Yahoo Password v2.0.370 serial key or number

Yahoo Password v2.0.370 serial key or number

Yahoo Password v2.0.370 serial key or number

Yahoo Password v2.0.370 serial key or number

Table of Contents

As filed with the Securities and Exchange Commission on June 16,

Investment Company Act File No. 

 

 

 

United States

Securities and Exchange Commission

Washington, D.C.

 

 

FORM N-2

 

 

&#;  Registration Statement under the Investment Company Act of

&#;  Amendment No.

 

 

ALTABA INC.

(Exact Name of Registrant as Specified in Charter)

 

 

East 45th Street, 15th Floor

New York, New York

(Address of Principal Executive Offices)

(Registrant&#;s Telephone Number, Including Area Code)

Arthur Chong

Altaba Inc.

East 45th Street, 15th Floor

New York, New York

(Name and Address of Agent for Service)

 

 

Copies to:

Michael K. Hoffman, Esq.

Skadden, Arps, Slate, Meagher & Flom LLP

4 Times Square

New York, New York

 

 

 


Table of Contents

TABLE OF CONTENTS

 

 

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SUMMARY

Altaba Inc. (the &#;Fund&#;) is an independent, publicly traded, non-diversified, closed-end management investment company registered under the Act. The Fund is organized as a Delaware corporation. Its common stock is listed on The NASDAQ Global Select Market (&#;Nasdaq&#;) and its ticker symbol is &#;AABA.&#;

Prior to registering as an investment company on June 16, , the Fund was an operating company named Yahoo! Inc. (&#;Yahoo&#;). Yahoo sold its operating business to Verizon Communications Inc. on June 13, (such sale, the &#;Sale Transaction&#;) pursuant to a Stock Purchase Agreement entered into by Yahoo and Verizon Communications Inc. (&#;Verizon&#;) on July 23, , as amended as of February 20, (the &#;Stock Purchase Agreement&#;). The purchase price that Verizon paid to the Fund at the closing in connection with the Sale Transaction was approximately $ billion in cash, subject to certain pre-closing and post-closing adjustments as provided in the Stock Purchase Agreement. On June 16, , Yahoo changed its name to Altaba Inc. and changed its Nasdaq ticker symbol to &#;AABA.&#;

Assuming the Sale Transaction had closed on December 31, , the Fund&#;s investment assets immediately after the Sale Transaction would have consisted of:

 

 &#; ,, ordinary shares, par value $ per share (&#;Alibaba Shares&#;), of Alibaba Group Holding Limited (&#;Alibaba&#;), which had an aggregate market value of approximately $ billion on December 31, based on the closing market price of Alibaba American Depositary Shares (&#;Alibaba ADS&#;) on the New York Stock Exchange (the &#;NYSE&#;) on December 30, (the last trading day prior to December 31, ) and would have represented approximately percent of the Fund&#;s total assets if the Sale Transaction had closed on such date;

 

 &#; 2,,, shares of common stock, no par value per share (the &#;Yahoo Japan Shares&#;), of Yahoo Japan Corporation (&#;Yahoo Japan&#;), which had an aggregate market value of approximately ¥,,, or approximately $ billion on December 31, based on the closing market price of Yahoo Japan Shares on the Tokyo Stock Exchange on December 30, (the last trading day prior to December 31, ) and the Yen/USD foreign exchange rate on such date and would have represented approximately percent of the Fund&#;s total assets if the Sale Transaction had closed on such date;

 

 &#; cash, cash equivalents, and marketable debt securities (the &#;Marketable Debt Securities Portfolio&#;) which had an aggregate market value of approximately $12 billion on December 31, (including the proceeds from the Sale Transaction subject to certain pre-closing and post-closing adjustments and which will be reduced by amounts used to repurchase Yahoo common stock pursuant to Yahoo&#;s tender offer that will expire on June 16, (the &#;Tender Offer&#;)) and would have represented approximately  percent of the Fund&#;s total assets if the Sale Transaction had closed on December 31, ;

 

 &#; investments in certain additional companies (the &#;Minority Investments&#;), which had an aggregate carrying value of approximately $ million on December 31, and would have represented less than percent of the Fund&#;s total assets if the Sale Transaction had closed on such date; and

 

 &#; all of the equity interests in Excalibur IP, LLC (&#;Excalibur&#;), a wholly owned subsidiary of the Fund that owns a portfolio of patent assets that are not core to Yahoo&#;s operating business (the &#;Excalibur IP Assets&#;), which had an approximate fair value of $ million as of December 31, and would have represented approximately percent of the Fund&#;s total assets if the Sale Transaction had closed on such date. As part of the Sale Transaction, Verizon received for its benefit and that of its current and certain of its future affiliates a non-exclusive, worldwide, perpetual, royalty free license to the Excalibur IP Assets.

 



 

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We refer to the Fund&#;s assets held immediately after the completion of the Sale Transaction as its &#;Initial Assets.&#;

As of December 31, , Yahoo&#;s ,, Alibaba Shares represented an approximate 15 percent equity interest in Alibaba and its 2,,, Yahoo Japan Shares represented an approximate 36 percent equity interest in Yahoo Japan. Because the Fund&#;s assets consist primarily of its Alibaba Shares and its Yahoo JapanShares, an investment in the Fund may be particularly subject to risks relating to Alibaba and Yahoo Japan. See the section of this registration statement entitled &#;Risk Factors.&#;

The Fund continues to hold ,, of its Alibaba Shares through Altaba Holdings Hong Kong Limited (&#;Altaba HK&#;), a Hong Kong private company limited by shares and a wholly owned subsidiary of the Fund that engages in no other business or operations, and owns no other assets other than de minimis cash. The balance of the Alibaba Shares continues to be held directly by the Fund.

A diagram depicting the Fund and its holdings as of the date of this registration statement is set forth below:

Fund Structure

 

 

*Approximately 24 percent of the Fund&#;s shares in Alibaba are held directly by the Fund and approximately 76 percent are held indirectly through Altaba HK.

The Tender Offer commenced on May 16, and will expire on June 16, at p.m., New York City time, unless it is withdrawn by Altaba or extended. The Fund offered to purchase for cash up to $3,,, of shares of its common stock at prices equal to (A) the daily volume-weighted average price of the Alibaba ADS (the &#;Alibaba VWAP&#;), multiplied by (B) multiples specified by tendering stockholders not greater than nor less than , less applicable withholding taxes and without interest. The terms and conditions of the Tender Offer are set forth in an Offer to Purchase, Letter of Transmittal and related documentation filed with the SEC. The purpose of the Tender Offer is to provide liquidity to stockholders that are forced to sell their shares because the Fund is required to register as an investment company under the Act and its shares will be removed from the Standard and Poor&#;s Composite Index and other indices.

Unless the tender offer is extended, the Alibaba VWAP to be used in determining the purchase price to be paid in the Tender Offer is equal to $, which was the daily volume-weighted average price for an Alibaba ADS on June 14, , the second trading day prior to the expiration date. Assuming that the conditions to the Tender Offer are satisfied or waived, based on the Alibaba VWAP of $, at the minimum purchase price of

 



 

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$ per share, the maximum number of shares that will be purchased is 59,, if the Tender Offer is fully subscribed, and the Fund does not increase the amount of shares sought in the Tender Offer. When the Tender Offer expires, the Fund will determine a single purchase price that it will pay for the shares by determining the lowest multiple within the specified range at which shares have been tendered or have been deemed to be tendered that when multiplied by the Alibaba VWAP that will enable the company to purchase the maximum number of shares properly tendered in the tender offer and not properly withdrawn having an aggregate purchase price not exceeding $3,,,

 



 

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ANNUAL FUND OPERATING EXPENSES

The purpose of the table and the example below is to help you understand the fees and expenses that you, as a holder of the Fund&#;s common stock, would bear directly or indirectly on an annual basis. The expenses shown in the table are based on estimated amounts for the Fund&#;s first year of operations as an investment company and assume that the Fund has approximate net assets attributable to the Fund&#;s common stock of $37 billion during its first full year of operations after registering as an investment company. The Fund&#;s actual expenses may vary from the estimated expenses shown in the table.

 

Common Stockholder Transaction Expenses

  

Sales load (as a percentage of offering price)

   N/A 

Dividend reinvestment and cash purchase plan fees(1)

   None 

 

   Percentage of
Net Assets
Attributable to
Common Stock
 

Annual Expenses (as a percentage of net assets attributable to the Fund&#;s Common Stock)(2)

  

Management fees(3)

   

Interest payments on borrowed funds(4)

   

Other expenses(5)

   

Tax expense(6)

   
  

 

 

 

Total annual expenses

   
  

 

 

 

 

(1)The Fund has not adopted a dividend reinvestment or cash purchase plan.
(2)Net assets attributable to the Fund&#;s common stock estimated based on total Initial Assets less total liabilities as of December 31,
(3)The Fund estimates paying management fees at the annual rate of percent of the average daily value of the Marketable Debt Securities Portfolio, which is an annual rate of approximately percent of the Fund&#;s net assets attributable to common stock. This figure assumes a Marketable Debt Securities Portfolio of $12 billion.
(4)Represents debt amortization expense on the Convertible Notes. Yahoo historically amortized debt discount within &#;other expenses&#; over the term of the Convertible Notes based on an effective interest rate of  percent. Future borrowing costs may differ based on varying market conditions and depending on the type of borrowing being used.
(5)The &#;Other expenses&#; percentage is based on an estimate of annual expenses (primarily compensation of employees and directors, custody fees, rent, insurance, audit fees, and compliance costs) representing all of the Fund&#;s operating expenses (except fees and expenses reported in other items of this table) that will be deducted from the Fund&#;s operating income and reflected as operating expenses in the Fund&#;s statement of operations, net of interest expense, for the Fund&#;s first full year of operations as an investment company, divided by net assets attributable to the Fund&#;s common stock as of December 31,
(6)For purposes of determining the estimated income tax expense, an estimated assumed 5 percent annual growth rate was used to calculate unrealized gains on investments, and an estimated assumed effective tax rate of percent was applied to the Fund&#;s income and realized and unrealized gains. The Fund does not currently qualify for pass-through status under Subchapter M of the Internal Revenue Code of , as amended (the &#;Code&#;), and the Fund anticipates that it will be taxed as a corporation for applicable income tax purposes. As a result, the net asset value of the Fund&#;s common stock will be impacted by the deferred tax liability applicable to any of its assets.

 

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As required by relevant U.S. Securities and Exchange Commission (the &#;SEC&#;) regulations, the following example illustrates the expenses that you would pay on a $1, investment in the Fund&#;s common stock, assuming (1) &#;Total Annual Expenses&#; of percent of net assets attributable to the Fund&#;s common stock and (2) a five percent annual return:*

 

1 Year

  

3 Years

  

5 Years

  

10 Years

$23

  $69  $  $

 

*The example should not be considered a representation of future expenses or returns. The example assumes that the amount estimated above for &#;Total Annual Expenses&#; is accurate. Actual expenses may be higher or lower than those assumed. Moreover, the Fund&#;s actual rate of return may be higher or lower than the hypothetical five percent return shown in the example.

 

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FINANCIAL STATEMENTS

The fund will file audited financial statements by amendment within 90 days of the filing of this registration statement.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies that will be followed by the Fund. These policies are in conformity with accounting principles generally accepted in the United States of America (&#;GAAP&#;). The Fund will follow the investment company accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standard Codification Topic Financial Services&#;Investing Companies.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited pro forma consolidated statement of assets and liabilities. Actual amounts could differ from those estimates.

Federal Income Taxes

The Fund is not eligible to be treated as a &#;regulated investment company&#; under the Code as a result of the Fund&#;s concentrated ownership of Alibaba Shares. Instead, the Fund is treated as a regular corporation, or a &#;C&#; corporation, for U.S. federal income tax purposes and, as a result, unlike most investment companies, will be subject to corporate income tax to the extent the Fund recognizes taxable income and taxable gains. The Fund will recognize tax expense on its taxable income and taxable gains on investments.

Deferred income taxes are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. Significant judgment will be required in evaluating the Fund&#;s uncertain tax positions and determining its provision for income taxes. The Fund establishes liabilities for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. These liabilities are established when the Fund believes that certain positions might be challenged despite its belief that its tax return positions are in accordance with applicable tax laws. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made.

Distribution of Cash

The Fund currently intends to return substantially all of its cash to stockholders over time through stock repurchases and distributions, although the Fund will retain sufficient cash to satisfy its obligations to creditors and for working capital. The timing and method of any return of capital will be determined by the Board of Directors of the Fund (the &#;Board&#;). Stock repurchases may take place in the open market, including under Rule 10b plans or tender offers, or in privately negotiated transactions, including structured and derivative transactions such as accelerated share repurchase transactions. The Fund currently anticipates that the amount of cash to be retained by the Fund will be at least $ billion, which is the minimum amount necessary to satisfy the Fund&#;s obligations under the Convertible Notes. However, the Fund&#;s obligations to creditors and working capital requirements may vary over time and may be materially greater than such amount, depending upon, among other factors, the cost of cash-settling any conversion obligations under the Convertible Notes, the Fund&#;s potential obligations with respect to potential liabilities and whether the income from the Fund&#;s investments is sufficient to cover its expenses.

 

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Securities Valuations Process and Structure

The Board will adopt methods for valuing securities and other derivative instruments, including in circumstances in which market quotes are not readily available, and will generally delegate authority to management of the Fund to apply those methods in making fair value determinations, subject to Board oversight. Fund management will administer, implement, and oversee the fair valuation process, and will make fair value decisions. Fund management will review changes in fair value measurements from period to period and may, as deemed appropriate, obtain approval from the Board to changes the fair valuation guidelines to better reflect the results of comparisons of fair value determinations with actual trade prices and address new or evolving issues. The Board and Audit Committee will periodically review reports that describe fair value determinations and methods.

Hierarchy of Fair Value Inputs

The Fund will categorize the inputs to valuation techniques used to value its investments into a disclosure hierarchy consisting of three levels as shown below:

Level 1&#;Unadjusted quoted prices in active markets for identical assets or liabilities that the Fund has the ability to access.

Level 2&#;Observable inputs other than quoted prices included in level 1 that are observable for the asset or liability either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates, and similar data.

Level 3&#;Unobservable inputs for the asset or liability to the extent that relevant observable inputs are not available, representing management&#;s own assumptions about the assumptions that a market participant would use in valuing the asset or liability, and that would be based on the best information available.

The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the security. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in level 3.

The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Fund intends to recognize transfers between level 1, level 2, and level 3 as of the beginning of the fiscal year.

Fair Value Measurements

A description of the valuation techniques anticipated to be applied to the Fund&#;s major categories of assets measured at fair value on a recurring basis follows.

 

 &#; Equity securities (common and preferred stock)&#;Securities traded on a national securities exchange will be stated at the last reported sales price on the day of valuation. To the extent these securities are actively traded, and valuation adjustments are not applied, they will be categorized in level 1 of the fair value hierarchy. Preferred stock and other equities traded on inactive markets will be categorized in level 3.

 

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 &#; Fixed Income Securities&#;The fair value of this investment class will be estimated using various techniques, which may consider recently executed transactions in securities of the issuer or comparable issuers, market price quotations (when observable), bond spreads, fundamental data relating to the issuer and credit default swap spreads adjusted for any basis differences between cash and derivative instruments. Although most corporate debt securities, commercial paper and bank certificates of weight is placed on transaction prices, quotations, or similar observable inputs, they will be categorized in level 3. U.S. government securities are normally valued using a model that incorporates market observable data, such as reported sales of similar securities, broker quotes, yields, bids, offers, and reference data. Certain securities will be valued principally using dealer quotations.

 

 &#; Money market funds will be valued at their respective publicly available net asset value at December 31,

 

 &#; Excalibur IP Assets&#;The fair value of the Excalibur IP Assets will be estimated using a combination of the market approach and income approaches, giving equal weighting to each approach. This combination is deemed to be the most indicative of the Excalibur IP Assets estimated fair value in an orderly transaction between market participants. Under the market approach, the Fund utilizes publicly-traded comparable market transaction information to determine a price per patent that is used to value the patent portfolio. Under the income approach, the Fund determines fair value based on estimated future cash flows of the patent portfolio discounted by an estimated weighted-average cost of capital, reflecting the overall level of inherent risk of the patent portfolio and the rate of return a market participant would expect to earn. The Fund will base cash flow projections for the patent portfolio using a forecast of cash flows over the expected life of the patent portfolio. The forecast and related assumptions were derived from market reports and publicly available market information.

 

 &#; Warrants will be valued using the Black-Scholes model using assumptions for the expected dividend yield, risk-free interest rate, expected volatility and expected life. The warrants will be categorized in level 3.

 

Fair Value Accounting Policies

$ in s

June 16, *

  Level 1   Level 2   Level 3   Total 

Investment shares in non-controlled affiliates

  $           $           $           $             

Investment shares of unaffiliated issuers(1)(2)

        

Common shares

        

Preferred shares

        

Warrants

        

Investment in securities of unaffiliated issuers

        

Money Market Funds

        

Fixed Income Securities

        

Corporate Debt

        

Commercial Paper

        

Certificates of Deposits

        

Agency Bonds

        

US Government Debt

        

Sovereign Government Debt

        

Investment in controlled affiliate

        

Excalibur(3)

        
  

 

 

   

 

 

   

 

 

   

 

 

 

Financial Assets at Fair Value

        

Unrealized loss on forward foreign currency contracts

        
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Financial Assets and Liabilities at Fair Value

  $   $   $   $ 
  

 

 

   

 

 

   

 

 

   

 

 

 

 

*Table to be completed by amendment filed within 90 days of the date of this filing.

 

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(1)Recorded as part of &#;Investments in securities of unaffiliated issuers&#; in the Unaudited Pro Forma Consolidated Statement of Assets and Liabilities of the Fund Reflecting Investment Company Accounting Principles.
(2)The Alibaba Shares were valued at the closing price of the Alibaba ADS traded on the NYSE as of June 16, The Yahoo Japan Shares were valued at the closing price of the Yahoo Japan Shares on the Tokyo Stock Exchange on June 16,
(3)Excalibur assets relate to the Fund&#;s patent portfolio. The Excalibur IP Assets are valued based on market inputs and annual valuation reports conducted by advisory firms which specialize in such activities.

Foreign Currency

Foreign-denominated assets, including investment securities, will be translated into U.S. dollars at the exchange rates at period end. Purchases and sales of investment securities, income and dividends received and expenses denominated in foreign currencies will be translated into U.S. dollars at the exchange rate in effect on the transaction date. The Fund may hedge against Yen currency risk in connection with dividends received or expected to be received from Yahoo Japan, which are denominated in Yen.

The effects of exchange rate fluctuations on investments will be included with the net realized and unrealized gain (loss) on investment securities. Other foreign currency transactions resulting in realized and unrealized gain (loss) will be disclosed separately.

Convertible Senior Notes

The Convertible Notes will be carried at their original issuance value, net of unamortized debt discount, and will not be marked to market each period. The estimated fair value of the Convertible Notes as of December 31, was approximately $ billion. The estimated fair value of the Convertible Notes was determined on the basis of quoted market prices observable in the market.

Other

The Fund will record security transactions based on the trade date. Dividend income will be recognized on the ex-dividend date, and interest income will be recognized on an accrual basis. Discounts and premiums on securities purchased will be accreted and amortized over the lives of the respective securities. Withholding taxes on foreign dividends will be provided for in accordance with the Fund&#;s understanding of the applicable country&#;s tax rules and rates. Realized gains and losses from security transactions will be based on the identified costs of the securities involved.

Approximately 24 percent of the Fund&#;s Alibaba Shares are held directly by the Fund and approximately 76 percent are held indirectly through Altaba HK, a wholly owned subsidiary of the Fund that engages in no other business or operations, and owns no other assets other than de minimis cash. The Fund will consolidate Altaba HK.

Fund expenses will be accrued in the period to which they relate based on estimates performed by management and adjustments are made when actual amounts are known.

 

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INVESTMENT OBJECTIVE AND POLICIES

Investment Objective

The Fund seeks to track the combined investment return of the Alibaba Shares and the Yahoo Japan Shares it owns.

In addition to the Alibaba Shares and the Yahoo Japan Shares, the Fund also owns the Minority Investments, Excalibur (which owns the Excalibur IP Assets) and the Marketable Debt Securities Portfolio. The Fund currently intends to seek to sell the Minority Investments over time. The Fund also currently intends to seek to sell Excalibur, though the Fund may seek to separately sell certain of the Excalibur IP Assets or to license the Excalibur IP Assets if the Board believes that doing so is in the best interest of the Fund&#;s stockholders. The Fund currently intends to return substantially all of its cash to stockholders over time through stock repurchases and distributions, although the Fund will retain sufficient cash to satisfy its obligations to creditors and for working capital. The timing and method of any return of capital will be determined by the Board. Stock repurchases may take place in the open market, including under Rule 10b plans or in a tender offer, or in privately negotiated transactions, including structured and derivative transactions such as accelerated share repurchase transactions. The Fund currently anticipates that the amount of cash to be retained by the Fund will be at least $ billion, which is the minimum amount necessary to satisfy the Fund&#;s obligations under the Convertible Notes. However, the Fund&#;s obligations to creditors and working capital requirements may vary over time and may be materially greater than such amount, depending upon, among other factors, the cost of cash-settling any conversion obligations under the Convertible Notes, the Fund&#;s potential obligations with respect to respect to potential liabilities, and whether the income from the Fund&#;s investments is sufficient to cover its expenses. Until the Minority Investments, Excalibur (or the Excalibur IP Assets), the Marketable Debt Securities Portfolio, and any other assets are sold and until any cash is returned to investors, these assets may cause the Fund&#;s returns to deviate from its current investment policy of tracking the combined investment return of the Alibaba Shares and the Yahoo Japan Shares. No assurance can be given that all or any portion of the Minority Investments or the Excalibur IP Assets will be sold or licensed or that the Fund will achieve its investment objective. The Fund may hold all or any portion of its assets, including cash, for an indefinite period of time.

The Fund&#;s investment objective is not fundamental and may be changed without notice to stockholders.

Investment Policies

Consistent with its current investment objective, the Fund currently does not intend to sell its Alibaba Shares or Yahoo Japan Shares in response to changes in the market price of those shares, though it reserves the right to do so. The Fund may, however, sell all or a portion of such shares to return capital to its stockholders or to seek to reduce any discount or increase any premium from net asset value at which the Fund&#;s common stock may trade if the Board believes the benefit to stockholders would outweigh the cost, including any taxes payable by the Fund, of doing so. The Fund also may sell such shares to satisfy its obligations to creditors or to pay expenses. The Board currently believes that it is more likely that capital may be returned from a sale of Yahoo Japan Shares than Alibaba Shares, though no assurance can be given in this regard or that any such shares will be sold to return capital. The Fund does not currently anticipate making new investments other than the purchase of short term investment grade debt securities due to turnover in its Marketable Debt Securities Portfolio, for ordinary course cash management purposes or to protect or enhance the value of an Initial Asset.

Investment Guidelines for the Marketable Debt Securities Portfolio

The Fund has hired BlackRock Advisors, LLC (&#;BlackRock&#;) and Morgan Stanley Smith Barney LLC (&#;Morgan Stanley&#; and, together with BlackRock, the &#;External Advisers&#;) as external investment advisers to manage the Marketable Debt Securities Portfolio. Each External Adviser will manage approximately half of the Marketable Debt Securities Portfolio. The following guidelines apply to each External Adviser, individually, without reference to the portion of the Marketable Debt Securities Portfolio managed by the other.

 

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The Fund&#;s objectives in managing the Marketable Debt Securities Portfolio are preservation of capital, maintenance of liquidity and achieving optimum yields in relation to the applicable guidelines. The Marketable Debt Securities Portfolio is not traded for short-term speculative purposes. The guidelines limit the weighted average effective duration of the Marketable Debt Securities Portfolio to 2 years.

Permitted investments include U.S. government and U.S. government-sponsored agency securities (excluding mortgage-backed securities), repurchase agreements with maturities not in excess of seven days collateralized by U.S. government securities and permitted U.S. government-sponsored agency securities, debt securities of corporations and commercial banks, non-U.S. sovereign debt rated Aaa/AAA by Moody&#;s, S&P and/or Fitch (denominated in U.S. dollars and traded in the U.S.), direct obligations of supranational organizations rated Aaa/AAA by Moody&#;s, S&P and/or Fitch (denominated in U.S. dollars and traded in the U.S.), foreign agency securities guaranteed by foreign governments rated Aaa/AAA by Moody&#;s, S&P and/or Fitch (denominated in U.S. dollars and traded in the U.S.), tax exempt securities and money market funds.

Ineligible investments include mortgage-backed securities, asset-backed securities, auction rate securities, variable rate demand obligations, extendable debt securities, subordinated corporate debt securities, taxable securities with maturities in excess of 3 years + 2 weeks, tax-exempt securities with maturities in excess of 2 years +2 weeks, securities with short-term ratings below P-1/A-1/F-1 by Moody&#;s, S&P and/or Fitch, securities with maturities less than or equal to 2 years with ratings below A3/A- by Moody&#;s, S&P and/or Fitch, securities with maturities greater than 2 years and less than 3 years with ratings below A2/A by Moody&#;s, S&P and/or Fitch and investments in non-U.S. sovereign debt, direct obligations of supranational organizations and foreign agency securities guaranteed by foreign governments in each case rated below Aaa/AAA by Moody&#;s, S&P and/or Fitch or which are not denominated in U.S. dollars or not traded in the U.S.

The guidelines require all debt securities to be rated by at least two of Moody&#;s, S&P and Fitch, and that split-rated securities will be deemed to have the lower rating. The Fund expects that ratings will be monitored on a continuous basis and the External Advisers will be required to notify the Fund in the event of any downgrades. With respect to tax-exempt securities, the guidelines apply the minimum ratings requirements described in the forgoing to the underlying assets of the municipal security and disregard any ratings enhancement obtained through insurance provided by monoline insurance companies. Additionally, the guidelines require that any investment included in the Marketable Debt Securities Portfolio be denominated in U.S. dollars and any corporate debt have a minimum issue size of $ million.

 

Hedging and Derivative Instruments

Consistent with the Fund&#;s current investment policies, the Fund currently does not intend to hedge its risk of owning the Alibaba Shares and Yahoo Japan Shares or otherwise enter into derivative transactions. Notwithstanding this current intention, the Fund reserves the right to hedge such risk generally and specifically in connection with transactions relating to the Alibaba Shares or Yahoo Japan Shares, in connection with dividends received or expected to be received from Yahoo Japan denominated in Yen, or in connection with repurchases of the Fund&#;s common stock to return capital to investors.

Loans of Portfolio Securities

The Fund may lend its Alibaba Shares, Yahoo Japan Shares, or other eligible portfolio securities (collectively, the &#;Eligible Portfolio Securities&#;) to generate income. Such income may be used for working capital purposes, to pay dividends to stockholders, or to repurchase the Fund&#;s common stock if and to the extent authorized by the Board from time to time. The Fund has no current intention of lending its Eligible Portfolio Securities to generate income to be used to purchase additional investment securities, though it retains the right to do so. Lending Eligible Portfolio Securities may cause the Fund&#;s returns to deviate from its investment objective of tracking the combined investment return of the Alibaba Shares and the Yahoo Japan Shares.

 

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Consistent with applicable regulatory requirements, the Fund may lend Eligible Portfolio Securities to broker-dealers or financial institutions; provided that such loans are callable at any time by the Fund (subject to notice provisions described below), and are at all times secured by cash or cash equivalents, which are earmarked or segregated pursuant to applicable regulations, and that are at least equal to the market value, determined daily, of the loaned Eligible Portfolio Securities. Any loans of the Eligible Portfolio Securities by the Fund will be collateralized in accordance with applicable regulatory requirements and no loan will cause the value of all loaned Eligible Portfolio Securities to exceed one-third of the value of the Fund&#;s total assets.

A loan of Eligible Portfolio Securities generally may be terminated by the borrower on one business day&#;s notice, or by the Fund on five business days&#; notice. If the borrower fails to deliver the loaned Eligible Portfolio Securities within five days after receipt of notice, the Fund could use the collateral to purchase replacement Eligible Portfolio Securities while holding the borrower liable for any excess of replacement cost over collateral. As with any extensions of credit, there are risks of delay in recovery, and in some cases even loss of rights in the collateral should the borrower of the Eligible Portfolio Securities fail financially. However, loans of Eligible Portfolio Securities will be made only to firms deemed by the Fund&#;s management to be creditworthy and when the income that can be earned from such loans justifies the attendant risks. The Board will oversee the creditworthiness of the contracting parties on an ongoing basis.

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