Professional Documents
Culture Documents
FormN2
N21d122862dn2.htmFORMN2
TableofContents
AsfiledwiththeSecuritiesandExchangeCommissiononJuly17,2015
1940ActFileNo.81123076
UnitedStates
SecuritiesandExchangeCommission
Washington,D.C.20549
FORMN2
RegistrationStatementundertheInvestmentCompanyActof1940
AmendmentNo.
AabacoHoldings,Inc.
(ExactNameofRegistrantasSpecifiedinCharter)
701FirstAvenue
Sunnyvale,California94089
(AddressofPrincipalExecutiveOffices)
RegistrantsTelephoneNumber,IncludingAreaCode:(408)3493300
RonaldS.Bell
701FirstAvenue
Sunnyvale,California94089
(NameandAddressofAgentforService)
Copiesto:
MichaelK.Hoffman,Esq.
MarcR.Packer,Esq.
Skadden,Arps,Slate,Meagher&FlomLLP
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NewYork,NewYork10036
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ExplanatoryNote:PortionsofthisRegistrationStatementandtheinformationstatementcontainedhereinarenotcomplete.
TheRegistrantintendstofileoneormoreamendmentstothisRegistrationStatementpriortothespinoffdescribedherein.
TheinformationstatementcontainedinthisRegistrationStatementwillnotbeusedinconnectionwithsuchspinoffuntil
thestaffoftheSecuritiesandExchangeCommissionhascompleteditsreviewoftheinformationcontainedherein.
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The information in this information statement is not complete and may be changed. We will not use this information statement
in connection with the SpinOff or otherwise until the staff of the Securities and Exchange Commission has completed its
review of the information statement.
SubjecttoCompletion
PreliminaryInformationStatementdatedJuly17,2015
INFORMATIONSTATEMENT
CommonStock
ThisinformationstatementisbeingprovidedinconnectionwiththedistributiontoholdersofcommonstockofYahoo!Inc.
(Yahoo),asadividend,ofallofthesharesofcommonstock,parvalue$0.00001pershare(theCommonStock),of
AabacoHoldings,Inc.(theFundorwe),aDelawarecorporationandcurrentlyawhollyownedsubsidiaryofYahoo.We
refertothistransactionastheSpinOff.
IfallconditionstotheSpinOffaresatisfiedorwaivedbyYahooinitssolediscretion,at5:00p.m.,NewYorkCitytime,on
[],2015(suchdateandtime,theDistributionDate),foreach[]wholeshare[s]ofYahooscommonstockheldbyyouas
of5:00p.m.,NewYorkCitytime,on[],2015(suchdateandtime,theRecordDate),youwillreceiveoneshareofthe
FundsCommonStock.CashwillbedistributedinlieuoffractionalsharesoftheFundsCommonStock.TheSpinOffis
intendedtobetaxfreetoYahoostockholdersforUnitedStatesfederalincometaxpurposes,exceptforcashreceivedinlieu
offractionalshares.
NovoteofYahoosstockholdersisrequiredorbeingsoughttoauthorizeoreffectuatetheSpinOff.Youdonotneedtopay
anyconsideration,exchangeorsurrenderyourexistingsharesofYahooscommonstock,ortakeanyotheractiontoreceive
sharesoftheFundsCommonStockintheSpinOff.
FollowingtheSpinOff,theFundwillbeanindependent,publiclytraded,nondiversified,closedendmanagement
investmentcompanyregisteredundertheInvestmentCompanyActof1940(the1940Act).ImmediatelyaftertheSpin
Off,theFundsinvestmentassetswillconsistof383,565,416ordinaryshares,parvalueUS$0.000025pershare(the
OrdinaryShares),ofAlibabaGroupHoldingLimited(Alibaba),representingasofthedateofthisinformationstatement
anapproximate15percentownershipinterestinAlibaba,anda100percentownershipinterestinAabacoSmallBusiness,
LLC.WesometimesrefertoAlibabasOrdinarySharesandAlibabasAmericanDepositaryShares(theAlibabaADS)
collectivelyastheAlibabaShares.
TheFundsinvestmentobjectiveistoseekreturnsforitsstockholdersprimarilythroughowningtheAlibabaShares.Based
ontheclosingmarketpriceofAlibabaADSontheNewYorkStockExchangeon[],2015,theFundanticipatesthatthe
valueofitsAlibabaShareswillexceed95percentofthevalueofitstotalassetsimmediatelyaftertheSpinOffiscompleted.
TheFundwillseektoachieveitsinvestmentobjectivebycontinuingtoinvestatleast80percentofitstotalassetsin
AlibabaSharesundernormalmarketconditions.TheFundsinvestmentobjectiveandthisinvestmentpolicyarenot
fundamentalandeithermaybechangedwithoutstockholderapproval,althoughtheFundwillprovidestockholderswithat
least60daysnoticebeforeimplementinganychangetoitsinvestmentobjectiveorthisinvestmentpolicy.Therecanbeno
assurancethattheFundwillachieveitsinvestmentobjective.
Unlikemostregisteredinvestmentcompanies,theFundisnoteligibletobetreatedasaregulatedinvestmentcompany
undertheInternalRevenueCodeof1986,asamended,asaresultoftheFundsconcentratedownershipofAlibabaShares.
Instead,theFundistreatedasaregularcorporation,oraCcorporation,forU.S.federalincometaxpurposesand,asaresult,
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unlikemostinvestmentcompanies,issubjecttocorporateincometaxtotheextenttheFundrecognizestaxableincome.Asa
result,theFundwilltakeintoaccountthetaxconsequencesofanychangetoitsinvestmentportfolio.
(Continuedoninsidecoverpage)
Thedateofthisinformationstatementis[],2015.
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(Continuedfromcoverpage)
YahoocurrentlyownsalloftheFundsoutstandingCommonStock.Accordingly,thereisnocurrenttradingmarketforthe
FundsCommonStock,althoughweexpectthatalimitedmarket,commonlyknownasawhenissuedtradingmarket,will
developonorshortlybeforetheRecordDate,andweexpectregularwaytradingoftheFundsCommonStocktobeginon
thefirsttradingdayfollowingcompletionoftheSpinOff.SharesoftheFundsCommonStockareexpectedtobelistedon
[]underthesymbol[],subjecttonoticeofissuance.
BecausetheFundisnewlyorganized,ithasnooperatinghistoryanditsCommonStockhasnohistoryofpublictrading.
Commonstockofclosedendinvestmentcompaniesfrequentlytradesatadiscountfromnetassetvalue.
InvestingintheFundsCommonStockinvolvescertainrisks.BecausetheFundscurrentinvestmentpolicyistoinvestat
least80percentofitstotalassetsintheAlibabaShares,aninvestmentintheFundisparticularlysubjecttorisksrelating
toAlibaba.SeeRiskFactorsbeginningonpage32ofthisinformationstatement.Youshouldcarefullyconsiderthese
riskstogetherwithalloftheotherinformationcontainedinthisinformationstatement.
NeithertheSecuritiesandExchangeCommissionnoranystatesecuritiescommissionhasapprovedordisapprovedof
thesesecuritiesorhaspassedupontheadequacyoraccuracyofthisinformationstatementastruthfulorcomplete.Any
representationtothecontraryisacriminaloffense.
Youshouldreadthisinformationstatement,whichcontainsimportantinformationabouttheFundthatyoushouldknow,
andretainitforfuturereference.Youmayrequestafreecopyofthisinformationstatementoranyotherinformationfiled
withtheU.S.SecuritiesandExchangeCommission(theSEC),whenavailable,andotherinformationabouttheFund,and
makestockholderinquiries,bycalling[]orbywritingto[],oryoumayobtainacopy(andotherinformationregarding
theFund)fromtheSECswebsite(www.sec.gov).FreecopiesoftheFundsreportswillalsobeavailablefromtheFunds
websiteat[].
TheFundsCommonStockdoesnotrepresentadepositinorobligationof,andisnotguaranteedorendorsedby,anybank
orotherinsureddepositoryinstitution,andisnotfederallyinsuredbytheFederalDepositInsuranceCorporation,theFederal
ReserveBoard,oranyothergovernmentagency.
Thisinformationstatementcontainsorincorporatesbyreferenceforwardlookingstatements,withinthemeaningofthe
federalsecuritieslaws,whichinvolverisksanduncertainties.ThesestatementsdescribetheproposedSpinOff,theFunds
plans,strategies,andgoals,andtheFundsbeliefsandassumptionsconcerningfutureeconomicandotherconditionsandthe
outlookfortheFund,basedoncurrentlyavailableinformation.Inthisinformationstatement,wordssuchasanticipates,
believes,expects,objectives,goals,future,intends,seeks,will,may,could,should,andsimilar
expressionsareusedinanefforttoidentifyforwardlookingstatements,althoughsomeforwardlookingstatementsmaybe
expresseddifferently.TheFundisnotentitledtothesafeharborforforwardlookingstatementspursuanttoSection27Aof
theSecuritiesActof1933.
Youshouldrelyonlyontheinformationcontainedorincorporatedbyreferenceinthisinformationstatement.TheFundhas
notauthorizedanyotherpersontoprovideyouwithdifferentinformation.Ifanyoneprovidesyouwithdifferentor
inconsistentinformation,youshouldnotrelyonit.Youshouldnotassumethattheinformationinthisinformationstatement
isaccurateasofanydateotherthanthedateofthisinformationstatement.TheFundsbusiness,financialcondition,and
resultsofoperationsmayhavechangedsincethatdate.
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TABLEOFCONTENTS
Summary
SummaryofFundExpenses
ProFormaStatementofAssetsandLiabilities
TheFund
TheSpinOff
InvestmentObjectiveandPolicies
BorrowingsandPreferredStock
RiskFactors
ManagementoftheFund
InvestmentAdvisoryServices
DescriptionofCapitalStructure
CertainProvisionsoftheFundsGoverningDocuments
ClosedEndFundStructure
RepurchaseoftheFundsCommonStock
BrokerageTransactions
U.S.FederalIncomeTaxConsiderations
Custodian,TransferAgent,andAdministrator
PrincipalStockholders
IndependentRegisteredPublicAccountingFirm
ProxyVotingPolicies
CodeofEthics
AdditionalInformation
PrivacyPrinciplesoftheFund
1
12
13
15
16
26
30
32
45
47
47
48
51
51
51
52
55
56
57
57
57
58
58
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SUMMARY
Thisisonlyasummaryofinformationcontainedelsewhereinthisinformationstatement.Youshouldcarefullyreadthe
moredetailedinformationcontainedinthisinformationstatement,especiallytheinformationundertheheadingsThe
SpinOff,InvestmentObjectiveandPolicies,andRiskFactors.
TheFund
AabacoHoldings,Inc.(theFundorwe)isaDelawarecorporationand
currentlyisawhollyownedsubsidiaryofYahoo!Inc.(Yahoo).Yahoo
hasauthorizedaplantospinofftheFundbydistributingtotheholdersof
Yahooscommonstock,asadividend,alloftheFundsoutstandingshares
ofcommonstock,parvalue$0.00001pershare(theCommonStock).We
refertothistransactionastheSpinOff.
FollowingtheSpinOff,theFundwillbeanindependent,publiclytraded,
nondiversified,closedendmanagementinvestmentcompanyregistered
undertheInvestmentCompanyActof1940(the1940Act).Immediately
aftertheSpinOff,theFundsinvestmentassetswillconsistof383,565,416
ordinaryshares,parvalueUS$0.000025pershare(theOrdinaryShares),
ofAlibabaGroupHoldingLimited(Alibaba),representingasofthedate
ofthisinformationstatementanapproximate15percentownershipinterest
inAlibaba,anda100percentownershipinterestinAabacoSmall
Business,LLC(ASB).TheFundwillhold290,938,700ofitsAlibaba
SharesthroughAabacoHoldingsHongKongLimited(formerly,Yahoo!
HongKongHoldingsLimited)(AabacoHongKong),aHongKong
privatecompanylimitedbysharesandawhollyownedsubsidiaryof
Yahoothatengagesinnootherbusinessoroperations,andownsnoother
assets.WesometimesrefertoAlibabasOrdinarySharesandAlibabas
AmericanDepositaryShares(theAlibabaADS)collectivelyasthe
AlibabaShares.
FollowingtheSpinOff,Yahoowillnotretainanyownershipinterestin
theFund.However,directors,officers,andemployeesofYahoowhoown
sharesofYahooscommonstockontherecorddatefortheSpinOffwill
receivesharesoftheFundsCommonStockinconnectionwiththeSpin
OffinthesameratioasotherYahoostockholders.
InvestmentObjectiveandPolicies
TheFundsinvestmentobjectiveistoseekreturnsforitsstockholders
primarilythroughowningtheAlibabaShares.Basedontheclosingmarket
priceoftheAlibabaADSontheNewYorkStockExchangeon[],2015,
theFundanticipatesthatthevalueofitsAlibabaShareswillexceed95
percentofthevalueofitstotalassetsimmediatelyaftertheSpinOffis
completed.TheFundsinvestmentobjectiveisnotfundamentalandmay
bechangedwithoutstockholderapproval,althoughtheFundwillprovide
stockholderswithatleast60daysnoticebeforeimplementinganychange
toitsinvestmentobjective.TherecanbenoassurancethattheFundwill
achieveitsinvestmentobjective.
TheFundwillseektoachieveitsinvestmentobjectivebycontinuingto
investatleast80percentofitstotalassetsinAlibabaSharesunder
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normalmarketconditions.Thispolicyisnotfundamentalandmaybe
changedwithoutstockholderapproval,althoughtheFundwillprovideits
stockholderswithatleast60daysnoticebeforeimplementinganychange
tothisinvestmentpolicy.TheFundhasnocurrentintentionofinvesting
lessthan80percentofitstotalassetsintheAlibabaShares.Becausethe
Fundsinvestmentpolicyistoinvestatleast80percentofitstotalassetsin
theAlibabaShares,aninvestmentintheFundisparticularlysubjectto
risksrelatingtoAlibaba.SeeRiskFactors.
TheFundsinvestmentintheAlibabaShareswillcauseittobeanon
diversifiedinvestmentcompanyandtoconcentrateitsinvestmentsin
securitiesissuedbycompaniesintheonlineservicesandecommerce
industry.Asaresult,the1940ActrequirestheFundtoobtainstockholder
approvaltoinvestlessthan25percentofitstotalassetsincompaniesin
theonlineservicesandecommerceindustry.TheFundhasnocurrent
intentionofinvestinglessthan25percentofitstotalassetsincompanies
intheonlineservicesandecommerceindustry.
TheFundintendstoenterintoacreditfacility(theCreditFacility)
pursuanttowhichtheFundmayborrowupto$[]million.TheFund
anticipatesthatitwillinitiallyborrow$[]millionpursuanttotheCredit
FacilityatoraboutthetimeofthecompletionoftheSpinOff.Thepurpose
oftheinitialborrowingistoprovideworkingcapitalduringtheFunds
firstyearofoperations.TheFundcurrentlyintendstoborrowmoneyonly
forworkingcapitalandtorepurchaseitsCommonStockifandtothe
extentauthorizedbyitsBoardofDirectorsfromtimetotime.TheFund
doesnotcurrentlyintendtousetheproceedsofanyborrowingtopurchase
additionalinvestmentsecuritiesortopaydividendstostockholders,
thoughitretainstherighttodoso.TheFundreservestherighttoborrow
moneytotheextentpermittedbythe1940Act.
TheFundmaylenditsAlibabaSharestogenerateincome.Suchincome
maybeusedforworkingcapitalpurposesortorepurchasetheFunds
CommonStockifandtotheextentauthorizedbyitsBoardofDirectors
fromtimetotime.TheFundhasnocurrentintentionoflendingitsAlibaba
Sharestogenerateincometobeusedtopurchaseadditionalinvestment
securitiesorpaydividendstostockholders,thoughitretainstherighttodo
so.
AlibabaGroupHoldingLimitedandAlibabaADS
Alibabaisanonlineandmobilecommercecompanythatoperates
primarilyinthePeoplesRepublicofChina(thePRC).AsofMay,2015,
Alibabareportedthatitisthelargestonlineandmobilecommerce
companyintheworldintermsofgrossmerchandisevolume.Alibaba
operatesaplatformforthirdparties,anditdoesnotengageindirectsales,
competewithmerchants,orholdinventory.
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InSeptember2014,Alibabacompletedaninitialpublicofferingofthe
AlibabaADS.AsapubliccompanyAlibabafilesreportswiththeU.S.
SecuritiesandExchangeCommission(theSEC)containingfinancialand
othermaterialinformationaboutitsbusinessandrisksrelatingtoits
business.ThisinformationmaybeobtainedattheSECswebsiteat
www.sec.gov.YoushouldreviewinformationfiledbyAlibabawiththe
SECbecausethevalueoftheFundsCommonStockwillbeheavily
dependentuponandinfluencedbythevalueoftheAlibabaShares.
TheAlibabaADSaretradedontheNewYorkStockExchangeunderthe
symbolBABA.On[],2015,theclosingpriceoftheAlibabaADSon
theNewYorkStockExchangewas$[]pershare.EachAlibabaADS
representsanownershipinterestinoneAlibabaOrdinaryShare.
AabacoSmallBusiness
ASBwasformedinconnectionwiththeSpinOffandwillacquirethe
assetsandassumetheliabilitiesrelatingtothebusinessthathas
historicallybeenoperatedbyYahoounderthenameYahooSmall
Business.
ASBoperatesacloudbasedservicesplatformthatenablessmallbusiness
entrepreneurstostart,build,andgrowtheirbusinesses.ASBprovidesafull
setofendtoendservicesformerchantstogettheironlinebusinessesup
andrunninginamatterofdays.ASBallowsitscustomerstochoosefroma
rangeofprepackagedoptionsforwebhosting,domainregistration,e
commercehostingservices(includingmerchantbillingandpayment
solutions),andotherofferings.
TheSpinOff
YahoohasauthorizedaplantospinofftheFundbydistributingtothe
holdersofYahooscommonstock,asadividend,alloftheFunds
outstandingCommonStock.
RequirementsforYahooStockholderParticipationintheSpinOff
HoldersofYahooscommonstockontheRecordDatearenotrequiredto
makeanyelection,payanycashordeliveranyotherconsideration,orgive
upanysharesofYahooscommonstock,toreceivetheFundsCommon
StockdistributabletothemintheSpinOff.
DistributiontoYahooStockholders
HoldersofYahooscommonstockwillreceiveadividendofoneshareof
theFundsCommonStockforeach[]wholeshare[s]ofYahooscommon
stockheldbythemontheRecordDate.Cashwillbedistributedinlieuof
fractionalsharesoftheFundsCommonStock.
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SecuritiestobeDistributed
Basedonthe[]sharesofYahooscommonstockoutstandingon[],
2015,andthedistributionratioofoneshareoftheFundsCommonStock
foreach[]wholeshare[s]ofYahooscommonstock,weexpectthat
approximately[]sharesoftheFundsCommonStockwillbedistributed
intheSpinOff.ThesharesoftheFundsCommonStocktobedistributed
byYahoowillconstitutealltheissuedandoutstandingsharesofthe
FundsCommonStockimmediatelyaftertheSpinOff.Theexactnumber
ofsharesoftheFundsCommonStocktobedistributedintheSpinOff
willnotbeknownuntiltheRecordDate.
TheRecordDate
TheRecordDateis5:00p.m.,NewYorkCitytime,on[],2015.
TheDistributionDateandEffectiveTimeoftheSpinOff
TheDistributionDateoftheSpinOffis5:00p.m.,NewYorkCitytime,on
[],2015.YahoointendstoeffecttheSpinOffontheDistributionDate.
DistributionAgent
[],([])servesastheFundsdistributionagentfortheCommonStock.
[]islocatedat[].
RelationshipBetweenYahooandtheFundFollowingtheSpinOff
FollowingtheSpinOff,theFundandYahoowilloperateindependently
ofeachother,andneitherwillhaveanyownershipinterestintheotherasa
resultoftheSpinOff.InconnectionwiththeSpinOff,however,theFund
andYahoo(orcertainoftheirrespectivesubsidiaries)areenteringinto
agreementsinordertogoverntherelationshipsbetweentheFundand
YahooaftertheSpinOffandtoprovideforanorderlytransition.
TheFundwillenterintoaseparationanddistributionagreement(the
SeparationandDistributionAgreement)withYahoowhichwillset
forth,amongotherthings,theprincipalcorporatetransactionsrequiredto
effecttheSpinOff,theconditionstotheSpinOff,andongoing
obligationsoftheFundandYahoofollowingcompletionoftheSpinOff.
TheFundwillalsoenterintoataxmattersagreement(theTaxMatters
Agreement)withYahoothatwillgovernYahoosandtheFunds
respectiverights,responsibilities,andobligationswithrespecttotaxesand
taxbenefits,thefilingoftaxreturns,thecontrolofaudits,andothertax
matters.
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YahooandASBwillenterintoatransferagreement(theTransfer
Agreement)pursuanttowhichYahoowilltransfertoASBsubstantially
alloftheassetsexclusivelyrelatingtothebusinesshistoricallyoperated
byYahooasYahooSmallBusiness,subjecttocertainexcludedassets
identifiedintheTransferAgreement,andASBwillassumeallofthe
liabilitiesrelatingtosuchassetsandbusiness.
TheFund,Yahooandcertainoftheirrespectivesubsidiarieswillenterinto
otheragreementsprimarilyintendedtofacilitatetheoperationsofASB
followingtheSpinOff(theAncillaryAgreements).TheAncillary
Agreementswillprovidefor(1)theprovisionofcertaintechnologyrelated
services,onatransitionalbasis(2)theprovisionofcertaingeneraland
administrativeservices,onatransitionalbasis(3)certainnonexclusive
licensesfortheuseofcertainintellectualpropertyand(4)ASBs
continuedprovisionofYahoosbusinessemailplatformtoASBs
customers.InadditiontotheseAncillaryAgreements,ASBwilllicense
certaincontenttoYahoo,andASBwillenterintoanadvertisingreseller
agreementwithYahoo.
TheSeparationandDistributionAgreement,theTaxMattersAgreement,
theTransferAgreement,andtheAncillaryAgreementswillbeapproved
bytheBoardofDirectorsoftheFund(theBoardortheBoardof
Directors,andeachmemberoftheBoardaDirectorandtogetherthe
Directors)inaccordancewithrequirementsofthe1940Actandcertain
pronouncementsofthestaffoftheSECthereunder.
ConditionsPrecedenttotheSpinOff
TheSeparationandDistributionAgreementwillprovidethatthe
completionoftheSpinOffissubjecttothesatisfactionofthefollowing
conditions,eachofwhichmaybewaived,inwholeorinpart(totheextent
permittedbyapplicablelaw),byYahooinitssoleandabsolutediscretion.
TheboardofdirectorsofYahooshallhaveapprovedtheSpinOffand
theothertransactionscontemplatedbytheSeparationand
DistributionAgreement,theTaxMattersAgreement,theTransfer
Agreement,andanyAncillaryAgreement,includingthesettingofthe
RecordDateandthedeclarationofthedividendoftheFunds
CommonStock,whichapprovalmaybegivenorwithheldatitssole
andabsolutediscretion.
TheBoardofDirectorsoftheFundshallhaveapprovedcompliance
policiesandprocedures,andcausedtheFundtoenterintosuch
agreementsandtakesuchotheractions,asreasonablynecessaryto
ensurethattheFundwillnotviolatetheUnitedStatesfederal
securitieslaws.
TheregistrationstatementundertheSecuritiesExchangeActof1934
(the1934Act)relatingtotheFundsCommonStock
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shallhavebecomeeffective,withnostoporderineffectwithrespect
thereto,andwithnoproceedingsforsuchpurposependingor
threatenedbytheSEC,andthisInformationStatementshallhavebeen
providedtoholdersofYahooscommonstockasoftheRecordDate.
TheFundshallhaveregisteredasaninvestmentcompanyunderthe
1940Act,suchregistrationshallnothavebeenwithdrawn,no
revocationofregistrationshallhavebeenissued,andnoproceeding
forsuchpurposeshallbependingorthreatenedbytheSEC.
Allotheractionsandfilingsnecessaryorappropriateunderapplicable
federalorstatesecuritieslawsandstateblueskylawsinconnection
withtheSpinOffshallhavebeentakenormade.
Yahooshallhavereceivedafavorableprivateletterrulingfromthe
IRSregardingcertainU.S.federalincometaxaspectsoftheSpinOff
(theIRSRuling),whichrulingshallremaininfullforceandeffect,
andshallnothavebeenmodifiedoramendedinanyrespectadversely
affectingtheU.S.federalincometaxtreatmentoftheSpinOff.
YahooshallhavereceivedanopinionfromSkadden,Arps,Slate,
Meagher&FlomLLP(SkaddenArps)(whichopinionmayrely
upontheeffectivenessandcontinuedvalidityoftheIRSRuling),in
formandsubstancereasonablyacceptabletoYahoo,substantiallyto
theeffectthattheSpinOffwillqualifyasataxfreetransactionto
YahooanditsstockholdersunderSections355and368(a)(1)(D)of
theInternalRevenueCodeof1986,asamended(theCode),and
that,forU.S.federalincometaxpurposes,(1)nogainorlosswillbe
recognizedbyYahoouponthedistributionoftheFundsCommon
StockintheSpinOff,and(2)nogainorlosswillberecognizedby,
andnoamountwillbeincludedintheincomeof,holdersofYahoos
commonstockuponthereceiptofsharesoftheFundsCommonStock
intheSpinOff(exceptwithrespecttothereceiptofcashinlieuof
fractionalsharesoftheFundsCommonStock).
Yahooshallhavereceivedanopinionfromanationallyrecognized
valuationfirm,informandsubstanceacceptabletoYahoo,
substantiallytotheeffectthat,amongotherthings,(1)Yahoohas
adequatecapitalsurplusundertheDelawareGeneralCorporationLaw
toeffecttheSpinOff,and(2)aftergivingeffecttotheSpinOff,
Yahoowillbesolvent.
TheFundsCommonStocktobedistributedpursuanttotheSpinOff
andrelatedtransactionsshallhavebeenacceptedforlistingon[],
subjecttoofficialnoticeofissuance.
ThetransactionscontemplatedbytheTransferAgreementshallhave
beencompleted.
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TheTaxMattersAgreementandtheAncillaryAgreementsshallhave
beenexecutedanddeliveredbyeachofthepartiestheretoandno
partytotheTaxMattersAgreementoranyoftheAncillary
Agreementsshallbeinmaterialbreachofanysuchagreement.
Allgovernmentalapprovalsandconsentsnecessarytoconsummate
theSpinOffandtheothertransactionscontemplatedbythe
SeparationandDistributionAgreement,theTaxMattersAgreement,
theTransferAgreement,andanyAncillaryAgreementshallhavebeen
obtainedandbeinfullforceandeffect.
Nopreliminaryorpermanentinjunctionorotherorder,decree,or
rulingissuedbyagovernmentalauthority,andnostatute(as
interpretedthroughordersorrulesofanygovernmentalauthorityduly
authorizedtoeffectuatethestatute),rule,regulation,orexecutive
orderpromulgatedorenactedbyanygovernmentalauthorityshallbe
ineffectpreventingtheconsummationof,ormateriallylimitingthe
benefitsof,theSpinOffandtheothertransactionscontemplatedby
theSeparationandDistributionAgreement,theTaxMatters
Agreement,theTransferAgreement,andanyAncillaryAgreement.
Noothereventordevelopmentshallhaveoccurredorfailedtooccur
that,inthejudgmentoftheboardofdirectorsofYahooinitssole
discretion,preventstheconsummationoftheSpinOffandtheother
transactionscontemplatedbytheSeparationandDistribution
Agreement,theTaxMattersAgreement,theTransferAgreement,and
anyAncillaryAgreementormakestheconsummationofsuch
transactionsinadvisable.
Yahoohasreservedtheright,initssoleandabsolutediscretion,to
abandonormodifythetermsoftheSpinOffatanytimepriortothe
DistributionDate,eveniftheconditionstotheSpinOffhavebeen
satisfied.
U.S.FederalIncomeTaxConsequencesoftheSpinOff
ThecompletionoftheSpinOffisconditioneduponthereceiptbyYahoo
oftheIRSRuling,whichrulingshallremaininfullforceandeffect,and
shallnothavebeenmodifiedoramendedinanyrespectadverselyaffecting
theU.S.federalincometaxtreatmentoftheSpinOff.Inaddition,theSpin
OffisconditioneduponthereceiptbyYahooofanopinionofSkadden
ArpstotheeffectthattheSpinOffwillqualifyasataxfreetransaction
underSections355and368(a)(1)(D)oftheCodeandthat,forU.S.federal
incometaxpurposes,(1)nogainorlosswillberecognizedbyYahooupon
thedistributionoftheFundsCommonStockintheSpinOff,and(2)no
gainorlosswillberecognizedby,andnoamountwillbeincludedinthe
incomeof,holdersofYahooscommonstockuponthereceiptofsharesof
theFundsCommonStockintheSpinOff(exceptwith
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respecttothereceiptofcashinlieuoffractionalsharesoftheFunds
CommonStock).Yahoohasreservedtherighttowaivetheseconditionsin
itssoleandabsolutediscretion.
FormoreinformationregardingtheopinionofSkaddenArpsandthe
potentialtaxconsequencesoftheSpinOfftoyou,pleaseseeU.S.Federal
IncomeTaxConsiderationsMaterialU.S.FederalIncomeTax
ConsequencesoftheSpinOff,RiskFactorsRisksRelatedtotheSpin
OffTheSpinOffcouldresultinsignificanttaxliabilities,andRisk
FactorsRisksRelatedtotheSpinOffTheFundmayhaveasignificant
indemnityobligationtoYahoo,whichisnotlimitedinamountorsubject
toanycap,iftheSpinOffistreatedasataxabletransaction.
HoldersofYahooscommonstockareurgedtoconsulttheirtax
advisorsastothespecifictaxconsequencesoftheSpinOfftothemin
lightoftheirparticularcircumstances.
ManagementoftheFund
TheFundisinternallymanagedbyitsofficersandemployeesunderthe
supervisionofitsBoardofDirectors.SeeManagementoftheFund.
Distributions
Unlikemostregisteredinvestmentcompanies,theFunddoesnotanticipate
makingregulardistributionstoitsstockholders.TheFundmay,however,
makedistributionsfromtimetotimeinthesolediscretionofitsBoardof
Directors.
TaxationoftheFund
Unlikemostregisteredinvestmentcompanies,theFundisnoteligibleto
betreatedasaregulatedinvestmentcompanyundertheCodeasaresult
oftheFundsconcentratedownershipofAlibabaShares.Instead,theFund
istreatedasaregularcorporation,oraCcorporation,forU.S.federal
incometaxpurposesand,asaresult,unlikemostinvestmentcompanies,is
subjecttocorporateincometaxtotheextenttheFundrecognizestaxable
income.FormoreinformationregardingtheU.S.federalincometax
treatmentoftheFund,pleaseseeU.S.FederalIncomeTaxConsiderations
U.S.FederalIncomeTaxationoftheFund.
ListingandSymbol
TheFundsCommonStockisexpectedtobelistedon[]underthe
symbol[],subjecttonoticeofissuance.
Onthedateofthisinformationstatement,theFundisawhollyowned
subsidiaryofYahoo.Accordingly,thereisnopublicmarketfortheFunds
CommonStock.Weanticipatethat,beginningonorshortlybeforethe
RecordDate,tradingintheFundsCommonStockwillbeginonawhen
issuedbasisandwillcontinueuptoandincludingthroughthe
DistributionDate.
BeginningonorshortlybeforetheRecordDateandcontinuinguptoand
includingthroughtheDistributionDate,Yahooexpectsthattherewillbe
twomarketsinYahooscommonstock:aregularwaymarketandanex
distributionmarket.
SharesofYahooscommonstockthattradeontheregularwaymarket
willtradewithanentitlementtotheFundsCommonStock
distributedpursuanttotheSpinOff.Therefore,ifyousell
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Yahooscommonstockintheregularwaymarketuptoandincluding
throughtheDistributionDate,youwillbesellingyourrightto
receivetheFundsCommonStockintheSpinOff.
SharesofYahooscommonstockthattradeontheexdistribution
marketwilltradewithoutanentitlementtotheFundsCommonStock
distributedpursuanttotheSpinOff.IfyouownYahooscommon
stockontheRecordDateandsellthosesharesontheexdistribution
marketuptoandincludingthroughtheDistributionDate,youwill
receivetheFundsCommonStockthatyouareentitledtoreceive
pursuanttoyourownershipofYahooscommonstockasofthe
RecordDate.
SeeTheSpinOffTradinginYahoosCommonStockBetweenthe
RecordDateandDistributionDate.
SpecialRiskConsiderations
AninvestmentintheFundissubjecttoinvestmentrisk,includingthe
possiblelossoftheentireprincipalamountinvested.Investmentinthe
Fundinvolvesspecialriskconsiderations,whicharesummarizedbelow:
RisksRelatedtoAlibaba
Alibabaisanonlineandmobilecommercecompanythatoperates
primarilyinthePRC.ImmediatelyaftertheSpinOff,AlibabaSharesare
expectedtorepresentmorethan95percentofthevalueoftheFundstotal
assets.TheFundcurrentlyintendstocontinuetoinvestatleast80percent
ofitstotalassetsintheAlibabaShares.Asaresult,themarketpriceandnet
assetvalueoftheFundsCommonStockwillbemateriallyimpactedby
themarketpriceofAlibabaShares,whichinturnwillbeaffectedby
Alibabasbusiness,management,resultsofoperations,andfinancial
condition.
AlibabafileswiththeSECreportscontainingfinancialandother
materialinformationaboutitsbusinessandrisksrelatingtoitsbusiness.
YouareencouragedtoreviewtheinformationsetforthinAlibabas
registrationstatementonFormF1(andtheprospectusthatisapartof
thatregistrationstatement)andinitsannualreportsfiledonForm20F
foradditionalinformationaboutAlibabasbusiness,management,
resultsofoperations,financialcondition,andrisks.Youshouldalso
reviewAlibabaspressreleasesandreportsfiledwiththeSEConForm
6K.ThisinformationmaybeobtainedattheSECswebsiteat
www.sec.gov.YoushouldreviewinformationfiledbyAlibabawiththe
SECbecausethevalueoftheFundsCommonStockwillbeheavily
dependentuponandinfluencedbythevalueoftheAlibabaShares.
RisksRelatedtotheSpinOff
TheFundissubjecttothefollowingriskfactorsrelatingtotheSpinOff:
TheSpinOffcouldresultinsignificanttaxliabilities.
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YahooandtheFundfaceuncertaintieswithrespecttoPRCtaxationof
indirecttransfersofChinesetaxablepropertyinconnectionwiththe
SpinOff.
TheFundmayhaveasignificantindemnityobligationtoYahoo,
whichisnotlimitedinamountorsubjecttoanycap,iftheSpinOffis
treatedasataxabletransaction.
TheFundmaydecidenottoengageincertaintransactionsinorderto
avoidtheriskofincurringsignificanttaxrelatedliabilities.
AchangeincontroloftheFundmightbediscouraged,delayed,or
preventedbecauseoftheFundsindemnityobligationundertheTax
MattersAgreement.
TheconditionstotheSpinOffmaynotbesatisfiedorwaivedandthe
SpinOffmaynotoccur.
ASBhasneveroperatedasanindependentcompanyanditsbusiness
maybeunsuccessful.
FollowingtheSpinOff,theFundwillbesubjecttoincreasedcosts.
Thefinancialinformationprovidedinthisinformationstatementmay
notberepresentativeoftheFundsactualfuturefinancialposition.
RisksRelatedtotheFundsOperationsasanInvestmentCompany
TheFundissubjecttothefollowingriskfactorsrelatingtoitsoperations
asaninvestmentcompany:
InvestmentsintheFundmayperformpoorlyandcouldresultinyour
entireinvestmentbeinglost.
AninvestmentintheFundsCommonStockshouldnotbeconsidered
acompleteinvestmentprogram.
TheFundsinvestmentsinequitysecuritiesarevolatile.
TheFundsrevenuesourcesmaybelimitedfollowingtheSpinOff.
TheFundsuseofborrowedmoneyforworkingcapitalorto
repurchasesharesofitsCommonStockcouldresultingreater
volatilityandlosses.
TheFundsinvestmentperformancemaybemateriallyandadversely
affectedbyeconomicconditionsinthePRCaswellasglobally.
IfthePRCgovernmentdeemsthatthecontractualarrangementsin
relationtoAlibabasvariableinterestentitiesdonotcomplywith
PRCgovernmentrestrictionsonforeigninvestment,orifthese
regulationsortheinterpretationofexistingregulationschangeinthe
future,Alibabasbusinessandresultsofoperations
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maybeimpacted,whichinturnmayadverselyaffecttheFunds
investmentperformance.
Thereareuncertaintiesregardingtheinterpretationandenforcementof
PRClaws,rulesandregulations.
LendingtheFundssecuritiestothirdpartiesmaycauselosses.
TheFundsuseofserviceprovidersmeansthattheFundisrelianton
thirdpartiestoperformtheirobligations.
TheFundreliesonthecompetenceandcontinuedserviceofitsown
officersandDirectorstomanagetheFund.
Asanondiversifiedinvestmentcompany,theFundsinvestment
performanceisatriskfromfluctuationsinAlibabasperformance.
TheFundsinvestmentsareconcentratedintheonlineservicesande
commerceindustry,andrisksassociatedwiththisindustrymay
adverselyaffecttheFundsinvestments.
Limitationsimposedbythe1940ActmayadverselyaffecttheFunds
operations.
TheFundwillfaceadditionalregulatoryrequirementsandincreased
expensesifitbecomessubjecttoregulationasacommoditypool
operator.
RisksRelatedtotheFundsCommonStockandtheSecuritiesMarket
FollowingtheSpinOff
TheFundissubjecttothefollowingriskfactorsrelatingtoitsCommon
Stockandthesecuritiesmarkets:
AnactivetradingmarketfortheFundsCommonStockmightnot
develop.
SharesoftheFundsCommonStockmaytradeatadiscountfromnet
assetvalue.
AntitakeoverprovisionsintheFundsgoverningdocumentswill
makeitmoredifficultforathirdpartytoacquiretheFund.
Foramorecompletediscussionofthespecialriskconsiderations
associatedwithaninvestmentintheFund,pleaseseeRiskFactors.
Custodian
[]servesasthecustodianoftheFundsassetspursuanttoacustody
agreement.Underthecustodyagreement,thecustodianholdstheFunds
assetsincompliancewiththe1940Act.
TransferAgent
[]servesastheFundstransferagentandregistrarwithrespecttothe
FundsCommonStock.
Administrator
PursuanttoanadministrationagreementwiththeFund,[]provides
certainadministrativeandbookkeepingservicestotheFund.
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SUMMARYOFFUNDEXPENSES
Thepurposeofthetableandtheexamplebelowistohelpyouunderstandthefeesandexpensesthatyou,asaholderof
theFundsCommonStock,wouldbeardirectlyorindirectly.Theexpensesshowninthetablearebasedonestimated
amountsfortheFundsfirstyearofoperationsandassumethattheFundhasanapproximateaverageaggregatedailynetasset
valueof$[]duringitsfirstfullyearofoperations.TheFundsactualexpensesmayvaryfromtheestimatedexpensesshown
inthetable.
CommonStockholderTransactionExpenses
Salesload(asapercentageofofferingprice)
Dividendreinvestmentandcashpurchaseplanfees(1)
N/A
None
AnnualExpenses(asapercentageofnetassetsattributabletothe
FundsCommonStock)(2)
Interestpaymentsonborrowedfunds(3)
Otherexpenses(4)
Totalannualexpenses
PercentageofNet
AssetsAttributabletoCommon
Stock
[]%
[]%
[]%
(1) TheFundhasnotadoptedadividendreinvestmentorcashpurchaseplan.
(2) NetassetsattributabletotheFundsCommonStockequalstotalassetslesstotalliabilitiesasof[],2015.
(3) Assumesacostofborrowedfundsof[]percent.Thisrateisanestimateandmaydifferbasedonvaryingmarket
conditionsanddependingonthetypeofborrowingused.IftheFundborrowsinanamountgreaterthan$[](or
approximately[]percentofitstotalassetsimmediatelyaftertheSpinOff)thisamountcouldincrease.
(4) TheOtherexpensespercentageisbasedonanestimateofannualexpensesrepresentingalloftheFundsoperating
expenses(exceptfeesandexpensesreportedinotheritemsofthistable)thatwillbedeductedfromtheFundsoperating
incomeandreflectedasoperatingexpensesintheFundsstatementofoperations,netofinterestexpense,fortheFunds
firstfullyearofoperations,dividedbynetassetsattributabletotheFundsCommonStockasof[],2015.
AsrequiredbyrelevantSECregulations,thefollowingexampleillustratestheexpensesthatyouwouldpayona
$1,000investmentintheFundsCommonStock,assuming(1)TotalAnnualExpensesof[]percentofnetassets
attributabletotheFundsCommonStockand(2)afivepercentannualreturn:*
1Year
3Years
5Years
10Years
$[]
$[]
$[]
$[]
* Theexampleshouldnotbeconsideredarepresentationoffutureexpensesorreturns.Theexampleassumesthatthe
amountestimatedaboveforTotalAnnualExpensesisaccurate.Actualexpensesmaybehigherorlowerthanthose
assumed.Moreover,theFundsactualrateofreturnmaybehigherorlowerthanthehypotheticalfivepercentreturn
shownintheexample.
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PROFORMASTATEMENTOFASSETSANDLIABILITIES
ThefollowingunauditedproformastatementofassetsandliabilitiesoftheFundassumesthattheSpinOffoccurredas
of[],2015,thatthedistributionratiowasequaltooneshareoftheFundsCommonStockforeach[]wholeshare[s]of
Yahooscommonstock,resultingin[]sharesoftheFundsCommonStockoutstanding,thattheAlibabaShares
contributedtotheFundwerevaluedattheclosingpriceoftheAlibabaADSon[],2015,andthatotherassetscontributed
totheFundwerevaluedatfairvalue.
Asof[],2015
Assets:
Investmentinnoncontrolledaffiliate(1)
Investmentincontrolledaffiliate(1)
Cash
TotalAssets
Fund
(asof[],2015)
ProForma
Fund
[]
[]
[]
[]
0
0
[10]
[10]
Liabilities:
Deferredtaxespayableonunrealized
appreciation(2)
CreditFacility(3)
TotalLiabilities
0
0
0
[]
[]
[]
NetAssetsAttributabletoCommonStockholders
[10]
[]
NetAssetsAttributabletoCommonStockholders
Consistof:
Paidincapital,at$0.00001parvaluepershare
Netunrealizedappreciationoninvestments
TotalNetAssets
[10]
[]
[10]
[]
[]
[]
[]
[]
NetAssetValuePerCommonShare
(1) InvestmentsincompaniesfivepercentormoreofwhoseoutstandingvotingsecuritiesareheldbytheFundare
affiliatesoftheFundasdefinedinSection2(a)(3)ofthe1940Act.
(2) Basedonthe$[]closingpriceofAlibabaADSon[],2015,theFundstaxbasisinitsAlibabaSharesandanassumed
effectivecombinedFederalandstatecorporatetaxrateoncapitalgainsofapproximately41percent.
(3) TheFundintendstoenterintoacreditfacility(theCreditFacility)pursuanttowhichtheFundmayborrowupto$[]
million.TheFundanticipatesthatitwillinitiallyborrow$[]millionpursuanttotheCreditFacilityatoraboutthe
timeofthecompletionoftheSpinOff.SeeBorrowingsandPreferredStockbelow.
YoucanfindinformationregardingAlibabasfinancialstatementsandbusinessinAlibabasperiodicreportsfiledwith
theSEC.
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SetforthbelowisinformationwithrespecttoYahooscommonstockandtheFundsCommonStockfollowingthe
SpinOff.ThefollowingtableassumesthatthenumberofsharesoftheFundsCommonStockdistributedasadividendin
connectionwiththeSpinOffwillbebasedonthe[]sharesofYahooscommonstockoutstandingasof[],2015andthe
distributionratioofoneshareoftheFundsCommonStockforeach[]wholeshare[s]ofYahooscommonstock.
Yahoocommonstock
FundCommonStock(proforma)
Amount
Authorized
5,000,000,000
[]
AmountHeldby
Issuerorforits
Account
Amount
Outstanding
[]
[]
[]
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THEFUND
AabacoHoldings,Inc.(theFundorwe)isaDelawarecorporationandcurrentlyisawhollyownedsubsidiaryof
Yahoo!Inc.(Yahoo).YahoohasauthorizedaplantospinofftheFundbydistributingtotheholdersofYahooscommon
stock,asadividend,alloftheFundsoutstandingsharesofcommonstock,parvalue$0.00001pershare(theCommon
Stock).WerefertothistransactionastheSpinOff.
FollowingtheSpinOff,theFundwillbeanindependent,publiclytraded,nondiversified,closedendmanagement
investmentcompanyregisteredundertheInvestmentCompanyActof1940(the1940Act).ImmediatelyaftertheSpin
Off,theFundsinvestmentassetswillconsistof383,565,416ordinaryshares,parvalueUS$0.000025pershare(the
OrdinaryShares),ofAlibabaGroupHoldingLimited(Alibaba),representingasofthedateofthisinformationstatement
anapproximate15percentownershipinterestinAlibaba,anda100percentownershipinterestinAabacoSmallBusiness,
LLC(ASB).TheFundwillhold290,938,700ofitsAlibabaOrdinarySharesthroughAabacoHoldingsHongKong
Limited(formerly,Yahoo!HongKongHoldingsLimited)(AabacoHongKong),aHongKongprivatecompanylimited
bysharesandawhollyownedsubsidiaryofYahoothatengagesinnootherbusinessoroperations,andownsnootherassets.
WesometimesrefertoAlibabasOrdinarySharesandAlibabasAmericanDepositaryShares(theAlibabaADS)
collectivelyastheAlibabaShares.
FollowingtheSpinOff,YahoowillnotretainanyownershipinterestintheFund.However,directors,officers,and
employeesofYahoowhoownsharesofYahooscommonstockontherecorddatefortheSpinOffwillreceivesharesofthe
FundsCommonStockinconnectionwiththeSpinOffinthesameratioasotherYahoostockholders.
AlibabaGroupHoldingLimitedandAlibabaADS
AlibabaisanonlineandmobilecommercecompanythatoperatesprimarilyinthePeoplesRepublicofChina(the
PRC).AsofMay,2015,Alibabareportedthatitisthelargestonlineandmobilecommercecompanyintheworldinterms
ofgrossmerchandisevolume.Alibabaoperatesaplatformforthirdparties,anditdoesnotengageindirectsales,compete
withmerchants,orholdinventory.
InSeptember2014,AlibabacompletedaninitialpublicofferingoftheAlibabaADS.AsapubliccompanyAlibaba
filesreportswiththeU.S.SecuritiesandExchangeCommission(theSEC)containingfinancialandothermaterial
informationaboutitsbusinessandrisksrelatingtoitsbusiness.ThisinformationmaybeobtainedattheSECswebsiteat
www.sec.gov.YoushouldreviewinformationfiledbyAlibabawiththeSECbecausethevalueoftheFundsCommonStock
willbeheavilydependentuponandinfluencedbythevalueofAlibabaADS.
TheAlibabaADSaretradedontheNewYorkStockExchangeunderthesymbolBABA.On[],2015,theclosing
priceoftheAlibabaADSontheNewYorkStockExchangewas$[]pershare.EachAlibabaADSrepresentsoneAlibaba
OrdinaryShare.TheAlibabaOrdinarySharesarenotlistedfortradingontheNewYorkStockExchangeoranyother
nationalsecuritiesexchange.Accordingly,inordertosellAlibabaOrdinarySharesthroughtheNewYorkStockExchange
ortolendthemtoinvestors,theFundmustfirstdepositthemwithCitibank,N.A.HongKongbranch,ascustodianfor
Citibank,N.A.(theDepositary)inexchangeforAlibabaADSandthensellorlendtheAlibabaADS.
AabacoSmallBusiness
ASBwasformedinconnectionwiththeSpinOffandwillacquiretheassetsandassumetheliabilitiesrelatingtothe
businessthathashistoricallybeenoperatedbyYahoounderthenameYahooSmallBusiness.
ASBoperatesacloudbasedservicesplatformthatenablessmallbusinessentrepreneurstostart,build,andgrowtheir
businesses.ASBprovidesafullsetofendtoendservicesformerchantstogettheironlinebusinesses
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upandrunninginamatterofdays.ASBallowsitscustomerstochoosefromarangeofprepackagedoptionsforwebhosting,
domainregistration,ecommercehostingservices(includingmerchantbillingandpaymentsolutions),andotherofferings.Its
offerings,whicharegenerallytailoredtotheonlineneedsofsmallandmediumsizebusinesses(SMBs),comprisefour
maingroupsofproducts:WebHosting,ECommerce,Localworks,andSmallBusinessAdvisor.ASBgeneratesrevenue
principallyfromuserfeespaidbySMBsforitscoreWebHostingandECommerceofferings.Itiscurrentlyanticipatedthat
ASBwillhaveapproximately140150fulltimeemployeesatthetimeoftheSpinOff.
THESPINOFF
YahoohasauthorizedaplantospinofftheFundbydistributingtotheholdersofitscommonstock,asadividend,allof
theFundsoutstandingCommonStock.
DistributiontoYahooStockholders
HoldersofYahooscommonstockwillreceiveadividendofoneshareoftheFundsCommonStockforeach[]whole
share[s]ofYahooscommonstockheldbythemontheRecordDate.HoldersofYahooscommonstockwillnotreceiveany
fractionalsharesoftheFundsCommonStock.Instead,thedistributionagentwillaggregatefractionalsharesintowhole
shares,sellthewholesharesintheopenmarketatprevailingmarketprices,anddistributetheaggregatecashproceeds(netof
discountsandcommissions)ofthesalesproratatoregisteredholdersofYahooscommonstockwhoheldsuchsharesonthe
RecordDate(basedonthefractionalshareeachsuchholderwouldotherwisehavebeenentitledtoreceiveinthe
distribution).Thedistributionagent,initssolediscretion,withoutanyinfluencebytheFundorYahoo,willdetermine
when,how,andthroughwhichbrokerdealertosellthewholeshares.Anybrokerdealerusedbythedistributionagentwill
notbeanaffiliateofeithertheFundorYahoo.NeithertheFundnorYahoowillbeabletoguaranteeanyminimumsaleprice
inconnectionwiththesaleoftheseshares.Recipientsofcashinlieuoffractionalshareswillnotbeentitledtoanyinterest
onamountspaidinlieuoffractionalshares.
TheaggregatenetcashproceedsofthesesaleswillbetaxableforU.S.federalincometaxpurposes.Seethesection
entitledU.S.FederalIncomeTaxConsiderationsMaterialU.S.FederalIncomeTaxConsequencesoftheSpinOff.Ifyou
arearegisteredholderofYahooscommonstockandareentitledtoreceiveapaymentinlieuoffractionalshares,youwill
receiveacheckfromthedistributionagentinanamountequaltoyourproratashareoftheaggregatenetcashproceedsofthe
sales.TheFundestimatesthatitwilltakeapproximatelytwoweeksfromtheDistributionDateforthedistributionagentto
completethedistributionsoftheaggregatenetcashproceeds.IfyouholdyoursharesofYahooscommonstockthrougha
bankorbrokeragefirmandareentitledtoreceiveapaymentinlieuoffractionalshares,yourbankorbrokeragefirmwill
receive,onyourbehalf,yourproratashareoftheaggregatenetcashproceedsofthesales,andwillelectronicallycredityour
accountforyourshareofsuchproceeds.
ResultsoftheSpinOff
Basedon[]sharesofYahooscommonstockoutstandingon[],2015,andthedistributionratioofoneshareofthe
FundsCommonStockforeach[]wholeshare[s]ofYahooscommonstock,theFundexpectstohaveoutstanding
approximately[]sharesofitsCommonStockimmediatelyaftertheSpinOff.TheactualnumberofsharesoftheFunds
CommonStocktobedistributedintheSpinOffwilldependontheactualnumberofwholesharesofYahooscommonstock
outstandingontheRecordDate.
ImmediatelyfollowingtheSpinOff,theFundexpectstohaveapproximately[]stockholdersofrecordbasedonthe
numberofstockholdersofrecordofYahooscommonstockon[],2015.
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MannerofEffectingtheSpinOff
YahooiseffectingtheSpinOffbydistributingtoholdersofitscommonstockasadividendonewholeshareofthe
FundsCommonStockforeach[]wholeshare[s]ofYahooscommonstockheldbyaYahoostockholderasoftheRecord
Date.
StockholdersofYahooarenotbeingaskedtotakeanyactioninconnectionwiththeSpinOff.Nostockholder
approvaloftheSpinOffisrequiredorbeingsought.NeitherYahoonortheFundisaskingyouforaproxy,andyouare
requestednottosendtheFundaproxy.YouarenotrequiredtopayanyconsiderationorgiveupanyportionofyourYahoo
commonstocktoreceivesharesoftheFundsCommonStockintheSpinOff.
FollowingtheRecordDateandonorpriortotheDistributionDate,Yahoowilldeliveralloftheissuedand
outstandingsharesoftheFundsCommonStocktothedistributionagent.IfyouownsharesofYahooscommonstockon
theRecordDate,thesharesoftheFundsCommonStockthatyouareentitledtoreceiveintheSpinOffwillbeissued
electronically,asoftheDistributionDate,toyouoryourbankorbrokeragefirmonyourbehalfindirectregistrationin
bookentryform,whichweexpecttooccurwithinonebusinessdayoftheDistributionDate.Ifyouholdphysicalcertificates
thatrepresentyoursharesofYahooscommonstock,oryouholdyoursharesindirectregistrationinbookentryform,and
youaretheregisteredholderofsuchshares,thedistributionagentorthetransferagentwillthenmailyouadirectregistration
accountstatementthatindicatesthenumberofsharesoftheFundsCommonStockthathavebeenregisteredinbookentry
forminyourname.Registrationinbookentryformreferstoamethodofrecordingshareownershipwhennophysicalshare
certificatesareissuedtostockholders,asisthecaseintheSpinOff.IfanystockholderofYahoosellssharesofYahoos
commonstockontheregularwaymarketuptoandincludingthroughtheDistributionDate,thenthebuyerofthoseshares,
andnottheseller,willbecomeentitledtoreceivethesharesoftheFundsCommonStockissuableinrespectoftheshares
sold.
MostYahoostockholdersholdtheircommonstockthroughabankorbrokeragefirm.Insuchcases,thebankor
brokeragefirmwouldbesaidtoholdthesharesinstreetname,andownershipwouldberecordedonthebankorbrokerage
firmsbooks.IfyouholdyoursharesofYahooscommonstockthroughabankorbrokeragefirm,yourbankorbrokerage
firmwillcredityouraccountfortheFundCommonStockyouareentitledtoreceiveintheSpinOffandwillreceive,onyour
behalf,yourproratashareoftheaggregatenetcashproceedsfromthesaleofanyfractionalshares,andwillelectronically
credityouraccountforyourshareofsuchproceeds.Ifyouhaveanyquestionsconcerningthemechanicsofhavingthe
FundsCommonStockheldinstreetname,pleasecontactyourbankorbrokeragefirm.
EffectiveTimeoftheSpinOff
YahoointendstoeffecttheSpinOffontheDistributionDate.
Listing,TradingandMarketoftheFundsCommonStock
Onthedateofthisinformationstatement,theFundisawhollyownedsubsidiaryofYahoo.Accordingly,thereisno
publicmarketfortheFundsCommonStock.TheFundhasappliedtolistitsCommonStockon[]underthesymbol[].
TheFundcannotpredictthepriceatwhichitsCommonStockwilltradeaftertheSpinOff.Infact,thecombinedtrading
prices,aftertheSpinOff,ofthesharesoftheFundsCommonStockthatYahoostockholderswillreceiveintheSpinOffand
therelatedsharesofYahooscommonstockheldattherecorddatemaynotequaltheregularwaytradingpriceofsuch
sharesofYahooscommonstockimmediatelypriortotheSpinOff.ThepriceatwhichtheFundsCommonStocktradesmay
fluctuatesignificantly,particularlyuntilanorderlypublicmarketdevelops.Sharesofclosedendinvestmentcompanieslike
theFundfrequentlytradeatadiscountfromnetassetvalue.TradingpricesoftheFundsCommonStockwillbedetermined
inthepublicmarketsandmaybeinfluencedbymanyfactors.SeethesectionentitledRiskFactorsRisksRelatedtothe
FundsCommonStockandtheSecuritiesMarketFollowingtheSpinOff.
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TradingPriortotheRecordDate
PriortotheRecordDate,YahooscommonstockwillcontinuetotradeontheNasdaqGlobalSelectMarketinthe
regularway.Therefore,ifyouownsharesofYahooscommonstockandsellthosesharespriortotheRecordDate,sothat
youarenottherecordholderofsuchsharesontheRecordDate,youwillalsobesellingyouropportunitytoreceivesharesof
theFundsCommonStockthatwouldhavebeendistributedtoyouintheSpinOffwithrespecttothesharesofYahoos
commonstockyousell.
TradinginYahoosCommonStockBetweentheRecordDateandDistributionDate
BeginningonorshortlybeforetheRecordDate,andcontinuinguptoandincludingthroughtheDistributionDate,
YahooexpectsthattherewillbetwomarketsinYahooscommonstock:aregularwaymarketandanexdistributionmarket.
SharesofYahooscommonstockthattradeontheregularwaymarketwilltradewithanentitlementtotheFunds
CommonStockdistributedpursuanttotheSpinOff.Therefore,ifyousellYahooscommonstockintheregular
waymarketuptoandincludingthroughtheDistributionDate,youwillbesellingyourrighttoreceivetheFunds
CommonStockintheSpinOff.
SharesofYahooscommonstockthattradeontheexdistributionmarketwilltradewithoutanentitlementtothe
FundsCommonStockdistributedpursuanttotheSpinOff.IfyouownYahooscommonstockontheRecordDate
andsellthosesharesontheexdistributionmarketuptoandincludingthroughtheDistributionDate,youwill
receivetheFundsCommonStockthatyouareentitledtoreceivepursuanttoyourownership,asoftheRecord
Date,ofYahooscommonstock.
OnthefirsttradingdayfollowingtheDistributionDate,Yahooscommonstockwilltradeontheregularwaymarket
withoutanentitlementtotheFundsCommonStock.
TradingintheFundsCommonStockBetweentheRecordDateandDistributionDate
Weanticipatethat,beginningonorshortlybeforetheRecordDate,tradingintheFundsCommonStockwillbeginon
awhenissuedbasisandwillcontinueuptoandincludingthroughtheDistributionDate.Thistypeoftradingreferstoasale
orpurchaseoftheFundsCommonStockmadeconditionallyonorbeforetheDistributionDate,becausetheFunds
CommonStockhasnotyetbeendistributed.IfyouownYahooscommonstockontheRecordDateyouwillbeentitledto
theFundsCommonStockdistributedpursuanttotheSpinOff.YoumaytradethisentitlementtosharesoftheFunds
CommonStock,withouttradingYahooscommonstockyouown,onthewhenissuedmarket.Onthefirsttradingday
followingtheDistributionDate,whenissuedtradingwithrespecttotheFundsCommonStockwillend,andtheFunds
CommonStockwillbeginregularwaytradingon[]underthesymbol[].
ConditionsPrecedenttotheSpinOff
TheSeparationandDistributionAgreementwillprovidethatthecompletionoftheSpinOffissubjecttothe
satisfactionofthefollowingconditions,eachofwhichmaybewaived,inwholeorinpart(totheextentpermittedby
applicablelaw),byYahooinitssoleandabsolutediscretion.
TheboardofdirectorsofYahooshallhaveapprovedtheSpinOffandtheothertransactionscontemplatedbythe
SeparationandDistributionAgreement,theTaxMattersAgreement,theTransferAgreement,andanyAncillary
Agreement(eachasdefinedbelow),includingthesettingoftheRecordDateandthedeclarationofthedividendof
theFundsCommonStock,whichapprovalmaybegivenorwithheldatitssoleandabsolutediscretion.
TheBoardofDirectorsoftheFund(theBoardortheBoardofDirectors,andeachmemberoftheBoarda
DirectorandtogethertheDirectors)shallhaveapprovedcompliancepoliciesandprocedures,andcausedthe
Fundtoenterintosuchagreements,andtakesuchotheractionsasreasonablynecessarytoensurethattheFundwill
notviolatetheUnitedStatesfederalsecuritieslaws.
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TheregistrationstatementundertheSecuritiesExchangeActof1934(the1934Act)relatingtotheFunds
CommonStockshallhavebecomeeffective,withnostoporderineffectwithrespectthereto,andwithno
proceedingsforsuchpurposependingorthreatenedbytheSEC,andthisInformationStatementshallhavebeen
providedtoholdersofYahooscommonstockasoftheRecordDate.
TheFundshallhaveregisteredasaninvestmentcompanyunderthe1940Act,suchregistrationshallnothavebeen
withdrawn,norevocationofregistrationshallhavebeenissued,andnoproceedingforsuchpurposeshallbe
pendingorthreatenedbytheSEC.
Allotheractionsandfilingsnecessaryorappropriateunderapplicablefederalorstatesecuritieslawsandstate
blueskylawsinconnectionwiththeSpinOffshallhavebeentakenormade.
YahooshallhavereceivedafavorableprivateletterrulingfromtheIRSregardingcertainU.S.federalincometax
aspectsoftheSpinOff(theIRSRuling),whichrulingshallremaininfullforceandeffect,andshallnothave
beenmodifiedoramendedinanyrespectadverselyaffectingtheU.S.federalincometaxtreatmentoftheSpinOff.
YahooshallhavereceivedanopinionfromSkadden,Arps,Slate,Meagher&FlomLLP(SkaddenArps)(which
opinionmayrelyupontheeffectivenessandcontinuedvalidityoftheIRSRuling),informandsubstance
reasonablyacceptabletoYahoo,substantiallytotheeffectthattheSpinOffwillqualifyasataxfreetransactionto
YahooanditsstockholdersunderSections355and368(a)(1)(D)oftheInternalRevenueCodeof1986,asamended
(theCode),andthat,forU.S.federalincometaxpurposes,(1)nogainorlosswillberecognizedbyYahooupon
thedistributionoftheFundsCommonStockintheSpinOff,and(2)nogainorlosswillberecognizedby,andno
amountwillbeincludedintheincomeof,holdersofYahooscommonstockuponthereceiptofsharesofthe
FundsCommonStockintheSpinOff(exceptwithrespecttothereceiptofcashinlieuoffractionalsharesofthe
FundsCommonStock).
Yahooshallhavereceivedanopinionfromanationallyrecognizedvaluationfirm,informandsubstance
acceptabletoYahoo,substantiallytotheeffectthat,amongotherthings,(1)Yahoohasadequatecapitalsurplus
undertheDelawareGeneralCorporationLawtoeffecttheSpinOff,and(2)aftergivingeffecttotheSpinOff,
Yahoowillbesolvent.
TheFundsCommonStocktobedistributedpursuanttotheSpinOffandrelatedtransactionsshallhavebeen
acceptedforlistingon[],subjecttoofficialnoticeofissuance.
ThetransactionscontemplatedbytheTransferAgreementshallhavebeencompleted.
TheTaxMattersAgreementandtheAncillaryAgreementsshallhavebeenexecutedanddeliveredbyeachofthe
partiestheretoandnopartytotheTaxMattersAgreementoranyoftheAncillaryAgreementsshallbeinmaterial
breachofanysuchagreement.
AllgovernmentalapprovalsandconsentsnecessarytoconsummatetheSpinOffandtheothertransactions
contemplatedbytheSeparationandDistributionAgreement,theTaxMattersAgreement,theTransferAgreement,
andanyAncillaryAgreementshallhavebeenobtainedandbeinfullforceandeffect.
Nopreliminaryorpermanentinjunctionorotherorder,decree,orrulingissuedbyagovernmentalauthority,andno
statute(asinterpretedthroughordersorrulesofanygovernmentalauthoritydulyauthorizedtoeffectuatethe
statute),rule,regulation,orexecutiveorderpromulgatedorenactedbyanygovernmentalauthorityshallbein
effectpreventingtheconsummationof,ormateriallylimitingthebenefitsof,theSpinOffandtheother
transactionscontemplatedbytheSeparationandDistributionAgreement,theTaxMattersAgreement,theTransfer
Agreement,andanyAncillaryAgreement.
Noothereventordevelopmentshallhaveoccurredorfailedtooccurthat,inthejudgmentoftheboardofdirectors
ofYahooinitssolediscretion,preventstheconsummationoftheSpinOffandtheothertransactionscontemplated
bytheSeparationandDistributionAgreement,theTaxMattersAgreement,
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theTransferAgreement,andanyAncillaryAgreement,ormakestheconsummationofsuchtransactions
inadvisable.
Yahoohasreservedtheright,initssoleandabsolutediscretion,toabandonormodifythetermsoftheSpinOffatany
timepriortotheDistributionDate,eveniftheconditionstotheSpinOffhavebeensatisfied.
AmountandSourceofFundsforExpensesRelatingtotheSpinOff
ItisexpectedthatYahoowillincuranaggregateof$[]millioninexpensesinconnectionwiththeSpinOff.Exceptas
otherwiseexpresslysetforthintheSeparationandDistributionAgreement,theTaxMattersAgreement,theTransfer
AgreementoranyAncillaryAgreement,orasotherwiseagreedbyYahooandtheFund,alloutofpocketfees,costsand
expensespaidorincurredinconnectionwiththeSpinOffandtheothertransactionscontemplatedbytheSeparationand
DistributionAgreementwillbebornebythecompanyincurringsuchfees,costsorexpenses.
TransferabilityofSharesoftheFundsCommonStockYouReceive
SharesoftheFundsCommonStockdistributedtoYahoostockholderswillbefreelytransferable,exceptforshares
receivedbypersonswhomaybedeemedtobeaffiliatesoftheFundundertheSecuritiesActof1933(the1933Act).
PersonswhomaybedeemedtobeaffiliatesoftheFundaftertheSpinOffgenerallyincludeindividualsorentitiesthat
control,arecontrolledby,orareundercommoncontrolwiththeFund,andmayincludeDirectorsandcertainofficersor
principalstockholdersoftheFund.AffiliatesoftheFundwillbepermittedtoselltheirsharesoftheFundsCommonStock
onlypursuanttoaneffectiveregistrationstatementunderthe1933Actoranexemptionfromtheregistrationrequirementsof
the1933Act,suchastheexemptionsaffordedbyRule144.
NoAppraisalRights
UndertheGeneralCorporationLawoftheStateofDelaware,underwhichYahooisincorporated,holdersofYahoos
commonstockwillnothaveappraisalrightsinconnectionwiththeSpinOff.
ReasonsforProvidingthisInformationStatement
ThisinformationstatementisbeingprovidedsolelytogiveinformationabouttheFundtoYahoostockholderswho
willreceivesharesoftheFundsCommonStockintheSpinOff.TheFundbelievesthattheinformationcontainedinthis
informationstatementisaccurateasofthedatesetforthonthecover.Changestotheinformationcontainedinthis
informationstatementmayoccurafterthatdate,andneithertheFundnorYahooundertaketoupdatetheinformationexcept
inthenormalcourseoftheirrespectivepublicdisclosureobligationsandpractices.
RelationshipBetweenYahooandtheFundFollowingtheSpinOff
FollowingtheSpinOff,theFundandYahoowilloperateindependentlyofeachother,andneitherwillhaveany
ownershipinterestintheotherasaresultoftheSpinOff.However,directors,officers,andemployeesofYahoowhoown
sharesofYahooscommonstockontheRecordDatewillreceivesharesoftheFundsCommonStockinconnectionwiththe
SpinOffinthesameratioasotherYahoostockholders.
InconnectionwiththeSpinOff,theFundandYahoo(orcertainoftheirrespectivesubsidiaries)areenteringinto
agreementsinordertogoverntherelationshipsbetweentheFundandYahoo(andcertainoftheirrespectivesubsidiaries)
aftertheSpinOff,andtoprovideforanorderlytransition.TheFundwillenterintoaseparationanddistributionagreement
(theSeparationandDistributionAgreement)withYahoowhichwillsetforth,amongotherthings,theprincipalcorporate
transactionsrequiredtoeffecttheSpinOff,theconditionsto
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theSpinOff,andongoingobligationsoftheFundandYahoofollowingcompletionoftheSpinOff.TheFundwillalso
enterintoataxmattersagreement(theTaxMattersAgreement)withYahoothatwillgovernYahoosandtheFunds
respectiverights,responsibilities,andobligationswithrespecttotaxesandtaxbenefits,thefilingoftaxreturns,thecontrol
ofaudits,andothertaxmatters.YahooandASBwillenterintoaTransferAgreement(theTransferAgreement)pursuantto
whichYahoowilltransfertoASBsubstantiallyalloftheassetsexclusivelyrelatingtothebusinesshistoricallyoperatedby
YahooasYahooSmallBusiness,subjecttocertainexcludedassetsidentifiedintheTransferAgreement,andASBwill
assumealloftheliabilitiesrelatingtosuchassetsandbusiness.TheFund,Yahooandcertainoftheirrespectivesubsidiaries
willenterintootheragreementsprimarilyintendedtofacilitatetheoperationsofASBfollowingtheSpinOff(theAncillary
Agreements).
SeparationandDistributionAgreement
TheSeparationandDistributionAgreementwillcontainthekeyprovisionsrelatingtotheseparationoftheassets,
liabilities,andbusinessesoftheFundfromYahoo(theSeparation).Italsowillsetforthcertainongoingobligationsof
YahooandtheFundthatwillcontinueafterthecompletionoftheSeparation.ForpurposesoftheSeparationand
DistributionAgreement:(1)theFundEntitiesmeanstheFundandeachofitssubsidiaries,and(2)theYahooEntities
meansYahooandeachofYahoossubsidiariesotherthantheFundEntities.
TransfersofAssetsandAssumptionofLiabilities.TheSeparationandDistributionAgreementwillallocate,tothe
extentnotpreviouslyaccomplishedpursuanttotheTransferAgreement,theassetsandliabilitiesofYahooandits
subsidiariesbetweentheFundEntitiesandtheYahooEntities,andwilldescribewhenandhowanyrequiredtransfersand
assumptionsofassetsandliabilitieswilloccur.
TerminationofIntercompanyAgreements.EffectiveasoftheDistributionDate,allagreementsbetweenanymemberof
theYahooEntities,ontheonehand,andanymemberoftheFundEntities,ontheotherhand,existingpriortotheSpinOff
(excludingtheSeparationandDistributionAgreement,anyagreementsidentifiedintheapplicablescheduletothe
SeparationandDistributionAgreement,theTaxMattersAgreement,theTransferAgreement,andtheAncillaryAgreements)
willbeterminated.
SettlementofIntercompanyAccounts.Anyreceivables,payables,orloansbetweenanymemberoftheYahooEntities,
ontheonehand,andanymemberoftheFundEntities,ontheotherhand,existingpriortotheSpinOffwillbesatisfied
and/orsettledincashorotherwisecanceled.
TheSpinOff.TheSeparationandDistributionAgreementalsowillgoverntherightsandobligationsofYahooandthe
FundregardingtheSpinOff.OntheDistributionDate,Yahoowillcausethedistributionagenttodistribute,onaprorata
basis,alloftheissuedandoutstandingsharesoftheFundsCommonStocktoYahoostockholderswhoheldYahoos
commonstockasoftheRecordDate.
AccesstoInformation.TheSeparationandDistributionAgreementwillprovidethatfor18monthsfollowingthe
DistributionDate,YahooandtheFundwillaffordeachotheraccesstocertaininformation,subjecttoappropriaterestrictions
forclassified,privileged,orconfidentialinformation,andtopreservethecompletenessandintegrityoftheinformation.In
addition,for18monthsaftertheDistributionDate,eachofYahooandtheFundwillusecommerciallyreasonableeffortsto
cooperateandconsultwitheachotherinconnectionwithanylegal,administrative,orotherproceeding,investigation,
informationrequest,orexaminationinwhichtheotherpartymaybecomeinvolved,asmaybereasonablyrequired.
Releases,AllocationofLiabilities,andIndemnification.TheSeparationandDistributionAgreementwillprovidefora
fullandcompletereleaseanddischargeofallliabilitiesexistingorarisingfromanyactsoreventsoccurringorfailingto
occurorallegedtohaveoccurredortohavefailedtooccuroranyconditionsexistingorallegedtohaveexistedatorbefore
theSeparation,betweenoramonganymemberoftheYahooEntitiesandanymemberoftheFundEntities,exceptas
expresslysetforthintheSeparationandDistributionAgreement.
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TheSeparationandDistributionAgreementwillprovidethat:
(1) theFundwillindemnifyeachmemberoftheYahooEntities,eachaffiliateofsuchmember,andeachoftheir
respectivecurrentandformerstockholders,members,directors,officers,managers,agents,andemployeesagainst
anyandalllosses(otherthanlossesthatareexpresslycoveredbytheTaxMattersAgreement)relatingto:
a)
liabilitiesarisingoutoftheFundsbusinesses,and
b)
anybreachbyanymemberoftheFundEntitiesofanyprovisionoftheSeparationandDistribution
Agreement,theTransferAgreement,oranyAncillaryAgreementand
(2) YahoowillindemnifyeachmemberoftheFundEntities,eachaffiliateofsuchmember,andeachoftheirrespective
currentandformerstockholders,members,directors,officers,managers,agents,andemployeesagainstanyandall
losses(otherthanlossesthatareexpresslycoveredbytheTaxMattersAgreement)relatingto:
a)
liabilitiesarisingoutofYahoosbusinesses,and
b)
anybreachbyanymemberoftheYahooEntitiesofanyprovisionoftheSeparationandDistribution
Agreement,theTransferAgreement,oranyAncillaryAgreement.
TheSeparationandDistributionAgreementwillprovideYahoowiththerighttocontrolthelitigationandsettlement
ofcertainlitigationmattersthatwereassertedagainstamemberofeachoftheYahooEntitiesandtheFundEntities,orthat
relatetocertainaspectsofASBsbusiness,andthatwereassertedbeforetheSeparation,aswellascertainotherlitigation
mattersthatwereassertedbefore,orareassertedafter,theSeparation.TheSeparationandDistributionAgreementalsowill
providefortheallocationofliabilitiesandexpensesbetweenYahooandtheFundwithrespecttothesematters.Italsowill
establishprocedureswithrespecttoclaimssubjecttoindemnification,insuranceclaims,andrelatedmatters.
IndemnificationwithrespecttotaxeswillbegovernedbytheTaxMattersAgreement.
Expenses.ExceptasotherwiseexpresslysetforthintheSeparationandDistributionAgreement,theTaxMatters
Agreement,theTransferAgreementoranyAncillaryAgreement,orasotherwiseagreedbyYahooandtheFund,alloutof
pocketfees,costsandexpensespaidorincurredinconnectionwiththeSpinOffandtheothertransactionscontemplatedby
theSeparationandDistributionAgreementwillbebornebythecompanyincurringsuchfees,costsorexpenses.
TaxMattersAgreement
TheTaxMattersAgreementwillgovernYahoosandtheFundsrespectiverights,responsibilities,andobligations
withrespecttotaxesandtaxbenefits,thepreparationandfilingoftaxreturns,thecontroloftaxcontestsandaudits,and
othertaxmatters.ForpurposesoftheTaxMattersAgreement:(1)theFundGroupmeanstheFundandeachofits
subsidiaries,and(2)theYahooGroupmeansYahooandeachofYahoossubsidiariesotherthanthemembersoftheFund
Group.Asusedinthissummary,thetermtaxesmeansU.S.federal,stateandlocaltaxes,andforeigntaxes,togetherwith
anyinterest,penalties,additionstotax,oradditionalamountsinrespectofsuchtaxes,andthetermTaxrelatedlosses
generallyreferstolossesarisingfromthefailureoftheSpinOffandrelatedrestructuringtransactionstobetaxfreetoYahoo,
theFund,theirrespectivesubsidiaries,andYahoostockholders.
UndertheTaxMattersAgreement,exceptasdescribedbelow,Yahoowillbeallocated(1)alltaxesattributableto
membersoftheYahooGroup,andalltaxesattributabletomembersoftheFundGroupforapreSpinOfftaxperiod(orthe
preSpinOffportionofastraddletaxperiod),thatarereportedonanytaxreturnthatincludesoneormoremembersofthe
YahooGroupandoneormoremembersoftheFundGroup,(2)alltaxesattributabletomembersoftheYahooGroupthatare
reportedonanytaxreturnthatincludesonlymembersofthe
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YahooGroup,and(3)alltaxesattributabletoAabacoHongKongforapreSpinOfftaxperiod(orthepreSpinOffportion
ofastraddletaxperiod).Generally,exceptasdescribedbelow,theFundwillbeallocated(1)alltaxesattributableto
membersoftheFundGroupforapostSpinOfftaxperiod(orthepostSpinOffportionofastraddletaxperiod)thatare
reportedonanytaxreturnthatincludesoneormoremembersoftheYahooGroupandoneormoremembersoftheFund
Group,and(2)alltaxesattributabletomembersoftheFundGroupthatarereportedonanytaxreturnthatincludesonly
membersoftheFundGroup(otherthantaxesattributabletoAabacoHongKongforapreSpinOfftaxperiod(orthepre
SpinOffportionofastraddletaxperiod)).
Notwithstandingtheforegoing,thefollowingspecialruleswillapply:
Ingeneral,exceptasotherwisedescribedbelow,theFundwillbeallocatedanytaxesandTaxrelatedlosses
resultingfromtheSpinOffandrelatedrestructuringtransactions.
Withoutlimitingthegeneralityoftheforegoing,theFundwillbeallocatedanytaxesandTaxrelatedlosses
resultingfromtheSpinOffandrelatedrestructuringtransactionsthat(1)resultprimarilyfrom,individuallyorin
theaggregate,anybreachbytheFundofanyofitsrepresentationsandcovenantsdescribedbelow,or(2)result
fromtheapplicationofSection355(e)oftheCodetotheSpinOffasaresultofthetreatmentoftheSpinOffaspart
ofaplan(orseriesofrelatedtransactions)pursuanttowhichoneormorepersonsacquire,directlyorindirectly,
stockrepresentinga50percentorgreaterinterestinthestockoftheFund.Inaddition,theFundwillbeallocated
anytaxesandTaxrelatedlossesthatresultfromtheapplicationofChinastaxrulesonindirectsharetransfers,
Bulletin7(asdefinedbelow),totheSpinOffandrelatedrestructuringtransactions.
YahoowillbeallocatedanytaxesandTaxrelatedlossesresultingfromtheSpinOffandrelatedrestructuring
transactionsthat(1)resultprimarilyfrom,individuallyorintheaggregate,anybreachbyYahooofanyofits
representationsandcovenantsdescribedbelow,or(2)resultfromtheapplicationofSection355(e)oftheCodeto
theSpinOffasaresultofthetreatmentoftheSpinOffaspartofaplan(orseriesofrelatedtransactions)pursuantto
whichoneormorepersonsacquire,directlyorindirectly,stockrepresentinga50percentorgreaterinterestinthe
stockofYahoo.
YahooandtheFundwilleachbeallocated50percentofanytransfertaxesarisingfromtheSpinOffandrelated
restructuringtransactions.
YahoowillberesponsibleforpreparingandfilingalltaxreturnsthatincludeoneormoremembersoftheYahooGroup
plusoneormoremembersoftheFundGroup.Inaddition,eachpartywillberesponsibleforpreparingandfilingtaxreturns
thatincludeonlymembersofsuchpartysgroup.OnanytaxreturnforwhichtheFundisresponsible,theFundandthe
membersoftheFundGroupwillberequiredtoallocatetaxitemsbetweensuchtaxreturnandanyrelatedtaxreturnfor
whichYahooisresponsiblethatisfiledwithrespecttothesametaxyearinamannerthatisconsistentwiththereportingof
suchtaxitemsonthetaxreturnpreparedbyYahoo.Thepartieswillberequiredtofilealltaxreturnsinamannerconsistent
withtheIRSRulingandthetaxopiniondeliveredtoYahooinconnectionwiththeSpinOff.Further,undertheTaxMatters
Agreement,amendedtaxreturnswithrespecttotheFundGroupmayonlybefiledbythepartyresponsibleforfilingthe
originaltaxreturn,andtheconsentofYahoowillberequiredwithrespecttothefilingofanyamendedtaxreturnbythe
FundthatislikelytoincreasethetaxesorindemnityobligationsofYahoobymorethanademinimisamount(unlessthe
Fundotherwiseagreestopaysuchincrementaltaxesorobligations).
Generally,eachpartywillbeentitledtoanyrefunds,credits,oroffsetsoftaxesallocatedtoandpaidbysuchparty
pursuanttotheTaxMattersAgreement.IftheFundrequestsinwritingthatYahooobtainarefund,credit,oroffsetoftaxes
withrespecttothecarrybackofanytaxattributeoftheFundorthemembersoftheFundGrouptoapreSpinOfftaxperiod,
Yahoowillberequiredtotakereasonablemeasurestoobtainarefund,credit,oroffsetoftaxeswithrespecttosuch
carrybackhowever,theFundwillonlybeentitledtosuchrefund,credit,oroffsetoftaxesattributable(onalastdollar
basis)tosuchcarrybackandonlytotheextentsuchrefund,credit,oroffsetisreceivedbyYahoo,andsuchamountwillbe
netofanyoutofpocketcosts,expenses,orincreaseintaxesincurredbyYahoowithrespecttothereceiptoraccrualthereof.
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EachofYahooandtheFundgenerallywillhavetheauthoritytorespondtoandcontrolalltaxproceedings,including
taxaudits,involvinganytaxesreportedontaxreturnsforwhichitisresponsibleundertheTaxMattersAgreement,andthe
othercompanywillhavetherighttoparticipate,atitsowncostandexpense,insuchtaxproceedingstotheextentsuch
proceedingscouldresultinataxliabilityforwhichsuchothercompanymaybeliableundertheTaxMattersAgreement.
Notwithstandingtheforegoing,YahooandtheFundwillhavetheauthoritytojointlycontrolallproceedings,includingtax
proceedings,involvinganytaxesorTaxrelatedlossesarisingfromtheSpinOfforrelatedrestructuringtransactions.TheTax
MattersAgreementwillalsoprovidefortheexchangeofinformationfortaxmatters(andconfidentialityprotectionsrelated
tosuchexchangedinformation),theretentionofrecordsthatmayaffectthetaxliabilitiesoftheparties,andcooperation
betweenYahooandtheFundwithrespecttotaxmatters.
ThepartieswillbesubjecttospecifiedrestrictivecovenantswithrespecttotheSpinOffandrelatedrestructuring
transactions.Ingeneral,Yahoo,theFund,andcertainoftheirrespectivesubsidiarieswillbeprohibitedfromtaking,or
failingtotake,anyactionfollowingtheSpinOffifsuchactionorfailuretoact:
wouldbeinconsistentwithorpreventcertainrestructuringtransactionsrelatedtotheSpinOfffromqualifyingfor
taxfreetreatmenttoYahooanditssubsidiariesforU.S.federalincometaxpurposes
wouldbeinconsistentwithorpreventtheSpinOfffromqualifyingasataxfreetransactionunderSections355and
368(a)(1)(D)oftheCodetoYahoo,itssubsidiaries,andtheYahoostockholders(exceptwithrespecttothe
distributionofcashinlieuoffractionalsharesoftheFundsCommonStock)or
wouldbeinconsistentwith,orotherwisecauseanypersontobeinbreachof,anyrepresentation,covenant,or
materialstatementmadeinconnectionwiththeIRSRulingorthetaxopiniondeliveredtoYahooinconnection
withtheSpinOff.
Further,eachpartywillrepresentthattherepresentationsandmaterialstatementsmadeinconnectionwiththeIRS
RulingorthetaxopiniondeliveredtoYahooinconnectionwiththeSpinOff,totheextentrelatedtosuchpartyandits
subsidiaries,aretrue,correct,andcompleteinallmaterialrespects.Inaddition,thepartieswillbeprohibitedfromtakingany
positionfortaxpurposesthatisinconsistentwiththetaxopiniondeliveredtoYahooinconnectionwiththeSpinOff.
Thepartieswillindemnifyeachother(andcertainrelatedpersons)fortaxesandlossesallocatedtothemundertheTax
MattersAgreement,andfortaxesandlossesarisingfromabreachoftheirrespectivecovenantsandobligationsundertheTax
MattersAgreement.
TransferAgreement
YahooandASBwillenterintoaTransferAgreementpursuanttowhichYahoowilltransfertoASBsubstantiallyallof
theassetsexclusivelyrelatingtothebusinesshistoricallyoperatedbyYahooasYahooSmallBusiness,subjecttocertain
excludedassetsidentifiedintheTransferAgreement.
Inaddition,ASBwillassumeallliabilitiesarisingfrom,relatedto,imposedunderorpursuanttotheacquiredassetsor
businesshistoricallyoperatedasYahooSmallBusinesswhetherarisingfromorrelatedtoanyperiodpriorto,on,orafterthe
closingofthetransfers,subjecttospecifiedretainedliabilitiesidentifiedintheTransferAgreement.
TheTransferAgreementwillprovideforASBtoemploythoseemployeesofYahoowhoseemploymentprimarily
relatestothebusinesshistoricallyoperatedasYahooSmallBusiness,andwillprovideforothermattersrelatingtothe
employmentbyASBofsuchemployees.
TheclosingofthetransferswillbeheldatatimeanddatedeterminedbyYahooinitssoleandabsolutediscretion.
Conditionstotheclosingofthetransferswillinclude:(1)receiptofallgovernmentalapprovals,and
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(2)absenceoflaws,orders,oractionsthat,orthatseekto,enjoinorotherwiseprohibittheconsummationofthetransfers.
TheseconditionsmaybewaivedbyYahooinitssoleandabsolutediscretion.
AncillaryAgreements
TheAncillaryAgreementsthatwillbeenteredintobytheFund,Yahooandcertainoftheirrespectivesubsidiarieswill
include:
TechnologyTransitionServicesAgreement
G&ATransitionServicesAgreement
IntellectualPropertyLicenseAgreement
MailServicesAgreement
TheAncillaryAgreementswillprovidefor(1)theprovisionofcertaintechnologyrelatedservices,onatransitional
basis(2)theprovisionofcertaingeneralandadministrativeservices,onatransitionalbasis(3)certainnonexclusive
licensesfortheuseofcertainintellectualpropertyand(4)ASBscontinuedprovisionofYahoosbusinessemailplatformto
ASBscustomers.
InadditiontotheseAncillaryAgreements,ASBwilllicensecertaincontenttoYahoo,andASBwillenterintoan
advertisingreselleragreementwithYahoo.
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INVESTMENTOBJECTIVEANDPOLICIES
InvestmentObjective
TheFundsinvestmentobjectiveistoseekreturnsforitsstockholdersprimarilythroughowningtheAlibabaShares.
BasedontheclosingmarketpriceofAlibabaADSontheNewYorkStockExchangeon[],2015,theFundanticipatesthat
thevalueofitsAlibabaShareswillexceed95percentofthevalueofitstotalassetsimmediatelyaftertheSpinOffis
completed.TheFundsinvestmentobjectiveisnotfundamentalandmaybechangedwithoutstockholderapproval,
althoughtheFundwillprovidestockholderswithatleast60daysnoticebeforeimplementinganychangetoitsinvestment
objective.TherecanbenoassurancethattheFundwillachieveitsinvestmentobjective.
InvestmentPolicies
TheFundwillseektoachieveitsinvestmentobjectivebycontinuingtoinvestatleast80percentofitstotalassetsin
AlibabaSharesundernormalmarketconditions.Thispolicyisnotfundamentalandmaybechangedwithoutstockholder
approval,althoughtheFundwillprovideitsstockholderswithatleast60daysnoticebeforeimplementinganychangeto
thisinvestmentpolicy.TheFundhasnocurrentintentionofinvestinglessthan80percentofitstotalassetsintheAlibaba
Shares.BecausetheFundsinvestmentpolicyistoinvestatleast80percentofitstotalassetsintheAlibabaShares,an
investmentintheFundisparticularlysubjecttorisksrelatingtoAlibaba.SeeRiskFactors.
TheFundsinvestmentintheAlibabaShareswillcauseittobeanondiversifiedinvestmentcompanyandto
concentrateitsinvestmentsinsecuritiesissuedbycompaniesintheonlineservicesandecommerceindustry.Asaresult,the
1940ActrequirestheFundtoobtainstockholderapprovaltoinvestlessthan25percentofitstotalassetsincompaniesin
theonlineservicesandecommerceindustry.TheFundhasnocurrentintentionofinvestinglessthan25percentofitstotal
assetsincompaniesintheonlineservicesandecommerceindustry.
Unlikemostregisteredinvestmentcompanies,theFundisnoteligibletobetreatedasaregulatedinvestment
companyundertheCode,asaresultoftheFundsconcentratedownershipofAlibabaShares.Instead,theFundistreatedas
aregularcorporation,oraCcorporation,forU.S.federalincometaxpurposesand,unlikemostinvestmentcompanies,is
subjecttocorporateincometaxtotheextenttheFundrecognizestaxableincome.Asaresult,theFundwilltakeinto
accountthetaxconsequencesofanychangetoitsinvestmentportfolio.
CompliancewithanypercentagelimitationsintheFundsinvestmentpolicieswillbedeterminedatthetimeof
investment.TheFundwillnotberequiredtopurchaseorsellsecuritiestocomplywithsuchpercentagelimitationsdueto
changesinthevalueofitsinvestments.
BorrowedMoney
TheFundintendstoenterintotheCreditFacilitypursuanttowhichtheFundmayborrowupto$[]million.TheFund
anticipatesthatitwillinitiallyborrow$[]millionpursuanttotheCreditFacilityatoraboutthetimeofthecompletionof
theSpinOff.ThepurposeoftheinitialborrowingistoprovideworkingcapitalduringtheFundsfirstyearofoperations.
TheFundcurrentlyintendstoborrowmoneyonlyforworkingcapitalandtorepurchaseitsCommonStockifandtothe
extentauthorizedbyitsBoardofDirectorsfromtimetotime.TheFunddoesnotcurrentlyintendtousetheproceedsofany
borrowingtopurchaseadditionalinvestmentsecuritiesortopaydividendstostockholders,thoughitretainstherighttodo
so.TheFundreservestherighttoborrowmoneytotheextentpermittedbythe1940Act.Formoreinformationregardingthe
Fundsborrowings,pleaseseeBorrowingsandPreferredStockBorrowings.
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LoansofPortfolioSecurities
TheFundmaylenditsAlibabaSharestogenerateincome.Suchincomemaybeusedforworkingcapitalpurposesorto
repurchasetheFundsCommonStockifandtotheextentauthorizedbyitsBoardofDirectorsfromtimetotime.TheFund
hasnocurrentintentionoflendingitsAlibabaSharestogenerateincometobeusedtopurchaseadditionalinvestment
securitiesorpaydividendstostockholders,thoughitretainstherighttodoso.
Consistentwithapplicableregulatoryrequirements,theFundmaylendAlibabaSharestobrokerdealersorfinancial
institutions,providedthatsuchloansarecallableatanytimebytheFund(subjecttonoticeprovisionsdescribedbelow),and
areatalltimessecuredbycashorcashequivalents,whichareearmarkedorsegregatedpursuanttoapplicableregulations,
andthatareatleastequaltothemarketvalue,determineddaily,oftheloanedAlibabaShares.AnyloansoftheAlibaba
SharesbytheFundwillbecollateralizedinaccordancewithapplicableregulatoryrequirementsandnoloanwillcausethe
valueofallloanedAlibabaSharestoexceedonethirdofthevalueoftheFundstotalassets.
AloanofAlibabaSharesgenerallymaybeterminatedbytheborrowerononebusinessdaysnotice,orbytheFundon
fivebusinessdaysnotice.IftheborrowerfailstodelivertheloanedAlibabaShareswithinfivedaysafterreceiptofnotice,
theFundcouldusethecollateraltopurchasereplacementAlibabaShareswhileholdingtheborrowerliableforanyexcessof
replacementcostovercollateral.Aswithanyextensionsofcredit,therearerisksofdelayinrecovery,andinsomecaseseven
lossofrightsinthecollateralshouldtheborroweroftheAlibabaSharesfailfinancially.However,loansofAlibabaShares
willbemadeonlytofirmsdeemedbytheFundsmanagementtobecreditworthyandwhentheincomethatcanbeearned
fromsuchloansjustifiestheattendantrisks.TheBoardofDirectorswilloverseethecreditworthinessofthecontracting
partiesonanongoingbasis.
Uponterminationoftheloan,theborrowerisrequiredtoreturntheAlibabaSharestotheFund.Anygainorlossinthe
marketpriceduringtheloanperiodwouldinuretotheFund.Ifthecounterpartytotheloanpetitionsforbankruptcyor
becomessubjecttotheUnitedStatesBankruptcyCode,thelawregardingtherightsoftheFundisunsettled.Asaresult,
underextremecircumstances,theremaybearestrictionontheFundsabilitytosellthecollateral,andtheFundwouldsuffer
aloss.WhenvotingorconsentrightsthataccompanyloanedAlibabaSharespasstotheborrower,theFundwillfollowthe
policyofcallingtheloanedsecurities,tobedeliveredwithinonedayafternotice,topermittheexerciseofsuchrightsifthe
mattersinvolvedwouldhaveamaterialeffectontheFundsinvestmentintheAlibabaShares.TheFundwillpayreasonable
finders,administrative,andcustodialfeesinconnectionwithaloanofitsAlibabaShares.
TheAlibabaOrdinarySharesarenotlistedfortradingontheNewYorkStockExchangeoranyothernationalsecurities
exchange.InordertolendAlibabaOrdinarySharestoinvestors,theFundmustfirstdepositthemwiththeDepositaryin
exchangeforAlibabaADSandthenlendtheAlibabaADS.
HedgingandDerivativeInstruments
TheFundhasadoptedapolicyofnotseekingtohedgerisksrelatedtoitsinvestmentintheAlibabaSharesbecausethe
FundseeksreturnsbasedonitsinvestmentintheAlibabaShares.Asaresult,theFundcurrentlydoesnotanticipate
investinginderivativeinstrumentsorusingthemforhedgingpurposes,althoughtheFundretainstherighttodoso.
FundamentalInvestmentRestrictions
TheFundhasadoptedrestrictionsandpoliciesrelatingtotheinvestmentofitsassetsanditsactivities.Asrequiredby
the1940Act,certainoftherestrictionsarefundamentalandmaynotbechangedwithouttheapprovalofa1940Act
MajorityoftheFundsoutstandingvotingsecurities,includingtheapprovalofa1940ActMajorityoftheFunds
outstandingsharesofpreferredstock,ifany,votingasaseparateclass.A1940Act
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Majoritymeansthelesserof(a)67percentormoreoftheFundsoutstandingvotingsecuritiespresentatastockholders
meeting,iftheholdersofmorethan50percentoftheFundsoutstandingvotingsecuritiesarepresentorrepresentedby
proxyatthemeeting,or(b)morethan50percentoftheFundsoutstandingvotingsecurities.Underthesefundamental
investmentrestrictions,theFundmaynot:
1.
Concentrateitsinvestmentsinaparticularindustry,asthattermisusedinthe1940Act,exceptthatFundwill
concentrateitsinvestmentsincompaniesoperatingintheonlineservicesandecommerceindustry.
2.
Borrowmoney,exceptaspermittedunderthe1940Act.
3.
Issueseniorsecuritiestotheextentsuchissuancewouldviolatethe1940Act.
4.
Purchaseorholdrealestate,otherthanforuseintheoperationsofeithertheFundorASB.
5.
Underwritesecuritiesissuedbyothers,excepttotheextentthatthesaleofportfoliosecurities(includingwithout
limitationtheAlibabaShares)bytheFundmaybedeemedtobeanunderwritingorasotherwisepermittedby
applicablelaw.
6.
Purchaseorsellcommoditiesorcommoditycontracts,exceptaspermittedbythe1940Act.
7.
Makeloanstotheextentprohibitedbythe1940Act.
ThefollowingexplanationsoftheFundsfundamentalinvestmentrestrictionsarenotconsideredtobepartofthe
Fundsfundamentalinvestmentrestrictions,andaresubjecttochangewithoutstockholderapproval.
Withrespecttothefundamentalpolicyrelatingtoconcentrationsetforthin(1)above,the1940Actdoesnotdefine
whatconstitutesconcentrationinanindustry.TheSECstaffhastakenthepositionthatinvestmentof25percentormore
ofaninvestmentcompanystotalassetsinoneormoreissuersconductingtheirprincipalactivitiesinthesameindustryor
groupofindustriesconstitutesconcentration.Itispossiblethatinterpretationsofconcentrationcouldchangeinthefuture.
Thepolicyin(1)abovewillbeinterpretedtorefertoconcentrationasthattermmaybeinterpretedfromtimetotime.The
policyalsowillbeinterpretedtopermitinvestmentwithoutlimitinthefollowing,ifandtotheextenttheFundwereto
investmorethan25percentofitstotalassetsinanyofthefollowinginstruments:securitiesoftheU.S.Governmentandits
agenciesorinstrumentalitiestaxexemptsecuritiesofstate,territory,possession,ormunicipalgovernmentsandtheir
authorities,agencies,instrumentalities,orpoliticalsubdivisionsandrepurchaseagreementscollateralizedbyanysuch
obligations.Accordingly,issuersoftheforegoingsecuritieswillnotbeconsideredtobemembersofanyindustry.Therealso
willbenolimitoninvestmentinissuersdomiciledinasinglejurisdictionorcountry.Financecompanieswillbeconsidered
tobeintheindustriesoftheirparentsiftheiractivitiesareprimarilyrelatedtofinancingtheactivitiesoftheparents.Each
foreigngovernmentwillbeconsideredtobeamemberofaseparateindustry.Thepolicyalsowillbeinterpretedtogive
broadauthoritytotheFundastohowtoclassifyissuerswithinoramongindustries.
Withrespecttothefundamentalpolicyrelatingtoborrowingmoneysetforthin(2)above,the1940Actpermitsthe
FundtoborrowmoneyinamountsofuptoonethirdoftheFundstotalassetsforanypurpose,andtoborrowuptofive
percentoftheFundstotalassetsfortemporarypurposes.TheFundstotalassetsincludetheamountsbeingborrowedand
retainedbytheFundincash,securities,orotherproperty.Tolimittherisksattendanttoborrowing,the1940Actrequiresthe
Fundtomaintainatalltimesanassetcoverageofatleast300percentoftheamountofitsborrowingsandofatleast200
percentoftheliquidationpreferenceofanypreferredstockthatitissues.ImmediatelyaftertheSpinOff,theFundwillhave
nosharesofpreferredstockoutstanding,andtheFundhasnocurrentintentiontoissuepreferredstock.Assetcoveragemeans
theratiothatthevalueoftheFundstotalassets(includingamountsborrowed),minusliabilitiesotherthanborrowings,bears
totheaggregateamountofallborrowings.Borrowingmoneytoincreaseportfolioholdingsisknownasleveraging.
Certaintradingpracticesandinvestments,suchasreverserepurchaseagreements,maybeconsideredtobeborrowingsor
involveleverage,andthusaresubjecttothe1940Actrestrictions.InaccordancewithSECstaff
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guidanceandinterpretations,whentheFundengagesinsuchtransactions,theFund,insteadofmaintainingassetcoverageof
atleast300percent,maysegregateorearmarkliquidassets,orenterintoanoffsettingposition,inanamountatleastequalto
theFundsexposure,onamarktomarketbasis,tothetransaction(ascalculatedpursuanttorequirementsoftheSEC).The
policyin(2)abovewillbeinterpretedtopermittheFundtoengageintradingpracticesandinvestmentsthatmaybe
consideredtobeborrowingortoinvolveleveragetotheextentpermittedbythe1940Act,andtopermittheFundto
segregateorearmarkliquidassetsorenterintooffsettingpositionsinaccordancewithSECstaffguidanceand
interpretations.Shorttermcreditsnecessaryforthesettlementofsecuritiestransactionsandarrangementswithrespectto
securitieslendingwillnotbeconsideredtobeborrowingsunderthepolicy.Practicesandinvestmentsthatmayinvolve
leveragebutarenotconsideredtobeborrowingsarenotsubjecttothepolicy.AlthoughtheFundreservestherightto
borrowmoneytotheextentpermittedbythe1940Act,itcurrentlyintendstoborrowmoneyonlyforworkingcapitalandto
repurchaseitsCommonStockifandtotheextentauthorizedbyitsBoardofDirectorsfromtimetotime.TheFunddoesnot
currentlyintendtousetheproceedsofanyborrowingtopurchaseadditionalinvestmentsecuritiesortopaydividendsto
stockholders,thoughitretainstherighttodoso.
Withrespecttothefundamentalpolicyrelatingtounderwritingsetforthin(5)above,the1940Actdoesnotprohibit
theFundfromengagingintheunderwritingbusinessorfromunderwritingthesecuritiesofotherissuers.Afundengagingin
transactionsinvolvingtheacquisitionordispositionofportfoliosecuritiesmaybeconsideredtobeanunderwriterunderthe
1933Act.Althoughitisnotbelievedthattheapplicationofthe1933ActprovisionsdescribedabovewouldcausetheFund
tobeengagedinthebusinessofunderwriting,thepolicyin(5)abovewillbeinterpretednottopreventtheFundfrom
engagingintransactionsinvolvingtheacquisitionordispositionofportfoliosecurities,regardlessofwhethertheFundmay
beconsideredtobeanunderwriterunderthe1933Actorisotherwiseengagedintheunderwritingbusinesstotheextent
permittedbyapplicablelaw.
Withrespecttothefundamentalpolicyrelatingtolendingsetforthin(7)above,the1940Actdoesnotprohibitthe
Fundfrommakingloans(includinglendingitssecurities)however,SECstaffinterpretationscurrentlyprohibitregistered
investmentcompaniesfromlendingmorethanonethirdoftheirtotalassets(includinglendingtheirsecurities),except
throughthepurchaseofdebtobligationsortheuseofrepurchaseagreements.Inaddition,collateralarrangementswith
respecttooptions,forwardcurrency,futurestransactions,andotherderivativeinstruments(asapplicable),aswellasdelays
inthesettlementofsecuritiestransactions,iftheFundwereevertousesuchderivativeinstruments,wouldnotbeconsidered
loans.TheFundcurrentlydoesnotintendtomakeloans,exceptthatitmaylenditsAlibabaSharestogenerateincome(a)for
workingcapitalor(b)torepurchasetheFundsCommonStockifandtotheextentauthorizedbyitsBoardofDirectorsfrom
timetotime.
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BORROWINGSANDPREFERREDSTOCK
Borrowings
TheFundintendstoenterintotheCreditFacilitypursuanttowhichtheFundmayborrowupto$[]million.TheFund
anticipatesthatitwillinitiallyborrow$[]millionpursuanttotheCreditFacilityatoraboutthetimeofthecompletionof
theSpinOff.ThepurposeoftheinitialborrowingistoprovideworkingcapitalduringtheFundsfirstyearofoperations.
TheFundcurrentlyintendstoborrowmoneyonlyforworkingcapitalandtorepurchaseitsCommonStockifandtothe
extentauthorizedbyitsBoardofDirectorsfromtimetotime.TheFunddoesnotcurrentlyintendtousetheproceedsofany
borrowingtopurchaseadditionalinvestmentsecuritiesortopaydividendstostockholders,thoughitretainstherighttodo
so.TheFundreservestherighttoborrowmoneytotheextentpermittedbythe1940Act.
TheFundintendstoborrowmoneyforworkingcapitalandtorepurchaseitsCommonStockifandtotheextent
authorizedbyitsBoardofDirectorsfromtimetotime.TheFunddoesnotcurrentlyintendtoinvestborrowedmoneytoseek
toincreasereturnstoitsinvestors.TheFundcurrentlyhasnointentiontoborrowmorethan$[](orapproximately[]
percentofitstotalassetsimmediatelyaftertheSpinOff)duringitsfirstyearofoperations,althoughtheFundreservesthe
righttoborrowuptoonethirdofitstotalassetsaspermittedbythe1940Act.
TheFundmayborrowmoneythroughtheissuanceofseniorsecuritiesrepresentingindebtedness,includingthrough
borrowingfromfinancialinstitutionsortheissuanceofdebtsecurities,includingnotesorcommercialpaper.Theamountand
typeofborrowingsbytheFundmustbeapprovedbyitsBoard.
Underthe1940Act,theFundgenerallyisnotpermittedtoborrowmoneyunless,immediatelyafterborrowingthe
money,thevalueoftheFundstotalassetslessliabilitiesotherthantheprincipalamountrepresentedbytheborrowingisat
least300percentoftheprincipalamountoftheborrowing.Inaddition,theFundisnotpermittedtodeclareanycash
dividendorotherdistributiononitsCommonStockunless,atthetimeofsuchdeclaration,thevalueoftheFundstotal
assetslessliabilitiesotherthantheprincipalamountofitsborrowingsisatleast300percentofsuchprincipalamountafter
deductingtheamountofsuchdividendorotherdistribution.Privateborrowingsfrombanksarenotsubjecttothese1940
Actlimitationsondividendsandotherdistributions.
ThetermsofanyborrowingbytheFundmayrequiretheFundtopayafeetomaintainalineofcredit,suchasa
commitmentfee,ortomaintainminimumaveragebalanceswithalender.Anysuchrequirementswouldincreasethecostof
suchborrowingoverthestatedinterestrate.Suchlenderswouldhavetherighttoreceiveinterestonandrepaymentof
principalofanysuchborrowings,whichrightwillbeseniortothoseoftheFundsCommonStock.Anysuchborrowingmay
containprovisionslimitingcertainactivitiesoftheFund,includingthepaymentofdividendstoholdersofitsCommon
Stockincertaincircumstances.
SometypesofborrowingsmaysubjecttheFundtocovenantsincreditagreementsrelatingtoassetcoverageand
portfoliocompositionrequirements.ItisnotanticipatedthatthesecovenantswillimpedetheabilityoftheFundtoachieve
itsinvestmentobjectiveinaccordancewithitsinvestmentpolicies.
The1940ActgrantsholdersofdebtsecuritiesissuedbytheFund,undercertaincircumstances,certainvotingrightsin
theeventofdefaultinthepaymentofinterestorrepaymentofprincipalrelatedtotheborrowing.Failuretomaintaincertain
assetcoveragerequirementscouldresultinaneventofdefaultandentitlethedebtholderstoelectamajorityoftheFunds
BoardofDirectors.Privateborrowingsfrombanksarenotsubjecttothese1940Actvotingrequirements.
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PreferredStock
AlthoughtheFundhasnocurrentintentiontoissuepreferredstock,the1940ActpermitstheFundtodoso.TheFunds
CertificateofIncorporationprovidesthattheFundsBoardofDirectorsmayauthorizeandissuepreferredstockwithrightsas
determinedbytheBoardwithoutpriorapprovaloftheholdersoftheFundsCommonStock.HoldersoftheFundsCommon
StockwillhavenopreemptiverighttopurchaseanypreferredstockthatmightbeissuedbytheFund.Anysuchpreferred
stockofferingwouldbesubjecttothelimitsimposedbythe1940Act.
Underthe1940Act,theFundmaynotissuepreferredstockunless,immediatelyaftersuchissuance,ithasanasset
coverageofatleast200percentoftheliquidationvalueoftheoutstandingpreferredstock(i.e.,suchliquidationvaluemay
notexceed50percentofthevalueoftheFundstotalassets).Forthesepurposes,assetcoveragemeanstheratioof(1)total
assetslessallliabilitiesandindebtednessnotrepresentedbyseniorsecuritiesto(2)theamountofseniorsecurities
representingindebtednessplustheinvoluntaryliquidationpreferenceofthepreferredstock.Seniorsecuritymeansany
bond,note,orsimilarsecurityevidencingindebtednessandanyclassofshareshavingpriorityoveranyotherclassasto
distributionofassetsorpaymentofdividends.Seniorsecurityrepresentingindebtednessmeansanyseniorsecurityother
thanequityshares.TheinvoluntaryliquidationpreferenceofthepreferredstockistheamountthatholdersoftheFunds
preferredstockwouldbeentitledtoreceiveintheeventofaninvoluntaryliquidationoftheFundinpreferencetotheFunds
CommonStock.
Inaddition,theFundwouldnotbepermittedtodeclareanydividend(exceptadividendpayableinitsCommonStock),
ortodeclareanyotherdistributiononitsCommonStock,ortopurchaseanyCommonStock,unlessitsoutstandingpreferred
stockhadatthetimeofthedeclarationofanysuchdividendorotherdistribution,oratthetimeofanysuchpurchaseofits
CommonStock,anassetcoverageofatleast200percentafterdeductingtheamountofsuchdividend,distributionor
purchaseprice.IftheFundissuesanypreferredstock,theFundintends,totheextentpossible,topurchaseorredeemits
preferredstockfromtimetotimetotheextentnecessarytomaintainassetcoverageofanyoutstandingpreferredstockofat
least200percent.AnypreferredstockissuedbytheFundwouldhavespecialvotingrightsandaliquidationpreferenceover
theFundsCommonStock.
IftheFundissuesanypreferredstock,twooftheFundsDirectorswillbeelectedbytheholdersofpreferredstock,
votingseparatelyasaclass,foraslongasthepreferredstockremainsoutstanding.TheremainingDirectorsoftheFund
wouldbeelectedbyholdersoftheFundsCommonStockanditspreferredstockvotingtogetherasasingleclass.Inthe
unlikelyeventtheFundfailedtopaydividendsonanyoutstandingpreferredstocksfortwoyears,holdersoftheFunds
preferredstockwouldbeentitledtoelectamajorityoftheDirectorsoftheFund.
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RISKFACTORS
YoushouldconsiderthefollowingriskfactorsandspecialconsiderationsassociatedwithinvestingintheFund.An
investmentintheFundissubjecttoinvestmentrisk,includingthepossiblelossoftheentireprincipalamountinvested.
RisksRelatedtoAlibaba
ThemarketpriceandnetassetvalueoftheFundsCommonStockwillbemateriallyimpactedbythemarketpriceof
AlibabaShares.
AlibabaisanonlineandmobilecommercecompanythatoperatesprimarilyinthePRC.ImmediatelyaftertheSpinOff,
AlibabaSharesareexpectedtorepresentmorethan95percentofthevalueoftheFundstotalassets.TheFundcurrently
intendstocontinuetoinvestatleast80percentofitstotalassetsintheAlibabaShares.Asaresult,themarketpriceandnet
assetvalueoftheFundsCommonStockwillbemateriallyimpactedbythemarketpriceofAlibabaShares,whichinturn
willbeaffectedbyAlibabasbusiness,management,resultsofoperations,andfinancialcondition.
AlibabafileswiththeSECreportscontainingfinancialandothermaterialinformationaboutitsbusinessandrisks
relatingtoitsbusiness.YouareencouragedtoreviewtheinformationsetforthinAlibabasregistrationstatementon
FormF1(andtheprospectusthatisapartofthatregistrationstatement)andinitsannualreportsfiledonForm20F
foradditionalinformationaboutAlibabasbusiness,management,resultsofoperations,financialcondition,andrisks.
YoushouldalsoreviewAlibabaspressreleasesandreportsfiledwiththeSEConForm6K.Thisinformationmaybe
obtainedattheSECswebsiteatwww.sec.gov.YoushouldreviewinformationfiledbyAlibabawiththeSECbecausethe
valueoftheFundsCommonStockwillbeheavilydependentuponandinfluencedbythevalueoftheAlibabaShares.
TheAlibabaPartnership,Alibabasvotingagreementswithcertainofitsshareholders,andSoftBanksinvestmentin
AlibabawilllimittheFundsabilitytoinfluencethenominationandelectionofAlibabadirectors.
TheAlibabapartnership,comprisedofcertainmanagementmembersofAlibaba,SmallandMicroFinancialServices
Company,andChinaSmartLogistics(theAlibabaPartnership)hastheability,underAlibabasarticlesofassociation,to
nominateasimplemajorityofAlibabasboardofdirectors.IfatanytimeAlibabasboardofdirectorsconsistsoffewerthana
simplemajorityofdirectorsnominatedorappointedbytheAlibabaPartnershipforanyreason,includingbecauseadirector
previouslynominatedbytheAlibabaPartnershipceasestobeamemberofAlibabasboardofdirectorsorbecausethe
AlibabaPartnershiphadpreviouslynotexerciseditsrighttonominateorappointasimplemajorityofAlibabasboardof
directors,theAlibabaPartnershipwillbeentitled(initssolediscretion)tonominateorappointsuchnumberofadditional
directorstotheboardasnecessarytoensurethatthedirectorsnominatedorappointedbytheAlibabaPartnershipcomprisea
simplemajorityofAlibabasboardofdirectors.
Inaddition,AlibabahasenteredavotingagreementpursuanttowhichSoftBankCorp.(SoftBank),whichcurrently
ownsapproximately32percentoftheAlibabaSharesbasedonpubliclyavailablefilingswiththeSEC,agreedtovoteits
sharesinfavoroftheAlibabaPartnershipdirectornomineesateachannualgeneralstockholdersmeeting,solongas
SoftBankownsatleast15percentofAlibabasoutstandingordinaryshares.
Asaresultoftheforegoingnominationandvotingarrangements,theFundsabilitytoaffectthemanagementofthe
AlibabathroughelectionofdirectorstoAlibabasboardofdirectorswillbesubstantiallylimited.
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RisksRelatedtotheSpinOff
TheSpinOffcouldresultinsignificanttaxliabilities.
UnlesswaivedbyYahoo,thecompletionoftheSpinOffisconditioneduponthereceiptbyYahoooftheIRSRuling
regardingcertainU.S.federalincometaxaspectsoftheSpinOff,andupontheabsenceofanysubsequentwithdrawal,
invalidation,ormodificationofsuchrulinginanadversemannerpriortotheeffectivetimeoftheSpinOff.Althoughthe
IRSRulinggenerallywillbebindingontheIRS,thecontinuedvalidityoftheIRSRulingwillbebaseduponandsubjectto
theaccuracyoffactualstatementsandrepresentationsmadetotheIRSbyYahoo.Inaddition,theIRSrecentlyannounced
thatitisreconsideringitsrulingpolicywithrespecttocertainissuesunderSection355oftheCode,whichcouldpotentially
impactYahoosabilitytoobtaintheIRSRuling.Accordingly,thereisariskthattheIRSmightnotissuetheIRSRulingor
mightdeterminetopromulgatenewadministrativeguidancepriortotheSpinOffthatcouldadverselyimpactthetaxfree
treatmentoftheSpinOffevenifYahoopreviouslyreceivedtheIRSRuling.Further,asaresultoftheIRSsgeneralruling
policywithrespecttotransactionsunderSection355oftheCode,theIRSRuling,ifreceived,willbelimitedtospecified
aspectsoftheSpinOffunderSection355oftheCode,andwillnotrepresentadeterminationbytheIRSthatallofthe
requirementsnecessarytoobtaintaxfreetreatmenttoholdersofYahooscommonstockandtoYahoohavebeensatisfied.
Moreover,ifanystatementorrepresentationuponwhichtheIRSRulingisbasedisincorrectoruntrueinanymaterial
respect,orifthefactsuponwhichtheIRSRulingisbasedaremateriallydifferentfromthefactsthatprevailatthetimeofthe
SpinOff,theIRSRulingcouldbeinvalidated.
AsaresultofthisIRSrulingpolicy,theSpinOffisalsoconditioneduponthereceiptbyYahoooftheopinionof
SkaddenArps,informandsubstancereasonablyacceptabletoYahoo,totheeffectthat,undercurrentU.S.federalincome
taxlaw,theSpinOffwillqualifyasataxfreetransactiontoYahooanditsstockholdersunderSections355and368(a)(1)(D)
oftheCode.TheopinionmayrelyonthecontinuedvalidityoftheIRSRuling,astothematterscoveredbytheIRSRuling,
andwillbebaseduponspecifiedassumptions,aswellasstatements,representations,andspecifiedundertakingsmadeby
officersofYahooandtheFund.Theseassumptions,statements,representations,andundertakingsareexpectedtorelateto,
amongotherthings,YahoosbusinessreasonsforengagingintheSpinOff,theconductofspecifiedbusinessactivitiesby
YahooandtheFund,andthecurrentplansandintentionsofYahooandtheFundtocontinueconductingthosebusiness
activitiesandnottomateriallymodifytheirownershiporcapitalstructurefollowingtheSpinOff.Ifanyofthosestatements,
representations,orassumptionsisincorrectoruntrueinanymaterialrespect,oranyofthoseundertakingsisnotcomplied
with,orifthefactsuponwhichtheopinionisbasedaremateriallydifferentfromthefactsthatprevailatthetimeoftheSpin
Off,theconclusionsreachedintheopinioncouldbeadverselyaffected.Inaddition,thelegalauthoritiesuponwhichthe
opinionofSkaddenArpsisbasedaresubjecttochangeordifferinginterpretationsatanytime,possiblywithretroactive
effect.TheopinionwillnotbebindingontheIRSoracourt,andthereisariskthattheIRSmaychallengetheconclusions
reachedintheopinionandthatacourtmaysustainsuchachallenge.
EveniftheSpinOffotherwisequalifiesunderSections355and368(a)(1)(D)oftheCode,theSpinOffwouldresultina
significantU.S.federalincometaxliabilitytoYahoo(butnottoYahoostockholders)underSection355(e)oftheCodeif
oneormorepersonsacquire,directlyorindirectly,a50percentorgreaterinterest(measuredbyvoteorvalue)inthestockof
YahooorinthestockoftheFund(excluding,forthispurpose,theacquisitionoftheFundsCommonStockbyYahoo
stockholdersintheSpinOff)aspartofaplanorseriesofrelatedtransactionsthatincludestheSpinOff.Currenttaxlaw
generallycreatesapresumptionthatanyacquisitionofthestockofYahooorthestockoftheFundwithintwoyearsbefore
oraftertheSpinOffispartofaplanthatincludestheSpinOff,althoughthatpresumptionissubjecttocertainsafeharbors
undertheapplicableTreasuryregulationsandmayotherwiseberebuttablebasedonthefactsandcircumstances.Theprocess
fordeterminingwhetheranacquisitionispartofaplanundertheserulesiscomplex,inherentlyfactualinnature,andsubject
toacomprehensiveanalysisofthefactsandcircumstancesoftheparticularcase.NotwithstandingtheopinionofSkadden
Arpsdescribedabove,YahooortheFundmightbeunabletoprevent,ormightinadvertentlycauseorpermit,adisqualifying
changeintheownershipofYahooortheFundtooccur,therebytriggeringasignificanttaxliabilitytoYahoo,whichcould
haveamaterialadverseeffect.Ifitissubsequentlydetermined,for
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whateverreason,thattheSpinOffdoesnotqualifyfortaxfreetreatment,Yahooand/oritsstockholderscouldincur
significanttaxliabilities,whichmayrequiretheFundtoindemnifyYahoopursuanttotheTaxMattersAgreement.
ForamorecompletediscussionoftheIRSRuling,theopinionofSkaddenArpsandthematerialU.S.federalincometax
consequencesoftheSpinOfftoYahooanditsstockholders,pleaseseeU.S.FederalIncomeTaxConsiderationsMaterial
U.S.FederalIncomeTaxConsequencesoftheSpinOff.
YahooandtheFundfaceuncertaintieswithrespecttoPRCtaxationofindirecttransfersofChinesetaxablepropertyin
connectionwiththeSpinOff.
OnFebruary3,2015,thePRCStateAdministrationofTaxation(SAT)issuedtheBulletinRegardingCertain
EnterpriseIncomeTaxMattersonIndirectTransferofPropertybyNonResidentEnterprises,SATBulletin[2015]No.7
(Bulletin7).Bulletin7governsindirecttransfersofChinesetaxableproperty,whichincludesequityinterestsinChinese
residententerprises,realestatelocatedinChina,andtheassetsofaplaceorestablishmentinChinaofaforeigncompany.
AnindirecttransferoccurswhenaforeigncompanythatisnotresidentinChinatransferssharesinanotherforeigncompany
thatisnotresidentinChina,andthecompanywhosesharesaretransferreddirectlyorindirectlyholdsChinesetaxable
property.
UnderBulletin7,anindirecttransferofChinesetaxableproperty,includingequityinterests,byaforeigncompany
thatisnotresidentinChinamayberecharacterizedandtreatedasadirecttransferofChinesetaxablepropertyandsubjectto
PRCtax,ifsucharrangementdoesnothaveareasonablecommercialpurpose.Anarrangementisdeemedtolackareasonable
commercialpurposeiftheprimarypurposeofthearrangementistoavoidPRCtax.Bulletin7providesthreesafeharbors
underwhichanindirecttransferwillnotbetaxed.Oneisforinternalreorganizationsthatmeetcertaincriteria,anotherisfor
thetransferofsharesthatwerebothacquiredandsoldonapublicexchange,andathirdisfortransfersthatwouldqualifyfor
taxexemptionunderataxtreatybetweenChinaandthetransferorscountryofresidenceifthetransferofChinesetaxable
propertyhadbeendirectratherthanindirect.
AstheFundsprincipalassetwillbeequityinterestsinAlibabaandAlibabahasChinesetaxableproperty,thedirect
andindirecttransfersoftheAlibabaSharestotheFundbyYahooandthedistributionofthesharesoftheFundbyYahooto
itsstockholders(collectivelytheSpinRelatedTransfers)areindirecttransfersunderBulletin7.Consequently,Yahooand
theFundfaceuncertaintieswithrespecttothepossiblePRCtaxationoftheSpinRelatedTransfersunderBulletin7.Ifthe
SpinRelatedTransfersweresubjecttoaPRCtaxunderBulletin7,thetaxwouldbe10%ofthegainthatthePRCtax
authoritiesdeemYahootohavederivedfromthetransfers.
IfthePRCtaxisdeemedapplicableandisnotpaidpriortotheeighthdayaftertheindirecttransferiscompleted,
interestwillaccrueuntilthetaxispaidorsettledbythetransferor.Further,atransfereewhohaspaidconsiderationforthe
sharestransferredisawithholdingagentandcanbesubjecttoapenaltyforfailuretowithholdthePRCtaxpayablebythe
transferorinanamountuptothreetimestheamountofthetax.
ThetransfereeandtransferorcaneachvoluntarilyreportanindirecttransferofChinesetaxablepropertytotheSAT.
VoluntaryreportingentitlesthetransferortoalowerrateofinterestonthePRCtaxpayableandgivesthetransfereea
possibleexemptionorreductionofthepenaltyforfailuretowithhold.
WebelievethattheSpinRelatedTransfersshouldqualifyforthetreatysafeharbordiscussedabove.Specifically,
YahooasataxresidentoftheUnitedStatesshouldbeeligibleforataxexemptionunderthetaxtreatybetweentheUnited
StatesandChinaif,hypothetically,ittransferredtheChinesesubsidiariesofAlibaba.Therefore,thetreatysafeharborshould
applytotheindirecttransferoftheseChinesesubsidiariesintheSpinRelatedTransfers.
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Further,evenifthetreatysafeharbordidnotapply,webelievethatneitherthecorporatestructureofAlibabanorthe
SpinRelatedTransfersconstitutesanarrangementlackinginreasonablecommercialpurposebecausetheydonothave
avoidanceofPRCtaxastheirmainpurpose.UnderBulletin7,whetherareasonablecommercialpurposeexistsisbasedona
factsandcircumstancesassessmentusingsevenfactorsplusotherfactorssetforthinBulletin7.WebelievetheSpinRelated
TransfersshouldnotbefoundtolackareasonablecommercialpurposeandsoshouldnotbesubjecttoPRCtaxunder
Bulletin7.
AsBulletin7wasjustrecentlyreleased,however,therearenoformalinterpretationsandlittlepracticalexperienceasto
howtheSATwillinterpretandapplyBulletin7,anditsinterpretationbythecourtsinChinaremainsuntested.TheSAT
mayinterpretandadministerBulletin7inawaythatresultsinPRCtaxationoftheSpinRelatedTransfers,notwithstanding
ourbeliefthatthiswouldbeincorrectasamatteroflawandtreaty.Insuchevent,YahoomaybesubjecttotaxontheSpin
RelatedTransfers,ortheFundmaybesubjecttoapenaltyasthewithholdingagentforsuchtax.TheFund,pursuanttothe
TaxMattersAgreement,wouldalsoberequiredtoindemnifyYahooforanyPRCtaximposedonYahoo.Inadditiontoour
indemnificationundertakingstopayanysuchpossiblePRCtax,wemayberequiredtoexpendsubstantialresourcesto
defendagainsttaxationunderBulletin7.
TheFundmayhaveasignificantindemnityobligationtoYahoo,whichisnotlimitedinamountorsubjecttoanycap,ifthe
SpinOffistreatedasataxabletransaction.
PursuanttotheTaxMattersAgreement,subjecttolimitedexceptions,theFundwillberequiredtoindemnifyYahoo,
itssubsidiaries,andspecifiedrelatedpersonsfortaxesandlossesresultingfromthefailureoftheSpinOfftoqualifyasatax
freetransactionunderSections355and368(a)(1)(D)oftheCode.Inaddition,theFundwillberequiredtoindemnifyYahoo,
itssubsidiaries,andspecifiedrelatedpersonsforanytaxesthatresultfromtheapplicationofspecifiedPRCtaxrulestothe
SpinOffandrelatedrestructuringtransactions.
TheFundsindemnificationobligationstoYahoo,itssubsidiaries,andspecifiedrelatedpersonswillnotbelimitedin
amountorsubjecttoanycap.TheseobligationsmaysubjecttheFundtosubstantialliabilities,whichcouldmaterially
adverselyaffecttheFundsfinancialposition.
ItispossiblethatliabilitiesarisingfromtheFundsindemnificationobligationsmightoccuratatimewhentheFund
hasinsufficientliquidityand,inordertomeetitslegalobligations,itmaybenecessaryfortheFundtosellaportionofits
portfoliosecuritiesataninopportunetime(whichcouldresultintaxesbeinglevied)orborrowtherequiredsumatan
unfavorableinterestrate.
ForamoredetaileddiscussionofthetermsoftheTaxMattersAgreement,pleaseseeTheSpinOffTaxMatters
Agreement.
TheFundmaydecidenottoengageincertaintransactionsinordertoavoidtheriskofincurringsignificanttaxrelated
liabilities.
UndertheTaxMattersAgreement,theFundwillcovenantnottotakeanyaction,orfailtotakeanyaction,following
theSpinOff,whichactionorfailuretoactisinconsistentwiththeSpinOffqualifyingfortaxfreetreatmentunderSections
355and368(a)(1)(D)oftheCode.Further,theTaxMattersAgreementwillrequirethattheFundgenerallyindemnifyYahoo
foranytaxesorlossesincurredbyYahoo(oritssubsidiaries)resultingfromthefailureoftheSpinOfftoqualifyasataxfree
transactionunderSections355and368(a)(1)(D)oftheCode,includingasaresultofbreachesoftheFundscovenantsorasa
resultoftheapplicationofSection355(e)oftheCodetotheSpinOffbecauseofacquisitionsofa50percentorgreater
interest(measuredbyvoteorvalue)intheFundsstockthatarepartofaplanthatincludestheSpinOff.Asaresult,theFund
mightdecidenottoengageintransactionsthatmighthaveotherwisebeenadvantageousinordertopreservethetaxfree
treatmentoftheSpinOff.
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Forexample,theFundmaydecidetocontinuetooperateASBfortheforeseeablefutureevenifasaleordiscontinuance
ofsuchbusinesswouldotherwisebeadvantageous.Moreover,inlightoftherequirementsofSection355(e)oftheCode,the
Fundmightdecidenottoengageintransactionssuchassharerepurchasesandstockissuancesinexcessofspecified
amounts,certainassetdispositions,andotherstrategictransactionsforsomeperiodoftimefollowingtheSpinOff.
AchangeincontroloftheFundmightbediscouraged,delayed,orpreventedbecauseoftheFundsindemnityobligation
undertheTaxMattersAgreement.
TheTaxMattersAgreementwillrequirethattheFundgenerallyindemnifyYahooforanytaxesorlossesincurredby
Yahoo(oritssubsidiaries)resultingfromthefailureoftheSpinOfftoqualifyasataxfreetransactionunderSections355
and368(a)(1)(D)oftheCode,includingasaresultoftheapplicationofSection355(e)oftheCodetotheSpinOffbecauseof
acquisitionsofa50percentorgreaterinterest(measuredbyvoteorvalue)intheFundsstockthatarepartofaplanthat
includestheSpinOff.Asaresult,theFundsindemnityobligationundertheTaxMattersAgreementmightdiscourage,
delay,orpreventachangeofcontroltransactionwithrespecttotheFundforsomeperiodoftimefollowingtheSpinOff,
dependingonthefactsandcircumstancesofthetransaction.
TheconditionstotheSpinOffmaynotbesatisfiedorwaivedandtheSpinOffmaynotoccur.
TheSpinOffwillnotoccuriftheconditionstotheSpinOffdescribedinthisinformationstatementarenotsatisfiedor
waivedbyYahoo,initssolediscretion.YahooalsomaychoosetoabandontheSpinOffatanytimepriortotheDistribution
Dateforanyreason,orfornoreason.AfailuretocompletetheSpinOffmayadverselyaffectthemarketpriceofYahoos
commonstock.Inaddition,theagreementstobeenteredintobytheFundwithYahooinconnectionwiththeSpinOff
(includingtheSeparationandDistributionAgreement,theTaxMattersAgreement,andtheAncillaryAgreements)maybe
amendedormodifiedpriortotheDistributionDate.
ASBhasneveroperatedasanindependentcompanyanditsbusinessmaybeunsuccessful.
ASBwasformedinconnectionwiththeSpinOffandwillacquiretheassetsandassumetheliabilitiesrelatingtothe
businessthathashistoricallybeenoperatedbyYahoounderthenameYahooSmallBusiness.PriortotheSpinOff,Yahoo
SmallBusinesshasbeenoperatedbyYahooaspartofitsbroadercorporateorganization,ratherthanasanindependent
company.YahoosseniormanagementoversawthestrategicdirectionofYahooSmallBusinessandYahooperformed
variouscorporatefunctionstosupportthebusiness,including:
humanresourcesfunctions
financeandtaxadministration
legalfunctions
businessdevelopmentfunctionsand
informationtechnologyandtelecommunicationsservices.
FollowingtheSpinOff,neitherYahoonoranyofitsaffiliateshaveanyobligationtoprovidethesefunctionstoASBor
theFundotherthanthoseservicesthatwillbeprovidedbyYahoopursuanttotheAncillaryAgreements.If,oncean
AncillaryAgreementterminates,ASBortheFunddonothaveinplacetheirownsystemsandbusinessfunctionsordonot
haveagreementswithotherprovidersofthoseservicesonacosteffectivebasis,ASBsfinancialresultsmaybeadversely
affected.
ASBsbusiness,whileoperatedasYahooSmallBusiness,alsowasdependentoncertainofYahoostechnology,
intellectualproperty,infrastructure,data,marketingandotherresourcesandoncertainofYahoos
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contractualarrangementswiththirdpartiesandbenefitedfromitsaffiliationwithYahoosbrandandthemarketrecognition
thatresultedfromthataffiliation.ASBstransitiontoanindependentcompanymayresultinfewercustomers,increased
costs,anddecreasedprofitability.Consequently,ASBsfuturesuccessdependsonitsabilitytoretaincustomers,avoid
interruptionsinservicestocustomers,minimizecosts,andexploitnewmarketsbyidentifyingandmonitoringtrends.There
canbenoassurancethatASBwillcontinuetobeprofitable.
FollowingtheSpinOff,theFundwillbesubjecttoincreasedcosts.
TheFundwillincurcostsandexpensesnotpreviouslyincurredasaresultofitsseparationfromYahoo.Theseincreased
costsandexpensesmayarisefromvariousfactors,includingoperatingexpenses(suchasrentandemployeecompensation
andbenefits),internalauditcosts,insurancecosts,financialreporting,andcostsforuseofthirdpartytechnologyand
intellectualproperty,aswellascostsassociatedwithcomplyingwiththefederalsecuritieslaws(includingcompliancewith
theSarbanesOxleyActof2002andthe1940Act),andpayingserviceprovidersforcustodial,transferagent,compliance,
andadministrativeservices.WhentheFundsAncillaryAgreementsterminate,thereisariskthattheFundmightnotbeable
toobtainreplacementservicesortechnologyordevelopinternalcapabilitiesortechnologyonacosteffectivebasisoratall.
ThefinancialinformationprovidedinthisinformationstatementmaynotberepresentativeoftheFundsactualfuture
financialposition.
PriortotheSpinOff,theFundwasawhollyownedsubsidiaryofYahoo.Thefinancialinformationincludedinthis
informationstatementincludesestimatesofexpensestheFundwillincurasastandalonecompanyaftertheSpinOff,and
maynotberepresentativeoftheFundsactualfutureexpenses.
RisksRelatedtotheFundsOperationsasanInvestmentCompany
InvestmentsintheFundmayperformpoorlyandcouldresultinyourentireinvestmentbeinglost.
AninvestmentintheFundsCommonStockissubjecttoinvestmentrisk,includingthepossiblelossoftheentire
amountthatyouinvest.Atanypointintime,yoursharesoftheFundsCommonStockmaybeworthlessthanyouroriginal
investment.TherecanbenoassurancethattheFundwillachieveitsinvestmentobjective.
AninvestmentintheFundsCommonStockshouldnotbeconsideredacompleteinvestmentprogram.
AninvestmentintheFundsCommonStockshouldnotbeconsideredacompleteinvestmentprogram.Each
stockholdershouldtakeintoaccounttheFundsinvestmentobjectiveandpolicies,aswellasthestockholdersother
investmentswhenconsideringaninvestmentintheFund.
TheFundsinvestmentsinequitysecuritiesarevolatile.
Stockmarketsarevolatile,andthepricesofequitysecurities,suchastheAlibabaShares,fluctuatebasedonchangesin
acompanysfinancialconditionandoverallmarketandeconomicconditions.Althoughovermanyhistoricalperiods
commonstockshavegeneratedhigheraveragetotalreturnsthanfixedincomesecurities,commonstocksalsohave
experiencedsignificantlymorevolatilityinthosereturnsand,incertainperiods,havesignificantlyunderperformedrelative
tofixedincomesecurities.Anadverseevent,suchasanunfavorableearningsreport,maydepressthevalueofsuchequity
securities.Equitysecuritiesmayalsodeclineduetofactorsaffectingtheissuersindustry.Thevalueoftheequitysecurities
heldbytheFund,suchastheAlibabaShares,maydeclineforanumberofotherreasonswhichdirectlyrelatetotheissuer,
suchasmanagementperformance,financialleverage,theissuershistoricalandprospectiveearnings,thevalueofitsassets,
andreduceddemandforitsgoodsandservices,orwhenpoliticaloreconomiceventsaffectingtheissueroccur.Also,the
pricesofcommonstocksaresensitivetogeneralmovementsinthestockmarketandadropinthestockmarketmaydepress
thepriceoftheissuersshares.Commonstockpricesfluctuateforseveralreasons,includingchangesin
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investorsperceptionsofthefinancialconditionofanissuerorthegeneralconditionoftherelevantstockmarket.In
addition,commonstockpricesmaybesensitivetorisinginterestrates,asthecostofcapitalrisesandissuersborrowingcosts
increase.Equitysecuritiesarestructurallysubordinatedtopreferredstock,bonds,andotherdebtinstrumentsintheissuers
capitalstructureintermsofprioritytocorporateincome,andarethereforeinherentlymoreriskythanpreferredstockordebt
instrumentsoftheissuer.
TheFundsrevenuesourcesmaybelimitedfollowingtheSpinOff.
ImmediatelyaftertheSpinOff,theFundsinvestmentassetswillbeitsdirectandindirectinterestsintheAlibaba
SharesandASB.TheFundsabilitytomeetitsfinancialobligationsandothercontractualcommitmentsdependsuponits
abilitytoaccesscash.TheFundssourcesofcashinclude:
availablecashbalances
anydividendstheFundmayreceivefromitsinvestmentintheAlibabaSharesorASB(althoughAlibabadoesnot
currentlyintendtopaydividendsonAlibabaShares)
amountstheFundisabletoborrow
incometheFundmaybeabletoearnfromlendingitsAlibabaSharesand
proceedsfromanyassetsales,netoftaxes.
Priortothedateofthisinformationstatement,AlibabahasnotpaiddividendsonAlibabaSharesandhasstatedthatit
doesnotcurrentlyintendtopaydividendsonAlibabaShares.TheabilityofASBtomakedistributions,payments,or
advancestotheFunddependsonitsoperatingresultsandworkingcapitalneeds.TheFundmaynotbeablegenerateincome
fromothersources.Asaresult,althoughtheFundcurrentlyhasnoplanswithrespecttoanyassetsales,theFundcouldbe
unableinthefuturetoobtaincashinamountssufficienttoserviceitsfinancialobligationsormeetitsothercommitments
unlessitsellsAlibabaShares,whichwouldcausetheFundtopaytaxesonanycapitalgainthatitrealizedinconnection
withthesale.
TheFundsuseofborrowedmoneyforworkingcapitalortorepurchasesharesofitsCommonStockcouldresultingreater
volatilityandlosses.
TheFundintendstoborrowmoneyforworkingcapitalandtorepurchasesharesofitsCommonStockifandtothe
extentauthorizedbyitsBoardofDirectorsfromtimetotime.OncetheFundborrowsmoney,thenetassetvalueandmarket
valueofitsCommonStockmaybemorevolatile.AnydeclineinthenetassetvalueoftheFundsinvestmentswillbeborne
entirelybytheholdersoftheFundsCommonStock.Therefore,ifthemarketvalueoftheFundsportfoliodeclines,the
borrowingwillresultinagreaterdecreaseinnetassetvaluetotheholdersoftheFundsCommonStockthaniftheFundhad
notborrowedmoney.ThisnetassetvaluedecreasemaycauseagreaterdeclineinthemarketpriceoftheFundsCommon
Stock.Inextremecases,theFundmightbeindangeroffailingtomaintainthe200percentassetcoveragerequiredbythe
1940Act.Insuchanevent,theFundmightliquidateinvestmentsinordertorepayalloraportionofthemoneyithad
borrowed.TheFundwouldberequiredtopaytaxesonanygainsrealizedinconnectionwithanysaleofitsassetstorepay
itsborrowings.AsaleofAlibabaSharesattimeswhenthevalueoftheAlibabaShareshasdeclinedwouldbe
disadvantageoustotheFund.
TheFundsinvestmentperformancemaybemateriallyandadverselyaffectedbyeconomicconditionsinthePRCaswell
asglobally.
SubstantiallyalloftheFundsassetsconsistofAlibabaSharesandAlibabaoperatesprimarilyinthePRC.Asaresult,
theFundsinvestmentperformanceandnetincomeareimpactedtoasignificantextentbyeconomicandoperating
conditionsinthePRC.
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ThePRCgovernmenthasinrecentyearsimplementedanumberofmeasurestocontroltherateofeconomicgrowth,
includingbyraisinginterestratesandadjustingdepositreserveratiosforcommercialbanks,aswellasbyimplementing
othermeasuresdesignedtotightencreditandliquidityandregulateitssecuritiesmarket.Thesemeasureshavecontributedto
aslowdownofthePRCeconomy.AccordingtotheNationalBureauofStatisticsofthePRC,inthefirstquarterof2015,the
PRCsannualGDPgrowthratewassevenpercentitslowestrateinsixyears.Anycontinuingorworseningslowdown
couldsignificantlyreducedomesticcommerceinthePRC,includingbusinessactivitiesconductedthroughtheinternet
generallyandwithintheonlineservicesandecommerceindustryinwhichtheFundsinvestmentsareconcentrated.An
economicdownturn,whetheractualorperceived,afurtherdecreaseineconomicgrowthrates,oranotherwiseuncertain
economicoutlookinthePRCoranyothermarketcouldhaveamaterialadverseeffectontheFundsinvestmentperformance
andfinancialcondition.
ThePRCeconomydiffersfromtheeconomiesofmostdevelopedcountriesinmanyrespects,includingtheextentof
governmentinvolvement,levelofdevelopment,growthrate,controlofforeignexchange,andallocationofresources.
AlthoughthePRCgovernmenthasimplementedmeasuresemphasizingtheutilizationofmarketforcesforeconomicreform,
thereductionofstateownershipofproductiveassets,andtheestablishmentofimprovedcorporategovernanceinbusiness
enterprises,asubstantialportionofproductiveassetsinthePRCisstillownedbythePRCgovernment.Inaddition,thePRC
governmentcontinuestoplayasignificantroleinregulatingindustrydevelopmentbyimposingindustrialpolicies.The
PRCgovernmentalsoexercisessignificantcontroloverChinaseconomicgrowthbystrategicallyallocatingresources,
controllingpaymentofforeigncurrencydenominatedobligations,settingmonetarypolicy,regulatingfinancialservicesand
institutions,andprovidingpreferentialtreatmenttoparticularindustriesorcompanies.
WhilethePRCeconomyhasexperiencedsignificantgrowthinthepastthreedecades,growthhasbeenunevenacross
differentperiods,regions,andeconomicsectors.ThePRCgovernmenthasimplementedvariousmeasurestoencourage
economicgrowthandguidetheallocationofresources.SomeofthesemeasuresmaybenefittheoverallPRCeconomy,but
mayalsohaveanegativeeffectontheFund.TheFundsfinancialconditionandinvestmentperformancecouldbematerially
andadverselyaffectedbygovernmentcontrolovercapitalinvestmentsorchangesintaxregulationsthatareapplicableto
Alibaba.
IfthePRCgovernmentdeemsthatthecontractualarrangementsinrelationtoAlibabasvariableinterestentitiesdonot
complywithPRCgovernmentrestrictionsonforeigninvestment,oriftheseregulationsortheinterpretationofexisting
regulationschangeinthefuture,Alibabasbusinessandresultsofoperationsmaybeimpacted,whichinturnmay
adverselyaffecttheFundsinvestmentperformance.
ForeignownershipofcertaintypesofinternetbusinessesinthePRC,suchasinternetinformationservices,issubjectto
restrictionsunderapplicablePRClaws,rulesandregulationsandforeigninvestorsaregenerallynotpermittedtoownmore
than50percentoftheequityinterestsinavalueaddedtelecommunicationserviceprovider.Alibabaprovidesinternet
informationservicesinthePRCthroughanumberofPRCincorporatedvariableinterestentities(VIEs),whichareowned
byPRCcitizensorbyPRCentitiesownedbysuchPRCcitizens,andwhohavecontractualarrangementswithAlibaba.
ThesecontractualarrangementsgiveAlibabaeffectivecontrolovereachoftheVIEsenablingittoobtainsubstantiallyallof
theeconomicbenefitsarisingfromtheVIEsandconsolidatethefinancialresultsoftheVIEsinitsresultsofoperations.
AlthoughtheVIEstructureadoptedbyAlibabaisconsistentwithlongstandingindustrypractice,andiscommonlyadopted
bycomparablecompaniesinthePRC,thePRCgovernmentmaynotagreethatthesearrangementscomplywithPRC
licensing,registration,orotherregulatoryrequirements,withexistingpolicies,orwithrequirementsorpoliciesthatmaybe
adoptedinthefuture.
InJanuary2015,theMinistryofCommerceofthePRCpublishedadiscussiondraftoftheproposedForeignInvestment
law(theDiscussionDraft),whichaimsto,uponitsenactment,replacetheexistinglawsregulatingforeigninvestmentin
thePRC.TheDiscussionDraft,ifenactedasproposed,mayimpacttheviabilityofAlibabascurrentcorporatestructure,
corporategovernanceandbusinessoperations.Therearesubstantial
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uncertaintieswithregardtotheinterpretationandapplicationoftheDiscussionDraft,onceenacted,andtocurrentPRC
laws,rules,andregulations.IfAlibabaoranyofitsVIEsarefoundtobeinviolationofanyexistingorfuturePRClaws,
rules,orregulations,orfailtoobtainormaintainanyoftherequiredpermitsorapprovals,therelevantPRCregulatory
authoritieswouldhavebroaddiscretiontotakeactionindealingwithsuchviolationsorfailures,whichcouldhavea
materialadverseeffectonthebusiness,financialcondition,andresultsofoperationsofAlibaba,andinturn,theFunds
investmentperformance.
ThereareuncertaintiesregardingtheinterpretationandenforcementofPRClaws,rules,andregulations.
MostofAlibabasoperationsareconductedinthePRCandaregovernedbythePRClaws,rules,andregulations.
AlibabasPRCsubsidiariesaresubjecttolaws,rules,andregulationsapplicabletoforeigninvestmentinthePRC.ThePRC
legalsystemisacivillawsystembasedonwrittenstatutes.Priorcourtdecisionsmaybecitedforreferencebut,unlikethe
commonlawsystem,theyhavelimitedprecedentialvalue.
In1979,thePRCgovernmentbegantopromulgateacomprehensivesystemoflaws,rules,andregulationsgoverning
economicmattersingeneral.Theoveralleffectoflegislationoverthepastthreedecadeshassignificantlyenhancedthe
protectionsaffordedtovariousformsofforeigninvestmentinthePRC.However,thePRChasnotdevelopedafully
integratedlegalsystem,andrecentlyenactedlaws,rules,andregulationsmaynotsufficientlycoverallaspectsofeconomic
activitiesinthePRC,ormaybesubjecttosignificantdegreesofinterpretationbyPRCregulatoryagencies.Inparticular,
becausetheselaws,rules,andregulationsarerelativelynew,andbecauseofthelimitednumberofpublisheddecisionsand
theirnonbindingnature,andbecausethelaws,rules,andregulationsoftengivetherelevantregulatorsignificantdiscretion
inhowtoenforcethem,theinterpretationandenforcementoftheselaws,rules,andregulationsinvolveuncertainties,and
canbeinconsistentandunpredictable.Inaddition,thePRClegalsystemisbasedinpartongovernmentpoliciesandinternal
rules,someofwhicharenotpublishedonatimelybasisoratall,andwhichmayhavearetroactiveeffect.Asaresult,
Alibabamaynotbeawareofanyviolationofthesepoliciesandrulesuntilsometimeaftertheoccurrenceoftheviolation.
AnyadministrativeandcourtproceedingsinthePRCmaybeprotracted,resultinginsubstantialcostsanddiversionof
resourcesandmanagementattention.SincePRCadministrativeandcourtauthoritieshavesignificantdiscretionin
interpretingandimplementingstatutoryandcontractualterms,itmaybemoredifficulttoevaluatetheoutcomeof
administrativeandcourtproceedingsandtheleveloflegalprotectionAlibabaenjoysthaninmoredevelopedlegalsystems.
TheseuncertaintiesmayimpedeAlibabasabilitytoenforcethecontractsithasenteredinto,andcouldmateriallyand
adverselyaffecttheperformanceoftheFundsinvestments.
LendingtheFundssecuritiestothirdpartiesmaycauselosses.
TheFundmaylenditsportfoliosecuritiestobanksordealerswhichmeetthecreditworthinessstandardsestablishedby
itsBoardofDirectorsfromtimetotime.Securitieslendingissubjecttotheriskthatloanedsecuritiesmaynotbeavailableto
theFundonatimelybasisandtheFundmay,therefore,losetheopportunitytosellthesecuritiesatadesirableprice.Any
lossinthemarketpriceofsecuritiesloanedbytheFundthatoccursduringthetermoftheloanwouldbebornebytheFund,
andwouldadverselyaffecttheFundsperformance.Also,theremaybedelaysinrecovery,ornorecovery,ofsecurities
loaned,orevenalossofrightsinthecollateralshouldtheborrowerofthesecuritiesfailfinanciallywhiletheloanis
outstanding.
TheFundsuseofserviceprovidersmeansthattheFundisreliantonthirdpartiestoperformtheirobligations.
TheFundwillrelyonserviceprovidersforcertainfunctionsthatareintegraltotheFundsoperationsandfinancial
performance,includingcustodyofitsassetsandtransferagency,compliance,andadministrativeservices.Failurebyany
serviceprovidertocarryoutitsobligationstotheFundinaccordancewiththetermsofitsappointment,toexerciseduecare
andskill,ortoperformitsobligationstotheFundatallasaresultof
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insolvency,bankruptcy,orothercausescouldhaveamaterialadverseeffectontheFundsperformanceandreturnsto
stockholders.TheterminationoftheFundsrelationshipwithanyserviceprovider,oranydelayinappointingareplacement
forsuchserviceprovider,couldmateriallydisruptthebusinessoftheFundandcouldhaveamaterialadverseeffectonthe
Fundsperformanceandreturnstostockholders.
TheFundreliesonthecompetenceandcontinuedserviceofitsownofficersandDirectorstomanagetheFund.
TheFundisinternallymanagedbyitsexecutiveofficersunderthesupervisionofitsBoardofDirectorsanddoesnot
dependonathirdpartyinvestmentadvisor.TheFunddoesnotpayinvestmentadvisoryfees,butinsteadincurstheoperating
costsassociatedwithemployingitsexecutiveofficersandemployees.TheFunddependsuponthemembersofitssenior
managementforthemonitoringoftheFundsinvestments.IftheFundlosestheservicesofanyseniormanagementmembers
theFundmaynotbeabletooperateitsbusinessasexpected,whichcouldcausetheFundsresultstosuffer.TheFunds
statusasaregisteredinvestmentcompanymaylimititsabilitytoattractandretainhighlyqualifiedpersonnel.
Asanondiversifiedinvestmentcompany,theFundsinvestmentperformanceisatriskfromfluctuationsinAlibabas
performance.
TheFundisanondiversifiedinvestmentcompanyunderthe1940Actandwillnotelecttobetreatedasaregulated
investmentcompanyundertheCode.Asaresult,therearenoregulatoryrequirementsunderthe1940ActortheCodethat
limittheproportionoftheFundsassetsthatmaybeinvestedinsecuritiesofasingleissuerand,immediatelyafter
completionoftheSpinOff,substantiallyalloftheFundsassetswillbeinvestedinAlibaba.Asaconsequenceofthis
concentration,theaggregatereturnstheFundrealizesmaybeadverselyaffectedifitsinvestmentinAlibabaperformspoorly.
TotheextentthatitsinvestmentinAlibabaremainsalargeportionoftheFundsassets,theFundsreturnsmayfluctuateasa
resultofanysingleeconomic,political,orregulatoryoccurrenceaffecting,orinthemarketsassessmentofAlibabatoa
greaterextentthanthoseofadiversifiedinvestmentcompany.
TheFundsinvestmentsareconcentratedintheonlineservicesandecommerceindustry,andrisksassociatedwiththis
industrymayadverselyaffecttheFundsinvestments.
TheFundsinvestmentswillbeconcentratedintheonlineservicesandecommerceindustry.BecausetheFundis
focusedinaspecificindustry,itmaypresentmorerisksthanifitwerebroadlydiversifiedovernumerousindustriesand
sectorsoftheeconomy.AdownturnintheonlineservicesandecommerceindustrymayhavealargerimpactontheFund
thanonaninvestmentcompanythatdoesnotconcentrateinsuchindustry.Attimes,theperformanceofsecuritiesof
companiesintheonlineservicesandecommerceindustrywilllagbehindtheperformanceofotherindustriesorthebroader
marketasawhole.
Alibabaoperatesaplatformforthirdpartiestosellproductsthroughitswebsite.ASBoperatesacloudbasedservices
platformthatenablessmallbusinessentrepreneurstostart,build,andgrowtheirbusinesses.BothAlibabaandASB
encounterrisksanddifficultiesfrequentlyexperiencedbyinternetbasedbusinesses,includingrisksrelatedtotheirabilityto
attractandretaincustomersonacosteffectivebasisandtheirabilitytooperate,support,expand,anddeveloptheirinternet
operations,website,software,andotherrelatedoperationalsystems.
AnycompromiseofAlibabasorASBsonlinesecurityormisappropriationofproprietaryinformationcouldhavea
materialadverseeffectontheFundsinvestments.Advancesincomputercapabilities,newdiscoveriesinthefieldof
cryptography,orothereventsordevelopmentsmayresultinacompromiseorbreachofthetechnologyusedbyAlibabaor
ASBtoprotectclienttransactiondata.AnyonewhoisabletocircumventAlibabasorASBssecuritymeasurescould
misappropriateproprietaryinformationorcausematerialinterruptionsinAlibabasorASBsoperations.AlibabaorASB
mayberequiredtoexpendsignificantcapitalandotherresourcestoprotectagainstsecuritybreachesortominimize
problemscausedbysecuritybreaches.To
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theextentthatAlibabasorASBsactivitiesinvolvethestorageandtransmissionofproprietaryinformation,security
breachescoulddamageAlibabasorASBsreputationandexposethemtoariskoflossand/orlitigationwhichmight
adverselyimpacttheFundsinvestmentperformance.
Theonlineandecommercebusinessisdependentuponthecontinueduseoftheinternetbyconsumersviacomputers
andmobiledevices.Thewaysinwhichconsumersaccessandusetheinternetrapidlyevolve,andtherecanbenoassurance
thatthesechangeswillnotadverselyaffecttheindustry.
Newregulationorchangestoexistingregulationofinternetservicesandecommercecompaniescouldadverselyaffect
AlibabasorASBsprofitabilityandoperationsandthevalueoftheFundsinvestmentsinAlibabaandASB.
Ecommercecompaniessometimesreceivecommunicationsallegingthatitemsorcontentofferedorsoldthroughtheir
onlinemarketplacesbythirdparties,orthattheymakeavailablethroughotherservicessuchasonlinemusicplatforms,
infringethirdpartycopyrights,trademarks,patents,orotherintellectualpropertyrights.Moreover,ecommercecompanies
receivenegativepublicityregardingthesalesofcounterfeitandpirateditemsorcontentontheirmarketplaces.Continued
publicperceptionthatcounterfeitorpirateditemsorcontentarecommonplaceonecommercemarketplaces,orperceived
delaysinremovaloftheseitemsorcontentfromecommercemarketplaces,eveniffactuallyincorrect,candamagethe
reputationofecommercecompanies,resultinlowerlistpricesforitemsorcontentsoldthroughtheirmarketplaces,harme
commercebusiness,andadverselyaffectthevalueoftheFundsinvestments.
Limitationsimposedbythe1940ActmayadverselyaffecttheFundsoperations.
TheFundisaregisteredclosedendmanagementinvestmentcompanyandassuchissubjecttoregulationunderthe
1940Act.The1940ActregulatesmanyaspectsoftheFundsoperationsandimposeslimitationssuchaslimitingtheFunds
abilityto:
useleverage
enterintotransactionswithaffiliatedpersons
makecertaintypesofinvestmentsand
useequitycompensationplanstoattractofficersandemployeestomanagetheFund,andDirectorstooverseethe
Fund.
These,andotherlimitations,imposedbythe1940ActmayadverselyaffecttheFundsoperationsandreturnsto
investors.
TheFundwillfaceadditionalregulatoryrequirementsandincreasedexpensesifitbecomessubjecttoregulationasa
commoditypooloperator.
CommodityFuturesTradingCommission(CFTC)Rule4.5permitsregisteredinvestmentcompaniestoclaiman
exclusionfromthedefinitionofcommoditypooloperatorundertheCommodityExchangeAct(CEA),provided
specifiedrequirementsaremet.Inordertoclaimthisexclusion,theFundwilllimititstransactions,ifany,infutures,options
onfutures,andswaps(excludingtransactionsenteredintoforbonafidehedgingpurposes,asdefinedunderCFTC
regulations)suchthateither:(1)theaggregateinitialmarginandpremiumsrequiredtoestablishitsfutures,optionson
futures,andswapsdonotexceedfivepercentoftheliquidationvalueoftheFundsportfolio,aftertakingintoaccount
unrealizedprofitsandlossesonsuchpositionsor(2)theaggregatenetnotionalvalueofitsfutures,optionsonfutures,and
swapsdoesnotexceed100percentoftheliquidationvalueoftheFundsportfolio,aftertakingintoaccountunrealized
profitsandlossesonsuchpositions.Accordingly,theFundwillnotbesubjecttoregulationundertheCEAorotherwise
regulatedbytheCFTC.IftheFundweretobeunabletoclaimtheexclusion,theFundwouldbecomesubjecttoregistration
andregulationasacommoditypooloperator,whichwouldsubjecttheFundtoadditionalregistrationandregulatory
requirementsandincreasedoperatingexpenses.
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RisksRelatedtotheFundsCommonStockandtheSecuritiesMarketFollowingtheSpinOff
AnactivetradingmarketfortheFundsCommonStockmightnotdevelop.
ThereisariskthatanactivetradingmarketmightnotdeveloporbesustainedfortheFundsCommonStockafterthe
SpinOff.TheFundcannotpredictthepricesatwhichtheFundsCommonStockmaytradeaftertheSpinOff,theeffectof
theSpinOffonthetradingpricesofYahooscommonstock,orwhethertheaggregatemarketvalueoftheFundsCommon
StockandYahooscommonstockheldbyastockholderaftertheSpinOffwillbelessthan,equalto,orgreaterthanthe
marketvalueofYahooscommonstockheldbysuchstockholderpriortotheSpinOff.
ThemarketpriceoftheFundsCommonStockmayfluctuatesignificantlyduetoanumberoffactors,someofwhich
maybebeyondtheFundscontrol,including:
themarketpriceofAlibabaADS
changestotaxlawsorregulationstowhichtheFundorAlibabaissubject
lackofdemandinthemarketforsharesoftheFundsCommonStockand
domesticandforeigneconomicconditions.
SharesoftheFundsCommonStockmaytradeatadiscountfromnetassetvalue.
Sharesofclosedendmanagementinvestmentcompaniesfrequentlytradeatadiscountfromnetassetvalue,whichisa
riskseparateanddistinctfromtheriskthattheFundsnetassetvaluecoulddecreaseasaresultofitsinvestmentactivities.
AlthoughthevalueoftheFundsnetassetsisgenerallyconsideredbymarketparticipantsindeterminingwhetherto
purchaseorselltheFundsCommonStock,whetherinvestorswillrealizegainsorlossesuponthesaleoftheFunds
CommonStockwilldependentirelyuponwhetherthemarketpriceoftheFundsCommonStockatthetimeofsaleisabove
orbelowtheinvestorspurchasepricefortheFundsCommonStock.BecausethemarketpriceoftheFundsCommonStock
willbedeterminedbyfactorsbeyondthecontroloftheFund,suchas,supplyofanddemandfortheFundsCommonStock,
tradingvolumeoftheFundsCommonStock,generalmarketandeconomicconditions,andotherfactors,theFundcannot
predictwhethertheFundsCommonStockwilltradeat,below,orabovenetassetvalue.Inaddition,thepriceoftheFunds
CommonStockmaybeadverselyaffectedbytheabilityofinvestorstoinvestdirectlyinAlibabaADSandnotbesubjectto
thefeesandexpensesincurredbytheFundinconnectionwithitsoperations,whichmayalsoreducetheliquidityofthe
FundsCommonStockwhich,inturn,maymakethemarketpriceoftheFundsCommonStockmorevolatile.
AntitakeoverprovisionsintheFundsgoverningdocumentswillmakeitmoredifficultforathirdpartytoacquirethe
Fund.
CertainprovisionsoftheFundscertificateofincorporationandbylawsmaydiscourage,delay,orpreventachangein
controloftheFundthatastockholdermayconsiderfavorable.Theseprovisionsincludethefollowing:
aprovisionthattheFundsBoardofDirectorsbedividedintothreeclassesconsisting,asnearlyasmaybepossible,
ofonethirdofthetotalnumberofDirectorsconstitutingtheentireBoardofDirectors,withthetermofeachclass
terminatingonceeverythreeyears
theinabilitytoremoveDirectorsotherthanforcauseandthenonlybytheaffirmativevoteoftheholdersofatleast
amajorityofthevotingpoweroftheissuedandoutstandingcapitalstockoftheFundentitledtovoteinthe
electionofDirectors
theinabilityoftheFundsstockholderstocallspecialmeetingsofstockholders
theinabilityoftheFundsstockholderstotakeactionbywrittenconsent,therebyrequiringallstockholderactions
tobetakenatameetingofthestockholders
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aprovisionrequiringtheaffirmativevoteoftwothirdsofthevotingpowerofthesharesentitledtovotein
connectionwiththeelectionofDirectorstoamendtheFundsbylaws
advancenoticerequirementsfornominationsofcandidatesforelectiontotheFundsBoardofDirectorsorfor
proposingmattersthatcanbeacteduponbystockholdersatstockholdermeetingsand
provisionsrequiringthefavorablevoteofamajorityoftheBoardfollowedbythefavorablevoteoftheholdersof
atleast75percentoftheoutstandingsharesofeachaffectedclassorseriesoftheFund,votingseparatelyasaclass
orseries,toapprove,adopt,orauthorizecertaintransactions,unlessthetransactionhasbeenapprovedbyatleast
80percentoftheDirectors,inwhichcaseamajorityoftheoutstandingvotingsecurities(asdefinedinthe1940
Act)oftheFundshallberequired.Withrespecttocertainextraordinarymatterssuchasamergerorconsolidation
oftheFund,asaleofallorsubstantiallyalloftheFundsassets,transactionswithprincipalstockholders,certain
amendmentstotheFundscertificateofincorporation,ortheconversionoftheFundtoanopenendinvestment
company,stockholderapprovalbyholdersofatleast80percentoftheFundsvotingpowerortheapprovalbyat
least75percentoftheFundsBoardofDirectorsshallberequired.
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MANAGEMENTOFTHEFUND
ThebusinessandaffairsoftheFundaremanagedunderthedirectionoftheBoardofDirectorsoftheFund.TheBoard
ofDirectorsismadeupoffiveDirectors,ofwhom[]arenotinterestedpersons,asdefinedinSection2(a)(19)ofthe1940
Act,oftheFund(IndependentDirectors),and[]areinterestedpersonsoftheFund(InterestedDirectors).TheBoard
ofDirectorselectstheofficersoftheFund,whoserveatthepleasureoftheBoardofDirectors.
BoardofDirectors
Position(s)
Heldwith
theFund
Termof
Officeand
Lengthof
TimeServed
PrincipalOccupationDuringthe
PastFiveYears
INTERESTEDDIRECTORS:
[Tocomebyamendment]
Name,
Address, (1)andAge
INDEPENDENT
DIRECTORS:
[Tocomebyamendment]
OtherDirectorships
heldbyDirector
DuringthePast
FiveYears
(1) ThebusinessaddressofeachDirectoroftheFundis[].
DirectorQualifications
[Tocomebyamendment]
ExecutiveOfficers
ThefollowinginformationrelatestotheexecutiveofficersoftheFundwhoarenotDirectors.
Name,Business
Address, (1)andAge
[Tocomebyamendment]
TermofOfficeand
LengthofTimeServed
Position
PrincipalOccupationsDuringthe
PastFiveYears
(1) ThebusinessaddressofeachofficeroftheFundis[].
BoardLeadershipStructureandRiskOversight
[Tocomebyamendment]
AuditCommittee
[],[],and[],whoareIndependentDirectors,serveontheFundsAuditCommittee.[]servesaschairpersonofthe
AuditCommittee.TheAuditCommitteeisgenerallyresponsibleforreviewingandevaluatingissuesrelatedtothe
accountingandfinancialreportingpoliciesandinternalcontrolsoftheFund,overseeingtheauditoftheFundsfinancial
statements,andactingasaliaisonbetweentheBoardofDirectorsandtheFundsindependentregisteredpublicaccounting
firm.
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TheAuditCommitteespurposeandresponsibilitiesaremorefullysetforthintheAuditCommitteeCharter,whichwas
adoptedbytheBoardandisavailableontheFundswebsiteat[].
TheAuditCommitteecurrentlyistheonlycommitteeoftheBoardofDirectors.
CompensationofDirectorsandOfficers
ThefollowingtableprovidesinformationregardingthecompensationofeachDirectorandeachofthethreehighest
paidofficersoftheFundwithaggregatecompensationfromtheFundforthemostrecentlycompletedfiscalyearinexcessof
$60,000.BecausetheFundisnewlyorganizedandhasnotyetcompletedafullfiscalyearofoperations,thetablebelow
showstheestimatedcompensationthatiscontemplatedtobepaidtoDirectorsandofficers,assumingafullfiscalyearof
operationsoftheFund.
AggregateEstimated
Compensationfromthe
Fund
PensionorRetirement
BenefitsAccruedasPartof
FundExpenses
[Tocomebyamendment]
INTERESTEDDIRECTORS:
[Tocomebyamendment]
OFFICERS:
[Tocomebyamendment]
Name
INDEPENDENTDIRECTORS:
EstimatedAnnual
BenefitsUpon
Retirement
DirectorShareOwnership
TheDirectorscouldnotownsharesintheFundasofDecember31,2014,themostrecentlycompletedcalendaryear
priortothedateofthisinformationstatement,becausetheFundhadnotyetcommencedoperationsasofthatdate.
[ThefollowingtableprovidesinformationregardingbeneficialownershipinYahooscommonstockoftheFunds
Directors,andofalltheFundsexecutiveofficersandDirectorsasagroup.Each[]wholeshare[s]ofYahooscommon
stockentitlestheholdertoreceiveoneshareoftheFundsCommonStock.]
Name
[Tocomebyamendment,ifnecessary]
DirectorsandOfficersasaGroup
AmountandNatureofBeneficial
OwnershipofYahoosCommonStock(Numberof
Shares)
Percentof
Yahoo
Direct
Indirect
Total
Shares
Estimated
Percentof
Funds
Shares
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INVESTMENTADVISORYSERVICES
TheFundisinternallymanagedandthereforehasnotenteredintoanyadvisoryagreementwith,orpaidadvisoryfees
to,anoutsideinvestmentadviser.
DESCRIPTIONOFCAPITALSTRUCTURE
ThefollowingsummaryoftheFundscapitalstockdoesnotpurporttobecompleteandissubjectto,andqualifiedin
itsentiretyby,theFundsCertificateofIncorporation.ReferenceismadetotheFundsCertificateofIncorporationfora
detaileddescriptionoftheprovisionssummarizedbelow.
OutstandingCapitalStock
ThefollowingaretheclassesofcapitalstockoftheFundasof[],2015.
TitleofClass
AmountAuthorized
CommonStock
UndesignatedPreferredStock
[]
[]
AmountHeldby
Registrantorforits
Account
AmountOutstanding
(ExclusiveofAmountHeld
byRegistrantorforits
Account)
[]
Asof[],2015,alloftheFundsoutstandingCommonStockwasheldbyYahoo.
CommonStock
AllsharesoftheFundsCommonStockhaveequalrightsastoearnings,assets,dividends,andvotingprivilegesand,
whenissued,willbedulyauthorized,validlyissued,fullypaid,andnonassessable.Distributionsmaybepaidtotheholders
oftheFundsCommonStock,ifandwhendeclaredbytheFundsBoardofDirectorsoutoffundslegallyavailabletherefor.
TheholdersoftheFundsCommonStockhavenopreemptive,conversionorredemptionrights,andtheirintereststhereinare
freelytransferable.Intheeventofliquidation,dissolution,orwindingupoftheFund,eachshareoftheFundsCommon
StockisentitledtoshareratablyinalloftheFundsassetsthatarelegallyavailablefordistributionafterpaymentofalldebts
andotherliabilities,andsubjecttoanypriorrightsofholdersoftheFundspreferredstock,ifany,thenoutstanding.Each
shareoftheFundsCommonStockisentitledtoonevoteanddoesnothavecumulativevotingrights,whichmeansthat
holdersofamajorityofsuchshares,iftheysochoose,couldelectalloftheFundsDirectors,andholdersoflessthana
majorityofsuchshareswould,inthatcase,beunabletoelectanyDirector.
TheFundhasnopresentintentionofofferinganyadditionalsharesoftheFundsCommonStock.Anyofferingsofthe
FundsCommonStockwillrequireapprovalbytheBoardofDirectors.AnyofferingoftheFundsCommonStockwillbe
subjecttotherequirementsofthe1940Act,whichprovidesthatsharesoftheFundsCommonStockmaynotbeissuedata
pricebelowtheFundsthencurrentnetassetvalue,exclusiveofsalesload,exceptinconnectionwithanofferingtoexisting
CommonStockholders,orwiththeconsentofamajorityoftheFundsoutstandingvotingsecurities.
TheFundsCommonStockwillbe,subjecttonoticeofissuance,listedon[]underthesymbol[].Unlikeopenend
funds,closedendfundsliketheFunddonotcontinuouslyoffersharesanddonotprovidedailyredemptions.Rather,ifa
stockholderdeterminestobuyadditionalsharesoftheFundsCommonStockorselltheFundsCommonStockalreadyheld,
thestockholdermaydosobytradingthroughabrokeron[]orotherwise.Sharesofclosedendinvestmentcompanies
frequentlytradeonanexchangeatpriceslowerthannetassetvalue.Sharesofclosedendinvestmentcompanieslikethe
Fundhaveduringsomeperiodstradedatprices
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higherthannetassetvalueandduringotherperiodshavetradedatpriceslowerthannetassetvalue.Becausethemarket
valueoftheFundsCommonStockmaybeinfluencedbysuchfactorsbeyondthecontroloftheFund,suchastherelative
demandforandsupplyofsharesoftheFundsCommonStockinthemarketandgeneralmarketandeconomicconditions,
theFundcannotassureyouthatsharesoftheFundsCommonStockwilltradeatapriceequaltoorhigherthannetasset
valueinthefuture.
TheFundwillnotissuecertificatesforsharesoftheFundsCommonStock.
PreferredStock
InadditiontosharesoftheFundsCommonStock,theFundsCertificateofIncorporationauthorizestheissuanceof
sharesofpreferredstock.TheFundsBoardofDirectorsisauthorizedtoprovidefortheissuanceofpreferredstockwithsuch
preferences,powers,rights,andprivilegesastheBoardofDirectorsdeemsappropriateexceptthatsuchanissuancemust
adheretotherequirementsofthe1940Act.HoldersoftheFundsCommonStockhavenopreemptiverighttopurchaseany
preferredsharesthatmightbeissued.
Underthe1940Act,theFundisnotpermittedtoissuepreferredstockunlessimmediatelyaftersuchissuancethevalue
oftheFundstotalassetsisatleast200percentoftheliquidationvalueoftheoutstandingpreferredstock(i.e.,the
liquidationvaluemaynotexceed50percentoftheFundstotalassets).Inaddition,theFundisnotpermittedtodeclareany
cashdividendorotherdistributiononitsCommonStockunless,atthetimeofsuchdeclaration,thevalueoftheFundstotal
assetsisatleast200percentofsuchliquidationvalue.Inaddition,the1940Actrequiresthattheholdersofpreferredstock,if
anyareissued,mustbeentitledasaclasstoelecttwoDirectorsatalltimes,andtoelectamajorityoftheDirectorsif
dividendsonpreferredstockareinarrearsbytwoyearsormore.
ImmediatelyaftercompletionoftheSpinOff,theFundwillnothaveoutstandinganysharesofpreferredstock
outstanding.TheFundhasnocurrentintentiontoissuepreferredstock,butitreservestherighttodosotothefullextent
permittedbythe1940Act.
CERTAINPROVISIONSOFTHEFUNDSGOVERNINGDOCUMENTS
Thedescriptionsetforthbelowisintendedasasummaryonlyandisqualifiedinitsentiretybyreferencetothe
CertificateofIncorporationandtheBylaws.
LimitationonLiabilityofDirectors
TheFundhasadoptedprovisionsintheCertificateofIncorporationlimitingtheliabilityoftheFundsDirectorsfor
monetarydamagestotheextentpermittedunderDelawarelaw,exceptthatthereisnolimitationontheliabilityofthe
FundsDirectors(1)foranybreachoftheDirectorsdutyofloyaltytotheFundoritsstockholders,(2)foractsoromissions
notingoodfaithorwhichinvolveintentionalmisconductoraknowingviolationoflaworbyreasonofwillfulmisfeasance,
badfaithorgrossnegligence,intheperformanceoftheDirectorsdutiesorbyreasonoftheDirectorsrecklessdisregardof
thedutiesinvolvedintheconductofhisorheroffice,(3)forunlawfulpaymentsofdividendsorunlawfulstockpurchasesor
redemptions,or(4)foranytransactionfromwhichtheDirectorderivedanimproperpersonalbenefit.Theeffectofthis
provisionintheCertificateofIncorporationistoeliminatetheFundsrightsandthestockholdersrights(through
stockholdersderivativesuitsonbehalfoftheFund)torecovermonetarydamagesagainstaDirectorforbreachofthe
fiduciarydutyofcareasaDirectorexceptinspecifiedlimitedsituations.Thisprovisiondoesnotlimitoreliminatethe
Fundsrightsoranystockholdersrightstoseeknonmonetaryreliefsuchasaninjunctionorrescissionintheeventofa
breachofaDirectorsdutyofcare.TheseprovisionswillnotaltertheliabilityofDirectorsunderfederalsecuritieslaws.
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CertainAntiTakeoverProvisions
TheCertificateofIncorporationandBylawscontaincertainprovisionsthatcouldmakemoredifficulttheacquisitionof
theFundbymeansofatenderoffer,aproxycontest,orotherwise.Theseprovisionsareexpectedtodiscouragecertaintypes
ofcoercivetakeoverpracticesandinadequatetakeoverbids,andtoencouragepersonsseekingtoacquirecontroloftheFund
tonegotiatefirstwiththeBoardofDirectors.TheFundbelievesthatthebenefitsoftheseprovisionsoutweighthepotential
disadvantagesofdiscouragingsuchproposalsbecause,amongotherthings,negotiationofsuchproposalsmightresultinan
improvementoftheirterms.
ClassifiedBoardofDirectorsNumberofDirectorsRemovalFillingVacancies
TheCertificateofIncorporationprovidesthattheFundsBoardofDirectorsbedividedintothreeclassesconsisting,as
nearlyasmaybepossible,ofonethirdofthetotalnumberofDirectorsconstitutingtheentireBoardofDirectors,withthe
termofeachclassterminatingonceeverythreeyears.TheCertificateofIncorporationalsoprovidesthatthenumberof
DirectorsshallconsistofbetweenthreeandnineDirectors,theexactnumberofwhichwillbedeterminedbytheBoardof
Directors.ADirectormayonlyberemovedfromtheBoardofDirectorsforcause,andthenonlybytheaffirmativevoteofthe
holdersofatleastamajorityofthevotingpowerofissuedandoutstandingcapitalstockoftheFundentitledtovoteinthe
electionofDirectors.TheCertificateofIncorporationprovidesthatanyvacancieswillbefilledbythevoteofamajorityof
theremainingDirectors,eveniflessthanaquorum,orbythesoleremainingDirector.AnyDirectorsoappointedshallhold
officeforatermcoincidingwiththeremainingtermofhisorherclass.
AdvanceNoticeProvisionsforStockholderNominationsandStockholderProposals
TheBylawsestablishanadvancenoticeprocedureforstockholderstomakenominationsofcandidatesforelectionas
Directorsortobringotherbusinessbeforeanannualmeetingofstockholders(theStockholderNoticeProcedure).
TheStockholderNoticeProcedureprovidesthat(1)onlypersonswhoarenominatedby,oratthedirectionof,the
BoardofDirectors,orbyastockholderwhohasgiventimelywrittennoticecontainingspecifiedinformationtotheFunds
secretarypriortothemeetingatwhichDirectorsaretobeelected,willbeeligibleforelectionasDirectorsand(2)atan
annualmeeting,onlysuchbusinessmaybeconductedashasbeenbroughtbeforethemeetingby,oratthedirectionof,the
BoardofDirectorsorbyastockholderwhohasgiventimelywrittennoticetotheFundssecretaryofsuchstockholders
intentiontobringsuchbusinessbeforethemeeting.Exceptforstockholderproposalssubmittedinaccordancewiththe
federalproxyrulesastowhichtherequirementsspecifiedthereinshallcontrol,noticeofstockholdernominationsor
businesstobeconductedatameetingmustbereceivedbytheFundnotlessthan90daysormorethan120dayspriortothe
firstanniversaryofthepreviousyearsannualmeetingifthenoticeistobesubmittedatanannualstockholdersmeeting.
AmendmentofCertificateofIncorporationandBylaws
TheCertificateofIncorporationprovidesthattheprovisionsthereinrelatingto,amongotherthings,theBoardof
Directors,thenumberofDirectors,vacanciesontheBoardofDirectors,removalofDirectors,thepowersoftheBoardof
Directors,exculpationofDirectors,theinabilityofstockholderstocallspecialmeetingsofstockholders,andtheinabilityof
thestockholderstotakeactionbywrittenconsentmaybeamendedorrepealedonlywiththeaffirmativevoteoftheholders
ofatleasttwothirdsoftheoutstandingsharesoftheFund,votingasasingleclass.
TheCertificateofIncorporationalsoprovidesthattheDirectorsshallhavethepowertoadopt,amend,alterorrepealthe
Bylaws.TheBylawsalsomaybeadopted,amended,alteredorrepealedbytheaffirmativevoteoftheholdersofatleasttwo
thirdsofthevotingpowerofthesharesentitledtovoteinconnectionwiththeelectionofDirectors.
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Theseprovisionsareintendedtomakeitmoredifficultforstockholderstocircumventcertainotherprovisions
containedintheCertificateofIncorporationandBylaws.Theseprovisions,however,alsowillnotallowstockholdersto
amendtheCertificateofIncorporationortheBylawswithouttheapprovaloftheBoardofDirectors,evenifamajorityofthe
stockholdersdeemssuchamendmenttobeinthebestinterestsofallstockholders.
TransactionswithaPrincipalStockholder
TheCertificateofIncorporationrequiresthefavorablevoteofamajorityoftheBoardfollowedbythefavorablevoteof
theholdersofatleast75percentoftheoutstandingsharesofeachaffectedclassorseriesoftheFund,votingseparatelyasa
classorseries,toapprove,adopt,orauthorizecertaintransactionswithfivepercentorgreaterholdersofaclassorseriesof
stockandtheirassociates,unlessthetransactionhasbeenapprovedbyatleast80percentoftheDirectors,inwhichcasea
majorityoftheoutstandingvotingsecurities(asdefinedinthe1940Act)oftheFundshallberequired.Forpurposesof
theseprovisions,afivepercentorgreaterholderofaclassorseriesofshares(aPrincipalStockholder)referstoanyperson
who,whetherdirectlyorindirectlyandwhetheraloneortogetherwithitsaffiliatesandassociates,beneficiallyownsfive
percentormoreoftheoutstandingsharesofalloutstandingclassesorseriesofstockoftheFund.Thefivepercentholder
transactionssubjecttothesespecialapprovalrequirementsare:
themergerorconsolidationoftheFundoranysubsidiaryoftheFundwithorintoanyPrincipalStockholder
theissuanceofanysecuritiesoftheFundtoanyPrincipalStockholderforcash
thesale,leaseorexchangeofalloranysubstantialpartoftheassetsoftheFundtoanyPrincipalStockholder,
exceptassetshavinganaggregatefairmarketvalueoflessthantwopercentofthetotalassetsoftheFund,
aggregatingforthepurposeofsuchcomputationallassetssold,leased,orexchangedinanyseriesofsimilar
transactionswithinatwelvemonthperiodor
thesale,lease,orexchangetotheFundoranysubsidiaryoftheFund,inexchangeforsecuritiesoftheFund,ofany
assetsofanyPrincipalStockholder,exceptassetshavinganaggregatefairmarketvalueoflessthantwopercentof
thetotalassetsoftheFund,aggregatingforpurposesofsuchcomputationallassetssold,leased,orexchangedin
anyseriesofsimilartransactionswithinatwelvemonthperiod.
ConversiontoOpenEndInvestmentCompany
ToconverttheFundtoanopenendinvestmentcompany(commonlyreferredtoasamutualfund),theCertificateof
IncorporationrequiresthefavorablevoteofamajorityoftheBoardfollowedbythefavorablevoteoftheholdersofatleast
75percentoftheoutstandingsharesofeachaffectedclassorseriesofstockoftheFund,votingseparatelyasaclassorseries,
unlesssuchconversionhasbeenapprovedbyatleast80percentoftheDirectors,inwhichcaseamajorityofthe
outstandingvotingsecurities(asdefinedinthe1940Act)oftheFundshallberequired.Theforegoingvotewouldsatisfya
separaterequirementinthe1940ActthatanyconversionoftheFundtoanopenendinvestmentcompanybeapprovedby
thestockholders.Ifapprovedintheforegoingmanner,aconversionoftheFundtoanopenendinvestmentcompanymight
notoccuruntil90daysafterthestockholdersmeetingatwhichsuchconversionwasapproved,andwouldalsorequireat
least10dayspriornoticetoallstockholders.ConversionoftheFundtoanopenendinvestmentcompanywouldrequirethe
redemptionofanyoutstandingpreferredstock.Followinganysuchconversion,itisalsopossiblethatcertainoftheFunds
investmentpoliciesandstrategieswouldhavetobemodifiedtoassuresufficientportfolioliquidity.Intheeventof
conversion,theFundsCommonStockwouldceasetobelistedon[]orothernationalsecuritiesexchangesormarket
systems.Stockholdersofanopenendinvestmentcompanymayrequirethecompanytoredeemtheirsharesatanytime,
exceptinspecifiedcircumstancesasauthorizedbyorunderthe1940Act,atthenetassetvaluepershare,lesssuch
redemptioncharge,ifany,asmightbeineffectatthetimeofaredemption.TheBoardbelieves,however,thattheclosedend
structureisdesirableinlightoftheFundsinvestmentobjectiveandpolicies.Therefore,youshouldassumethatitisnot
likelythattheBoardwouldvotetoconverttheFundtoanopenendfund.
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CLOSEDENDFUNDSTRUCTURE
TheFundisanondiversified,closedendmanagementinvestmentcompany(commonlyreferredtoasaclosedend
fund)withnooperatinghistory.Closedendfundsdifferfromopenendfunds(commonlyreferredtoasmutualfunds)inthat
closedendfundsgenerallylisttheircommonstockfortradingonastockexchangeanddonotredeemsharesofcommon
stockattherequestofthestockholder.Thismeansthatifyouwishtosellyoursharesofcommonstockofaclosedendfund
youmusttradethemonthestockexchangelikeanyotherstockattheprevailingmarketpriceatthattime.Inamutualfund,
ifthestockholderwishestosellsharesofthefund,themutualfundwillredeemorbuybackthesharesatnetassetvalueper
share.Also,mutualfundsgenerallyoffernewsharesonacontinuousbasistonewinvestorsandclosedendfundsgenerally
donot.Thecontinuousinflowsandoutflowsofassetsinamutualfundcanmakeitdifficulttomanagethefunds
investments.Bycomparison,closedendfundsaregenerallyabletostaymorefullyinvestedinsecuritiesthatareconsistent
withtheirinvestmentobjectivesandalsohavegreaterflexibilitytomakecertaintypesofinvestmentsandtousecertain
investmentstrategies,suchasfinancialleverageandinvestmentsinilliquidsecurities.
REPURCHASEOFTHEFUNDSCOMMONSTOCK
Sharesofclosedendfundsfrequentlytradeatadiscounttonetassetvalue.Becauseofthispossibilityandthe
recognitionthatanysuchdiscountmaynotbeintheinterestofstockholders,theBoardmightconsiderfromtimetotime
engaginginopenmarketrepurchases,tenderoffersforshares,orotherprogramsintendedtoreducethediscount.TheFund
cannotguaranteeorassure,however,thattheBoardwilldecidetoengageinanyoftheseactions.Noristhereanyguarantee
orassurancethatsuchactions,ifundertaken,wouldresultinthesharestradingatapriceequalorclosetothenetassetvalue
pershare.AlthoughsharerepurchasesandtenderofferscouldhaveafavorableeffectonthemarketpriceoftheFunds
CommonStock,theacquisitionofsharesoftheFundsCommonStockbytheFundwoulddecreasethecapitaloftheFund
and,therefore,mayhavetheeffectofincreasingtheFundsexpenseratio.Anysharerepurchasesortenderofferswillbemade
inaccordancewiththerequirementsofthe1934Act,the1940Act,andtheprincipalstockexchangeonwhichtheFunds
CommonStockistraded.BeforedecidingwhethertotakeanyactiontorepurchasetheFundsCommonStock,theBoard
wouldlikelyconsiderallrelevantfactors,includingtheextentanddurationofthediscount,theliquidityoftheFunds
portfolio,taxconsequencestotheFundanditsstockholders,theimpactofanyactionthatmightbetakenontheFundorits
stockholders,andmarketconsiderations.Basedontheseconsiderations,eveniftheFundsshareswouldtradeatadiscount,
theBoardmaydeterminethat,intheinterestoftheFundanditsstockholders,noactionshouldbetaken.
BROKERAGETRANSACTIONS
TheFunddoesnotcurrentlyintendtoregularlyengageinbrokeragetransactions.IftheFundengagesinbrokerage
transactions,Fundmanagementwillnotexecutetransactionsthroughanyparticularbrokerordealer,butwillseektoobtain
thebestnetresultsfortheFund.WhileFundmanagementgenerallywillseekreasonabletradeexecutioncosts,theFundwill
notnecessarilypaythelowestspreadorcommissionavailable,andpaymentofthelowestcommissionorspreadisnot
necessarilyconsistentwithobtainingthebestpriceandexecutioninparticulartransactions.Inselectingbrokersordealersto
executeportfoliotransactions,Fundmanagementwillseektoobtainthebestpriceandmostfavorableexecutionforthe
Fund,takingintoaccountavarietyoffactorsincluding:(1)thesize,natureandcharacterofthesecurityorinstrumentbeing
tradedandthemarketsinwhichitispurchasedorsold(2)thedesiredtimingofthetransaction(3)knowledgeofthe
expectedcommissionratesandspreadscurrentlyavailable(4)theactivityexistingandexpectedinthemarketforthe
particularsecurityorinstrument,includinganyanticipatedexecutiondifficulties(5)thefullrangeofbrokerageservices
provided(6)thebrokersordealerscapital(7)thequalityofresearchandresearchservicesprovided(8)thereasonableness
ofthecommission,dealerspread,oritsequivalentforthespecifictransactionand(9)knowledgeofanyactualorapparent
operationalproblemsofabrokerordealer.
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U.S.FEDERALINCOMETAXCONSIDERATIONS
ThefollowingdiscussionisasummaryofthematerialU.S.federalincometaxconsequencesoftheSpinOfftoholders
ofYahooscommonstockandcertainotherU.S.federalincometaxconsiderationsforholdersofYahooscommonstockthat
acquiretheFundsCommonStockintheSpinOff.ThisdiscussionisbasedontheCode,applicableTreasuryregulations,
judicialauthority,andadministrativerulingsandpractice,allasineffectasofthedateofthisdocument.Suchauthoritiesare
subjecttochangeordifferinginterpretationsatanytime,possiblywithretroactiveeffect.Thisdiscussionislimitedto
holdersofYahooscommonstockthatareU.S.holders,asdefinedbelow,andthatholdtheirsharesofYahooscommon
stockandtheFundsCommonStockascapitalassets,withinthemeaningofSection1221oftheCode.Further,this
discussiondoesnotdiscussalltaxconsiderationsthatmayberelevanttoholdersofYahooscommonstockinlightoftheir
particularcircumstances,nordoesitaddressanytaxconsequencestoholdersofYahooscommonstocksubjecttospecial
treatmentundertheU.S.federalincometaxlaws,suchastaxexemptentities,partnerships(includingentitiestreatedas
partnershipsforU.S.federalincometaxpurposes),personswhoacquiredtheirsharesofYahooscommonstockpursuantto
theexerciseofemployeestockoptions,orotherwiseascompensation,financialinstitutions,insurancecompanies,dealersor
tradersinsecurities,andpersonswhoholdtheirsharesofYahooscommonstockortheFundsCommonStockaspartofa
straddle,hedge,conversion,constructivesale,syntheticsecurity,integratedinvestment,orotherriskreductiontransaction
forU.S.federalincometaxpurposes.ThisdiscussiondoesnotaddressanyU.S.federalestate,gift,orothernonincometax
considerations(includingtheMedicaretaxonnetinvestmentincome),anystate,local,orforeigntaxconsiderations,orany
taxreportingrequirements.
HoldersofYahooscommonstockareurgedtoconsulttheirtaxadvisorsastothespecifictaxconsequencesofthe
SpinOfftotheminlightoftheirparticularcircumstances,aswellasanyothertaxconsiderationsrelatedtotheownershipof
theFundsCommonStockfollowingtheSpinOff.
Forpurposesofthissection,aU.S.holderisabeneficialownerofYahooscommonstockortheFundsCommonStock
acquiredintheSpinOffthatis,forU.S.federalincometaxpurposes:
anindividualwhoisacitizenoraresidentoftheUnitedStates
acorporation,orotherentitytaxableasacorporationforU.S.federalincometaxpurposes,createdororganized
underthelawsoftheUnitedStatesoranystateorpoliticalsubdivisionthereof
anestate,theincomeofwhichissubjecttoU.S.federalincometaxationregardlessofitssourceor
atrust,if(1)acourtwithintheUnitedStatesisabletoexerciseprimaryjurisdictionoveritsadministrationandone
ormoreU.S.personshavetheauthoritytocontrolallofitssubstantialdecisions,or(2)ithasavalidelectionin
placeunderapplicableTreasuryregulationstobetreatedasaU.S.person.
Ifapartnership(includinganyentitytreatedasapartnershipforU.S.federalincometaxpurposes)holdssharesof
Yahooscommonstock,thetaxtreatmentofapartnerinthepartnershipgenerallywilldependuponthestatusofthepartner
andtheactivitiesofthepartnership.ApartnerinapartnershipholdingsharesofYahooscommonstockshouldconsultits
taxadvisorregardingthetaxconsequencesoftheSpinOffandanyothertaxconsiderationsrelatedtothepartnerships
ownershipoftheFundsCommonStockfollowingtheSpinOff.
MaterialU.S.FederalIncomeTaxConsequencesoftheSpinOff
UnlesswaivedbyYahoo,thecompletionoftheSpinOffisconditioneduponthereceiptbyYahoooftheIRSRuling
regardingcertainU.S.federalincometaxaspectsoftheSpinOff,whichrulingmustnotbewithdrawn,invalidated,or
modifiedinanadversemannerpriortotheeffectivetimeoftheSpinOff.AlthoughtheIRSRulinggenerallywillbebinding
ontheIRS,thecontinuedvalidityoftheIRSRulingwillbebaseduponandsubjecttotheaccuracyoffactualstatementsand
representationsmadetotheIRSbyYahoo.Inaddition,the
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IRSrecentlyannouncedthatitisreconsideringitsrulingpolicywithrespecttocertainissuesunderSection355oftheCode,
whichcouldpotentiallyimpactYahoosabilitytoobtaintheIRSRuling.Accordingly,thereisariskthattheIRSmightnot
issuetheIRSRulingormightdeterminetopromulgatenewadministrativeguidancepriortotheSpinOffthatcould
adverselyimpactthetaxfreetreatmentoftheSpinOffevenifYahoopreviouslyreceivedtheIRSRuling.Further,asaresult
oftheIRSsgeneralrulingpolicywithrespecttotransactionsunderSection355oftheCode,theIRSRuling,ifreceived,will
belimitedtospecifiedaspectsoftheSpinOffunderSection355oftheCode,andwillnotrepresentadeterminationbythe
IRSthatalloftherequirementsnecessarytoobtaintaxfreetreatmenttoholdersofYahooscommonstockandtoYahoo
havebeensatisfied.Moreover,ifanystatementorrepresentationuponwhichtheIRSRulingisbasedisincorrectoruntruein
anymaterialrespect,orifthefactsuponwhichtheIRSRulingisbasedaremateriallydifferentfromthefactsthatprevailat
thetimeoftheSpinOff,theIRSRulingcouldbeinvalidated.
AsaresultofthisIRSrulingpolicy,theSpinOffisalsoconditioneduponthereceiptbyYahoooftheopinionof
SkaddenArps,informandsubstancereasonablyacceptabletoYahoo,totheeffectthat,undercurrentU.S.federalincome
taxlaw,theSpinOffwillqualifyasataxfreetransactiontoYahooanditsstockholdersunderSections355and368(a)(1)(D)
oftheCode.TheopinionmayrelyonthecontinuedvalidityoftheIRSRuling,astothematterscoveredbytheIRSRuling,
andwillbebaseduponspecifiedassumptions,aswellasstatements,representations,andspecifiedundertakingsmadeby
officersofYahooandtheFund.Theseassumptions,statements,representations,andundertakingsareexpectedtorelateto,
amongotherthings,YahoosbusinessreasonsforengagingintheSpinOff,theconductofcertainbusinessactivitiesby
YahooandtheFund,andthecurrentplansandintentionsofYahooandtheFundtocontinueconductingthosebusiness
activitiesandnottomateriallymodifytheirownershiporcapitalstructurefollowingtheSpinOff.Ifanyofthosestatements,
representations,orassumptionsisincorrectoruntrueinanymaterialrespect,oranyofthoseundertakingsisnotcomplied
with,orifthefactsuponwhichtheopinionisbasedaremateriallydifferentfromthefactsthatprevailatthetimeoftheSpin
Off,theconclusionsreachedintheopinioncouldbeadverselyaffected.
ThelegalauthoritiesuponwhichtheopinionofSkaddenArpsisbasedaresubjecttochangeordifferinginterpretations
atanytime,possiblywithretroactiveeffect.TheopinionwillnotbebindingontheIRSoracourt,andthereisariskthatthe
IRSmaychallengetheconclusionsreachedintheopinionandthatacourtmaysustainsuchachallenge.
AssumingthattheSpinOffqualifiesasataxfreetransactionunderSections355and368(a)(1)(D)oftheCode,then:
nogainorlosswillberecognizedbyYahoouponthedistributionoftheFundsCommonStocktoholdersof
YahooscommonstockintheSpinOff
exceptwithrespecttothereceiptofcashinlieuoffractionalsharesoftheFundsCommonStock,nogainorloss
willberecognizedby,andnoamountwillbeincludedintheincomeof,holdersofYahooscommonstockupon
thereceiptofsharesoftheFundsCommonStockpursuanttotheSpinOff
astockholderwhoreceivessharesoftheFundsCommonStockintheSpinOffwillhaveanaggregatetaxbasisin
itssharesofYahooscommonstockandsharesoftheFundsCommonStockimmediatelyaftertheSpinOffequal
totheaggregatetaxbasisofYahooscommonstockthatthestockholderheldimmediatelybeforetheSpinOff
allocatedbetweensuchsharesofYahooscommonstockandsharesoftheFundsCommonStockinproportionto
theirrespectivefairmarketvaluesand
theholdingperiodofthesharesoftheFundsCommonStockreceivedintheSpinOffbyaholderofYahoos
commonstockwillincludetheholdingperiodofitssharesofYahooscommonstock.
StockholderswhohaveacquireddifferentblocksofYahooscommonstockatdifferenttimesoratdifferentprices
shouldconsulttheirtaxadvisorsregardingtheallocationoftheiraggregatetaxbasisamong,andtheholdingperiodof,the
sharesoftheFundsCommonStockreceivedwithrespecttosuchblocksofYahooscommonstock.
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IfastockholderreceivescashinlieuoffractionalsharesoftheFundsCommonStock,thestockholderwillbetreatedas
receivingsuchfractionalsharesintheSpinOffandthensellingsuchfractionalsharesfortheamountofcashreceived.The
salegenerallywillresultintherecognitionofcapitalgainorlossforU.S.federalincometaxpurposes,measuredbythe
differencebetweentheamountofcashreceivedforthefractionalsharesandthestockholderstaxbasisinthefractional
shares(determinedasdescribedabove).
IftheSpinOffdoesnotqualifyunderSections355and368(a)(1)(D)oftheCode,Yahoowouldgenerallybesubjectto
taxasifitsoldthesharesoftheFundsCommonStockdistributedintheSpinOffinataxabletransaction.Yahoowould
recognizetaxablegaininanamountequaltotheexcessof(1)thetotalfairmarketvalueofthesharesoftheFundsCommon
StockdistributedintheSpinOffover(2)YahoosaggregatetaxbasisinsuchsharesoftheFundsCommonStock.A
stockholderwhoreceivessharesoftheFundsCommonStockintheSpinOffwouldbetreatedasreceivingataxable
distributioninanamountequaltothetotalfairmarketvalueofsuchsharesoftheFundsCommonStock.Ingeneral,the
distributionwouldbetaxableasadividendtotheextentofYahooscurrentandaccumulatedearningsandprofits.Any
amountofthedistributioninexcessofYahoosearningsandprofitswouldbetreatedfirstasanontaxablereturnofcapital
totheextentofthestockholderstaxbasisinitssharesofYahooscommonstock,andanyremainingamountwouldbetaxed
ascapitalgain.AstockholderwouldhaveataxbasisinitssharesoftheFundsCommonStockimmediatelyaftertheSpin
Offequaltotheirfairmarketvalue.Certainstockholdersmaybesubjecttospecialrulesgoverningtaxabledistributions,
suchasthosethatrelatetothedividendsreceiveddeductionandextraordinarydividends.
EveniftheSpinOffotherwisequalifiesunderSections355and368(a)(1)(D)oftheCode,theSpinOffwouldresultina
significantU.S.federalincometaxliabilitytoYahoo(butnottoYahoostockholders)underSection355(e)oftheCodeif
oneormorepersonsacquire,directlyorindirectly,a50percentorgreaterinterest(measuredbyvoteorvalue)inthestockof
YahooorinthestockoftheFund(excluding,forthispurpose,theacquisitionoftheFundsCommonStockbyYahoo
stockholdersintheSpinOff)aspartofaplanorseriesofrelatedtransactionsthatincludestheSpinOff.Currenttaxlaw
generallycreatesapresumptionthatanyacquisitionofthestockofYahooorthestockoftheFundwithintwoyearsbefore
oraftertheSpinOffispartofaplanthatincludestheSpinOff,althoughthatpresumptionmayberebuttableundercertain
circumstances.Theprocessfordeterminingwhetheranacquisitionispartofaplanundertheserulesiscomplex,inherently
factualinnature,andsubjecttoacomprehensiveanalysisofthefactsandcircumstancesoftheparticularcase.
NotwithstandingtheopinionofSkaddenArpsdescribedabove,YahooortheFundmightinadvertentlycauseorpermita
disqualifyingchangeintheownershipofYahooortheFundtooccur.IftheSpinOffweredeterminedtobetaxableto
YahoounderSection355(e)oftheCode,Yahoowouldrecognizetaxablegaininanamountequaltotheexcessof(1)the
totalfairmarketvalueofthesharesoftheFundsCommonStockdistributedintheSpinOffover(2)Yahoosaggregatetax
basisinsuchsharesoftheFundsCommonStock.
PursuanttotheTaxMattersAgreement,subjecttospecifiedlimitedexceptions,theFundwillberequiredtoindemnify
Yahoo,itssubsidiaries,andspecifiedrelatedpersonsfortaxesandlossesresultingfromthefailureoftheSpinOfftoqualify
asataxfreetransactionunderSections355and368(a)(1)(D)oftheCode.Foramoredetaileddiscussionofthetermsofthe
TaxMattersAgreement,pleaseseeTheSpinOffTaxMattersAgreement.
U.S.FederalIncomeTaxationoftheFund
TheFundistreatedasaregularcorporation,oraCcorporation,forU.S.federalincometaxpurposes.TheFundisnot
andwillnotbeeligibletoelecttobetreatedasaregulatedinvestmentcompanyundertheCodebecausearegulated
investmentcompanycannotinvestmorethan25percentofitsassetsinsecuritiesofasingleissuer,andmorethan25percent
oftheFundsassetswillbeinvestedinsecuritiesofAlibaba.Accordingly,theFundgenerallyissubjecttoU.S.federal
incometaxonitstaxableincomeatthegraduatedratesapplicabletocorporationsundertheCode.Inaddition,theFundmay
besubjecttoanalternativeminimumtaxonitsalternativeminimumtaxableincometotheextentthatthealternative
minimumtaxexceedstheFundsregularincometaxliability.TheextenttowhichtheFundisrequiredtopayU.S.corporate
incometaxoralternativeminimumtaxcouldmateriallyreducetheFundscashavailabletomakedistributionsontheFunds
CommonStock.
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OwnershipoftheFundsCommonStock
Distributions.DistributionsbytheFundofcashorpropertyinrespectoftheFundsCommonStockwillbetreatedas
dividendsforU.S.federalincometaxpurposestotheextentpaidfromtheFundscurrentoraccumulatedearningsandprofits
(asdeterminedunderU.S.federalincometaxprinciples).Anysuchdividendswillbeeligibleforthedividendsreceived
deductionifreceivedbyanotherwisequalifyingcorporateholderthatmeetstheholdingperiodandotherrequirementsfor
thedividendsreceiveddeduction.DividendspaidbytheFundtocertainnoncorporateholdersoftheFundsCommonStock
(includingindividuals)areeligibleforU.S.federalincometaxationattheratesgenerallyapplicabletolongtermcapital
gainsforindividuals,providedthattheholderreceivingthedividendsatisfiesapplicableholdingperiodandother
requirements.
IftheamountofaFunddistributionexceedstheFundscurrentandaccumulatedearningsandprofits,suchexcesswill
betreatedfirstasataxfreereturnofcapitaltotheextentoftheholdersadjustedtaxbasisintheFundsCommonStock,with
anyremainingamounttaxedascapitalgain.Anysuchcapitalgainwillbelongtermcapitalgainiftheholderreceivingthe
distributionhasaholdingperiodintheapplicablesharesoftheFundsCommonStockofmorethanoneyear.Longterm
capitalgainsofcertainnoncorporateholdersoftheFundsCommonStock(includingindividuals)aregenerallysubjectto
U.S.federalincometaxationatreducedmaximumrates.
SalesoftheFundsCommonStock.Uponthesale,exchange,orothertaxabledispositionoftheFundsCommonStock,
aholdergenerallywillrecognizecapitalgainorlossequaltothedifferencebetweentheamountrealizedonthesale,
exchange,orothertaxabledispositionandtheU.S.holdersadjustedtaxbasisintheFundsCommonStock.Anysuch
capitalgainorlosswillbelongtermcapitalgainorlossiftheU.S.holdersholdingperiodintheFundsCommonStockis
morethanoneyearatthetimeofdisposition.LongtermcapitalgainsofcertainnoncorporateholdersoftheFunds
CommonStock(includingindividuals)aregenerallysubjecttoU.S.federalincometaxationatreducedmaximumrates.The
deductibilityofcapitallossesissubjecttolimitationsundertheCode.
ForadescriptionofthetaxbasisandholdingperiodofsharesoftheFundsCommonStockreceivedintheSpinOffby
aholderofYahooscommonstock,pleaseseeMaterialU.S.FederalIncomeTaxConsequencesoftheSpinOff.
CUSTODIAN,TRANSFERAGENT,ANDADMINISTRATOR
Custodian
[]servesasthecustodianoftheFundsassetspursuanttoacustodyagreement.Underthecustodyagreement,the
custodianholdstheFundsassetsincompliancewiththe1940Act.Foritsservices,thecustodianwillreceiveamonthlyfee
basedupon[],pluscertainchargesforsecuritiestransactions.[]islocatedat[].
TransferAgent
[]servesastheFundstransferagentandregistrarfortheFundsCommonStock.[]islocatedat[].
Administrator
[]servesasadministratortotheFund.Pursuanttoanadministrationagreement,[]isresponsiblefor[]andwill
receive$[]incompensationforservicesrendered.
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PRINCIPALSTOCKHOLDERS
Currently,alloftheFundsoutstandingsharesofCommonStockareheldbyYahoo.IntheSpinOff,Yahoowill
distributeallofthesharesoftheFundsCommonStockoftheFund,andYahoowillnotretainanyownershipinterestinthe
Fund.Therefore,totheknowledgeoftheFund,basedonthestockholdersofYahooon[],2015,itisexpectedthat
immediatelyuponcompletionoftheSpinOff,nopersonwillbeneficiallyownmorethanfivepercentofthevoting
securitiesofanyclassofequitysecuritiesoftheFund,exceptasfollows:
Amountand
StockholderNameandAddress
DavidFilo
701FirstAvenue
Sunnyvale,CA94089
BlackRock,Inc.(3)
55East52ndStreet
NewYork,NY10022
VanguardGroup,Inc.(4)
P.O.Box2600
ValleyForge,PA19482
ClassofShares
Natureof
Beneficial
Ownership(1)
Percentof
CommonStock
Outstanding(2)
CommonStock
70,761,390
7.5%
CommonStock
55,942,047
6.0%
CommonStock
46,883,344
5.0%
(1) ThenumberofsharesbeneficiallyownedbyeachpersonorgroupasofApril1,2015(exceptwhereanotherdateis
indicated)includessharesofYahooscommonstockthatsuchpersonorgrouphadtherighttoacquireonorwithin60
daysafterthatdate,including,butnotlimitedto,upontheexerciseofoptionsandvestingandpaymentofrestricted
stockunits.
(2) Foreachpersonandgroupincludedinthetable,percentageownershipiscalculatedbydividingthenumberofshares
beneficiallyownedbysuchpersonorgroupasdescribedabovebythesumofthe937,362,493sharesofYahoos
commonstockoutstanding(excludingtreasuryshares)onApril1,2015,andthenumberofsharesofYahooscommon
stockthatsuchpersonorgrouphadtherighttoacquirefromYahooonorwithin60daysofthatdate,including,butnot
limitedto,upontheexerciseofoptionsanduponvestingandpaymentofrestrictedstockunits.
(3) BeneficialownershipinformationforBlackRock,Inc.isasofDecember31,2014andisbasedoninformationcontained
intheSchedule13GAmendmentNo.1filedwiththeSEConFebruary9,2015byBlackRock,Inc.Suchamendment
statesthatBlackRock,Inc.hassolevotingpowerover45,668,925shares,sharedvotingpowerover3,036shares,sole
dispositivepowerover55,939,011shares,andshareddispositivepowerover3,036shares.
(4) BeneficialownershipinformationforVanguardGroup,Inc.isasofDecember31,2014andisbasedoninformation
containedintheForm13FfiledwiththeSEConFebruary12,2015byVanguardGroup,Inc.Suchformstatesthatthe
VanguardGrouphassoleinvestmentdiscretionover45,425,309shares,andsharedinvestmentdiscretion(withother
Vanguardinvestmentmanagers)over1,458,035shares.AccordingtoinformationreceivedfromtheVanguardGroup,it
beneficiallyownedallsharesreportedinsuchformasbeingunderitsinvestmentdiscretion.
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INDEPENDENTREGISTEREDPUBLICACCOUNTINGFIRM
[],[],istheindependentregisteredpublicaccountingfirmoftheFundandisexpectedtorenderanopinionannually
onthefinancialstatementsoftheFund.
PROXYVOTINGPOLICIES
TheFundwillvoteproxiesrelatingtoitsportfoliosecuritiesinamannerinwhichtheFundbelievesisconsistentwith
thebestinterestofstockholders.TheFundwillreviewonacasebycasebasiseachproposalsubmittedtoastockholdervote
todetermineitsimpactontheportfoliosecuritiesheldbytheFund.AlthoughtheFundgenerallywillvoteagainstproposals
thattheFundexpectswouldhaveanegativeimpactonitsportfoliosecurities,theFundmayvoteforsuchaproposalifthere
existscompellinglongtermreasonstodoso.
TheFundsproxyvotingdecisionsaremadebyaproxyvotingcommittee.ToensurethattheFundsvoteisnotthe
productofaconflictofinterest,theFundrequiresthat:
anyoneinvolvedinthedecisionmakingprocessdisclosetotheFundsChiefComplianceOfficeranypotential
conflictthatheorsheisawareofandanycontactthatheorshehashadwithanyinterestedpartyregardingaproxy
voteand
employeesinvolvedinthedecisionmakingprocessorvoteadministrationareprohibitedfromrevealinghowthe
Fundcurrentlyintendstovoteonaproposalinordertoreduceanyattemptedinfluencefrominterestedparties.
InformationonhowtheFundvotedproxiesrelatingtoportfoliosecuritiesduringthemostrecenttwelvemonthperiod
endedJune30willbeavailablewithoutcharge,uponrequest,bycalling[]orbyvisitingtheFundswebsiteat[].This
informationwillalsobeavailableontheSECswebsiteatwww.sec.gov.
CODEOFETHICS
TheFundhasadoptedacodeofethicspursuanttoRule17j1underthe1940Act.Thecodeofethicsappliestothe
personalinvestingactivitiesofDirectors,officers,andcertainemployees(AccessPersons).Rule17j1andthecodesof
ethicsaredesignedtopreventunlawfulpracticesinconnectionwiththepurchaseorsaleofsecuritiesbyAccessPersons.
Underthecodeofethics,AccessPersonsarepermittedtoengageinpersonalsecuritiestransactions,butaregenerally
requiredtoprecleartheirpersonalsecuritiestransactions,includingprivateinvestmentsandIPOs,andmustreporttheir
holdingsformonitoringpurposes.AccessPersonsmayengageinpersonalsecuritiestransactionsinsecuritiesthatareheldby
theFund,subjecttothelimitationsofthecodeofethics.
ThecodeofethicsoftheFundisonfilewiththeSECandcanbereviewedandcopiedattheSECsPublicReference
RoominWashington,D.C.InformationontheoperationofthePublicReferenceRoommaybeobtainedbycallingtheSEC
at(202)5518090.ThecodeofethicsisalsoavailableontheEDGARDatabaseontheSECsInternetsiteatwww.sec.gov,
andcopiesofthecodeofethicsmaybeobtained,afterpayingaduplicatingfee,byelectronicrequestatthefollowingemail
address:publicinfo@sec.gov,orbywritingtheSECsPublicReferenceSection,Washington,D.C.205490102.
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ADDITIONALINFORMATION
ThisinformationstatementconstitutespartofaregistrationstatementfiledbytheFundwiththeSECunderthe1940
Act.Thisinformationstatementomitscertainoftheinformationcontainedintheregistrationstatement,andreferenceis
herebymadetotheregistrationstatementandrelatedexhibitsforfurtherinformationwithrespecttotheFund.Any
statementscontainedhereinconcerningtheprovisionsofanydocumentarenotnecessarilycomplete,andineachinstance
referenceismadetothecopyofsuchdocumentfiledasanexhibittotheregistrationstatementorotherwisefiledwiththe
SEC.Eachsuchstatementisqualifiedinitsentiretybysuchreference.Thecompleteregistrationstatementmaybeobtained
fromtheSECuponpaymentofthefeeprescribedbyitsrulesandregulationsorfreeofchargethroughtheSECwebsite
(www.sec.gov).
PRIVACYPRINCIPLESOFTHEFUND
TheFundiscommittedtomaintainingtheprivacyofitscurrentandformerstockholdersandtosafeguardingtheirnon
publicpersonalinformation.
Inordertoconductitsbusiness,theFund,throughitstransferagent,[],collectsandmaintainscertainnonpublic
personalinformationabouttheFundsstockholdersofrecord,butnottheunderlyingbeneficialholder,withrespecttotheir
transactionsinsharesoftheFundssecurities.Thisinformationincludesthestockholderofrecordsaddress,tax
identificationorSocialSecuritynumber,andsharebalances.
TheFunddoesnotdiscloseanynonpublicpersonalinformationaboutyou,theFundsotherstockholders,ortheFunds
formerstockholderstothirdpartiesunlessnecessarytoprocessatransaction,serviceanaccount,orasotherwisepermittedby
law.
Toprotectyourpersonalinformationinternally,theFundrestrictsaccesstononpublicpersonalinformationabout
FundstockholderstothoseemployeeswhoneedtoknowthatinformationtoprovideservicestoFundstockholders.The
Fundalsomaintainsphysical,electronic,andproceduralsafeguardsthataredesignedtoprotectthenonpublicpersonal
informationofitscurrentandformerstockholders,includingproceduresrelatingtotheproperstorageanddisposalofsuch
information.
Ifyouarelocatedinajurisdictionwherespecificlaws,rules,orregulationsrequiretheFundtoprovideyouwith
additionalordifferentprivacyrelatedrightsbeyondwhatissetforthabove,thentheFundwillcomplywiththosespecific
laws,rules,orregulations.
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PARTC
OTHERINFORMATION
Item25.
FinancialStatementsAndExhibits
(1) FinancialStatements
TheRegistranthasnotconductedanybusinessasofthedateofthisfiling,otherthaninconnectionwithits
organization.
(2) Exhibits
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(l)
(m)
(n)
(o)
(p)
(q)
(r)
CertificateofIncorporationofRegistrant(+)
ByLawsofRegistrant(+)
Notapplicable
Notapplicable
Notapplicable
Notapplicable
Notapplicable
OmittedpursuanttoGeneralInstructionG(3)ofFormN2
Notapplicable
FormofCustodyAgreement(+)
FormofStockTransferAgencyAgreement(+)
FormofAdministrationAgreement(+)
FormofTaxMattersAgreement(+)
FormofTransferAgreement(+)
FormofSeparationandDistributionAgreement(+)
FormofComplianceServicesAgreement(+)
OmittedpursuanttoGeneralInstructionG(3)ofFormN2
Notapplicable
OmittedpursuanttoGeneralInstructionG(3)ofFormN2
OmittedpursuanttoGeneralInstructionG(3)ofFormN2
Notapplicable
Notapplicable
CodeofEthicsofRegistrant(+)
(+) Tobefiledbyfurtheramendment.
Item26.
MarketingArrangements
Notapplicable.
Item27.
OtherExpensesofIssuanceandDistribution
ThefollowingtablesetsforththeestimatedexpensestobeincurredinconnectionwiththeSpinOff:
[]ListingFees
Printer/EDGARFiler
LegalCounsel
IndependentRegisteredPublicAccountingFirm
DistributionAgent
Miscellaneous
Total
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$[]
$[]
$[]
$[]
$[]
$[]
$[]
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Item28.
PersonsControlledbyorUnderCommonControlwithRegistrant
[Tocome]
Item29.
NumberofHoldersofSecurities
TitleofClass
Commonstock,parvalue
$0.00001pershare
NumberofRecordStockholders
asof,2015
Item30.
Indemnification
ReferenceismadetoArticle[]oftheRegistrantsCertificateofIncorporationprovidesasfollows:
[]
ReferenceismadetoSection[]oftheTaxMattersAgreementfiledasexhibit(k)(iii)hereto,whichprovidesas
follows:
[]
ReferenceismadetoSection[]oftheSeparationandDistributionAgreementfiledasexhibit(k)(v)hereto,which
providesasfollows:
[]
Item31.
BusinessandOtherConnectionsoftheInvestmentAdviserandtheSubAdviser
Notapplicable.
Item32.
LocationofAccountsandRecords
TheaccountsandrecordsoftheRegistrantaremaintainedattheofficesoftheFundat[].
Item33.
ManagementServices
Notapplicable.
Item34.
Undertakings
Notapplicable.
C2
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Signatures
PursuanttotherequirementsoftheInvestmentCompanyActof1940,theRegistranthasdulycausedthisregistration
statementtobesignedonitsbehalfbytheundersigned,thereuntodulyauthorized,intheCityofSunnyvale,Stateof
California,onthe17thdayofJuly,2015.
AABACOHOLDINGS,INC.
By: /s/AmanS.Kothari
AmanS.Kothari
InitialDirector,PrincipalExecutiveOfficer,
andPrincipalFinancialOfficer
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