November 30, 2011
|
GBAB l Guggenheim Build America Bonds Managed Duration Trust l Portfolio of Investments (unaudited) continued
|
|||||||
| Principal |
Optional Call
|
||||||
| Amount |
Description
|
Rating*
|
Coupon
|
Maturity
|
Provisions**
|
Value
|
|
|
Technology – 0.7%
|
|||||||
|
$ 99,456
|
API Technologies Corp.
|
BB-
|
7.75%
|
06/27/2016
|
N/A
|
$ 95,975
|
|
|
1,000,000
|
Infor Global Solutions 2nd Lien
|
Caa2
|
6.51%
|
03/02/2014
|
N/A
|
821,500
|
|
|
1,706,300
|
Lawson Software
|
B+
|
6.75%
|
07/05/2017
|
N/A
|
1,670,041
|
|
|
2,587,516
|
|||||||
|
Total Term Loans – 3.1%
|
|||||||
|
(Cost $11,840,718)
|
11,921,905
|
||||||
| Number | |||||||
| of Shares |
Description
|
Value
|
|||||
|
Preferred Stocks – 1.9%
|
|||||||
|
Diversified Financial Services – 0.5%
|
|||||||
|
1,900
|
Falcons Funding Trust I(b)(d)
|
NR
|
8.88%
|
–
|
1,983,837
|
||
|
Transportation – 1.4%
|
|||||||
|
200,000
|
Seaspan Corp., Series C
|
NR
|
9.50%
|
–
|
5,290,000
|
||
|
Total Preferred Stocks – 1.9%
|
|||||||
|
(Cost $6,928,500)
|
7,273,837
|
||||||
|
Warrants – 0.0%
|
|||||||
|
1,550
|
Alion Science and Technology Corp.(g)
|
03/15/2017
|
–
|
||||
|
(Cost $16)
|
|||||||
|
Total Long-Term Investments – 128.9%
|
|||||||
|
(Cost $445,438,000)
|
493,012,559
|
||||||
| Principal | |||||||
| Amount |
Description
|
Coupon
|
Maturity
|
Value
|
|||
|
Short-Term Investments – 1.1%
|
|||||||
|
Municipal Bonds – 1.1%
|
|||||||
|
Michigan – 1.1%
|
|||||||
|
$ 2,000,000
|
Michigan Finance Authority, State Aid Revenue Notes, School District of the City of Detroit,
|
||||||
|
Series 2011A-1(h)
|
SP-1
|
6.45%
|
02/20/2012
|
2,018,480
|
|||
|
2,400,000
|
Michigan Finance Authority, State Aid Revenue Notes, School District of the City of Detroit,
|
||||||
|
Series 2011A-2(h)
|
SP-1
|
6.65%
|
03/20/2012
|
2,431,776
|
|||
|
(Cost $4,400,000)
|
4,450,256
|
||||||
|
Total Investments – 130.0%
|
|||||||
|
(Cost $449,838,000)
|
497,462,815
|
||||||
|
Other Assets in excess of Liabilities – 2.1%
|
7,856,940
|
||||||
|
Reverse Repurchase Agreements – (32.1%)
|
(122,753,507)
|
||||||
|
Net Assets – 100.0%
|
$ 382,566,248
|
||||||
See notes to financial statements.
Semiannual Report l November 30, 2011 l 19
GBAB l Guggenheim Build America Bonds Managed Duration Trust l Portfolio of Investments (unaudited) continued
AGM – Insured by Assured Guaranty Municipal Corporation
Assured GTY – Insured by Assured Guaranty Corporation
CDO – Collateralized Debt Obligation
CLO – Collateralized Loan Obligation
LLC – Limited Liability Company
LP – Limited Partnership
N/A- Not Applicable
PLC – Public Limited Company
Pty – Propriety
SAB de CV – Publicly Traded Company
|
*
|
Ratings shown are per Standard & Poor’s, Moody’s or Fitch. Securities classified as NR are not rated. (For securities not rated by Standard & Poor’s Rating Group, the rating by Moody’s Investor Services, Inc. is provided. Likewise, for securities not rated by Standard & Poor’s Rating Group and Moody’s Investor Services, Inc., the rating by Fitch Ratings is provided.) All ratings are unaudited. The ratings apply to the credit worthiness of the issuers of the underlying securities and not to the Trust or its shares.
|
|
**
|
Date and price of the earliest optional call or put provision. There may be other call provisions at varying prices at later dates.
|
|
(a)
|
Taxable municipal bond issued as part of the Build America Bond program.
|
|
(b)
|
Securities are exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At November 30, 2011, these securities amounted to $43,271,875, which represents 11.3% of net assets applicable to common shares.
|
|
(c)
|
The issuer of this security may elect to pay interest entirely in cash, entirely by issuing payment-in-kind shares, or pay 50% of the interest in cash and 50% of the interest by issuing payment-in-kind shares.
|
|
(d)
|
Floating or variable rate coupon. The rate shown is as of November 30, 2011.
|
|
(e)
|
Security is a “Step-up” bond where the coupon increases or steps up at a predetermined date. The rate shown reflects the rate in effect at the end of the reporting period.
|
|
(f)
|
Term loans held by the Trust have a variable interest rate feature which is periodically adjusted based on an underlying interest rate benchmark. In addition, term loans may include mandatory and/or optional prepayment terms. As a result, the actual maturity dates of the loan may be different than the amounts disclosed in the portfolios of investments. Term loans may be considered restricted in that the Trust may be contractually obligated to secure approval from the Agent Bank and/or Borrower prior to the sale or disposition of loan.
|
|
(g)
|
Non-income producing security.
|
|
(h)
|
All or a portion of these securities have been physically segregated in connection with unfunded loan commitments and reverse repurchase agreements. As of November 30, 2011, the total amount segregated was $181,420,204.
|
See notes to financial statements.
20 l Semiannual Report l November 30, 2011
GBAB l Guggenheim Build America Bonds Managed Duration Trust
Statement of Assets and Liabilities l November 30, 2011 (unaudited)
|
Assets
|
|||
|
Investments in securities, at value (cost $449,838,000)
|
$ | 497,462,815 | |
|
Interest receivable
|
9,383,413 | ||
|
Other assets
|
7,023 | ||
|
Total assets
|
506,853,251 | ||
|
Liabilities
|
|||
|
Reverse repurchase agreements
|
122,753,507 | ||
|
Due to custodian
|
675,758 | ||
|
Payable for securities purchased
|
368,320 | ||
|
Advisory fee payable
|
248,637 | ||
|
Interest due on borrowings
|
104,099 | ||
|
Administrative fee payable
|
9,470 | ||
|
Accrued expenses and other liabilities
|
127,212 | ||
|
Total liabilities
|
124,287,003 | ||
|
Net Assets
|
$ | 382,566,248 | |
|
Composition of Net Assets
|
|||
|
Common stock, $.01 par value per share; unlimited number of shares authorized, 17,409,470 shares issued and outstanding
|
$ | 174,095 | |
|
Additional paid-in capital
|
331,604,613 | ||
|
Accumulated undistributed net investment income
|
2,820,698 | ||
|
Accumulated net realized gain on investments
|
342,027 | ||
|
Accumulated net unrealized appreciation on investments
|
47,624,815 | ||
|
Net Assets
|
$ | 382,566,248 | |
|
Net Asset Value
|
|||
|
(based on 17,409,470 common shares outstanding)
|
$ | 21.97 | |
See notes to financial statements.
Semiannual Report l November 30, 2011 l 21
GBAB l Guggenheim Build America Bonds Managed Duration Trust
Statement of Operations l For the six months ended November 30, 2011 (unaudited)
|
Investment Income
|
|||||||
|
Interest
|
$ | 15,945,269 | |||||
|
Dividends
|
238,810 | ||||||
|
Total income
|
$ | 16,184,079 | |||||
|
Expenses
|
|||||||
|
Advisory fee
|
1,458,068 | ||||||
|
Interest expense
|
506,153 | ||||||
|
Professional fees
|
131,401 | ||||||
|
Trust accounting
|
59,190 | ||||||
|
Administrative fee
|
56,059 | ||||||
|
Trustees’ fees and expenses
|
45,101 | ||||||
|
Custodian fee
|
41,624 | ||||||
|
Printing expenses
|
40,633 | ||||||
|
NYSE listing fee
|
12,702 | ||||||
|
Insurance expense
|
10,534 | ||||||
|
Transfer agent fee
|
9,232 | ||||||
|
Miscellaneous
|
3,461 | ||||||
|
Total expenses
|
2,374,158 | ||||||
|
Net investment income
|
13,809,921 | ||||||
|
Realized and Unrealized Gain on Investments
|
|||||||
|
Net realized gain on:
|
|||||||
|
Investments
|
115,214 | ||||||
|
Net change in unrealized appreciation on:
|
|||||||
|
Investments
|
21,627,687 | ||||||
|
Net realized and unrealized gain on investments
|
21,742,901 | ||||||
|
Net Increase in Net Assets Resulting from Operations
|
$ | 35,552,822 | |||||
See notes to financial statements.
22 l Semiannual Report l November 30, 2011
GBAB l Guggenheim Build America Bonds Managed Duration Trust
Statement of Changes in Net Assets l
|
For the Six
|
For the Period
|
||||||
|
Months Ended
|
October 28, 2010*
|
||||||
|
November 30, 2011
|
through
|
||||||
|
(unaudited)
|
May 31, 2011
|
||||||
|
Increase in Net Assets from Operations
|
|||||||
|
Net investment income
|
$ | 13,809,921 | $ | 11,815,722 | |||
|
Net realized gain/(loss) on investments
|
115,214 | (9,230 | ) | ||||
|
Net change in unrealized appreciation on investments
|
21,627,687 | 25,997,128 | |||||
|
Net increase in net assets resulting from operations
|
35,552,822 | 37,803,620 | |||||
|
Distributions to Common Shareholders
|
|||||||
|
From net investment income
|
(12,430,362 | ) | (10,184,540 | ) | |||
|
Capital Share Transactions
|
|||||||
|
Net proceeds from the issuance of common shares
|
0 | 332,420,793 | |||||
|
Common share offering costs charged to paid-in capital
|
0 | (696,169 | ) | ||||
|
Net increase from capital share transactions
|
0 | 331,724,624 | |||||
|
Total increase in net assets
|
23,122,460 | 359,343,704 | |||||
|
Net Assets
|
|||||||
|
Beginning of period
|
359,443,788 | 100,084 | |||||
|
End of period (including undistributed net investment income of $2,820,698 and
|
|||||||
|
$1,441,139, respectively)
|
$ | 382,566,248 | $ | 359,443,788 | |||
|
* Commencement of investment operations.
|
|||||||
See notes to financial statements.
Semiannual Report l November 30, 2011 l 23
GBAB l Guggenheim Build America Bonds Managed Duration Trust
Statement of Cash Flows l For the six months ended November 30, 2011 (unaudited)
|
Cash Flows from Operating Activities:
|
|||
|
Net increase in net assets resulting from operations
|
$ | 35,552,822 | |
|
Adjustments to Reconcile Net Increase in Net Assets Resulting from Operations to
|
|||
|
Net Cash Used by Operating and Investing Activities:
|
|||
|
Net unrealized appreciation on investments
|
(21,627,687 | ) | |
|
Net realized gain on investments
|
(115,214 | ) | |
|
Paydowns received
|
(342,843 | ) | |
|
Net accretion of bond discount and amortization of bond premium
|
(241,389 | ) | |
|
Purchase of long-term investments
|
(32,049,217 | ) | |
|
Proceeds from sale of long-term investments
|
12,716,942 | ||
|
Net proceeds from sale of short-term investments
|
2,874,884 | ||
|
Decrease in interest receivable
|
38,276 | ||
|
Decrease in receivable for securities sold
|
1,982,500 | ||
|
Decrease in other assets
|
10,534 | ||
|
Decrease in payable for securities purchased
|
(4,901,648 | ) | |
|
Increase in due to custodian
|
675,758 | ||
|
Increase in advisory fee payable
|
16,280 | ||
|
Increase in interest due on borrowings
|
46,865 | ||
|
Increase in administration fee payable
|
451 | ||
|
Decrease in accrued expenses and other liabilities
|
(54,051 | ) | |
|
Net Cash Used by Operating and Investing Activities
|
(5,416,737 | ) | |
|
Cash Flows From Financing Activities:
|
|||
|
Distributions to common shareholders
|
(12,430,362 | ) | |
|
Increase in reverse repurchase agreements
|
17,847,099 | ||
|
Net Cash Provided by Financing Activities
|
5,416,737 | ||
|
Net change in cash
|
– | ||
|
Cash at Beginning of Period
|
– | ||
|
Cash at End of Period
|
$ | – | |
|
Supplemental Disclosure of Cash Flow Information: Cash paid during the period for interest
|
$ | 459,288 | |
See notes to financial statements.
24 l Semiannual Report l November 30, 2011
GBAB l Guggenheim Build America Bonds Managed Duration Trust
Financial Highlights l
|
For the Six
|
For the Period
|
||||||
|
Months Ended
|
October 28, 2010*
|
||||||
|
Per share operating performance
|
November 30, 2011
|
through
|
|||||
|
for a common share outstanding throughout the period
|
(unaudited)
|
May 31, 2011
|
|||||
|
Net asset value, beginning of period
|
$ | 20.65 | $ | 19.10 | (a) | ||
|
Income from investment operations
|
|||||||
|
Net investment income (b)
|
0.79 | 0.68 | |||||
|
Net realized and unrealized gain on investments
|
1.24 | 1.50 | |||||
|
Total from investment operations
|
2.03 | 2.18 | |||||
|
Common shares’ offering expenses charged to paid-in capital
|
– | (0.04 | ) | ||||
|
Distributions to Common Shareholders
|
|||||||
|
From net investment income
|
(0.71 | ) | (0.59 | ) | |||
|
Net asset value, end of period
|
$ | 21.97 | $ | 20.65 | |||
|
Market value, end of period
|
$ | 20.92 | $ | 19.54 | |||
|
Total investment return (c)
|
|||||||
|
Net asset value
|
9.98 | % | 11.34 | % | |||
|
Market value
|
10.93 | % | 0.80 | % | |||
|
Ratios and supplemental data
|
|||||||
|
Net assets, end of period (thousands)
|
$ | 382,566 | $ | 359,444 | |||
|
Ratios to Average Net Assets applicable to Common Shares:
|
|||||||
|
Total expenses, excluding interest expense
|
1.00 | %(d) | 0.91 | %(d) | |||
|
Total expenses, including interest expense
|
1.28 | %(d) | 1.05 | %(d) | |||
|
Net investment income, including interest expense
|
7.42 | %(d) | 6.00 | %(d) | |||
|
Portfolio turnover rate (e)
|
2 | % | 3 | % | |||
|
Senior Indebtedness:
|
|||||||
|
Total Borrowings outstanding (in thousands)
|
$ | 122,754 | $ | 104,906 | |||
|
Asset Coverage per $1,000 of indebtedness
|
$ | 4,117 | $ | 4,426 | |||
|
*
|
Commencement of investment operations.
|
|
(a)
|
Before deduction of offering expenses charged to capital.
|
|
(b)
|
Based on average shares outstanding during the period.
|
|
(c)
|
Total investment return is calculated assuming a purchase of a common share at the beginning of the period and a sale on the last day of the period reported either at net asset value (“NAV”) or market price per share. Dividends and distributions are assumed to be reinvested at NAV for NAV returns or the prices obtained under the Trust’s Dividend Reinvestment Plan for market value returns. Total investment return does not reflect brokerage commissions. A return calculated for a period of less than one year is not annualized.
|
|
(d)
|
Annualized.
|
|
(e)
|
Portfolio turnover is not annualized for periods of less than one year.
|
|
(f)
|
Calculated by subtracting the Trust’s total liabilities (not including borrowings) from the Trust’s total assets and dividing by the total borrowings.
|
See notes to financial statements.
Semiannual Report l November 30, 2011 l 25
GBAB l Guggenheim Build America Bonds Managed Duration Trust
Notes to Financial Statementsl November 30, 2011 (unaudited)
Note 1 – Organization:
Guggenheim Build America Bonds Managed Duration Trust (the “Trust”) was organized as a Delaware statutory trust on June 30, 2010. The Trust is registered as a diversified closed-end management investment company under the Investment Company Act of 1940, as amended.
The Trust’s primary investment objective is to provide current income with a secondary objective of long-term capital appreciation. There can be no assurance that the Trust will achieve its investment objectives. The Trust’s investment objectives are considered fundamental and may not be changed without shareholder approval.
Note 2 – Accounting Policies:
The preparation of the financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from these estimates.
The following is a summary of significant accounting policies consistently followed by the Trust.
(a) Valuation of Investments
The Trust values equity securities at the last reported sale price on the principal exchange or in the principal over-the-counter (“OTC”) market in which such securities are traded, as of the close of regular trading on the New York Stock Exchange (“NYSE”) on the day the securities are being valued or, if there are no sales, at the mean between the last available bid and ask prices on that day. Securities traded on NASDAQ are valued at the NASDAQ Official Closing Price. The Trust values debt securities (including municipal securities, asset-backed securities, collateralized mortgage obligations and term loans) at the last available bid price for such securities or, if such prices are not available, at prices for securities of comparable maturity, quality, and type. Short-term securities with remaining maturities of 60 days or less may be valued at amortized cost, which approximates fair value.
For those securities where quotations or prices are not available, the valuations are determined in accordance with procedures established in good faith by management and approved by the Board of Trustees. Valuations in accordance with these procedures are intended to reflect each security’s (or asset’s) “fair value”. Such “fair value” is the amount that the Trust might reasonably expect to receive for the security (or asset) upon its current sale. Each such determination should be based on a consideration of all relevant factors, which are likely to vary from one pricing context to another. Examples of such factors may include, but are not limited to: (i) the type of security, (ii) the initial cost of the security, (iii) the existence of any contractual restrictions on the security’s disposition, (iv) the price and extent of public trading in similar securities of the issuer or of comparable companies, (v) quotations or evaluated prices from broker-dealers and/or pricing services, (vi) information obtained from the issuer, analysts, and/or the appropriate stock exchange (for exchange traded securities), (vii) an analysis of the company’s financial statements, and (viii) an evaluation of the forces that influence the issuer and the market(s) in which the security is purchased and sold (e.g. the existence of pending merger activity, public offerings or tender offers that might affect the value of the security).
Fair value is defined as the price that the Trust would receive to sell an investment or pay to transfer a liability in an orderly transaction with an independent buyer in the principal market, or in the absence of a principal market the most advantageous market for the investment or liability. There are three different categories for valuations. Level 1 valuations are those based upon quoted prices in active markets. Level 2 valuations are those based upon quoted prices in inactive markets or based upon significant observable inputs (e.g. yield curves; benchmark interest rates; indices). Level 3 valuations are those based upon unobservable inputs (e.g. discounted cash flow analysis; non-market based methods used to determine fair valuation).
The Trust values Level 1 securities using readily available market quotations in active markets. The Trust values Level 2 fixed income securities using independent pricing providers who employ matrix pricing models utilizing market prices, broker quotes and prices of securities with comparable maturities and qualities. The Trust values Level 2 equity securities using various observable market inputs in accordance with procedures established in good faith by management and approved by the Board of Trustees as described above. The Trust did not have any Level 3 securities during the six months ended November 30, 2011.
The following table represents the Trust’s investments carried on the Statement of Assets and Liabilities by caption and by level within the fair value hierarchy as of November 30, 2011.
|
Description
|
|||||||||||||||
|
(value in $000s)
|
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||
|
Assets:
|
|||||||||||||||
|
Municipal Bonds
|
$ | – | $ | 411,336 | $ | – | $ | 411,336 | |||||||
|
Corporate Bonds
|
– | 36,234 | – | 36,234 | |||||||||||
|
Asset Backed Securities
|
– | 28,774 | – | 28,774 | |||||||||||
|
Collateralized Mortgage Obligations
|
– | 1,923 | – | 1,923 | |||||||||||
|
Term Loans
|
– | 11,922 | – | 11,922 | |||||||||||
|
Preferred Stock
|
7,274 | – | – | 7,274 | |||||||||||
|
Warrants
|
– | – | * | – | – | * | |||||||||
|
Total
|
$ | 7,274 | $ | 490,189 | $ | – | $ | 497,463 | |||||||
|
* Less than minimum amount disclosed.
|
|||||||||||||||
There were no transfers between levels during the six months ended November 30, 2011.
(b) Investment Transactions and Investment Income
Investment transactions are accounted for on the trade date. Realized gains and losses on investments are determined on the identified cost basis. Paydown gains and losses on mortgage and asset-backed securities are treated as an adjustment to interest income. For the six months ended November 30, 2011, the Trust recognized an increase of interest income and a decrease of net realized gain of $342,843. This reclassification is reflected on the Statement of Operations and had no effect on the net asset value of the Trust. Dividend income is recorded net of applicable withholding taxes on the ex-dividend date and interest income is recorded on an accrual basis. Discounts or premiums on debt securities purchased are accreted or amortized to interest income over the lives of the respective securities using the effective interest method.
(c) Swaps
A swap is an agreement to exchange the return generated by one instrument for the return generated by another instrument. The Trust may enter into swap agreements to manage its exposure to interest rates or to manage the duration of its portfolio. The swaps are valued daily at current market value and any unrealized gain or loss is included in the Statement of Operations. The Trust accrues for the interim payments on swap contracts on a daily basis, with the net amount recorded within unrealized appreciation/depreciation of swap contracts on the Statement of Assets and Liabilities. Once the interim payments are settled in cash, the net amount is recorded as realized gain/loss on swaps, in addition to realized gain/loss recorded upon the termination of swap contracts on the Statement of Operations. During the period that the swap agreement is open, the Trust may be subject to risk from the potential inability of the counterparty to meet the terms of the agreement. The swaps involve elements of both market and credit risk in excess of the amounts reflected on the Statement of Assets and Liabilities. During the period ended November 30, 2011, there were no swaps outstanding.
26 l Semiannual Report l November 30, 2011
GBAB l Guggenheim Build America Bonds Managed Duration Trust l Notes to Financial Statements (unaudited) continued
(d) When-Issued and Delayed Delivery Transactions
The Trust may engage in when-issued or delayed delivery transactions. The Trust records when-issued securities on the trade date and maintains security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased on a when-issued or delayed delivery basis are marked to market daily and begin earning interest on the settlement date. Losses may occur on these transactions due to changes in a market conditions or the failure of counterparties to perform under the contract.
(e) Distributions
The Trust declares and pays monthly dividends to common shareholders. Any net realized long-term gains are distributed annually. Distributions to shareholders are recorded on the ex-dividend date. The amount and timing of distributions are determined in accordance with federal income tax regulations, which may differ from GAAP.
(f) Currency Translation
Assets and liabilities denominated in foreign currencies are translated into U.S. dollars at the mean of the bid and asked price of the respective exchange rates on the last day of the period. Purchases and sales of investments denominated in foreign currencies are translated at the mean of the bid and asked price of respective exchange rates on the date of the transaction.
Foreign exchange gain or loss resulting from holding of a foreign currency, expiration of a currency exchange contract, difference in the exchange rates between the trade date and settlement date of an investment purchased or sold, and the difference between dividends actually received compared to the amount shown in a Trust’s accounting records on the date of receipt are included as net realized gains or losses on foreign currency forwards and currency transactions in the Trust’s Statement of Operations.
Foreign exchange gain or loss on assets and liabilities, other than investments, is included in unrealized appreciation (depreciation) on foreign currency transactions. There were no currency gains or losses for the six months ended November 30, 2011.
(g) Recent Accounting Pronouncements
On May 12, 2011, the Financial Accounting Standards Board (“FASB”) issued ASU 2011-04, modifying Topic 820, Fair Value Measurements and Disclosures. At the same time, the International Accounting Standards Board (“IASB”) issued International Financial Reporting Standard (“IFRS”) 13, Fair Value Measurement. The objective by the FASB and IASB is convergence of their guidance on fair value measurements and disclosures. Specifically, the ASU requires reporting entities to disclose (i) the amounts of any transfers between Level 1 and Level 2, and the reasons for the transfers, (ii) for Level 3 fair value measurements, quantitative information about significant unobservable inputs used, (iii) a description of the valuation processes used by the reporting entity and, (iv) a narrative description of the sensitivity of the fair value measurement to changes in unobservable inputs if a change in those inputs might result in a significantly higher or lower fair value measurement. The effective date of the ASU is for interim and annual periods beginning after December 15, 2011, and is therefore not effective for the current fiscal year. The Adviser is in the process of assessing the impact of the updated standards on the Trust’s financial statements.
Note 3 – Investment Advisory Agreement, Sub-Advisory Agreement and Other Agreements:
Pursuant to an Investment Advisory Agreement (the “Agreement”) between the Trust and Guggenheim Funds Investment Advisors, LLC (“the Adviser”), the Adviser furnished offices, necessary facilities and equipment, provides administrative services, oversees the activities of Guggenheim Partners Asset Management, LLC (“GPAM”), provides personnel including certain officers required for the Trust’s administrative management and compensates the officers and trustees of the Trust who are affiliates of the Adviser. As compensation for these services, the Trust pays the Adviser a fee, payable monthly, in an amount equal to 0.60% of the Trust’s average daily managed assets (net assets applicable to common shareholders plus any assets attributable to financial leverage).
Pursuant to a Sub-Advisory Agreement (the “Sub-Advisory Agreement”) among the Trust, the Adviser and GPAM, GPAM under the supervision of the Trust’s Board of Trustees and the Adviser, provides a continuous investment program for the Trust’s portfolio; provides investment research; makes and executes recommendations for the purchase and sale of securities; and provides certain facilities and personnel, including certain officers required for its administrative management and pays the compensation of all officers and trustees of the Trust who are GPAM’s affiliates. As compensation for its services, the Adviser pays GPAM a fee, payable monthly, in an annual amount equal to 0.30% of the Trust’s average daily managed assets.
Certain officers of the Trust may also be officers, directors and/or employees of the Adviser or GPAM. The Trust does not compensate its officers who are officers, directors and/or employees of the aforementioned firms.
Under a separate Fund Administration agreement, the Adviser provides Fund Administration services to the Trust. As compensation for services performed under the Administration Agreement, the Adviser will receive an administration fee payable monthly at the annual rate set forth below as a percentage of the average daily managed assets of the Trust:
|
Managed Assets
|
Rate
|
||
|
First $200,000,000
|
0.0275 | % | |
|
Next $300,000,000
|
0.0200 | % | |
|
Next $500,000,000
|
0.0150 | % | |
|
Over $1,000,000,000
|
0.0100 | % | |
For the six months ended November 30, 2011, the Trust recognized expenses of approximately $56,059 for these services.
The Bank of New York Mellon (“BNY”) acts as the Trust’s custodian and accounting agent. As custodian, BNY is responsible for the custody of the Trust’s assets. As accounting agent, BNY is responsible for maintaining the books and records of the Trust’s securities and cash.
Note 4 – Federal Income Taxes:
The Trust intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies. Accordingly, no provision for U.S. federal income taxes is required. In addition, by distributing substantially all of its ordinary income and long-term capital gains, if any, during each calendar year, the Trust intends not to be subject to U.S. federal excise tax.
Semiannual Report l November 30, 2011 l 27
GBAB l Guggenheim Build America Bonds Managed Duration Trust l Notes to Financial Statements (unaudited) continued
Information on the components of net assets on a tax basis as of November 30, 2011, is as follows:
|
Net Tax
|
|||
|
Cost of
|
Unrealized
|
||
|
Investments
|
Gross Tax
|
Gross Tax
|
Appreciation
|
|
for Tax
|
Unrealized
|
Unrealized
|
on
|
|
Purposes
|
Appreciation
|
Depreciation
|
Investments
|
|
$449,838,000
|
$50,892,087
|
$(3,267,272)
|
$47,624,815
|
As of May 31, 2011 (the most recent fiscal year end for federal income tax purposes), the components of accumulated earnings/(losses) (excluding paid-in capital) on a tax basis were as follows:
|
Undistributed
|
Accumulated
|
|
Ordinary
|
Long-Term
|
|
Income/
|
Gains/
|
|
(Accumulated
|
(Accumulated
|
|
Ordinary Loss)
|
Capital Loss)
|
|
$1,441,139
|
$226,813
|
For the period ended May 31, 2011, the tax character of distributions paid to common shareholders as reflected in the Statement of Changes in Net Assets was as follows:
|
Distributions paid from
|
2011
|
|
Ordinary Income
|
$10,184,540
|
For all open tax years and all major jurisdictions, management of the Trust has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Uncertain tax positions are tax positions taken or expected to be taken in the course of preparing the Trust’s tax returns that would not meet a more-likely-than-not threshold of being sustained by the applicable tax authority and would be recorded as a tax expense in the current year. Open tax years are those that are open for examination by taxing authorities (i.e. generally the last four tax year ends and the interim tax period since them). Furthermore, management of the Trust is also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Note 5 – Investments in Securities:
For the six months ended November 30, 2011, the cost of purchases and proceeds from sales of investments, excluding short-term securities, were $32,049,217 and $12,716,942, respectively.
Note 6 – Capital:
Common Shares
In connection with its organization process, the Trust sold 5,240 shares of beneficial interest to Guggenheim Funds Distributors, Inc., an affiliate of the Adviser, for consideration of $100,084 at a price of $19.10 per share. The Trust has an unlimited amount of common shares, $0.01 par value, authorized and 17,409,470 issued and outstanding. Of this amount, the Trust issued 17,000,000 shares of common stock in its initial public offering. These shares were issued at $19.10 per share after deducting the sales load but before underwriters’ expense reimbursement.
In connection with the initial public offering of the Trust’s common shares, the underwriters were granted an option to purchase additional common shares. On December 14, 2010, the underwriters purchased, at a price of $19.10 per common share (after deducting the sales load but before underwriters’ expense reimbursement), 404,230 common shares of the Trust pursuant to the over-allotment option.
Offering costs, estimated at $696,169 or $0.04 per share, in connection with the issuance of common shares have been borne by the Trust and were charged to paid-in capital. The Adviser and GPAM have agreed to pay offering expenses (other than sales load, but including reimbursement of expenses to the underwriters) in excess of $0.04 per common share.
Note 7 – Leverage:
Reverse Repurchase Agreements
The Trust may enter into reverse repurchase agreements as part of its financial leverage strategy. Under a reverse repurchase agreement, the Trust temporarily transfers possession of a portfolio instrument to another party, such as a bank or broker-dealer, in return for cash. At the same time, the Trust agrees to repurchase the instrument at an agreed upon time and price, which reflects an interest payment. Such agreements have the economic effect of borrowings. The Trust may enter into such agreements when it is able to invest the cash acquired at a rate higher than the cost of the agreement, which would increase earned income. When the Trust enters into a reverse repurchase agreement, any fluctuations in the market value of either the instruments transferred to another party or the instruments in which the proceeds may be invested would affect the market value of the Trust’s assets. As a result, such transactions may increase fluctuations in the market value of the Trust’s assets. For six months ended November 30, 2011, the average daily balance for which reverse repurchase agreements were outstanding amounted to $113,845,737. The weighted average interest rate was 0.90%. As of November 30, 2011, the total amount segregated in connection with reverse repurchase agreements was $148,144,954. As of November 30, 2011, there was $122,753,507 in reverse repurchase agreements outstanding.
At November 30, 2011, the Trust had outstanding reverse repurchase agreements with various counterparties. Details of the reverse repurchase agreements by counterparty are as follows:
|
Range of
|
Range of
|
||
|
Counterparty
|
Interest Rates
|
Maturity Dates
|
Face Value
|
|
BNP Paribas
|
0.80%
|
04/06/12
|
$ 55,971,726
|
|
Banc of America
|
|||
|
Securities LLC
|
0.90% - 0.95%
|
12/05/11 – 01/05/12
|
10,031,969
|
|
Royal Bank of Canada
|
0.90% - 1.10%
|
12/01/11- 12/28/11
|
56,749,812
|
|
$122,753,507
|
Note 8 – Loan Commitments
Pursuant to the terms of certain Term Loan agreements, the Trust held unfunded loan commitments of as of November 30, 2011. The Trust is obligated to fund these loan commitments at the borrower’s discretion. The Trust intends to reserve against such contingent obligations by designating cash, liquid securities, and liquid term loans as a reserve.
At November 30, 2011, the Trust had the following unfunded loan commitments which could be extended at the option of the borrower:
|
Unrealized
|
|||
|
Expiration
|
Principal
|
Appreciation/
|
|
|
Borrower
|
Date
|
Amount
|
(Depreciation)
|
|
99 Cents Only Stores
|
04/06/2012
|
$1,000,000
|
$ –
|
|
PPDI
|
04/02/2012
|
1,500,000
|
–
|
|
Superior Energy
|
04/30/2012
|
500,000
|
–
|
|
$3,000,000
|
$ –
|
28 l Semiannual Report l November 30, 2011
GBAB l Guggenheim Build America Bonds Managed Duration Trust l Notes to Financial Statements (unaudited) continued
Note 9 – Indemnifications:
In the normal course of business, the Trust enters into contracts that contain a variety of representations, which provide general indemnifications. The Trust’s maximum exposure under these arrangements is unknown, as this would require future claims that may be made against the Trust that have not yet occurred. However, the Trust expects the risk of loss to be remote.
Note 10 – Subsequent Events:
The Trust evaluated subsequent events through the date the financial statements were available for issue and determined there were no additional material events that would require disclosure in the Trust’s financial statements, except as noted below.
On December 1, 2011, the Trust declared a monthly dividend of $0.129 per common share. The dividend was payable on December 30, 2011, to shareholders of record on December 15, 2011.
Effective December 7, 2011, the Trust entered into a $125,000,000 credit facility agreement with Bank of America, N.A. The interest rate on the amount borrowed is based on the 1-month LIBOR plus 0.90%. An unused fee of 0.25% is charged on the difference between the $125,000,000 and the amount borrowed.
On January 3, 2012, the Trust declared a monthly dividend of $0.129 per common share. The dividend was payable on January 31, 2012, to shareholders of record on January 13, 2012.
Semiannual Report l November 30, 2011 l 29
GBAB l Guggenheim Build America Bonds Managed Duration Trust
Supplemental Information l (unaudited)
Federal Income Tax Information
In January 2012, you will be advised on IRS Form 1099 DIV or substitute 1099 DIV as to the federal tax status of the distributions received by you in the calendar year 2011.
Trustees
The Trustees of the Guggenheim Build America Bonds Managed Duration Trust and their principal occupations during the past five years:
| Number | ||||
|
of Portfolios
|
||||
| Name, Address*, |
in the
|
|||
| Year of Birth | Term of |
Trust
|
Other | |
| and Position(s) | Office** and |
Principal Occupations during
|
Complex***
|
Directorships |
|
Held with
|
Length of
|
the Past Five Years and
|
Overseen
|
Held by
|
|
Registrant
|
Time Served
|
Other Affiliations
|
by Trustee
|
Trustee
|
|
Independent Trustees:
|
||||
|
Randall C. Barnes
|
Since 2010
|
Private Investor (2001-present). Formerly, Senior Vice President and Treasurer, PepsiCo, Inc.
|
56
|
None.
|
|
Year of Birth: 1951
|
(1993-1997), President, Pizza Hut International (1991-1993) and Senior Vice President, Strategic
|
|||
|
Trustee
|
Planning and New Business Development (1987-1990).
|
|||
|
Roman Friedrich III
|
Since 2010
|
Founder and President of Roman Friedrich & Company, Ltd., a mining and metals investment bank
|
50
|
Director, Axiom Gold and Silver Corp.
|
|
Year of birth: 1946
|
(1998-present). Advisory Board Member of McNicoll, Lewis & Vlak, an investment bank and
|
(2011-present), Windstorm
|
||
|
Trustee
|
institutional broker-dealer specializing in capital intensive industries such as energy, metals and
|
Resources, Inc. (2011-present),
|
||
|
mining (2010-present).
|
Zincore Metals, Inc. (2009-present),
|
|||
| StrataGold Corporation (2003-2009), | ||||
|
Gateway Gold Corp. (2004-2008),
|
||||
|
GFM Resources Ltd. (2005-2010).
|
||||
|
Robert B. Karn III
|
Since 2010
|
Consultant (1998-present). Previously, Managing Partner, Financial and Economic Consulting,
|
50
|
Director of Peabody Energy Company
|
|
Year of Birth: 1942
|
St. Louis office of Arthur Andersen, LLP.
|
(2003-present), GP Natural Resource
|
||
|
Trustee
|
Partners LLC (2002-present).
|
|||
|
Ronald A. Nyberg
|
Since 2010
|
Partner of Nyberg & Cassioppi, LLC, a law firm specializing in corporate law, estate planning
|
58
|
None.
|
|
Year of birth: 1953
|
and business transactions (2000-present). Formerly, Executive Vice President, General
|
|||
|
Trustee
|
Counsel and Corporate Secretary of Van Kampen Investments (1982-1999).
|
|||
|
Ronald E. Toupin, Jr.
|
Since 2010
|
Portfolio Consultant (2010-present). Formerly, Vice President, Manager and Portfolio
|
55
|
Trustee, Bennett Group of Funds
|
|
Year of birth: 1958
|
Manager of Nuveen Asset Management (1998-1999), Vice President of Nuveen
|
(2011-present). | ||
|
Trustee
|
Investment Advisory Corp. (1992-1999), Vice President and Manager of Nuveen Unit
|
|||
|
Investment Trusts (1991-1999), and Assistant Vice President and Portfolio Manager of
|
||||
|
Nuveen Unit Investment Trusts (1988-1999), each of John Nuveen & Company, Inc. (1982-1999).
|
|
*
|
Address for all Trustees unless otherwise noted: 2455 Corporate West Drive, Lisle, IL 60532
|
|
|
**
|
After a Trustee’s initial term, each Trustee is expected to serve a three-year term concurrent with the class of Trustees for which he serves:
|
|
|
·
|
Messrs. Friedrich and Nyberg, as Class II Trustees, are expected to stand for re-election at the Trust’s annual meeting of shareholders for fiscal year ending May 31, 2012.
|
|
|
·
|
Messrs. Karn and Toupin, as Class III Trustees, are expected to stand for re-election at the Trust’s annual meeting of shareholders for fiscal year ending May 31, 2013.
|
|
|
·
|
Mr. Barnes, as a Class I Trustee, is expected to stand for re-election at the Trust’s annual meeting of shareholders for fiscal year ending May 31, 2014.
|
|
|
***
|
As of period end. The Guggenheim Funds Fund Complex consists of U.S. registered investment companies advised or serviced by Guggenheim Funds Investment Advisors, LLC and/or Guggenheim Funds Distributors, Inc. The Guggenheim Funds Fund Complex is overseen by multiple Boards of Trustees.
|
|
30 l Semiannual Report l November 30, 2011
GBAB l Guggenheim Build America Bonds Managed Duration Trust l Supplemental Information (unaudited) continued
|
Officers
|
|
The officers of the Guggenheim Build America Bonds Managed Duration Trust and their principal occupations during the past five years:
|
|
Name, Address*, Year
|
Term of Office**
|
|
|
of Birth and Position(s)
|
and Length of
|
Principal Occupations During the Past Five Years and
|
|
Held with Registrant
|
Time Served
|
Other Affiliations
|
|
Officers:
|
||
|
Kevin M. Robinson
|
Since 2010
|
Senior Managing Director and General Counsel of Guggenheim Funds Investment Advisors, LLC, Guggenheim Funds Distributors, Inc., and
|
|
Year of Birth: 1959
|
Guggenheim Funds Services Group, Inc. (2007-present). Chief Legal Officer and Chief Executive Officer of certain other funds in the Fund
|
|
|
Chief Executive Officer
|
Complex. Formerly, Associate General Counsel and Assistant Corporate Secretary of NYSE Euronext, Inc. (2000-2007).
|
|
|
Chief Legal Officer
|
||
|
John Sullivan
|
Since 2010
|
Senior Managing Director of Guggenheim Funds Investment Advisors, LLC and Guggenheim Funds Distributors, Inc. Chief Accounting
|
|
Year of Birth: 1955
|
Officer, Chief Financial Officer and Treasurer of certain other funds in the Fund Complex. Formerly, Chief Compliance Officer, Van
|
|
|
Chief Accounting Officer,
|
Kampen Funds (2004–2010). Head of Fund Accounting, Morgan Stanley Investment Management (2002–2004). Chief Financial Officer,
|
|
|
Chief Financial Officer
|
Treasurer, Van Kampen Funds (1996-2004).
|
|
|
Treasurer
|
||
|
Bruce Saxon
|
Since 2010
|
Vice President, Fund Compliance Officer of Guggenheim Funds Investment Advisors, LLC (2006 to present). Formerly, Chief Compliance
|
|
Year of birth: 1957
|
Officer/Assistant Secretary of Harris Investment Management, Inc. (2003-2006). Director-Compliance of Harrisdirect LLC (1999-2003).
|
|
|
Chief Compliance Officer
|
||
|
Mark E. Mathiasen
|
Since 2010
|
Vice President; Assistant General Counsel of Guggenheim Funds Services Group, Inc. (2007-present). Secretary of certain funds in the
|
|
Year of birth: 1978
|
Fund Complex. Formerly, Law Clerk, Idaho State Courts (2003-2006).
|
|
|
Secretary
|
|
*
|
Address for all Officers: 2455 Corporate West Drive, Lisle, IL 60532
|
|
**
|
Officers serve at the pleasure of the Board of Trustees and until his or her successor is appointed and qualified or until his or her earlier resignation or removal.
|
Semiannual Report l November 30, 2011 l 31
GBAB l Guggenheim Build America Bonds Managed Duration Trust
Dividend Reinvestment Plan l (unaudited)
Unless the registered owner of common shares elects to receive cash by contacting Computershare Shareowner Services LLC (the “Plan Administrator”), all dividends declared on common shares of the Trust will be automatically reinvested by the Plan Administrator, administrator for shareholders in the Trust’s Dividend Reinvestment Plan (the “Plan”), in additional common shares of the Trust. Participation in the Plan is completely voluntary and may be terminated or resumed at any time without penalty by notice if received and processed by the Plan Administrator prior to the dividend record date; otherwise such termination or resumption will be effective with respect to any subsequently declared dividend or other distribution. Some brokers may automatically elect to receive cash on your behalf and may re-invest that cash in additional common shares of the Trust for you. If you wish for all dividends declared on your common shares of the Trust to be automatically reinvested pursuant to the Plan, please contact your broker.
The Plan Administrator will open an account for each common shareholder under the Plan in the same name in which such common shareholder’s common shares are registered. Whenever the Trust declares a dividend or other distribution (together, a “Dividend”) payable in cash, non-participants in the Plan will receive cash and participants in the Plan will receive the equivalent in common shares. The common shares will be acquired by the Plan Administrator for the participants’ accounts, depending upon the circumstances described below, either (i) through receipt of additional unissued but authorized common shares from the Trust (“Newly Issued Common Shares”) or (ii) by purchase of outstanding common shares on the open market (“Open-Market Purchases”) on the New York Stock Exchange or elsewhere. If, on the payment date for any Dividend, the closing market price plus estimated brokerage commission per common share is equal to or greater than the net asset value per common share, the Plan Administrator will invest the Dividend amount in Newly Issued Common Shares on behalf of the participants. The number of Newly Issued Common Shares to be credited to each participant’s account will be determined by dividing the dollar amount of the Dividend by the net asset value per common share on the payment date; provided that, if the net asset value is less than or equal to 95% of the closing market value on the payment date, the dollar amount of the Dividend will be divided by 95% of the closing market price per common share on the payment date. If, on the payment date for any Dividend, the net asset value per common share is greater than the closing market value plus estimated brokerage commission, the Plan Administrator will invest the Dividend amount in common shares acquired on behalf of the participants in Open-Market Purchases.
If, before the Plan Administrator has completed its Open-Market Purchases, the market price per common share exceeds the net asset value per common share, the average per common share purchase price paid by the Plan Administrator may exceed the net asset value of the common shares, resulting in the acquisition of fewer common shares than if the Dividend had been paid in Newly Issued Common Shares on the Dividend payment date. Because of the foregoing difficulty with respect to Open-Market Purchases, the Plan provides that if the Plan Administrator is unable to invest the full Dividend amount in Open-Market Purchases during the purchase period or if the market discount shifts to a market premium during the purchase period, the Plan Administrator may cease making Open-Market Purchases and may invest the uninvested portion of the Dividend amount in Newly Issued Common Shares at net asset value per common share at the close of business on the Last Purchase Date provided that, if the net asset value is less than or equal to 95% of the then current market price per common share; the dollar amount of the Dividend will be divided by 95% of the market price on the payment date.
The Plan Administrator maintains all shareholders’ accounts in the Plan and furnishes written confirmation of all transactions in the accounts, including information needed by shareholders for tax records. Common shares in the account of each Plan participant will be held by the Plan Administrator on behalf of the Plan participant, and each shareholder proxy will include those shares purchased or received pursuant to the Plan. The Plan Administrator will forward all proxy solicitation materials to participants and vote proxies for shares held under the Plan in accordance with the instruction of the participants.
There will be no brokerage charges with respect to common shares issued directly by the Trust. However, each participant will pay a pro rata share of brokerage commission incurred in connection with Open-Market Purchases. The automatic reinvestment of Dividends will not relieve participants of any Federal, state or local income tax that may be payable (or required to be withheld) on such Dividends.
The Trust reserves the right to amend or terminate the Plan. There is no direct service charge to participants with regard to purchases in the Plan; however, the Trust reserves the right to amend the Plan to include a service charge payable by the participants.
All correspondence or questions concerning the Plan should be directed to the Plan Administrator, Computershare Shareowner Services LLC Shareowner Services, P.O. Box 358015, Pittsburgh PA 15252-8015; Attention: Shareholder Services Department, Phone Number: (866) 488-3559.
32 l Semiannual Report l November 30, 2011
This Page Intentionally Left Blank.
This Page Intentionally Left Blank.
GBAB l Guggenheim Build America Bonds Managed Duration Trust
Trust Information l
|
Board of Trustees
|
Officers
|
Investment Adviser
|
|
Randall C. Barnes
|
Kevin M. Robinson
|
and Administrator
|
|
Chief Executive Officer and
|
Guggenheim Funds Investment
|
|
|
Roman Friedrich III
|
Chief Legal Officer
|
Advisors, LLC
|
|
Lisle, Illinois
|
||
|
Robert B. Karn III
|
John Sullivan
|
|
|
Chief Financial Officer,
|
Investment Sub-Adviser
|
|
|
Ronald A. Nyberg
|
Chief Accounting Officer
|
Guggenheim Partners Asset
|
|
and Treasurer
|
Management, LLC
|
|
|
Ronald E. Toupin, Jr.,
|
Santa Monica, California
|
|
|
Chairman
|
Bruce Saxon
|
|
|
Chief Compliance Officer
|
Accounting Agent and Custodian
|
|
|
The Bank of New York Mellon
|
||
|
Mark E. Mathiasen
|
New York, New York
|
|
|
Secretary
|
||
|
Legal Counsel
|
||
|
Skadden, Arps, Slate, Meagher &
|
||
|
Flom LLP
|
||
|
New York, New York
|
||
|
Independent Registered
|
||
|
Public Accounting Firm
|
||
|
Ernst & Young LLP
|
||
|
Chicago, Illinois
|
Privacy Principles of Guggenheim Build America Bonds Managed Duration Trust for Shareholders
The Trust is committed to maintaining the privacy of its shareholders and to safeguarding its non-public personal information. The following information is provided to help you understand what personal information the Trust collects, how we protect that information and why, in certain cases, we may share information with select other parties.
Generally, the Trust does not receive any non-public personal information relating to its shareholders, although certain non-public personal information of its shareholders may become available to the Trust. The Trust does not disclose any non-public personal information about its shareholders or former shareholders to anyone except as permitted by law or as is necessary in order to service shareholder accounts (for example, to a transfer agent or third party administrator).
The Trust restricts access to non-public personal information about the shareholders to Guggenheim Funds Investment Advisors, LLC employees with a legitimate business need for the information. The Trust maintains physical, electronic and procedural safeguards designed to protect the non-public personal information of its shareholders.
Questions concerning your shares of Guggenheim Build America Bonds Managed Duration Trust?
|
·
|
If your shares are held in a Brokerage Account, contact your Broker.
|
|
·
|
If you have physical possession of your shares in certificate form, contact the Transfer Agent:
|
Computershare Shareowner Services LLC, 480 Washington Boulevard, Jersey City, NJ 07310; (866) 488-3559
This report is sent to shareholders of Guggenheim Build America Bonds Managed Duration Trust for their information. It is not a Prospectus, circular or representation intended for use in the purchase or sale of shares of the Trust or of any securities mentioned in this report.
A description of the Trust’s proxy voting policies and procedures related to portfolio securities is available without charge, upon request, by calling the Trust at (866) 392-3004.
Information regarding how the Trust voted proxies for portfolio securities, if applicable, during the most recent 12-month period ended June 30, is also available, without charge and upon request by calling (866) 392-3004, by visiting the Trust’s website at www.guggenheimfunds.com/gbab or by accessing the Trust’s Form N-PX on the U.S. Securities and Exchange Commission’s (SEC) website at www.sec.gov.
The Trust files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Trust’s Form N-Q is available on the SEC website at www.sec.gov or the Trust’s website at www.guggenheimfunds.com/gbab. The Trust’s Form N-Q may also be viewed and copied at the SEC’s Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330.
Semiannual Report l November 30, 2011 l 35
GBAB l Guggenheim Build America Bonds Managed Duration Trust
About the Trust Manager l
Guggenheim Partners Asset Management, LLC
Guggenheim Partners Asset Management, LLC (“GPAM”) is an indirect subsidiary of Guggenheim Partners, LLC, a diversified financial services firm. The firm provides capital markets services, portfolio and risk management expertise, wealth management, and investment advisory services. Clients of Guggenheim Partners, LLC subsidiaries are an elite mix of individuals, family offices, endowments, foundations, insurance companies and other institutions.
Investment Philosophy
GPAM’s investment philosophy is predicated upon the belief that thorough research and independent thought are rewarded with performance that has the potential to outperform benchmark indexes with both lower volatility and lower correlation of returns over time as compared to such benchmark indexes.
Investment Process
GPAM’s investment process is a collaborative effort between various groups including the Portfolio Construction Group, which utilize proprietary portfolio construction and risk modeling tools to determine allocation of assets among a variety of sectors, and its Sector Specialists, who are responsible for security selection within these sectors and for implementing securities transactions, including the structuring of certain securities directly with the issuers or with investment banks and dealers involved in the origination of such securities.
Guggenheim Funds Distributors, Inc.
2455 Corporate West Drive
Lisle, IL 60532
Member FINRA/SIPC
(01/12)
CEF-GBAB-SAR-1111
Item 2. Code of Ethics.
Not applicable for a semi-annual reporting period.
Item 3. Audit Committee Financial Expert.
Not applicable for a semi-annual reporting period.
Item 4. Principal Accountant Fees and Services.
Not applicable for a semi-annual reporting period.
Item 5. Audit Committee of Listed Registrants.
Not applicable for a semi-annual reporting period.
Item 6. Schedule of Investments.
The Schedule of Investments is included as part of Item 1.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable for a semi-annual reporting period.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
(a) Not applicable for a semi-annual reporting period.
(b) There has been no change, as of the date of filing, in any of the Portfolio Managers identified in response to paragraph (a)(1) of this Item in the registrant’s most recent annual report on Form N-CSR.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
None.
Item 10. Submission of Matters to a Vote of Security Holders.
The registrant has not made any material changes to the procedures by which shareholders may recommend nominees to the registrant’s Board of Trustees.
Item 11. Controls and Procedures.
(a) The registrant's principal executive officer and principal financial officer have evaluated the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment
Company Act) as of a date within 90 days of this filing and have concluded based on such evaluation, as required by Rule 30a-3(b) under the Investment Company Act, that the registrant's disclosure controls and procedures were effective, as of that date, in ensuring that information required to be disclosed by the registrant in this Form N-CSR was recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.
(b) There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act) that occurred during the registrant’s second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. Exhibits.
|
(a)(1)
|
Not applicable.
|
|
(a)(2)
|
Certifications of principal executive officer and principal financial officer pursuant to Rule 30a-2(a) under the Investment Company Act.
|
|
(a)(3)
|
Not applicable.
|
|
(b)
|
Certifications of principal executive officer and principal financial officer pursuant to Rule 30a-2(b) under the Investment Company Act and Section 906 of the Sarbanes-Oxley Act of 2002.
|
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Guggenheim Build America Bonds Managed Duration Trust
By: /s/ Kevin M. Robinson
Name: Kevin M. Robinson
Title: Chief Executive Officer and Chief Legal Officer
Date: February 3, 2012
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: /s/ Kevin M. Robinson
Name: Kevin M. Robinson
Title: Chief Executive Officer and Chief Legal Officer
Date: February 3, 2012
By: /s/ John Sullivan
Name: John Sullivan
Title: Chief Financial Officer, Chief Accounting Officer and Treasurer
Date: February 3, 2012