Altaba Inc.

Consolidated Schedule of Investments

As of March 31, 2019 (unaudited)

($ in 000's, except strike prices)

 

Description               Expiration     Principal $ / Shares / Units     Fair Value $  

Affiliated Investments at Fair Value — 120.5%

 

     

Online Services and e-Commerce

         

Common shares - 120.5%

         

Alibaba Group Holding Limited (1)(2)(3)

 

        283,315,416       51,690,898  

Total Affiliated Investments at Fair Value
(Cost — $2,011,203)

 

          51,690,898  

Unaffiliated Investments at Fair Value — 0.0%

 

     

Internet Software & Services

         

Common shares - 0.0%

         

SeatGeek, Inc. (1)(4)

          47,463       185  

Total Common Shares (Cost — $9)

            185  
Fixed Income Securities         Rate % (5)     Final
Maturity (6)
    Principal $     Fair Value $  

Money Market Funds — 6.2%

         

Fidelity Government Portfolio - Class I

 

    2.30         1,456,826       1,456,826  

Invesco Government and Agency Portfolio - Instutitional Class

 

    2.34         1,000,000       1,000,000  

Invesco Treasury Portfolio - Institutional Class

 

    2.33         219,852       219,852  

JP Morgan U.S. Government Money Market Fund - Capital Class

 

    2.33         2,300       2,300  

Total Money Market Investments
(Cost — $2,678,978)

 

        2,678,978       2,678,978  
    Rate Type     Rate % (7)     Final
Maturity
    Principal $     Fair Value $  

Short Term

         

Corporate Debt — 0.3%

         

Financial — 0.1%

         

Berkshire Hathaway Finance Corp.

    Floating       3.10 (3 month LIBOR USD + 0.32)       1/10/2020       2,500       2,505  

Branch Banking and Trust Co.

    Floating       3.24 (3 month LIBOR USD + 0.45)       1/15/2020       4,000       4,013  

Branch Banking and Trust Co.

    Floating       3.27 (3 month LIBOR USD + 0.53)       5/1/2019       12,500       12,500  

National Rural Utilities Coop Finance Corp

    Floating       3.00 (3 month LIBOR USD + 0.20)       4/5/2019       14,952       14,952  

Principal Life Global Funding II

    Fixed       1.50       4/18/2019       3,870       3,868  

Total

          37,822       37,838  

 

  

 


Industrial — 0.2%

         

Apple Inc.

    Floating       2.94 (3 month LIBOR USD + 0.20)       2/7/2020       13,506       13,529  

Chevron Corp

    Floating       2.83 (3 month LIBOR USD + 0.21)       3/3/2020       12,000       11,998  

Cisco Systems Inc.

    Floating       2.97 (3 month LIBOR USD + 0.34)       9/20/2019       11,000       11,009  

Daimler Finance North America LLC

    Fixed       2.30       1/6/2020       18,543       18,433  

Honeywell International Inc.

    Floating       3.03 (3 month LIBOR USD + 0.28)       10/30/2019       3,563       3,567  

John Deere Capital Corporation

    Fixed       2.30       9/16/2019       20,000       19,962  

John Deere Capital Corporation

    Floating       2.91 (3 month LIBOR USD + 0.30)       3/13/2020       8,140       8,153  

Siemens Financieringsmaatschappij N.V.

    Floating       2.95 (3 month LIBOR USD + 0.34)       3/16/2020       15,000       15,040  

Total

          101,752       101,691  

Total Corporate Debt (Cost — $139,508)

          139,574       139,529  
          Rate % (8)                    

Commercial Paper — 2.0%

         

BPCE

   
Zero
Coupon
 
 
    2.86       9/17/2019       30,000       29,603  

Exxon Mobil Corporation

   
Zero
Coupon
 
 
    2.46       4/8/2019       50,000       49,976  

John Deere Capital Corporation

   
Zero
Coupon
 
 
    2.54       4/15/2019       25,000       24,975  

Merck & Co., Inc.

   
Zero
Coupon
 
 
    2.47       4/2/2019       50,000       49,997  

Merck & Co., Inc.

   
Zero
Coupon
 
 
    2.47       4/9/2019       50,000       49,973  

National Australia Bank Limited

   
Zero
Coupon
 
 
    2.73       9/17/2019       75,000       74,053  

National Australia Bank Limited

   
Zero
Coupon
 
 
    2.73       9/19/2019       50,000       49,361  

Nestle Capital Corporation

   
Zero
Coupon
 
 
    2.56       9/4/2019       30,000       29,671  

Nestle Capital Corporation

   
Zero
Coupon
 
 
    2.64       9/23/2019       50,000       49,366  

Royal Bank of Canada

   
Zero
Coupon
 
 
    2.76       9/26/2019       80,000       78,922  

Santander UK PLC

   
Zero
Coupon
 
 
    2.84       9/13/2019       50,000       49,358  

Santander UK PLC

   
Zero
Coupon
 
 
    2.83       9/19/2019       25,000       24,669  

Swedbank AB

   
Zero
Coupon
 
 
    2.74       9/16/2019       75,000       74,055  

The Coca-Cola Company

   
Zero
Coupon
 
 
    2.71       9/19/2019       90,000       88,859  

The Coca-Cola Company

   
Zero
Coupon
 
 
    2.68       9/20/2019       10,000       9,873  

Walmart Inc.

   
Zero
Coupon
 
 
    2.49       4/8/2019       50,000       49,976  

Walmart Inc.

   
Zero
Coupon
 
 
    2.49       4/9/2019       50,000       49,972  

Walmart Inc.

   
Zero
Coupon
 
 
    2.49       4/10/2019       25,000       24,985  

Total Commercial Paper (Cost — $857,623)

          865,000       857,644  
          Rate % (7)                    

Certificates of Deposits — 0.2%

         

BNP Paribas

    Fixed       2.85       9/17/2019       50,000       50,000  

BNP Paribas

    Fixed       2.78       9/3/2019       25,000       25,000  

Total Certificates of Deposits (Cost — $75,000)

 

      75,000       75,000  

U.S. Government Debt — 0.4%

         

United States Treasury

    Fixed       0.88       9/15/2019       80,000       79,450  

United States Treasury

    Fixed       1.75       9/30/2019       90,000       89,691  

Total U.S. Government Debt (Cost — $169,080)

 

      170,000       169,141  

Total Short Term Fixed Income Securities (Cost — $1,241,211) — 2.9%

 

      1,249,574       1,241,314  

Long Term

         

Corporate Debt — 0.4%

         

Financial — 0.2%

         

Mass Mutual Global Funding II

    Fixed       1.95       9/22/2020       20,000       19,817  

Protective Life Global Funding

    Fixed       2.16       9/25/2020       7,000       6,939  

U.S. Bank N.A

    Fixed       2.05       10/23/2020       25,000       24,820  

Wells Fargo Bank N.A.

    Fixed       2.60       1/15/2021       35,000       34,888  

Total

          87,000       86,464  

Industrial — 0.2%

         

American Honda Finance Corp

    Fixed       2.45       9/24/2020       20,000       19,932  

American Honda Finance Corp

    Fixed       2.65       2/12/2021       12,500       12,491  

American Honda Finance Corp

    Floating       2.91 (3 month LIBOR USD + 0.21)       2/12/2021       12,500       12,506  

Apple Inc.

    Floating       2.77 (3 month LIBOR USD + 0.07)       5/11/2020       7,000       7,006  

Intel Corp

    Floating       2.78 (3 month LIBOR USD + 0.08)       5/11/2020       11,000       10,997  


Toyota Motor Credit Corporation

     Floating        3.03 (3 month LIBOR USD + 0.26)        4/17/2020        12,000        12,026  

Total

              75,000        74,958  

Total Corporate Debt (Cost — $161,321)

              162,000        161,422  

Total Long Term Fixed Income Securities
(Cost — $161,321) — 0.4%

 

           162,000        161,422  

Total Unaffiliated Investments
(Cost — $4,081,519)

 

           4,090,552        4,081,899  
                          Units      Fair Value $  

Investment in Controlled Affiliate

              

Internet Software & Services

              

Excalibur IP, LLC (1)(4)

              3,340        250,000  

Total Investment in Controlled Affiliate
(Cost — $0) — 0.6%

                 250,000  
              

 

 

 

Total Investments — 130.6%

                 56,022,797  

Liability for Margin Loan Payable — (7.0)%

 

              (3,000,000

Other Liabilities/Other Assets — (23.6)%

 

              (10,127,024
              

 

 

 

Net Assets Applicable to Common Shares — 100%

 

            $ 42,895,773  
              

 

 

 

 

(1)

Non-income producing securities.

(2)

The Fund is a party to a registration rights agreement with respect to its Alibaba shares. The registration rights agreement contains provisions restricting the ability to sell the Alibaba shares in certain circumstances. As of March 31, 2019, some of the Fund's Alibaba shares were held in the form of ordinary shares. The Alibaba ordinary shares would need to be converted to American Depository Shares prior to any sale on the New York Stock Exchange. For a further description see the Fund's Registration Statement on Form N-2.

(3)

All or a portion of this security has been pledged as collateral in connection with the Fund's Margin Loan Agreement. As of March 31, 2019, the number of Alibaba shares pledged as collateral was 28,000,000 and the total value of securities pledged as collateral for the Margin Loan Agreement was $5.1 billion as well as approximately $2 billion of cash and short term investments. Subsequent to March 31, 2019, the Margin Loan has been repaid and all of the Alibaba shares pledged as collateral have been released.

(4)

Fair-value security. Represents fair value measured in good faith under procedures approved by the Board of Directors, aggregate holdings equal 0.6% of the net assets of the Fund.

(5)

Presented rate represents the Money Market Fund's average 7-day % yield.

(6)

Money Market Funds do not have a set maturity date.

(7)

For fixed and floating rate bonds, the rate presented is the coupon rate as of March 31, 2019. LIBOR stands for London Interbank Offered Rate.

(8)

For zero coupon bonds, the rate presented is Yield as of March 31, 2019.

 

     Weighted Average
Strike Price $
     Expiration(1)      # of Contracts      Fair Value $  

Written Warrants (1)(2)(3)

           

Total Value of Written Warrants
(Premiums Received — $75,067)

     69.39        3/1/19 - 5/24/19        3        (82,457

 

(1)

European style warrants.

(2)

The initial strike price of the written warrants was $71.24. Counterparties to the written warrants may make adjustments to certain terms of the written warrants upon the occurrence of specified events, if the event results in a material change to the trading price of Altaba's common stock or the value of the written warrants. The adjusted weighted average strike price of $69.39 was used in estimating the fair value of the written warrants as of March 31, 2019.

(3)

Fair-value security. Represents fair value measured in good faith under procedures approved by the Board of Directors, aggregate holdings equal (0.2)% of the net assets of the Fund.

At March 31, 2019, the tax cost basis of the Fund's investments and derivatives was $8,759,382 and the unrealized appreciation and depreciation were $47,188,348 and $(7,390), respectively, with a net unrealized appreciation of $47,180,958.

 

  

 


Hierarchy of Fair Value Inputs

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

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

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

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

The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

The following table reflects the valuation level used in the consolidated schedule of investments as of March 31, 2019 for the Fund's assets (in thousands):

 

     Level 1      Level 2      Level 3      Total  

Affiliated investments

   $  51,690,898      $ —        $ —        $  51,690,898  

Unaffiliated investments:

           

Common shares

     —          —          185        185  

Money market funds

     2,678,978        —          —          2,678,978  

Fixed income securities:

           

Corporate debt - short and long term

     —          300,951        —          300,951  

Commercial paper

     —          857,644        —          857,644  

Certificates of deposits

     —          75,000        —          75,000  

U.S. government debt

     —          169,141        —          169,141  

Investment in controlled affiliate:

           

Excalibur(1)

     —          —          250,000        250,000  
  

 

 

    

 

 

    

 

 

    

 

 

 

Financial assets at fair value

     54,369,876        1,402,736        250,185        56,022,797  

Written warrants

     —          —          (82,457      (82,457
  

 

 

    

 

 

    

 

 

    

 

 

 

Total financial assets and liabilities at fair value

   $ 54,369,876      $  1,402,736      $  167,728      $ 55,940,340  

 

(1)

Excalibur assets relates to the Fund's patent portfolio.

The following is a reconciliation of investments for which significant unobservable inputs (Level 3) were used in determining fair value (in thousands):

 

     Assets      Liabilities  
     Total
Investments in
Securities
     Unaffiliated
Investments
     Investment in
Controlled
Affiliate
     Written
Warrants
 

Balance as of January 1, 2019

   $  250,185      $  185      $  250,000      $  (23,974

Purchases

     —          —          —          32,047  

Sales

     —          —          —          —    

Change in unrealized appreciation (depreciation)

     —          —          —          (74,926

Realized gain (loss)

     —          —          —          (15,604

Transfers out of Level 3

     —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Balance as of March 31, 2019

   $ 250,185      $ 185      $ 250,000      $  (82,457

The change in unrealized appreciation (depreciation) attributable to assets and liabilities owned on March 31, 2019, which were valued using significant unobservable inputs (Level 3) amounted to nil and $(65) million, respectively.

The fair values of Altaba's Level 1 financial assets and liabilities are based on quoted prices in active markets for identical assets or liabilities that the Fund has the ability to access. The fair values of Altaba's Level 2 financial assets and liabilities are obtained using quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets in markets that are not active; and inputs other than quoted prices (e.g., interest rates and yield curves). Altaba utilizes a pricing service to assist in obtaining fair value pricing for the marketable debt securities. The fair value for Altaba's Level 3 financial assets were obtained using a variety of techniques including transaction price, income approach and Black-Scholes models.

 

Type of investment

   Fair Value at
March 31, 2019
(in thousands)
    Valuation Technique      Unobservable Inputs

Unaffiliated investments - common shares

   $ 185       Transaction price      Price per share    $2.60 - $5.20

Investment in controlled affiliate - Excalibur

   $ 250,000       Income approach      Number of patents plus
applications pending
   3,340
       

 

Discount rate

   12.50%

Written warrants

   $ (82,457     Black Scholes Model      Expected dividend yield    0.02%
        Risk-free interest rate    2.62%
        Market Volatility    25.18% - 41.14%
        Expected life (in years)    0.04

Quantitative Disclosure of Derivative Holdings

The Fund entered into Hedge Transactions to reduce the potential dilution with respect to Altaba's common stock upon conversion of the Fund's 0.00% Convertible Senior Notes due 2018 (the “Convertible Notes”). The Convertible Notes and Hedge Transactions were settled in December 2018.

The Fund also entered into Warrant Transactions with the certain option counterparties giving them the right to purchase common stock from Altaba. The Warrant Transactions


initially covered, subject to customary anti-dilution adjustments, the same number of shares of common stock that initially underlay the Convertible Notes, including any notes purchased by the initial purchasers pursuant to their over-allotment option. The Warrant Transactions may separately have a dilutive effect with respect to Altaba's common stock to the extent that the net asset value per share of its common stock exceeds the strike price of the Warrant Transactions, in which case the Fund would be prohibited under the 1940 Act from issuing shares to satisfy its obligations under the Warrant Transactions. If the Fund is required to sell assets to satisfy its obligations under the Warrant Transactions in cash, it may be required to do so at a time that is disadvantageous to the Fund and its stockholders.

The initial strike price of the Warrant Transactions was $71.24. Counterparties to the written warrants may make adjustments to certain terms of the Warrant Transactions upon the occurrence of specified events. The adjusted weighted average strike price of $69.39 (which takes into account adjustments made by Counterparties to the Warrant Transactions in connection with the sale of its operating business to Verizon Communications Inc.) was used in estimating the fair value of the written warrants as of March 31, 2019. The Warrant Transactions began to expire on March 1, 2019 and will continue to expire through May 24, 2019.

There is no master netting arrangement policy.

The average quarterly fair value of written warrants during the period ended March 31, 2019 was $(53) million.

The realized gain (loss) and change in unrealized appreciation (depreciation) on derivatives recognized on the consolidated statement of operations for the period ended March 31, 2019 is as follows (in thousands):

Amount of realized gain (loss) on derivatives recognized as a result of operations:

 

     Written  
     Warrants  

Equity contracts

   $  (15,604

Change in unrealized appreciation (depreciation) on derivatives recognized as a result of operations:

 

     Written  
     Warrants  

Equity contracts

   $  (74,926

Investments in Affiliates(1)

If the Fund's holding represents ownership of 5% or more of voting securities of a company, the company is deemed to be an affiliate as defined in the 1940 Act. The Fund had the following transactions during the period ended March 31, 2019 with affiliated companies(1):

 

     Alibaba Group  
     Holding  
     Limited  

Balance of shares held at January 1, 2019

     283,315,416  

Purchases

     —    

Balance of shares held at March 31, 2019

     283,315,416  

Fair value as of March 31, 2019(2)

   $ 51,690,898  

Change in unrealized appreciation (depreciation)(2)

   $ 12,856,854  

Distributions(2)

   $ —    

Net realized gain (loss)(2)

   $ —    

 

(1)

Affiliated issuer, as defined in the Investment Company Act of 1940, as amended.

(2)

In thousands.

 

     Excalibur IP,  
     LLC  

Balance of patents held and applications pending at January 1, 2019

     3,420  

Change in patents held

     (80

Balance of patents held and applications pending at March 31, 2019

     3,340  

Fair value as of March 31, 2019(2)

   $  250,000  

Change in unrealized appreciation (depreciation)(2)

   $ —    

Distributions(2)

   $ —    

Net realized gain (loss)(2)

   $ —    

 

(1)

Affiliated issuer, as defined in the Investment Company Act of 1940, as amended.

(2)

In thousands.

 

  

 


SIGNATURE

The Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

   (Registrant):    Altaba Inc.
   By (Signature and Title):           

/s/ Alexi A. Wellman

      Alexi A. Wellman, Chief Financial and Accounting Officer
   Date:    May 3, 2019