ck0001083387-20231231
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| April
30, 2024 |
Prospectus |
www.kineticsfunds.com |
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The
Internet Fund (WWWFX)
The
Global Fund (WWWEX)
The
Paradigm Fund (WWNPX)
The
Small Cap Opportunities Fund (KSCOX)
The
Market Opportunities Fund (KMKNX)
The
Multi-Disciplinary Income Fund (KMDNX)
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a series of Kinetics Mutual Funds, Inc. |
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| The
U.S. Securities and Exchange Commission has not approved or disapproved
these securities or passed upon the adequacy of the Prospectus. Any
representation to the contrary is a criminal
offense. |
Table
of Contents
Investment
Objectives
The
investment objective of the Internet Fund is long-term growth of
capital. The Internet Fund seeks to
obtain current income as a secondary objective. The Internet Fund is the sole
“feeder fund” to The Internet Portfolio, a series of Kinetics Portfolios
Trust.
Fees and Expenses of the
Fund
This
table describes the fees and expenses that you may pay if you buy, hold, and
sell shares of the Internet Fund. You may pay other fees, such as brokerage
commissions and other fees to financial intermediaries, which are not reflected
in the table and example below.
Fee
Table(1)
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SHAREHOLDER
FEES
(fees
paid directly from your investment) |
No
Load Class |
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Redemption
Fee (as a percentage of amount redeemed on shares held for 30 days or
less, if applicable) |
2.00% |
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ANNUAL
FUND OPERATING EXPENSES
(expenses
that you pay each year as a percentage of the value of your
investment) |
| No
Load Class |
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Management
Fees(1) |
| 1.25% |
| Distribution
(Rule 12b-1) Fees |
| None |
| Other
Expenses |
| 0.50% |
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Shareholder
Servicing Fees |
0.25% |
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Other
Operating Expenses |
0.25% |
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| Total
Annual Fund Operating Expenses |
| 1.75% |
(1)This
table and the example below reflect the aggregate expenses of the Internet Fund
and the Internet Portfolio. The management fees paid by the Internet Fund
reflect the proportionate share of fees allocated to the Internet Fund from the
Internet Portfolio.The fees and expenses of the Internet Portfolio included
those incurred by any subsidiary wholly-owned and controlled by the Internet
Portfolio.
Example. This Example is intended to help you compare the cost of investing
in the Internet Fund with the cost of investing in other mutual funds. This
Example assumes that you invest $10,000 in the Internet Fund for the time
periods indicated and then redeem all of your shares at the end of those
periods. The Example also assumes that your investment has a 5% return each year
and that the Internet Fund’s operating expenses remain the same (taking into
account the expense limitation only in the first year).
Although your actual costs may be higher
or lower, based on these assumptions your costs for the Internet Fund would
be:
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Year |
3
Years |
5
Years |
10
Years |
| No
Load Class |
$178 |
$551 |
$949 |
$2,062 |
Portfolio
Turnover.
The Internet Portfolio pays transaction
costs, such as commissions, when it buys and sells securities (or “turns over”
its portfolio). A higher portfolio turnover rate may indicate higher transaction
costs and may result in higher taxes when Fund shares are held in a taxable
account. These
costs,
which are not reflected in annual fund operating expenses or in the Example,
affect the Internet Portfolio’s, and therefore the Internet Fund’s, performance.
During the most recent fiscal year, the Internet Portfolio’s portfolio turnover
rate was 19% of the average value of its portfolio.
Principal Investment
Strategy
The
Internet Fund is a non-diversified fund that invests all of its investable
assets in the Internet Portfolio, a series of Kinetics Portfolios Trust.
Under normal circumstances, the Internet Portfolio invests
at least 80% of its net assets plus any borrowings for investment purposes in
common stocks, convertible securities, warrants and other equity securities
having the characteristics of common stocks (such as American Depositary
Receipts (“ADRs”), Global Depositary Receipts (“GDRs”) and International
Depositary Receipts (“IDRs”)), of U.S. and foreign companies engaged in the
Internet and Internet‑related activities and whose businesses are vastly
improved through the distribution of content and reduction of costs with the use
of the Internet, such as content providers, computer hardware and software,
venture capital, Internet service providers, Internet portals,
wireless/broadband access, e-commerce, financial service companies, auction
houses, and telecommunications. The Internet Portfolio may also invest in
exchange-traded funds (“ETFs”) and purchase and write options for hedging
purposes and/or direct investment.
The Internet Portfolio may invest up to 20% of its total assets in
convertible and non-convertible debt securities rated below investment grade,
also known as junk bonds, or unrated securities that the Investment Adviser has
determined to be of comparable quality.
The
Investment Adviser selects portfolio securities by evaluating a company’s
positioning and business model as well as its ability to grow and expand its
activities via the Internet or achieve a competitive advantage in
cost/profitability and brand image leveraging via use of the Internet. The
Investment Adviser also considers a company’s fundamentals by reviewing its
balance sheets, corporate revenues, earnings and dividends. Furthermore, the
Investment Adviser looks at the amount of capital a company currently expends on
research and development. The Internet Portfolio may invest in companies of any
size, including small and medium-sized companies. Additionally, the Internet
Portfolio may participate in securities lending arrangements up to 33-1/3% of
the securities in its portfolio with brokers, dealers, and financial
institutions (but not individuals) in order to increase the return on its
portfolio.
The
Internet Portfolio may invest indirectly in bitcoin through a Delaware statutory
trust, Grayscale Bitcoin Trust ETF (“Grayscale Bitcoin Trust”) and through other
pooled investment vehicles that provide exposure to crypto assets. Certain of
these vehicles may not be registered under the Investment Company Act of 1940,
as amended (the “1940 Act”) and do not receive the protections of the 1940 Act.
The
Internet Portfolio will not invest directly in Bitcoin or other crypto assets.
Grayscale
Bitcoin Trust is one of the first spot Bitcoin ETFs in the U.S. It enables
investors to gain exposure to bitcoin in the form of a security while avoiding
the challenges of buying, storing, and safekeeping bitcoin, directly. Bitcoins
are a type of crypto assets that are not issued by a government, bank or central
organization. Bitcoins exist on an online, peer-to-peer computer network (the
“Bitcoin Network”) that hosts a public transaction ledger where bitcoin
transfers are recorded (the “Blockchain”). Bitcoins have no physical existence
beyond the record of transactions on the Blockchain. The Grayscale Bitcoin Trust
invests principally
in
bitcoins. The Internet Portfolio held 52.67% of its net assets in the Grayscale
Bitcoin Trust as of March 31, 2024. The amount of the Internet Portfolio’s
investment in crypto assets may be limited by law or by tax considerations.
The
Internet Portfolio contributed a portion of its holdings in the Grayscale
Bitcoin Trust
to
a wholly-owned and controlled subsidiary organized under the laws of the Cayman
Islands (the “Cayman Subsidiary”).
The
Internet Portfolio is also the sole shareholder of a wholly owned subsidiary
organized under Delaware law (the “Delaware Subsidiary”). The Internet Portfolio
contributed a portion of its holdings in the Grayscale Bitcoin Trust to the
Delaware Subsidiary. Any net gains that the Delaware Subsidiary recognizes on
future sales of the contributed Grayscale Bitcoin Trust shares will be subject
to federal and state corporate income tax, but the dividends that the Delaware
Subsidiary pays to the Internet Portfolio (i.e.,
those gains, net of the tax paid and any other expenses of the Delaware
Subsidiary, such as its management and advisory fees) will be eligible to be
treated as “qualified dividend income” under the Internal Revenue Code of 1986,
as amended (the “Internal Revenue Code”). The Delaware Subsidiary and the Cayman
Subsidiary are each referred to herein as a “Subsidiary” and collectively as
“Subsidiaries.” Additional information regarding the tax treatment of the Fund
is provided in the “Taxes” section of the SAI.
In
the future, the Internet Portfolio may seek to gain additional exposure to the
Grayscale Bitcoin Trust that may not produce qualifying income for the Internet
Fund under the Internal Revenue Code if held directly. The Internet Portfolio
will not make any additional investments in the Grayscale Bitcoin Trust if as a
result of such investment, its aggregate investment in the Grayscale Bitcoin
Trust, either directly or through a Subsidiary, would be more than 15% of its
assets at the time of the investment. However, the Portfolio’s investment in the
Grayscale Bitcoin Trust may, at times, exceed 15% of its net assets, due to
appreciation.
Each
Subsidiary invests primarily in the Grayscale Bitcoin Trust. The Internet
Portfolio will invest in its Subsidiaries in a manner that is consistent with
the limitations of the federal tax laws, rules and regulations that apply to the
Internet Fund as a “regulated investment company” (“RIC”) under
Subchapter M of Subtitle A, Chapter 1, of the Internal Revenue Code
(“Subchapter M”). However, the Internet Portfolio and each Subsidiary comply
with the same fundamental investment restrictions on an aggregate basis, to the
extent those restrictions are applicable to the investment activities of each
Subsidiary. Each Subsidiary also complies with Section 17 of the 1940 Act
relating to affiliated transactions and custody, and the Investment Adviser
complies with Section 15 of the 1940 Act, relating to investment advisory
contracts with respect to the Subsidiaries. Unlike the Internet Fund, each
Subsidiary does not, and will not, seek to qualify as a RIC. The Internet
Portfolio is the sole shareholder of each Subsidiary and does not expect shares
of the Subsidiaries to be offered or sold to other investors. The Subsidiaries
include entities that engage in investment activities in securities or other
assets that are primarily controlled by the Internet Portfolio. The Internet
Portfolio does not intend to create or acquire primary control of any entity
which primarily engages in investment activities in securities or other assets
other than entities wholly-owned by the Internet Portfolio.
Sell
decisions are generally triggered by either adequate value being achieved, as
determined by the Investment Adviser, or by an adverse change in a company’s
operating performance or a deterioration of the company’s business model. A sell
trigger may also occur if the Investment Adviser discovers a new investment
opportunity that it believes is more compelling and represents a greater risk
reward profile than other investment(s) held by the Internet Portfolio.
The
Internet Portfolio may maintain during a temporary period, which could be for a
short period or a longer period lasting several years or more, of abnormal
conditions, a significant portion of its total assets in cash and securities,
generally considered to be cash and cash equivalents, including, but not limited
to: high quality, U.S. short-term debt securities and money market instruments.
The Investment
Adviser
will invest in such short-term cash positions to the extent that the Investment
Adviser is unable to find sufficient investments meeting its criteria and when
the Investment Adviser believes the purchase of additional equity securities
would not further the investment objective of the Internet Portfolio during such
periods of time. Additionally, to respond to adverse market, economic, political
or other conditions, which may persist for short or long periods of time, the
Internet Portfolio may invest up to 100% of its assets in the types of high
quality, U.S. short-term debt securities and money market instruments described
above.
If
the market advances during periods when the Internet Portfolio is holding a
large cash position, the Portfolio may not participate as much as it would have
if it had been more fully invested in securities. In the aforementioned
temporary defensive periods, the Investment Adviser believes that an additional
amount of liquidity in the Internet Portfolio is desirable both to meet
operating requirements and to take advantage of new investment opportunities.
When the Internet Portfolio holds a significant portion of assets in cash and
cash equivalents, it may not meet its investment objective.
The
Internet Portfolio held 14.20% of its net assets in the Texas Pacific Land
Corporation (the “Land Corporation”) as of March 31, 2024. The Land Corporation
is a corporation organized under the laws of the state of New York. One of the
largest land owners in Texas, the Land Corporation derives most of its income
from oil and gas royalty revenue, land easements and water royalties and sales.
The Land Corporation has historically operated with minimal operating expenses,
little to no debt and utilized cash flow to return capital to unitholders
through share repurchases and dividends. While the Land Corporation has held the
majority of its assets since its formation in 1888, the development of energy
resources subject to its royalty interests and related land use have experienced
rapid growth in recent years due to advances in energy exploration and
extraction technologies.
Principal Investment
Risks
Investing in
common stocks has inherent risks that could cause you to lose
money. The principal risks of investing in the Internet Fund,
and indirectly the Internet Portfolio, are listed below and could adversely
affect the net asset value (“NAV”), total return and value of the Internet Fund,
Internet Portfolio and your investment. The first six risks are prioritized by
order of importance. The remaining principal risks are presented in alphabetical
order to facilitate finding particular risks and comparing them with other
funds. Each risk summarized below is considered a principal risk of investing in
the Internet Fund, and indirectly the Internet Portfolio, regardless of the
order in which it appears. Different risks may be more significant at different
times depending on market conditions or other factors.
ª Crypto
Asset
Exposure
Risk:
Crypto
assets
(also
referred
to
as
“virtual
currencies”
and
“digital
currencies”)
are
digital
assets
designed
to
act
as
a medium of exchange. Although crypto assets are an emerging asset class, they
are not presently widely accepted as a medium of exchange. There are thousands
of crypto assets, the most well-known of which is bitcoin.
Bitcoin
or BTC was the first decentralized crypto asset. Bitcoin is a type of crypto
asset that is not issued by a government, bank or central organization. Bitcoin
exists on an online, peer-to-peer computer network that hosts the Blockchain.
Bitcoin has no physical existence beyond the record of transactions on the
Blockchain. The Bitcoin Network allows people to exchange tokens of value,
bitcoins, which are recorded on a public transaction ledger known as a
Blockchain. The Fund may invest indirectly in bitcoin through the Grayscale
Bitcoin Trust and through other pooled investment vehicles that provide exposure
to crypto assets. Grayscale Bitcoin Trust is one of the first spot Bitcoin ETFs
in the U.S. It enables investors to gain exposure to bitcoin in the form of a
security while avoiding the challenges of buying, storing, and safekeeping
bitcoin, directly.
In
addition to the general risks of investing in other investment vehicles, the
value of the Internet Portfolio’s indirect investments in crypto assets are
subject to fluctuations in the value of the crypto asset, which can be highly
volatile. The value of crypto assets is determined by the supply and demand for
crypto assets in the global market for the trading of crypto assets, which
consists primarily of transactions on crypto asset trading platforms. The value
of crypto assets has been, and may continue to be, substantially dependent on
speculation, such that trading and investing in crypto assets generally may not
be based on fundamental analysis. The Internet Portfolio’s exposure to crypto
assets can result in substantial losses to the Internet Fund.
Crypto
assets facilitate decentralized, peer-to-peer financial exchange and value
storage, without the oversight of a central authority or banks. The value of
crypto assets are not backed by any government, corporation, or other identified
body. Crypto assets are also susceptible to theft, loss and
destruction.
Crypto
assets trade on crypto asset trading platforms, which are largely unregulated
and may therefore be more exposed to fraud and failure than established,
regulated exchanges for securities, derivatives and other currencies. These
crypto asset trading platforms can cease operating temporarily or even
permanently, resulting in the potential loss of users’ crypto assets or other
market disruptions. Crypto asset trading platforms may be more exposed to the
risk of market manipulation than exchanges for more traditional assets.
Individuals or organizations holding a large amount of crypto assets in which
the Internet Portfolio may invest indirectly (also known as “whales”) may have
the ability to manipulate the prices of those crypto assets. Crypto asset
trading platforms on which crypto assets are traded are or may become subject to
enforcement actions by regulatory authorities. Crypto asset trading platforms
that are regulated typically must comply with minimum net worth, cybersecurity,
and anti-money laundering requirements, but are not typically required to
protect customers or their markets to the same extent that regulated securities
exchanges or futures exchanges are required to do so. Furthermore, crypto asset
trading platforms may be operating out of compliance with regulations, and many
crypto asset trading platforms lack certain safeguards established by more
traditional exchanges to enhance the stability of trading on the exchange, such
as measures designed to prevent sudden drops in value of items traded on the
exchange (i.e.,
“flash crashes”). As a result, the prices of crypto assets on crypto asset
trading platforms may be subject to larger and more frequent sudden declines
than assets traded on more traditional
exchanges.
ª Crypto
Asset Industry Risk:
The crypto asset industry is a newer, speculative, and still-developing industry
that faces many risks. The crypto asset industry may still be experiencing a
bubble or may experience a bubble again in the future. For example, in the first
half of 2022, each of Celsius Network, Voyager Digital Ltd., and Three Arrows
Capital declared bankruptcy, resulting in a loss of confidence in participants
of the digital asset ecosystem and negative publicity surrounding digital assets
more broadly. In November 2022, FTX Trading Ltd. (“FTX”), one of the largest
digital asset platforms by volume at the time, halted customer withdrawals amid
rumors of the company’s liquidity issues and likely insolvency, which were
subsequently corroborated by its CEO. Shortly thereafter, FTX’s CEO resigned and
FTX and many of its affiliates filed for bankruptcy in the United States, while
other affiliates have entered insolvency, liquidation, or similar proceedings
around the globe, following which the U.S. Department of Justice brought
criminal fraud and other charges, and the SEC and CFTC brought civil securities
and commodities fraud charges, against certain of FTX’s and its affiliates’
senior executives, including its former CEO. In addition, several other entities
in the crypto asset industry filed for bankruptcy following FTX’s bankruptcy
filing, such as BlockFi Inc. and Genesis Global Capital, LLC. In response to
these events, the prices of crypto assets have experienced extreme volatility
and other entities in the crypto asset industry have been, and may continue to
be, negatively affected, further undermining confidence in the crypto asset
industry.
These
events are continuing to develop and the full facts are continuing to emerge. It
is not possible to predict at this time all of the risks that they may pose to
the Internet Portfolio, and therefore the Internet Fund, its service providers
or to the crypto asset industry as a whole.
Factors
affecting the further development of crypto assets include, but are not limited
to, continued worldwide growth or possible cessation or reversal in the adoption
and use of crypto assets and other digital assets; government and
quasi-government regulation or restrictions on or regulation of access to and
operation of digital asset networks; changes in consumer demographics and public
preferences; maintenance and development of open-source software protocol;
availability and popularity of other forms or methods of buying and selling
goods and services; the use of the networks supporting digital assets, such as
those for developing smart contracts and distributed applications; general
economic conditions and the regulatory environment relating to digital assets;
negative consumer or public perception; and general risks tied to the use of
information technologies, including cyber risks. A hack or failure of one crypto
asset may lead to a loss in confidence in, and thus decreased usage and/or value
of, other crypto assets.
ª Crypto
Asset Regulatory Risk: Crypto
asset markets in the U.S. exist in a state of regulatory uncertainty. Regulatory
changes or actions by Congress as well as U.S. federal or state agencies may
adversely affect the value of the Internet Portfolio’s indirect investments in
crypto assets. As digital assets have grown in both popularity and market size,
a number of state and federal agencies have issued consumer advisories regarding
the risks posed by digital assets to investors. In addition, the Securities and
Exchange Commission, U.S. state securities regulators and several foreign
governments have issued warnings and instituted legal proceedings in which they
argue that certain digital assets may be classified as securities and that both
those digital assets and any related initial coin offerings are subject to
securities regulations. Additionally, U.S. state and federal, and foreign
regulators and legislatures have taken action against virtual currency
businesses or enacted restrictive regimes in response to adverse publicity
arising from hacks, consumer harm, or criminal activity stemming from virtual
currency activity.
Currently,
there is relatively limited use of crypto assets in the retail and commercial
marketplace, which contributes to price volatility. A lack of expansion by
crypto assets into retail and commercial markets, or a contraction of such use,
may result in increased volatility or a reduction in the value of crypto assets,
either of which could adversely impact the value of the Internet Portfolio’s
investment. In addition, to the extent market participants develop a preference
for one crypto asset over another, the value of the less preferred crypto assets
would likely be adversely affected.
The
Internet Portfolio’s exposure to crypto assets may change over time and,
accordingly, such exposure may not be represented in the Internet Portfolio’s
portfolio at any given time. Many significant aspects of the tax treatment of
investments in crypto assets are uncertain, and a direct or indirect investment
in crypto assets may produce non-qualifying income. Crypto assets are a new
technological innovation with a limited history; it is a highly speculative
asset and future regulatory actions or policies may limit, perhaps to a
materially adverse extent, the value of the Internet Portfolio’s indirect
investment in crypto assets and the ability to exchange a crypto asset or
utilize it for payments.
ª Non-Diversification
Risks:
As a non-diversified investment company, the Internet Portfolio can invest a
large percentage of its assets in a small number of issuers. As a result, a
change in the value of any one investment may affect the overall value of the
Internet Portfolio’s shares, and therefore the Internet Fund’s shares, more than
shares of a diversified mutual fund that holds more
investments.
ª Liquidity
Risks:
The Investment Adviser may not be able to sell portfolio securities at an
optimal time or price. The Portfolio’s significant investment in a single
position, makes the Portfolio especially susceptible to the risk that during
certain periods the liquidity of the single position will decrease or disappear
suddenly and without warning as a result of adverse market or political events,
or adverse investor perceptions.
ª Single
Stock Concentration Risk: The
Internet Portfolio may hold a large concentration of its net assets in a single
security or issuer. Holding a large concentration in a single security or issuer
may expose the portfolio to the market volatility of that specific security or
issuer if the security or issuer performs worse than the market as a whole,
which could adversely affect the Portfolio’s
performance.
ª Below
Investment Grade Debt Securities Risks: Generally,
below investment grade debt securities, i.e.,
junk bonds, are subject to greater credit risk, price volatility and risk of
loss than investment grade securities. Junk bonds are considered to be
speculative in nature.
ª Convertible
Securities Risks: Convertible
securities are subject to the risks affecting both equity and fixed income
securities, including market, credit, liquidity and interest rate
risk.
ª Exchange-Traded
Funds (ETFs) Risks: ETFs
are registered investment companies whose shares are listed and traded on U.S.
stock exchanges or otherwise traded in the over-the-counter market. In general,
passively-managed ETFs seek to track a specified securities index or a basket of
securities that an “index provider,” such as S&P Global, selects as
representative of a market, market segment or industry sector. A
passively-managed ETF is designed so that its performance will correspond
closely with that of the index it tracks. A leveraged ETF will engage in
transactions and purchase instruments that give rise to forms of leverage,
including, among others, the use of reverse repurchase agreements and other
borrowings, the investment of collateral from loans of portfolio securities, the
use of when issued, delayed-delivery or forward commitment transactions or short
sales. To the extent a fund invests in ETFs that achieve leveraged exposure to
their underlying indexes through the use of derivative instruments, the fund
will indirectly be subject to leveraging risk.
As
a shareholder in an ETF, the Internet Portfolio will bear its pro rata portion
of an ETF’s expenses, including advisory fees, in addition to its own expenses.
The existence of extreme market volatility or potential lack of an active
trading market for an ETF’s shares could result in such shares trading at a
significant premium or discount to their
NAV.
ª Foreign
Securities Risks:
The Internet Portfolio may invest in foreign securities directly or through
ADRs, GDRs and IDRs. Foreign securities can carry higher returns but involve
more risks than those associated with U.S. investments. Additional risks
associated with investment in foreign securities include currency fluctuations,
political and economic instability, less publicly available information,
differences in financial reporting standards and less stringent regulation of
securities markets. Foreign securities in which the Portfolio invests may be
traded in markets that close before the time that the Portfolio calculates its
NAV. Furthermore, certain foreign securities in which the Portfolio invests may
be listed on foreign exchanges that trade on weekends or other days when the
Portfolio does not calculate its NAV. As a result, the value of the Portfolio’s
holdings may change on days when shareholders are not able to purchase or redeem
the Internet Fund’s shares.
ª Interest
Rate Risk:
The risk that when interest rates increase, fixed-income securities held by the
Internet Portfolio will decline in value. Long-term fixed-income securities will
normally have more price volatility because of this risk than short-term
fixed-income securities. A low or negative interest rate environment could cause
the Internet Portfolio's earnings to fall below the Portfolio's expense
ratio,
resulting in a decline in the Portfolio's share price. A general rise in
interest rates may cause investors to move out of fixed income securities on a
large scale, which could adversely affect the price and liquidity of fixed
income securities. The risks associated with changing interest rates may have
unpredictable effects on the markets and the Internet Portfolio's
investments.
ª Internet
Industry Concentration Risks:
Investing a substantial portion of the Internet Portfolio’s assets in the
Internet industry carries the risk that Internet-related securities will decline
in price due to Internet developments. Companies that conduct business on the
Internet or derive a substantial portion of their revenues from Internet-related
activities in general are subject to a rate of change in technology and
competition which is generally higher than that of other
industries.
ª Leveraging
Risks:
Investments in derivative instruments may give rise to a form of leverage. The
Investment Adviser may engage in speculative transactions, which involve
substantial risk and leverage. The use of leverage by the Investment Adviser may
increase the volatility of the Internet Portfolio. These leveraged instruments
may result in losses to the Internet Portfolio or may adversely affect the
Internet Portfolio’s NAV or total return, because instruments that contain
leverage are more sensitive to changes in interest rates. The Internet Portfolio
may also have to sell assets at inopportune times to satisfy its obligations in
connection with such transactions.
ª Management
Risks: There
is no guarantee that the Internet Fund will meet its investment objective. The
Investment Adviser does not guarantee the performance of the Internet Fund, nor
can it assure you that the market value of your investment will not
decline.
ª Petroleum
and Gas Sector Risk:
The profitability of companies in the oil and gas industry is related to
worldwide energy prices, exploration costs and production spending. Companies in
the oil and gas industry may be at risk for environmental damage claims and
other types of litigation. Companies in the oil and gas industry may be
adversely affected by: natural disasters or other catastrophes; changes in
exchange rates or interest rates; prices for competitive energy services,
economic conditions, tax treatment, or government regulation; government
intervention; negative public perception; or unfavorable events in the regions
where companies operate (e.g.,
expropriation, nationalization, confiscation of assets and property, imposition
of restrictions on foreign investments or repatriation of capital, military
coups, social or political unrest, violence or labor unrest). Companies in the
oil and gas industry may have significant capital investments in, or engage in
transactions involving, emerging market countries, which may heighten these
risks.
ª Sector
Concentration Risk: Although
the Internet Portfolio will not concentrate its investments in any industries,
the Internet Portfolio may, at certain times, have concentrations in one or more
sectors which may cause the Portfolio to be more sensitive to economic changes
or events occurring in those sectors, and the Portfolio's investments may be
more volatile. As of December 31, 2023, the Portfolio had 45.3% invested in the
Finance and Insurance sector and 17.5% invested in the Mining, Quarrying and Oil
& Gas Extraction sector.
ª Small
and Medium-Size Company Risks:
The Internet Portfolio may invest in the equity securities of small and
medium-size companies. Small and medium-size companies often have narrower
markets and more limited managerial and financial resources than do larger, more
established companies. As a result, their performance can be more volatile and
they face a greater risk of business failure, which could increase the
volatility of the Internet Portfolio’s
assets.
ª Stock
Market Risks: Stock
mutual funds are subject to stock market risks and significant fluctuations in
value. If the stock market declines in value, the Internet Portfolio is likely
to decline in value and you could lose money on your investment. Natural
disasters, public health emergencies (including
epidemics
and pandemics), geopolitical events, terrorism and other global unforeseeable
events may lead to instability in world economies and markets, market volatility
and may have adverse long-term
effects.
ª Stock
Selection Risks:
The portfolio securities selected by the Investment Adviser may decline in value
or not increase in value when the stock market in general is rising and may fail
to meet the Internet Portfolio’s, and therefore the Internet Fund’s, investment
objective.
ª Subsidiary
Risks:
By investing in its Subsidiaries, the Internet Portfolio is indirectly exposed
to the risks associated with each Subsidiary’s investments. Those investments
held by the Subsidiaries are generally similar to the investments that are
permitted to be held by the Internet Portfolio and are subject to the same risks
that would apply to similar investments if held directly by the Internet
Portfolio. Each Subsidiary is not registered under the 1940 Act and, unless
otherwise noted in this Prospectus, is not subject to all the investor
protections of the 1940 Act. In addition, changes in the laws of the United
States, Delaware and/or the Cayman Islands could result in the inability of the
Internet Portfolio and/or its Subsidiaries to continue to operate and could
adversely affect the Internet Fund’s
performance.
ª Tax
Risks:
In order to qualify as a RIC, the Internet Fund must meet certain requirements
regarding the source of its income, the diversification of its assets and the
distribution of its income. Under the test regarding the source of a RIC’s
income, at least 90% of the gross income of the RIC each year must be qualifying
income, which consists of dividends, interest, gains on investments in
securities and certain other categories of investment income. It appears to be
the position of the Internal Revenue Service (the “IRS”) that gain realized on
bitcoin investments such as investments in the Grayscale Bitcoin Trust will not
be qualifying income. The Internet Portfolio’s investment in each Subsidiary is
expected to provide the Internet Fund with exposure to such bitcoin investments
within the limitations of the Internal Revenue Code for qualification as a RIC
because, under applicable tax rules, the earnings of each Subsidiary will be
qualifying income for the RIC when distributed by the Subsidiary even though the
income would not be qualifying income if earned directly by the RIC or
indirectly by an entity classified as a partnership for federal income tax
purposes, such as the Internet Portfolio, in which the RIC invests. There is a
risk, however, that the IRS might assert that the income derived from the
Internet Portfolio’s investment in a Subsidiary will not be considered
qualifying income. If the Internet Fund were to fail to qualify as a RIC and
became subject to federal income tax, shareholders of the Internet Fund would be
subject to diminished returns. Additionally, the Internet Fund invests, directly
and indirectly, in entities that take the position that they are not subject to
entity-level tax. If any such entity is reclassified as a corporation for U.S.
federal income tax purposes, shareholders of the Internet Fund would be subject
to diminished returns. Changes in the laws of the United States, Delaware and/or
the Cayman Islands could result in the inability of the Internet Portfolio
and/or its Subsidiaries to operate as described in this Prospectus and could
adversely affect the Internet Fund. For example, the Cayman Islands does not
currently impose any income, corporate or capital gains tax or withholding tax
on the Cayman Subsidiary. If Cayman Islands law changes such that the Cayman
Subsidiary must pay Cayman Islands taxes, Fund shareholders would likely suffer
decreased investment returns.
ª Valuation
Risk: The
sales price the Portfolio could receive for any particular portfolio investment
may differ from the Portfolio’s valuation of the investment, particularly for
securities or other investments, such as Bitcoin, that trade in thin or volatile
markets or that are valued using a fair value methodology. Valuation may be more
difficult in times of market turmoil since many investors and market makers may
be reluctant to purchase complex instruments or quote prices for them. Fair
valuation of the Portfolio’s investments involves subjective judgment. The
Portfolio’s ability to value
its
investments may be impacted by technological issues and/or errors by pricing
services or other third-party service providers. Shares of Grayscale Bitcoin
Trust are intended to reflect the price of bitcoin assets, less fees and
expenses, and shares of the Grayscale Bitcoin Trust have historically traded,
and may continue to trade, at a significant discount or premium to net asset
value. As such, the price of Grayscale Bitcoin Trust may go down even if the
price of the underlying asset, bitcoin, remains unchanged. Additionally, shares
that trade at a premium mean that an investor who purchases $1 of a portfolio
will actually own less than $1 in
assets.
ª Volatility
Risk:
The Portfolio may have investments, including but not limited to Bitcoin, that
appreciate or depreciate significantly in value over short periods of time. This
may cause the Portfolio’s net asset value per share to experience significant
increases or declines in value over short periods of
time.
Who
may want to invest?
The
Internet Fund may be appropriate for investors who:
ª wish
to invest for the long-term;
ª want
to diversify their portfolios;
ª want
to allocate some portion of their long-term investments to value equity
investing;
ª are
willing to accept the volatility associated with equity and Bitcoin investing;
and
ª are
comfortable with the risks described herein.
Performance
The bar chart
and table shown below illustrate the variability of the Internet Fund’s
returns. The bar chart indicates the risks of investing in the
Internet Fund by showing the changes in the Internet Fund’s performance from
year to year (on a calendar year basis). The table shows how the Internet Fund’s
average annual returns, before and after taxes, compare with those of the
S&P 500®
Index and the NASDAQ Composite®
Index, which represent broad measures of market performance. The
past performance of the Internet Fund, before and after taxes, is not
necessarily an indication of how the Internet Fund or the Internet Portfolio
will perform in the future. Updated performance information is
available on the Fund’s website at http://www.kineticsfunds.com or by calling the Fund toll-free at (800)
930-3828.
The
Internet Fund – No Load Class
Calendar
Year Returns as of 12/31
|
|
|
|
|
|
|
|
|
|
|
| |
| Best
Quarter: |
Q4 2020 |
51.80 |
% |
| Worst
Quarter: |
Q2 2022 |
-25.13 |
% |
The
Internet Fund’s after-tax returns as shown in the following table are calculated
using the historical highest individual federal marginal income tax rates and do
not reflect the impact of state and local taxes. Your actual
after-tax returns depend on your tax situation and may differ from those shown.
If you own Fund shares in a
tax-deferred account, such as a 401(k) plan or an individual retirement account
(“IRA”), the information on after-tax returns is not relevant to your
investment.
The Return After Taxes on
Distributions and Sale of Fund Shares is higher than other return figures when a
capital loss occurs upon the redemption of Fund
shares.
Average Annual Total
Returns as of 12/31/2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 1
Year |
5
Years |
10
Years |
Since
Inception(1) |
| The
Internet Fund (WWWFX) No Load |
|
|
| |
|
Return Before
Taxes |
29.76 |
% |
17.52 |
% |
9.53 |
% |
13.81 |
% |
|
Return After
Taxes on Distributions |
29.53 |
% |
17.31 |
% |
7.34 |
% |
12.84 |
% |
|
Return
After Taxes on Distributions and Sale of Fund Shares (2) |
17.78 |
% |
14.21 |
% |
6.88 |
% |
9.62 |
% |
|
S&P
500®
Index
(reflects no deductions for
fees, expenses or taxes) |
26.29 |
% |
15.69 |
% |
12.03 |
% |
9.26 |
% |
|
NASDAQ
Composite®
Index
(reflects no deductions for
fees, expenses or taxes) |
43.42 |
% |
17.74 |
% |
13.65 |
% |
9.62 |
% |
(1)The
Internet Fund’s No Load Class shares commenced operations on October 21,
1996
and converted into a feeder fund of the Internet Portfolio on April 28, 2000.
The returns for the two indices in this column have been calculated since the
October 21, 1996 inception date of the Internet Fund’s No Load Class
shares.
(2)In
some cases, the Return After Taxes on Distributions and Sale of Fund Shares may
exceed the Return After Taxes on Distributions or Return Before Taxes due to an
assumed benefit from any losses on a sale of Fund Shares at the end of the
measurement period.
Management
Investment
Adviser. Horizon
Kinetics Asset Management LLC is the Internet Portfolio’s investment adviser.
Portfolio
Managers. The
Internet Portfolio is managed by an investment team with Mr. Doyle, Mr. Stahl
and Mr. Davolos as the Co-Portfolio Managers. Each investment team member serves
as a research analyst.
|
|
|
|
|
|
|
|
| |
| Investment
team member |
Primary
Title |
Years
of Service with the Fund |
| Peter
B. Doyle |
Co-Portfolio
Manager |
25 |
| Murray
Stahl |
Co-Portfolio
Manager |
25 |
| James
Davolos |
Co-Portfolio
Manager |
18 |
| Steven
Tuen |
Investment
Team Member |
25 |
| Steven
Bregman |
Investment
Team Member |
8 |
Purchase
and Sale of Fund Shares
You
may purchase, exchange or redeem Fund shares on any business day by written
request via mail (Kinetics Mutual Funds – The Internet Fund, c/o U.S. Bank
Global Fund Services, P.O. Box 701, Milwaukee, Wisconsin 53201-0701), by
telephone at 1-800-930-3828, or through a financial intermediary. You may also
purchase or redeem Fund shares by wire transfer. The minimum initial investment
for both regular accounts and IRAs is $2,500 ($2,000 for Coverdell Education
Savings Accounts). There is no minimum on subsequent investments for all account
types.
Tax
Information
Unless
you are investing through a tax-deferred arrangement, such as a 401(k) or an
IRA, the Fund’s distributions will generally be taxable to you at ordinary
income or capital gain tax rates, and you will generally recognize gain or loss
when you redeem shares.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker-dealer or other financial intermediary,
the Fund and/or its Investment Adviser may pay the intermediary for the sale of
Fund shares and related services. These payments may create a conflict of
interest by influencing the broker-dealer or other financial intermediary and
your salesperson to recommend the Fund over another investment. Ask your
salesperson or visit your financial intermediary’s website for more information.
Investment
Objective
The
investment objective of the Global Fund is long-term growth of capital. The
Global Fund is the sole “feeder fund” to The Global Portfolio, a series of
Kinetics Portfolios Trust.
Fees and Expenses of the
Fund
This table describes the fees and expenses that you may pay if you
buy, hold, and sell shares of the Global Fund. You may pay other fees, such as
brokerage commissions and other fees to financial intermediaries, which are not
reflected in the table and example below.
Fee
Table(1)
|
|
|
|
|
| |
|
SHAREHOLDER
FEES
(fees
paid directly from your investment) |
No
Load Class |
|
Redemption
Fee (as a percentage of amount redeemed on shares held for 30 days or
less, if applicable) |
2.00% |
|
|
|
|
|
|
|
|
| |
|
ANNUAL
FUND OPERATING EXPENSES
(expenses
that you pay each year as a percentage of the value of your
investment) |
| No
Load Class |
|
Management
Fees(1) |
| 1.25% |
| Distribution
(Rule 12b-1) Fees |
| None |
| Other
Expenses |
| 0.88% |
|
Shareholder
Servicing Fees |
0.25% |
|
|
Other
Operating Expenses |
0.63% |
|
| Total
Annual Fund Operating Expenses |
| 2.13% |
|
Fee
Waiver and/or Expense Reimbursements(2) |
| -0.74% |
|
Total
Annual Fund Operating Expenses after Fee Waiver and/or Expense
Reimbursements |
| 1.39% |
(1)This
table and the example below reflect the aggregate expenses of the Global Fund
and the Global Portfolio. The management fees paid by the Global Fund reflect
the proportionate share of fees allocated to the Global Fund from the Global
Portfolio. The fees and expenses of the Global Portfolio included those incurred
by any subsidiary wholly-owned and controlled by the Global
Portfolio.
(2)Horizon
Kinetics Asset Management LLC, the investment adviser to the Global Portfolio of
the Kinetics Portfolios Trust (the “Investment Adviser”), has agreed to waive
management fees and reimburse Fund expenses so that Total Annual Fund Operating
Expenses after Fee Waiver and/or Expense Reimbursements do not exceed 1.39%,
excluding acquired fund fees and expenses. These waivers and reimbursements are
in effect until April 30,
2025,
and may not be terminated without the approval of the Board.
Example.
This Example is
intended to help you compare the cost of investing in No Load Class shares of
the Global Fund with the cost of investing in other mutual funds. This Example
assumes that you invest $10,000 in the Global Fund for the time periods
indicated and then redeem all of your shares at the end of these periods. The
Example also assumes that your investment has a 5% return each year and that the
Global Fund’s operating expenses remain the same (taking into account the
expense limitation only in the first year). Although your
actual costs may be higher or lower, based on these assumptions your cost for
the Global Fund would be:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 1
Year |
3
Years |
5
Years |
10
Years |
| No
Load Class |
$142 |
$596 |
$1,076 |
$2,404 |
Portfolio
Turnover.
The Global Portfolio pays transaction costs,
such as commissions, when it buys and sells securities (or “turns over” its
portfolio). A higher portfolio turnover rate may indicate higher transaction
costs and may result in higher taxes when Fund shares are held in a taxable
account. These costs, which are not reflected in annual fund operating expenses
or in the Example, affect the Global Portfolio’s, and therefore the Global
Fund’s, performance. During the most recent fiscal year, the Global Portfolio’s
portfolio turnover rate was 16% of the average value of its portfolio.
Principal Investment
Strategy
The
Global Fund is a diversified fund that invests all of its investable assets in
the Global Portfolio, a series of Kinetics Portfolios Trust. Under normal circumstances, the Global Portfolio invests
at least 65% of its net assets plus any borrowings for investment purposes in
common stocks, exchange-traded funds (“ETFs”), convertible securities, warrants
and other equity securities having the characteristics of common stocks (such as
American Depositary Receipts (“ADRs”), Global Depositary Receipts (“GDRs”) and
International Depositary Receipts (“IDRs”)) of foreign and U.S. companies listed
on publicly traded exchanges. At least 40% of the Global Portfolio’s net assets
will be invested in companies located outside the United States. The Global
Portfolio will at all times have exposure to at least three (3) countries, which
may include the United States. The Global Portfolio may also purchase and write
options for hedging purposes and/or direct investment and invest in
participatory notes (commonly known as “P-notes”) to take positions in certain
foreign securities.
The Global Portfolio may invest up to 20% of its total assets in
convertible and non-convertible debt securities rated below investment grade,
also known as junk bonds, or unrated securities that the Investment Adviser has
determined to be of comparable quality. The Global Portfolio may invest up to
100% of its assets in companies located in emerging markets.
The
Investment Adviser selects portfolio securities by evaluating a company’s
positioning and business model as well as its ability to grow and expand its
activities or achieve a greater competitive advantage in cost/profitability and
brand image leveraging. This evaluation by the Investment Adviser includes
consideration of a company’s potential to maintain and grow long lived assets,
while generating high returns on capital with operating predictability and
transparency. The Investment Adviser also considers a company’s fundamentals by
reviewing its balance sheets, corporate revenues, earnings and dividends. The
Global Portfolio may invest in companies of any size, including small and
medium-sized companies. Additionally, the Global Portfolio may participate in
securities lending arrangements up to 33-1/3% of the securities in its portfolio
with brokers, dealers, and financial institutions (but not individuals) in order
to increase the return on its portfolio.
The
Global Portfolio may invest indirectly in bitcoin through a Delaware statutory
trust, Grayscale Bitcoin Trust ETF (“Grayscale Bitcoin Trust”) and through other
pooled investment vehicles that provide exposure to crypto assets. Certain of
these vehicles may not be registered under the Investment Company Act of 1940,
as amended (the “1940 Act”) and do not receive the protections of the 1940 Act.
The
Global Portfolio will not invest directly in Bitcoin or other crypto assets.
Grayscale
Bitcoin Trust is one of the first spot Bitcoin ETFs in the U.S. It enables
investors to gain exposure to bitcoin in the form of a security while avoiding
the challenges of buying, storing, and safekeeping bitcoin, directly. Bitcoins
are a type of crypto assets that are not issued by a government, bank or central
organization. Bitcoins exist on an online, peer-to-peer computer network (the
“Bitcoin Network”) that hosts a public transaction ledger where bitcoin
transfers are recorded (the “Blockchain”). Bitcoins have no physical existence
beyond the record of transactions on the Blockchain. The Grayscale Bitcoin Trust
invests principally
in
bitcoins. The Global Portfolio held 41.84% of its net assets in the Grayscale
Bitcoin Trust as of March 31, 2024. The Global Portfolio may also invest in
other pooled investment vehicles that provide exposure to the spot
price
of crypto assets. For example, the Global Portfolio may invest in the Grayscale
Ethereum Classic Trust. The amount of the Global Portfolio’s investment in
crypto assets may be limited by law or by tax considerations.
The
Global Portfolio contributed a portion of its holdings in the Grayscale Bitcoin
Trust
to
a wholly-owned and controlled subsidiary organized under the laws of the Cayman
Islands (the “Cayman Subsidiary”).
The
Global Portfolio is also the sole shareholder of a wholly owned subsidiary
organized under Delaware law (the “Delaware Subsidiary”). The Global Portfolio
contributed a portion of its holdings in the Grayscale Bitcoin Trust to the
Delaware Subsidiary. Any net gains that the Delaware Subsidiary recognizes on
future sales of the contributed Grayscale Bitcoin Trust shares will be subject
to federal and state corporate income tax, but the dividends that the Delaware
Subsidiary pays to the Global Portfolio (i.e.,
those gains, net of the tax paid and any other expenses of the Delaware
Subsidiary, such as its management and advisory fees) will be eligible to be
treated as “qualified dividend income” under the Internal Revenue Code of 1986,
as amended (the “Internal Revenue Code”). The Delaware Subsidiary and the Cayman
Subsidiary are each referred to herein as a “Subsidiary” and collectively as
“Subsidiaries.” Additional information regarding the tax treatment of the Fund
is provided in the “Taxes” section of the SAI.
In
the future, the Global Portfolio may seek to gain additional exposure to the
Grayscale Bitcoin Trust that may not produce qualifying income for the Global
Fund under the Internal Revenue Code if held directly. The Global Portfolio will
not make any additional investments in the Grayscale Bitcoin Trust if as a
result of such investment, its aggregate investment in the Grayscale Bitcoin
Trust, either directly or through a Subsidiary, would be more than 15% of its
assets at the time of the investment. However, the Portfolio’s investment in the
Grayscale Bitcoin Trust may, at times, exceed 15% of its net assets, due to
appreciation.
Each
Subsidiary invests primarily in the Grayscale Bitcoin Trust. The Global
Portfolio will invest in its Subsidiaries in a manner that is consistent with
the limitations of the federal tax laws, rules and regulations that apply to the
Global Fund as a “regulated investment company” (“RIC”) under Subchapter M
of Subtitle A, Chapter 1, of the Internal Revenue Code (“Subchapter M”).
However, the Global Portfolio and each Subsidiary comply with the same
fundamental investment restrictions on an aggregate basis, to the extent those
restrictions are applicable to the investment activities of each Subsidiary.
Each Subsidiary also complies with Section 17 of the 1940 Act relating to
affiliated transactions and custody, and the Investment Adviser complies with
Section 15 of the 1940 Act relating to investment advisory contracts with
respect to the Subsidiaries. Unlike the Global Fund, each Subsidiary does not,
and will not, seek to qualify as a RIC. The Global Portfolio is the sole
shareholder of each Subsidiary and does not expect shares of the Subsidiaries to
be offered or sold to other investors. The Subsidiaries include entities that
engage in investment activities in securities or other assets that are primarily
controlled by the Global Portfolio. The Global Portfolio does not intend to
create or acquire primary control of any entity which primarily engages in
investment activities in securities or other assets other than entities
wholly-owned by the Global Portfolio.
Sell
decisions are generally triggered by either adequate value being achieved, as
determined by the Investment Adviser, or by an adverse change in a company’s
operating performance or a deterioration of the company’s business model. A sell
trigger may also occur if the Investment Adviser discovers a new investment
opportunity that it believes is more compelling and represents a greater risk
reward profile than other investment(s) held by the Global Portfolio.
The
Global Portfolio may maintain during a temporary period, which could be for a
short period or a longer period lasting several years or more, of abnormal
conditions, a significant portion of its total assets in cash and securities,
generally considered to be cash and cash equivalents, including, but not limited
to: high quality, U.S. short-term debt securities and money market instruments.
The Investment Adviser will invest in such short-term cash positions to the
extent that the Investment Adviser is unable to find sufficient investments
meeting its criteria and when the Investment Adviser believes the purchase of
additional equity securities would not further the investment objective of the
Global Portfolio during such periods of time. Additionally, to respond to
adverse market, economic, political or other conditions, which may persist for
short or long periods of time, the Global Portfolio may invest up to 100% of its
assets in the types of high quality, U.S. short-term debt securities and money
market instruments described above.
If
the market advances during periods when the Global Portfolio is holding a large
cash position, the Portfolio may not participate as much as it would have if it
had been more fully invested in securities. In the aforementioned temporary
defensive periods, the Investment Adviser believes that an additional amount of
liquidity in the Global Portfolio is desirable both to meet operating
requirements and to take advantage of new investment opportunities. When the
Global Portfolio holds a significant portion of assets in cash and cash
equivalents, it may not meet its investment objective.
The Global Portfolio held 21.55% of its net assets in the Texas
Pacific Land Corporation (the “Land Corporation”) as of March 31, 2024. The Land
Corporation is a corporation organized under the laws of the state of New York.
One of the largest land owners in Texas, the Land Corporation derives most of
its income from oil and gas royalty revenue, land easements and water royalties
and sales. The Land Corporation has historically operated with minimal operating
expenses, little to no debt and utilized cash flow to return capital to
unitholders through share repurchases and dividends. While the Land Corporation
has held the majority of its assets since its formation in 1888, the development
of energy resources subject to its royalty interests and related land use have
experienced rapid growth in recent years due to advances in energy exploration
and extraction technologies.
Principal Investment
Risks
The Global
Portfolio’s investments, including common stocks, have inherent risks that could
cause you to lose money. The principal risks of investing in the
Global Fund, and indirectly the Global Portfolio, are listed below and could
adversely affect the net asset value (“NAV”), total return and value of the
Global Fund, Global Portfolio and your investment. The first six risks are
prioritized by order of importance. The remaining principal risks are presented
in alphabetical order to facilitate finding particular risks and comparing them
with other funds. Each risk summarized below is considered a principal risk of
investing in the Global Fund, and indirectly the Global Portfolio, regardless of
the order in which it appears. Different risks may be more significant at
different times depending on market conditions or other factors.
ª Crypto
Asset
Exposure
Risk:
Crypto
assets
(also
referred
to
as
“virtual
currencies”
and
“digital
currencies”)
are
digital
assets
designed
to
act
as
a medium of exchange. Although crypto assets are an emerging asset class, they
are not presently widely accepted as a medium of exchange. There are thousands
of crypto assets, the most well-known of which is bitcoin.
Bitcoin
or BTC was the first decentralized crypto asset. Bitcoin is a type of crypto
asset that is not issued by a government,
bank
or
central
organization.
Bitcoin
exists
on
an
online,
peer-to-peer
computer
network
that
hosts
the
Blockchain. Bitcoin has no physical existence beyond the record of transactions
on the Blockchain. The Bitcoin Network allows people to exchange tokens of
value,
bitcoins,
which are recorded on a public transaction ledger known as a Blockchain. The
Fund may invest indirectly in bitcoin through the Grayscale Bitcoin Trust and
through other pooled investment
vehicles
that
provide
exposure
to
crypto
assets.
Grayscale
Bitcoin
Trust
is
one
of
the
first
spot Bitcoin ETFs in the U.S. It enables investors to gain exposure to bitcoin
in the form of a security while avoiding the challenges of buying, storing, and
safekeeping bitcoin, directly.
In
addition to the general risks of investing in other investment vehicles, the
value of the Global Portfolio’s indirect investments in crypto assets are
subject to fluctuations in the value of the crypto asset, which can be highly
volatile. The value of crypto assets is determined by the supply and demand for
crypto assets in the global market
for
the
trading
of
crypto
assets,
which
consists
primarily
of
transactions
on
crypto
asset
trading
platforms.
The value of crypto assets has been, and may continue to be, substantially
dependent on speculation, such that trading and investing in crypto assets
generally may not be based on fundamental analysis.
The
Global Portfolio’s exposure to crypto assets can result in substantial losses to
the Global Fund.
Crypto
assets facilitate decentralized, peer-to-peer financial exchange and value
storage, without the oversight of a central authority or banks. The value of
crypto assets are not backed by any government, corporation, or other identified
body. Crypto assets are also susceptible to theft, loss and
destruction.
Crypto
assets trade on crypto asset trading platforms, which are largely unregulated
and may therefore be more exposed
to
fraud
and
failure
than
established,
regulated
exchanges
for
securities,
derivatives
and
other
currencies.
These crypto asset trading platforms can cease operating temporarily or even
permanently, resulting in the potential loss of users’ crypto assets or other
market disruptions. Crypto asset trading platforms may be more exposed to the
risk of market manipulation than exchanges for more traditional assets.
Individuals or organizations holding a large amount of crypto assets in which
the Global Portfolio may invest indirectly (also known as “whales”) may have the
ability to manipulate the prices of those crypto assets. Crypto asset trading
platforms on which crypto assets are traded are or may become subject to
enforcement actions by regulatory authorities. Crypto asset trading platforms
that are regulated typically must comply with minimum net worth, cybersecurity,
and anti-money laundering requirements, but are not typically required to
protect customers or their markets to the same extent that regulated securities
exchanges or futures exchanges are required to do so. Furthermore, crypto asset
trading platforms may be operating out of compliance with regulations and many
crypto asset trading platforms lack certain safeguards established by more
traditional exchanges to enhance the stability of trading on the exchange, such
as measures designed to prevent sudden drops in value of items traded on the
exchange (i.e.,
“flash crashes”).
As
a result, the prices of crypto assets on crypto asset trading platforms may be
subject to larger and more frequent sudden declines than assets traded on more
traditional exchanges.
ª Crypto
Asset Industry Risk:
The
crypto asset industry is a newer, speculative, and still-developing industry
that faces many risks.
The
crypto asset industry may still be experiencing a bubble or may experience a
bubble again in the future. For example, in the first half of 2022, each of
Celsius Network, Voyager Digital Ltd., and Three Arrows Capital declared
bankruptcy, resulting in a loss of confidence in participants of the digital
asset ecosystem and negative publicity surrounding
digital
assets
more
broadly.
In
November
2022,
FTX
Trading
Ltd.
(“FTX”),
one
of
the
largest
digital
asset platforms by volume at the time, halted customer withdrawals amid rumors
of the company’s liquidity issues and likely insolvency, which were subsequently
corroborated by its CEO. Shortly thereafter, FTX’s CEO resigned and FTX and many
of its affiliates filed for bankruptcy in the United States, while other
affiliates have entered
insolvency,
liquidation,
or
similar
proceedings
around
the
globe,
following
which
the
U.S.
Department
of
Justice brought criminal fraud and other charges, and the SEC and CFTC brought
civil securities and commodities fraud charges, against certain of FTX’s and its
affiliates’ senior executives, including its former CEO. In addition, several
other entities in the crypto asset industry filed for bankruptcy following FTX’s
bankruptcy filing, such as BlockFi Inc. and Genesis Global Capital, LLC. In
response to these events, the prices of crypto assets have experienced extreme
volatility and other entities in the crypto asset industry have been, and may
continue to be, negatively affected, further undermining confidence in the
crypto asset industry. These events are continuing to develop and the full facts
are continuing to emerge. It is not possible to predict at this time all of the
risks that they may pose to the Global Portfolio, and therefore the Global Fund,
its service providers or to the crypto asset industry as a whole.
Factors
affecting the further development of crypto assets include, but are not limited
to, continued worldwide growth or possible cessation or reversal in the adoption
and use of crypto assets and other digital assets; government
and
quasi-government
regulation
or
restrictions
on
or
regulation
of
access
to
and
operation
of
digital
asset networks; changes in consumer demographics and public preferences;
maintenance and development of open-source
software
protocol;
availability
and
popularity
of
other
forms
or
methods
of
buying
and
selling
goods
and services; the use of the networks supporting digital assets, such as those
for developing smart contracts and distributed applications; general economic
conditions and the regulatory environment relating to digital assets; negative
consumer or public perception; and general risks tied to the use of information
technologies, including cyber risks.
A
hack
or failure of one crypto asset may lead to a loss in confidence in, and thus
decreased usage and/or value of, other crypto
assets.
ª Crypto
Asset Regulatory Risk:
Crypto
asset markets in the U.S. exist in a state of regulatory uncertainty. Regulatory
changes or actions by Congress as well as U.S. federal or state agencies may
adversely affect the value of the Global Portfolio’s indirect investments in
crypto assets.
As
digital assets have grown in both popularity and market size, a number of state
and federal agencies have issued consumer advisories regarding the risks posed
by digital assets to investors. In addition, the Securities and Exchange
Commission, U.S. state securities regulators and several foreign
governments
have
issued
warnings
and
instituted
legal
proceedings
in
which
they
argue
that
certain
digital
assets
may be classified as securities and that both those digital assets and any
related initial coin offerings are subject to securities
regulations.
Additionally,
U.S. state and federal, and foreign regulators and legislatures have taken
action against virtual currency businesses or enacted restrictive regimes in
response to adverse publicity arising from hacks, consumer harm, or criminal
activity stemming from virtual currency activity.
Currently,
there is relatively limited use of crypto assets in the retail and commercial
marketplace, which contributes to price volatility.
A
lack
of expansion by crypto assets into retail and commercial markets, or a
contraction
of
such
use,
may
result
in
increased
volatility
or
a
reduction
in
the
value
of
crypto
assets,
either
of
which could adversely impact the value of the Global Portfolio’s investment. In
addition, to the extent market participants develop a preference for one crypto
asset over another, the value of the less preferred crypto assets would likely
be adversely affected.
The
Global Portfolio’s exposure to crypto assets may change over time and,
accordingly, such exposure may not be represented in the Global Portfolio’s
portfolio at any given time. Many significant aspects of the tax treatment of
investments in crypto assets are uncertain, and a direct or indirect investment
in crypto assets may produce non-qualifying income. Crypto assets are a new
technological innovation with a limited history; it is a highly speculative
asset and future regulatory
actions
or policies may limit, perhaps to a materially adverse extent, the
value
of
the
Global
Portfolio’s
indirect
investment
in
crypto
assets
and
the
ability
to
exchange
a
crypto
asset
or
utilize
it
for
payments.
ª Single
Stock Concentration Risk: The
Global Portfolio may hold a large concentration of its net assets in a single
security or issuer. Holding a large concentration in a single security or issuer
may expose the portfolio to the market volatility of that specific security or
issuer if the security or issuer performs worse than the market as a whole,
which could adversely affect the Portfolio’s
performance.
ª Liquidity
Risks:
The Investment Adviser may not be able to sell portfolio securities at an
optimal time or price. The Portfolio’s significant investment in a single
position, makes the Portfolio especially susceptible to the risk that during
certain periods the liquidity of the single position will decrease or disappear
suddenly and without warning as a result of adverse market or political events,
or adverse investor perceptions.
ª Foreign
Securities Risks:
The Global Portfolio may invest in foreign securities directly or through ADRs,
GDRs and IDRs. Foreign securities can carry higher returns but involve more
risks than those associated with U.S. investments. Additional risks associated
with investment in foreign securities include currency fluctuations, political
and economic instability, less publicly available information, differences in
financial reporting standards and less stringent regulation of securities
markets. Foreign securities in which the Portfolio invests may be traded in
markets that close before the time that the Portfolio calculates its NAV.
Furthermore, certain foreign securities in which the Portfolio invests may be
listed on foreign exchanges that trade on weekends or other days when the
Portfolio does not calculate its NAV. As a result, the value of the Portfolio’s
holdings may change on days when shareholders are not able to purchase or redeem
the Global Fund’s shares.
ª Below
Investment Grade Debt Securities Risks: Generally,
below investment grade debt securities, i.e., junk bonds, are subject to greater credit risk, price volatility and
risk of loss than investment grade securities. Junk bonds are considered to be
speculative in nature.
ª Convertible
Securities Risks: Convertible
securities are subject to the risks affecting both equity and fixed income
securities, including market, credit, liquidity and interest rate
risk.
ª Counterparty
Risks: Transactions
involving a counterparty are subject to the credit risk of the counterparty. A
Portfolio that enters into contracts with counterparties, such as repurchase or
reverse repurchase agreements or over-the-counter (“OTC”) derivatives contracts,
or that lends its securities run the risk that the counterparty will be unable
or unwilling to make timely settlement payments or otherwise honor its
obligations. If a counterparty fails to meet its contractual obligations, goes
bankrupt, or otherwise experiences a business interruption, the Portfolio could
suffer losses, including monetary losses, miss investment opportunities or be
forced to hold investments it would prefer to sell. Counterparty risk is
heightened during unusually adverse market
conditions.
ª Emerging
Markets Risks:
The
risk that the securities markets of emerging countries are less liquid, are
especially subject to greater price volatility, have smaller market
capitalizations, have less government regulation and are not subject to as
extensive and frequent accounting, financial and other reporting requirements as
the securities markets of more developed countries as have historically been the
case. The information available about an emerging market issuer may be less
reliable than for comparable issuers in more developed capital markets. In
addition, investments in certain emerging markets are subject to an elevated
risk of loss resulting from market manipulation and the imposition of exchange
controls (including repatriation restrictions). The legal rights and remedies
available for investors in emerging markets may be more limited than the rights
and
remedies
available in the U.S., and the ability of U.S. authorities (e.g., SEC and the
U.S. Department of Justice) to bring actions against bad actors in emerging
markets may be limited.
ª Exchange-Traded
Funds (ETFs) Risks: ETFs
are registered investment companies whose shares are listed and traded on U.S.
stock exchanges or otherwise traded in the over-the-counter market. In general,
passively-managed ETFs seek to track a specified securities index or a basket of
securities that an “index provider,” such as S&P Global, selects as
representative of a market, market segment or industry sector. A
passively-managed ETF is designed so that its performance will correspond
closely with that of the index it tracks. A leveraged ETF will engage in
transactions and purchase instruments that give rise to forms of leverage,
including, among others, the use of reverse repurchase agreements and other
borrowings, the investment of collateral from loans of portfolio securities, the
use of when issued, delayed-delivery or forward commitment transactions or short
sales. To the extent a fund invests in ETFs that achieve leveraged exposure to
their underlying indexes through the use of derivative instruments, the fund
will indirectly be subject to leveraging risk.
As
a shareholder in an ETF, the Global Portfolio will bear its pro rata portion of
an ETF’s expenses, including advisory fees, in addition to its own expenses. The
existence of extreme market volatility or potential lack of an active trading
market for an ETF’s shares could result in such shares trading at a significant
premium or discount to their NAV.
ª Interest
Rate Risk:
The risk that when interest rates increase, fixed-income securities held by the
Global Portfolio will decline in value. Long-term fixed-income securities will
normally have more price volatility because of this risk than short-term
fixed-income securities. A low or negative interest rate environment could cause
the Global Portfolio's earnings to fall below the Portfolio's expense ratio,
resulting in a decline in the Portfolio's share price. A general rise in
interest rates may cause investors to move out of fixed income securities on a
large scale, which could adversely affect the price and liquidity of fixed
income securities. The risks associated with changing interest rates may have
unpredictable effects on the markets and the Global Portfolio's
investments.
ª Leveraging
Risks:
Investments in derivative instruments may give rise to a form of leverage. The
Investment Adviser may engage in speculative transactions, which involve
substantial risk and leverage. The use of leverage by the Investment Adviser may
increase the volatility of the Global Portfolio. These leveraged instruments may
result in losses to the Global Portfolio or may adversely affect the Global
Portfolio’s NAV or total return, because instruments that contain leverage are
more sensitive to changes in interest rates. The Global Portfolio may also have
to sell assets at inopportune times to satisfy its obligations in connection
with such transactions.
ª Management
Risks: There
is no guarantee that the Global Fund will meet its investment objective. The
Investment Adviser does not guarantee the performance of the Global Fund, nor
can it assure you that the market value of your investment will not
decline.
ª
Petroleum
and Gas Sector Risk:
The profitability of companies in the oil and gas industry is related to
worldwide energy prices, exploration costs and production spending. Companies in
the oil and gas industry may be at risk for environmental damage claims and
other types of litigation. Companies in the oil and gas industry may be
adversely affected by: natural disasters or other catastrophes; changes in
exchange rates or interest rates; prices for competitive energy services,
economic conditions, tax treatment, or government regulation; government
intervention; negative public perception; or unfavorable events in the regions
where companies operate (e.g.,
expropriation, nationalization, confiscation of assets and property, imposition
of restrictions on foreign investments or repatriation of capital, military
coups, social or political unrest, violence or labor unrest). Companies in the
oil and gas industry may have significant capital investments in, or engage in
transactions involving, emerging market countries, which may heighten these
risks.
ª
Sector Concentration Risk: Although
the Global Portfolio will not concentrate its investments in any industries, the
Global Portfolio may, at certain times, have concentrations in one or more
sectors which may cause the Portfolio to be more sensitive to economic changes
or events occurring in those sectors, and the Portfolio's investments may be
more volatile. As of December 31, 2023, the Portfolio had 28.47% invested in the
Mining,
Quarrying and Oil & Gas Extraction sector.
ª Small
and Medium-Size Company Risks:
The Global Portfolio may invest in the equity securities of small and
medium-size companies. Small and medium-size companies often have narrower
markets and more limited managerial and financial resources than do larger, more
established companies. As a result, their performance can be more volatile and
they face a greater risk of business failure, which could increase the
volatility of the Global Portfolio’s
assets.
ª Stock
Market Risks:
Stock mutual funds are subject to stock market risks and significant
fluctuations in value. If the stock market declines in value, the Global
Portfolio, and therefore the Global Fund, is likely to decline in value and you
could lose money on your investment. Natural disasters, public health
emergencies (including epidemics and pandemics), geopolitical events, terrorism
and other global unforeseeable events may lead to instability in world economies
and markets, market volatility and may have adverse long-term
effects.
ª Stock
Selection Risks:
The portfolio securities selected by the Investment Adviser may decline in value
or not increase in value when the stock market in general is rising and may fail
to meet the Global Portfolio’s, and therefore the Global Fund’s, investment
objective.
ª Subsidiary
Risks:
By
investing in its Subsidiaries, the Global Portfolio is indirectly exposed to the
risks associated with each Subsidiary’s investments. Those investments held by
the Subsidiaries are generally similar to the investments that are permitted to
be held by the Global Portfolio and are subject to the same risks that would
apply to similar investments if held directly by the Global Portfolio. Each
Subsidiary is not registered under the 1940 Act and, unless otherwise noted in
this Prospectus, is not subject to all the investor protections of the 1940 Act.
In addition, changes in the laws of the United States, Delaware and/or the
Cayman Islands could result in the inability of the Global Portfolio and/or its
Subsidiaries to continue to operate and could adversely affect the Global Fund’s
performance.
ª Tax
Risks: In
order to qualify as a RIC, the Global Fund must meet certain requirements
regarding the source of its income, the diversification of its assets and the
distribution of its income. Under the test regarding the source of a RIC’s
income, at least 90% of the gross income of the RIC each year must be qualifying
income, which consists of dividends, interest, gains on investments in
securities and certain other categories of investment income. It appears to be
the position of the Internal Revenue Service (the “IRS”) that gain realized on
bitcoin investments such as investments in the Grayscale Bitcoin Trust will not
be qualifying income. The Global Portfolio’s investment in each Subsidiary is
expected to provide the Global Fund with exposure to such bitcoin investments
within the limitations of the Internal Revenue Code for qualification as a RIC
because, under applicable tax rules, the earnings of each Subsidiary will be
qualifying income for the RIC when distributed by the Subsidiary even though the
income would not be qualifying income if earned directly by the RIC or directly
by an entity classified as a partnership for federal income tax purposes, such
as the Global Portfolio, in which the RIC invests. There is a risk, however,
that the IRS might assert that the income derived from the Global Portfolio’s
investment in a Subsidiary will not be considered qualifying income. If the
Global Fund were to fail to qualify as a RIC and became subject to federal
income tax, shareholders of the Global Fund would be subject to diminished
returns. Additionally, the Global Fund invests, directly and indirectly, in
entities that take the position that they are not subject to
entity-level
tax. If any such entity is reclassified as a corporation for U.S. federal income
tax purposes, shareholders of the Global Fund would be subject to diminished
returns. Changes in the laws of the United States, Delaware and/or the Cayman
Islands could result in the inability of the Global Portfolio and/or its
Subsidiaries to operate as described in this Prospectus and could adversely
affect the Global Fund. For example, the Cayman Islands does not currently
impose any income, corporate or capital gains tax or withholding tax on the
Cayman Subsidiary. If Cayman Islands law changes such that the Cayman Subsidiary
must pay Cayman Islands taxes, Global Fund shareholders would likely suffer
decreased investment returns.
ª Valuation
Risk: The
sales price the Portfolio could receive for any particular portfolio investment
may differ from the Portfolio’s valuation of the investment, particularly for
securities or other investments, such as Bitcoin, that trade in thin or volatile
markets or that are valued using a fair value methodology. Valuation may be more
difficult in times of market turmoil since many investors and market makers may
be reluctant to purchase complex instruments or quote prices for them. Fair
valuation of the Portfolio’s investments involves subjective judgment. The
Portfolio’s ability to value its investments may be impacted by technological
issues and/or errors by pricing services or other third-party service providers.
Shares of Grayscale Bitcoin Trust are intended to reflect the price of bitcoin
assets, less fees and expenses, and the shares of the Grayscale Bitcoin Trust
have historically traded, and may continue to trade, at a significant discount
or premium to net asset value. As such, the price of Grayscale Bitcoin Trust may
go down even if the price of the underlying asset, bitcoin, remains unchanged.
Additionally, shares that trade at a premium mean that an investor who purchases
$1 of a portfolio will actually own less than $1 in
assets.
ª Volatility
Risk:
The Portfolio may have investments, including but not limited to Bitcoin, that
appreciate or depreciate significantly in value over short periods of time. This
may cause the Portfolio’s net asset value per share to experience significant
increases or declines in value over short periods of
time.
Who
may want to invest?
The
Global Fund may be appropriate for investors who:
ª wish
to invest for the long-term;
ª want
to diversify their portfolios;
ª want
to allocate some portion of their long-term investments to value equity
investing;
ª are
willing to accept the volatility associated with equity and Bitcoin investing;
and
ª are
comfortable with the risks described herein.
Performance
The bar chart
and table shown below illustrate the variability of the Global Fund’s
returns. The bar chart indicates the risks of investing in the
Global Fund by showing the changes in the Global Fund’s performance from year to
year (on a calendar year basis). The table shows how the Global Fund’s average
annual returns, before and after taxes, compare with those of the
S&P®
500 Index and the MSCI ACWI (All Country World Index) Index (“MSCI ACWI Index”),
which represent broad measures of market performance. As of March 14, 2008,
the Global Fund and the Global Portfolio, which were formerly known as the
Internet Emerging Growth Fund and the Internet Emerging Growth Portfolio,
respectively, changed to the investment strategy set forth in this Prospectus.
The performance shown for the periods or portion of periods prior to March 14,
2008 represents performance of the Global Portfolio’s prior strategy to invest
at least 80% of its net assets plus any borrowings for investment purposes in
equity securities of small and medium-capitalization U.S. and foreign companies
engaged in the Internet and Internet-related
activities.
The past performance of the
Global Fund, before and after taxes, is not necessarily an indication of how the
Global Fund or the Global Portfolio will perform in the future.
Performance reflects fee waivers in effect. If fee waivers were not in place,
the Global Fund’s performance would be reduced. Updated performance information
is available on the Fund’s website at http://www.kineticsfunds.com or by calling the Fund toll-free at (800) 930-3828.
The
Global Fund – No Load Class
Calendar
Year Returns as of 12/31
|
|
|
|
|
|
|
|
|
|
|
| |
| Best
Quarter: |
Q4 2020 |
30.71 |
% |
| Worst
Quarter: |
Q4 2018 |
-18.32 |
% |
The
Global Fund’s after-tax returns as shown in the following table are calculated
using the historical highest individual federal marginal income tax rates and do
not reflect the impact of state and local taxes. Your actual
after-tax returns depend on your tax situation and may differ from those shown.
If you own Fund shares in a
tax-deferred account, such as a 401(k) plan or an individual retirement account
(“IRA”), the information on after-tax returns is not relevant to your
investment.
The Return After Taxes on
Distributions and Sale of Fund Shares is higher than other return figures when a
capital loss occurs upon the redemption of Fund
shares.
Average Annual
Total Returns as of 12/31/2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 1
Year |
5
Years |
10
Years |
Since
Inception(1) |
| The
Global Fund (WWWEX) No Load |
|
|
| |
|
Return Before
Taxes |
11.89 |
% |
13.10 |
% |
6.25 |
% |
1.46 |
% |
|
Return After
Taxes on Distributions |
10.88 |
% |
12.56 |
% |
5.74 |
% |
1.03 |
% |
| Return After
Taxes on Distributions and Sale of Fund Shares |
7.14 |
% |
10.33 |
% |
4.87 |
% |
0.98 |
% |
|
S&P
500®
Index (reflects no deductions for
fees, expenses or taxes) |
26.29 |
% |
15.69 |
% |
12.03 |
% |
7.03 |
% |
|
MSCI ACWI
Index (reflects no deductions for
fees, expenses or taxes) |
22.20 |
% |
11.72 |
% |
7.93 |
% |
5.14 |
% |
(1)The
Global Fund’s No Load Class shares commenced operations on December 31,
1999 and converted into a feeder
fund of the Global Portfolio on April 28, 2000. The returns for the indices in
this column have been calculated since the December 31, 1999 inception date of
the Global Fund’s No Load Class shares.
Management
Investment
Adviser. Horizon
Kinetics Asset Management LLC is the Global Portfolio’s investment adviser.
Portfolio
Managers. The
Global Portfolio is managed by an investment team with Mr. Stahl and
Mr. Tuen as the Co-Portfolio Managers. Each investment team member serves
as a research analyst.
|
|
|
|
|
|
|
|
| |
| Investment
team member |
Primary
Title |
Years
of Service with the Fund |
| Murray
Stahl |
Co-Portfolio
Manager |
25 |
| Steven
Tuen |
Co-Portfolio
Manager |
21 |
| Peter
B. Doyle |
Investment
Team Member |
25 |
| James
Davolos |
Investment
Team Member |
18 |
| Steven
Bregman |
Investment
Team Member |
8 |
Purchase
and Sale of Fund Shares
You
may purchase, exchange or redeem Fund shares on any business day by written
request via mail (Kinetics Mutual Funds – The Global Fund, c/o U.S. Bank Global
Fund Services, P.O. Box 701, Milwaukee, Wisconsin 53201-0701), by telephone at
1-800-930-3828, or through a financial intermediary. You may also purchase or
redeem Fund shares by wire transfer. The minimum initial investment for both
regular accounts and IRAs is $2,500 ($2,000 for Coverdell Education Savings
Accounts). There is no minimum on subsequent investments for all account types.
Tax
Information
Unless
you are investing through a tax-deferred arrangement, such as a 401(k) or an
IRA, the Fund’s distributions will generally be taxable to you at ordinary
income or capital gain tax rates, and you will generally recognize gain or loss
when you redeem shares.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker-dealer or other financial intermediary,
the Fund and/or its Investment Adviser may pay the intermediary for the sale of
Fund shares and related services. These payments may create a conflict of
interest by influencing the broker-dealer or other financial intermediary and
your salesperson to recommend the Fund over another investment. Ask your
salesperson or visit your financial intermediary’s website for more information.
Investment
Objective
The
investment objective of the Paradigm Fund is long-term growth of
capital.
Fees and Expenses of the
Fund
This
table describes the fees and expenses that you may pay if you buy, hold, and
sell shares of the Paradigm Fund. You may pay other fees, such as brokerage
commissions and other fees to financial intermediaries, which are not reflected
in the table and example below.
Fee
Table(1)
|
|
|
|
|
| |
|
SHAREHOLDER
FEES
(fees
paid directly from your investment) |
No
Load Class |
|
Redemption
Fee (as a percentage of amount redeemed on shares held for 30 days or
less, if applicable) |
2.00% |
|
|
|
|
|
|
|
|
| |
|
ANNUAL
FUND OPERATING EXPENSES
(expenses
that you pay each year as a percentage of the value of your
investment) |
| No
Load Class |
|
Management
Fees(1) |
| 1.25% |
| Distribution
(Rule 12b-1) Fees |
| None |
| Other
Expenses |
| 0.43% |
|
Shareholder
Servicing Fees |
0.25% |
|
|
Other
Operating Expenses |
0.18% |
|
|
Total
Annual Fund Operating Expenses |
| 1.68% |
|
Fee
Waiver and/or Expense Reimbursements(2) |
| -0.04% |
|
Total
Annual Fund Operating Expenses after Fee Waiver and/or Expense
Reimbursements |
| 1.64% |
(1)This
table and the example below reflect the aggregate expenses of the Paradigm Fund
and the Paradigm Portfolio. The management fees paid by the Paradigm Fund
reflect the proportionate share of fees allocated to the Paradigm Fund from the
Paradigm Portfolio. The fees and expenses of the Paradigm Portfolio included
those incurred by any subsidiary wholly-owned and controlled by the Paradigm
Portfolio.
(2)Horizon
Kinetics Asset Management LLC, the investment adviser to the Paradigm Portfolio
of the Kinetics Portfolios Trust (the “Investment Adviser”), has agreed to waive
management fees and reimburse Fund expenses so that Total Annual Fund Operating
Expenses after Fee Waiver and/or Expense Reimbursements do not exceed 1.64%,
excluding acquired fund fees and expenses. These waivers and reimbursements are
in effect until April 30,
2025,
and may not be terminated without the approval of the Board.
Example.
This Example is
intended to help you compare the cost of investing in the Paradigm Fund with the
cost of investing in other mutual funds. This Example assumes that you invest
$10,000 in the Paradigm Fund for the time periods indicated and then redeem all
of your shares at the end of these periods. The Example also assumes that your
investment has a 5% return each year and that the Paradigm Fund’s operating
expenses remain the same (taking into account the expense limitation only in the
first year). Although your actual costs may be higher
or lower, based on these assumptions your cost for the Paradigm Fund would
be:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 1
Year |
3
Years |
5
Years |
10
Years |
| No
Load Class |
$167 |
$526 |
$909 |
$1,984 |
Portfolio
Turnover.
The Paradigm Portfolio pays transaction
costs, such as commissions, when it buys and sells securities (or “turns over”
its portfolio). A higher portfolio turnover rate may indicate higher transaction
costs and may result in higher taxes when Fund shares are held in a taxable
account. These costs, which are not reflected in annual fund operating expenses
or in the Example, affect the Paradigm Portfolio’s, and therefore the Paradigm
Fund’s, performance. During the most recent fiscal year, the Paradigm
Portfolio’s portfolio turnover rate was 0% of the average value of its portfolio.
Principal Investment
Strategy
The
Paradigm Fund is a non-diversified fund that invests all of its investable
assets in the Paradigm Portfolio, a series of Kinetics Portfolios Trust.
Under normal
circumstances, the Paradigm Portfolio invests at least 65% of its net assets in
common stocks, exchange-traded funds (“ETFs”), convertible securities, warrants,
and other equity securities having the characteristics of common stocks (such as
American Depositary Receipts (“ADRs”), Global Depositary Receipts (“GDRs”) and
International Depositary Receipts (“IDRs”)) of U.S. and foreign companies that
the Investment Adviser believes are undervalued, that have, or are expected to
soon have, high returns on equity and that are well positioned to reduce their
costs, extend the reach of their distribution channels and experience
significant growth in their assets or revenues. The Paradigm Portfolio will
carry out its investment strategy by regarding investments as representing
fractional ownership in the underlying companies’ assets. This will allow the
Paradigm Portfolio, and therefore the Paradigm Fund, to attempt to achieve its
investment objective by acting as a classic value investor seeking high returns
on equity, an intrinsic characteristic of the investment, not a reappraisal of a
company’s stock value by the market, an external factor. The Paradigm Portfolio
may also purchase and write options for hedging purposes and/or direct
investment.
The Paradigm Portfolio may invest up to 20% of its total assets in
convertible and non-convertible debt securities rated below investment grade,
also known as junk bonds, or unrated securities that the Investment Adviser has
determined to be of comparable quality. The Paradigm Portfolio may invest up to
100% of its total assets in companies located in emerging
markets.
The
Investment Adviser selects portfolio securities by evaluating a company’s
positioning and traditional business lines as well as its ability to expand its
activities or achieve competitive advantage in cost/profitability and brand
image leveraging. The Investment Adviser also considers a company’s fundamentals
by reviewing its balance sheets, corporate revenues, earnings and dividends. The
Paradigm Portfolio may invest in companies of any size, including small and
medium-size companies. Additionally, the Paradigm Portfolio may participate in
securities lending arrangements up to 33-1/3% of the securities in its portfolio
with brokers, dealers, and financial institutions (but not individuals) in order
to increase the return on its portfolio.
The
Paradigm Portfolio may invest indirectly in bitcoin through a Delaware statutory
trust, Grayscale Bitcoin Trust ETF (“Grayscale Bitcoin Trust”) and through other
pooled investment vehicles that provide exposure to crypto assets. Certain of
these vehicles may not be registered under the Investment Company Act of 1940,
as amended (the “1940 Act”) and do not receive the protections of the 1940 Act.
The
Paradigm Portfolio will not invest directly in Bitcoin or other crypto assets.
Grayscale
Bitcoin Trust is one of the first spot Bitcoin ETFs in the U.S. It enables
investors to gain exposure to bitcoin in the form of a security while avoiding
the challenges of buying, storing, and safekeeping bitcoin, directly. Bitcoins
are a type of crypto assets that are not issued by a government, bank or central
organization. Bitcoins exist on an online, peer-to-peer computer network (the
“Bitcoin Network”) that hosts a public transaction ledger where bitcoin
transfers are recorded (the “Blockchain”). Bitcoins have no physical existence
beyond the record of transactions on the Blockchain. The Grayscale Bitcoin Trust
invests principally in bitcoins. The Paradigm Portfolio held 14.30% of its net
assets in the Grayscale Bitcoin Trust as of March 31, 2024. The Paradigm
Portfolio may also invest in other pooled investment vehicles that provide
exposure
to the spot price of crypto assets. For example, the Paradigm Portfolio may
invest in the Grayscale Ethereum Classic Trust. The amount of the Paradigm
Portfolio’s investment in crypto assets may be limited by law or by tax
considerations.
The
Paradigm Portfolio contributed a portion of its holdings in the Grayscale
Bitcoin Trust
to
a wholly-owned and controlled subsidiary organized under the laws of the Cayman
Islands (the “Subsidiary” or the “Cayman Subsidiary”). Additional information
regarding the tax treatment of the Fund is provided in the “Taxes” section of
the SAI.
In
the future, the Paradigm Portfolio may seek to gain additional exposure to the
Grayscale Bitcoin Trust that may not produce qualifying income for the Paradigm
Fund under the Internal Revenue Code of 1986, as amended (the “Internal Revenue
Code”) if held directly. The Paradigm Portfolio will not make any additional
investments in the Grayscale Bitcoin Trust if as a result of such investment,
its aggregate investment in the Grayscale Bitcoin Trust, either directly or
through the Subsidiary, would be more than 15% of its assets at the time of the
investment. However, the Portfolio’s investment in the Grayscale Bitcoin Trust
may, at times, exceed 15% of its net assets, due to appreciation.
The
Subsidiary invests primarily in the Grayscale Bitcoin Trust. The Paradigm
Portfolio will invest in its Subsidiary in a manner that is consistent with the
limitations of the federal tax laws, rules and regulations that apply to the
Paradigm Fund as a “regulated investment company” (“RIC”) under Subchapter M of
Subtitle A, Chapter 1, of the Internal Revenue Code (“Subchapter M”).
However, the Paradigm Portfolio and the Subsidiary comply with the same
fundamental investment restrictions on an aggregate basis, to the extent those
restrictions are applicable to the investment activities of the Subsidiary. The
Subsidiary also complies with Section 17 of the 1940 Act relating to affiliated
transactions and custody, and the Investment Adviser complies with Section 15 of
the 1940 Act, relating to investment advisory contracts with respect to the
Subsidiary. Unlike the Paradigm Fund, the Subsidiary does not, and will not,
seek to qualify as a RIC. The Paradigm Portfolio is the sole shareholder of the
Subsidiary and does not expect shares of the Subsidiary to be offered or sold to
other investors. The Subsidiary includes entities that engage in investment
activities in securities or other assets that are primarily controlled by the
Paradigm Portfolio. The Paradigm Portfolio does not intend to create or acquire
primary control of any entity which primarily engages in investment activities
in securities or other assets other than entities wholly-owned by the Paradigm
Portfolio.
Sell
decisions are generally triggered by either adequate value being achieved, as
determined by the Investment Adviser, or by an adverse change in a company’s
operating performance or a deterioration of the company’s business model. A sell
trigger may also occur if the Investment Adviser discovers a new investment
opportunity that it believes is more compelling and represents a greater risk
reward profile than other investment(s) held by the Paradigm Portfolio.
The
Paradigm Portfolio may maintain during a temporary period, which could be for a
short period or a longer period lasting several years or more, of abnormal
conditions, a significant portion of its total assets in cash and securities,
generally considered to be cash and cash equivalents, including, but not limited
to: high quality, U.S. short-term debt securities and money market instruments.
The Investment Adviser will invest in such short-term cash positions to the
extent that the Investment Adviser is unable to find sufficient investments
meeting its criteria and when the Investment Adviser believes the purchase of
additional equity securities would not further the investment objective of the
Paradigm Portfolio during such periods of time. Additionally, to respond to
adverse market, economic, political or other conditions, which may persist for
short or long periods of time, the Paradigm Portfolio may invest up to 100% of
its assets in the types of high quality, U.S. short-term debt securities and
money market instruments described above.
If
the market advances during periods when the Paradigm Portfolio is holding a
large cash position, the Portfolio may not participate as much as it would have
if it had been more fully invested in securities. In the aforementioned
temporary defensive periods, the Investment Adviser believes that an additional
amount of liquidity in the Paradigm Portfolio is desirable both to meet
operating requirements and to take advantage of new investment opportunities.
When the Paradigm Portfolio holds a significant portion of assets in cash and
cash equivalents, it may not meet its investment objective.
The
Paradigm Portfolio held 57.62%
of its net assets in the Texas Pacific Land Corporation (the “Land Corporation”)
as of March 31, 2024. The Land Corporation is a corporation organized under the laws of
the state of New York. One of the largest land owners in Texas, the Land
Corporation derives most of its income from oil and gas royalty revenue, land
easements and water royalties and sales. The Land Corporation has historically
operated with minimal operating expenses, little to no debt and utilized cash
flow to return capital to unitholders through share repurchases and dividends.
While the Land Corporation has held the majority of its assets since its
formation in 1888, the development of energy resources subject to its royalty
interests and related land use have experienced rapid growth in recent years due
to advances in energy exploration and extraction technologies.
Principal Investment
Risks
Investing in
common stocks has inherent risks that could cause you to lose
money. The principal risks of investing in the Paradigm Fund,
and indirectly the Paradigm Portfolio, are listed below and could adversely
affect the net asset value (“NAV”), total return and value of the Paradigm Fund,
Paradigm Portfolio and your investment. The first seven risks are prioritized by
order of importance. The remaining principal risks are presented in alphabetical
order to facilitate finding particular risks and comparing them with other
funds. Each risk summarized below is considered a principal risk of investing in
the Paradigm Fund, and indirectly the Paradigm Portfolio, regardless of the
order in which it appears. Different risks may be more significant at different
times depending on market conditions or other factors.
ª Single
Stock Concentration Risk: The Paradigm Portfolio may hold a large concentration of its net
assets in a single security or issuer. Holding a large concentration in a single
security or issuer may expose the portfolio to the market volatility of that
specific security or issuer if the security or issuer performs worse than the
market as a whole, which could adversely affect the Fund’s
performance.
ª Crypto
Asset
Exposure
Risk:
Crypto
assets
(also
referred
to
as
“virtual
currencies”
and
“digital
currencies”)
are
digital
assets
designed
to
act
as
a medium of exchange. Although crypto assets are an emerging asset class, they
are not presently widely accepted as a medium of exchange. There are thousands
of crypto assets, the most well-known of which is bitcoin.
Bitcoin
or BTC was the first decentralized crypto asset. Bitcoin is a type of crypto
asset that is not issued by a government,
bank
or
central
organization.
Bitcoin
exists
on
an
online,
peer-to-peer
computer
network
that
hosts
the
Blockchain. Bitcoin has no physical existence beyond the record of transactions
on the Blockchain. The Bitcoin Network allows people to exchange tokens of
value, bitcoins, which are recorded on a public transaction ledger known as a
Blockchain. The Fund may invest indirectly in bitcoin through the Grayscale
Bitcoin Trust and through other pooled investment
vehicles
that
provide
exposure
to
crypto
assets.
Grayscale
Bitcoin
Trust
is
one
of
the
first
spot Bitcoin ETFs in the U.S. It enables investors to gain exposure to bitcoin
in the form of a security while avoiding the challenges of buying, storing, and
safekeeping bitcoin, directly.
In
addition to the general risks of investing in other investment vehicles, the
value of the Paradigm Portfolio’s indirect investments in crypto assets are
subject to fluctuations in the value of the crypto asset, which can be highly
volatile. The value of crypto assets is determined by the supply and demand for
crypto assets in the global market
for
the
trading
of
crypto
assets,
which
consists
primarily
of
transactions
on
crypto
asset
trading
platforms.
The value of crypto assets has been, and may continue to be, substantially
dependent on speculation, such that trading and investing in crypto assets
generally may not be based on fundamental analysis.
The
Paradigm Portfolio’s exposure to crypto assets can result in substantial losses
to the Paradigm Fund.
Crypto
assets facilitate decentralized, peer-to-peer financial exchange and value
storage, without the oversight of a central authority or banks. The value of
crypto assets are not backed by any government, corporation, or other identified
body. Crypto assets are also susceptible to theft, loss and
destruction.
Crypto
assets trade on crypto asset trading platforms, which are largely unregulated
and may therefore be more exposed
to
fraud
and
failure
than
established,
regulated
exchanges
for
securities,
derivatives
and
other
currencies.
These crypto asset trading platforms can cease operating temporarily or even
permanently, resulting in the potential loss of users’ crypto assets or other
market disruptions. Crypto asset trading platforms may be more exposed to the
risk of market manipulation than exchanges for more traditional assets.
Individuals or organizations holding a large amount of crypto assets in which
the Paradigm Portfolio may invest indirectly (also known as “whales”) may have
the ability to manipulate the prices of those crypto assets. Crypto asset
trading platforms on which crypto assets are traded are or may become subject to
enforcement actions by regulatory authorities. Crypto asset trading platforms
that are regulated typically must comply with minimum net worth, cybersecurity,
and anti-money laundering requirements, but are not typically required to
protect customers or their markets to the same extent that regulated securities
exchanges or futures exchanges are required to do so. Furthermore, crypto asset
trading platforms may be operating out of compliance with regulations, and many
crypto asset trading platforms lack certain safeguards established by more
traditional exchanges to enhance the stability of trading on the exchange, such
as measures designed to prevent sudden drops in value of items traded on the
exchange (i.e.,
“flash crashes”).
As
a result, the prices of crypto assets on crypto asset trading platforms may be
subject to larger and more frequent sudden declines than assets traded on more
traditional exchanges.
ª Crypto
Asset Industry Risk:
The
crypto asset industry is a newer, speculative, and still-developing industry
that faces many risks.
The
crypto asset industry may still be experiencing a bubble or may experience a
bubble again in the future. For example, in the first half of 2022, each of
Celsius Network, Voyager Digital Ltd., and Three Arrows Capital declared
bankruptcy, resulting in a loss of confidence in participants of the digital
asset ecosystem and negative publicity surrounding
digital
assets
more
broadly.
In
November
2022,
FTX
Trading
Ltd.
(“FTX”),
one
of
the
largest
digital
asset platforms by volume at the time, halted customer withdrawals amid rumors
of the company’s liquidity issues and likely insolvency, which were subsequently
corroborated by its CEO. Shortly thereafter, FTX’s CEO resigned and FTX and many
of its affiliates filed for bankruptcy in the United States, while other
affiliates have entered
insolvency,
liquidation,
or
similar
proceedings
around
the
globe,
following
which
the
U.S.
Department
of
Justice brought criminal fraud and other charges, and the SEC and CFTC brought
civil securities and commodities fraud charges, against certain of FTX’s and its
affiliates’ senior executives, including its former CEO. In addition, several
other entities in the crypto asset industry filed for bankruptcy following FTX’s
bankruptcy filing, such as BlockFi Inc. and Genesis Global Capital, LLC. In
response to these events, the prices of crypto assets have
experienced
extreme volatility and other entities in the crypto asset industry have been,
and may continue to be, negatively affected, further undermining confidence in
the crypto asset industry. These events are continuing to develop and the full
facts are continuing to emerge. It is not possible to predict at this time all
of the risks that they may pose to the Paradigm Portfolio, and therefore the
Paradigm Fund, its service providers or to the crypto asset industry as a
whole.
Factors
affecting the further development of crypto assets include, but are not limited
to, continued worldwide growth or possible cessation or reversal in the adoption
and use of crypto assets and other digital assets; government
and
quasi-government
regulation
or
restrictions
on
or
regulation
of
access
to
and
operation
of
digital
asset networks; changes in consumer demographics and public preferences;
maintenance and development of open-source
software
protocol;
availability
and
popularity
of
other
forms
or
methods
of
buying
and
selling
goods
and services; the use of the networks supporting digital assets, such as those
for developing smart contracts and distributed applications; general economic
conditions and the regulatory environment relating to digital assets; negative
consumer or public perception; and general risks tied to the use of information
technologies, including cyber risks.
A
hack
or failure of one crypto asset may lead to a loss in confidence in, and thus
decreased usage and/or value of, other crypto
assets.
ª Crypto
Asset Regulatory Risk:
Crypto
asset markets in the U.S. exist in a state of regulatory uncertainty. Regulatory
changes or actions by Congress as well as U.S. federal or state agencies may
adversely affect the value of the Paradigm Portfolio’s indirect investments in
crypto assets.
As
digital assets have grown in both popularity and market size, a number of state
and federal agencies have issued consumer advisories regarding the risks posed
by digital assets to investors. In addition, the Securities and Exchange
Commission, U.S. state securities regulators and several foreign
governments
have
issued
warnings
and
instituted
legal
proceedings
in
which
they
argue
that
certain
digital
assets
may be classified as securities and that both those digital assets and any
related initial coin offerings are subject to securities
regulations.
Additionally,
U.S. state and federal, and foreign regulators and legislatures have taken
action against virtual currency businesses or enacted restrictive regimes in
response to adverse publicity arising from hacks, consumer harm, or criminal
activity stemming from virtual currency activity.
Currently,
there is relatively limited use of crypto assets in the retail and commercial
marketplace, which contributes to price volatility.
A
lack
of expansion by crypto assets into retail and commercial markets, or a
contraction
of
such
use,
may
result
in
increased
volatility
or
a
reduction
in
the
value
of
crypto
assets,
either
of
which could adversely impact the value of the Paradigm Portfolio’s investment.
In addition, to the extent market participants develop a preference for one
crypto asset over another, the value of the less preferred crypto assets would
likely be adversely affected.
The
Paradigm Portfolio’s exposure to crypto assets may change over time and,
accordingly, such exposure may not be represented in the Paradigm Portfolio’s
portfolio at any given time. Many significant aspects of the tax treatment of
investments in crypto assets are uncertain, and a direct or indirect investment
in crypto assets may produce non-qualifying income. Crypto assets are a new
technological innovation with a limited history; it is a highly speculative
asset and future regulatory actions or policies may limit, perhaps to a
materially adverse extent, the value
of
the
Paradigm
Portfolio’s
indirect
investment
in
crypto
assets
and
the
ability
to
exchange
a
crypto
asset
or
utilize
it
for
payments.
ª Non-Diversification
Risks:
As a non-diversified investment company, the Paradigm Portfolio can invest a
large percentage of its assets in a small number of issuers. As a result, a
change in the value
of
any one investment may affect the overall value of the Paradigm Portfolio’s
shares, and therefore the Paradigm Fund’s shares, more than shares of a
diversified mutual fund that holds more
investments.
ª Petroleum
and Gas Sector Risk:
The profitability of companies in the oil and gas industry is related to
worldwide energy prices, exploration costs and production spending. Companies in
the oil and gas industry may be at risk for environmental damage claims and
other types of litigation. Companies in the oil and gas industry may be
adversely affected by: natural disasters or other catastrophes; changes in
exchange rates or interest rates; prices for competitive energy services,
economic conditions, tax treatment, or government regulation; government
intervention; negative public perception; or unfavorable events in the regions
where companies operate (e.g.,
expropriation, nationalization, confiscation of assets and property, imposition
of restrictions on foreign investments or repatriation of capital, military
coups, social or political unrest, violence or labor unrest). Companies in the
oil and gas industry may have significant capital investments in, or engage in
transactions involving, emerging market countries, which may heighten these
risks.
ª Below
Investment Grade Debt Securities Risks: Generally,
below investment grade debt securities, i.e.,
junk bonds, are subject to greater credit risk, price volatility and risk of
loss than investment grade securities. Junk bonds are considered to be
speculative in nature.
ª Convertible
Securities Risks: Convertible securities are subject to the risks affecting both equity
and fixed income securities, including market, credit, liquidity and interest
rate risk.
ª Emerging
Markets Risks: The
risks of foreign investments are usually much greater for the emerging markets.
Investments in emerging markets may be considered speculative. The information
available about an emerging market issuer may be less reliable than for
comparable issuers in more developed capital markets. In addition, investments
in certain emerging markets are subject to an elevated risk of loss resulting
from market manipulation and the imposition of exchange controls (including
repatriation restrictions). The legal rights and remedies available for
investors in emerging markets may be more limited than the rights and remedies
available in the U.S., and the ability of U.S. authorities (e.g.,
SEC and the U.S. Department of Justice) to bring actions against bad actors in
emerging markets may be limited.
ª Exchange-Traded
Funds (ETFs) Risks: ETFs
are registered investment companies whose shares are listed and traded on U.S.
stock exchanges or otherwise traded in the over-the-counter market. In general,
passively-managed ETFs seek to track a specified securities index or a basket of
securities that an “index provider,” such as S&P Global, selects as
representative of a market, market segment or industry sector. A
passively-managed ETF is designed so that its performance will correspond
closely with that of the index it tracks. A leveraged ETF will engage in
transactions and purchase instruments that give rise to forms of leverage,
including, among others, the use of reverse repurchase agreements and other
borrowings, the investment of collateral from loans of portfolio securities, the
use of when issued, delayed-delivery or forward commitment transactions or short
sales. To the extent a fund invests in ETFs that achieve leveraged exposure to
their underlying indexes through the use of derivative instruments, the fund
will indirectly be subject to leveraging risk.
As
a shareholder in an ETF, the Paradigm Portfolio will bear its pro rata portion
of an ETF’s expenses, including advisory fees, in addition to its own expenses.
The existence of extreme market volatility or potential lack of an active
trading market for an ETF’s shares could result in such shares trading at a
significant premium or discount to their NAV.
ª Foreign
Securities Risks:
The Paradigm Portfolio may invest in foreign securities directly or through
ADRs, GDRs and IDRs. Foreign securities can carry higher returns but involve
more risks than those associated with U.S. investments. Additional risks
associated with investment in foreign securities include currency fluctuations,
political and economic instability, less publicly available information,
differences in financial reporting standards and less stringent regulation of
securities markets. Foreign securities in which the Portfolio invests may be
traded in markets that close before the time that the Portfolio calculates its
NAV. Furthermore, certain foreign securities in which the Portfolio invests may
be listed on foreign exchanges that trade on weekends or other days when the
Portfolio does not calculate its NAV. As a result, the value of the Portfolio’s
holdings may change on days when shareholders are not able to purchase or redeem
the Paradigm Fund’s shares.
ª Interest
Rate Risk:
The risk that when interest rates increase, fixed-income securities held by the
Paradigm Portfolio will decline in value. Long-term fixed-income securities will
normally have more price volatility because of this risk than short-term
fixed-income securities. A low or negative interest rate environment could cause
the Paradigm Portfolio's earnings to fall below the Portfolio's expense ratio,
resulting in a decline in the Portfolio's share price. A general rise in
interest rates may cause investors to move out of fixed income securities on a
large scale, which could adversely affect the price and liquidity of fixed
income securities. The risks associated with changing interest rates may have
unpredictable effects on the markets and the Paradigm Portfolio's
investments.
ª Leveraging
Risks: Investments in derivative instruments may give rise to a form of
leverage. The Investment Adviser may engage in speculative transactions, which
involve substantial risk and leverage. The use of leverage by the Investment
Adviser may increase the volatility of the Paradigm Portfolio. These leveraged
instruments may result in losses to the Paradigm Portfolio or may adversely
affect the Paradigm Portfolio’s NAV or total return, because instruments that
contain leverage are more sensitive to changes in interest rates. The Paradigm
Portfolio may also have to sell assets at inopportune times to satisfy its
obligations in connection with such transactions.
ª Liquidity
Risks:
The Investment Adviser may not be able to sell portfolio securities at an
optimal time or price. The Portfolio’s significant investment in a single
position, makes the Portfolio especially susceptible to the risk that during
certain periods the liquidity of the single position will decrease or disappear
suddenly and without warning as a result of adverse market or political events,
or adverse investor perceptions.
ª Management
Risks: There
is no guarantee that the Paradigm Fund will meet its investment objective. The
Investment Adviser does not guarantee the performance of the Paradigm Fund, nor
can it assure you that the market value of your investment will not
decline.
ª Sector
Concentration Risk: Although the Paradigm Portfolio will not concentrate its investments
in any industries, the Paradigm Portfolio may, at certain times, have
concentrations in one or more sectors which may cause the Portfolio to be more
sensitive to economic changes or events occurring in those sectors, and the
Portfolio’s investments may be more volatile. As of December 31, 2023, the
Portfolio had 61.4% invested in the Mining, Quarrying, and Oil and Gas
Extraction sector.
ª Small
and Medium-Size Company Risks:
The Paradigm Portfolio may invest in the equity securities of small and
medium-size companies. Small and medium-size companies often have narrower
markets and more limited managerial and financial resources than do larger, more
established companies. As a result, their performance can be more volatile and
they face a greater risk of business failure, which could increase the
volatility of the Paradigm Portfolio’s assets.
ª Stock
Market Risks:
Stock mutual funds are subject to stock market risks and significant
fluctuations in value. If the stock market declines in value, the Paradigm
Portfolio, and therefore the Paradigm Fund, is likely to decline in value and
you could lose money on your investment. Natural disasters, public health
emergencies (including epidemics and pandemics), geopolitical events, terrorism
and other global unforeseeable events may lead to instability in world economies
and markets, market volatility and may have adverse long-term
effects.
ª Stock
Selection Risks:
The portfolio securities selected by the Investment Adviser may decline in value
or not increase in value when the stock market in general is rising and may fail
to meet the Paradigm Portfolio’s, and therefore the Paradigm Fund’s, investment
objective.
ª Subsidiary
Risks:
By investing in the Subsidiary, the Paradigm Portfolio is indirectly exposed to
the risks associated with the Subsidiary’s investments. Those investments held
by the Subsidiary are generally similar to the investments that are permitted to
be held by the Paradigm Portfolio and are subject to the same risks that would
apply to similar investments if held directly by the Paradigm Portfolio. The
Subsidiary is not registered under the 1940 Act and, unless otherwise noted in
this Prospectus, is not subject to all the investor protections of the 1940 Act.
In addition, changes in the laws of the United States and/or the Cayman Islands
could result in the inability of the Paradigm Portfolio and/or its Subsidiary to
continue to operate and could adversely affect the Paradigm Fund’s
performance.
ª Tax
Risks:
In order to qualify as a RIC, the Paradigm Fund must meet certain requirements
regarding the source of its income, the diversification of its assets and the
distribution of its income. Under the test regarding the source of a RIC’s
income, at least 90% of the gross income of the RIC each year must be qualifying
income, which consists of dividends, interest, gains on investments in
securities and certain other categories of investment income. It appears to be
the position of the Internal Revenue Service (the “IRS”) that gain realized on
bitcoin investments such as investments in the Grayscale Bitcoin Trust will not
be qualifying income. The Paradigm Portfolio’s investment in the Subsidiary is
expected to provide the Paradigm Fund with exposure to such bitcoin investments
within the limitations of the Internal Revenue Code for qualification as a RIC
because, under applicable tax rules, the earnings of the Subsidiary will be
qualifying income for the RIC when distributed by the Subsidiary even though the
income would not be qualifying income if earned directly by the RIC or directly
by an entity classified as a partnership for federal income tax purposes, such
as the Paradigm Portfolio, in which the RIC invests. There is a risk, however,
that the IRS might assert that the income derived from the Paradigm Portfolio’s
investment in the Subsidiary will not be considered qualifying income. If the
Paradigm Fund were to fail to qualify as a RIC and became subject to federal
income tax, shareholders of the Paradigm Fund would be subject to diminished
returns. Additionally, the Paradigm Fund invests, directly and indirectly, in
entities that take the position that they are not subject to entity-level tax.
If any such entity is reclassified as a corporation for U.S. federal income tax
purposes, shareholders of the Paradigm Fund would be subject to diminished
returns. Changes in the laws of the United States and/or the Cayman Islands
could result in the inability of the Paradigm Portfolio and/or its Subsidiary to
operate as described in this Prospectus and could adversely affect the Paradigm
Fund. For example, the Cayman Islands does not currently impose any income,
corporate or capital gains tax or withholding tax on the Cayman Subsidiary. If
Cayman Islands law changes such that the Cayman Subsidiary must pay Cayman
Islands taxes, Paradigm Fund shareholders would likely suffer decreased
investment returns.
ª Valuation
Risk: The
sales price the Portfolio could receive for any particular portfolio investment
may differ from the Portfolio’s valuation of the investment, particularly for
securities or other investments, such as Bitcoin, that trade in thin or volatile
markets or that are valued using a fair value
methodology.
Valuation may be more difficult in times of market turmoil since many investors
and market makers may be reluctant to purchase complex instruments or quote
prices for them. Fair valuation of the Portfolio’s investments involves
subjective judgment. The Portfolio’s ability to value its investments may be
impacted by technological issues and/or errors by pricing services or other
third-party service providers. Shares of Grayscale Bitcoin Trust are intended to
reflect the price of bitcoin assets, less fees and expenses, and shares of the
Grayscale Bitcoin Trust have historically traded, and may continue to trade, at
a significant discount or premium to net asset value. As such, the price of
Grayscale Bitcoin Trust may go down even if the price of the underlying asset,
bitcoin, remains unchanged. Additionally, shares that trade at a premium mean
that an investor who purchases $1 of a portfolio will actually own less than $1
in assets.
ª Volatility
Risk:
The Portfolio may have investments, including but not limited to Bitcoin, that
appreciate or depreciate significantly in value over short periods of time. This
may cause the Portfolio’s net asset value per share to experience significant
increases or declines in value over short periods of
time.
Who
may want to invest?
The
Paradigm Fund may be appropriate for investors who:
ª wish
to invest for the long-term;
ª want
to diversify their portfolios;
ª want
to allocate some portion of their long-term investments to equity
investing;
ª are
willing to accept the volatility associated with equity and Bitcoin investing;
and
ª are
comfortable with the risks described herein.
Performance
The bar chart
and table shown below illustrate the variability of the Paradigm Fund’s
returns. The bar chart indicates the risks of investing in the
Paradigm Fund by showing the changes in the Paradigm Fund’s performance from
year to year (on a calendar year basis). The table shows how the Paradigm Fund’s
average annual returns, before and after taxes, compare with those of the
S&P 500® Index and the MSCI ACWI (All Country World Index) Index (“MSCI ACWI
Index”), which represent broad measures of market performance. The
past performance of the Paradigm Fund, before and after taxes, is not
necessarily an indication of how the Paradigm Fund or the Paradigm Portfolio
will perform in the future. Performance reflects fee waivers in
effect. If fee waivers were not in effect, the Paradigm Fund’s performance would
be reduced. Updated performance information is available on the Fund’s website
at http://www.kineticsfunds.com
or by calling the Fund toll-free at (800) 930-3828.
The
Paradigm Fund – No Load Class
Calendar
Year Returns as of 12/31
|
|
|
|
|
|
|
|
|
|
|
| |
| Best
Quarter: |
Q1 2021 |
54.40 |
% |
| Worst
Quarter: |
Q1 2020 |
-32.22 |
% |
The
Paradigm Fund’s after-tax returns as shown in the following table are calculated
using the historical highest individual federal marginal income tax rates and do
not reflect the impact of state and local taxes.Your actual
after-tax returns depend on your tax situation and may differ from those shown.
If you own Fund shares in a
tax-deferred account, such as a 401(k) plan or an individual retirement account
(“IRA”), the information on after-tax returns is not relevant to your
investment.
Average Annual
Total Returns as of 12/31/2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 1
Year |
5
Years |
10
Years |
Since
Inception(1) |
| The
Paradigm Fund (WWNPX) No Load |
|
|
| |
|
Return Before
Taxes |
-16.89 |
% |
14.86 |
% |
10.26 |
% |
10.10 |
% |
|
Return After
Taxes on Distributions |
-17.94 |
% |
14.21 |
% |
9.70 |
% |
9.79 |
% |
|
Return
After Taxes on Distributions and Sale of Fund Shares(2) |
-9.24 |
% |
11.96 |
% |
8.38 |
% |
8.89 |
% |
|
S&P
500®
Index
(reflects no deductions for
fees, expenses or taxes) |
26.29 |
% |
15.69 |
% |
12.03 |
% |
7.03 |
% |
|
MSCI ACWI
Index (reflects no deductions for
fees, expenses or taxes) |
22.20 |
% |
11.72 |
% |
7.93 |
% |
5.14 |
% |
(1)The
Paradigm Fund’s No Load Class shares commenced operations on December 31,
1999 and converted into a feeder
fund of the Paradigm Portfolio on April 28, 2000. The returns for the two
indices in this column have been calculated since the December 31, 1999
inception date of the Paradigm Fund’s No Load Class
shares.
(2)In some cases, the Return
After Taxes on Distributions and Sale of Fund Shares may exceed the Return After
Taxes on Distributions or Return Before Taxes due to an assumed benefit from any
losses on a sale of Fund Shares at the end of the measurement
period.
Management
Investment
Adviser. Horizon
Kinetics
Asset Management LLC is the Paradigm Portfolio’s investment adviser.
Portfolio
Managers. The
Paradigm Portfolio is managed by an investment team with Mr. Doyle,
Mr. Stahl, and Mr. Bregman as the Co-Portfolio Managers. Each investment
team member serves as a research analyst.
|
|
|
|
|
|
|
|
| |
| Investment
team member |
Primary
Title |
Years
of Service with the Fund |
| Peter
B. Doyle |
Co-Portfolio
Manager |
25 |
| Murray
Stahl |
Co-Portfolio
Manager |
25 |
| Steven
Bregman |
Co-Portfolio
Manager |
8 |
| James
Davolos |
Investment
Team Member |
18 |
Purchase
and Sale of Fund Shares
You
may purchase, exchange or redeem Fund shares on any business day by written
request via mail (Kinetics Mutual Funds – The Paradigm Fund, c/o U.S. Bank
Global Fund Services, P.O. Box 701, Milwaukee, Wisconsin 53201-0701), by
telephone at 1-800-930-3828, or through a financial intermediary. You may also
purchase or redeem Fund shares by wire transfer. The minimum initial investment
for both regular accounts and IRAs is $2,500 ($2,000 for Coverdell Education
Savings Accounts). There is no minimum on subsequent investments for all account
types.
Tax
Information
Unless
you are investing through a tax-deferred arrangement, such as a 401(k) or an
IRA, the Fund’s distributions will generally be taxable to you at ordinary
income or capital gain tax rates, and you will generally recognize gain or loss
when you redeem shares.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker-dealer or other financial intermediary,
the Fund and/or its Investment Adviser may pay the intermediary for the sale of
Fund shares and related services. These payments may create a conflict of
interest by influencing the broker-dealer or other financial intermediary and
your salesperson to recommend the Fund over another investment. Ask your
salesperson or visit your financial intermediary’s website for more information.
|
|
| |
|
THE SMALL CAP
OPPORTUNITIES FUND |
Investment
Objective
The
investment objective of the Small Cap Opportunities Fund (the “Small Cap Fund”)
is long-term growth of capital. The Small Cap Fund is the sole “feeder fund” to
The Small Cap Opportunities Portfolio (the “Small Cap Portfolio”), a series of
Kinetics Portfolios Trust.
Fees and Expenses of the
Fund
This
table describes the fees and expenses that you may pay if you buy, hold, and
sell shares of the Small Cap Fund. You may pay other fees, such as brokerage
commissions and other fees to financial intermediaries, which are not reflected
in the table and example below.
Fee
Table(1)
|
|
|
|
|
| |
|
SHAREHOLDER
FEES
(fees paid directly from your
investment) |
No
Load Class |
| Redemption
Fee (as a percentage of amount redeemed on shares held for 30 days or
less, if applicable) |
2.00% |
|
|
|
|
|
|
|
|
| |
|
ANNUAL
FUND OPERATING EXPENSES
(expenses
that you pay each year as a percentage of the value of your
investment) |
| No
Load Class |
|
Management
Fees(1) |
| 1.25% |
| Distribution
(Rule 12b-1) Fees |
| None |
| Other
Expenses |
| 0.47% |
|
Shareholder
Servicing Fees |
0.25% |
|
|
Other
Operating Expenses |
0.22% |
|
| Total
Annual Fund Operating Expenses |
| 1.72% |
|
Fee
Waiver and/or Expense Reimbursements(2) |
| -0.08% |
|
Total
Annual Fund Operating Expenses after Fee Waiver and/or Expense
Reimbursements |
| 1.64% |
(1)This
table and the example below reflect the aggregate expenses of the Small Cap Fund
and the Small Cap Opportunities Portfolio (the “Small Cap Portfolio”). The
management fees paid by the Small Cap Fund reflect the proportionate share of
fees allocated to the Small Cap Fund from the Small Cap Portfolio. The fees and
expenses of the Small Cap Portfolio included those incurred by any subsidiary
wholly-owned and controlled by the Small Cap
Portfolio.
(2)Horizon
Kinetics Asset Management LLC, the investment adviser to the Small Cap Portfolio
of the Kinetics Portfolios Trust (the “Investment Adviser”), has agreed to waive
management fees and reimburse Fund expenses so that Total Annual Fund Operating
Expenses after Fee Waiver and/or Expense Reimbursements do not exceed 1.64%,
excluding acquired fund fees and expenses. These waivers and reimbursements are
in effect until April 30,
2025,
and may not be terminated without the approval of the Board.
Example.
This Example is
intended to help you compare the cost of investing in the Small Cap Fund with
the cost of investing in other mutual funds. This Example assumes that you
invest $10,000 in the Small Cap Fund for the time periods indicated and then
redeem all of your shares at the end of these periods. The Example also assumes
that your investment has a 5% return each year and that the Small Cap Fund’s
operating expenses remain the same (taking into account the expense limitation
only in the first year). Although your actual
costs may be higher or lower, based on these assumptions your cost for the Small
Cap Fund would be:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 1
Year |
3
Years |
5
Years |
10
Years |
| No
Load Class |
$167 |
$534 |
$926 |
$2,024 |
Portfolio
Turnover.
The Small Cap Portfolio pays transaction
costs, such as commissions, when it buys and sells securities (or “turns over”
its portfolio). A higher portfolio turnover rate may indicate higher transaction
costs and may result in higher taxes when Fund shares are held in a taxable
account. These costs, which are not reflected in annual fund operating expenses
or in the Example, affect the Small Cap Portfolio’s, and therefore the Small Cap
Fund’s, performance. During the most recent fiscal year, the Small Cap
Portfolio’s portfolio turnover rate was 2% of the average value of its portfolio.
Principal Investment
Strategy
The
Small Cap Fund is a non-diversified fund that invests all of its investable
assets in the Small Cap Portfolio, a series of Kinetics Portfolios Trust.
Under normal
circumstances, the Small Cap Portfolio invests at least 80% of its net assets
plus any borrowings for investment purposes in common stocks, convertible
securities, warrants and other equity securities having the characteristics of
common stocks (such as American Depositary Receipts (“ADRs”), Global Depositary
Receipts (“GDRs”) and International Depositary Receipts (“IDRs”)) of U.S. and
foreign small capitalization companies that provide attractive valuation
opportunities. The Small Cap Portfolio’s Investment Adviser considers small cap
companies to be those with market capitalizations at or below the highest market
capitalization of a component security within the S&P
600®
SmallCap Index. The highest market capitalization of a company within the
S&P 600®
SmallCap Index was approximately $7.3 billion as of March 31, 2024. The Small
Cap Portfolio may also invest in exchange-traded funds (“ETFs”) and purchase and
write options for hedging purposes and/or direct investment.
The Small Cap Portfolio may invest up to 20% of its total assets in
convertible and non-convertible debt securities rated below investment grade,
also known as junk bonds, or unrated securities that the Investment Adviser has
determined to be of comparable quality.
The
Small Cap Portfolio focuses on undervalued and special situation small
capitalization equities that the Investment Adviser believes have the potential
for rewarding long-term investment results. Small Cap Portfolio securities will
generally be selected from companies that are engaged in a number of industries
if, in the Investment Adviser’s opinion, they are selling below their perceived
intrinsic value, have limited or no institutional ownership, have had short-term
earnings shortfalls, have had a recent initial public offering (“IPO”) but have
not attracted significant analyst coverage, are selling at or below book or
replacement value, or have modest price to earnings ratios. The Investment
Adviser considers a company’s fundamentals by reviewing its balance sheets,
corporate revenues, earnings and dividends. The Investment Adviser also looks at
the amount of capital a company spends on research and development.
Additionally, the Small Cap Portfolio may participate in securities lending
arrangements up to 33-1/3% of the securities in its portfolio with brokers,
dealers, and financial institutions (but not individuals) in order to increase
the return on its portfolio.
The
Small Cap Portfolio may invest indirectly in bitcoin through a Delaware
statutory trust, Grayscale Bitcoin Trust ETF (“Grayscale Bitcoin Trust”) and
through other pooled investment vehicles that provide exposure to crypto assets.
Certain of these vehicles may not be registered under the Investment Company Act
of 1940, as amended (the “1940 Act”) and do not receive the protections of the
1940 Act. The Small Cap Portfolio will not invest directly in Bitcoin or other
crypto assets. Grayscale Bitcoin Trust is one of the first spot Bitcoin ETFs in
the U.S. It enables investors to gain exposure to bitcoin in the form of a
security while avoiding the challenges of buying, storing, and safekeeping
bitcoin, directly. Bitcoins are a type of crypto assets that are not issued by a
government, bank or central organization. Bitcoins exist on an online,
peer-to-peer computer network (the “Bitcoin Network”) that hosts a public
transaction ledger where bitcoin transfers are recorded (the “Blockchain”).
Bitcoins have no physical existence beyond the record of transactions on the
Blockchain. The Grayscale Bitcoin Trust invests principally in bitcoins. The
Small Cap Portfolio held 6.72% of its net assets in the Grayscale Bitcoin Trust
as of March 31, 2024.
The
Small Cap Portfolio may also invest in other pooled investment vehicles that
provide exposure to the spot price of crypto assets. For example, the Small Cap
Portfolio may invest in the Grayscale Ethereum Classic Trust. The amount of the
Small Cap Portfolio’s investment in crypto assets may be limited by law or by
tax considerations.
The
Small Cap Portfolio contributed a portion of its holdings in the Grayscale
Bitcoin Trust to a wholly-owned and controlled subsidiary organized under the
laws of the Cayman Islands (the “Subsidiary”).
In
the future, the Small Cap Portfolio may seek to gain additional exposure to the
Grayscale Bitcoin Trust that may not produce qualifying income for the Small Cap
Fund under the Internal Revenue Code of 1986, as amended (the “Internal Revenue
Code”) if held directly. The Small Cap Portfolio will not make any additional
investments in the Grayscale Bitcoin Trust if as a result of such investment,
its aggregate investment in the Grayscale Bitcoin Trust, either directly or
through a Subsidiary, would be more than 15% of its assets at the time of the
investment. However, the Portfolio’s investment in the Grayscale Bitcoin Trust
may, at times, exceed 15% of its net assets, due to appreciation.
The
Subsidiary invests primarily in the Grayscale Bitcoin Trust. The Small Cap
Portfolio will invest in its Subsidiary in a manner consistent with the
limitations of the federal tax laws, rules and regulations that apply to the
Small Cap Fund as a “regulated investment company” (“RIC”) under Subchapter M of
Subtitle A, Chapter 1, of the Internal Revenue Code (“Subchapter M”). However,
the Small Cap Portfolio and its Subsidiary comply with the same fundamental
investment restrictions on an aggregate basis, to the extent those restrictions
are applicable to the investment activities of the Subsidiary. The Subsidiary
also complies with Section 17 of the 1940 Act relating to affiliated
transactions and custody, and the Investment Adviser complies with Section 15 of
the 1940 Act, relating to investment advisory contracts with respect to the
Subsidiary. Unlike the Small Cap Fund, the Subsidiary does not, and will not,
seek to qualify as a RIC. The Small Cap Portfolio is the sole shareholder of its
Subsidiary and does not expect shares of its Subsidiary to be offered or sold to
other investors. The Subsidiary includes entities that engage in investment
activities in securities or other assets that are primarily controlled by the
Small Cap Portfolio. The Small Cap Portfolio does not intend to create or
acquire primary control of any entity which primarily engages in investment
activities in securities or other assets other than entities wholly-owned by the
Small Cap Portfolio.
Sell
decisions are generally triggered by either adequate value being achieved, as
determined by the Investment Adviser, or by an adverse change in a company’s
operating performance or a deterioration of the company’s business model. A sell
trigger may also occur if the Investment Adviser discovers a new investment
opportunity that it believes is more compelling and represents a greater risk
reward profile than other investment(s) held by the Small Cap Portfolio.
The
Small Cap Portfolio may maintain during a temporary period, which could be for a
short period or a longer period lasting several years or more, of abnormal
conditions, a significant portion of its total assets in cash and securities,
generally considered to be cash and cash equivalents, including, but not limited
to: high quality, U.S. short-term debt securities and money market instruments.
The Investment Adviser will invest in such short-term cash positions to the
extent that the Investment Adviser is unable to find sufficient investments
meeting its criteria and when the Investment Adviser believes the purchase of
additional equity securities would not further the investment objective of the
Small Cap Portfolio during such periods of time. Additionally, to respond to
adverse market, economic, political or other conditions, which may persist for
short or long periods of time, the Small Cap Portfolio may invest up to 100% of
its assets in the types of high quality, U.S. short-term debt securities and
money market instruments described above.
If
the market advances during periods when the Small Cap Portfolio is holding a
large cash position, the Portfolio may not participate as much as it would have
if it had been more fully invested in securities. In the aforementioned
temporary defensive periods, the Investment Adviser believes that an additional
amount of liquidity in the Small Cap Portfolio is desirable both to meet
operating requirements and to take advantage of new investment opportunities.
When the Small Cap Portfolio holds a significant portion of assets in cash and
cash equivalents, it may not meet its investment objective.
The
Small Cap Portfolio held 47.40%
of its net assets in the Texas Pacific Land Corporation (the “Land Corporation”)
as of March 31, 2024. The Land Corporation is a corporation organized under the laws of
the state of New York. One of the largest land owners in Texas, the Land
Corporation derives most of its income from oil and gas royalty revenue, land
easements and water royalties and sales. The Land Corporation has historically
operated with minimal operating expenses, little to no debt and utilized cash
flow to return capital to unitholders through share repurchases and dividends.
While the Land Corporation has held the majority of its assets since its
formation in 1888, the development of energy resources subject to its royalty
interests and related land use have experienced rapid growth in recent years due
to advances in energy exploration and extraction technologies.
Principal Investment
Risks
Investing in
common stocks has inherent risks that could cause you to lose
money. The principal risks of investing in the Small Cap Fund,
and indirectly the Small Cap Portfolio, are listed below and could adversely
affect the net asset value (“NAV”), total return and value of the Small Cap
Fund, the Small Cap Portfolio and your investment. The first six risks are
prioritized by order of importance. The remaining principal risks are presented
in alphabetical order to facilitate finding particular risks and comparing them
with other funds. Each risk summarized below is considered a principal risk of
investing in the Small Cap Fund, and indirectly the Small Cap Portfolio,
regardless of the order in which it appears. Different risks may be more
significant at different times depending on market conditions or other factors.
ª Single
Stock Concentration Risk: The
Small Cap Portfolio may hold a large concentration of its net assets in a single
security or issuer. Holding a large concentration in a single security or issuer
may expose the portfolio to the market volatility of that specific security or
issuer if the security or issuer performs worse than the market as a whole,
which could adversely affect the Fund’s
performance.
ª Crypto
Asset
Exposure
Risk:
Crypto
assets
(also
referred
to
as
“virtual
currencies”
and
“digital
currencies”)
are
digital
assets
designed
to
act
as
a medium of exchange. Although crypto assets are an emerging asset class, they
are not presently widely accepted as a medium of exchange. There are thousands
of crypto assets, the most well-known of which is bitcoin.
Bitcoin
or BTC was the first decentralized crypto asset. Bitcoin is a type of crypto
asset that is not issued by a government,
bank
or
central
organization.
Bitcoin
exists
on
an
online,
peer-to-peer
computer
network
that
hosts
the Blockchain. Bitcoin has no physical existence beyond the record of
transactions on the Blockchain. The Bitcoin Network allows people to exchange
tokens of value, bitcoins, which are recorded on a public transaction ledger
known as a Blockchain. The Fund may invest indirectly in bitcoin through the
Grayscale Bitcoin Trust and through other pooled investment
vehicles
that
provide
exposure
to
crypto
assets.
Grayscale
Bitcoin
Trust
is
one
of
the
first
spot Bitcoin ETFs in the U.S. It enables investors to gain exposure to bitcoin
in the form of a security while avoiding the challenges of buying, storing, and
safekeeping bitcoin, directly.
In
addition to the general risks of investing in other investment vehicles, the
value of the Small Cap Portfolio’s indirect investments in crypto assets are
subject to fluctuations in the value of the crypto asset, which can be highly
volatile. The value of crypto assets is determined by the supply and demand for
crypto assets in the global market
for
the
trading
of
crypto
assets,
which
consists
primarily
of
transactions
on
crypto
asset
trading
platforms.
The value of crypto assets has been, and may continue to be, substantially
dependent on speculation, such that trading and investing in crypto assets
generally may not be based on fundamental analysis.
The
Small Cap Portfolio’s exposure to crypto assets can result in substantial losses
to the Small Cap Fund.
Crypto
assets facilitate decentralized, peer-to-peer financial exchange and value
storage, without the oversight of a central authority or banks. The value of
crypto assets are not backed by any government, corporation, or other identified
body. Crypto assets are also susceptible to theft, loss and
destruction.
Crypto
assets trade on crypto asset trading platforms, which are largely unregulated
and may therefore be more exposed
to
fraud
and
failure
than
established,
regulated
exchanges
for
securities,
derivatives
and
other
currencies.
These crypto asset trading platforms can cease operating temporarily or even
permanently, resulting in the potential loss of users’ crypto assets or other
market disruptions. Crypto asset trading platforms may be more exposed to the
risk of market manipulation than exchanges for more traditional assets.
Individuals or organizations holding a large amount of crypto assets in which
the Small Cap Portfolio may invest indirectly (also known as “whales”) may have
the ability to manipulate the prices of those crypto assets. Crypto asset
trading platforms on which crypto assets are traded are or may become subject to
enforcement actions by regulatory authorities. Crypto asset trading platforms
that are regulated typically must comply with minimum net worth, cybersecurity,
and anti-money laundering requirements, but are not typically required to
protect customers or their markets to the same extent that regulated securities
exchanges or futures exchanges are required to do so. Furthermore, crypto asset
trading platforms may be operating out of compliance with regulations, and many
crypto asset trading platforms lack certain safeguards established by more
traditional exchanges to enhance the stability of trading on the exchange, such
as measures designed to prevent sudden drops in value of items traded on the
exchange (i.e.,
“flash crashes”).
As
a result, the prices of crypto assets on crypto asset trading platforms may be
subject to larger and more frequent sudden declines than assets traded on more
traditional exchanges.
ª Crypto
Asset Industry Risk:
The
crypto asset industry is a newer, speculative, and still-developing industry
that faces many risks.
The
crypto asset industry may still be experiencing a bubble or may experience a
bubble again in the future. For example, in the first half of 2022, each of
Celsius Network, Voyager Digital Ltd., and Three Arrows Capital declared
bankruptcy, resulting in a loss of confidence in participants of the digital
asset ecosystem and negative publicity surrounding
digital
assets
more
broadly.
In
November
2022,
FTX
Trading
Ltd.
(“FTX”),
one
of
the
largest
digital
asset platforms by volume at the time, halted customer withdrawals amid rumors
of the company’s liquidity issues and likely insolvency, which were subsequently
corroborated by its CEO. Shortly thereafter, FTX’s CEO resigned and FTX and many
of its affiliates filed for bankruptcy in the United States, while other
affiliates have entered
insolvency,
liquidation,
or
similar
proceedings
around
the
globe,
following
which
the
U.S.
Department
of
Justice brought criminal fraud and other charges, and the SEC and CFTC brought
civil securities and commodities fraud charges, against certain of FTX’s and its
affiliates’ senior executives, including its former CEO. In addition, several
other entities in the crypto asset industry filed for bankruptcy following FTX’s
bankruptcy filing, such as BlockFi Inc. and Genesis Global Capital, LLC. In
response to these events, the prices of crypto assets have experienced extreme
volatility and other entities in the crypto asset industry have been, and may
continue to be, negatively affected, further undermining confidence in the
crypto asset industry. These events are continuing to develop and the full facts
are continuing to emerge. It is not possible to predict at this time all of the
risks that they may pose to the Small Cap Portfolio, and therefore the Small Cap
Fund, its service providers or to the crypto asset industry as a whole.
Factors
affecting the further development of crypto assets include, but are not limited
to, continued worldwide growth or possible cessation or reversal in the adoption
and use of crypto assets and other digital assets; government
and
quasi-government
regulation
or
restrictions
on
or
regulation
of
access
to
and
operation
of
digital
asset networks; changes in consumer demographics and public preferences;
maintenance and development of open-source
software
protocol;
availability
and
popularity
of
other
forms
or
methods
of
buying
and
selling
goods
and services; the use of the networks supporting digital assets, such as those
for developing smart contracts and distributed applications; general economic
conditions and the regulatory environment relating to digital assets; negative
consumer or public perception; and general risks tied to the use of information
technologies, including cyber risks.
A
hack
or failure of one crypto asset may lead to a loss in confidence in, and thus
decreased usage and/or value of, other crypto
assets.
ª Crypto
Asset Regulatory Risk:
Crypto
asset markets in the U.S. exist in a state of regulatory uncertainty. Regulatory
changes or actions by Congress as well as U.S. federal or state agencies may
adversely affect the value of the Small Cap Portfolio’s indirect investments in
crypto assets.
As
digital assets have grown in both popularity and market size, a number of state
and federal agencies have issued consumer advisories regarding the risks posed
by digital assets to investors. In addition, the Securities and Exchange
Commission, U.S. state securities regulators and several foreign
governments
have
issued
warnings
and
instituted
legal
proceedings
in
which
they
argue
that
certain
digital
assets
may be classified as securities and that both those digital assets and any
related initial coin offerings are subject to securities
regulations.
Additionally,
U.S. state and federal, and foreign regulators and legislatures have taken
action against virtual currency businesses or enacted restrictive regimes in
response to adverse publicity arising from hacks, consumer harm, or criminal
activity stemming from virtual currency activity.
Currently,
there is relatively limited use of crypto assets in the retail and commercial
marketplace, which contributes to price volatility.
A
lack
of expansion by crypto assets into retail and commercial markets, or a
contraction
of
such
use,
may
result
in
increased
volatility
or
a
reduction
in
the
value
of
crypto
assets,
either
of
which could adversely impact the value of the Small Cap Portfolio’s investment.
In addition, to the extent market participants develop a preference for one
crypto asset over another, the value of the less preferred crypto assets would
likely be adversely affected.
The
Small Cap Portfolio’s exposure to crypto assets may change over time and,
accordingly, such exposure may not be represented in the Small Cap Portfolio’s
portfolio at any given time. Many significant aspects of the tax treatment of
investments in crypto assets are uncertain, and a direct or indirect investment
in crypto assets may produce non-qualifying income. Crypto assets are a new
technological innovation with a limited history; it is a highly speculative
asset and future regulatory actions or policies may limit, perhaps to a
materially adverse extent, the value
of
the
Small
Cap Portfolio’s
indirect
investment
in
crypto
assets
and
the
ability
to
exchange
a
crypto
asset
or
utilize
it
for
payments.
ª Non-Diversification
Risks:
As a non-diversified investment company, the Small Cap Portfolio can invest a
large percentage of its assets in a small number of issuers. As a result, a
change in the value of any one investment may affect the overall value of the
Small Cap Portfolio’s shares, and therefore the Small Cap Fund’s shares, more
than shares of a more diversified mutual fund that holds more
investments.
ª Liquidity
Risks:
The Investment Adviser may not be able to sell portfolio securities at an
optimal time or price. The Portfolio’s significant investment in a single
position, makes the Portfolio especially susceptible to the risk that during
certain periods the liquidity of the single position will decrease or disappear
suddenly and without warning as a result of adverse market or political events,
or adverse investor perceptions.
ª Below
Investment Grade Debt Securities Risks: Generally,
below investment grade debt securities, i.e.,
junk bonds, are subject to greater credit risk, price volatility and risk of
loss than investment grade securities. Junk bonds are considered to be
speculative in nature.
ª Convertible
Securities Risks: Convertible
securities are subject to the risks affecting both equity and fixed income
securities, including market, credit, liquidity and interest rate
risk.
ª Exchange-Traded
Funds (ETFs) Risks: ETFs
are registered investment companies whose shares are listed and traded on U.S.
stock exchanges or otherwise traded in the over-the-counter market. In general,
passively-managed ETFs seek to track a specified securities index or a basket of
securities that an “index provider,” such as S&P Global, selects as
representative of a market, market segment or industry sector. A
passively-managed ETF is designed so that its performance will correspond
closely with that of the index it tracks. A leveraged ETF will engage in
transactions and purchase instruments that give rise to forms of leverage,
including, among others, the use of reverse repurchase agreements and other
borrowings, the investment of collateral from loans of portfolio securities, the
use of when issued, delayed-delivery or forward commitment transactions or short
sales. To the extent a fund invests in ETFs that achieve leveraged exposure to
their underlying indexes through the use of derivative instruments, the fund
will indirectly be subject to leveraging risk. As a shareholder in an ETF, the
Small Cap Portfolio will bear its pro rata portion of an ETF’s expenses,
including advisory fees, in addition to its own expenses. The existence of
extreme market volatility or potential lack of an active trading market for an
ETF’s shares could result in such shares trading at a significant premium or
discount to their NAV.
ª Foreign
Securities Risks:
The Small Cap Portfolio may invest in foreign securities directly or through
ADRs, GDRs and IDRs. Foreign securities can carry higher returns but involve
more risks than those associated with U.S. investments. Additional risks
associated with investment in foreign securities include currency fluctuations,
political and economic instability, less publicly available information,
differences in financial reporting standards and less stringent regulation of
securities markets. Foreign securities in which the Portfolio invests may be
traded in markets that close before the time that the Portfolio calculates its
NAV. Furthermore, certain foreign securities in which the Portfolio invests
may
be listed on foreign exchanges that trade on weekends or other days when the
Portfolio does not calculate its NAV. As a result, the value of the Portfolio’s
holdings may change on days when shareholders are not able to purchase or redeem
the Small Cap Fund’s shares.
ª Interest
Rate Risk:
The risk that when interest rates increase, fixed-income securities held by the
Small Cap Portfolio will decline in value. Long-term fixed-income securities
will normally have more price volatility because of this risk than short-term
fixed-income securities. A low or negative interest rate environment could cause
the Small Cap Portfolio's earnings to fall below the Portfolio's expense ratio,
resulting in a decline in the Portfolio's share price. A general rise in
interest rates may cause investors to move out of fixed income securities on a
large scale, which could adversely affect the price and liquidity of fixed
income securities. The risks associated with changing interest rates may have
unpredictable effects on the markets and the Small Cap Portfolio's
investments.
ª IPO
Risk:
IPO share prices can be volatile and fluctuate considerably due to factors such
as the absence of a prior public market, unseasoned trading, a limited number of
shares available for trading, and limited operating history and/or information
about the issuer. The purchase of IPO shares may involve high transaction costs.
IPO shares are subject to market risk and liquidity
risk.
ª Leveraging
Risks:
Investments in derivative instruments may give rise to a form of leverage. The
Investment Adviser may engage in speculative transactions, which involve
substantial risk and leverage. The use of leverage by the Investment Adviser may
increase the volatility of the Small Cap Portfolio. These leveraged instruments
may result in losses to the Small Cap Portfolio or may adversely affect the
Small Cap Portfolio’s NAV or total return, because instruments that contain
leverage are more sensitive to changes in interest rates. The Small Cap
Portfolio may also have to sell assets at inopportune times to satisfy its
obligations in connection with such
transactions.
ª Management
Risks: There
is no guarantee that the Small Cap Fund will meet its investment objective. The
Investment Adviser does not guarantee the performance of the Small Cap Fund, nor
can it assure you that the market value of your investment will not
decline.
ª Petroleum
and Gas Sector Risk:
The profitability of companies in the oil and gas industry is related to
worldwide energy prices, exploration costs and production spending. Companies in
the oil and gas industry may be at risk for environmental damage claims and
other types of litigation. Companies in the oil and gas industry may be
adversely affected by: natural disasters or other catastrophes; changes in
exchange rates or interest rates; prices for competitive energy services,
economic conditions, tax treatment, or government regulation; government
intervention; negative public perception; or unfavorable events in the regions
where companies operate (e.g.,
expropriation, nationalization, confiscation of assets and property, imposition
of restrictions on foreign investments or repatriation of capital, military
coups, social or political unrest, violence or labor unrest). Companies in the
oil and gas industry may have significant capital investments in, or engage in
transactions involving, emerging market countries, which may heighten these
risks.
ª Sector
Concentration Risk:
Although the Small Cap Portfolio will not concentrate its investments in any
industries, the Small Cap Portfolio may, at certain times, have concentrations
in one or more sectors which may cause the Portfolio to be more sensitive to
economic changes or events occurring in those sectors, and the Portfolio's
investments may be more volatile. As of December 31, 2023, the Portfolio had
49.3% invested in the Mining, Quarrying and Oil and Gas Extraction
sector.
ª Small-Capitalization
Company Risks: The
Small Cap Portfolio primarily invests in the stocks of small-capitalization
companies. Small-capitalization companies often have narrower markets and more
limited managerial and financial resources than larger, more established
companies. As a result,
their
performance can be more volatile and they face a greater risk of business
failure, which could increase the volatility of the Small Cap Portfolio’s
assets.
ª Special
Situations Risks: The
Small Cap Portfolio may use aggressive investment techniques, including seeking
to benefit from “special situations,” such as mergers, reorganizations, or other
unusual events expected to affect a particular issuer. There is a risk that the
“special situation” might not occur or involve longer time frames than
originally expected, which could have a negative impact on the price of the
issuer’s securities and fail to produce gains or produce a loss for the Small
Cap Portfolio, and therefore the Small Cap Fund.
ª Stock
Market Risks: Stock mutual funds are subject to stock market risks and significant
fluctuations in value. If the stock market declines in value, the Small Cap
Portfolio, and therefore the Small Cap Fund, is likely to decline in value and
you could lose money on your investment. Natural disasters, public health
emergencies (including epidemics and pandemics), geopolitical events, terrorism
and other global unforeseeable events may lead to instability in world economies
and markets, market volatility and may have adverse long-term
effects.
ª Stock
Selection Risks: The
portfolio securities selected by the Investment Adviser may decline in value or
not increase in value when the stock market in general is rising and may fail to
meet the Small Cap Portfolio’s, and therefore the Small Cap Fund’s, investment
objective.
ª Subsidiary
Risks:
By investing in its Subsidiary, the Small Cap Portfolio is indirectly exposed to
the risks associated with the Subsidiary’s investments. Those investments held
by the Subsidiary are generally similar to the investments that are permitted to
be held by the Small Cap Portfolio and are subject to the same risks that would
apply to similar investments if held directly by the Small Cap Portfolio. The
Subsidiary is not registered under the 1940 Act and, unless otherwise noted in
this Prospectus, is not subject to all the investor protections of the 1940 Act.
In addition, changes in the laws of the United States and/or the Cayman Islands
could result in the inability of the Small Cap Portfolio and/or its Subsidiary
to continue to operate and could adversely affect the Small Cap Fund’s
performance.
ª Tax
Risks:
In order to qualify as a RIC, the Small Cap Fund must meet certain requirements
regarding the source of its income, the diversification of its assets and the
distribution of its income. Under the test regarding the source of a RIC’s
income, at least 90% of the gross income of the RIC each year must be qualifying
income, which consists of dividends, interest, gains on investments in
securities and certain other categories of investment income. It appears to be
the position of the Internal Revenue Service (the “IRS”) that gain realized on
bitcoin investments such as investments in the Grayscale Bitcoin Trust will not
be qualifying income. The Small Cap Portfolio’s investment in its Subsidiary is
expected to provide the Small Cap Fund with exposure to such bitcoin investments
within the limitations of the Internal Revenue Code for qualification as a RIC
because, under applicable tax rules, the earnings of the Subsidiary will be
qualifying income for the RIC when distributed by the Subsidiary even though the
income would not be qualifying income if earned directly by the RIC or directly
by an entity classified as a partnership for federal income tax purposes, such
as the Small Cap Portfolio, in which the RIC invests. There is a risk, however,
that the IRS might assert that the income derived from the Small Cap Portfolio’s
investment in its Subsidiary will not be considered qualifying income. If the
Small Cap Fund were to fail to qualify as a RIC and became subject to federal
income tax, shareholders of the Small Cap Fund would be subject to diminished
returns. Additionally, the Small Cap Fund invests, directly and indirectly, in
entities that take the position that they are not subject to entity-level tax.
If any such entity is reclassified as a corporation for U.S. federal income tax
purposes, shareholders of the Small Cap Fund would be
subject
to diminished returns. Changes in the laws of the United States and/or the
Cayman Islands could result in the inability of the Small Cap Portfolio and/or
its Subsidiary to operate as described in this Prospectus and could adversely
affect the Small Cap Fund. For example, the Cayman Islands does not currently
impose any income, corporate or capital gains tax or withholding tax on the
Subsidiary. If Cayman Islands law changes such that the Subsidiary must pay
Cayman Islands taxes, Small Cap Fund shareholders would likely suffer decreased
investment returns.
ª Valuation
Risk: The
sales price the Portfolio could receive for any particular portfolio investment
may differ from the Portfolio’s valuation of the investment, particularly for
securities or other investments, such as Bitcoin, that trade in thin or volatile
markets or that are valued using a fair value methodology. Valuation may be more
difficult in times of market turmoil since many investors and market makers may
be reluctant to purchase complex instruments or quote prices for them. Fair
valuation of the Portfolio’s investments involves subjective judgment. The
Portfolio’s ability to value its investments may be impacted by technological
issues and/or errors by pricing services or other third-party service providers.
Shares of Grayscale Bitcoin Trust are intended to reflect the price of bitcoin
assets, less fees and expenses, and shares of the Grayscale Bitcoin Trust have
historically traded, and may continue to trade, at a significant discount or
premium to net asset value. As such, the price of Grayscale Bitcoin Trust may go
down even if the price of the underlying asset, bitcoin, remains unchanged.
Additionally, shares that trade at a premium mean that an investor who purchases
$1 of a portfolio will actually own less than $1 in
assets.
ª Volatility
Risk:
The Portfolio may have investments, including but not limited to Bitcoin, that
appreciate or depreciate significantly in value over short periods of time. This
may cause the Portfolio’s net asset value per share to experience significant
increases or declines in value over short periods of
time.
Who
may want to invest?
The
Small Cap Fund may be appropriate for investors who:
ª wish
to invest for the long-term;
ª want
to diversify their portfolios;
ª want
to allocate some portion of their long-term investments to value equity
investing;
ª are
willing to accept the volatility associated with equity and Bitcoin investing;
and
ª are
comfortable with the risks described herein.
Performance
The bar chart
and table shown below illustrate the variability of the Small Cap Fund’s
returns. The bar chart indicates the risks of investing in the
Small Cap Fund by showing the changes in the Small Cap Fund’s performance from
year to year (on a calendar year basis). The table shows how the Small Cap
Fund’s average annual returns, before and after taxes, compare with those of the
S&P 600®
SmallCap Index and the S&P 500®
Index, which represent broad measures of market performance. The
past performance of the Small Cap Fund, before and after taxes, is not
necessarily an indication of how the Small Cap Fund or the Small Cap Portfolio
will perform in the future. Performance reflects fee waivers in
effect. If fee waivers were not in place, the Small Cap Fund’s performance would
be reduced. Updated performance information is available on the Fund’s website
at http://www.kineticsfunds.com or by calling the Fund toll-free at (800) 930-3828.
The
Small Cap Fund – No Load Class
Calendar
Year Returns as of 12/31
|
|
|
|
|
|
|
|
|
|
|
| |
| Best
Quarter: |
Q1 2021 |
60.47 |
% |
| Worst
Quarter: |
Q1 2020 |
-34.39 |
% |
The Small Cap Fund’s after-tax
returns as shown in the following table are calculated using the historical
highest individual federal marginal income tax rates and do not reflect the
impact of state and local taxes. Your actual after-tax returns
depend on your tax situation and may differ from those shown. If
you own Fund shares in a tax-deferred account, such as a 401(k) plan or an
individual retirement account (“IRA”), the information on after-tax returns is
not relevant to your investment.
Average Annual
Total Returns as of 12/31/2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 1
Year |
5
Years |
10
Years |
Since
Inception(1) |
| The
Small Cap Fund (KSCOX) No Load |
|
|
| |
|
Return Before
Taxes |
-14.69 |
% |
17.08 |
% |
10.92 |
% |
11.28 |
% |
|
Return
After Taxes on Distributions |
-15.96 |
% |
16.61 |
% |
10.69 |
% |
11.04 |
% |
|
Return
After Taxes on Distributions and Sale of Fund Shares(2) |
-7.78 |
% |
13.83 |
% |
9.07 |
% |
10.00 |
% |
|
S&P
600®
SmallCap Index (reflects no deductions for
fees, expenses or taxes) |
16.05 |
% |
11.03 |
% |
8.66 |
% |
9.31 |
% |
|
S&P
500®
Index
(reflects no deductions for
fees, expenses or taxes) |
26.29 |
% |
15.69 |
% |
12.03 |
% |
7.13 |
% |
(1)The
Small Cap Fund’s No Load Class shares commenced operations on March 20,
2000,
and converted to a feeder fund of the Small Cap Portfolio on April 28, 2000. The
returns for the two indices in this column have been calculated since the March
20, 2000 inception date of the Small Cap Fund’s No Load Class
shares.
(2)In
some cases, the Return After Taxes on Distributions and Sale of Fund Shares may
exceed the Return After Taxes on Distributions or Return Before Taxes due to an
assumed benefit from any losses on a sale of Fund Shares at the end of the
measurement period.
Management
Investment
Adviser. Horizon
Kinetics Asset Management LLC is the Small Cap Portfolio’s investment adviser.
Portfolio
Managers. The
Small Cap Portfolio is managed by an investment team with Mr. Doyle,
Mr. Stahl and Mr. Houk as the Co-Portfolio Managers. Each investment team
member serves as a research analyst.
|
|
|
|
|
|
|
|
| |
| Investment
team member |
Primary
Title |
Years
of Service with the Fund |
| Peter
B. Doyle |
Co-Portfolio
Manager |
24 |
| Murray
Stahl |
Co-Portfolio
Manager |
24 |
| Matthew
Houk |
Co-Portfolio
Manager |
13 |
| James
Davolos |
Investment
Team Member |
18 |
| Steven
Bregman |
Investment
Team Member |
8 |
Purchase
and Sale of Fund Shares
You
may purchase, exchange or redeem Fund shares on any business day by written
request via mail (Kinetics Mutual Funds – The Small Cap Opportunities Fund, c/o
U.S. Bank Global Fund Services, P.O. Box 701, Milwaukee, Wisconsin 53201-0701),
by telephone at 1-800-930-3828, or through a financial intermediary. You may
also purchase or redeem Fund shares by wire transfer. The minimum initial
investment for both regular accounts and IRAs is $2,500 ($2,000 for Coverdell
Education Savings Accounts). There is no minimum on subsequent investments for
all account types.
Tax
Information
Unless
you are investing through a tax-deferred arrangement, such as a 401(k) or an
IRA, the Fund’s distributions will generally be taxable to you at ordinary
income or capital gain tax rates, and you will generally recognize gain or loss
when you redeem shares.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker-dealer or other financial intermediary,
the Fund and/or its Investment Adviser may pay the intermediary for the sale of
Fund shares and related services. These payments may create a conflict of
interest by influencing the broker-dealer or other financial intermediary and
your salesperson to recommend the Fund over another investment. Ask your
salesperson or visit your financial intermediary’s website for more information.
|
|
| |
|
THE MARKET
OPPORTUNITIES FUND |
Investment
Objective
The investment objective of the Market Opportunities Fund is
long-term growth of capital. The Market Opportunities Fund is the sole “feeder
fund” to The Market Opportunities Portfolio, a series of Kinetics Portfolios
Trust.
Fees and Expenses of the
Fund
This
table describes the fees and expenses that you may pay if you buy, hold, and
sell shares of the Market Opportunities Fund. You may pay other fees, such as
brokerage commissions and other fees to financial intermediaries, which are not
reflected in the table and example below.
Fee
Table(1)
|
|
|
|
|
| |
|
SHAREHOLDER
FEES
(fees
paid directly from your investment) |
No
Load Class |
| Redemption
Fee (as a percentage of amount redeemed on shares held for 30 days or
less, if applicable) |
2.00% |
|
|
|
|
|
|
|
|
| |
|
ANNUAL
FUND OPERATING EXPENSES
(expenses
that you pay each year as a percentage of the value of your
investment) |
| No
Load Class |
|
Management
Fees(1) |
| 1.25% |
| Distribution
(Rule 12b-1) Fees |
| None |
| Other
Expenses |
| 0.51% |
|
Shareholder
Servicing Fees |
0.25% |
|
|
Other
Operating Expenses |
0.26% |
|
|
|
| |
| Total
Annual Fund Operating Expenses |
| 1.76% |
|
Fee
Waiver and/or Expense Reimbursements(2) |
| -0.36% |
|
Total
Annual Fund Operating Expenses after Fee Waiver and/or Expense
Reimbursements |
| 1.40% |
(1)This
table and the example below reflect the aggregate expenses of the Market
Opportunities Fund and the Market Opportunities Portfolio. The management fees
paid by the Market Opportunities Fund reflect the proportionate share of fees
allocated to the Market Opportunities Fund from the Market Opportunities
Portfolio. The fees and expenses of the Market Opportunities Portfolio included
those incurred by any subsidiary wholly-owned and controlled by the Market
Opportunities Portfolio.
(2)Horizon
Kinetics Asset Management LLC, the investment adviser to the Market
Opportunities Portfolio of the Kinetics Portfolios Trust (the “Investment
Adviser”), has agreed to waive management fees and reimburse Fund expenses so
that Total Annual Fund Operating Expenses after Fee Waiver and/or Expense
Reimbursements do not exceed 1.40% of the Fund’s average daily net assets,
excluding acquired fund fees and expenses, taxes, brokerage commissions,
extraordinary items and interest. The Fund may have to repay the Investment
Adviser some of these amounts waived or reimbursed within three years if total
operating expenses fall below the expense cap described above. Such repayments
are subject to approval by the Board of Trustees, and amounts recaptured under
the agreement, if any, are limited to the lesser of (i) the expense limitation
in effect at the time of the waiver or reimbursement and (ii) the expense
limitation in effect at the time of the recapture. These waivers and
reimbursements are in effect until April 30,
2025,
and may not be terminated without the approval of the Board.
Example.
This Example is intended to help you compare the cost of
investing in the Market Opportunities Fund with the cost of investing in other
mutual funds. This Example assumes that you invest $10,000 in the Market
Opportunities Fund for the time periods indicated and then redeem all of your
shares at the
end of these periods. The Example also assumes that your investment
has a 5% return each year and that the Market Opportunities Fund’s operating
expenses remain the same (taking into account the expense limitation only in the
first year). Although your actual costs may be higher
or lower, based on these assumptions your cost for the Market Opportunities Fund
would be:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 1
Year |
3
Years |
5
Years |
10
Years |
| No
Load Class |
$143 |
$519 |
$920 |
$2,043 |
Portfolio
Turnover.
The Market Opportunities Portfolio pays
transaction costs, such as commissions, when it buys and sells securities (or
“turns over” its portfolio). A higher portfolio turnover rate may indicate
higher transaction costs and may result in higher taxes when Fund shares are
held in a taxable account. These costs, which are not reflected in annual fund
operating expenses or in the Example, affect the Market Opportunities
Portfolio’s, and therefore the Market Opportunities Fund’s, performance. During
the most recent fiscal year, the Market Opportunities Portfolio’s portfolio
turnover rate was 5% of the average value of its portfolio.
Principal Investment
Strategy
The
Market Opportunities Fund is a non-diversified fund that invests all of its
investable assets in the Market Opportunities Portfolio, a series of Kinetics
Portfolios Trust. Under normal
circumstances, the Market Opportunities Portfolio invests at least 65% of its
net assets in common stocks, convertible securities, warrants and other equity
securities having the characteristics of common stocks (such as American
Depositary Receipts (“ADRs”), Global Depositary Receipts (“GDRs”) and
International Depositary Receipts (“IDRs”)) of U.S. and foreign companies
involved in capital markets or related to capital markets, as well as companies
involved in the gaming industry. Capital market companies include companies that
are engaged in or derive a substantial portion of their revenue from activities
with a publicly traded securities exchange, such as equity exchanges and
commodity exchanges, including but not limited to clearing firms and brokerage
houses. The Market Opportunities Portfolio may also invest in exchange-traded
funds (“ETFs”) and purchase and write options for hedging purposes and/or direct
investment.
The Market Opportunities Portfolio may invest up to 20% of its total
assets in convertible and non-convertible debt securities rated below investment
grade, also known as junk bonds, or unrated securities that the Investment
Adviser has determined to be of comparable
quality.
The
Market Opportunities Portfolio securities will be selected by the Investment
Adviser from companies that are engaged in public exchanges, derivative
exchanges, and capital markets; companies that experience operational scale from
increased volume such as investment banks, credit card processing companies,
electronic payment companies and companies in the gaming industry; and from
companies that act as facilitators such as publicly traded expressways,
airports, roads and railways. Companies that experience operational scale from
increased volume are similar to capital markets companies because they have
greater fixed costs than variable costs, operating margins that rise once fixed
costs are covered, and an ability to generate higher operating margins once
fixed costs are covered (referred to as operating leverage). High operating
leverage describes a company’s ability to experience rising profit margins as
revenues increase. These companies may be large, medium or small in size if, in
the Investment Adviser’s opinion, these companies meet the Market Opportunities
Portfolio’s investment criteria. The Investment Adviser seeks to invest in
companies with high operating leverage that can expand capacity with negligible
or limited associated costs. Generally, high returns on equity, long product
life cycles, high barriers to entry and certain degrees of financial gearing are
necessary for this. Financial gearing occurs with the use of loans and debt in
companies where it is necessary to build
capacity
and infrastructure before operations can begin. Additionally, the Market
Opportunities Portfolio may participate in securities lending arrangements up to
33-1/3% of the securities in its portfolio with brokers, dealers, and financial
institutions (but not individuals) in order to increase the return on its
portfolio.
The
Market Opportunities Portfolio may invest indirectly in bitcoin through a
Delaware statutory trust, Grayscale Bitcoin Trust ETF (“Grayscale Bitcoin
Trust”) and through other pooled investment vehicles that provide exposure to
crypto assets. Certain of these vehicles may not be registered under the
Investment Company Act of 1940, as amended (the “1940 Act”) and do not receive
the protections of the 1940 Act. The
Market Opportunities Portfolio will not invest directly in Bitcoin or other
crypto assets. Grayscale
Bitcoin Trust is one of the first spot Bitcoin ETFs in the U.S. It enables
investors to gain exposure to bitcoin in the form of a security while avoiding
the challenges of buying, storing, and safekeeping bitcoin, directly. Bitcoins
are a type of crypto assets that are not issued by a government, bank or central
organization. Bitcoins exist on an online, peer-to-peer computer network (the
“Bitcoin Network”) that hosts a public transaction ledger where bitcoin
transfers are recorded (the “Blockchain”). Bitcoins have no physical existence
beyond the record of transactions on the Blockchain. The Grayscale Bitcoin Trust
invests principally
in
bitcoins. The Market Opportunities Portfolio held 26.36% of its net assets in
the Grayscale Bitcoin Trust as of March 31, 2024. The Market Opportunities
Portfolio may also invest in other pooled investment vehicles that provide
exposure to the spot price of crypto assets. For example, the Market
Opportunities Portfolio may invest in the Grayscale Ethereum Classic Trust. The
amount of the Market Opportunities Portfolio’s investment in crypto assets may
be limited by law or by tax considerations.
The
Market Opportunities Portfolio contributed a portion of its holdings in the
Grayscale Bitcoin Trust
to
a wholly-owned and controlled subsidiary organized under the laws of the Cayman
Islands (the “Cayman Subsidiary”).
The
Market Opportunities Portfolio is also the sole shareholder of a wholly owned
subsidiary organized under Delaware law (the “Delaware Subsidiary”). The Market
Opportunities Portfolio contributed a portion of its holdings in the Grayscale
Bitcoin Trust to the Delaware Subsidiary. Any net gains that the Delaware
Subsidiary recognizes on future sales of the contributed Grayscale Bitcoin Trust
shares will be subject to federal and state corporate income tax, but the
dividends that the Delaware Subsidiary pays to the Market Opportunities
Portfolio (i.e.,
those gains, net of the tax paid and any other expenses of the Delaware
Subsidiary, such as its management and advisory fees) will be eligible to be
treated as “qualified dividend income” under the Internal Revenue Code of 1986,
as amended (the “Internal Revenue Code”). The Delaware Subsidiary and the Cayman
Subsidiary are each referred to herein as a “Subsidiary” and collectively as
“Subsidiaries.” Additional information regarding the tax treatment of the Fund
is provided in the “Taxes” section of the SAI.
In
the future, the Market Opportunities Portfolio may seek to gain additional
exposure to the Grayscale Bitcoin Trust that may not produce qualifying income
for the Market Opportunities Fund under the Internal Revenue Code if held
directly. The Market Opportunities Portfolio will not make any additional
investments in the Grayscale Bitcoin Trust if as a result of such investment,
its aggregate investment in the Grayscale Bitcoin Trust, either directly or
through a Subsidiary, would be more than 15% of its assets at the time of the
investment. However, the Portfolio’s investment in the Grayscale Bitcoin Trust
may, at times, exceed 15% of its net assets, due to appreciation.
Each
Subsidiary invests primarily in the Grayscale Bitcoin Trust. The Market
Opportunities Portfolio will invest in its Subsidiaries in a manner that is
consistent with the limitations of the federal tax laws, rules and regulations
that apply to the Market Opportunities Fund as a “regulated investment
company”
(“RIC”) under Subchapter M of Subtitle A, Chapter 1, of the Internal
Revenue Code (“Subchapter M”). However, the Market Opportunities Portfolio and
each Subsidiary comply with the same fundamental investment restrictions on an
aggregate basis, to the extent those restrictions are applicable to the
investment activities of each Subsidiary. Each Subsidiary also complies with
Section 17 of the 1940 Act relating to affiliated transactions and custody, and
the Investment Adviser complies with Section 15 of the 1940 Act, relating to
investment advisory contracts with respect to the Subsidiaries. Unlike the
Market Opportunities Fund, each Subsidiary does not, and will not, seek to
qualify as a RIC. The Market Opportunities Portfolio is the sole shareholder of
each Subsidiary and does not expect shares of the Subsidiaries to be offered or
sold to other investors. The Subsidiaries include entities that engage in
investment activities in securities or other assets that are primarily
controlled by the Market Opportunities Portfolio. The Market Opportunities
Portfolio does not intend to create or acquire primary control of any entity
which primarily engages in investment activities in securities or other assets
other than entities wholly-owned by the Market Opportunities Portfolio.
Sell
decisions are generally triggered by either adequate value being achieved, as
determined by the Investment Adviser, or by an adverse change in a company’s
operating performance or a deterioration of the company’s business model. A sell
trigger may also occur if the Investment Adviser discovers a new investment
opportunity that it believes is more compelling and represents a greater risk
reward profile than other investment(s) held by the Market Opportunities
Portfolio.
The
Market Opportunities Portfolio may maintain during a temporary period, which
could be for a short period or a longer period lasting several years or more, of
abnormal conditions, a significant portion of its total assets in cash and
securities, generally considered to be cash and cash equivalents, including, but
not limited to: high quality, U.S. short-term debt securities and money market
instruments. The Investment Adviser will invest in such short-term cash
positions to the extent that the Investment Adviser is unable to find sufficient
investments meeting its criteria and when the Investment Adviser believes the
purchase of additional equity securities would not further the investment
objective of the Market Opportunities Portfolio during such periods of time.
Additionally, to respond to adverse market, economic, political or other
conditions, which may persist for short or long periods of time, the Market
Opportunities Portfolio may invest up to 100% of its assets in the types of high
quality, U.S. short-term debt securities and money market instruments described
above.
If
the market advances during periods when the Market Opportunities Portfolio is
holding a large cash position, the Portfolio may not participate as much as it
would have if it had been more fully invested in securities. In the
aforementioned temporary defensive periods, the Investment Adviser believes that
an additional amount of liquidity in the Market Opportunities Portfolio is
desirable both to meet operating requirements and to take advantage of new
investment opportunities. When the Market Opportunities Portfolio holds a
significant portion of assets in cash and cash equivalents, it may not meet its
investment objective.
The
Market Opportunities Portfolio held 43.93% of its net assets in the Texas
Pacific Land Corporation (the “Land Corporation”) as of March 31,
2024.
The Land Corporation is a corporation organized under the laws of the state of
New York. One of the largest land owners in Texas, the Land Corporation derives
most of its income from oil and gas royalty revenue, land easements and water
royalties and sales. The Land Corporation has historically operated with minimal
operating expenses, little to no debt and utilized cash flow to return capital
to unitholders through share repurchases and dividends. While the Land
Corporation has held the majority of its assets since its formation in 1888, the
development of energy resources subject to its royalty interests and related
land use have experienced rapid growth in recent years due to advances in energy
exploration and extraction technologies.
Principal Investment
Risks
Investing in
common stocks has inherent risks that could cause you to lose
money. The principal risks of investing in the Market
Opportunities Fund, and indirectly the Market Opportunities Portfolio, are
listed below and could adversely affect the net asset value (“NAV”), total
return and the value of the Market Opportunities Fund, Market Opportunities
Portfolio and your investment. The first six risks are prioritized by order of
importance. The remaining principal risks are presented in alphabetical order to
facilitate finding particular risks and comparing them with other funds. Each
risk summarized below is considered a principal risk of investing in the Market
Opportunities Fund, and indirectly the Market Opportunities Portfolio,
regardless of the order in which it appears. Different risks may be more
significant at different times depending on market conditions or other
factors.
ª Non-Diversification
Risks:
As a non-diversified investment company, the Market Opportunities Portfolio can
invest a large percentage of its assets in a small number of issuers. As a
result, a change in the value of any one investment may affect the overall value
of the Market Opportunities Portfolio’s shares, and therefore the Market
Opportunities Fund’s shares, more than shares of a diversified mutual fund that
holds more investments.
ª Crypto
Asset
Exposure
Risk:
Crypto
assets
(also
referred
to
as
“virtual
currencies”
and
“digital
currencies”)
are
digital
assets
designed
to
act
as
a medium of exchange. Although crypto assets are an emerging asset class, they
are not presently widely accepted as a medium of exchange. There are thousands
of crypto assets, the most well-known of which is bitcoin.
Bitcoin
or BTC was the first decentralized crypto asset. Bitcoin is a type of crypto
asset that is not issued by a government,
bank
or
central
organization.
Bitcoin
exists
on
an
online,
peer-to-peer
computer
network
that
hosts
the
Blockchain. Bitcoin has no physical existence beyond the record of transactions
on the Blockchain. The Bitcoin Network allows people to exchange tokens of
value, bitcoins, which are recorded on a public transaction ledger known as a
Blockchain. The Fund may invest indirectly in bitcoin through the Grayscale
Bitcoin Trust and through other pooled investment
vehicles
that
provide
exposure
to
crypto
assets.
Grayscale
Bitcoin
Trust
is
one
of
the
first
spot Bitcoin ETFs in the U.S. It enables investors to gain exposure to bitcoin
in the form of a security while avoiding the challenges of buying, storing, and
safekeeping bitcoin, directly.
In
addition to the general risks of investing in other investment vehicles, the
value of the Market Opportunities Portfolio’s indirect investments in crypto
assets are subject to fluctuations in the value of the crypto asset, which can
be highly volatile. The value of crypto assets is determined by the supply and
demand for crypto assets in the global market
for
the
trading
of
crypto
assets,
which
consists
primarily
of
transactions
on
crypto
asset
trading
platforms.
The value of crypto assets has been, and may continue to be, substantially
dependent on speculation, such that trading and investing in crypto assets
generally may not be based on fundamental analysis.
The
Market Opportunities Portfolio’s exposure to crypto assets can result in
substantial losses to the Market Opportunities Fund.
Crypto
assets facilitate decentralized, peer-to-peer financial exchange and value
storage, without the oversight of a central authority or banks. The value of
crypto assets are not backed by any government, corporation, or other identified
body. Crypto assets are also susceptible to theft, loss and
destruction.
Crypto
assets trade on crypto asset trading platforms, which are largely unregulated
and may therefore be more exposed
to
fraud
and
failure
than
established,
regulated
exchanges
for
securities,
derivatives
and
other
currencies.
These crypto asset trading platforms can cease operating temporarily or even
permanently, resulting in the potential loss of users’ crypto assets or other
market disruptions. Crypto
asset
trading platforms may be more exposed to the risk of market manipulation than
exchanges for more traditional assets. Individuals or organizations holding a
large amount of crypto assets in which the Market Opportunities Portfolio may
invest indirectly (also known as “whales”) may have the ability to manipulate
the prices of those crypto assets. Crypto asset trading platforms on which
crypto assets are traded are or may become subject to enforcement actions by
regulatory authorities. Crypto asset trading platforms that are regulated
typically must comply with minimum net worth, cybersecurity, and anti-money
laundering requirements, but are not typically required to protect customers or
their markets to the same extent that regulated securities exchanges or futures
exchanges are required to do so. Furthermore, crypto asset trading platforms may
be operating out of compliance with regulations, and many crypto asset trading
platforms lack certain safeguards established by more traditional exchanges to
enhance the stability of trading on the exchange, such as measures designed to
prevent sudden drops in value of items traded on the exchange (i.e.,
“flash crashes”).
As
a result, the prices of crypto assets on crypto asset trading platforms may be
subject to larger and more frequent sudden declines than assets traded on more
traditional exchanges.
ª
Crypto
Asset Industry Risk:
The
crypto asset industry is a newer, speculative, and still-developing industry
that faces many risks.
The
crypto asset industry may still be experiencing a bubble or may experience a
bubble again in the future. For example, in the first half of 2022, each of
Celsius Network, Voyager Digital Ltd., and Three Arrows Capital declared
bankruptcy, resulting in a loss of confidence in participants of the digital
asset ecosystem and negative publicity surrounding
digital
assets
more
broadly.
In
November
2022,
FTX
Trading
Ltd.
(“FTX”),
one
of
the
largest
digital
asset platforms by volume at the time, halted customer withdrawals amid rumors
of the company’s liquidity issues and likely insolvency, which were subsequently
corroborated by its CEO. Shortly thereafter, FTX’s CEO resigned and FTX and many
of its affiliates filed for bankruptcy in the United States, while other
affiliates have entered
insolvency,
liquidation,
or
similar
proceedings
around
the
globe,
following
which
the
U.S.
Department
of
Justice brought criminal fraud and other charges, and the SEC and CFTC brought
civil securities and commodities fraud charges, against certain of FTX’s and its
affiliates’ senior executives, including its former CEO. In addition, several
other entities in the crypto asset industry filed for bankruptcy following FTX’s
bankruptcy filing, such as BlockFi Inc. and Genesis Global Capital, LLC. In
response to these events, the prices of crypto assets have experienced extreme
volatility and other entities in the crypto asset industry have been, and may
continue to be, negatively affected, further undermining confidence in the
crypto asset industry. These events are continuing to develop and the full facts
are continuing to emerge. It is not possible to predict at this time all of the
risks that they may pose to the Market Opportunities Portfolio, and therefore
the Market Opportunities Fund, its service providers or to the crypto asset
industry as a whole.
Factors
affecting the further development of crypto assets include, but are not limited
to, continued worldwide growth or possible cessation or reversal in the adoption
and use of crypto assets and other digital assets; government
and
quasi-government
regulation
or
restrictions
on
or
regulation
of
access
to
and
operation
of
digital
asset networks; changes in consumer demographics and public preferences;
maintenance and development of open-source
software
protocol;
availability
and
popularity
of
other
forms
or
methods
of
buying
and
selling
goods
and services; the use of the networks supporting digital assets, such as those
for developing smart contracts and distributed applications; general economic
conditions and the regulatory environment relating to digital assets; negative
consumer or public perception; and general risks tied to the use of information
technologies, including cyber risks.
A
hack
or failure of one crypto asset may lead to a loss in confidence in, and thus
decreased usage and/or value of, other crypto
assets.
ª
Crypto
Asset Regulatory Risk:
Crypto
asset markets in the U.S. exist in a state of regulatory uncertainty. Regulatory
changes or actions by Congress as well as U.S. federal or state agencies may
adversely affect the value of the Market Opportunities Portfolio’s indirect
investments in crypto assets.
As
digital assets have grown in both popularity and market size, a number of state
and federal agencies have issued consumer advisories regarding the risks posed
by digital assets to investors. In addition, the Securities and Exchange
Commission, U.S. state securities regulators and several foreign
governments
have
issued
warnings
and
instituted
legal
proceedings
in
which
they
argue
that
certain
digital
assets
may be classified as securities and that both those digital assets and any
related initial coin offerings are subject to securities
regulations.
Additionally,
U.S. state and federal, and foreign regulators and legislatures have taken
action against virtual currency businesses or enacted restrictive regimes in
response to adverse publicity arising from hacks, consumer harm, or criminal
activity stemming from virtual currency activity.
Currently,
there is relatively limited use of crypto assets in the retail and commercial
marketplace, which contributes to price volatility.
A
lack
of expansion by crypto assets into retail and commercial markets, or a
contraction
of
such
use,
may
result
in
increased
volatility
or
a
reduction
in
the
value
of
crypto
assets,
either
of
which could adversely impact the value of the Market Opportunities Portfolio’s
investment. In addition, to the extent market participants develop a preference
for one crypto asset over another, the value of the less preferred crypto assets
would likely be adversely affected.
The
Market Opportunities Portfolio’s exposure to crypto assets may change over time
and, accordingly, such exposure may not be represented in the Market
Opportunities Portfolio’s portfolio at any given time. Many significant aspects
of the tax treatment of investments in crypto assets are uncertain, and a direct
or indirect investment in crypto assets may produce non-qualifying income.
Crypto assets are a new technological innovation with a limited history; it is a
highly speculative asset and future regulatory actions or policies may limit,
perhaps to a materially adverse extent, the value
of
the
Market
Opportunities Portfolio’s
indirect
investment
in
crypto
assets
and
the
ability
to
exchange
a
crypto
asset
or
utilize
it
for
payments.
ª Liquidity
Risks:
The Investment Adviser may not be able to sell portfolio securities at an
optimal time or price. The Portfolio’s significant investment in a single
position, makes the Portfolio especially susceptible to the risk that during
certain periods the liquidity of the single position will decrease or disappear
suddenly and without warning as a result of adverse market or political events,
or adverse investor perceptions.
ª Sector
Concentration Risk: Although
the Market Opportunities Portfolio will not concentrate its investments in any
industries, the Market Opportunities Portfolio may, at certain times, have
concentrations in one or more sectors which may cause the Portfolio to be more
sensitive to economic changes or events occurring in those sectors, and the
Portfolio's investments may be more volatile. As of December 31, 2023, the
Portfolio had 47.5% invested in the Mining, Quarrying, and Oil and Gas
Extraction sector and 26% invested in the Finance and Insurance
sector.
ª Below
Investment Grade Debt Securities Risks: Generally,
below investment grade debt securities, i.e.,
junk bonds, are subject to greater credit risk, price volatility and risk of
loss than investment grade securities. Junk bonds are considered to be
speculative in nature.
ª Convertible
Securities Risks: Convertible
securities are subject to the risks affecting both equity and fixed income
securities, including market, credit, liquidity and interest rate
risk.
ª Exchange-Traded
Funds (ETFs) Risks: ETFs
are registered investment companies whose shares are listed and traded on U.S.
stock exchanges or otherwise traded in the over-the-counter market. In general,
passively-managed ETFs seek to track a specified securities index or a basket of
securities that an “index provider,” such as S&P Global, selects as
representative of a market, market segment or industry sector. A
passively-managed ETF is designed so that its performance will correspond
closely with that of the index it tracks. A leveraged ETF will engage in
transactions and purchase instruments that give rise to forms of leverage,
including, among others, the use of reverse repurchase agreements and other
borrowings, the investment of collateral from loans of portfolio securities, the
use of when issued, delayed-delivery or forward commitment transactions or short
sales. To the extent a fund invests in ETFs that achieve leveraged exposure to
their underlying indexes through the use of derivative instruments, the fund
will indirectly be subject to leveraging risk.
As
a shareholder in an ETF, the Market Opportunities Portfolio will bear its pro
rata portion of an ETF’s expenses, including advisory fees, in addition to its
own expenses. The existence of extreme market volatility or potential lack of an
active trading market for an ETF’s shares could result in such shares trading at
a significant premium or discount to their
NAV.
ª Foreign
Securities Risks:
The Market Opportunities Portfolio may invest in foreign securities directly or
through ADRs, GDRs and IDRs. Foreign securities can carry higher returns but
involve more risks than those associated with U.S. investments. Additional risks
associated with investment in foreign securities include currency fluctuations,
political and economic instability, less publicly available information,
differences in financial reporting standards and less stringent regulation of
securities markets. Foreign securities in which the Portfolio invests may be
traded in markets that close before the time that the Portfolio calculates its
NAV. Furthermore, certain foreign securities in which the Portfolio invests may
be listed on foreign exchanges that trade on weekends or other days when the
Portfolio does not calculate its NAV. As a result, the value of the Portfolio’s
holdings may change on days when shareholders are not able to purchase or redeem
the Market Opportunities Fund’s
shares.
ª Interest
Rate Risk:
The risk that when interest rates increase, fixed-income securities held by the
Market Opportunities Portfolio will decline in value. Long-term fixed-income
securities will normally have more price volatility because of this risk than
short-term fixed-income securities. A low or negative interest rate environment
could cause the Market Opportunities Portfolio’s earnings to fall below the
Portfolio’s expense ratio, resulting in a decline in the Portfolio’s share
price. A general rise in interest rates may cause investors to move out of fixed
income securities on a large scale, which could adversely affect the price and
liquidity of fixed income securities. The risks associated with changing
interest rates may have unpredictable effects on the markets and the Market
Opportunities Portfolio’s
investments.
ª Leveraging
Risks:
Investments in derivative instruments may give rise to a form of leverage. The
Investment Adviser may engage in speculative transactions, which involve
substantial risk and leverage. The use of leverage by the Investment Adviser may
increase the volatility of the Market Opportunities Portfolio. These leveraged
instruments may result in losses to the Market Opportunities Portfolio or may
adversely affect the Market Opportunities Portfolio’s NAV or total return,
because instruments that contain leverage are more sensitive to changes in
interest rates. The Market Opportunities Portfolio may also have to sell assets
at inopportune times to satisfy its obligations in connection with such
transactions.
ª Management
Risks: There
is no guarantee that the Market Opportunities Fund will meet its investment
objective. The Investment Adviser does not guarantee the performance of the
Market Opportunities Fund, nor can it assure you that the market value of your
investment will not decline.
ª Petroleum
and Gas Sector Risk: The
profitability of companies in the oil and gas industry is related to worldwide
energy prices, exploration costs and production spending. Companies in the oil
and gas industry may be at risk for environmental damage claims and other types
of litigation. Companies in the oil and gas industry may be adversely affected
by: natural disasters or other catastrophes; changes in exchange rates or
interest rates; prices for competitive energy services; economic conditions; tax
treatment or government regulation; government intervention; negative public
perception; or unfavorable events in the regions where companies operate
(e.g.,
expropriation, nationalization, confiscation of assets and property, imposition
of restrictions on foreign investments or repatriation of capital, military
coups, social or political unrest, violence or labor unrest). Companies in the
oil and gas industry may have significant capital investments in, or engage in
transactions involving, emerging market countries, which may heighten these
risks.
ª Sector
Emphasis Risks:
The Market Opportunities Portfolio’s investments in the capital markets sector
subjects it to the risks affecting that sector more than would a fund that
invests in a wide variety of market sectors. For instance, companies in the
capital markets sector may be adversely affected by changes in economic
conditions as well as legislative initiatives, all of which may impact the
profitability of companies in this sector. The Market Opportunities Portfolio’s
investments in the gaming sector may be adversely affected by changes in
economic conditions. The casino industry is particularly susceptible to economic
conditions that negatively affect tourism. Casino and gaming companies are
highly competitive, and new products, casino concepts and venues are competitive
challenges to existing companies. In addition, gaming and related companies are
highly regulated, and state and federal legislative changes can significantly
impact profitability in those
sectors.
ª Single
Stock Concentration Risk:
The Market Opportunities Portfolio may hold a large concentration of its net
assets in a single security or issuer. Holding a large concentration in a single
security or issuer may expose the portfolio to the market volatility of that
specific security or issuer if the security or issuer performs worse than the
market as a whole, which could adversely affect the Fund’s
performance.
ª Small
and Medium-Size Company Risks:
The Market Opportunities Portfolio may invest in the equity securities of small
and medium-size companies. Small and medium-size companies often have narrower
markets and more limited managerial and financial resources than do larger, more
established companies. As a result, their performance can be more volatile and
they face a greater risk of business failure, which could increase the
volatility of the Market Opportunities Portfolio’s
assets.
ª Stock
Market Risks:
Stock mutual funds are subject to stock market risks and significant
fluctuations in value. If the stock market declines in value, the Market
Opportunities Portfolio, and therefore the Market Opportunities Fund, is likely
to decline in value and you could lose money on your investment. Natural
disasters, public health emergencies (including epidemics and pandemics),
geopolitical events, terrorism and other global unforeseeable events may lead to
instability in world economies and markets, market volatility and may have
adverse long-term effects.
ª Stock
Selection Risks: The portfolio securities selected by the Investment Adviser may
decline in value or not increase in value when the stock market in general is
rising and may fail to meet the Market Opportunities Portfolio’s, and therefore
the Market Opportunities Fund’s, investment objective.
ª Subsidiary
Risks:
By investing in its Subsidiaries, the Market Opportunities Portfolio is
indirectly exposed to the risks associated with each Subsidiary’s investments.
Those investments held by the Subsidiaries are generally similar to the
investments that are permitted to be held by the Market Opportunities Portfolio
and are subject to the same risks that would apply to similar investments if
held
directly by the Market Opportunities Portfolio. Each Subsidiary is not
registered under the 1940 Act and, unless otherwise noted in this Prospectus, is
not subject to all the investor protections of the 1940 Act. In addition,
changes in the laws of the United States, Delaware and/or the Cayman Islands
could result in the inability of the Market Opportunities Portfolio and/or its
Subsidiaries to continue to operate and could adversely affect the Market
Opportunities Fund’s performance.
ª Tax
Risks:
In order to qualify as a RIC, the Market Opportunities Fund must meet certain
requirements regarding the source of its income, the diversification of its
assets and the distribution of its income. Under the test regarding the source
of a RIC’s income, at least 90% of the gross income of the RIC each year must be
qualifying income, which consists of dividends, interest, gains on investments
in securities and certain other categories of investment income. It appears to
be the position of the Internal Revenue Service (the “IRS”) that gain realized
on bitcoin investments such as investments in the Grayscale Bitcoin Trust will
not be qualifying income. The Market Opportunities Portfolio’s investment in
each Subsidiary is expected to provide the Market Opportunities Fund with
exposure to such bitcoin investments within the limitations of the Internal
Revenue Code for qualification as a RIC because, under applicable tax rules, the
earnings of each Subsidiary will be qualifying income for the RIC when
distributed by the Subsidiary even though the income would not be qualifying
income if earned directly by the RIC or directly by an entity classified as a
partnership for federal income tax purposes, such as the Market Opportunities
Portfolio, in which the RIC invests. There is a risk, however, that the IRS
might assert that the income derived from the Market Opportunities Portfolio’s
investment in a Subsidiary will not be considered qualifying income. If the
Market Opportunities Fund were to fail to qualify as a RIC and became subject to
federal income tax, shareholders of the Market Opportunities Fund would be
subject to diminished returns. Additionally, the Market Opportunities Fund
invests, directly and indirectly, in entities that take the position that they
are not subject to entity-level tax. If any such entity is reclassified as a
corporation for U.S. federal income tax purposes, shareholders of the Market
Opportunities Fund would be subject to diminished returns. Changes in the laws
of the United States, Delaware and/or the Cayman Islands could result in the
inability of the Market Opportunities Portfolio and/or its Subsidiaries to
operate as described in this Prospectus and could adversely affect the Market
Opportunities Fund. For example, the Cayman Islands does not currently impose
any income, corporate or capital gains tax or withholding tax on the Cayman
Subsidiary. If Cayman Islands law changes such that the Cayman Subsidiary must
pay Cayman Islands taxes, Market Opportunities Fund shareholders would likely
suffer decreased investment returns.
ª Valuation
Risk: The
sales price the Portfolio could receive for any particular portfolio investment
may differ from the Portfolio’s valuation of the investment, particularly for
securities or other investments, such as Bitcoin, that trade in thin or volatile
markets or that are valued using a fair value methodology. Valuation may be more
difficult in times of market turmoil since many investors and market makers may
be reluctant to purchase complex instruments or quote prices for them. Fair
valuation of the Portfolio's investments involves subjective judgment. The
Portfolio’s ability to value its investments may be impacted by technological
issues and/or errors by pricing services or other third-party service providers.
Shares of Grayscale Bitcoin Trust are intended to reflect the price of bitcoin
assets, less fees and expenses, and shares of the Grayscale Bitcoin Trust have
historically traded, and may continue to trade, at a significant discount or
premium to net asset value. As such, the price of Grayscale Bitcoin Trust may go
down even if the price of the underlying asset, bitcoin, remains unchanged.
Additionally, shares that trade at a premium mean that an investor who purchases
$1 of a portfolio will actually own less than $1 in
assets.
ª Volatility
Risk:
The Portfolio may have investments, including but not limited to Bitcoin, that
appreciate or depreciate significantly in value over short periods of time. This
may cause the
Portfolio’s
net asset value per share to experience significant increases or declines in
value over short periods of time.
Who
may want to invest?
The
Market Opportunities Fund may be appropriate for investors who:
ª wish
to invest for the long-term;
ª want
to diversify their portfolios;
ª want
to allocate some portion of their long-term investments to value equity
investing;
ª are
willing to accept the volatility associated with equity and Bitcoin investing;
and
ª are
comfortable with the risks described herein.
Performance
The bar chart
and table shown below illustrate the variability of the Market Opportunities
Fund’s returns. The bar chart indicates the risks of investing
in the Market Opportunities Fund by showing the changes in the Market
Opportunities Fund’s performance from year to year (on a calendar year basis).
The table shows how the Market Opportunities Fund’s average annual returns,
before and after taxes, compare with those of the S&P 500®
Index and the MSCI EAFE Index, which represent broad measures of market
performance. The past performance of the
Market Opportunities Fund, before and after taxes, is not necessarily an
indication of how the Market Opportunities Fund or the Market Opportunities
Portfolio will perform in the future. Performance reflects fee
waivers in effect. If fee waivers were not in place, the Market Opportunities
Fund’s performance would be reduced. Updated performance information is
available on the Fund’s website at http://www.kineticsfunds.com or by calling the Fund toll-free at (800)
930-3828.
The
Market Opportunities Fund – No Load Class
Calendar
Year Returns as of 12/31
|
|
|
|
|
|
|
|
|
|
|
| |
| Best
Quarter: |
Q1 2021 |
45.93 |
% |
| Worst
Quarter: |
Q1 2020 |
-21.60 |
% |
The Market Opportunities Fund’s
after-tax returns as shown in the following table are calculated using
historical highest individual federal marginal income tax rates and do not
reflect the impact of state and local taxes. Your actual
after-tax returns depend on your tax situation and may differ from those shown.
If you own Fund shares in a
tax-deferred account, such as a 401(k) plan or an individual retirement account
(“IRA”), the information on after-tax returns is not relevant to your
investment.
Average Annual
Total Returns as of 12/31/2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 1
Year |
5
Years |
10
Years |
Since
Inception (January 31,
2006) |
| The
Market Opportunities Fund (KMKNX) No Load |
|
|
| |
|
Return Before
Taxes |
-7.33 |
% |
14.90 |
% |
10.52 |
% |
9.74 |
% |
|
Return
After Taxes on Distributions |
-7.58 |
% |
14.64 |
% |
10.04 |
% |
9.38 |
% |
|
Return
After Taxes on Distributions and Sale of Fund Shares(1) |
-4.27 |
% |
11.99 |
% |
8.50 |
% |
8.25 |
% |
|
S&P
500®
Index
(reflects no deductions for
fees, expenses or taxes) |
26.29 |
% |
15.69 |
% |
12.03 |
% |
9.79 |
% |
|
MSCI EAFE
Index (reflects no deductions for
fees, expenses or taxes) |
18.24 |
% |
8.16 |
% |
4.28 |
% |
4.08 |
% |
(1) In some cases, the Return
After Taxes on Distributions and Sale of Fund Shares may exceed the Return After
Taxes on Distributions or Return Before Taxes due to an assumed benefit from any
losses on a sale of Fund Shares at the end of the measurement
period.
Management
Investment
Adviser. Horizon
Kinetics Asset Management LLC is the Market Opportunities Portfolio’s investment
adviser.
Portfolio
Managers. The
Market Opportunities Portfolio is managed by an investment team with
Mr. Doyle and Mr. Stahl as the Co-Portfolio Managers. Each investment team
member serves as a research analyst.
|
|
|
|
|
|
|
|
| |
| Investment
team member |
Primary
Title |
Years
of Service with the Fund |
| Peter
B. Doyle |
Co-Portfolio
Manager |
18 |
| Murray
Stahl |
Co-Portfolio
Manager |
18 |
| Eric
Sites |
Investment
Team Member |
13 |
| James
Davolos |
Investment
Team Member |
18 |
| Steven
Bregman |
Investment
Team Member |
8 |
Purchase
and Sale of Fund Shares
You
may purchase, exchange or redeem Fund shares on any business day by written
request via mail (Kinetics Mutual Funds – The Market Opportunities Fund, c/o
U.S. Bank Global Fund Services, P.O. Box 701, Milwaukee, Wisconsin 53201-0701),
by telephone at 1-800-930-3828, or through a financial intermediary. You may
also purchase or redeem Fund shares by wire transfer. The minimum initial
investment for both regular accounts and IRAs is $2,500 ($2,000 for Coverdell
Education Savings Accounts). There is no minimum on subsequent investments for
all account types.
Tax
Information
Unless
you are investing through a tax-deferred arrangement, such as a 401(k) or an
IRA, the Fund’s distributions will generally be taxable to you at ordinary
income or capital gain tax rates, and you will generally recognize gain or loss
when you redeem shares.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker-dealer or other financial intermediary,
the Fund and/or its Investment Adviser may pay the intermediary for the sale of
Fund shares and related services. These payments may create a conflict of
interest by influencing the broker-dealer or other financial intermediary and
your salesperson to recommend the Fund over another investment. Ask your
salesperson or visit your financial intermediary’s website for more information.
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THE
MULTI-DISCIPLINARY INCOME
FUND |
Investment
Objectives
The investment objective of the Multi-Disciplinary Income Fund is
total return. The Multi-Disciplinary Income Fund is the sole “feeder fund” to
The Multi-Disciplinary Income Portfolio, a series of Kinetics Portfolios
Trust.
Fees and Expenses of the
Fund
This table describes the fees and expenses that you may pay if you
buy, hold, and sell shares of the Multi-Disciplinary Income Fund. You may pay
other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the table and example
below.
Fee
Table(1)
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SHAREHOLDER
FEES
(fees
paid directly from your investment) |
No
Load Class |
| Redemption
Fee (as a percentage of amount redeemed on shares held for less than 30
days, if applicable) |
2.00% |
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ANNUAL
FUND OPERATING EXPENSES
(2)
(expenses
that you pay each year as a percentage of the value of your
investment) |
| No
Load Class |
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Management
Fees(3) |
| 1.00% |
| Distribution
(Rule 12b-1) Fees |
| None |
| Other
Expenses |
| 0.39% |
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Shareholder
Servicing Fees |
0.25% |
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Other
Operating Expenses |
0.14% |
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| Acquired
Fund Fees and Expenses |
| 0.24% |
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Total
Annual Fund Operating Expenses(4) |
| 1.63% |
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Fee
Waiver and/or Expense Reimbursements(5) |
| -0.61% |
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Total
Annual Fund Operating Expenses after Fee Waiver and/or Expense
Reimbursements |
| 1.02% |
(1)This
table and the example below reflect the aggregate expenses of the
Multi-Disciplinary Income Fund and the Multi-Disciplinary Income Portfolio. The
management fees paid by the Multi-Disciplinary Income Fund reflect the
proportionate share of fees allocated to the Multi-Disciplinary Income Fund from
the Multi-Disciplinary Income
Portfolio.
(2) Expense
information has been restated to reflect current
fees.
(3) Effective
April 30, 2023, Horizon Kinetics Asset Management LLC (the “Investment Adviser”)
agreed to reduce its management from 1.25% to 1.00%.
(4) Total Annual Fund
Operating Expenses do not correlate to the ratio of operating expenses to
average net assets before expense reimbursement found in the “Financial
Highlights” section of this Prospectus, which reflects the Multi-Disciplinary
Income Fund’s operating Expenses and does not include acquired fund fees and
expenses.
(5) The Investment Adviser has agreed to waive management fees
and reimburse Fund expenses so that Total Annual Fund Operating Expenses after
Fee Waiver and/or Expense Reimbursements do not exceed 0.74%, excluding acquired
fund fees and expenses and interest expense on securities sold short. The
Investment Adviser has also agreed to waive 0.75% of the 1.00% management fee.
These waivers and reimbursements are in effect until
April 30,
2025,
and may not be terminated without the approval of the
Board.
Example.
This Example is intended to help you compare the cost of
investing in the Multi-Disciplinary Income Fund with the cost of investing in
other mutual funds. This Example assumes that you invest $10,000 in the
Multi-Disciplinary Income Fund for the time periods indicated and then redeem
all of your shares at the end of these periods. The Example also assumes that
your investment has a 5% return each
year and that the Multi-Disciplinary Income Fund’s operating expenses
remain the same (taking into account the expense limitation only in the first
year). Although your actual costs may be higher
or lower, based on these assumptions your cost for the Multi-Disciplinary Income
Fund would be:
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Year |
3
Years |
5
Years |
10
Years |
| No
Load Class |
$129 |
$532 |
$959 |
$2,151 |
Portfolio
Turnover.
The Multi-Disciplinary Income Portfolio pays
transaction costs, such as commissions, when it buys and sells securities (or
“turns over” its portfolio). A higher portfolio turnover rate may indicate
higher transaction costs and may result in higher taxes when Fund shares are
held in a taxable account. These costs, which are not reflected in annual fund
operating expenses or in the Example, affect the Multi-Disciplinary Income
Portfolio’s, and therefore the Multi-Disciplinary Income Fund’s, performance.
During the most recent fiscal year, the Multi-Disciplinary Income Portfolio’s
portfolio turnover rate was 37% of the average value of its portfolio.
Principal Investment
Strategy
The
Multi-Disciplinary Income Fund is a diversified fund that invests all of its
investable assets in the Multi-Disciplinary Income Portfolio, a series of
Kinetics Portfolios Trust. “Total Return” sought by the Multi-Disciplinary
Income Portfolio consists of income earned on the Multi-Disciplinary Income
Portfolio’s investments, plus capital appreciation. The Multi-Disciplinary
Income Portfolio utilizes a two-part investment strategy, which includes
fixed-income components, including fixed-income exchange-traded funds (“ETFs”),
collateralized loan obligations (“CLOs”) and senior secured corporate loans, and
derivatives components. Under normal circumstances, the
Multi-Disciplinary Income Portfolio will invest at least 65% of its net assets
in fixed-income securities (which includes CLOs and corporate loans),
derivatives and cash or cash equivalents committed as collateral for written
option contracts.
There
is no limit on the amount of assets the Multi-Disciplinary Income Portfolio may
invest in fixed-income securities. The Multi-Disciplinary Income Portfolio may
invest in the debt tranches of CLOs.
The
CLO debt tranches may have any stated maturity and may be rated (at time of
issuance), from “AAA” to and including “B-” (or equivalent by a nationally
recognized statistical rating organization (“NRSRO”)), or if unrated, determined
to be of comparable credit quality by the Investment Adviser. An NRSRO is a
credit rating agency that is registered with the U.S. Securities and Exchange
Commission (“SEC”) that issues credit ratings that the SEC permits other
financial firms to use for certain regulatory purposes.
The
Multi-Disciplinary Income Portfolio may invest up to 35% of its net assets in
senior secured corporate loans, issued by either public or privately owned
companies. Senior secured corporate loans will be first lien or second lien
loans, have maturities of up to 8 years, and may be 100% rated below investment
grade by an NRSRO.
The
Multi-Disciplinary Income Portfolio may invest up to 20% of its total assets in
selling equity put options. The Multi-Disciplinary Income Portfolio may also
invest in U.S. Treasury note futures; selling or buying equity calls, bond
calls, and bond put options, as well as other derivatives, to manage risk or to
enhance return. The Multi-Disciplinary Income Portfolio may also buy puts on
specific underlying equity securities that are traded on a national securities
exchange. The Multi-Disciplinary Income Portfolio will not invest more than 15%
of its net assets in illiquid investments.
The
Investment Adviser uses a bottom-up approach in managing the Multi-Disciplinary
Income Fund, which means that the focus is on the analysis of individual
securities. By engaging in quantitative and qualitative analysis of individual
securities, the Investment Adviser examines an investment’s current valuation,
income potential, risk adjusted return and credit profile.
The
Multi-Disciplinary Income Portfolio will invest in CLOs and senior secured
corporate loans with a minimum initial total offering size of $250 million, that
are floating rate and are U.S. dollar denominated. The Multi-Disciplinary Income
Portfolio may purchase CLOs and senior secured corporate loans in both the
primary and secondary markets.
The
Multi-Disciplinary Income Portfolio will generally not invest more than 5% of
its portfolio in any single investment measured at the time of purchase. It is
intended that the Multi-Disciplinary Income Portfolio will hold between 20 to 75
investments with a position weighing between 1% to 5% per security. The
Multi-Disciplinary Income Portfolio may temporarily deviate from this
diversification weighting due to, among other reasons, market conditions and the
initial size of the fund as determined by the Investment Adviser, in its sole
discretion. The Investment Adviser may sell a security due to changes in credit
characteristics or outlook, as well as changes in portfolio strategy or cash
flow needs. A security may also be sold and replaced with one that presents a
better value or risk adjusted return profile. The Investment Adviser may
actively trade Multi-Disciplinary Income Portfolio securities.
The
Multi-Disciplinary Income Portfolio may maintain during a temporary period,
which could be for a short period or a longer period lasting several years or
more, of abnormal conditions, a significant portion of its total assets in cash
and securities, generally considered to be cash and cash equivalents, including,
but not limited to: high quality, U.S. short-term debt securities and money
market instruments. The Investment Adviser will invest in such short-term cash
positions to the extent that the Investment Adviser is unable to find sufficient
investments meeting its criteria. Additionally, to respond to adverse market,
economic, political or other conditions, which may persist for short or long
periods of time, the Multi-Disciplinary Income Portfolio may invest up to 100%
of its assets in the types of high quality, U.S. short-term debt securities and
money market instruments described above.
If
the market advances during periods when the Multi-Disciplinary Income Portfolio
is holding a large cash position, the Portfolio may not participate as much as
it would have if it had been more fully invested in securities. In the
aforementioned temporary defensive periods, the Investment Adviser believes that
an additional amount of liquidity in the Multi-Disciplinary Income Portfolio is
desirable both to meet operating requirements and to take advantage of new
investment opportunities. When the Multi-Disciplinary Income Portfolio holds a
significant portion of assets in cash and cash equivalents, it may not meet its
investment objective.
Principal Investment
Risks
The
Multi-Disciplinary Income Portfolio’s investments have inherent risks that could
cause you to lose money. The principal risks of investing in the
Multi-Disciplinary Income Fund, and indirectly the Multi-Disciplinary Income
Portfolio, are listed below and could adversely affect the net asset value
(“NAV”), total return and the value of the Multi-Disciplinary Income Fund,
Multi-Disciplinary Income Portfolio and your investment. The principal risks are
presented in alphabetical order to facilitate finding particular risks and
comparing them with other funds. Each risk summarized below is considered a
principal risk of investing in the Multi-Disciplinary Income Fund, and
indirectly the Multi-Disciplinary Income Portfolio, regardless of the order in
which it appears. Different risks may be more significant at different times
depending on market conditions or other factors.
ª Below
Investment Grade Securities Risks. Securities
rated “BB+” or below by S&P or “Ba1” or below by Moody’s are known as high
yield securities and are commonly referred to as “junk debt.”
Such
securities entail greater price volatility and credit and interest rate risk
than investment-grade securities. Analysis of the creditworthiness of high yield
issuers is more complex than for higher-rated securities, making it more
difficult for the Investment Adviser to accurately predict risk. There is a
greater risk with high yield securities that an issuer will not be able to make
principal and interest payments when due. If the Multi-Disciplinary Income
Portfolio pursues missed payments, there is a risk that fund expenses could
increase. In addition, lower-rated securities may not trade as often and may be
less liquid than higher-rated securities, especially during periods of economic
uncertainty or change. As a result of all these factors, these securities are
generally considered to be
speculative.
ª Collateralized
Loan Obligations Leveraging
Risk:
CLOs
are typically leveraged, and such leverage will magnify the loss on CLO
investments, which may in turn magnify the loss experienced by the
Multi-Disciplinary Income Fund. The cumulative effect of the use of leverage
with respect to any investments in a market that moves adversely to such
investments could result in a substantial loss that would be greater than if the
Multi-Disciplinary Income Portfolio’s investments were not
leveraged.
ª Collateralized
Loan Obligations Manager Risk:
CLO managers are responsible for selecting, managing, and replacing the
underlying collateral assets within a CLO. CLO managers may have limited
operating histories, may be subject to conflicts of interests,
including
managing the assets of other clients or other investment vehicles, or receiving
fees that incentivize maximizing the yield, and indirectly the risk, of a CLO.
Adverse developments with respect to a CLO manager, such as personnel and
resource constraints, regulatory issues or other developments that may impact
the ability and/or performance of the CLO manager, may adversely impact the
performance of the CLO debt tranches in which the Multi-Disciplinary
Income Portfolio invests.
ª Collateralized
Loan Obligations Risk: A
CLO is a securitization vehicle collateralized by a pool of
credit-related assets. Generally, these assets are below investment grade and
are subject to greater credit risk, price volatility and risk of loss than
investment grade securities. CLO securities present risks similar to those of
other types of credit investments, including default (credit), interest rate and
prepayment risks. The extent of these risks depends largely on the type of
securities used as collateral and the debt tranche of the CLOs in which the
Multi-Disciplinary Income Portfolio invests. In addition, CLOs are often
governed by a complex series of legal documents and contracts, which increases
the risk of dispute over the interpretation and enforceability of such documents
relative to other types of investments. There is also a risk that the trustee of
a CLO does not properly carry out its duties to the CLO, potentially resulting
in loss to the CLO.
ª Covenant
Lite Corporate Loans Risk:
Certain underlying corporate loans in which the Multi-Disciplinary Income
Portfolio may invest on a direct basis and/or indirectly through an investment
in a CLO debt tranche, may be “covenant lite”, which have few or no financial
maintenance covenants that would require a borrower to maintain. As a result,
there may be delays in enforcing our interests in such covenant lite securities,
which may result in losses and adversely affect the Multi-Disciplinary Income
Fund.
ª Credit/Default
Risk:
The Multi-Disciplinary Income Portfolio is subject to the risks associated with
the credit quality of CLO debt tranches and corporate loans. Credit quality
measures the likelihood that the obligor will be able to meet its debt service
obligations. Credit risk is the risk that an obligor will be unable to make
principal and interest payments when due, or default on its obligations. Most
CLO debt tranches and corporate loans which would be considered for investment
by the Multi-Disciplinary Income Portfolio, will have credit ratings issued from
NRSROs such as S&P Global,
Fitch,
and Moody’s. These NRSROs assign ratings to the obligor by assessing the
likelihood of issuer default.
ª Cybersecurity
Risk:
Cybersecurity incidents may allow an unauthorized party to gain access to
Multi-Disciplinary Income Fund assets or proprietary information, or cause the
fund, the Investment Adviser, and/or other service providers (including
custodians and financial intermediaries) to suffer data breaches or data
corruption. Additionally, cybersecurity failures or breaches of the electronic
systems of the Multi-Disciplinary Income Fund, the Investment Adviser, or the
Multi-Disciplinary Income Fund’s other service providers, or the issuers of
securities in which the Multi-Disciplinary Income Portfolio invests have the
ability to disrupt and negatively affect the Fund’s business operations,
including the ability to purchase and sell fund shares, potentially resulting in
financial losses to the Multi-Disciplinary Income Fund and its
shareholders.
ª Derivatives
Risk:
The Multi-Disciplinary Income Portfolio’s investments in futures, options and
other derivative instruments may result in loss. Derivative instruments may be
illiquid, difficult to price and leveraged so that small changes may produce
disproportionate losses to the Multi-Disciplinary Income Portfolio. The use of
derivatives is a highly specialized activity that involves investment techniques
and risks different from those associated with investments in more traditional
securities and instruments.
ª Exchange-Traded
Funds (ETFs) Risk:
ETFs are registered investment companies whose shares are listed and traded on
U.S. stock exchanges or otherwise traded in the over-the-counter market. In
general, passively-managed ETFs seek to track a specified securities index or a
basket of securities that an “index provider,” such as S&P Global, selects
as representative of a market, market segment or industry sector. A
passively-managed ETF is designed so that its performance will correspond
closely with that of the index it tracks.
A
leveraged ETF will engage in transactions and purchase instruments that give
rise to forms of leverage, including, among others, the use of reverse
repurchase agreements and other borrowings, the investment of collateral from
loans of portfolio securities, the use of when issued, delayed-delivery or
forward commitment transactions or short sales. To the extent a fund invests in
ETFs that achieve leveraged exposure to their underlying indexes through the use
of derivative instruments, the fund will indirectly be subject to leveraging
risk. As a shareholder in an ETF, the Multi-Disciplinary Income Portfolio will
bear its pro rata portion of an ETF’s expenses, including advisory fees, in
addition to its own expenses. The existence of extreme market volatility or
potential lack of an active trading market for an ETF’s shares could result in
such shares trading at a significant premium or discount to their
NAV.
ª Fixed
Income Risk:
Fixed income securities are subject to credit risk and interest rate risk.
Credit risk, as described more fully herein, refers to the possibility that the
issuer of a debt security will be unable to make interest payments or repay
principal when it becomes due. Interest rate risk refers to fluctuations in the
value of a debt security resulting from changes in the general level of interest
rates. Prices of fixed income securities tend to move inversely with changes in
interest rates. Additionally, investments in fixed income securities are subject
to the following risks:
•Prepayment
Risk.
CLO debt tranches and corporate loans are subject to prepayment risk. During
periods when credit spreads are contracting, a callable CLO debt tranche or
corporate loan held by the Multi-Disciplinary Income Portfolio may be “called”
and repaid before its stated maturity, and the Multi-Disciplinary Income
Portfolio may have to reinvest the proceeds at a lower interest rate, resulting
in a decline in the Multi-Disciplinary Income Fund’s income.
CLOs
are also typically structured such that, after a specified time period
(i.e.,
the non-call period), the majority
investor(s)
in the equity tranche can call (i.e.,
require the CLO issuer to redeem) the CLO debt tranches issued by the CLO in
full, plus accrued interest. The Multi-Disciplinary Income Portfolio may not be
able to accurately predict when or which of its CLO investments may be called,
resulting in the Multi-Disciplinary Income Portfolio having to reinvest the
proceeds in unfavorable market conditions, which in turn could cause a decline
in the Multi-Disciplinary Income Fund’s income.
•Credit
Risk of Underlying CLO Collateral.
The ability of the underlying collateral assets held by the CLOs to generate
sufficient cash flow to meet the debt service requirements of the CLO debt
tranches on a full and timely basis when principal and/or interest payments are
due, may be adversely affected by payment defaults of certain collateral assets
held by the CLO.
•Extension
Risk.
During periods when credit spreads are increasing, certain CLO debt tranches may
be paid off substantially more slowly than originally anticipated and the value
of those securities may fall sharply, resulting in a decline in the
Multi-Disciplinary Income Fund’s income and potentially in the value of the
Multi-Disciplinary Income Portfolio’s investments.
•Interest
Rate Risk: The
risk that when interest rates increase, fixed-income securities held by the
Multi-Disciplinary Income Portfolio may decline in value. Floating interest rate
securities may increase or decrease in value in response to changes in interest
rates, although generally to a lesser degree than fixed-income
securities.
•Floating
Interest Rate Risk. CLO tranches and corporate loans have floating interest rates, and
therefore their market price may be less sensitive to interest rate changes than
securities with fixed interest rates but may still decline in value if their
interest rates do not rise as much, or as quickly, as interest rates in general.
Conversely, floating rate securities will not generally increase in value if
interest rates decline. Since the Multi-Disciplinary Income Portfolio invests
primarily in floating rate CLO debt tranches and corporate loans, a decline in
interest rates may result in a reduction of income and may adversely affect the
value of the Multi-Disciplinary Income Fund’s shares. The interest rate for a
CLO tranche resets quarterly and for corporate loans usually resets either
monthly or quarterly, by reference to a benchmark interest rate index. The
impact of interest rate changes on floating rate CLO investments and corporate
loans is typically mitigated by the periodic interest rate reset of the
investments. Securities with longer durations tend to be more sensitive to
interest rate changes, usually making them more volatile than securities with
shorter durations.
•Income
Risk. The
Multi-Disciplinary Income Fund’s income may decline if interest rates fall. This
decline in income can occur because investments held by the Multi-Disciplinary
Income Portfolio will have floating or variable interest
rates.
•Privately
Issued Securities Risk. The
Multi-Disciplinary Income Portfolio may invest in privately issued securities,
including those that are normally purchased pursuant to Rule 144A or Regulation
S under the Securities Act of 1933, as amended. Privately issued securities
typically may be resold only to qualified institutional buyers, in a privately
negotiated transaction, to a limited number of purchasers, or in limited
quantities after they have been held for a specified period of time and other
conditions are met for an exemption from registration. Because there may be
relatively few potential purchasers for such securities, especially under
adverse market or
economic
conditions or in the event of adverse changes in the financial condition of the
issuer, the Multi-Disciplinary Income Portfolio may find it more difficult to
sell such securities when it may be advisable to do so or it may be able to sell
such securities only at lesser prices than if such securities were more widely
held and traded. At times, it also may be more difficult to determine the fair
value of such securities for the purposes of computing the Fund’s NAV due to the
absence of an active trading market. The determinations of the fair value of the
Multi-Disciplinary Income Portfolio’s investments may cause its NAV on a given
date to understate or overstate, possibly materially, the value that the
Multi-Disciplinary Income Portfolio may ultimately realize on one or more of its
investments. There can also be no assurance that a privately issued security
previously deemed to be liquid when purchased will continue to be liquid for as
long as it is held by the Multi-Disciplinary Income Portfolio, and its value may
decline as a result.
ª LIBOR
Discontinuance or Unavailability Risk: The
CLO debt tranches and corporate loans in which the Multi-Disciplinary Income
Portfolio invests may bear interest based upon LIBOR (London Interbank Offered
Rate), which is intended to represent the rate at which contributing banks may
obtain short-term borrowings from each other in the London interbank market. As
of June 30, 2023, almost all settings of LIBOR have ceased to be published,
except that certain widely used U.S. dollar LIBORs will continue to be published
on a temporary, synthetic and non-representative basis through at least
September 30, 2024. In some instances, regulators have restricted new use of
LIBORs prior to the date when synthetic LIBORs will cease to be published. SOFR,
which has been used increasingly on a voluntary basis in new instruments and
transactions, is a broad measure of the cost of borrowing cash overnight
collateralized by U.S. Treasury securities in the repurchase agreement market.
On December 16, 2022, the Federal Reserve Board adopted regulations implementing
the Adjustable Interest Rate Act, which provides a statutory fallback mechanism
to replace LIBOR, by identifying benchmark rates based on SOFR that will replace
LIBOR in certain financial contracts after June 30, 2023. These regulations
apply only to contracts governed by U.S. law, among other limitations. The
transition away from LIBOR could have a significant impact on the financial
markets in general and may also present heightened risk to market participants.
It is difficult to predict the full impact of the transition away from LIBOR on
the Multi-Disciplinary Income Portfolio and Multi-Disciplinary Income Fund until
new reference rates and fallbacks for both legacy and new instruments and
contracts are commercially accepted and market practices become
settled.
ª Liquidity
Risk:
Liquidity risk refers to the possibility that the Multi-Disciplinary Income
Portfolio may not be able to buy or sell a security at a favorable price or
time. Consequently, the Multi-Disciplinary Income Portfolio may have to accept a
lower price to sell a security, sell other securities to raise cash, or decline
an investment opportunity, any of which could have a negative effect on the
Multi-Disciplinary Income Fund’s performance. Infrequent trading of securities
also may lead to an increase in their price volatility. While CLO debt tranches
and corporate loans in which the Multi-Disciplinary Income Portfolio seeks to
invest are expected to be supported by a secondary market, it is possible that
they may be characterized as illiquid investments under adverse market
conditions resulting in a limited market for the resale for such securities or
affected by the liquidity in the fixed income market,
generally.
ª Management
Risk: The Investment Adviser continuously evaluates the Multi-Disciplinary
Income Portfolio’s holdings, purchases, and sales with a view to achieving the
Multi-Disciplinary Income Fund’s investment objective. However, achievement of
the stated investment objective cannot be guaranteed. The Investment Adviser’s
judgment about the markets, the economy, CLOs and corporate loans may not
anticipate actual market movements, economic conditions, CLOs or corporate loans
securities performance, and these factors may affect the return on your
investment.
ª Market
Risk:
The Multi-Disciplinary Income Fund is subject to market risks and
significant fluctuations in value. If the stock market declines in value, the
Multi-Disciplinary Income Portfolio is likely to decline in value and you could
lose money on your investment. Natural disasters, public health emergencies
(including epidemics and pandemics), geopolitical events, terrorism and other
global unforeseeable events may lead to instability in world economies and
markets, market volatility and may have adverse long-term
effects.
ª Option
Transaction Risk:
Purchasing
and writing put and call options are highly specialized activities and entail
greater than ordinary investment risks. The successful use of options depends in
part on the ability of the Investment Adviser to manage future price
fluctuations and the degree of correlation between the options and securities
(or currency) markets. By writing put options on equity securities, the
Multi-Disciplinary Income Portfolio gives up the opportunity to benefit from
potential increases in the value of the common stocks above the strike prices of
the written put options, but continues to bear the risk of declines in the value
of its common stock portfolio. The Multi-Disciplinary Income Portfolio will
receive a premium from writing a covered call option that it retains whether or
not the option is exercised. The premium received from the written options may
not be sufficient to offset any losses sustained from the volatility of the
underlying equity securities over
time.
ª Redemption
Risk:
Paying redemption proceeds may require the Multi-Disciplinary Income Portfolio
to dispose of or sell portfolio investments at an inopportune time to obtain the
cash needed to pay redemption proceeds. This may cause the Multi-Disciplinary
Income Fund to incur certain costs and to recognize gains or
losses.
ª Temporary
Defensive Position Risk:
If the Multi-Disciplinary Income Portfolio takes a temporary defensive position,
it may invest all or a large portion of its assets in cash and/or cash
equivalents. If the Multi-Disciplinary Income Portfolio takes a temporary
defensive position, the Multi-Disciplinary Income Fund may not achieve its
investment objective.
ª Valuation
Risk:
There is a risk that one or more of the securities in which the Multi-Disciplinary
Income Portfolio invests are valued differently than the price realized upon such
security’s sale. In times of market instability, valuation may be more
difficult. The tiered capital structure of CLOs may also subject them to price
volatility and valuation risk in times of market stress.
Who
may want to invest?
The
Multi-Disciplinary Income Fund may be appropriate for investors who:
ª wish
to diversify their portfolios;
ª wish
to generate total return while maintaining capital preservation;
ª wish
to invest for the long-term; and
ª are
comfortable with the risks described herein.
Performance
The bar chart
and table shown below illustrate the variability of the Multi-Disciplinary
Income Fund’s returns. The bar chart indicates the risks of
investing in the Multi-Disciplinary Income Fund by showing the changes in the
Multi-Disciplinary Income Fund’s performance from year to year (on a calendar
year basis). The table shows how the Multi-Disciplinary Income Fund’s average
annual returns, before and after taxes (after taking into account any sales
charges) compare with those of the
Bloomberg
U.S.
Aggregate Bond Index and Bloomberg U.S. Corporate High Yield Bond Index, which
represent broad measures of market performance. The past
performance of the Multi-Disciplinary Income Fund, before and after taxes, is
not necessarily an indication of how the Multi-Disciplinary Income Fund or the
Multi-Disciplinary Income Portfolio will perform in the future.
Performance reflects fee waivers in effect. If fee waivers were not in place,
the Multi-Disciplinary Income Fund’s performance would be reduced. Updated
performance
information is available on the Fund’s website at http://www.kineticsfunds.com or by calling the Fund toll-free at (800)
930-3828.
The
Multi-Disciplinary Income Fund – No Load Class
Calendar
Year Returns as of 12/31
|
|
|
|
|
|
|
|
|
|
|
| |
| Best
Quarter: |
Q2 2020 |
6.64 |
% |
| Worst
Quarter: |
Q1 2020 |
-10.52 |
% |
The
Multi-Disciplinary Income Fund’s after-tax returns as shown in the following
table are calculated using the historical highest individual federal marginal
income tax rates and do not reflect the impact of state and local
taxes. Your actual after-tax returns depend on your tax
situation and may differ from those shown. If you own
Fund shares in a tax-deferred account, such as a 401(k) plan or an individual
retirement account (“IRA”), the information on after-tax returns is not relevant
to your investment.
The Return After Taxes on
Distributions and Sale of Fund Shares is higher than other return figures when a
capital loss occurs upon the redemption of Fund
shares.
Average Annual
Total Returns as of 12/31/2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 1
Year |
5
Years
|
10
Years |
Since
Inception
(February 11,
2008) |
| The
Multi-Disciplinary Income Fund (KMDNX) No Load |
|
|
| |
|
Return Before
Taxes |
5.15 |
% |
2.26 |
% |
2.53 |
% |
3.65 |
% |
|
Return
After Taxes on Distributions |
2.94 |
% |
0.90 |
% |
1.02 |
% |
2.18 |
% |
|
Return
After Taxes on Distributions and Sale of Fund Shares(1) |
3.02 |
% |
1.15 |
% |
1.26 |
% |
2.22 |
% |
|
Bloomberg
U.S. Aggregate Bond Index (reflects no deductions for
fees, expenses or taxes) |
5.53 |
% |
1.10 |
% |
1.81 |
% |
2.75 |
% |
|
Bloomberg
U.S. Corporate High Yield Bond Index (reflects no deductions for
fees, expenses or taxes) |
13.44 |
% |
5.37 |
% |
4.60 |
% |
6.76 |
% |
(1)In
some cases, the Return After Taxes on Distributions and Sale of Fund Shares may
exceed the Return After Taxes on Distributions or Return Before Taxes due to an
assumed benefit from any losses on a sale of Fund shares at the end of the
measurement period.
Management
Investment
Adviser. Horizon
Kinetics Asset Management LLC is the Multi-Disciplinary Income Portfolio’s
investment adviser.
Portfolio
Managers. The
Multi-Disciplinary Income Portfolio is managed by an investment team with Mr.
Monasebian and Mr. Stahl as the Co-Portfolio Managers. Each investment team
member serves as a research analyst.
|
|
|
|
|
|
|
|
| |
| Investment
team member |
Primary
Title |
Years
of Service with the Fund |
| Darryl
Monasebian |
Co-Portfolio
Manager |
2 |
| Murray
Stahl |
Co-Portfolio
Manager |
16 |
Purchase
and Sale of Fund Shares
You
may purchase, exchange or redeem Fund shares on any business day by written
request via mail (Kinetics Mutual Funds – The Multi-Disciplinary Income Fund,
c/o U.S. Bank Global Fund Services, P.O. Box 701, Milwaukee, Wisconsin
53201-0701), by telephone at 1-800-930-3828, or through a financial
intermediary. You may also purchase or redeem Fund shares by wire transfer. The
minimum initial investment for both regular accounts and IRAs is $2,500 ($2,000
for Coverdell Education Savings Accounts). There is no minimum on subsequent
investments for all account types.
Tax
Information
Unless
you are investing through a tax-deferred arrangement, such as a 401(k) or an
IRA, the Fund’s distributions will generally be taxable to you at ordinary
income or capital gain tax rates, and you will generally recognize gain or loss
when you redeem shares.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker-dealer or other financial intermediary,
the Fund and/or its Investment Adviser may pay the intermediary for the sale of
Fund shares and related services. These payments may create a conflict of
interest by influencing the broker-dealer or other financial intermediary and
your salesperson to recommend the Fund over another investment. Ask your
salesperson or visit your financial intermediary’s website for more
information.
|
|
| |
|
ADDITIONAL
INFORMATION ABOUT THE FUNDS’
INVESTMENTS |
The
Investment Adviser believes that the global economy will continue to be impacted
by increased and enhanced connectivity enabled by the sustained development of
the Internet. Established businesses will continue to be disrupted by this
development, while some may also stand to benefit, realizing gains in
efficiency, scale and speed. Newly developed companies that leverage the global
Internet infrastructure are continuously emerging. Identifying the advantaged
business models that are sustainable and supported by strong financial metrics
warrant the Investment Adviser’s investment consideration.
Internet
Portfolio securities will be selected by the Investment Adviser from companies
that are engaged in the development of hardware, software and telecommunications
solutions that enable the transaction of business on the Internet by individuals
and companies engaged in private and commercial use of the Internet as well as
companies that offer products and services primarily via the Internet.
Accordingly, the Internet Portfolio seeks to invest in the equity securities of
companies whose research and development efforts may result in higher stock
values. These companies may be large, medium or small in size if, in the
Investment Adviser’s opinion, they meet the Internet Portfolio’s investment
criteria. Also, such companies’ core business may not be primarily
Internet-related. Such companies include, but are not limited to, the
following:
ª Content
Developers: Companies
that supply proprietary information and entertainment content, such as games,
music, video, graphics and news, on the Internet.
ª Computer
Hardware:
Companies that develop and produce computer and network hardware such as modems,
switchers and routers, and those that develop and manufacture workstations and
personal communications systems used to access the Internet and provide Internet
services.
ª Computer
Software:
Companies that produce, manufacture and develop tools to access the Internet,
enable Internet users to enhance the speed, integrity and storage of data on the
Internet, facilitate information distribution and gathering on the Internet, and
secure Internet-based transactions.
ª Venture
Capital: Companies
that invest in pre-IPO and start-up stage companies with business models related
to the Internet.
ª Internet
Service Providers:
Companies that provide users with access to the Internet.
ª Internet
Portals:
Companies that provide users with search-engine services to access various sites
by category on the Internet.
ª Wireless/Broadband
Access: Companies
that provide the infrastructure to enable high-speed and wireless communication
of data via the Internet.
ª E-Commerce:
Companies
that derive a substantial portion of their revenue from sales of products and
services conducted via the Internet.
ª Telecommunications:
Companies
that are primarily engaged in the development of the telecommunications
transmission lines and software technologies that enhance the reach and
bandwidth of Internet users.
ª Other
Companies: Companies
whose core business may not be primarily Internet-related include, but are not
limited to, publishing and media companies.
The
Internet Portfolio may invest indirectly in bitcoin through the Grayscale
Bitcoin Trust and through other pooled investment vehicles that provide exposure
to crypto assets. Certain of these vehicles may not be registered under the 1940
Act and do not receive the protections of the 1940 Act. The Internet Portfolio
will not invest directly in Bitcoin or other crypto assets. Grayscale Bitcoin
Trust is one of the first spot Bitcoin ETFs in the U.S. It enables investors to
gain exposure to bitcoin in the form of a security while avoiding the challenges
of buying, storing, and safekeeping bitcoin, directly. Bitcoins are a type of
crypto assets that are not issued by a government, bank or central organization.
Bitcoins exist on the Bitcoin Network that hosts the Blockchain. Bitcoins have
no physical existence beyond the record of transactions on the Blockchain. The
Grayscale Bitcoin Trust invests principally
in
bitcoins.
The
Internet Portfolio contributed a portion of its holdings in the Grayscale
Bitcoin Trust
to
its wholly-owned and controlled Cayman Subsidiary.
The
Internet Portfolio is also the sole shareholder of its wholly owned Delaware
Subsidiary. The Internet Portfolio contributed a portion of its holdings in the
Grayscale Bitcoin Trust to the Delaware Subsidiary. Any net gains that the
Delaware Subsidiary recognizes on future sales of the contributed Grayscale
Bitcoin Trust shares will be subject to federal and state corporate income tax,
but the dividends that the Delaware Subsidiary pays to the Internet Portfolio
(i.e.,
those gains, net of the tax paid and any other expenses of the Delaware
Subsidiary, such as its management and advisory fees) will be eligible to be
treated as “qualified dividend income” under the Internal Revenue Code.
Additional information regarding the tax treatment of the Fund is provided in
the “Taxes” section of the SAI.
In
the future, the Internet Portfolio may seek to gain additional exposure to the
Grayscale Bitcoin Trust that may not produce qualifying income for the Internet
Fund under the Internal Revenue Code if held directly. The Internet Portfolio
will not make any additional investments in the Grayscale Bitcoin Trust if as a
result of such investment, its aggregate investment in the Grayscale Bitcoin
Trust, either directly or through a Subsidiary, would be more than 15% of its
assets at the time of the investment. However, the Portfolio’s investment in the
Grayscale Bitcoin Trust may, at times, exceed 15% of its net assets, due to
appreciation.
Each
Subsidiary invests primarily in the Grayscale Bitcoin Trust. The Internet
Portfolio will invest in its Subsidiaries in a manner that is consistent with
the limitations of the federal tax laws, rules and regulations that apply to the
Internet Fund as a RIC under Subchapter M. However, the Internet Portfolio
and each Subsidiary comply with the same fundamental investment restrictions on
an aggregate basis, to the extent those restrictions are applicable to the
investment activities of each Subsidiary. Each Subsidiary also complies with
Section 17 of the 1940 Act relating to affiliated transactions and custody, and
the Investment Adviser complies with Section 15 of the 1940 Act relating to
investment advisory contracts with respect to the Subsidiaries. Unlike the
Internet Fund, each Subsidiary does not, and will not, seek to qualify as a RIC.
The Internet Portfolio is the sole shareholder of each Subsidiary and does not
expect shares of the Subsidiaries to be offered or sold to other investors. The
Subsidiaries include entities that engage in investment activities in securities
or other assets that are primarily controlled by the Internet Portfolio. The
Internet Portfolio does not intend to create or acquire primary control of any
entity which primarily engages in investment activities in securities or other
assets other than entities wholly-owned by the Internet Portfolio.
The
Internet Portfolio may invest up to 20% of its assets in high quality, U.S.
short-term debt securities and money market instruments to maintain liquidity.
Some of these short-term instruments include commercial paper, certificates of
deposit, demand and time deposits and banker’s acceptances, U.S. government
securities (i.e.,
U.S. Treasury obligations) and repurchase agreements.
Temporary
and Defensive Cash and Cash Equivalent Holdings
The
Internet Portfolio may maintain during a temporary period, which could be for a
short period or a longer period lasting several years or more, of abnormal
conditions, a significant portion of its total assets in cash and securities,
generally considered to be cash and cash equivalents, including, but not limited
to: high quality, U.S. short-term debt securities and money market instruments,
as described above. The Investment Adviser will invest in such short-term cash
positions to the extent that the Investment Adviser is unable to find sufficient
investments meeting its criteria and when the Investment Adviser believes the
purchase of additional equity securities would not further the investment
objective of the Internet Portfolio during such periods of time. Additionally,
to respond to adverse market, economic, political or other conditions, which may
persist for short or long periods of time, the Internet Portfolio may invest up
to 100% of its assets in the types of high quality, U.S. short-term debt
securities and money market instruments described above.
If
the market advances during periods when the Internet Portfolio is holding a
large cash position, the Portfolio may not participate as much as it would have
if it had been more fully invested in securities. In the aforementioned
temporary defensive periods, the Investment Adviser believes that an additional
amount of liquidity in the Internet Portfolio is desirable both to meet
operating requirements and to take advantage of new investment opportunities.
When the Internet Portfolio holds a significant portion of assets in cash and
cash equivalents, it may not meet its investment objective.
Fund
Structure
The
Internet Portfolio has an investment objective identical to that of the Internet
Fund. The Internet Fund may withdraw its investment from the Internet Portfolio
at any time if the Board of Directors of the Company determines that it is in
the best interests of the Internet Fund to do so. Upon any such withdrawal, the
Directors will consider what action might be taken, including investing all of
the Internet Fund’s investable assets in another pooled investment entity having
substantially the same objective and strategies as the Internet Fund or
retaining an investment adviser, including the current Investment Adviser, to
manage the Internet Fund’s assets directly.
The
Global Portfolio securities selected by the Investment Adviser generally will be
those of foreign companies that have the ability to facilitate an increase in
the growth of their traditional business lines and those of U.S. companies that
benefit from international economic growth. An increase in growth may occur by
entry into new distribution channels, through an ability to leverage brand
identity, and by improvement in the underlying cost/profitability dynamics of
the business. Accordingly, the Global Portfolio seeks to invest in the equity
securities of companies whose research and development efforts may result in
higher stock values. These companies may be large, medium or small in size if,
in the Investment Adviser’s opinion, the companies meet the Global Portfolio’s
investment criteria. Such companies include, but are not limited to, the
following:
ª Infrastructure:
Companies
that hold equity stakes in or are involved in building, owning or operating
infrastructure assets including electric generation and transmission, airports,
toll roads, railways, ports, etc.
ª Energy:
Companies that explore for, finance, produce, market or distribute
energy-oriented products and services, including oil and natural gas, coal and
alternate energy sources.
ª Utilities:
Companies
and industries such as gas, electric and telephone.
ª Financial
Services:
Companies that engage in financial service transactions such as banking, credit
cards and investment services.
ª Real
Estate Development: Companies
that provide commercial real estate property and services.
ª Business
Services:
Companies that provide business-to-business products and services.
ª Healthcare:
Companies and industries such as pharmaceuticals, healthcare services,
contracting services, hospitals, medical devices, medical equipment,
etc.
ª Media:
Companies that provide print, broadcast, cable, satellite and web-based
information and entertainment content.
ª Travel
& Leisure:
Companies that provide transportation and recreational services.
ª Retailers:
Companies that sell retail products and services through traditional stores,
catalogues, telemarketing, and web-sites.
The
Global Portfolio may invest indirectly in bitcoin through the Grayscale Bitcoin
Trust and through other pooled investment vehicles that provide exposure to
crypto assets. Certain of these vehicles may not be registered under the 1940
Act and do not receive the protections of the 1940 Act. The Global Portfolio
will not invest directly in Bitcoin or other crypto assets. Grayscale Bitcoin
Trust is one of the first spot Bitcoin ETFs in the U.S. It enables investors to
gain exposure to bitcoin in the form of a security while avoiding the challenges
of buying, storing, and safekeeping bitcoin, directly. Bitcoins are a type of
crypto assets that are not issued by a government, bank or central organization.
Bitcoins exist on the Bitcoin Network that hosts the Blockchain. Bitcoins have
no physical existence beyond the record of transactions on the Blockchain. The
Grayscale Bitcoin Trust invests principally
in
bitcoins. The Global Portfolio may also invest in other pooled investment
vehicles that provide exposure to the spot price of crypto assets. For example,
the Global Portfolio may invest in the Grayscale Ethereum Classic Trust. Each
Subsidiary invests primarily in the Grayscale Bitcoin Trust. The Global
Portfolio will invest in its Subsidiaries in a manner that is consistent with
the limitations of the federal tax laws, rules and regulations that apply to the
Global Fund as a RIC under Subchapter M. However, the Global Portfolio and each
Subsidiary comply with the same fundamental investment restrictions on an
aggregate basis, to the extent those restrictions are applicable to the
investment activities of each Subsidiary. Each Subsidiary also complies with
Section 17 of the 1940 Act relating to affiliated transactions and custody, and
the Investment Adviser complies with Section 15 of the 1940 Act relating to
investment advisory contracts with respect to the Subsidiaries. Unlike the
Global Fund, each Subsidiary does not, and will not, seek to qualify as a RIC.
The Global Portfolio is the sole shareholder of each Subsidiary and does not
expect shares of the Subsidiaries to be offered or sold to other investors. The
Subsidiaries include entities that engage in investment activities in securities
or other assets that are primarily controlled by the Global Portfolio. The
Global Portfolio does not intend to create or acquire primary control of any
entity which primarily engages in investment activities in securities or other
assets other than entities wholly-owned by the Global Portfolio.
The
Global Portfolio contributed a portion of its holdings in the Grayscale Bitcoin
Trust
to
its wholly-owned and controlled Cayman Subsidiary.
The
Global Portfolio is also the sole shareholder of a wholly owned Delaware
Subsidiary. The Global Portfolio contributed a portion of its holdings in the
Grayscale Bitcoin Trust to the Delaware Subsidiary. Any net gains that the
Delaware Subsidiary recognizes on future sales of the contributed Grayscale
Bitcoin Trust shares will be subject to federal and state corporate income tax,
but the dividends that the Delaware Subsidiary pays to the Global Portfolio
(i.e.,
those gains, net of the tax paid and any other expenses of the Delaware
Subsidiary, such as its management and advisory fees) will be eligible to be
treated
as “qualified dividend income” under the Internal Revenue Code. Additional
information regarding the tax treatment of the Fund is provided in the “Taxes”
section of the SAI.
In
the future, the Global Portfolio may seek to gain additional exposure to the
Grayscale Bitcoin Trust that may not produce qualifying income for the Global
Fund under the Internal Revenue Code if held directly. The Global Portfolio will
not make any additional investments in the Grayscale Bitcoin Trust if as a
result of such investment, its aggregate investment in the Grayscale Bitcoin
Trust, either directly or through a Subsidiary, would be more than 15% of its
assets at the time of the investment. However, the Portfolio’s investment in the
Grayscale Bitcoin Trust may, at times, exceed 15% of its net assets, due to
appreciation.
Each
Subsidiary invests primarily in the Grayscale Bitcoin Trust. The Global
Portfolio will invest in its Subsidiaries in a manner that is consistent with
the limitations of the federal tax laws, rules and regulations that apply to the
Global Fund as a RIC under Subchapter M. However, the Global Portfolio and
each Subsidiary comply with the same fundamental investment restrictions on an
aggregate basis, to the extent those restrictions are applicable to the
investment activities of each Subsidiary. Each Subsidiary also complies with
Section 17 of the 1940 Act relating to affiliated transactions and custody, and
the Investment Adviser complies with Section 15 of the 1940 Act relating to
investment advisory contracts with respect to the Subsidiaries. Unlike the
Global Fund, each Subsidiary does not, and will not, seek to qualify as a RIC.
The Global Portfolio is the sole shareholder of each Subsidiary and does not
expect shares of the Subsidiaries to be offered or sold to other investors. The
Subsidiaries include entities that engage in investment activities in securities
or other assets that are primarily controlled by the Global Portfolio. The
Global Portfolio does not intend to create or acquire primary control of any
entity which primarily engages in investment activities in securities or other
assets other than entities wholly-owned by the Global Portfolio.
The
Global Portfolio may also invest in participatory notes. Participatory notes
(commonly known as “P-notes”) are derivative instruments used by investors to
take positions in certain foreign securities. P-notes are generally issued by
the associates of foreign-based foreign brokerages and domestic institutional
brokerages. P-notes represent interests in securities listed on certain foreign
exchanges, and thus present similar risks to investing directly in such
securities. P-notes also expose investors to counterparty risk, which is the
risk that the entity issuing the note may not be able to honor its financial
commitments.
Temporary
and Defensive Cash and Cash Equivalent Holdings
The
Global Portfolio may maintain during a temporary period, which could be for a
short period or a longer period lasting several years or more, of abnormal
conditions, a significant portion of its total assets in cash and securities,
generally considered to be cash and cash equivalents, including, but not limited
to: high quality, U.S. short-term debt securities and money market instruments,
as described above. The Investment Adviser will invest in such short-term cash
positions to the extent that the Investment Adviser is unable to find sufficient
investments meeting its criteria and when the Investment Adviser believes the
purchase of additional equity securities would not further the investment
objective of the Global Portfolio during such periods of time. Additionally, to
respond to adverse market, economic, political or other conditions, which may
persist for short or long periods of time, the Global Portfolio may invest up to
100% of its assets in the types of high quality, U.S. short-term debt securities
and money market instruments described above.
If
the market advances during periods when the Global Portfolio is holding a large
cash position, the Portfolio may not participate as much as it would have if it
had been more fully invested in securities. In the aforementioned temporary
defensive periods, the Investment Adviser believes that an additional amount of
liquidity in the Global Portfolio is desirable both to meet operating
requirements and to take
advantage
of new investment opportunities. When the Global Portfolio holds a significant
portion of assets in cash and cash equivalents, it may not meet its investment
objective.
Fund
Structure
The
Global Portfolio has an investment objective identical to that of the Global
Fund. The Global Fund may withdraw its investment from the Global Portfolio at
any time if the Board of Directors of the Company determines that it is in the
best interests of the Global Fund to do so. Upon any such withdrawal, the
Directors will consider what action might be taken, including investing all of
the Global Fund’s investable assets in another pooled investment entity having
substantially the same objective and strategies as the Global Fund or retaining
an investment adviser, including the current Investment Adviser, to manage the
Global Fund’s assets directly.
The
Paradigm Portfolio’s securities will be selected by the Investment Adviser from
companies that are engaged in various industries that will facilitate an
increase in the growth of traditional business lines, entry into new
distribution channels, an ability to leverage brand identity, and an improvement
in the underlying cost/profitability dynamics of the business. These companies
may be large, medium or small in size if, in the Investment Adviser’s opinion,
these companies meet the Paradigm Portfolio’s investment criteria. Accordingly,
the Paradigm Portfolio seeks to invest in the equity securities of companies
whose research and development efforts may result in higher stock values. Such
companies include, but are not limited to, the following:
ª Retailers:
Companies that sell retail products and services through traditional stores,
catalogues, telemarketing, and web-sites.
ª Media:
Companies that provide print, broadcast, cable, satellite and web-based
information and entertainment content.
ª Financial
Services:
Companies that engage in financial service transactions such as banking, credit
cards and investment services.
ª Real
Estate Development:
Companies that provide commercial real estate property and
services.
ª Business
Services:
Companies that provide business-to-business products and services.
ª Travel
& Leisure:
Companies that provide transportation and recreational services.
ª Utilities:
Companies and industries such as gas, electric and telephone.
The
Paradigm Portfolio may invest indirectly in bitcoin through the Grayscale
Bitcoin Trust and through other pooled investment vehicles that provide exposure
to crypto assets. Certain of these vehicles may not be registered under the 1940
Act and do not receive the protections of the 1940 Act. The Paradigm Portfolio
will not invest directly in Bitcoin or other crypto assets. Grayscale Bitcoin
Trust is one of the first spot Bitcoin ETFs in the U.S. It enables investors to
gain exposure to bitcoin in the form of a security while avoiding the challenges
of buying, storing, and safekeeping bitcoin, directly. Bitcoins are a type of
crypto assets that are not issued by a government, bank or central organization.
Bitcoins exist on the Bitcoin Network that hosts the Blockchain. Bitcoins have
no physical existence beyond the record of transactions on the Blockchain. The
Grayscale Bitcoin Trust invests principally in bitcoins. The Paradigm Portfolio
may also invest in other pooled investment vehicles that provide exposure to the
spot price of crypto assets. For example, the Paradigm Portfolio may invest in
the Grayscale Ethereum Classic Trust.
The
Paradigm Portfolio contributed a portion of its holdings in the Grayscale
Bitcoin Trust to its wholly-owned and controlled Cayman Subsidiary. Additional
information regarding the tax treatment of the Fund is provided in the “Taxes”
section of the SAI.
In
the future, the Paradigm Portfolio may seek to gain additional exposure to the
Grayscale Bitcoin Trust that may not produce qualifying income for the Paradigm
Fund under the Internal Revenue Code if held directly. The Paradigm Portfolio
will not make any additional investments in the Grayscale Bitcoin Trust if as a
result of such investment, its aggregate investment in the Grayscale Bitcoin
Trust, either directly or through the Subsidiary, would be more than 15% of its
assets at the time of the investment. However, the Portfolio’s investment in the
Grayscale Bitcoin Trust may, at times, exceed 15% of its net assets, due to
appreciation.
The
Subsidiary invests primarily in the Grayscale Bitcoin Trust. The Paradigm
Portfolio will invest in its Subsidiary in a manner that is consistent with the
limitations of the federal tax laws, rules and regulations that apply to the
Paradigm Fund as a RIC under Subchapter M. However, the Paradigm Portfolio and
the Subsidiary comply with the same fundamental investment restrictions on an
aggregate basis, to the extent those restrictions are applicable to the
investment activities of the Subsidiary. The Subsidiary also complies with
Section 17 of the 1940 Act relating to affiliated transactions and custody, and
the Investment Adviser complies with Section 15 of the 1940 Act relating to
investment advisory contracts with respect to the Subsidiary. Unlike the
Paradigm Fund, the Subsidiary does not, and will not, seek to qualify as a RIC.
The Paradigm Portfolio is the sole shareholder of the Subsidiary and does not
expect shares of the Subsidiary to be offered or sold to other investors. The
Subsidiary includes entities that engage in investment activities in securities
or other assets that are primarily controlled by the Paradigm Portfolio. The
Paradigm Portfolio does not intend to create or acquire primary control of any
entity which primarily engages in investment activities in securities or other
assets other than entities wholly-owned by the Paradigm Portfolio.
The
Paradigm Portfolio may invest up to 35% of its assets in high quality, U.S.
short-term debt securities and money market instruments to maintain liquidity.
Some of these short-term instruments include commercial paper, certificates of
deposit, demand and time deposits and banker’s acceptances, U.S. government
securities (i.e.,
U.S. Treasury obligations) and repurchase agreements.
Temporary
and Defensive Cash and Cash Equivalent Holdings
The
Paradigm Portfolio may maintain during a temporary period, which could be for a
short period or a longer period lasting several years or more, of abnormal
conditions, a significant portion of its total assets in cash and securities,
generally considered to be cash and cash equivalents, including, but not limited
to: high quality, U.S. short-term debt securities and money market instruments,
as described above. The Investment Adviser will invest in such short-term cash
positions to the extent that the Investment Adviser is unable to find sufficient
investments meeting its criteria and when the Investment Adviser believes the
purchase of additional equity securities would not further the investment
objective of the Paradigm Portfolio during such periods of time. Additionally,
to respond to adverse market, economic, political or other conditions, which may
persist for short or long periods of time, the Paradigm Portfolio may invest up
to 100% of its assets in the types of high quality, U.S. short-term debt
securities and money market instruments described above.
If
the market advances during periods when the Paradigm Portfolio is holding a
large cash position, the Portfolio may not participate as much as it would have
if it had been more fully invested in securities. In the aforementioned
temporary defensive periods, the Investment Adviser believes that an additional
amount of liquidity in the Paradigm Portfolio is desirable both to meet
operating requirements and to take
advantage
of new investment opportunities. When the Paradigm Portfolio holds a significant
portion of assets in cash and cash equivalents, it may not meet its investment
objective.
Fund
Structure
The
Paradigm Portfolio has an investment objective identical to that of the Paradigm
Fund. The Paradigm Fund may withdraw its investment from the Paradigm Portfolio
at any time if the Board of Directors of the Company determines that it is in
the best interests of the Paradigm Fund to do so. Upon any such withdrawal, the
Directors will consider what action might be taken, including investing all of
the Paradigm Fund’s investable assets in another pooled investment entity having
substantially the same objective and strategies as the Paradigm Fund or
retaining an investment adviser, including the current Investment Adviser, to
manage the Paradigm Fund’s assets directly.
|
|
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|
THE
SMALL CAP OPPORTUNITIES FUND |
The
Small Cap Portfolio’s Investment Adviser considers small cap companies to be
those with market capitalizations at or below the highest market capitalization
of a component security within the S&P 600®
SmallCap Index. The highest market capitalization of a company within the
S&P 600®
SmallCap Index was approximately $7.3 billion as of March 31, 2024. The
Investment Adviser believes that favorable investment opportunities are
available through companies that exhibit a number of the following
characteristics: have little or no institutional ownership, have had short-term
earnings shortfalls, have had a recent IPO but have not attracted significant
analyst coverage, are selling at or below book or replacement value, and have
price to earnings ratios that are less than one half of their projected growth
rate.
Small
Cap Portfolio securities will be selected from companies that are engaged in a
number of industries if, in the Investment Adviser’s opinion, the companies meet
the Small Cap Portfolio’s investment criteria. Such companies include, but are
not limited to, the following:
ª Media:
Companies that provide print, broadcast, cable, satellite and web-based
information and entertainment content.
ª Financial
Services:
Companies that engage in financial service transactions such as banking, credit
cards and investment services.
ª Retailers:
Companies that sell retail products and services through traditional stores,
catalogues, telemarketing, and web-sites.
ª Manufacturing
and Consumer Products: Companies
that manufacture and distribute products to retail outlets.
ª Utilities:
Companies and industries such as gas, electric and telephone.
The
Small Cap Portfolio may invest indirectly in bitcoin through the Grayscale
Bitcoin Trust and through other pooled investment vehicles that provide exposure
to crypto assets. Certain of these vehicles may not be registered under the 1940
Act and do not receive the protections of the 1940 Act. The Small Cap Portfolio
will not invest directly in Bitcoin or other crypto assets. Grayscale Bitcoin
Trust is one of the first spot Bitcoin ETFs in the U.S. It enables investors to
gain exposure to bitcoin in the form of a security while avoiding the challenges
of buying, storing, and safekeeping bitcoin, directly. Bitcoins are a type of
crypto assets that are not issued by a government, bank or central organization.
Bitcoins exist on the Bitcoin Network that hosts the Blockchain. Bitcoins have
no physical existence beyond the record of transactions on the Blockchain. The
Grayscale Bitcoin Trust invests principally in bitcoins. The Small Cap Portfolio
may also invest in other pooled investment vehicles that provide exposure to the
spot price
of
crypto assets. For example, the Small Cap Portfolio may invest in the Grayscale
Ethereum Classic Trust.
The
Small Cap Portfolio contributed a portion of its holdings in the Grayscale
Bitcoin Trust to its wholly-owned and controlled Subsidiary.
In
the future, the Small Cap Portfolio may seek to gain additional exposure to the
Grayscale Bitcoin Trust that may not produce qualifying income for the Small Cap
Fund under the Internal Revenue Code if held directly. The Small Cap Portfolio
will not make any additional investments in the Grayscale Bitcoin Trust if as a
result of such investment, its aggregate investment in the Grayscale Bitcoin
Trust, either directly or through the Subsidiary, would be more than 15% of its
assets at the time of the investment. However, the Portfolio’s investment in the
Grayscale Bitcoin Trust may, at times, exceed 15% of its net assets, due to
appreciation.
The
Subsidiary invests primarily in the Grayscale Bitcoin Trust. The Small Cap
Portfolio will invest in its Subsidiary in a manner that is consistent with the
limitations of the federal tax laws, rules and regulations that apply to the
Small Cap Fund as a RIC under Subchapter M. However, the Small Cap Portfolio and
its Subsidiary comply with the same fundamental investment restrictions on an
aggregate basis, to the extent those restrictions are applicable to the
investment activities of the Subsidiary. The Subsidiary also complies with
Section 17 of the 1940 Act relating to affiliated transactions and custody, and
the Investment Adviser complies with Section 15 of the 1940 Act relating to
investment advisory contracts with respect to the Subsidiary. Unlike the Small
Cap Fund, the Subsidiary does not, and will not, seek to qualify as a RIC. The
Small Cap Portfolio is the sole shareholder of its Subsidiary and does not
expect shares of its Subsidiary to be offered or sold to other investors. The
Subsidiary includes entities that engage in investment activities in securities
or other assets that are primarily controlled by the Small Cap Portfolio. The
Small Cap Portfolio does not intend to create or acquire primary control of any
entity which primarily engages in investment activities in securities or other
assets other than entities wholly-owned by the Small Cap Portfolio.
The
Small Cap Portfolio may invest up to 20% of its assets in high quality, U.S.
short-term debt securities and money market instruments to maintain liquidity.
Some of these short-term instruments include commercial paper, certificates of
deposit, demand and time deposits and banker’s acceptances, U.S. government
securities (i.e.,
U.S. Treasury obligations) and repurchase agreements.
Temporary
and Defensive Cash and Cash Equivalent Holdings
The
Small Cap Portfolio may maintain during a temporary period, which could be for a
short period or a longer period lasting several years or more, of abnormal
conditions, a significant portion of its total assets in cash and securities,
generally considered to be cash and cash equivalents, including, but not limited
to: high quality, U.S. short-term debt securities and money market instruments,
as described above. The Investment Adviser will invest in such short-term cash
positions to the extent that the Investment Adviser is unable to find sufficient
investments meeting its criteria and when the Investment Adviser believes the
purchase of additional equity securities would not further the investment
objective of the Small Cap Portfolio during such periods of time. Additionally,
to respond to adverse market, economic, political or other conditions, which may
persist for short or long periods of time, the Small Cap Portfolio may invest up
to 100% of its assets in the types of high quality, U.S. short-term debt
securities and money market instruments described above.
If
the market advances during periods when the Small Cap Portfolio is holding a
large cash position, the Portfolio may not participate as much as it would have
if it had been more fully invested in securities. In the aforementioned
temporary defensive periods, the Investment Adviser believes that an additional
amount
of liquidity in the Small Cap Portfolio is desirable both to meet operating
requirements and to take advantage of new investment opportunities. When the
Small Cap Portfolio holds a significant portion of assets in cash and cash
equivalents, it may not meet its investment objective.
Fund
Structure
The
Small Cap Portfolio has an investment objective identical to that of the Small
Cap Fund. The Small Cap Fund may withdraw its investment from the Small Cap
Portfolio at any time if the Board of Directors of the Company determines that
it is in the best interests of the Small Cap Fund to do so. Upon any such
withdrawal, the Directors will consider what action might be taken, including
investing all of the Small Cap Fund’s investable assets in another pooled
investment entity having substantially the same objective and strategies as the
Small Cap Fund or retaining an investment adviser, including the current
Investment Adviser, to manage the Small Cap Fund’s assets directly.
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THE
MARKET OPPORTUNITIES FUND |
Market
Opportunities Portfolio securities will be selected by the Investment Adviser
from companies that are engaged in public exchanges, derivative exchanges,
capital markets and companies that experience operational scale from increased
volume such as investment banks, credit card processing companies, electronic
payment companies, publicly traded expressways, airports, roads and railways, or
from companies in the gaming industry. These companies may be large, medium or
small in size if, in the Investment Adviser’s opinion, these companies meet the
Market Opportunities Portfolio’s investment criteria. The Investment Adviser
selects portfolio securities by, among other things, evaluating a company’s
balance sheets, corporate revenues, earnings and dividends. Such companies
include, but are not limited to, the following:
ª Exchanges:
Companies that are organized as public exchanges where debt and equity
securities are traded, including derivative exchanges.
ª Financial
Services:
Companies that engage in financial service transactions relating to capital
markets such as banking, credit cards and investment services.
ª Business
Services:
Companies that provide business-to-business products and services involving
capital markets or the gaming industry.
ª Gaming:
Companies engaged in casino entertainment, including casino resorts and other
leisure activities.
Other
leisure activities are defined as those activities that individuals engage in
for entertainment, enjoyment and pleasure, which may take place at casinos.
Additionally, a substantial aspect of the operations of gaming companies is the
operation of casino resorts, which includes, but is not limited to lodging,
amenities and recreational activities.
Although
the Market Opportunities Portfolio intends to focus its investments in the
capital markets and gaming sectors, the Market Opportunities Portfolio may also
purchase the securities of companies such as auction houses and payroll and
other processing companies that, due to the fixed costs of their operations,
benefit from an increase in the volume of sales/transactions.
The
Market Opportunities Portfolio may invest indirectly in bitcoin through the
Grayscale Bitcoin Trust and through other pooled investment vehicles that
provide exposure to crypto assets. Certain of these vehicles may not be
registered under the 1940 Act and do not receive the protections of the 1940
Act. The Market Opportunities Portfolio will not invest directly in Bitcoin or
other crypto assets. Grayscale Bitcoin
Trust
is one of the first spot Bitcoin ETFs in the U.S. It enables investors to gain
exposure to bitcoin in the form of a security while avoiding the challenges of
buying, storing, and safekeeping bitcoin, directly. Bitcoins are a type of
crypto assets that are not issued by a government, bank or central organization.
Bitcoins exist on the Bitcoin Network that hosts the Blockchain. Bitcoins have
no physical existence beyond the record of transactions on the Blockchain. The
Grayscale Bitcoin Trust invests principally
in
bitcoins. The Market Opportunities Portfolio may also invest in other pooled
investment vehicles that provide exposure to the spot price of crypto assets.
For example, the Market Opportunities Portfolio may invest in the Grayscale
Ethereum Classic Trust.
The
Market Opportunities Portfolio contributed a portion of its holdings in the
Grayscale Bitcoin Trust
to
its wholly-owned and controlled Cayman Subsidiary.
The
Market Opportunities Portfolio is also the sole shareholder of its wholly owned
Delaware Subsidiary. The Market Opportunities Portfolio contributed a portion of
its holdings in the Grayscale Bitcoin Trust to the Delaware Subsidiary. Any net
gains that the Delaware Subsidiary recognizes on future sales of the contributed
Grayscale Bitcoin Trust shares will be subject to federal and state corporate
income tax, but the dividends that the Delaware Subsidiary pays to the Market
Opportunities Portfolio (i.e.,
those gains, net of the tax paid and any other expenses of the Delaware
Subsidiary, such as its management and advisory fees) will be eligible to be
treated as “qualified dividend income” under the Internal Revenue Code.
Additional information regarding the tax treatment of the Fund is provided in
the “Taxes” section of the SAI.
In
the future, the Market Opportunities Portfolio may seek to gain additional
exposure to the Grayscale Bitcoin Trust that may not produce qualifying income
for the Market Opportunities Fund under the Internal Revenue Code if held
directly. The Market Opportunities Portfolio will not make any additional
investments in the Grayscale Bitcoin Trust if as a result of such investment,
its aggregate investment in the Grayscale Bitcoin Trust, either directly or
through a Subsidiary, would be more than 15% of its assets at the time of the
investment. However, the Portfolio’s investment in the Grayscale Bitcoin Trust
may, at times, exceed 15% of its net assets, due to appreciation.
Each
Subsidiary invests primarily in the Grayscale Bitcoin Trust. The Market
Opportunities Portfolio will invest in its Subsidiaries in a manner that is
consistent with the limitations of the federal tax laws, rules and regulations
that apply to the Market Opportunities Fund as a RIC under Subchapter M.
However, the Market Opportunities Portfolio and each Subsidiary comply with the
same fundamental investment restrictions on an aggregate basis, to the extent
those restrictions are applicable to the investment activities of each
Subsidiary. Each Subsidiary also complies with Section 17 of the 1940 Act
relating to affiliated transactions and custody, and the Investment Adviser
complies with Section 15 of the 1940 Act relating to investment advisory
contracts with respect to the Subsidiaries. Unlike the Market Opportunities
Fund, each Subsidiary does not, and will not, seek to qualify as a RIC. The
Market Opportunities Portfolio is the sole shareholder of each Subsidiary and
does not expect shares of the Subsidiaries to be offered or sold to other
investors. The Subsidiaries include entities that engage in investment
activities in securities or other assets that are primarily controlled by the
Market Opportunities Portfolio. The Market Opportunities Portfolio does not
intend to create or acquire primary control of any entity which primarily
engages in investment activities in securities or other assets other than
entities wholly-owned by the Market Opportunities Portfolio.
The
Market Opportunities Portfolio may invest up to 35% of its assets in high
quality, U.S. short-term debt securities and money market instruments to
maintain liquidity. Some of these short-term instruments include commercial
paper, certificates of deposit, demand and time deposits and banker’s
acceptances, U.S. government securities (i.e.,
U.S. Treasury obligations) and repurchase agreements.
Temporary
and Defensive Cash and Cash Equivalent Holdings
The
Market Opportunities Portfolio may maintain during a temporary period, which
could be for a short period or a longer period lasting several years or more, of
abnormal conditions, a significant portion of its total assets in cash and
securities, generally considered to be cash and cash equivalents, including, but
not limited to: high quality, U.S. short-term debt securities and money market
instruments, as described above. The Investment Adviser will invest in such
short-term cash positions to the extent that the Investment Adviser is unable to
find sufficient investments meeting its criteria and when the Investment Adviser
believes the purchase of additional equity securities would not further the
investment objective of the Market Opportunities Portfolio during such periods
of time. Additionally, to respond to adverse market, economic, political or
other conditions, which may persist for short or long periods of time, the
Market Opportunities Portfolio may invest up to 100% of its assets in the types
of high quality, U.S. short-term debt securities and money market instruments
described above.
If
the market advances during periods when the Market Opportunities Portfolio is
holding a large cash position, the Portfolio may not participate as much as it
would have if it had been more fully invested in securities. In the
aforementioned temporary defensive periods, the Investment Adviser believes that
an additional amount of liquidity in the Market Opportunities Portfolio is
desirable both to meet operating requirements and to take advantage of new
investment opportunities. When the Market Opportunities Portfolio holds a
significant portion of assets in cash and cash equivalents, it may not meet its
investment objective.
Fund
Structure
The
Market Opportunities Portfolio has an investment objective identical to that of
the Market Opportunities Fund. The Market Opportunities Fund may withdraw its
investment from the Market Opportunities Portfolio at any time if the Board of
Directors of the Company determines that it is in the best interests of the
Market Opportunities Fund to do so. Upon any such withdrawal, the Directors will
consider what action might be taken, including investing all of the Market
Opportunities Fund’s investable assets in another pooled investment entity
having substantially the same objective and strategies as the Market
Opportunities Fund or retaining an investment adviser, including the current
Investment Adviser, to manage the Market Opportunities Fund’s assets
directly.
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THE
MULTI-DISCIPLINARY INCOME FUND |
The
Multi-Disciplinary Income Fund is a diversified fund that invests all of its
investable assets in the Multi-Disciplinary Income Portfolio, a series of
Kinetics Portfolios Trust. The investment objective of the Multi-Disciplinary
Income Fund is to provide total return. “Total Return” sought by the
Multi-Disciplinary Income Portfolio consists of income earned on the
Multi-Disciplinary Income Portfolio’s investments, plus capital appreciation.
The Multi-Disciplinary Income Portfolio utilizes a two-part investment strategy,
which includes fixed-income components, including ETFs, CLOs and senior secured
corporate loans, and derivatives components. Under normal circumstances, the
Multi-Disciplinary Income Portfolio will invest at least 65% of its net assets
in fixed-income securities (which includes CLOs and corporate loans),
derivatives and cash or cash equivalents committed as collateral for written
option contracts.
There
is no limit on the amount of assets the Multi-Disciplinary Income Portfolio may
invest in fixed-income securities. The Multi-Disciplinary Income Portfolio may
invest in the debt tranches of CLOs.
The
CLO debt tranches may have any stated maturity and may be rated (at time of
issuance), from “AAA” to and including “B-” (or equivalent by an NRSRO), or if
unrated, determined to be of comparable credit
quality
by the Investment Adviser. An NRSRO is a credit rating agency that is registered
with the SEC that issues credit ratings that the SEC permits other financial
firms to use for certain regulatory purposes.
The
Multi-Disciplinary Income Portfolio may invest up to 35% of its net assets in
senior secured corporate loans, issued by either public or privately owned
companies. Senior secured corporate loans will be first lien or second lien
loans, have maturities of up to 8 years, and may be 100% rated below investment
grade by an NRSRO.
CLO
structures are securitization vehicles collateralized by a pool of investments,
which are primarily below investment grade (or unrated equivalent), first lien
senior secured corporate loans (generally at least 90% of the CLO portfolio).
CLOs are typically permitted to also invest up to 10% of their portfolio in
below investment grade (or unrated equivalent) second lien senior secured
corporate loans, unsecured corporate loans, and senior secured and senior
unsecured corporate bonds. CLOs are generally required to hold a portfolio of
investments that are highly diversified by the underlying borrower and industry
and that are subject to a variety of asset concentration limitations. The
covenants of a typical CLO structure are, with certain exceptions, based
primarily on the cash flow generated by, and the par value (as opposed to the
market price) of, the collateral. These covenants include collateral coverage
tests, interest coverage tests and collateral quality tests. The CLOs are
generally structured with several debt tranches (typically rated “AAA” and “AA”
(or its equivalent), which are the senior notes of the CLO, down to “BB-” or
“B-” rated (or its equivalent), which is below investment grade, at the most
junior debt level), and an equity or “first loss” tranche. CLOs have two
priority-of-payment schedules (“waterfalls”), which are documented in a CLO’s
indenture, and which govern how cash generated from a CLO’s underlying
collateral is distributed to the CLO’s debt and equity tranches. The interest
waterfall applies to interest payments received on a CLO’s underlying
collateral. The principal waterfall applies to cash generated from principal on
the underlying collateral, primarily through loan repayments and the proceeds
from loan sales. Debt tranches (starting with the AAA rated, then AA rated and
then lower rated debt tranches in that order) are paid sequentially under the
waterfall, with the equity or “first loss” tranche paid last. Losses are first
borne by the equity tranche, followed by the junior debt tranches, and finally
by the senior debt tranches. The equity tranche has the highest potential return
but is subject to the greatest risk of loss if some collateral assets held by
the CLO default and the cash received by the CLO is insufficient to meet all its
debt service obligations under the waterfall. Since the debt tranches of CLOs
are over-collateralized, they are partially protected from defaults of
collateral assets held by the CLO. The debt tranches generally have a higher
rating and lower yield than the underlying collateral assets held in the CLO.
Despite the protection afforded through subordination, the debt tranches can
still experience losses due to actual defaults of the collateral assets, market
anticipation of defaults and aversion to CLO investments as a
class.
The
Investment Adviser uses a bottom-up approach in managing the Multi-Disciplinary
Income Portfolio, which means that the focus is on the analysis of individual
securities. By engaging in quantitative and qualitative analysis of individual
securities, the Investment Adviser examines an investment’s current valuation,
income potential, risk adjusted return and credit profile.
The
Multi-Disciplinary Income Portfolio will invest in CLOs and senior secured
corporate loans with a minimum initial total offering size of $250 million, that
are floating rate and are U.S. dollar denominated. The Multi-Disciplinary Income
Portfolio may purchase CLOs and senior secured corporate loans, in both the
primary and secondary markets.
The
Multi-Disciplinary Income Portfolio will generally not invest more than 5% of
its portfolio in any single investment measured at the time of purchase. It is
intended that the Multi-Disciplinary Income
Portfolio
will hold between 20 to 75 investments with a position weighing between 1% to 5%
per security. The Multi-Disciplinary Income Portfolio may temporarily deviate
from this diversification weighting due to, among other reasons, market
conditions and the initial size of the fund as determined by the Investment
Adviser, in its sole discretion.
Temporary
and Defensive Cash and Cash Equivalent Holdings
The
Multi-Disciplinary Income Portfolio may maintain during a temporary period,
which could be for a short period or a longer period lasting several years or
more, of abnormal conditions, a significant portion of its total assets in cash
and securities, generally considered to be cash and cash equivalents, including,
but not limited to: high quality, U.S. short-term debt securities and money
market instruments, as described above. The
Investment Adviser will invest in such short-term cash positions to the extent
that the Investment Adviser is unable to find sufficient investments meeting its
criteria and when the Investment Adviser believes the purchase of additional
investments would not further the investment objective of the Multi-Disciplinary
Income Portfolio during such periods of time.
Additionally, to respond to adverse market, economic, political or other
conditions, which may persist for short or long periods of time, the
Multi-Disciplinary Income Portfolio may invest up to 100% of its assets in the
types of high quality, U.S. short-term debt securities and money market
instruments described above.
If
the market advances during periods when the Multi-Disciplinary Income Portfolio
is holding a large cash position, the Portfolio may not participate as much as
it would have if it had been more fully invested in securities. In the
aforementioned temporary defensive periods, the Investment Adviser believes that
an additional amount of liquidity in the Multi-Disciplinary Income Portfolio is
desirable both to meet operating requirements and to take advantage of new
investment opportunities. When the Multi-Disciplinary Income Portfolio holds a
significant portion of assets in cash and cash equivalents, it may not meet its
investment objective.
Fund
Structure
The
Multi-Disciplinary Income Portfolio has an investment objective identical to
that of the Multi-Disciplinary Income Fund. The Multi-Disciplinary Income Fund
may withdraw its investment from the Multi-Disciplinary Income Portfolio at any
time if the Board of Directors of the Company determines that it is in the best
interests of the Multi-Disciplinary Income Fund to do so. Upon any such
withdrawal, the Directors will consider what action might be taken, including
investing all of the Multi-Disciplinary Income Fund’s investable assets in
another pooled investment entity having substantially the same objective and
strategies as the Multi-Disciplinary Income Fund or retaining an investment
adviser, including the current Investment Adviser, to manage the
Multi-Disciplinary Income Fund’s assets directly.
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Additional
Information About the Risks of Investing in Each of the
Funds |
The
principal risks of investing in each fund described in this Prospectus (each, a
“Fund” and the corresponding portfolio, a “Portfolio”) are described previously
in each Fund’s summary section of this Prospectus. Each of those risks is
considered a "principal risk" of investing in a Fund, regardless of the order in
which it appears. This section provides more detail about some of those risks,
along with information on additional types of risks that may apply to the Funds.
Crypto
Asset Exposure Risk—All Funds, except the Multi-Disciplinary Income Fund
Crypto
assets (also referred to as “virtual currencies” and “digital currencies”) are
digital assets designed to act as a medium of exchange. Although crypto assets
are an emerging asset class, they are not presently widely accepted as a medium
of exchange. There are thousands of crypto assets, the most well-known of which
is bitcoin.
Bitcoin
or BTC was the first decentralized crypto asset. Bitcoin is a type of crypto
asset that is not issued by a government, bank or central organization. Bitcoin
exists on an online, peer-to-peer computer network that hosts the Blockchain.
Bitcoin has no physical existence beyond the record of transactions on the
Blockchain. The bitcoin network allows people to exchange tokens of value,
bitcoins, which are recorded on a public transaction ledger known as a
blockchain. The Portfolios, except the Multi-Disciplinary Income Portfolio, may
invest indirectly in bitcoin through the Grayscale Bitcoin Trust and through
other pooled investment vehicles that provide exposure to crypto assets.
Grayscale Bitcoin Trust is one of the first spot Bitcoin ETFs in the U.S. It
enables investors to gain exposure to bitcoin in the form of a security while
avoiding the challenges of buying, storing, and safekeeping bitcoin,
directly.
In
addition to the general risks of investing in other investment vehicles, the
value of a Portfolio’s indirect investments in crypto assets are subject to
fluctuations in the value of the crypto asset, which can be highly volatile. The
value of crypto assets is determined by the supply and demand for crypto assets
in the global market for the trading of crypto assets, which consists primarily
of transactions on crypto asset trading platforms. The value of crypto assets
has been, and may continue to be, substantially dependent on speculation, such
that trading and investing in crypto assets generally may not be based on
fundamental analysis. A Portfolio’s exposure to crypto assets can result in
substantial losses to a Fund.
Crypto
assets facilitate decentralized, peer-to-peer financial exchange and value
storage, without the oversight of a central authority or banks. The value of
crypto assets are not backed by any government, corporation, or other identified
body. Crypto assets are also susceptible to theft, loss and
destruction.
Crypto
Asset Trading Platform Risk
Crypto
assets trade on crypto asset trading platforms, which are largely unregulated
and may therefore be more exposed to fraud and failure than established,
regulated exchanges for securities, derivatives and other currencies. These
crypto asset trading platforms can cease operating temporarily or even
permanently, resulting in the potential loss of users’ crypto assets or other
market disruptions. Crypto asset trading platforms may be more exposed to the
risk of market manipulation than exchanges for more traditional assets.
Individuals or organizations holding a large amount of crypto assets in which a
Portfolio may invest indirectly (also known as “whales”) may have the ability to
manipulate the prices of those crypto assets. Crypto asset trading platforms on
which crypto assets are traded are or may become subject to enforcement actions
by regulatory authorities. Crypto asset trading platforms that are regulated
typically must comply with minimum net worth, cybersecurity, and anti-money
laundering requirements, but are not typically required to protect customers or
their markets to the same extent that regulated securities exchanges or futures
exchanges are required to do so. Furthermore, crypto asset trading platforms may
be operating out of compliance with regulations, and many crypto asset trading
platforms lack certain safeguards established by more traditional exchanges to
enhance the stability of trading on the exchange, such as measures designed to
prevent sudden drops in value of items traded on the exchange (i.e.,
“flash crashes”). As a result, the prices of crypto assets on crypto asset
trading platforms may be subject to larger and more frequent sudden declines
than assets traded on more traditional exchanges.
Crypto
Asset Industry Risk
The
crypto asset industry is a newer, speculative, and still-developing industry
that faces many risks. The crypto asset industry may still be experiencing a
bubble or may experience a bubble again in the future. For example, in the first
half of 2022, each of Celsius Network, Voyager Digital Ltd., and Three Arrows
Capital declared bankruptcy, resulting in a loss of confidence in participants
of the digital asset ecosystem and negative publicity surrounding digital assets
more broadly. In November 2022, FTX Trading Ltd. (“FTX”), one of the largest
digital asset platforms by volume at the time, halted customer withdrawals amid
rumors of the company’s liquidity issues and likely insolvency, which were
subsequently corroborated by its CEO. Shortly thereafter, FTX’s CEO resigned and
FTX and many of its affiliates filed for bankruptcy in the United States, while
other affiliates have entered insolvency, liquidation, or similar proceedings
around the globe, following which the U.S. Department of Justice brought
criminal fraud and other charges, and the SEC and CFTC brought civil securities
and commodities fraud charges, against certain of FTX’s and its affiliates’
senior executives, including its former CEO. In addition, several other entities
in the crypto asset industry filed for bankruptcy following FTX’s bankruptcy
filing, such as BlockFi Inc. and Genesis Global Capital, LLC. In response to
these events, the prices of crypto assets have experienced extreme volatility
and other entities in the crypto asset industry have been, and may continue to
be, negatively affected, further undermining confidence in the crypto asset
industry. These events are continuing to develop and the full facts are
continuing to emerge. It is not possible to predict at this time all of the
risks that they may pose to a Portfolio/Fund, its service providers or to the
crypto asset industry as a whole.
Factors
affecting the further development of crypto assets include, but are not limited
to, continued worldwide growth or possible cessation or reversal in the adoption
and use of crypto assets and other digital assets; government and
quasi-government regulation or restrictions on or regulation of access to and
operation of digital asset networks; changes in consumer demographics and public
preferences; maintenance and development of open-source software protocol;
availability and popularity of other forms or methods of buying and selling
goods and services; the use of the networks supporting digital assets, such as
those for developing smart contracts and distributed applications; general
economic conditions and the regulatory environment relating to digital assets;
negative consumer or public perception; and general risks tied to the use of
information technologies, including cyber risks. A hack or failure of one crypto
asset may lead to a loss in confidence in, and thus decreased usage and/or value
of, other crypto assets.
Crypto
Asset Regulatory Risk
In
particular, Crypto asset markets in the U.S. exist in a state of regulatory
uncertainty. Regulatory changes or actions by Congress as well as U.S. federal
or state agencies may adversely affect the value of a Portfolio’s indirect
investments in crypto assets. As digital assets have grown in both popularity
and market size, a number of state and federal agencies have issued consumer
advisories regarding the risks posed by digital assets to investors. In
addition, the Securities and Exchange Commission, U.S. state securities
regulators and several foreign governments have issued warnings and instituted
legal proceedings in which they argue that certain digital assets may be
classified as securities and that both those digital assets and any related
initial coin offerings are subject to securities regulations. Additionally, U.S.
state and federal, and foreign regulators and legislatures have taken action
against virtual currency businesses or enacted restrictive regimes in response
to adverse publicity arising from hacks, consumer harm, or criminal activity
stemming from virtual currency activity.
Currently,
there is relatively limited use of crypto assets in the retail and commercial
marketplace, which contributes to price volatility. A lack of expansion by
crypto assets into retail and commercial markets, or a contraction of such use,
may result in increased volatility or a reduction in the value of crypto assets,
either of which could adversely impact the value of a Portfolio’s investment. In
addition, to the extent
market
participants develop a preference for one crypto asset over another, the value
of the less preferred crypto assets would likely be adversely
affected.
A
Portfolio’s exposure to crypto assets may change over time and, accordingly,
such exposure may not be represented in a Portfolio’s portfolio at any given
time. Many significant aspects of the tax treatment of investments in crypto
assets are uncertain, and a direct or indirect investment in crypto assets may
produce non-qualifying income. Crypto assets are a new technological innovation
with a limited history; it is a highly speculative asset and future regulatory
actions or policies may limit, perhaps to a materially adverse extent, the value
of a Portfolio’s indirect investment in crypto assets and the ability to
exchange a crypto asset or utilize it for payments.
Bitcoin
Risks
Bitcoin
is a relatively new innovation with a limited history and the market for bitcoin
is volatile and subject to rapid price swings, changes and uncertainty and is a
largely unregulated marketplace. Bitcoin is subject to the risk of fraud, theft,
manipulation or security failures, operational or other problems that impact
bitcoin trading venues. Newly created bitcoin are generated through a process
referred to as “mining,” and such bitcoin are referred to as “newly mined
bitcoin.” Approximately 900 newly mined bitcoin are created each day. “Halving”
events occur periodically, further decreasing the amount of newly mined bitcoin
created each day. If entities engaged in bitcoin mining choose not to hold the
newly mined bitcoin, and, instead, make them available for sale, there can be
downward pressure on the price of bitcoin which could negatively affect an
investment in a Portfolio, and therefore the corresponding Fund. Miners may
cease expanding processing power to create blocks and verify transactions if
they are not adequately compensated, which may negatively impact the development
of the bitcoin network and adversely affect the price of bitcoin.
As
a digital asset, bitcoin is subject to the risk that malicious actors will
exploit flaws in its code or structure that will allow them to, among other
things, steal bitcoin held by others, control the blockchain, steal personally
identifying information, or issue significant amounts of bitcoin in
contravention of the bitcoin blockchain code. The occurrence of any of these
events is likely to have a significant adverse impact on the price and liquidity
of bitcoin. A malicious actor may attack in various ways, including a “50
Percent Attack” or a spam attack. If a malicious actor obtains a majority of the
processing power dedicated to mining, it will be able to exert unilateral
control over the addition of blocks to the blockchain. As long as the malicious
actor enjoys this majority it may be able to double-spend its own bitcoin (i.e.,
spend the same bitcoin in two or more conflicting transactions) as well as
prevent the confirmation of other bitcoin transactions. If such a scenario were
to occur, it could adversely affect an investment in a Portfolio, and therefore
the corresponding Fund. A malicious actor could also attempt to flood the pool
of unconfirmed transactions with tens of thousands of transactions in an effort
to significantly slow the confirmation of legitimate transactions across the
bitcoin network. Such a delay, if sustained for extended periods of time, could
negatively impact the secondary market price of bitcoin. These or any other form
of attack on the bitcoin network could adversely affect an investment in a
Portfolio, and therefore the corresponding Fund.
There
is no central registry showing which individuals or entities own bitcoin or the
quantity of bitcoin that is owned by any particular person or entity. There are
no regulations in place that would prevent a large holder of bitcoin or a group
of holders from selling their bitcoin which could depress the price of bitcoin
or otherwise attempting to manipulate the price of bitcoin or the bitcoin
network. A significant portion of bitcoin is held by a small number of holders
sometimes referred to as “whales.” These holders have the ability to manipulate
the price of bitcoin. Events that reduce user confidence in bitcoin, the bitcoin
network and the fairness of bitcoin trading venues could have a negative impact
on the price of
bitcoin.
The realization of any of these risks could result in a decline in the
acceptance of bitcoin and consequently a reduction in the value of
bitcoin.
From
time to time, the developers suggest changes to the bitcoin software. If a
sufficient number of miners or validators elect not to adopt the changes, a new
digital asset, operating on the earlier version of the software, may be created.
This is often referred to as a “fork.” The creation of a “fork” or a substantial
giveaway of bitcoin (sometimes referred to as an “air drop”) may result in
significant and unexpected declines in the value of bitcoin. Network
contributors could propose amendments to the bitcoin network’s protocols and
software that, if accepted and authorized by the bitcoin network, could
adversely affect an investment in a Portfolio and the corresponding
Fund.
Bitcoin
blockchain’s protocol may contain flaws that can be exploited by attackers. The
occurrence of any of these events is likely to have a significant adverse impact
on the price and liquidity of bitcoin and therefore the value of an investment
of a Portfolio/Fund.
Bitcoin
was developed as an alternative payment system but has not yet achieved this
objective, which may adversely affect its value. The emergence of other public
blockchains that are similarly designed to serve as an alternative payment
system, such as those focused on privacy through the use of zero-knowledge
cryptography, may negatively impact on the demand for and value of bitcoin and
an investment in a Portfolio/Fund. The common impediments and/or disadvantages
to adopting the bitcoin blockchain as a payment network include, but are not
limited to, the slowness of transaction processing and finality, variability of
transaction fees, and volatility of bitcoin’s price.
The
development and adoption of other blockchains, such as the Ethereum blockchain,
may compete with bitcoin and result in a reduction in the use of bitcoin and the
Bitcoin blockchain. The sophisticated and multi-use nature of the Ethereum
blockchain and the fact that the absolute amount of ether is limited may result
in greater adoption of the Ethereum blockchain by users, which may negatively
affect the value of bitcoin and the Bitcoin blockchain.
Further
development and use of the bitcoin blockchain for its intended purpose are, and
may continue to be, substantially dependent on “Layer 2” solutions (i.e.,
separate blockchains that extends the bitcoin blockchain and inherits the
security guarantees of bitcoin in order to increase transaction throughput and
reduce transaction fees), which may not be implemented correctly which may
negatively impact the bitcoin blockchain and bitcoin.
The
bitcoin network’s functionality relies on the internet. A significant disruption
of internet connectivity affecting large numbers of users or geographic areas
could impede the functionality of the bitcoin network and adversely affect a
Portfolio/Fund. In addition, certain features of the bitcoin network, such as
decentralization, open source protocol, and reliance on peer-to-peer
connectivity, may increase the risk of fraud or cyber-attack by potentially
reducing the likelihood of a coordinated response.
Investors
may obtain additional information about the Grayscale Bitcoin Trust, including
financial statements by visiting Grayscale’s website at
https://grayscale.com/products/grayscale-bitcoin-trust/. Additional information
can also be found on the SEC’s website at
https://www.sec.gov/edgar/searchedgar/companysearch.html.
Blockchain
Technology Risk
Blockchain
technology is a relatively new and untested technology which operates as a
distributed ledger. The risks associated with blockchain technology may not
fully emerge until the technology is widely
used.
Blockchain systems could be vulnerable to fraud, particularly if a significant
minority of participants colluded to defraud the rest. Access to a given
blockchain requires an individualized key, which, if compromised, could result
in loss due to theft, destruction or inaccessibility. There is little regulation
of blockchain technology other than the intrinsic public nature of the
blockchain system. Any future regulatory developments could affect the viability
and expansion of the use of blockchain technology.
The
adoption of blockchain and the development of competing platforms or
technologies could affect its usage. There are currently a number of competing
blockchain platforms with competing intellectual property claims. The
uncertainty inherent in these competing technologies could cause companies to
use alternatives to blockchain. In addition, blockchain networks may undergo
technological developments or upgrades. Certain upgrade proposals to a
blockchain may not be accepted by all the participants in an ecosystem. If one
significant group adopts a proposed upgrade and another does not – or if groups
adopt different upgrades – this can result in a “fork” of the blockchain,
wherein two distinct sets of users and validators or users and miners run two
different versions of a protocol. If the versions are sufficiently different
such that the two versions of the protocol cannot simultaneously maintain and
update a shared record of the blockchain database, it is called a “hard fork.” A
hard fork can result in the creation of two competing blockchains, each with its
own native crypto assets.
Lastly,
technological developments may lead to technical or other flaws (including
undiscovered flaws) in the underlying blockchain technology, including in the
process by which transactions are recorded to a blockchain, or by which the
validity of a copy of such blockchain can be proven, or the development of new
or existing hardware or software tools or mechanisms that could negatively
impact the functionality of the blockchain systems, all of which could
negatively impact Portfolio/Fund shares.
Collateralized
Loan Obligations Leveraging Risk - Multi-Disciplinary Income Fund
CLOs
are typically leveraged, and such leverage will magnify the loss on CLO
investments, which may in turn magnify the loss experienced by the
Multi-Disciplinary Income Fund. The cumulative effect of the use of leverage
with respect to any investments in a market that moves adversely to such
investments could result in a substantial loss that would be greater than if the
Multi-Disciplinary Income Portfolio’s investments were not leveraged.
Collateralized
Loan Obligations Manager Risk - Multi-Disciplinary Income Fund
CLO
managers are responsible for selecting, managing, and replacing the underlying
collateral assets within a CLO. CLO managers may have limited operating
histories, may be subject to conflicts of interests, including
managing the assets of other clients or other investment vehicles, or receiving
fees that incentivize maximizing the yield, and indirectly the risk, of a CLO.
Adverse developments with respect to a CLO manager, such as personnel and
resource constraints, regulatory issues or other developments that may impact
the ability and/or performance of the CLO manager, may adversely impact the
performance of the CLO debt tranches in which the Multi-Disciplinary
Income Portfolio
invests.
Collateralized
Loan Obligations Risk - Multi-Disciplinary Income Fund
A
CLO
is a securitization vehicle collateralized by a pool of credit-related assets.
Generally, these assets are below investment grade and are subject to greater
credit risk, price volatility and risk of loss than investment grade securities.
CLO securities present risks similar to those of other types of credit
investments, including default (credit), interest rate and prepayment risks. The
extent of these risks depends largely on the type of securities used as
collateral and the tranche of the CLOs in which the
Multi-Disciplinary
Income Portfolio invests. In addition, CLOs are often governed by a complex
series of legal documents and contracts, which increases the risk of dispute
over the interpretation and enforceability of such documents relative to other
types of investments. There is also a risk that the trustee of a CLO does not
properly carry out its duties to the CLO, potentially resulting in loss to the
CLO.
Covenant
Lite Corporate Loans Risk - Multi-Disciplinary Income Fund
Certain
underlying corporate loans in which the Multi-Disciplinary Income Portfolio may
invest on a direct basis and/or indirectly through an investment in a CLO debt
tranche, may be “covenant lite”, which have few or no financial maintenance
covenants that would require a borrower to maintain. As a result, there may be
delays in enforcing interests in such covenant lite securities, which may result
in losses and adversely affect the Multi-Disciplinary Income Fund.
Credit/Default
Risk - Multi-Disciplinary Income Fund
The
Multi-Disciplinary Income Portfolio is subject to the risks associated with the
credit quality of CLO debt tranches and corporate loans. Credit quality measures
the likelihood that the obligor will be able to meet its debt service
obligations. Credit risk is the risk that an obligor will be unable to make
principal and interest payments when due, or default on its obligations. Most
CLO debt tranches and corporate loans which would be considered for investment
by the Multi-Disciplinary Income Portfolio, will have credit ratings issued from
NRSROs such as S&P Global, Fitch, and Moody’s. These NRSROs assign ratings
to the obligor by assessing the likelihood of issuer default.
Currency
Risk – All Funds except the Multi-Disciplinary Income Fund
Fluctuations
in the exchange rates between the U.S. dollar and foreign currencies may
negatively impact an investment. A decline in the value of a foreign currency
versus the U.S. dollar reduces the dollar value of securities denominated in
that currency. Exchange rate movements can be large and unpredictable and can
last for extended periods. Absent other events that could otherwise affect the
value of a foreign security (such as a change in the political climate or an
issuer’s credit quality), appreciation in value of a foreign currency generally
can be expected to increase the value of a foreign-currency denominated security
in terms of U.S. dollars. An increase in foreign interest rates or a decline in
the value of the foreign currency relative to the U.S. dollar generally can be
expected to depress the value of a foreign currency-denominated security.
Although a Portfolio may invest in securities denominated in foreign currencies,
its portfolio securities and other assets are valued in U.S. dollars. Currency
exchange rates may fluctuate significantly over short periods of time causing,
together with other factors, a Portfolio’s net asset value to fluctuate as well.
Currency exchange rates generally are determined by the forces of supply and
demand in the foreign exchange markets and the relative merits of investments in
different countries, actual or anticipated changes in interest rates and other
complex factors, as seen from an international perspective. Currency exchange
rates also may be affected unpredictably by the intervention or the failure to
intervene by U.S. or foreign governments or central banks, or by currency
controls or political developments in the United States or abroad. To the extent
that a Portfolio’s total assets, adjusted to reflect the Portfolio’s net
position after giving effect to currency transactions, are denominated in the
currencies of foreign countries, the Portfolio will be more susceptible to the
risk of adverse economic and political developments within those countries. The
Portfolios investing in foreign securities are all subject to the possible
imposition of exchange control regulations or freezes on convertibility of
currency. Currency risk may be particularly high to the extent that a Portfolio
invests in foreign currencies or engages in foreign currency transactions that
are economically tied to emerging markets countries. These currency transactions
may present market, credit, currency, liquidity, legal, political and other
risks different from, or greater than, the risks of investing in developed
foreign currencies or engaging in foreign currency transactions that are
economically tied to developed foreign countries.
Cybersecurity
Risk – All Funds.
With
the increased use of technologies such as the Internet and the dependence on
computer systems to perform business and operational functions, the Funds and
their service providers may be prone to operational and information security
risks resulting from cyber-attacks and/or technological malfunctions. In
general, cyber-attacks are deliberate, but unintentional events may have similar
effects. Cyber-attacks include, among others, stealing or corrupting data
maintained online or digitally, preventing legitimate users from accessing
information or services on a website, releasing confidential information without
authorization, and causing operational disruption. Cybersecurity incidents may
allow an unauthorized party to gain access to Portfolio assets or proprietary
information, or cause a Fund, the Investment Adviser and/or other service
providers (including custodians and financial intermediaries) to suffer data
breaches or data corruption. Additionally, cybersecurity failures or breaches of
the electronic systems of a Fund, the Investment Adviser or a Fund’s other
service providers, have the ability to cause disruptions and negatively impact
the fund’s business operations, including the ability to purchase and sell Fund
shares, potentially resulting in financial losses to the Fund and its
shareholders. For instance, cyber-attacks or technical malfunctions may
interfere with the processing of shareholder or other transactions, affect a
Fund’s ability to calculate its NAV, cause the release of private shareholder
information or confidential Fund information, impede trading, cause reputational
damage, and subject a Fund to regulatory fines, penalties or financial losses,
reimbursement or other compensation costs, and additional compliance costs.
Cyber-attacks or technical malfunctions may render records of Fund assets and
transactions, shareholder ownership of fund shares, and other data integral to
the functioning of a Fund inaccessible or inaccurate or incomplete. A Fund may
also incur substantial costs for cybersecurity risk management in order to
prevent cyber incidents in the future. A Fund and its respective shareholders
could be negatively impacted as a result.
Derivatives
Risk – All Funds
Each
Portfolio may invest in derivatives such as options. The successful use of these
investment practices depends on the Investment Adviser’s ability to forecast
stock price movements correctly. Should stock prices move unexpectedly, a
Portfolio may not achieve the anticipated benefits of the transactions, or may
realize losses, and thus be in a worse position than if such strategies had not
been used. Unlike many exchange-traded options, there are no daily price
fluctuation limits for certain options, and adverse market movements could
therefore continue for an unlimited extent over a period of time. In addition,
the correlation between movements in the prices of options and movements in the
prices of the securities hedged or used for cover will not be perfect and could
produce unanticipated losses.
A
Portfolio’s ability to dispose of its positions in options, depends on the
availability of liquid markets in such instruments. Markets in options with
respect to a number of types of securities are relatively new and still
developing. It is impossible to predict the amount of trading interest that may
exist in various types of options. If a secondary market does not exist for an
option purchased or written by a Portfolio, it might not be possible to effect a
closing transaction in the option (i.e.,
dispose of the option), with the result that (1) an option purchased by a
Portfolio would have to be exercised in order for the Portfolio to realize any
profit and (2) a Portfolio may not be able to sell portfolio securities covering
an option written by the Portfolio until the option expires or it delivers the
underlying security, upon exercise. Therefore, no assurance can be given that a
Portfolio will be able to utilize these instruments effectively. In addition,
the ability to engage in options transactions may be limited by tax
considerations and the use of certain hedging activities may adversely impact
the characterization of income to the Portfolio for U.S. federal income tax
purposes.
The
Paradigm Portfolio may enter into futures contracts in U.S. domestic markets or
on exchanges located outside of the United States. Foreign markets may offer
advantages such as trading opportunities or arbitrage possibilities not
available in the U.S. Foreign markets, however, may have greater risk potential
than domestic markets. For example, some foreign exchanges are principal
markets, so that no common clearing facility exists and that an investor may
look only to the broker or counter-party for the performance of the contract.
Unlike trading on domestic commodity exchanges, trading on foreign commodity
exchanges is not regulated by the Commodity Futures Trading Commission. The use
of derivatives is subject to operational and legal risks. Operational risks
generally refer to risks related to potential operational issues, including
documentation issues, settlement issues, system failures, inadequate controls,
and human error. Legal risks generally refer to risks of loss resulting from
insufficient documentation, insufficient capacity or authority of counterparty,
or legality or enforceability of a contract.
On
August 19, 2022, new SEC regulations governing the use of derivatives by
registered investment companies became effective. Rule 18f-4 imposes limits on
the amount of derivatives a fund can enter into, eliminates the asset
segregation framework previously used by funds to comply with section 18 of the
1940 Act, treats derivatives as senior securities so that a failure to comply
with the limits would result in a statutory violation, and requires certain
funds to establish and maintain a comprehensive derivatives risk management
program and appoint a derivatives risk manager. The Funds/Portfolios are
required to comply with Rule 18f-4 and have adopted procedures for investing in
derivatives and other transactions in compliance with Rule 18f-4.
Exchange-Traded
Funds (ETFs) – All Funds
ETFs
are registered investment companies whose shares are listed and traded on U.S.
stock exchanges or otherwise traded in the over-the-counter market. In general,
passively-managed ETFs seek to track a specified securities index or a basket of
securities that an “index provider,” such as S&P Global, selects as
representative of a market, market segment or industry sector. A
passively-managed ETF generally holds the same stocks or bonds as the index it
tracks or it may hold a representative sample of such securities. Thus, a
passively-managed ETF is designed so that its performance will correspond
closely with that of the index it tracks. Conversely, actively-managed ETFs seek
an investment objective by investing in a basket of securities based on the
investment strategy and discretion of the ETF’s adviser. A leveraged ETF will
engage in transactions and purchase instruments that give rise to forms of
leverage, including, among others, the use of reverse repurchase agreements and
other borrowings, the investment of collateral from loans of portfolio
securities, the use of when issued, delayed-delivery or forward commitment
transactions or short sales. To the extent a fund invests in ETFs that achieve
leveraged exposure to their underlying indexes through the use of derivative
instruments, the fund will indirectly be subject to leveraging risk. As a
shareholder in an ETF, a Portfolio will bear its pro rata portion of an ETF’s
expenses, including advisory fees, in addition to its own expenses. Certain ETFs
may be thinly traded and experience large spreads between the "ask" price quoted
by a seller and the "bid" price offered by a buyer. The existence of extreme
market volatility or potential lack of an active trading market for an ETF’s
shares could result in such shares trading at a significant premium or discount
to their NAV.
Fixed
Income Risk – Multi-Disciplinary Income Fund
Fixed
income securities are subject to credit risk and interest rate risk. Credit
risk, as described more fully herein, refers to the possibility that the issuer
of a debt security will be unable to make interest payments or repay principal
when it becomes due. Interest rate risk refers to fluctuations in the value of a
debt security resulting from changes in the general level of interest rates.
Prices of fixed income securities tend to move inversely with changes in
interest rates. Additionally, investments in fixed income securities are subject
to the following risks:
◦Prepayment
Risk.
CLO debt tranches and corporate loans are subject to prepayment risk. During
periods when credit spreads are contracting a callable CLO debt tranche or
corporate loan held by the Multi-Disciplinary Income Portfolio may be “called”
and repaid before its stated maturity, and the Multi-Disciplinary Income
Portfolio may have to reinvest the proceeds at a lower interest rate, resulting
in a decline in the Multi-Disciplinary Income Fund’s income.
CLOs
are also typically structured such that, after a specified time period
(i.e.,
the non-call period), the majority investor(s) in the equity tranche can call
(i.e.,
require the CLO issuer to redeem) the CLO debt tranches issued by the CLO in
full, plus accrued interest. The Multi-Disciplinary Income Portfolio may not be
able to accurately predict when or which of its CLO investments may be called,
resulting in the Multi-Disciplinary Income Portfolio having to reinvest the
proceeds in unfavorable market conditions, which in turn could cause a decline
in the Multi-Disciplinary Income Fund’s income.
◦Credit
Risk of Underlying CLO Collateral.
The ability of the underlying collateral assets held by the CLOs to generate
sufficient cash flow to meet the debt service requirements of the CLO debt
tranches on a full and timely basis when principal and/or interest payments are
due, may be adversely affected by payment defaults of certain collateral assets
held by the CLO.
◦Extension
Risk.
During periods when credit spreads are increasing, certain CLO debt tranches may
be paid off substantially more slowly than originally anticipated and the value
of those securities may fall sharply, resulting in a decline in the
Multi-Disciplinary Income Fund’s income and potentially in the value of its
investments.
◦Interest
Rate Risk: The
risk that when interest rates increase, fixed-income securities held by the
Multi-Disciplinary Income Portfolio may decline in value. Floating interest rate
securities may increase or decrease in value in response to changes in interest
rates, although generally to a lesser degree than fixed-income
securities.
◦Floating
Interest Rate Risk.
CLO tranches and corporate loans have floating interest rates, and therefore
their market price may be less sensitive to interest rate changes than
securities with fixed interest rates but may still decline in value if their
interest rates do not rise as much, or as quickly, as interest rates in general.
Conversely, floating rate securities will not generally increase in value if
interest rates decline. Since the Multi-Disciplinary Income Portfolio invests in
floating rate CLO debt tranches and corporate loans, a decline in interest rates
may result in a reduction of income and may adversely affect the value of the
Multi-Disciplinary Income Fund’s shares. The interest rate for a CLO tranche
resets quarterly and for corporate loans usually reset either monthly or
quarterly, by reference to a benchmark interest rate index. The impact of
interest rate changes on floating rate CLO investments and corporate loans is
typically mitigated by the periodic interest rate reset of the investments.
Securities with longer durations tend to be more sensitive to interest rate
changes, usually making them more volatile than securities with shorter
durations.
◦Income
Risk. The
Multi-Disciplinary Income Fund’s income may decline if interest rates fall. This
decline in income can occur because investments held by the Multi-Disciplinary
Income Portfolio will have floating or variable interest rates.
◦Privately
Issued Securities Risk. The
Multi-Disciplinary Income Portfolio may invest in privately issued securities,
including those that are normally purchased pursuant to Rule 144A or Regulation
S under the Securities Act of 1933. Privately issued securities typically may be
resold only to qualified institutional buyers, in a privately negotiated
transaction, to a limited number of purchasers, or in limited quantities after
they have been held for a specified period of time and
other
conditions are met for an exemption from registration. Because there may be
relatively few potential purchasers for such securities, especially under
adverse market or economic conditions or in the event of adverse changes in the
financial condition of the issuer, the Multi-Disciplinary Income Fund may find
it more difficult to sell such securities when it may be advisable to do so or
it may be able to sell such securities only at lesser prices than if such
securities were more widely held and traded. At times, it also may be more
difficult to determine the fair value of such securities for the purposes of
computing the Multi-Disciplinary Income Fund’s NAV due to the absence of an
active trading market. The determinations of the fair value of the
Multi-Disciplinary Income Portfolio investments may cause the Multi-Disciplinary
Income Fund’s NAV on a given date to understate or overstate, possibly
materially, the value that the Multi-Disciplinary Income Portfolio may
ultimately realize on one or more of its investments. There can also be no
assurance that a privately issued security previously deemed to be liquid when
purchased will continue to be liquid for as long as it is held by the
Multi-Disciplinary Income Portfolio, and its value may decline as a result.
Foreign
Securities – All Funds, except the Multi-Disciplinary Income Fund
Investing
in foreign securities can carry higher returns than those generally associated
with U.S. investments. However, foreign securities may be substantially riskier
than U.S. investments. The economies of foreign countries may differ from the
U.S. economy in such respects as growth of gross domestic product, rate of
inflation, currency depreciation, capital reinvestment, resource
self-sufficiency, and balance of payments position. Furthermore, the economies
of developing countries generally are heavily dependent on international trade
and, accordingly, have been, and may continue to be, adversely affected by trade
barriers, exchange controls, managed adjustments in relative currency values and
other protective measures imposed or negotiated by the countries with which they
trade. These economies also have been, and may continue to be, adversely
affected by economic conditions in the countries with which they trade. A
Portfolio may be required to obtain prior governmental approval for foreign
investments in some countries under certain circumstances. Governments may
require approval to invest in certain issuers or industries deemed sensitive to
national interests, and the extent of foreign investment in certain debt
securities and companies may be subject to limitation. Individual companies may
also limit foreign ownership to prevent, among other things, violation of
foreign investment limitations.
Some
foreign investments may risk being subject to repatriation controls that could
render such securities illiquid. Other countries might undergo nationalization,
expropriation, political changes, governmental regulation, social instability or
diplomatic developments (including war) that could adversely affect the
economies of such countries or the value of the investments in those countries.
Certain foreign markets may rely heavily on particular industries or foreign
capital and are more vulnerable to diplomatic developments, the imposition of
economic sanctions against a particular country or countries, organizations,
entities and/or individuals, changes in international trading patterns, trade
barriers, and other protectionist or retaliatory measures. International trade
barriers or economic sanctions against foreign countries, organizations,
entities and/or individuals may adversely affect a Portfolio's holdings or
exposures. Additional risks include more or less government regulation, less
public information, currency fluctuations, political and economic instability,
differences in financial reporting standards and less stringent regulation of
securities markets.
Futures
Risks—All Funds, except the Multi-Disciplinary Income Fund
There
are risks associated with these activities, including the following: (1) the
success of a hedging strategy may depend on an ability to predict movements in
the prices of individual securities, fluctuations
in
markets and movements in interest rates; (2) there may be an imperfect or no
correlation between the changes in market value of the securities held by a
Portfolio and the prices of futures; (3) there may not be a liquid secondary
market for a futures contract; (4) trading restrictions or limitations may be
imposed by an exchange; and (5) government regulations may restrict trading in
futures contracts.
Risks
of Investing in Investment Grade Debt Securities and Below Investment Grade Debt
Securities—All Funds
Investments
in debt securities pose different risks than investments in equity securities.
The value of fixed income securities generally will fall if interest rates rise
and generally will rise if interest rates fall. The value of these securities
may also fall as a result of other factors such as the performance of the
issuer, the market perception of the issuer or general economic conditions.
These investments also involve a risk that the issuer may not be able to meet
its principal and interest payment obligations. Fixed-income securities having
longer maturities involve greater risk of fluctuations in value. The longer the
duration of a bond, the more a change in interest rates affects the bond’s
price. Short-term and long-term interest rates may not move the same amount and
may not move in the same direction. The risks associated with changes in
interest rates may have unpredictable effects on the markets and the Portfolios'
investments. A general rise in interest rates may cause investors to move out of
fixed income securities on a large scale, which could adversely affect the price
and liquidity of fixed income securities. Fluctuations in interest rates may
also affect the liquidity of fixed income securities and instruments held by a
Portfolio. Other types of securities also may be adversely affected from changes
in interest rates. During periods of declining interest rates, a bond issuer may
“call,” or repay, its high yielding bonds before their maturity dates. A
Portfolio would then be forced to invest the unanticipated proceeds at lower
interest rates, resulting in a decline in its income.
Investments
in debt securities rated below investment grade, i.e.,
junk bonds, and unrated securities of comparable quality are subject to the
increased risk of an issuer’s inability to meet principal and interest payment
obligations. These securities may be subject to greater price volatility due to
such factors as specific corporate or municipal developments, interest rate
sensitivity, negative perceptions of the junk bond markets generally and less
secondary market liquidity.
IPO
Risk—Small Cap Fund
IPO
share prices can be volatile and fluctuate considerably due to factors such as
the absence of a prior public market, unseasoned trading, a limited number of
shares available for trading and limited operating history and/or information
about the issuer. The purchase of IPO shares may involve high transaction costs.
IPO shares are subject to market risk and liquidity risk. In addition, the
limited number of shares available for trading in some IPOs may also make it
more difficult for the Fund to buy or sell significant amounts of those shares
without an unfavorable impact on the prevailing prices. In addition, some
companies initially offering their shares publicly are involved in relatively
new industries or lines of business, which may not be widely understood by
investors. Some of the companies involved in new industries may be regarded as
developmental stage companies, without revenues or operating income or the
near-term prospects of them. Many IPOs are by small- or micro-cap companies that
are undercapitalized.
Internet
Industry Concentration Risks—The Internet Fund
The
value of the Internet Portfolio’s shares will be susceptible to factors
affecting the Internet, such as heightened regulatory scrutiny and impending
changes in government policies, which may have a material effect on the products
and services of this industry. Furthermore, securities of companies in this
industry tend to be more volatile than securities of companies in other
industries. Competitive pressures and changing demand may have a significant
effect on the financial condition of Internet companies.
These
companies spend heavily on research and development and are especially sensitive
to the risk of product obsolescence. The occurrence of any of these factors,
individually or collectively, may adversely affect the value of the Internet
Portfolio’s shares and your investment in the Internet Fund.
Leveraging
Risk – All Funds
A
Portfolio’s use of derivative instruments will have the economic effect of
financial leverage. The use of leverage by the Investment Adviser may increase
the volatility of a Portfolio. These leveraged instruments may result in losses
to a Portfolio or may adversely affect a Portfolio’s NAV or total return,
because instruments that contain leverage are more sensitive to changes in
interest rates. A Portfolio may also use borrowed funds to create leverage.
Although the use of leverage by a Portfolio may create an opportunity for
increased return, it also results in additional risks and can magnify the effect
of any losses. If the income and gains earned on the securities and instruments
purchased with leverage proceeds are greater than the cost of the leverage, a
Portfolio’s return will be greater than if leverage had not been used.
Conversely, if the income and gains from the securities and instruments
purchased with such proceeds does not cover the cost of leverage, a Portfolio’s
return will be less than if leverage had not been used. In the event of a
sudden, precipitous drop in value of a Portfolio’s assets, the Portfolio may not
be able to liquidate assets quickly enough to pay off its borrowing. Using this
investment technique may adversely affect a Portfolio’s NAV or total return.
LIBOR
Discontinuance or Unavailability Risk - Multi-Disciplinary Income
Fund.
The
CLO debt tranches and corporate loans in which the Multi-Disciplinary Income
Portfolio invests may bear interest based upon LIBOR (London Interbank Offered
Rate), which is intended to represent the rate at which contributing banks may
obtain short-term borrowings from each other in the London interbank market. As
of June 30, 2023, almost all settings of LIBOR have ceased to be published,
except that certain widely used U.S. dollar LIBORs will continue to be published
on a temporary, synthetic and non-representative basis through at least
September 30, 2024. In some instances, regulators have restricted new use of
LIBORs prior to the date when synthetic LIBORs will cease to be published. SOFR,
which has been used increasingly on a voluntary basis in new instruments and
transactions, is a broad measure of the cost of borrowing cash overnight
collateralized by U.S. Treasury securities in the repurchase agreement market.
On December 16, 2022, the Federal Reserve Board adopted regulations implementing
the Adjustable Interest Rate Act, which provides a statutory fallback mechanism
to replace LIBOR, by identifying benchmark rates based on SOFR that will replace
LIBOR in certain financial contracts after June 30, 2023. These regulations
apply only to contracts governed by U.S. law, among other limitations. The
regulations include provisions that (i) provide a safe harbor for selection or
use of a replacement benchmark rate selected by the Federal Reserve Board; (ii)
clarify who may choose the replacement benchmark rate selected by the Federal
Reserve Board; and (iii) ensure that contracts adopting a replacement benchmark
rate selected by the Federal Reserve Board will not be interrupted or terminated
following the replacement of LIBOR. Uncertainty related to the liquidity impact
of the change in rates, and how to appropriately adjust these rates at the time
of transition, poses risks for the Multi-Disciplinary Income Portfolio, and
accordingly, the Multi-Disciplinary Income Fund. The transition away from LIBOR
could have a significant impact on the financial markets in general and may also
present heightened risk to market participants, including public companies,
investment advisers, investment companies, and broker-dealers. The risks
associated with this discontinuation and transition will be exacerbated if the
work necessary to effect an orderly transition to an alternative reference rate
is not completed in a timely manner. For example, current information technology
systems may be unable to accommodate new instruments and rates with features
that differ from LIBOR. Accordingly, it is difficult to predict the full impact
of the transition away from LIBOR on the Multi-Disciplinary Income Fund until
new reference rates and fallbacks for both legacy and new instruments and
contracts are commercially accepted and market practices become
settled.
Liquidity
Risk – All Funds.
Liquidity
risk refers to the possibility that a Portfolio may not be able to sell or buy a
security or close out an investment contract at a favorable price or time.
Consequently, a Portfolio may have to accept a lesser price to sell a security,
sell other securities to raise cash, or give up an investment opportunity, any
of which could have a negative effect on a Fund’s performance. Infrequent
trading of securities also may lead to an increase in their price volatility.
In
addition, during periods of reduced market liquidity or in the absence of
readily available market quotations for particular investments in a Fund’s
portfolio, the ability of a Fund to assign an accurate daily value to these
investments may be difficult and the Investment Adviser may be required to fair
value the investments. Fair value determinations are inherently subjective and
reflect good faith judgments based on available information. Accordingly, there
can be no assurance that the determination of a security’s fair value in
accordance with a Fund’s valuation procedures will in fact approximate the price
at which such Fund could sell that security at that time (i.e.,
the sale price could differ, sometimes significantly, from the Portfolio’s last
valuation for the security). Investors who purchase or redeem shares of a Fund
on days when such Fund is holding fair valued securities may receive fewer or
more shares or lower or higher redemption proceeds than they would have received
if the Fund had not fair valued the securities or had used a different valuation
methodology. These risks may be magnified if a Portfolio holds a significant
percentage of fair valued or otherwise difficult to value securities, such
Portfolio may be particularly susceptible to the risks associated with
valuation.
Liquidity
risk also refers to the risk of unusually high redemption requests, redemption
requests by certain large shareholders such as institutional investors or asset
allocators, or other unusual market conditions that may make it difficult for a
Fund to sell investments within the allowable time period to meet redemptions.
Meeting such redemption requests could require a Fund to sell securities at
reduced prices or under unfavorable conditions or access additional means of
liquidity, which would reduce the value of such Fund.
Management
Risk – All Funds.
Each
Fund is actively managed and may not meet its investment objective based on the
Investment Adviser’s success or failure to implement investment strategies for
the Portfolio. The Investment Adviser’s evaluations and assumptions regarding
issuers, securities, and other factors may not successfully achieve a Fund’s
investment objective given actual market conditions.
Other
Investment Companies – All Funds
The
Portfolios may invest in securities issued by other investment companies to the
extent permitted by the 1940 Act. Under the 1940 Act, a Portfolio’s investments
in such securities currently are limited to, subject to certain exceptions, (i)
3% of the total voting stock of any one investment company, (ii) 5% of the
Portfolio’s total assets with respect to any one investment company and (iii)
10% of the Portfolio’s total assets with respect to investment companies in the
aggregate. Because other investment companies employ an investment adviser, such
investments by each Portfolio may cause shareholders to bear duplicate fees.
Among
other things, each Portfolio may invest in money market mutual funds for cash
management purposes by “sweeping” excess cash balances into such funds until the
cash is invested or otherwise utilized. A Portfolio will indirectly bear its
proportionate share of any management fees and other expenses paid by investment
companies in which it invests in addition to the advisory and administration
fees paid by the Portfolio.
In
October 2020, the SEC adopted revisions to the rules permitting funds to invest
in other investment companies to streamline and enhance the regulatory framework
applicable to fund of funds arrangements. While Rule 12d1-4 permits more types
of fund-of-fund arrangements without reliance on an exemptive order or no-action
letters, it imposes new conditions, including limits on control and voting of
acquired funds’ shares, evaluations and findings by investment advisers, fund
investment agreements, and limits on most three-tier fund structures. Rule
12d1-4 went into effect on January 19, 2021. The rescission of the applicable
exemptive orders and the withdrawal of the applicable no-action letters was
effective on January 19, 2022.
Risks
of Investing in Mutual Funds—All Funds
All
mutual funds carry risks that may cause you to lose money on your investment in
one or more of the Funds. In general, the risks associated with the use of the
Master/Feeder Fund Structure and the risks associated with your investment in a
Fund are substantially identical to the risks associated with a Fund’s
investment in a Portfolio. The following describes the primary risks to each
Fund that invests in its corresponding Portfolio due to each Portfolio’s
specific investment objective and strategies. As all investment securities are
subject to inherent market risks and fluctuations in value due to earnings,
economic and political conditions and other factors, no Fund or its
corresponding Portfolio can give any assurance that its investment objective
will be achieved.
Market
Risks—All Funds
The
NAV of each Portfolio will fluctuate based on changes in the value of its
underlying portfolio. The stock market is generally susceptible to volatile
fluctuations in market price. Market prices of securities in which each
Portfolio invests may be adversely affected by an issuer’s having experienced
losses or lack of earnings, or by the issuer’s failure to meet the market’s
expectations with respect to new products or services, or even by factors wholly
unrelated to the value or condition of the issuer. The value of the securities
held by each Portfolio is also subject to the risk that a specific segment of
the stock market may not perform as well as the overall market. Under any of
these circumstances, the value of each Portfolio’s shares and total return will
fluctuate, and your investment in the corresponding Fund may be worth more or
less than your original cost when you redeem your shares.
In
early 2020, an outbreak of a novel strain of coronavirus (COVID-19) emerged
globally. The outbreak of COVID-19 and its variants resulted in closing
international borders, enhanced health screenings, healthcare service
preparation and delivery, quarantines, cancellations and disruptions to supply
chains and customer activity, as well as general public concern and uncertainty.
This outbreak negatively affected the worldwide economy, as well as the
economies of individual countries, the financial health of individual companies
and the market in general in significant and unforeseen ways. On May 5, 2023,
the World Health Organization declared the end of the global emergency status
for COVID-19. The United States subsequently ended the federal COVID-19 public
health emergency declaration effective May 11, 2023. Although vaccines for
COVID-19 are widely available, it is unknown how long certain circumstances
related to the pandemic will persist, whether they will reoccur in the future,
and what additional implications may follow from the pandemic. The impact of
these events and other epidemics or pandemics in the future could adversely
affect Portfolio, and therefore, Fund performance.
In
March 2023, a number of banks experienced financial difficulties and, in some
cases, failures. There can be no certainty that the actions taken by regulators
to limit the effect of those financial difficulties and failures on other banks
or other financial institutions or on the economy generally will be successful.
It is possible that more banks or other financial institutions will experience
financial difficulties or fail, which may affect adversely other financial
institutions and economies.
Recently,
various countries have seen significant internal conflicts and in some cases,
civil wars may have had an adverse impact on the securities markets of the
countries concerned. In addition, the occurrence of new disturbances due to acts
of war or terrorism or other political developments cannot be excluded.
Nationalization, expropriation or confiscatory taxation, currency blockage,
political changes, government regulation, political, regulatory or social
instability or uncertainty or diplomatic developments, including the imposition
of sanctions or other similar measures, could adversely affect a Portfolio's
investments. Recent examples of the above include conflict, loss of life and
disaster connected to ongoing armed conflict between Russia and Ukraine in
Europe and Hamas and Israel in the Middle East. The extent, duration and impact
of these conflicts, related sanctions and retaliatory actions are difficult to
ascertain, but could be significant and have severe adverse effects on the
region, including significant adverse effects on the regional or global
economies and the markets for certain securities and commodities. These impacts
could negatively affect a Portfolio's investments in securities and instruments
that are economically tied to the applicable region, and include (but are not
limited to) declines in value and reductions in liquidity. In addition, to the
extent new sanctions are imposed or previously relaxed sanctions are reimposed
(including with respect to countries undergoing transformation), complying with
such restrictions may prevent the Portfolios from pursuing certain investments,
cause delays or other impediments with respect to consummating such investments
or divestments, require divestment or freezing of investments on unfavorable
terms, render divestment of underperforming investments impracticable,
negatively impact the Portfolios' ability to achieve their investment
objectives, prevent the Portfolios from receiving payments otherwise due,
increase diligence and other similar costs to the Portfolios, render valuation
of affected investments challenging, or require the Portfolios to consummate an
investment on terms that are less advantageous than would be the case absent
such restrictions. Any of these outcomes could adversely affect the Portfolios'
performance, and thus the Funds' performance.
Non-Diversification
Risks—All Funds except the Global Fund and the Multi-Disciplinary Income Fund
Each
Portfolio, except the Global Portfolio and the Multi-Disciplinary Income
Portfolio, and each Fund, except the Global Fund and the Multi-Disciplinary
Income Fund, is a non-diversified fund and therefore may be more susceptible to
adverse financial, economic or other developments affecting any single issuer,
and more susceptible to greater losses because of these developments. In certain
instances, the non-diversified funds may hold relatively substantial portions of
their assets in the securities of a single issuer.
Petroleum
and Gas Sector Risk
–
All Funds except the Multi-Disciplinary Income Fund
The
profitability of companies in the oil and gas industry is related to worldwide
energy prices, exploration costs and production spending. Companies in the oil
and gas industry may be at risk for environmental damage claims and other types
of litigation. Companies in the oil and gas industry may be adversely affected
by: natural disasters or other catastrophes; changes in exchange rates or
interest rates; prices for competitive energy services, economic conditions, tax
treatment, or government regulation; government intervention; negative public
perception; or unfavorable events in the regions where companies operate
(e.g.,
expropriation, nationalization, confiscation of assets and property, imposition
of restrictions on foreign investments or repatriation of capital, military
coups, social or political unrest, violence or labor unrest). Companies in the
oil and gas industry may have significant capital investments in, or engage in
transactions involving, emerging market countries, which may heighten these
risks.
Portfolio
Borrowing Risks—All Funds
Each
Portfolio may leverage its assets, subject to the provisions of the 1940 Act, to
fund investment activities or to achieve higher returns. Each Portfolio may
borrow money from banks for temporary or emergency purposes in order to meet
redemption requests. To reduce its indebtedness, a Portfolio may have to sell a
portion of its investments at a time when it may be disadvantageous to do so. In
addition,
interest
paid by a Portfolio on borrowed funds would decrease the net earnings of both
that Portfolio and your investment in a corresponding Fund.
Portfolio
Turnover Risks—All Funds
Under
certain circumstances a Portfolio may take advantage of short-term trading
opportunities without regard to the length of time its securities have been
held. This strategy often calls for frequent trading of a Portfolio’s securities
in order to take advantage of anticipated changes in market conditions. Frequent
trading by the Portfolio could increase the rate of its portfolio turnover,
which would involve correspondingly greater expenses. Such expenses may include
brokerage commissions or dealer mark-ups/mark-downs, as well as other
transaction costs on the sale of securities and reinvestments in other
securities. Such sales also may result in adverse tax consequences to
shareholders. If a Portfolio realizes capital gains when it sells its portfolio
investments, the corresponding Fund will realize the capital gains on a flow
through basis and will make taxable distributions to shareholders to the extent
of the net amount of such capital gains. For more information see the heading
“Taxes.” The trading costs and tax effects associated with such portfolio
turnover may adversely affect a Portfolio’s performance under these
circumstances, and large movements of assets into and out of a Portfolio may
negatively impact such Portfolio’s ability to achieve its investment objective
or maintain its current level of operating expenses.
Sector
Concentration Risk
– All
Funds, except the Multi-Disciplinary Income Fund
Although
the Portfolios will not concentrate their investments in any industries, the
Portfolios may, at certain times, have concentrations in one or more sectors
which may cause the Portfolios to be more sensitive to economic changes or
events occurring in those sectors. As of December 31, 2023, the Internet
Portfolio, Global Portfolio, Paradigm Portfolio, Small Cap Portfolio and Market
Opportunities Portfolio had 17.5%, 28.47%, 61.4%, 49.3% and 47.5% invested in
the Mining, Quarrying, and Oil and Gas Extraction sector, respectively.
Additionally, as of December 31, 2023, the Internet Portfolio and the Market
Opportunities Portfolio had 45.3% and 26.0% invested in the Finance and
Insurance sector, respectively.
Securities
Lending Risks—All Funds, except the Multi-Disciplinary Income Fund
Each
Portfolio (other than the Multi-Disciplinary Income Portfolio) may lend its
portfolio securities to broker-dealers by entering directly into lending
arrangements with such broker-dealers or indirectly through repurchase
agreements, amounting to no more than 33 1/3% of the total assets of each
Portfolio (including any collateral posted) or 50% of the total assets of each
Portfolio (excluding any collateral posted). Cash collateral may be invested by
a Portfolio in short-term investments, including repurchase agreements and money
market funds that meet the requirements of Rule 2a-7 of the 1940 Act. Repurchase
transactions will be fully collateralized at all times with cash and/or
short-term debt obligations. These transactions involve some risk to a Portfolio
if the other party should default on its obligation and the Portfolio is delayed
or prevented from recovering the collateral. In the event that the original
seller defaults on its obligation to repurchase, a Portfolio will seek to sell
the collateral, which could involve costs or delays. To the extent proceeds from
the sale of collateral are less than the repurchase price, each Portfolio would
suffer a loss if forced to sell such collateral in this manner. In addition,
invested collateral will be subject to market depreciation or appreciation, and
a Portfolio will be responsible for any loss that might result from its
investment of the collateral.
Regulations
that took effect in 2019 require certain bank-regulated counterparties and
certain of their affiliates to include in certain financial contracts, including
many securities lending agreements, terms that delay or restrict the rights of
counterparties, such as a Fund, to terminate such agreements, foreclose upon
collateral, exercise other default rights or restrict transfers of credit
support in the event that the counterparty and/or its affiliates are subject to
certain types of resolution or insolvency proceedings. It is
possible
that these new requirements, as well as potential additional government
regulation and other developments in the market, could adversely affect a
Portfolio’s ability to terminate existing securities lending agreements or to
realize amounts to be received under such agreements.
Single
Stock Concentration Risk—All Funds, except the Multi-Disciplinary Income
Fund
A
Portfolio may hold a large concentration of its net assets in a single security
or issuer. Holding a large concentration in a single security or issuer may
expose the Portfolio to the market volatility of that specific security or
issuer if the security or issuer performs worse than the market as a whole,
which could adversely affect the Fund’s performance. As of March 31, 2024, the
Internet Portfolio, Global Portfolio, Paradigm Portfolio, the Small Cap
Opportunities Portfolio and the Market Opportunities Portfolio each held a large
concentration of its net assets in the Land Corporation. Because a large portion
of the Land Corporation’s revenue is derived from oil and gas royalties, the
performance of the Funds could be adversely affected if the underlying markets
for oil or gas were to decline, thereby having a more significant impact on the
Funds given the concentration in this holding.
Risks
of Investment in Small and Medium-Size Companies—All Funds except the
Multi-Disciplinary Income Fund
Each
Portfolio (other than the Multi-Disciplinary Income Portfolio) may invest in
small or medium-size companies. Accordingly, a Portfolio may be subject to the
additional risks associated with investment in companies with small or
medium-size capital structures (generally a market capitalization of $5 billion
or less). The market prices of the securities of such companies tend to be more
volatile than those of larger companies. Further, these securities tend to trade
at a lower volume than those of larger, more established companies. If a
Portfolio is heavily invested in these securities and the value of these
securities suddenly declines, the NAV of that Portfolio and your investment in a
corresponding Fund will be more susceptible to significant losses.
Subsidiary
Risk—All Funds, except the Multi-Disciplinary Income Fund
Each
Portfolio will make investments through a wholly-owned Subsidiary organized
under the laws of Delaware and/or the Cayman Islands. By investing in a
Subsidiary, the Portfolio is indirectly exposed to the risks associated with the
Subsidiary’s investments. The investments held by a Subsidiary are generally
similar to those that are permitted to be held by the Portfolio and are subject
to the same risks that apply to similar investments if held directly by the
Portfolio. These risks are described elsewhere in this Prospectus. There can be
no assurance that the investment objective of a Subsidiary will be achieved.
Each
Subsidiary is not registered under the 1940 Act, and, unless otherwise noted in
this Prospectus, is not subject to all the investor protections of the 1940 Act.
However, each Portfolio wholly-owns and controls its Subsidiaries, making it
unlikely that a Subsidiary will take action contrary to the interests of a Fund
and its shareholders. The Board has oversight responsibility for the investment
activities of each Portfolio, including its investment in each Subsidiary, and
each Portfolio’s role as sole shareholder of its Subsidiaries. Each Portfolio
and its corresponding Subsidiaries will be subject to the same investment
restrictions and limitations on a consolidated basis, and to the extent
applicable to the investment activities of a Subsidiary, each Subsidiary will
follow the same compliance policies and procedures as its Portfolio.
Changes
in the laws of Delaware, the United States and/or the Cayman Islands could
result in the inability of a Portfolio and/or its Subsidiaries to operate as
described in this Prospectus and could adversely affect a Fund. For example, the
Cayman Islands does not currently impose any income, corporate or capital gains
tax or withholding tax on the Cayman Subsidiaries. If Cayman Islands law changes
such that the
Cayman
Subsidiaries must pay Cayman Islands taxes, Fund shareholders would likely
suffer decreased investment returns.
Tax
Risk—All Funds, except the Multi-Disciplinary Income Fund
To
qualify as a RIC, the Funds must, among other things, derive at least 90% of
their gross income for each taxable year from sources treated as “qualifying
income” under Subchapter M. Although qualifying income does not include income
derived directly from commodities – the IRS has issued guidance that bitcoin is
to be treated for federal income tax purposes as “property,” which thus could be
considered a commodity, and the Portfolios, therefore will restrict their gross
income from direct investments therein (including shares of the Grayscale
Bitcoin Trust) to a maximum of 10% of its gross income for each taxable year —
the Portfolios’ investment in the Subsidiaries is expected to provide the Funds
with indirect exposure to the Grayscale Bitcoin Trust within the limitations of
the federal tax requirements of Subchapter M.
The
investment of up to 25% of a fund’s assets in a foreign subsidiary such as a
Cayman Subsidiary is a structure that has been used by a number of RICs as a way
of indirectly making commodities-related investments that would not generate
qualifying income if they were made directly by the RIC or directly by an entity
classified as a partnership for federal income tax purposes in which the RIC
invests. Section 851(b) of the Internal Revenue Code provides that income
earned by a controlled foreign corporation (a “CFC”), such as a Cayman
Subsidiary, will be treated as qualifying income for a RIC provided that CFC
distributes those earnings out to the RIC each year. The IRS has issued
regulations that provide that where distributions are received from a CFC,
amounts included in gross income pursuant to subpart F income rules are
considered as dividends and therefore qualifying income. In addition, these
regulations provide that subpart F income that is included in a Fund's gross
income by virtue of its investment in the Subsidiary is qualifying income to the
extent derived with respect to a Fund's business of investing stock, securities
or currencies (even if not distributed currently).
If,
however, the IRS were to determine that income derived from a Portfolio’s
investment in its Cayman or Delaware Subsidiary does not constitute qualifying
income and if such positions were upheld by a court, or if future legislation or
Treasury regulations were to adversely affect the tax treatment of such
investments, that Fund might cease to qualify as a RIC and could be required to
reduce its exposure to such investments. In a Senate subcommittee hearing on the
subject of RIC commodities-related investments in 2012, Senator Levin, the
subcommittee chairman, expressed the view that a wholly-owned foreign subsidiary
such as a Cayman Subsidiary, which is used by a RIC to make investments or
otherwise to engage in transactions that the RIC could not accomplish directly
under the applicable tax rules, should be disregarded as a separate entity for
federal income tax purposes. Senator Levin’s view was not endorsed by the IRS
Commissioner and the Treasury Acting Assistant Secretary for Tax Policy in their
hearing testimony and their post-hearing responses to supplemental questions
from Senator Levin. If the IRS were ultimately to adopt such a view, however,
with respect to the Cayman or Delaware Subsidiary, and if that position were to
be sustained by the courts, a Fund might fail to meet the 90% qualifying income
test and therefore might not qualify as a RIC. In that event, that Fund’s
taxable income would be subject to tax at the Fund level at regular corporate
tax rates (without reduction for distributions to shareholders) and to a further
tax at the shareholder level when such income is distributed. In such an event,
in order to re-qualify for taxation as a RIC, the Fund may be required to
recognize unrealized gains, pay substantial taxes and interest and make certain
distributions.
Valuation
Risk—All Funds
The
sales price a Portfolio could receive for any particular portfolio investment
may differ from a Portfolio’s valuation of the investment, particularly for
securities or other investments, such as Bitcoin,
that
trade in thin or volatile markets or that are valued using a fair value
methodology. Valuation may be more difficult in times of market turmoil since
many investors and market makers may be reluctant to purchase complex
instruments or quote prices for them. Fair valuation of a Portfolio's
investments involves subjective judgment. A Portfolio’s ability to value its
investments may be impacted by technological issues and/or errors by pricing
services or other third party service providers. Shares of Grayscale Bitcoin
Trust are intended to reflect the price of bitcoin assets, less fees and
expenses, and shares of the Grayscale Bitcoin Trust have historically traded,
and may continue to trade, at a significant discount or premium to net asset
value. As such, the price of Grayscale Bitcoin Trust may go down even if the
price of the underlying asset, bitcoin, remains unchanged. Additionally, shares
that trade at a premium mean that an investor who purchases $1 of a portfolio
will actually own less than $1 in assets.
Volatility
Risk—All Funds
A
Portfolio may have investments, including but not limited to Bitcoin, that
appreciate or depreciate significantly in value over short periods of time. This
may cause a Portfolio’s net asset value per share to experience significant
increases or declines in value over short periods of time.
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Portfolio
Holdings Information |
A
description of the Portfolios’ policies and procedures with respect to the
disclosure of their portfolio securities is available in the Funds’ SAI. Each
Portfolio files its portfolio holdings with the SEC and the holdings are
publicly available twice each fiscal year on Form N-CSR (with respect to each
annual and semi-annual period) and twice each fiscal year on Form N-PORT (with
respect to the first and third quarters of the Portfolios' fiscal year). The
annual and semi-annual reports are available by contacting Kinetics Mutual
Funds, Inc., c/o U.S. Bank Global Fund Services, P.O. Box 701, Milwaukee,
Wisconsin 53201-0701 or calling 1-800-930-3828. In addition, the Company may
publish on its webpage (www.kineticsfunds.com)
month-end (a) top twenty portfolio holdings of each Portfolio and the percentage
that each holding represents of the Portfolio’s net assets, (b) top five
performing and bottom five performing portfolio holdings of each Portfolio, and
(c) for Portfolios that primarily invest in derivatives, cash and fixed income
instruments, the top ten (10) derivative and top ten (10) fixed income holdings,
along with their respective percentage of net assets in each Portfolio, in all
cases no earlier than twenty calendar days after the end of each calendar
quarter. This information will be available on the website until the date on
which a Fund files its next quarterly portfolio holdings report on
Form N‑CSR or Part F of Form N‑PORT with the SEC or until the next
month in which portfolio holdings are posted in accordance with the above
policy.
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Management
of the Funds and the Portfolios |
Investment
Adviser
Each
Portfolio’s investment adviser is Horizon Kinetics Asset Management LLC
(“Kinetics” or the “Investment Adviser”), 470 Park Avenue South New York, New
York 10016. The Investment Adviser provides investment advisory services to a
family of seven mutual funds with discretionary management authority over
approximately $6.98 billion in assets as of March 31, 2024. The Investment
Adviser is a wholly-owned subsidiary of Horizon Kinetics LLC.
On
April 24, 2019, Kinetics Asset Management LLC (“KAM”), the Portfolios’ former
investment adviser, reorganized into Horizon Asset Management LLC (“HAM”),
following which HAM was renamed Horizon Kinetics Asset Management LLC. Both KAM
and HAM were wholly-owned subsidiaries of Horizon Kinetics LLC.
As
part of the reorganization, the Portfolios’ investment advisory agreement was
transferred from KAM to the Investment Adviser, and the Investment Adviser
replaced KAM as the Portfolios’ investment adviser. The reorganization resulted
in no other change to the terms of the investment advisory agreement, including
the advisory fee rates. Further, the portfolio managers, all of whom are now
employees of the Investment Adviser, have not changed as a result of the
reorganization. KAM was advised by legal counsel that the reorganization did not
result in an “assignment” of the investment advisory agreement (as such term is
defined in the 1940 Act).
The
Investment Adviser conducts investment research and supervision for each
Portfolio and is responsible for the purchase and sale of securities for each
Portfolio. Except with respect to the Multi-Disciplinary Income Portfolio, the
Investment Adviser is entitled to receive an annual fee from each Portfolio for
its services of 1.25% of each Portfolio’s average daily net assets. Effective as
of April 30, 2023, the Investment Adviser agreed to reduce the management fee
for the Multi-Disciplinary Income Portfolio from 1.25% to 1.00%. Additionally,
effective as of April 30, 2023, the Investment Adviser has agreed to waive 0.75%
of the 1.00% management fee for the Multi-Disciplinary Income Portfolio through
April 30, 2025. As a result of fee waivers for certain Funds, the advisory fees
paid to the Investment Adviser for the fiscal year ended December 31, 2023,
were as follows:
|
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| Advisory
Fees
(as a percentage of average net assets) |
| Internet
Fund |
1.25% |
| Global
Fund |
1.25% |
| Paradigm
Fund |
1.25% |
| Small
Cap Opportunities Fund |
1.25% |
| Market
Opportunities Fund |
1.25% |
| Multi-Disciplinary
Income Fund |
1.10% |
A
discussion regarding the basis of the Kinetics Portfolios Trust’s (the “Trust”)
Board of Trustees’ approval of the investment advisory agreement for each
Portfolio is available in the Company’s semi-annual report to shareholders for
the period ended June 30, 2023.
Kinetics,
as the Investment Adviser to each Portfolio, is engaged in a broad range of
portfolio management, portfolio advisory and other business activities.
Kinetics’ services are not exclusive to the Portfolios and nothing prevents it,
or any affiliates, from providing similar services to other investment funds and
other clients (whether or not their investment objectives, strategies, or
criteria are similar to those of a Portfolio) or from engaging in other
activities.
Members
of the Investment Team
Murray
Stahl is the Chief Investment Officer for Horizon Kinetics LLC, the parent
company to the Investment Adviser and Horizon, and generally oversees the
management of each Portfolio’s investment team. The following persons are
members of an investment team: Peter B. Doyle, Murray Stahl, Steven Bregman,
Steven Tuen, James Davolos, Matthew Houk, Eric Sites and Darryl Monasebian. Each
person’s role varies from Portfolio to Portfolio as indicated in the table
below. Each investment team member is an employee of the Investment
Adviser.
The
Portfolio Manager(s) of a Portfolio are responsible for the day-to-day
management of the applicable Portfolio. Each investment team member serves as a
research analyst. While the investment team
discusses
investment ideas and overall portfolio structure, the final buy/sell decision
for a particular security resides with the Portfolio’s Portfolio
Manager(s).
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The
Internet Portfolio |
The
Global Portfolio |
The
Paradigm Portfolio |
The
Small Cap Opportunities Portfolio |
The
Market Opportunities Portfolio |
The
Multi-Disciplinary Income Portfolio |
|
Peter
B. Doyle |
Co-Portfolio
Manager |
Investment
Team Member |
Co-Portfolio
Manager |
Co-Portfolio
Manager |
Co-Portfolio
Manager |
N/A |
|
Steven
Tuen |
Investment
Team Member |
Co-Portfolio
Manager |
N/A |
N/A |
N/A |
N/A |
|
Murray
Stahl |
Co-Portfolio
Manager |
Co-Portfolio
Manager |
Co-Portfolio
Manager |
Co-Portfolio
Manager |
Co-Portfolio
Manager |
Co-Portfolio
Manager |
|
Steven
Bregman |
Investment
Team Member |
Investment
Team Member |
Co-Portfolio
Manager |
Investment
Team Member |
Investment
Team Member |
N/A |
|
James
Davolos |
Co-Portfolio
Manager |
Investment
Team Member |
Investment
Team Member |
Investment
Team Member |
Investment
Team Member |
N/A |
|
Matthew
Houk |
N/A |
N/A |
N/A |
Co-Portfolio
Manager |
N/A |
N/A |
|
Eric
Sites |
N/A |
N/A |
N/A |
N/A |
Investment
Team Member |
N/A |
| Darryl
Monasebian |
N/A |
N/A |
N/A |
N/A |
N/A |
Co-Portfolio
Manager |
Peter
B. Doyle is the Chairman of the Board of the Company. In 1994, he co-founded
Horizon, an affiliate of the Investment Adviser since May 2011. In 1996,
Mr. Doyle co-founded the Investment Adviser. From 1999 through 2011, Mr. Doyle
was a dual employee of both the Investment Adviser and Horizon.
Murray
Stahl is the Chief Investment Officer and has been a Portfolio Manager for the
Portfolios since 2000. In 1994, he co-founded Horizon and currently serves as
Chairman and Chief Investment Officer for Horizon Kinetics, the parent company
to the Investment Adviser and Horizon. From 2000 through 2011, Mr. Stahl was a
dual employee of both the Investment Adviser and Horizon.
Steven
Tuen joined the Investment Adviser in 1999 as a research analyst. He joined
Horizon in 1996, also as a research analyst, and between 1999 and 2011 was a
dual employee of both the Investment Adviser and Horizon.
James
Davolos joined the Investment Adviser as an analyst in 2005, and is now a
Portfolio Manager focusing on, among other things, emerging
markets.
Matthew
Houk joined the Investment Adviser in 2011 and began serving as a Portfolio
Manager in 2012. Previously, he was a research analyst at Horizon, beginning in
2008. Prior to Horizon, Mr. Houk held various positions at Goldman, Sachs &
Co.
Eric
Sites has been an Investment Team Member for the Company since 2013. He joined
Horizon in 2004 as a research analyst and Portfolio Manager.
Steven
Bregman is a Portfolio Manager for the Portfolios since 2017. In 1994, he
co-founded Horizon and currently serves as President and Director of Research
for Horizon Kinetics, the parent company to the Investment Adviser and
Horizon.
Darryl
Monasebian has been a Senior Portfolio Manager of the Investment Adviser since
June 2022. Before joining the Investment Adviser, Mr. Monasebian served as an
Executive Vice President at Oxford Funds, LLC from 2005 to June 2022. Prior to
that, he held several positions including a Director in the Merchant Banking
Group at BNP Paribas, a Director at Swiss Bank Corporation, a Senior Account
Officer at Citibank, and an Investment
Analyst in the Corporate Investments Department at Metropolitan Life Insurance
Company. Mr.
Monasebian has over 30 years of professional experience. Mr. Monasebian received
a BS degree in Management Science/Operations Research from Case Western Reserve
University and an MBA from Boston University’s Graduate School of
Management.
The
SAI provides additional information about the portfolio managers’ compensation,
other accounts managed by the portfolio managers, and the portfolio managers’
ownership of securities in the Funds.
Shares
of each Fund’s No Load Class are sold at NAV per share, which is determined by
each Fund as of the close of regular trading (generally 4:00 p.m. Eastern Time)
on each day that the New York Stock Exchange (the “Exchange”) is open for
unrestricted business. The Exchange is closed on the following holidays: New
Year’s Day, Martin Luther King, Jr.’s Day, Washington’s Birthday/President’s
Day, Good Friday, Memorial Day, Juneteenth National Independence Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Purchase and
redemption requests are priced at the next NAV per share calculated after
receipt and acceptance of a completed purchase or redemption request. The NAV
for each Class of shares of each Fund is determined by dividing the value of the
Fund’s securities, cash and other assets attributable to that Class, minus all
expenses and liabilities attributable to that Class, by the number of shares
outstanding of that Class. The NAV for a Class of shares of a Fund takes into
account the expenses and fees of that Class, including management,
administration, distribution and shareholder servicing fees, which are accrued
daily. The NAV of each Portfolio is calculated at the same time and generally in
the same manner (i.e.,
assets-liabilities/ # of shares = NAV per share) as those of each corresponding
Fund’s Classes.
Each
Portfolio’s equity securities are valued each day at the last quoted market sale
price on the securities’ principal exchange. If there is no sales price, a
security is valued at the last reported bid price. Securities listed on the
Nasdaq Stock Market, Inc., however, are valued using the Nasdaq Official Closing
Price (“NOCP”), and if no NOCP is available, then at the last reported bid
price. If market quotations are not readily available or if events occur that
may significantly affect the value of a particular security between the time
trading ends on a particular security and the close of regular trading on the
Exchange, securities will be valued at their fair market value as determined in
good faith in accordance with procedures adopted by the Investment Adviser and
approved by the Board of Trustees/Directors. The Board has designated the
Investment Adviser as its “valuation designee” under Rule 2a-5 of the 1940 Act,
subject to its oversight. Situations involving significant events may include
those where: a security’s trading has been halted or suspended; the security has
been de-listed from a national exchange; or the security has not been traded for
an extended period of time. In addition, the prices of foreign securities may be
affected by events that occur after the close of a foreign market but before a
Portfolio prices its shares. See “Trading in Foreign Securities.” Each Portfolio
may use independent pricing services to assist in calculating the NAV per share
of such Portfolio.
Futures,
options on futures and swap contracts that are listed or traded on a national
securities exchange, commodities exchange, contract market or over-the-counter
markets and that are freely transferable will be valued at the composite price,
using the National Best Bid and Offer quotes (“NBBO”). NBBO consists of the
highest bid price and lowest ask price across any of the exchanges on which an
option is quoted thus providing a view across the entire U.S. options
marketplace. Composite option pricing calculates the mean of the highest bid
price and lowest ask price across the exchanges where the option is traded. If a
composite price is not available, then a quote is provided by one of the
authorized pricing vendors. If neither a composite price or quote from an
authorized pricing provider is available, and it is the day of expiration or
post-expiration, expiring options will be priced at intrinsic value.
Non-exchange traded options also will be valued at the mean between the last bid
and asked quotations. Securities that have no public market and all other assets
of a Portfolio are considered at such value as the Investment Adviser, as
valuation designee, may determine in good faith, in accordance with a
Portfolio’s valuation procedures as approved by the Trust’s Board of Trustees
and the Company’s Board of Directors.
A
Portfolio’s debt obligations (including convertible securities) that are either
investment grade or non-investment grade and irrespective of days to maturity
are valued at evaluated mean by one of the authorized third party pricing agents
which rely on various valuation methodologies such as matrix pricing and other
analytical pricing models as well as market transactions and dealer quotations.
Certain instruments such as repurchase agreements, demand notes, and money
market mutual funds are traded at cost and there are no market values available
for those instruments from third parties. Those instruments are priced at cost.
Debt securities that are not priced by an independent third party pricing agent
shall be valued (a) at the last sale price if such last sale occurred
within the previous five business days, and (b) if there was no sale price
during the previous five business days, at the average of the bids, or the sole
bid if there is only one. Debt securities and other securities which, in the
judgment of the Investment Adviser, do not properly represent the value of a
security will be valued at their fair market value as determined in good faith
by the Investment Adviser, as valuation designee, in accordance with procedures
adopted by the Investment Adviser and approved by the Trust’s Board of Trustees
and the Company’s Board of Directors.
Fair
valuation of securities introduces an element of subjectivity to the pricing of
securities. As a result, the price of a security determined through fair
valuation techniques may differ from the price quoted or published by other
sources and may not accurately reflect the market value of the security when
trading resumes. If a reliable market quotation becomes available for a security
formerly valued through fair valuation techniques, the Investment Adviser
compares the new market quotation to the fair value price to evaluate the
effectiveness of the Portfolios’ fair valuation procedures.
Trading
in Foreign Securities
Trading
in foreign securities may be completed at times when the Exchange is closed. In
computing the NAV per share of each Fund and each corresponding Portfolio, the
value of a foreign security is determined as of the close of trading on the
foreign exchange on which it is principally traded or as of the scheduled close
of trading on the Exchange, whichever is earlier, at the closing sales prices
provided by approved pricing services or other alternate sources. In the absence
of sales, the last available closing bid will be used. Securities and assets for
which market quotations are not readily available are valued at fair value as
determined in good faith by the Investment Adviser, as valuation designee.
Values of foreign securities are translated from the local currency into U.S.
dollars on the basis of the foreign currency exchange rates, as provided by an
independent pricing service or reporting agency, generally prior to the close of
the Exchange. Occasionally, events affecting the value of foreign securities and
such exchange rates occur between the time at which they are determined and the
close of the Exchange, which events would not be reflected in the computation of
a Portfolio’s NAV. If events materially affecting the value of
such
securities or currency exchange rates occur during such time period, the
securities will be valued at their fair value as determined in good faith by the
Investment Adviser, as valuation designee.
In
General
No
Load Class shares of each Fund are sold at NAV, and will be credited to a
shareholder’s account at the NAV per share next computed after an order and
payment is received. The minimum initial investment for both regular accounts
and individual retirement accounts is $2,500 ($2,000 for Coverdell Education
Savings Accounts). There is no minimum on subsequent investments for all account
types. The Company reserves the right to vary or waive any minimum investment
requirement. Each Fund reserves the right to reject any purchase order if, in
its opinion, it is in the Fund’s best interest to do so. A service fee of $25
will be deducted from a shareholder’s Fund account, in addition to any loss
sustained by the Fund, for any purchases that do not clear. Your order will not
be accepted until a completed New Account Application is received by the Funds
or their transfer agent, U.S. Bank Global Fund Services (in such capacity, the
“Transfer Agent”).
Investing
by Telephone
If
you have accepted the Telephone and Internet Options on the No Load Class New
Account Application (the “Application”) and your account has been open for seven
business days, you may purchase additional shares by telephoning a Fund toll
free at 1-800-930-3828. This option allows investors to move money from their
bank account to their Fund account upon request. Only bank accounts held at
domestic institutions that are Automated Clearing House (“ACH”) members may be
used for telephone transactions. Your purchase will take place at the NAV per
share determined on the day your order is placed, provided that your order is
received prior to 4:00 p.m. Eastern Time.
During
periods of high market activity, you may encounter higher than usual wait times.
Please allow sufficient time to ensure that you will be able to complete your
telephone transaction prior to market close. Once a telephone transaction has
been placed, it cannot be canceled or modified after the close of regular
trading on the NYSE (generally, 4:00 p.m., Eastern Time).
There
is no minimum on telephone purchases. You may not make your initial purchase of
a Fund’s shares by telephone.
Automatic
Investment Plan
Once
an account has been established, you may purchase shares of a Fund through an
Automatic Investment Plan (“AIP”). You can have money automatically transferred
from your checking, savings or bank money market account on a monthly basis.
There is no minimum purchase amount in order to participate in the
AIP.
To
be eligible for the AIP, your bank must be a domestic institution that is an ACH
member. If your bank rejects your payment, the Transfer Agent will charge a $25
fee to your account. To begin participating in the AIP, please complete the AIP
section on the Application or call the Transfer Agent at 1-800-930-3828 with any
questions. The first AIP purchase will take place no earlier than seven business
days after the Transfer Agent has received your request. Any request to change
or terminate your AIP should be submitted to the Transfer Agent five days prior
to the desired effective date of such change or termination. The Funds may
modify or terminate the AIP at any time.
Purchase
By Mail
To
purchase a Fund’s shares by mail, simply complete and sign the Application and
mail it, along with a check made payable to [NAME OF FUND], c/o Kinetics Mutual
Funds, Inc., to:
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| Regular
Mail |
Overnight
or Express Mail |
|
Kinetics
Mutual Funds, Inc. |
Kinetics
Mutual Funds, Inc. |
|
[NAME
OF FUND] |
[NAME
OF FUND] |
|
c/o
U.S. Bank Global Fund Services |
c/o
U.S. Bank Global Fund Services |
|
P.O.
Box 701 |
615
East Michigan Street, 3rd Floor |
|
Milwaukee,
WI 53201-0701 |
Milwaukee,
WI 53202 |
The
Funds do not consider the U.S. Postal Service or other independent delivery
services to be its agents. Therefore, deposit in the mail or with such services,
or receipt at U.S. Bank Global Fund Services post office box, of purchase orders
or redemption requests does not constitute receipt by the transfer agent of the
Fund. Receipt of purchase orders or redemption requests is based on when the
order is received at the Transfer Agent’s offices.
All
purchases by check must be in U.S. dollars drawn on a bank located within the
United States. The Funds will not accept payment in cash or money orders. To
prevent check fraud, the Funds will not accept third party checks, Treasury
checks, credit card checks, traveler’s checks or starter checks for the purchase
of shares. The Funds are unable to accept post-dated checks or any conditional
order or payment.
Purchase
By Wire
To
open an account by wire, a completed Application is required before your wire
can be accepted. You can mail or overnight deliver your Application to the
Transfer Agent at the above address. Upon receipt of your completed Application,
an account will be established for you. You will need to provide the assigned
account number to your bank when instructing it to wire the funds. Your bank
must include along with the wire the name of the Fund, the account number and
your name so that monies can be correctly applied. To ensure proper application
of wired funds, please call 1-800-930-3828 to notify the applicable Fund that
the wire is coming. Wired funds must be received prior to 4:00 p.m. Eastern Time
to be eligible for same day pricing. The Funds and U.S. Bank N.A. are not
responsible for delays resulting from the banking or Federal Reserve wire
system. Please use the following wiring instructions:
Wire
to: U.S. Bank N.A.
ª ABA
Number: 075000022
ª Credit: U.S.
Bancorp Fund Services, LLC
ª Account: 112-952-137
ª Further
Credit: Kinetics Mutual Funds, Inc.
[NAME
OF FUND]
(Shareholder
Name/Account Registration)
(Shareholder
Account Number)
Subsequent
Investments
You
may add to your account at any time by purchasing shares by mail, by telephone,
or by wire. You may also purchase additional shares online if you have
established an online account. To purchase by mail, submit your check with the
Invest by Mail form attached to your most recent confirmation statement
received
from the Transfer Agent. If you do not have the Invest by Mail form, include the
Fund name, your name, address, and account number on a separate piece of paper
along with your check. To purchase by telephone, call 1-800-930-3828 prior to
4:00 p.m. Eastern Time to place your order. To ensure proper application of
wired funds, please call 1-800-930-3828 to notify the Fund that the wire is
coming. All purchase requests must include your shareholder account
number.
Individual
Retirement Accounts
You
may invest in any Fund by establishing a tax-sheltered IRA. Each Fund offers
Traditional IRA, Roth IRA, SEP IRA, SIMPLE IRA, and Coverdell Education Savings
Accounts. For additional information on IRA options, please call
1-800-930-3828.
Investing
Through Brokers or Agents
You
may invest in each Fund through brokers or agents who have entered into selling
agreements with the Funds’ distributor. The broker or agent may set their own
initial and subsequent investment minimums. You may be charged a fee if you use
a broker or agent to buy or redeem shares of a Fund.
In
General
You
may redeem part or all of your shares of a Fund on any business day that the
Fund calculates its NAV per share. To redeem shares, you must contact the Fund
in which you are invested either by mail or by phone to place a redemption
order. Redemption requests may also be placed online if you have established an
online account. You should request your redemption prior to market close to
obtain that day’s closing NAV. Redemption requests received after the close of
the Exchange will be treated as though received on the next business
day.
Each
Fund will generally send redemption proceeds the next business day and, in any
event, no later than seven days after the receipt of a redemption request in
“good order” (see below). Please note, however, that when a purchase order has
been made by check or electronic funds transfer through the ACH network, a Fund
will not be able to send your redemption proceeds until the purchase amount has
cleared. This may take up to 12 calendar days. This delay can be avoided by
purchasing shares by wire. Since each Fund invests all of its investable assets
in a corresponding Portfolio, a Fund will normally need to redeem a portion of
its investment in its corresponding Portfolio in order to meet redemption
requests.
The
Portfolios typically expect that a Portfolio will hold cash or cash equivalents
to meet redemption requests. The Funds may also use the proceeds from the sale
of portfolio securities to meet redemption requests if consistent with the
management of the Portfolios. These redemption methods will be used regularly
and may also be used in stressed market conditions. The Portfolios reserve the
right to redeem in-kind as described under “Additional Information.” Redemptions
in-kind are typically used to meet redemption requests that represent a large
percentage of a Portfolio’s net assets in order to minimize the effect of large
redemptions on a Portfolio and its remaining shareholders. Redemptions in-kind
may be used regularly in circumstances as described above, and may also be used
in stressed market conditions.
Redemption
proceeds may be sent to the address of record, wired to a shareholder’s bank
account of record, or sent via electronic funds transfer through the ACH network
to the shareholder’s bank account of record. Wires are subject to a $15 fee paid
by the investor, but the investor does not incur any charge when proceeds are
sent via the ACH system. If the redemption proceeds are requested to be sent to
an address other than the address of record, or if the address of record has
been changed within 15 days of the redemption request, the request must be in
writing with your signature guaranteed. Signature
guarantees
can be obtained from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies and
savings association, as well as from participants in the New York Stock Exchange
Medallion Signature Program and the Securities Transfer Agents Medallion Program
(“STAMP”), but
not from a notary public.
The Funds will not be responsible for interest lost on redemption amounts due to
lost or misdirected mail.
A
signature guarantee, from either a Medallion program member or a non-Medallion
program member, of each owner is required in the following
situations:
ª If
you are requesting a change in account ownership;
ª When
redemption proceeds are payable or sent to any person, address or bank account
not on record;
ª Written
requests to wire redemption proceeds (if not previously authorized on the
account);
ª When
a redemption request is received by the Transfer Agent and the account address
has changed within the last 15 calendar days.
Non-financial
transactions, including establishing or modifying certain services on an
account, may require a signature guarantee, signature verification from a
Signature Validation Program member, or other acceptable form of authentication
from a financial institution source. In addition to the situations described
above, the Fund(s) and/or the Transfer Agent reserve the right at their
discretion to require a signature guarantee or signature validation in other
circumstances. The Fund(s) reserve the right to waive any signature guarantee
requirement at its/their discretion.
Written
Redemption
You
can execute most redemptions by furnishing an unconditional written request to a
Fund in which you are invested to redeem your shares at the current NAV per
share. Redemption requests in writing should be sent to the Transfer Agent at:
|
|
|
|
|
| |
| Regular
Mail |
Overnight
or Express Mail |
|
Kinetics
Mutual Funds, Inc. |
Kinetics
Mutual Funds, Inc. |
|
[NAME
OF FUND] |
[NAME
OF FUND] |
|
c/o
U.S. Bank Global Fund Services |
c/o
U.S. Bank Global Fund Services |
|
P.O.
Box 701 |
615
East Michigan Street, 3rd Floor |
|
Milwaukee,
WI 53201-0701 |
Milwaukee,
WI 53202 |
The
Funds do not consider the U.S. Postal Service or other independent delivery
services to be its agents. Therefore, deposit in the mail or with such services,
or receipt at U.S. Bank Global Fund Services post office box, of purchase orders
or redemption requests does not constitute receipt by the transfer agent of the
Fund. Receipt of purchase orders or redemption requests is based on when the
order is received at the Transfer Agent’s offices.
Requests
for redemption in “good order” must:
ª indicate
the name of the Fund;
ª be
signed exactly as the shares are registered, including the signature of each
owner (including a signature guarantee when required);
ª specify
the number of shares or dollar amount to be redeemed; and
ª indicate
your account registration number.
Telephone
Redemption
If
you are authorized to perform telephone transactions (either through your
Application or by subsequent arrangement in writing with a Fund) you may redeem
shares in any amount by instructing the Fund in which you are invested by phone
at 1-800-930-3828. A signature guarantee or signature validation may be required
of all shareholders in order to add or change telephone redemption privileges on
an existing account.
Note:
Neither the Funds nor any of their service providers will be liable for any loss
or expense in acting upon instructions that are reasonably believed to be
genuine. To confirm that all telephone instructions are genuine, each Fund will
use reasonable procedures, such as requesting:
ª your
Fund account number;
ª the
name in which your account is registered;
ª the
social security or tax identification number under which the account is
registered; and
ª the
address of the account holder, as stated in the Application.
Note:
If an account has more than one owner or authorized person, the Fund will accept
telephone instructions from any one owner or authorized person.
During
periods of high market activity, you may encounter higher than usual wait times.
Please allow sufficient time to ensure that you will be able to complete your
telephone transaction prior to market close. If you are unable to contact the
Funds by telephone, you may make your redemption request in writing. Once a
telephone transaction has been placed, it cannot be canceled or modified after
the close of regular trading on the NYSE (generally, 4:00 p.m., Eastern
Time).
Wire
Redemption
Wire
transfers may be arranged to redeem shares. However, the Transfer Agent charges
a $15 fee per wire redemption against your account for this service. There is no
minimum on wire redemptions.
Systematic
Withdrawal Plan
If
you own shares with a value of $10,000 or more, you may participate in the
Systematic Withdrawal Plan. The Systematic Withdrawal Plan allows you to make
automatic withdrawals from your account at regular intervals (monthly, quarterly
or annually). Proceeds can be mailed via check to the address of record, or sent
via electronic funds transfer through the ACH system to your bank account if
your bank is an ACH system member. If the date you select to have the withdrawal
made is a weekend or holiday, the redemption will be made on the next business
day. Money will be transferred from your Fund account to the account you chose
at the interval you select on the Application. If you expect to purchase
additional shares of a Fund, it may not be to your advantage to participate in
the Systematic Withdrawal Plan because of the possible adverse tax consequences
of making contemporaneous purchases and redemptions. There is no minimum on
systematic withdrawals. Any request to change or terminate your Systematic
Withdrawal Plan should be submitted to the Transfer Agent five days prior to the
next scheduled withdrawal.
The
Funds’ Right to Redeem an Account
Each
Fund reserves the right to redeem the shares of any shareholder, other than a
shareholder who is an active participant in the AIP, whose account balance is
less than $1,000, other than as a result of a decline in the NAV of a Fund. Each
Fund will provide shareholders with written notice 30 days prior to redeeming
the shareholder’s account.
IRA
Redemption
If
you are an IRA shareholder, you must indicate on your written redemption request
whether or not to withhold federal income tax. Requests that do not indicate a
preference will be subject to withholding. Shares held in IRA accounts may be
redeemed by telephone at 1-800-930-3828. Investors will be asked whether or not
to withhold taxes from any distribution.
Householding
By
signing the Application, you acknowledge and consent to the householding
(i.e.,
consolidation of mailings) of regulatory documents such as prospectuses, and
certain other shareholder documents. In an effort to decrease costs, the Funds
will reduce the number of duplicate prospectuses, supplements and certain other
shareholder documents you receive by sending only one copy of each to those
addresses shared by two or more accounts. Call toll-free at 1-800-930-3828 to
request individual copies of documents; if your shares are held through a
Financial Intermediary, please contact them directly. The Funds will begin
sending individual copies 30 days after receiving your request. This policy does
not apply to account statements.
Shareholder
Inactivity/Lost Shareholder
It
is important that the Fund maintain a correct address for each investor. An
incorrect address may cause an investor’s account statements and other mailings
to be returned to a Fund. Based upon statutory requirements for returned mail,
the Fund will attempt to locate the investor or rightful owner of the account.
If the Fund is unable to locate the investor, then they will determine whether
the investor’s account can legally be considered abandoned. The Fund is legally
obligated to escheat (or transfer) abandoned property to the appropriate state’s
unclaimed property administrator in accordance with statutory requirements. The
investor’s last known address of record determines which state has jurisdiction.
Under certain circumstances, if no activity occurs in an account within a time
period specified by state law, your shares in a Fund may be transferred to that
state.
Investors
with a state of residence in Texas have the ability to designate a
representative to receive legislatively required unclaimed property due
diligence notifications. Please contact the Texas Comptroller of Public Accounts
for further information.
Redemption
Fees
The
Funds are designed for long-term investors willing to accept the risks
associated with a long-term investment. In accordance with policies and
procedures adopted by the Board of Directors of the Company, frequent purchases
and redemptions of Fund shares are not encouraged but are generally permitted by
the Funds. Such purchases and redemptions may have an adverse effect on other
Fund shareholders, including, without limitation, the possibility of disrupting
portfolio management strategies, increasing brokerage and administrative costs,
harming Fund performance and possible dilution of the value of Fund shares held
by long-term shareholders. The Company may, in its sole discretion, reject
purchase orders when, in the judgment of management, such rejection is in the
best interest of a Fund and its shareholders. The Funds assess a 2.00% fee on
the redemption or exchange of Fund shares held for 30 days or less from the
date of purchase. The fee is paid back to the Fund from which the investor
redeemed to help offset any potential transaction costs.
The
Funds will use the first-in, first-out method to determine the 30-day holding
period. Under this method, the date of the redemption or exchange will be
compared to the earliest purchase date of shares held in the account. If this
holding period is 30 days or less, the redemption fee will be
assessed.
The
redemption fee will not apply to any shares purchased through reinvested
distributions (dividends and capital gains), or to redemptions made under the
Funds’ systematic programs, as these transactions are typically de minimis. This
fee will also not be assessed to the participants in employer-sponsored
retirement plans that are held at the Funds in an omnibus account (such as
401(k), 403(b), 457, Keogh, Profit Sharing Plans, and Money Purchase Pension
Plans) or to accounts held under trust agreements at a trust institution held at
the Funds in an omnibus account. The redemption fee will also not be assessed to
accounts of the Investment Adviser or its affiliates used to capitalize the
Funds as such accounts will be used specifically to control the volatility of
shareholder subscriptions and redemptions to avoid adverse effects to the Funds.
In addition, the Funds are authorized to waive redemption fees for redemptions
effected pursuant to asset allocation programs, wrap fee programs, other
investment programs offered by financial institutions, and the Company reserves
the right to lower or waive any redemption fee. Although frequent purchases and
redemptions of Fund shares are generally permitted, the Funds only intend to
waive redemption fees for redemptions the Funds reasonably believe do not raise
frequent trading or market timing concerns.
The
Funds reserve the right to modify or eliminate the redemption fees or waivers at
any time and will give shareholders 60 days’ prior written notice of any
material changes, unless otherwise provided by law. The redemption fee policy
may be modified or amended in the future to reflect, among other factors,
regulatory requirements mandated by the SEC.
Currently,
the Funds are limited in their ability to assess or collect the redemption fee
on all shares redeemed by financial intermediaries on behalf of their customers.
For example, where a financial intermediary is not able to determine if the
redemption fee applies and/or is not able to assess or collect the fee, or does
not collect the fee at the time of redemption, a Fund will not receive the
redemption fee. If Fund shares are redeemed by a financial intermediary at the
direction of its customers, the Fund may not know whether a redemption fee is
applicable or the identity of the customer who should be assessed the redemption
fee. Due to operational differences, a financial intermediary’s methods for
tracking and calculating the redemption fee may differ in some respects from
that of the Fund. If necessary, the Funds may prohibit additional purchases of
Fund shares by a financial intermediary or by certain of the intermediaries’
customers.
Notice
of Customer Verification
In
compliance with the USA PATRIOT Act of 2001, please note that the Transfer Agent
will verify certain information on your Application as part of the Funds’
Anti-Money Laundering Program. As requested on the Application, you must supply
your full name, date of birth, social security number and permanent street
address. If you are opening the account in the name of a legal entity
(e.g.,
partnership, limited liability company, business trust, corporation, etc.), you
must also supply the identity of the beneficial owners. Mailing addresses
containing only a P.O. Box will not be accepted. Please contact the Transfer
Agent at 1-800-930-3828 if you need additional assistance when completing your
Application.
If
we do not have a reasonable belief as to the identity of a shareholder, the
account will be rejected or you will not be allowed to perform a transaction on
the account until such information is received. In the rare event that the
Transfer Agent is unable to verify your identity, each Fund reserves the right
to redeem your account at the current day’s net asset value.
If
you have accepted the Telephone and Internet Options on the Application, you can
exchange your shares in any Fund for shares of the same class of any other Fund
offered by the Company, (e.g.,
No Load Class shares for No Load Class shares). If the exchange is requested via
telephone, a $5 per exchange transaction cost will be assessed. You should
carefully read the Prospectus of a Fund before exchanging shares into that Fund.
Be advised that exercising the exchange privilege consists of two transactions:
a sale of shares in one Fund and the purchase of shares in another Fund.
Therefore, an exchange of Fund shares held for 30 days or less may be subject to
a 2.00% redemption fee. See “Redemption Fees” above. Further, exchanges may have
certain tax consequences and you could realize short- or long-term capital gains
or losses. Exchanges are generally made only between identically registered
accounts unless you send written instructions with a signature guarantee
requesting otherwise. You should request your exchange prior to market close to
obtain that day’s closing NAV. Exchange requests received after the close of the
Exchange will be treated as though received on the next business day.
Call
1-800-930-3828 to learn more about the other funds or classes offered by the
Company and about exercising your exchange privilege.
Distributions
Distributions
(whether treated for tax purposes as ordinary income, qualified dividend income,
section 199A dividends or long-term capital gains) to shareholders of each
Fund are generally paid in additional shares of the same Class of the Fund in
which shareholders are already invested, with no sales charge, based on the NAV
per share of that Class as of the close of business on the record date for such
distributions. However, you may elect on the Application to receive
distributions as follows:
Option
1: To receive income dividends and capital gain distributions in additional Fund
shares, or
Option
2: To receive all income dividends and/or capital gain distributions in
cash.
Option
3: To reinvest capital gain distributions in additional Fund shares, while
receiving income distribution in cash.
Option
4: To reinvest all income dividends in additional Fund shares, while receiving
capital gain distributions in cash.
You
may change your dividend and capital gain distribution election in writing or by
calling the Transfer Agent in advance of the next distribution.
Each
Fund intends to pay any dividends from investment company taxable income and
distributions representing capital gain at least annually, usually in December.
Each Fund will advise each shareholder annually of the amounts of dividends from
investment company taxable income and of net capital gain distributions
reinvested or paid in cash to the shareholder during the calendar
year.
If
you selected any distributions to be paid in cash and the U.S. Postal Service
cannot deliver your distribution checks, or if your distribution checks remain
uncashed for six months, your distribution checks will be reinvested in your
account at the then current NAV of the appropriate Fund and your election will
be converted to the purchase of additional shares.
Taxes
The
following is a summary of certain United States tax considerations relevant
under current law, which may be subject to change in the future. Except where
otherwise indicated, the summary assumes you are a U.S. citizen or resident or
otherwise subject to U.S. federal income tax. You should consult your tax
adviser for further information regarding federal, state, local and/or foreign
tax consequences relevant to your specific situation.
Fund
Distributions
Each
Fund has qualified and intends to continue to qualify for federal tax purposes
as a regulated investment company and to distribute substantially all of its
taxable income, including its net capital gain (the excess of net long-term
capital gain over net short-term capital loss). Except as otherwise noted below,
you will generally be subject to federal income tax on Fund distributions to you
regardless whether they are paid in cash or reinvested in additional shares.
Fund distributions attributable to short-term capital gains and net investment
income will generally be taxable to you as ordinary income, except as discussed
below. It is anticipated that most of the Multi-Disciplinary Income Fund’s
distributions will be taxable as ordinary income.
Distributions
attributable to the net capital gain of a Fund generally are taxable to you as
long-term capital gain, regardless of how long you have held your shares. The
maximum long-term capital gain rate applicable to individuals, estates and
trusts is currently 23.8% (which includes a 3.8% Medicare tax).
Distributions
of “qualifying dividends” will also generally be taxable to you at long-term
capital gain rates, as long as certain requirements are met. In general, if 95%
or more of the gross income of a Fund (other than net capital gain) consists of
dividends received from domestic corporations or “qualified” foreign
corporations (“qualifying dividends”), then all distributions paid by the Fund
to individual shareholders will be taxed at long-term capital gain rates. But if
less than 95% of the gross income of a Fund (other than net capital gain)
consists of qualifying dividends, then distributions paid by the Fund to
individual shareholders will be qualifying dividends only to the extent they are
derived from qualifying dividends earned by the Fund. For the lower rates to
apply, you must have owned your Fund shares for at least 61 days during the
121-day period beginning on the date that is 60 days before the Fund’s
ex-dividend date (and the Fund will need to have met a similar holding period
requirement with respect to the shares of the corporation paying the qualifying
dividend). The amount of a Fund’s distributions that qualify for this favorable
treatment may be reduced as a result of the Fund’s securities lending activities
(if any), a high portfolio turnover rate or investments in debt securities or
non-qualified foreign corporations. Also, distributions on income contributable
to each Cayman Subsidiary will generally not be “qualifying
dividends.”
Through
2025, certain Funds may make distributions to you of “section 199A dividends”
with respect to qualified dividends that it receives with respect to such Fund's
investments in REITs. A section 199A dividend is any dividend or part of such
dividend that the Fund pays to you and reports as a section 199A dividend in
written statements furnished to you. Distributions paid by a Fund that are
eligible to be treated as section 199A dividends for a taxable year may not
exceed the “qualified REIT dividends” received by the Fund from a REIT reduced
by the Fund's allocable expenses. Section 199A dividends may be taxed to
individuals and other non-corporate shareholders at a reduced effective federal
income tax rate, provided you have satisfied a holding period requirement for
the Fund's shares and satisfied certain other conditions. For the lower rates to
apply, you must have owned your Fund shares for at least 46 days during the
91-day period beginning on the date that is 45 days before the Fund's
ex-dividend date, but only to the extent that you are not under an obligation
(under a short-sale or otherwise) to make related
payments
with respect to positions in substantially similar or related property. The
special Section 199A provisions are currently set to expire after December 31,
2025.
Distributions
from each Fund will generally be taxable to you in the taxable year in which
they are paid, with one exception. Distributions declared by a Fund in October,
November or December and paid in January of the following year are taxed as
though they were paid on December 31. You will be notified annually of the tax
status of distributions to you.
A
portion of distributions attributable to investments in U.S. corporations paid
by a Fund to shareholders who are corporations may also qualify for the
dividends-received deduction for corporations, subject to certain holding period
requirements and debt financing limitations. The amount of such dividends
qualifying for this deduction may, however, be reduced as a result of a Fund’s
securities lending activities (if any), by a high portfolio turnover rate or by
investments in debt securities.
The
Funds may be subject to foreign withholding or other foreign taxes on income or
gain from certain foreign securities. If more than 50% of the value of the total
assets of a Fund consists of stocks and securities (including debt securities)
of foreign corporations at the close of a taxable year, a Fund may elect, for
federal income tax purposes, to treat certain foreign taxes paid by it,
including generally any withholding and other foreign income taxes, as paid by
its shareholders. If a Fund makes this election, the amount of those foreign
taxes paid by a Fund will be included in its shareholders’ income pro rata (in
addition to taxable distributions actually received by them), and each such
shareholder will be entitled either (1) to credit that proportionate amount
of taxes against U.S. federal income tax liability as a foreign tax credit or
(2) to take that amount as an itemized deduction. If a Fund is not eligible
or chooses not to make this election, the Fund will be entitled to deduct any
such foreign taxes in computing the amounts it is required to
distribute.
You
should note that if you purchase shares just before a distribution, the purchase
price will reflect the amount of the upcoming distribution, but you will be
taxed on the entire amount of the distribution received, even though, as an
economic matter, the distribution simply constitutes a return of capital. This
adverse tax result is known as “buying into a dividend.”
Sales
and Exchanges
You
will generally recognize taxable gain or loss for federal income tax purposes on
a sale, exchange or redemption of your shares in a Fund, including an exchange
of shares pursuant to a Fund’s exchange privilege, based on the difference
between your tax basis in the shares and the amount you receive for them.
Generally, you will recognize long-term capital gain or loss if you have held
your Fund shares for over twelve months at the time you dispose of
them.
Any
loss realized on shares held for six months or less will be treated as a
long‑term capital loss to the extent of any capital gain dividends that were
received on the shares. Additionally, any loss realized on a disposition of
shares of a Fund may be disallowed under “wash sale” rules to the extent the
shares disposed of are replaced with other shares of the same Fund within a
period of 61 days beginning 30 days before and ending 30 days
after the shares are disposed of, such as pursuant to a dividend reinvestment in
shares of the Fund. If disallowed, the loss will be reflected in an upward
adjustment to the basis of the shares acquired.
For
shares acquired on or after January 1, 2012, the Funds (or relevant broker
or financial adviser) are required to compute and report to the Internal Revenue
Service (the “IRS”) and furnish to Fund shareholders cost basis information when
such shares are sold or exchanged. The Funds have elected to
use
the average cost method, unless you instruct the Funds to use a different
IRS-accepted cost basis method or choose to specifically identify your shares at
the time of each sale or exchange. If your account is held by your broker or
other financial adviser, they may select a different cost basis method. In these
cases, please contact your broker or other financial adviser to obtain
information with respect to the available methods and elections for your
account. You should carefully review the cost basis information provided by the
Funds and make any additional basis, holding period or other adjustments that
are required when reporting these amounts on your federal and state income tax
returns. Fund shareholders should consult with their tax advisers to determine
the best IRS-accepted cost basis method for their tax situation and to obtain
more information about how the cost basis reporting requirements apply to
them.
IRAs
and Other Tax-Qualified Plans
One
major exception to the preceding tax principles is that distributions on, and
sales, exchanges and redemptions of, shares held in an IRA (or other
tax‑qualified plan) will not be currently taxable unless such shares were
acquired with borrowed funds.
Backup
Withholding
On
the Application, you will be asked to certify that your social security number
or taxpayer identification number is correct and that you are not subject to
backup withholding. If you (i) fail to provide a correct taxpayer
identification number in the manner required; (ii) are subject to backup
withholding by the IRS for failure to properly include on your return payments
of taxable interest or dividends; or (iii) fail to certify that you are not
subject to backup withholding when required to do so or that you are an “exempt
recipient,” the IRS may, in certain cases, require each Fund to withhold a
percentage of dividends or redemption or exchange proceeds. Each Fund reserves
the right to reject any application that does not include a certified social
security or taxpayer identification number. The current backup withholding rate
is 24%.
U.S.
Tax Treatment of Foreign Shareholders
Generally,
nonresident aliens, foreign corporations and other foreign investors are subject
to 30% withholding tax on dividends paid by a U.S. corporation, although the
rate may be reduced for an investor that is a qualified resident of a foreign
country with an applicable income tax treaty with the United States (provided
that the shareholder furnishes the Fund with a properly completed Form W-8BEN or
Form W8BEN-E, as applicable, to establish entitlement for these treaty
benefits). In the case of regulated investment companies such as the Funds,
however, certain categories of dividends are exempt from the 30% withholding
tax. These generally include dividends attributable to the Funds’ net capital
gains (the excess of net long-term capital gains over net short-term capital
loss), dividends attributable to the Funds’ interest income from U.S. obligors
and dividends attributable to net short-term capital gains of the
Funds.
Foreign
shareholders will generally not be subject to U.S. tax on gains realized on the
sale, exchange or redemption of shares in a Fund, except that a nonresident
alien individual who is present in the United States for 183 days or more in a
calendar year will be taxable on such gains and on capital gain dividends from a
Fund.
In
contrast, if a foreign investor conducts a trade or business in the United
States and the investment in a Fund is effectively connected with that trade or
business, then the foreign investor’s income from the Fund will generally be
subject to U.S. federal income tax at graduated rates in a manner similar to the
income of a U.S. citizen or resident.
Each
Fund will also generally be required to withhold 30% tax on certain payments to
foreign entities that do not provide a Form W-8BEN-E that evidences their
compliance with, or exemption from, specified information reporting requirements
under the Foreign Account Tax Compliance Act.
All
foreign investors should consult their own tax advisers regarding the tax
consequences in their country of residence of an investment in a
Fund.
State
and Local Taxes
You
may also be subject to state and local taxes on distributions, sales, exchanges
and redemptions. State income taxes may not apply, however, to any portions of a
Fund’s distributions, if any, that are attributable to interest on U.S.
government securities or interest on securities of the particular state or
localities within the state in which you live. You should consult your tax
adviser regarding the tax status of distributions in your state and
locality.
More
tax information relating to the Funds is provided in the SAI.
Distributor
Kinetics
Funds Distributor LLC (“KFD”), an affiliate of the Investment Adviser, 470 Park
Avenue South, New York, New York 10016, is the distributor for the shares of the
Funds. KFD is a registered broker-dealer and member of the Financial Industry
Regulatory Authority, Inc. Shares of each Fund are offered on a continuous
basis.
Shareholder
Servicing Agents
Pursuant
to separate shareholder servicing agreements, the Investment Adviser is
responsible for paying various shareholder servicing agents for performing
shareholder servicing functions and maintaining shareholder accounts. These
agents have written shareholder servicing agreements with the Investment Adviser
and perform these functions on behalf of their clients who own shares of the
Funds. For this service, the Investment Adviser receives an annual
shareholder-servicing fee from each Class equal to 0.25% of each Fund’s average
daily net assets attributable to that Class.
Arrangements
with Certain Financial Institutions
The
Investment Adviser and/or its affiliates may make payments to selected
affiliated or unaffiliated broker-dealers and other financial institutions
(“Financial Institutions”) from time to time in connection with the sale,
distribution, retention and/or servicing of shares of the Funds and other funds
managed by the Investment Adviser or its affiliates. These payments are made out
of the Investment Adviser’s, and/or its affiliates’, own assets and are not an
additional charge to the Funds. The payments are in addition to the shareholder
servicing fees described in this Prospectus. The amount of such payments may be
significant in amount and the prospect of receiving any such payments may
provide Financial Institutions or their employees with an incentive to favor
sales of shares of the Funds over other investment options. You should contact
your Financial Institution for more information about the payments it may
receive and potential conflicts of interest.
Fund
Administrator
U.S.
Bancorp Fund Services, LLC, doing business as U.S. Bank Global Fund Services
(“Fund Services”), serves as administrator to each Fund and each
Portfolio.
Custodian,
Transfer Agent, Dividend Disbursing Agent and Fund Accountant
U.S.
Bank N.A. serves as Custodian for each Fund’s cash and securities. The Custodian
does not assist in, and is not responsible for, investment decisions involving
assets of the Funds. Fund Services acts as each Fund’s Transfer Agent, Dividend
Disbursing Agent and Fund Accountant.
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Unique
Characteristics of the Fund
Structure |
Unlike
other mutual funds that directly acquire and manage their own portfolio
securities, each Fund invests all of its investable assets in a Portfolio that
is a series of a separately registered investment company. The Portfolio, in
turn, invests in securities, using the strategies described in this
Prospectus.
In
addition to selling a beneficial interest to a Fund or Funds, a Portfolio could
also sell beneficial interests to other mutual funds or institutional investors.
Such investors would invest in such Portfolio on the same terms and conditions
and would pay a proportionate share of such Portfolio’s expenses. However, other
investors in a Portfolio are not required to sell their shares at the same
public offering price as a Fund, and might bear different levels of ongoing
expenses than the Fund. Shareholders of the Funds should be aware that these
differences would result in differences in returns experienced in the different
funds that invest in a Portfolio. Such differences in returns are also present
in other mutual fund structures.
Smaller
funds investing in a Portfolio could be materially affected by the actions of
larger funds investing in the Portfolio. For example, if a large feeder fund
were to withdraw from a Portfolio, the remaining funds might experience higher
pro rata operating expenses, thereby producing lower returns. Additionally, the
Portfolio could become less diverse, resulting in increased portfolio risk.
However, that possibility also exists for traditionally structured funds that
have large or institutional investors. Funds with a greater pro rata ownership
in a Portfolio could have effective voting control of such
Portfolio.
Certain
changes in a Portfolio’s objective, policies or restrictions might require the
Company to withdraw the corresponding Fund’s interest in such Portfolio. Any
such withdrawal could result in a distribution in kind of portfolio securities
(as opposed to a cash distribution from such Portfolio). A Fund could incur
brokerage fees or other transaction costs in converting such securities to cash.
In addition, a distribution in kind could result in a less diversified portfolio
of investments or adversely affect the liquidity of a Fund.
The
Company’s Board of Directors retains its right to withdraw any Fund’s investment
from a Portfolio at any time if the Board of Directors determines that such
withdrawal would be in the best interest of the Fund’s shareholders. The Fund
would then resume investing directly in individual securities of other issuers
or invest in another Portfolio of the Trust.
The
SAI contains more information about each Fund and Portfolio, the Master/Feeder
Fund Structure and the types of securities in which each Portfolio may
invest.
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Counsel
and Independent Registered Public Accounting
Firm |
Legal
matters in connection with the issuance of shares of common stock of each Fund
are passed upon by Faegre Drinker Biddle & Reath LLP, One Logan Square,
Suite 2000, Philadelphia, PA 19103-6996.
Tait,
Weller & Baker LLP, Two Liberty Place, 50 South 16th Street, Suite 2900,
Philadelphia, PA 19102, is the independent registered public accounting firm for
the Funds.
The
Bloomberg U.S. Aggregate Bond Index covers the USD-denominated,
investment-grade, fixed-rate, taxable bond market of SEC-registered securities.
The Index includes multiple types of government and corporate-issued bonds, some
of which are asset-backed.
The
Bloomberg U.S. Corporate High-Yield Index measures the market of
USD-denominated, non-investment grade, fixed-rate, taxable corporate bonds.
Securities are classified as high yield if the middle rating of Moody’s, Fitch,
and S&P is Ba1/BB+/BB+ or below after dropping the highest and lowest
available ratings. The index excludes emerging markets debt.
The
S&P 500®
Index is an unmanaged index created by S&P Global that is considered to
represent U.S. stock market performance in general. The Index is not an
investment product available for purchase and does not include any deduction for
fees, expenses or taxes.
S&P
600®
SmallCap Index
measures
the small-cap segment of the U.S. equity market. The index is designed to track
companies that meet specific inclusion criteria to ensure that they are liquid
and financially viable.
The
NASDAQ Composite®
Index is a broad-based capitalization-weighted index of all Nasdaq stocks. The
Index does not include the reinvestment of dividends or deductions for fees,
expenses or taxes.
The
MSCI EAFE®
Index (Europe, Australasia, Far East) is a free float-adjusted market
capitalization index that is designed to measure the equity market performance
of developed markets, excluding the US & Canada. As of March 31, 2024, the
MSCI EAFE®
Index consisted of the following developed market country indices: Australia,
Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel,
Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain,
Sweden, Switzerland and the UK.
The
MSCI ACWI (All Country World Index) Index is a free float-adjusted market
capitalization weighted index that is designed to measure the equity market
performance of developed and emerging markets. As of March 2024, it covers 2,841
constituents across 11 sectors and approximately 85% of the free float-adjusted
market capitalization in each market. The index is built using MSCI’s Global
Investable Market Index (GIMI) methodology, which is designed to take into
account variations reflecting conditions across regions, market-cap sizes,
sectors, style segments and combinations.
The
financial highlights tables set forth below are intended to help you understand
each Fund’s financial performance for the last five fiscal years. Most of the
information reflects financial results with respect to a single No Load Class
share of each Fund. The total returns in the tables represent the rates that an
investor
would have earned (or lost) on an investment in the Funds (assuming reinvestment
of all dividends and distributions).
The
financial information provided was audited by Tait, Weller & Baker LLP,
whose report, along with the Funds’ financial statements, are included in the
Funds’ annual
report
and incorporated by reference into the SAI, both of which are available upon
request, or by following the hyperlink to the Annual
Report
dated December 31, 2023.
The
Internet Fund
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| No
Load Class |
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For
the
Year
Ended
December
31,
2023 |
For
the
Year Ended
December 31,
2022 |
For
the
Year Ended
December 31,
2021 |
For
the
Year Ended
December 31,
2020 |
For
the
Year Ended
December 31,
2019 |
|
PER
SHARE DATA:(1) |
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Net
Asset Value, Beginning of Year. |
$45.53 |
|
| $60.64 |
|
| $53.01 |
|
| $33.89 |
|
| $27.19 |
| |
| Income
from Investment Operations: |
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| |
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Net
investment income (loss)(2) |
0.40 |
|
| (0.30) |
|
| (0.83) |
|
| (0.29) |
|
| (0.25) |
| |
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Net
realized and unrealized gain (loss) on investments. |
13.14 |
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| (14.44) |
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| 8.93 |
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| 19.41 |
|
| 7.44 |
| |
|
Total
from Investment Operations. |
13.54 |
|
| (14.74) |
|
| 8.10 |
|
| 19.12 |
|
| 7.19 |
| |
|
Redemption
Fees. |
0.01 |
|
| 0.01 |
|
| 0.05 |
|
| 0.00 |
|
(3) |
0.00 |
|
(3) |
| Less
Distributions: |
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| From
net realized gains |
(0.44) |
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| (0.38) |
|
| (0.52) |
|
| — |
|
| (0.49) |
| |
| Total
Distributions |
(0.44) |
|
| (0.38) |
|
| (0.52) |
|
| — |
|
| (0.49) |
| |
| Net
Asset Value, End of Year |
$58.64 |
|
| $45.53 |
|
| $60.64 |
|
| $53.01 |
|
| $33.89 |
| |
| Total
return |
29.76 |
% |
| (24.28) |
% |
| 15.35 |
% |
| 56.42 |
% |
| 26.45 |
% |
|
| SUPPLEMENTAL
DATA AND RATIOS |
|
|
|
|
|
|
|
| |
|
|
Net
assets, end of Year (000’s) |
$185,790 |
|
| $144,397 |
|
| $226,228 |
|
| $169,374 |
|
| $115,351 |
| |
|
Ratio
of operating expenses to average net
assets: |
1.75 |
% |
| 1.77 |
% |
| 1.71 |
% |
| 1.82 |
% |
| 1.84 |
% |
|
| Ratio
of net investment income (loss) to average net assets: |
0.83 |
% |
| (0.60) |
% |
| (1.29) |
% |
| (0.80) |
% |
| (0.76) |
% |
|
|
Portfolio
turnover rate(4) |
19 |
% |
| 19 |
% |
| 4 |
% |
| 1 |
% |
| 1 |
% |
|
(1)Information
presented relates to a share of capital stock outstanding for each
year.
(2)Net
investment income per share represents net investment income divided by the
average shares outstanding throughout the year.
(3)Amount
calculated is less than $0.005.
(4)Portfolio
turnover of The Internet Portfolio.
The
Global Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| No
Load Class |
|
|
For
the
Year
Ended
December
31,
2023 |
For
the
Year Ended
December 31,
2022 |
For
the
Year Ended
December 31,
2021 |
For
the
Year Ended
December 31,
2020 |
For
the
Year Ended
December 31,
2019 |
|
PER
SHARE DATA:(1) |
|
|
|
|
|
| |
| |
|
| Net
Asset Value, Beginning of Year |
$8.60 |
|
| $9.33 |
|
| $8.30 |
|
| $6.64 |
|
| $5.46 |
| |
| Income
from Investment Operations: |
|
|
|
|
|
|
|
| |
|
|
Net
investment income (loss)(2) |
0.15 |
|
| 0.02 |
|
| (0.09) |
|
| (0.03) |
| (0.00) |
(3) |
| Net
realized and unrealized gain (loss) on investments |
0.87 |
|
| (0.62) |
|
| 1.43 |
|
| 1.69 |
|
| 1.18 |
| |
|
Total
from Investment Operations. |
1.02 |
|
| (0.60) |
|
| 1.34 |
|
| 1.66 |
|
| 1.18 |
| |
| Redemption
Fees |
0.00 |
|
(3) |
0.00 |
|
(3) |
0.01 |
|
| 0.00 |
|
(3) |
0.00 |
|
(3) |
| Less
Distributions: |
|
|
|
|
|
|
|
| |
|
|
From
net investment income. |
(0.23) |
|
| — |
|
| (0.29) |
|
| — |
|
| — |
| |
|
From
net realized gains. |
— |
|
| (0.13) |
|
| (0.03) |
|
| — |
|
| — |
| |
| Total
Distributions |
(0.23) |
|
| (0.13) |
|
| (0.32) |
|
| — |
|
| — |
| |
| Net
Asset Value, End of Year |
$9.39 |
|
| $8.60 |
|
| $9.33 |
|
| $8.30 |
|
| $6.64 |
| |
|
Total
return |
11.89 |
% |
| (6.46) |
% |
| 16.32 |
% |
| 25.00 |
% |
| 21.61 |
% |
|
| SUPPLEMENTAL
DATA AND RATIOS |
|
|
|
|
|
|
|
| |
|
|
Net
assets, end of Year (000’s) |
$11,857 |
|
| $21,052 |
|
| $19,128 |
|
| $13,904 |
|
| $8,115 |
| |
| Ratio
of operating expenses to average net assets: |
|
|
|
|
|
|
|
| |
|
|
Before
expense reimbursement. |
2.13 |
% |
| 2.07 |
% |
| 2.08 |
% |
| 2.45 |
% |
| 2.53 |
% |
|
|
After
expense reimbursement |
1.39 |
% |
| 1.39 |
% |
| 1.39 |
% |
| 1.39 |
% |
| 1.39 |
% |
|
| Ratio
of net investment income (loss) to average net assets: |
1.81 |
% |
| 0.25 |
% |
| (0.90) |
% |
| (0.46) |
% |
| 0.01 |
% |
|
|
Portfolio
turnover rate(4) |
16 |
% |
| 57 |
% |
| 7 |
% |
| 8 |
% |
| 5 |
% |
|
(1)Information
presented relates to a share of capital stock outstanding for each
year.
(2)Net
investment income per share represents net investment income divided by the
average shares outstanding throughout the year.
(3)Amount
calculated is less than $0.005.
(4)Portfolio
turnover of The Global Portfolio.
The
Paradigm Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| No
Load Class |
|
|
For
the
Year
Ended
December
31,
2023 |
For
the
Year Ended
December 31,
2022 |
For
the
Year Ended
December 31,
2021 |
For
the
Year Ended
December 31,
2020 |
For
the
Year Ended
December 31,
2019 |
|
PER
SHARE DATA:(1) |
|
|
|
|
|
|
|
|
| |
| Net
Asset Value, Beginning of Year |
$92.91 |
|
| $73.37 |
|
| $53.99 |
|
| $53.38 |
|
| $41.32 |
| |
| Income
from Investment Operations: |
|
|
|
|
|
|
|
|
| |
|
Net
investment income (loss)(2) |
(0.39) |
|
| (0.13) |
|
| (0.67) |
|
| 0.19 |
|
| (0.36) |
| |
| Net
realized and unrealized gain (loss) on investments |
(15.26) |
|
| 21.52 |
|
| 21.26 |
|
| 1.59 |
|
| 12.96 |
| |
|
Total
from Investment Operations. |
(15.65) |
|
| 21.39 |
|
| 20.59 |
|
| 1.78 |
|
| 12.60 |
| |
|
Redemption
Fees. |
0.00 |
|
(3) |
0.01 |
|
| 0.01 |
|
| 0.00 |
|
(3) |
0.00 |
|
(3) |
| Less
Distributions: |
|
|
|
|
|
|
|
|
| |
| From
net investment income |
— |
|
| (0.01) |
|
| — |
| (0.18) |
|
| (0.01) |
| |
| From
net realized gains |
(4.13) |
|
| (1.85) |
|
| (1.22) |
|
| (0.99) |
|
| (0.53) |
| |
| Total
Distributions |
(4.13) |
|
| (1.86) |
|
| (1.22) |
|
| (1.17) |
|
| (0.54) |
| |
| Net
Asset Value, End of Year |
$73.13 |
|
| $92.91 |
|
| $73.37 |
|
| $53.99 |
|
| $53.38 |
| |
| Total
return |
(16.89) |
% |
| 29.17 |
% |
| 38.15 |
% |
| 3.32 |
% |
| 30.48 |
% |
|
|
|
|
|
|
|
|
|
|
|
| |
| SUPPLEMENTAL
DATA AND RATIOS |
|
|
|
|
|
|
|
|
| |
|
Net
assets, end of Year (000’s) |
$338,263 |
|
| $517,268 |
|
| $368,383 |
|
| $274,876 |
|
| $348,402 |
| |
| Ratio
of operating expenses to average net assets: |
|
|
|
|
|
|
|
|
| |
| Before
expense reimbursement |
1.68 |
% |
| 1.67 |
% |
| 1.68 |
% |
| 1.72 |
% |
| 1.72 |
% |
|
|
After
expense reimbursement |
1.64 |
% |
| 1.64 |
% |
| 1.64 |
% |
| 1.64 |
% |
| 1.64 |
% |
|
| Ratio
of net investment income (loss) to average net assets: |
(0.51) |
% |
| (0.16) |
% |
| (0.88) |
% |
| 0.42 |
% |
| (0.72) |
% |
|
|
Portfolio
turnover rate(4) |
0 |
% |
| 0 |
% |
| 1 |
% |
| 1 |
% |
| 1 |
% |
|
(1)Information
presented relates to a share of capital stock outstanding for each
year.
(2)Net
investment income per share represents net investment income divided by the
average shares outstanding throughout the year.
(3)Amount
calculated is less than $0.005.
(4)Portfolio
turnover of The Paradigm Portfolio.
The
Small Cap Opportunities Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| No
Load Class |
|
|
For
the
Year
Ended
December
31,
2023 |
For
the
Year Ended
December 31,
2022 |
For
the
Year Ended
December 31,
2021 |
For
the
Year Ended
December 31,
2020 |
For
the
Year Ended
December 31,
2019 |
|
PER
SHARE DATA:(1) |
|
|
|
|
|
|
|
|
| |
| Net
Asset Value, Beginning of Year |
$130.35 |
|
| $98.78 |
|
| $66.81 |
|
| $65.31 |
|
| $51.40 |
| |
| Income
from Investment Operations: |
|
|
|
|
|
|
|
|
| |
|
Net
investment income (loss)(2) |
0.25 |
|
| 0.07 |
|
| (0.91) |
|
| 0.43 |
|
| (0.29) |
| |
|
Net
realized and unrealized gain (loss) on investments |
(19.35) |
|
| 31.47 |
|
| 34.48 |
|
| 1.07 |
|
| 14.20 |
| |
|
Total
from Investment Operations. |
(19.10) |
|
| 31.54 |
|
| 33.57 |
|
| 1.50 |
|
| 13.91 |
| |
|
Redemption
Fees. |
0.02 |
|
| 0.03 |
|
| 0.05 |
|
| 0.00 |
|
(3) |
0.00 |
|
(3) |
| Less
Distributions: |
|
|
|
|
|
|
|
|
| |
| From
net investment income |
(1.30) |
|
| — |
|
| (1.65) |
|
| — |
|
| — |
| |
|
From
net realized gains |
(5.70) |
|
|
|
|
|
|
|
|
| |
| Total
Distributions |
(7.00) |
|
| — |
|
| (1.65) |
|
| — |
|
| — |
| |
| Net
Asset Value, End of Year |
$104.27 |
|
| $130.35 |
|
| $98.78 |
|
| $66.81 |
|
| $65.31 |
| |
| Total
return |
(14.69) |
% |
| 31.96 |
% |
| 50.33 |
% |
| 2.30 |
% |
| 27.06 |
% |
|
| SUPPLEMENTAL
DATA AND RATIOS |
|
|
|
|
|
|
|
|
| |
|
Net
assets, end of Year (000’s) |
$204,889 |
|
| $327,093 |
|
| $195,631 |
|
| $126,350 |
|
| $180,575 |
| |
| Ratio
of operating expenses to average net assets: |
|
|
|
|
|
|
|
|
| |
| Before
expense reimbursement |
1.72 |
% |
| 1.69 |
% |
| 1.70 |
% |
| 1.78 |
% |
| 1.75 |
% |
|
|
After
expense reimbursement |
1.64 |
% |
| 1.64 |
% |
| 1.64 |
% |
| 1.64 |
% |
| 1.64 |
% |
|
| Ratio
of net investment income (loss) to average net assets: |
0.22 |
% |
| 0.07 |
% |
| (0.93) |
% |
| 0.78 |
% |
| (0.48) |
% |
|
|
Portfolio
turnover rate(4) |
2 |
% |
| 6 |
% |
| 3 |
% |
| 0 |
% |
| 4 |
% |
|
(1)Information
presented relates to a share of capital stock outstanding for each
year.
(2)Net
investment income per share represents net investment income divided by the
average shares outstanding throughout the year.
(3)Amount
calculated is less than $0.005.
(4)Portfolio
turnover of The Small Cap Opportunities Portfolio.
The
Market Opportunities Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| No
Load Class |
|
|
For
the
Year
Ended
December
31,
2023 |
For
the
Year Ended
December 31,
2022 |
For
the
Year Ended
December 31,
2021 |
For
the
Year Ended
December 31,
2020 |
For
the
Year Ended
December 31,
2019 |
|
PER
SHARE DATA:(1) |
|
|
|
| |
|
|
|
| |
| Net
Asset Value, Beginning of Year |
$45.55 |
|
| $40.16 |
|
| $31.85 |
|
| $26.71 |
|
| $21.83 |
| |
| Income
from Investment Operations: |
|
|
|
|
|
|
|
|
| |
|
Net
investment income (loss)(2) |
0.36 |
|
| 0.07 |
|
| (0.33) |
|
| 0.10 |
|
| (0.00) |
(3) |
| Net
realized and unrealized gain (loss) on investments |
(3.70) |
|
| 5.94 |
|
| 9.25 |
|
| 5.12 |
|
| 4.97 |
| |
|
Total
from Investment Operations. |
(3.34) |
|
| 6.01 |
|
| 8.92 |
|
| 5.22 |
|
| 4.97 |
| |
| Redemption
Fees |
0.00 |
|
(3) |
0.00 |
|
(3) |
0.02 |
|
| 0.00 |
|
(3) |
0.00 |
|
(3) |
| Less
Distributions: |
|
|
|
|
|
|
|
|
| |
|
From
net investment income. |
(0.36) |
|
| (0.02) |
|
| (0.59) |
|
| (0.08) |
|
| (0.09) |
| |
|
From
net realized gains. |
— |
|
| (0.60) |
|
| (0.04) |
|
| — |
|
| — |
| |
| Total
Distributions |
(0.36) |
|
| (0.62) |
|
| (0.63) |
|
| (0.08) |
|
| (0.09) |
| |
| Net
Asset Value, End of Year |
$41.85 |
|
| $45.55 |
|
| $40.16 |
|
| $31.85 |
|
| $26.71 |
| |
|
Total
return |
(7.33) |
% |
| 14.98 |
% |
| 28.04 |
% |
| 19.55 |
% |
| 22.76 |
% |
|
|
|
|
|
|
|
|
|
|
|
| |
| SUPPLEMENTAL
DATA AND RATIOS |
|
|
|
|
|
|
|
|
| |
|
Net
assets, end of Year (000’s) |
$92,117 |
|
| $96,190 |
|
| $86,943 |
|
| $66,570 |
|
| $56,987 |
| |
| Ratio
of operating expenses to average net assets: |
|
|
|
|
|
|
|
|
| |
|
Before
expense reimbursement. |
1.76 |
% |
| 1.76 |
% |
| 1.75 |
% |
| 1.85 |
% |
| 1.84 |
% |
|
|
After
expense reimbursement |
1.40 |
% |
| 1.40 |
% |
| 1.40 |
% |
| 1.40 |
% |
| 1.40 |
% |
|
| Ratio
of net investment income (loss) to average net assets: |
0.90 |
% |
| 0.18 |
% |
| (0.79) |
% |
| 0.40 |
% |
| (0.01) |
% |
|
|
Portfolio
turnover rate(4) |
5 |
% |
| 13 |
% |
| 2 |
% |
| 2 |
% |
| 4 |
% |
|
(1)Information
presented relates to a share of capital stock outstanding for each
year.
(2)Net
investment income per share represents net investment income divided by the
average shares outstanding throughout the year.
(3)Amount
calculated is less than $0.005.
(4)Portfolio
turnover of The Market Opportunities Portfolio.
The
Multi-Disciplinary Income Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| No
Load Class |
|
|
For
the
Year
Ended December 31, 2023 |
For
the
Year Ended December 31, 2022 |
For
the
Year Ended December 31, 2021 |
For
the
Year Ended December 31, 2020 |
For
the
Year Ended
December 31,
2019 |
|
PER
SHARE DATA:(1) |
|
|
|
|
|
|
|
| |
|
| Net
Asset Value, Beginning of Year |
$9.94 |
|
| $10.40 |
|
| $10.45 |
|
| $10.95 |
|
| $10.46 |
| |
| Income
from Investment Operations: |
|
|
|
|
|
|
|
| |
|
|
Net
investment income(2) |
0.49 |
|
| 0.21 |
|
| 0.18 |
|
| 0.33 |
|
| 0.45 |
| |
| Net
realized and unrealized gain (loss) on investments |
0.01 |
|
| (0.45) |
|
| (0.07) |
|
| (0.50) |
|
| 0.49 |
| |
|
Total
from Investment Operations. |
0.50 |
|
| (0.24) |
|
| 0.11 |
|
| (0.17) |
|
| 0.94 |
| |
| Redemption
Fees |
0.00 |
|
(3) |
0.00 |
|
(3) |
0.01 |
|
| 0.00 |
|
(3) |
0.00 |
|
(3) |
| Less
Distributions: |
|
|
|
|
|
|
|
| |
|
|
From
net investment income. |
(0.52) |
|
| (0.22) |
|
| (0.17) |
|
| (0.33) |
|
| (0.45) |
| |
| Total
Distributions |
(0.52) |
|
| (0.22) |
|
| (0.17) |
|
| (0.33) |
|
| (0.45) |
| |
| Net
Asset Value, End of Year |
$9.92 |
|
| $9.94 |
|
| $10.40 |
|
| $10.45 |
|
| $10.95 |
| |
| Total
return |
5.15 |
% |
| (2.30) |
% |
| 1.18 |
% |
| (1.38) |
% |
| 9.08 |
% |
|
|
|
|
|
|
|
|
|
|
|
| |
| SUPPLEMENTAL
DATA AND RATIOS |
|
|
|
|
|
|
|
| |
|
| Net
assets, end of Year (000’s) |
$12,121 |
|
| $16,325 |
|
| $3,202 |
|
| $3,698 |
|
| $6,025 |
| |
| Ratio
of operating expenses to average net assets: |
|
|
|
|
|
|
|
| |
|
|
Before
expense reimbursement |
1.64 |
% |
| 2.30 |
% |
| 2.10 |
% |
| 2.13 |
% |
| 2.04 |
% |
|
|
After
expense reimbursement |
1.03 |
% |
(5) |
1.49 |
% |
| 1.49 |
% |
| 1.49 |
% |
| 1.49 |
% |
|
| Ratio
of net investment income to average net assets: |
4.94 |
% |
| 2.06 |
% |
| 1.72 |
% |
| 3.14 |
% |
| 4.10 |
% |
|
|
Portfolio
turnover rate(4) |
37 |
% |
| 0 |
% |
| 0 |
% |
| 0 |
% |
| 0 |
% |
|
(1)Information
presented relates to a share of capital stock outstanding for each
year.
(2)Net
investment income per share represents net investment income divided by the
average shares outstanding throughout the year.
(3)Amount
calculated is less than $0.005.
(4)Portfolio
turnover of The Multi-Disciplinary Income Portfolio.
(5)Effective
as of April 30, 2023, the Adviser has agreed to reduce the expense limitation
for the Multi-Disciplinary Income Fund from 1.49% to 0.74%.
Kinetics
Mutual Funds, Inc.
|
|
|
|
|
| |
| The
Internet Fund |
The
Small Cap Opportunities Fund |
|
The
Global Fund
|
The
Market Opportunities Fund |
| The
Paradigm Fund |
The
Multi-Disciplinary Income Fund |
|
|
|
|
|
| |
|
Investment
Adviser
and
Shareholder Servicing Agent |
Horizon
Kinetics Asset Management LLC
470
Park Avenue South
New
York, NY 10016 |
|
| |
|
Legal
Counsel |
Faegre
Drinker Biddle & Reath LLP
One
Logan Square
Suite
2000
Philadelphia,
PA 19103-6996 |
|
| |
|
Independent
Registered Public
Accounting
Firm |
Tait,
Weller & Baker LLP
Two
Liberty Place, 50 South 16th Street, Suite 2900
Philadelphia,
PA 19102 |
|
| |
|
Distributor |
Kinetics
Funds Distributor LLC
470
Park Avenue South
New
York, NY 10016 |
|
| |
|
Transfer
Agent, Fund Accountant,
and
Administrator |
U.S.
Bank Global Fund Services
615
East Michigan Street
Milwaukee,
WI 53202 |
|
| |
|
Custodian |
U.S.
Bank N.A.
1555
N. RiverCenter Drive, Suite 302
Milwaukee,
WI 53212 |
You
may obtain the following and other information on the Funds free of
charge:
Statement
of Additional Information (SAI) dated April 30, 2024
The
SAI of the Funds provides more details about each Fund’s policies and
management. The Funds’ SAI is incorporated by reference into this
Prospectus.
Annual
and Semi-Annual Report
Additional
information about the Funds’ investments is available in the Funds’ annual
and semi-annual
reports to shareholders and in Form N-CSR. In the Funds’ annual report, you will
find a discussion of the market conditions and investment strategies that
significantly affected each Fund’s performance during the last fiscal year. In
Form N-CSR, you will find each Fund’s annual and semi-annual financial
statements.
To
receive any of these documents or the Funds’ Prospectus, free of charge, to
request additional information about the Company or to make shareholder
inquiries, please contact us:
|
|
|
|
|
| |
| By
Telephone: |
By
Internet: |
|
(800)
930-3828 |
http://www.kineticsfunds.com |
By
Mail:
Kinetics
Mutual Funds, Inc.
c/o U.S. Bank Global Fund Services
P.O. Box 701
Milwaukee, WI 53201-0701
Additionally,
the foregoing Fund documents are available on the Funds’ website listed
above.
SEC:
Reports
and other information about each Fund are available on the EDGAR Database on the
SEC’s website at http://www.sec.gov.
Copies of the information may be obtained, after paying a duplicating fee, by
electronic request at the following E-mail address: [email protected].
1940
Act File No. 811-09303
