ck0001083387-20221231
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| April
30, 2023 |
Prospectus |
www.kineticsfunds.com |
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The
Internet Fund
Advisor
Class A (KINAX)
Advisor
Class C (KINCX)
The
Global
Fund
Advisor
Class A (KGLAX)
Advisor
Class C (KGLCX)
The
Paradigm Fund
Advisor
Class A (KNPAX)
Advisor
Class C (KNPCX)
The
Small
Cap Opportunities Fund
Advisor
Class A (KSOAX)
Advisor
Class C (KSOCX)
The
Market
Opportunities Fund
Advisor
Class A (KMKAX)
Advisor
Class C (KMKCX)
Each
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. |
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. You may qualify for sales charge discounts
for Advisor Class A shares if you and your family invest, or agree to invest in
the future, at least $50,000
in Advisor Class A shares of the Kinetics Funds. More
information about these and other discounts is available from your financial
professional and in the sections titled “Description of Advisor Classes”
beginning on page 94 of the Fund’s prospectus, in Appendix A to this Prospectus
- Financial Intermediary Sales Charge Variations, and “Purchasing Shares”
beginning on page 59 of the Fund’s statement of additional
information.
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Fee
Table(1) |
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SHAREHOLDER
FEES
(fees paid directly from your
investment) |
Advisor
Class A |
Advisor
Class C |
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Maximum
Sales Charge (Load) Imposed on Purchases
(as a percentage of offering
price) |
5.75% |
None |
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Maximum
Deferred Sales Charge (Load) (as a percentage of original purchase price
or redemption price, whichever is less) |
None |
1.00% |
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Redemption
Fee (as a percentage of amount redeemed on shares held for 30 days or
less, if applicable) |
2.00% |
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) |
Advisor
Class A |
Advisor
Class C |
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Management
Fees(1) |
1.25% |
1.25% |
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Distribution
and Service (Rule 12b-1) Fees(2) |
0.50% |
1.00% |
| Other
Expenses |
0.27% |
0.27% |
| Total
Annual Fund Operating Expenses |
2.02% |
2.52% |
(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.
(2)The
Board of Directors (the “Board”) of Kinetics Mutual Funds, Inc. has approved a
Rule 12b-1 Distribution Plan that allows the Fund to pay up to 0.50% and 0.75%
of the average daily net asset value (“NAV”) of the Advisor Class A shares and
Advisor Class C shares, respectively, as compensation to the distributor or
other qualified recipients, pursuant to the Plan. However, at the present time,
the Fund is only assessing 0.25% and 0.75% under the Rule 12b-1
Distribution Plan for Advisor Class A shares and Advisor Class C shares,
respectively. In addition, the Board has approved a Shareholder Servicing Plan
for Advisor Class A shares and Advisor Class C shares that provides for an
annual shareholder servicing fee equal to 0.25% of the average daily net assets
attributable to Advisor Class A shares and Advisor Class C shares. At the
present time, the Fund is assessing, 0.25% and 0.75% of the distribution fees
for Advisor Class A shares and Advisor Class C shares, respectively, and is
assessing 0.25% of the shareholder servicing fees for Advisor Class A shares and
Advisor Class C shares.
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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| 1
Year |
3
Years |
5
Years |
10
Years |
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Advisor
Class A (if
you redeem your shares at the end of the period) |
$768 |
$1,172 |
$1,600 |
$2,788 |
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Advisor
Class C (if
you redeem your shares at the end of the period) |
$255 |
$785 |
$1,340 |
$2,856 |
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Advisor
Class C (if
you do not
redeem your shares at the end of the period) |
$358 |
$785 |
$1,340 |
$2,856 |
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 bitcoins exclusively through a
Delaware statutory trust (“Grayscale Bitcoin Trust”) that offers exposure to
bitcoin. Grayscale Bitcoin Trust offers shares on an ongoing basis through
private placements pursuant to the exemption from registration provided by Rule
506(c) under Regulation D of the Securities Act of 1933, as amended. Bitcoins
are a digital commodity 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 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. 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 Investment
Company Act of 1940 (the “1940 Act”) relating to affiliated transactions and
custody. 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.
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 22.3% of its net assets in the Texas Pacific Land
Corporation (the “Land Corporation”) as of March 31, 2023. 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 four 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 Bitcoin
Risks:
The value of the Internet Portfolio’s investment in the Grayscale Bitcoin Trust
directly and indirectly through its Subsidiaries is subject to fluctuations in
the value of bitcoins. The value of bitcoins is determined by the supply of and
demand for bitcoins in the global market for the trading of bitcoins, which
consists of transactions on electronic bitcoin exchanges (“Bitcoin Exchanges”).
Pricing on Bitcoin Exchanges and other venues can be volatile and can adversely
affect the value of the Grayscale Bitcoin Trust. Currently, there is relatively
small use of bitcoins in the retail and commercial marketplace in comparison to
the relatively large use of bitcoins by speculators, thus contributing to price
volatility that could adversely affect the Internet Portfolio’s investment in
the Grayscale Bitcoin Trust. Bitcoin transactions are irrevocable, and stolen or
incorrectly transferred bitcoins may be irretrievable. As a result, any
incorrectly executed bitcoin transactions could
adversely
affect the value of the Internet Portfolio’s investment in the Grayscale Bitcoin
Trust. Shares of the Grayscale Bitcoin Trust may trade at a premium or discount
to the net asset value of the Grayscale Bitcoin Trust.
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 Standard & Poor’s, 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. Recently, there have been inflationary price movements and
rising interest rates. 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 Regulatory
Risk:
Bitcoin is generally not subject to the same degree of regulation as are
registered U.S. securities. The reporting, accounting and auditing standards for
Bitcoin may differ from the standards for registered U.S. securities.
Furthermore, countries, including the United States, may in the future curtail
or outlaw the acquisition, use or redemption of bitcoins.
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, 2022, the Portfolio had 33.6% invested in the
Mining, Quarrying, and Oil and 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),
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, (after taking into account any sales
charges) 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. The bar chart shows how the performance of Advisor Class
A shares (the Class with the longest period of annual returns) has varied from
year to year. The returns for Advisor Class C shares were different than the
returns shown below because each Class of shares has different expenses. Updated
performance information is available on the Internet Fund’s website at
http://www.kineticsfunds.com or by calling the Fund toll-free at
(800)
930-3828.
The
Internet Fund – Advisor Class A
Calendar
Year Returns as of 12/31
Sales charges are not reflected in
the bar chart. If these amounts were reflected, returns would be less than those
shown.
|
|
|
|
|
|
|
|
|
|
|
| |
| Best
Quarter: |
Q4 2020 |
51.69% |
| Worst
Quarter: |
Q2 2022 |
-25.16% |
The after-tax returns for the
Internet Fund’s Advisor Class A shares 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. After-tax returns are shown
for Advisor Class A shares only. After-tax returns for Advisor Class C shares
will differ. 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
12/31/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 1
Year |
5
Years |
10
Years |
Since
Inception(1) |
|
The
Internet Fund (KINAX) Advisor Class
A |
|
|
| |
|
Return Before
Taxes |
-28.81% |
3.17% |
9.77% |
7.62% |
|
Return After Taxes on
Distributions |
-28.97% |
1.46% |
7.36% |
6.45% |
|
Return
After Taxes on Distributions and Sale of Fund Shares(2) |
-16.95% |
1.94% |
7.28% |
6.16% |
|
S&P
500®
Index
(reflects
no deduction for fees, expenses or taxes) |
-18.11% |
9.42% |
12.56% |
7.44% |
|
NASDAQ
Composite®
Index (reflects no deduction for fees, expenses or
taxes) |
-33.10% |
8.68% |
13.24% |
7.85% |
|
The
Internet Fund (KINCX) Advisor Class
C |
|
|
| |
|
Return Before
Taxes |
-25.61% |
3.87% |
9.88% |
8.88% |
|
S&P
500®
Index (reflects no deductions for
fees, expenses or taxes) |
-18.11% |
9.42% |
12.56% |
8.47% |
|
NASDAQ
Composite®
Index (reflects no deductions for fees, expenses or
taxes) |
-33.10% |
8.68% |
13.24% |
9.45% |
(1)The Internet Fund’s
Advisor Class A shares commenced operations on April 26,
2001 and Advisor Class C shares
commenced operations on February 16,
2007. The returns for the two
indices in this column have been calculated since the inception date of the
Internet Fund’s Advisor Class A shares and Advisor Class C shares, as
applicable.
(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 |
24 |
| Murray
Stahl |
Co-Portfolio
Manager |
24 |
| James
Davolos |
Co-Portfolio
Manager |
17 |
| Steven
Tuen |
Investment
Team Member |
24 |
| Steven
Bregman |
Investment
Team Member |
7 |
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. You may qualify for sales charge discounts
for Advisor Class A shares if you and your family invest, or agree to invest in
the future, at least $50,000
in Advisor Class A shares of the Kinetics Funds. More
information about these and other discounts is available from your financial
professional and in the sections titled “Description of Advisor Classes”
beginning on page 94 of the Fund’s prospectus, in Appendix A to this Prospectus
- Financial Intermediary Sales Charge Variations, and “Purchasing Shares”
beginning on page 59 of the Fund’s statement of additional
information.
|
|
|
|
|
|
|
|
| |
|
Fee
Table(1) |
| |
|
SHAREHOLDER
FEES
(fees paid directly from your
investment) |
Advisor
Class A |
Advisor
Class C |
|
Maximum
Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price) |
5.75% |
None |
|
Maximum
Deferred Sales Charge (Load) (as a percentage of original purchase price
or redemption price, whichever is less) |
None |
1.00% |
|
Redemption
Fee (as a percentage of amount redeemed on shares held for 30 days or
less, if applicable) |
2.00% |
2.00% |
|
|
|
|
|
|
|
|
| |
|
ANNUAL
FUND OPERATING EXPENSES
(expenses
that you pay each year as a percentage of the value of your
investment) |
Advisor
Class A |
Advisor
Class C |
|
Management
Fees(1) |
1.25% |
1.25% |
|
Distribution
and Service (Rule 12b-1) Fees(2) |
0.50% |
1.00% |
| Other
Expenses |
0.57% |
0.57% |
| Total
Annual Fund Operating Expenses |
2.32% |
2.82% |
|
Fee
Waiver and/or Expense Reimbursements(3) |
-0.68% |
-0.68% |
|
Total
Annual Fund Operating Expenses after Fee Waiver and/or Expense
Reimbursements |
1.64% |
2.14% |
(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.
(2)The
Board of Directors (the “Board”) of Kinetics Mutual Funds, Inc. has approved a
Rule 12b-1 Distribution Plan that allows the Fund to pay up to 0.50% and 0.75%
of the average daily net asset value (“NAV”) of the Advisor Class A shares and
Advisor Class C shares, respectively, as compensation to the distributor or
other qualified recipients, pursuant to the Plan. However, at the present time,
the Fund is only assessing 0.25% and 0.75% under the Rule 12b-1 Distribution
Plan for Advisor Class A shares and Advisor Class C shares, respectively. In
addition, the Board has approved a Shareholder Servicing Plan for Advisor Class
A shares and Advisor Class C shares that provides for an annual shareholder
servicing fee equal to 0.25% of the average daily net assets attributable to
Advisor Class A shares and Advisor Class C shares.
(3)Horizon Kinetics Asset
Management LLC, the investment adviser to the Global Portfolio of the Kinetics
Portfolio 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% and 2.14%,
excluding AFFE, for the Advisor Class A shares and Advisor Class C shares,
respectively. These
waivers
and reimbursements are in effect until April 30,
2024, 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 Advisor Class A and
Advisor Class C 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 |
|
Advisor
Class A
(if you redeem your shares at the end of the period) |
$732 |
$1,196 |
$1,686 |
$3,029 |
|
Advisor
Class C (if
you redeem your shares at the end of the period) |
$217 |
$810 |
$1,429 |
$3,098 |
|
Advisor
Class C
(if you do not
redeem your shares at the end of the period) |
$320 |
$810 |
$1,429 |
$3,098 |
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 57% 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 bitcoins exclusively through a
Delaware statutory trust (“Grayscale Bitcoin Trust”) that offers exposure to
bitcoin. Grayscale Bitcoin Trust offers shares on an ongoing basis through
private placements pursuant to the exemption from registration provided by Rule
506(c) under Regulation D of the Securities Act of 1933, as amended. Bitcoins
are a digital commodity 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 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. 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 Investment Company Act of
1940 (the “1940 Act”) relating to affiliated transactions and custody. 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.
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 17.5% of its net
assets in the Texas Pacific Land Corporation (the “Land Corporation”) as of
March 31, 2023. 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 four 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 Bitcoin
Risks:
The
value of the Global Portfolio’s investment in the Grayscale Bitcoin Trust
directly and indirectly through its Subsidiaries is subject to fluctuations in
the value of bitcoins. The value of bitcoins is determined by the supply of and
demand for bitcoins in the global market for the trading of bitcoins, which
consists of transactions on electronic bitcoin exchanges (“Bitcoin Exchanges”).
Pricing on Bitcoin Exchanges and other venues can be volatile and can adversely
affect the value of the Grayscale Bitcoin Trust. Currently, there is relatively
small use of bitcoins in the retail and commercial marketplace in comparison to
the relatively large use of bitcoins by speculators, thus
contributing
to price volatility that could adversely affect the Global Portfolio’s
investment in the Grayscale Bitcoin Trust. Bitcoin transactions are irrevocable,
and stolen or incorrectly transferred bitcoins may be irretrievable. As a
result, any incorrectly executed bitcoin transactions could adversely affect the
value of the Global Portfolio’s investment in the Grayscale Bitcoin Trust.
Shares of the Grayscale Bitcoin Trust may trade at a premium or discount to the
net asset value of the Grayscale Bitcoin Trust.
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 Standard & Poor’s, 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. Recently, there have been inflationary price movements and
rising interest rates. 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 Regulatory
Risk:
Bitcoin is generally not subject to the same degree of regulation as are
registered U.S. securities. The reporting, accounting and auditing standards for
Bitcoin may differ from the standards for registered U.S. securities.
Furthermore, countries, including the United States, may in the future curtail
or outlaw the acquisition, use or redemption of bitcoins.
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), 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, (after taking into account any sales charges)
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
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. The bar chart shows how the performance of
Advisor Class A shares (the Class with the longest period of annual returns) has
varied from year to year. The returns for Advisor Class C shares were different
than the returns shown below because each Class of shares has different
expenses. 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 – Advisor Class A
Calendar
Year Returns as of 12/31
Sales charges are not reflected in
the bar chart. If these amounts were reflected, returns would be less than those
shown.
|
|
|
|
|
|
|
|
|
|
|
| |
| Best
Quarter: |
Q4 2020 |
30.43% |
| Worst
Quarter: |
Q4 2018 |
-18.23% |
The after-tax returns for the
Global Fund’s Advisor Class A shares 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. After-tax returns are shown
for Advisor Class A shares only. After-tax returns for Advisor Class C shares
will differ. 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
12/31/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 1
Year |
5
Years |
10
Years |
Since
Inception
(May 19,
2008) |
|
The
Global Fund (KGLAX) Advisor Class
A |
|
|
| |
|
Return Before
Taxes |
-12.17% |
3.28% |
6.94% |
5.39% |
|
Return After Taxes on
Distributions |
-12.48% |
3.02% |
6.56% |
5.09% |
|
Return
After Taxes on Distributions and Sale of Fund Shares(1) |
-6.99% |
2.48% |
5.53% |
4.36% |
|
The
Global Fund (KGLCX) Advisor Class
C |
|
|
| |
|
Return Before
Taxes |
-8.12% |
4.00% |
6.94% |
5.17% |
|
S&P®
500 Index (reflects no deductions for
fees, expenses or taxes) |
-18.11% |
9.42% |
12.56% |
9.20% |
|
MSCI ACWI Index (reflects no deductions
for fees, expenses or taxes) |
-18.36% |
5.23% |
7.98% |
5.01% |
(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 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 |
24 |
| Steven
Tuen |
Co-Portfolio
Manager |
20 |
| Peter
B. Doyle |
Investment
Team Member |
24 |
| James
Davolos |
Investment
Team Member |
17 |
| Steven
Bregman |
Investment
Team Member |
7 |
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. You may qualify for sales charge discounts
for Advisor Class A shares if you and your family invest, or agree to invest in
the future, at least $50,000
in Advisor Class A shares of the Kinetics Funds. More
information about these and other discounts is available from your financial
professional and in the sections titled “Description of Advisor Classes”
beginning on page 94 of the Fund’s prospectus, in Appendix A to this Prospectus
- Financial Intermediary Sales Charge Variations, and “Purchasing Shares”
beginning on page 59 of the Fund’s statement of additional
information.
|
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|
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|
|
|
| |
|
Fee
Table(1) |
| |
|
SHAREHOLDER
FEES
(fees
paid directly from your investment) |
Advisor
Class A |
Advisor
Class C |
|
Maximum
Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price) |
5.75% |
None |
|
Maximum
Deferred Sales Charge (Load) (as a percentage of original purchase price
or redemption price, whichever is less) |
None |
1.00% |
|
Redemption
Fee (as a percentage of amount redeemed on shares held for 30 days or
less, if applicable) |
2.00% |
2.00% |
|
|
|
|
|
|
|
|
| |
|
ANNUAL
FUND OPERATING EXPENSES
(expenses
that you pay each year as a percentage of the value of your
investment) |
Advisor
Class A |
Advisor
Class C |
|
Management
Fees(1) |
1.25% |
1.25% |
|
Distribution
and Service (Rule 12b-1) Fees(2) |
0.50% |
1.00% |
| Other
Expenses |
0.17% |
0.17% |
|
Total
Annual Fund Operating Expenses |
1.92% |
2.42% |
|
Fee
Waiver and/or Expense Reimbursements(3) |
-0.03% |
-0.03% |
|
Total
Annual Fund Operating Expenses after Fee Waiver and/or Expense
Reimbursements |
1.89% |
2.39% |
(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.
(2)The
Board of Directors (the “Board”) of Kinetics Mutual Funds, Inc. has approved a
Rule 12b-1 Plan that allows the Fund to pay up to 0.50% and 0.75% of the average
daily net asset value (“NAV”) of the Advisor Class A shares and Advisor Class C
shares, respectively, as compensation to the distributor or other qualified
recipients, pursuant to the Plan. However, at the present time, the Fund is only
assessing 0.25% and 0.75% under the Rule 12b-1 Distribution Plan for Advisor
Class A shares and Advisor Class C shares, respectively. In addition, the Board
has approved a Shareholder Servicing Plan for Advisor Class A shares and Advisor
Class C shares that provides for an annual shareholder servicing fee equal to
0.25% of the average daily net assets attributable to Advisor Class A shares and
Advisor Class C shares.
(3)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 1.89% and 2.39%,
excluding acquired fund fees and expenses (“AFFE”), for Advisor Class A shares
and Advisor Class C shares, respectively. These waivers and reimbursements are
in effect until April 30,
2024, 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:
|
|
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|
|
|
|
|
|
|
|
|
|
|
| |
|
| 1
Year |
3
Years |
5
Years |
10
Years |
|
Advisor
Class A (if
you redeem your shares at the end of the period) |
$756 |
$1,141 |
$1,549 |
$2,687 |
|
Advisor
Class C (if
you redeem your shares at the end of the period) |
$242 |
$752 |
$1,288 |
$2,754 |
|
Advisor
Class C
(if you do not
redeem your shares at the end of the period) |
$345 |
$752 |
$1,288 |
$2,754 |
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 bitcoins exclusively through a
Delaware statutory trust (“Grayscale Bitcoin Trust”) that offers exposure to
bitcoin. Grayscale Bitcoin Trust offers shares on an ongoing basis through
private placements pursuant to the exemption from registration provided by
Rule 506(c) under Regulation D of the Securities Act of 1933, as amended.
Bitcoins are a digital commodity 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 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 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 Investment
Company Act of 1940 (the “1940 Act”) relating to affiliated transactions and
custody. 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.
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 62.4% of its net assets in the Texas Pacific Land
Corporation (the “Land Corporation”) as of March 31, 2023. 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 five 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 Bitcoin
Risks:
The value of the Paradigm Portfolio’s investment in the Grayscale Bitcoin Trust
directly and indirectly through its Subsidiaries is subject to fluctuations in
the value of bitcoins. The value of bitcoins is determined by the supply of and
demand for bitcoins in the global market for the trading of bitcoins, which
consists of transactions on electronic bitcoin exchanges (“Bitcoin Exchanges”).
Pricing on Bitcoin Exchanges and other venues can be volatile and can adversely
affect the value of the Grayscale Bitcoin Trust. Currently, there is relatively
small use of bitcoins in the retail and commercial marketplace in comparison to
the relatively large use of bitcoins by
speculators,
thus contributing to price volatility that could adversely affect the Paradigm
Portfolio’s investment in the Grayscale Bitcoin Trust. Bitcoin transactions are
irrevocable, and stolen or incorrectly transferred bitcoins may be
irretrievable. As a result, any incorrectly executed bitcoin transactions could
adversely affect the value of the Paradigm Portfolio’s investment in the
Grayscale Bitcoin Trust. Shares of the Grayscale Bitcoin Trust may trade at a
premium or discount to the net asset value of the Grayscale Bitcoin
Trust.
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 Regulatory
Risk:
Bitcoin is generally not subject to the same degree of regulation as are
registered U.S. securities. The reporting, accounting and auditing standards for
Bitcoin may differ from the standards for registered U.S. securities.
Furthermore, countries, including the United States, may in the future curtail
or outlaw the acquisition, use or redemption of bitcoins.
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 Standard & Poor’s, 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. Recently, there have been inflationary price movements and
rising interest rates. 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, 2022, the Portfolio had
70.9% 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), 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, (after taking into account any sales
charges) 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 place. If fee
waivers
were
not in place, the Paradigm Fund’s performance would be reduced. The bar chart
shows how the performance of Advisor Class A shares (the Class with the longest
period of annual returns) has varied from year to year. The returns for Advisor
Class C shares were different than the returns shown below because each Class of
shares has different expenses. 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 – Advisor Class A
Calendar
Year Returns as of 12/31
Sales charges are not reflected in
the bar chart. If these amounts were reflected, returns would be less than those
shown.
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|
|
|
|
|
| |
| Best
Quarter: |
Q1 2021 |
54.32% |
| Worst
Quarter: |
Q1 2020 |
-32.27% |
The after-tax returns for the
Paradigm Fund’s Advisor Class A shares 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. After-tax returns are shown
for Advisor Class A shares only. After-tax returns for Advisor Class C shares
will differ.
Average Annual Total Returns as of
12/31/2022
|
|
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|
|
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|
|
|
|
|
|
| |
|
| 1
Year |
5
Years |
10
Years |
Since
Inception(1) |
|
The
Paradigm Fund (KNPAX) Advisor Class
A |
|
|
| |
|
Return Before
Taxes |
21.45% |
16.16% |
15.52% |
11.38% |
|
Return After Taxes on
Distributions |
20.86% |
15.24% |
15.05% |
11.10% |
| Return After Taxes on Distributions and
Sale of Fund Shares |
13.12% |
12.74% |
13.03% |
10.00% |
|
S&P
500®
Index
(reflects no deductions for
fees, expenses or taxes) |
-18.11% |
9.42% |
12.56% |
7.44% |
|
MSCI ACWI Index (reflects no deductions
for fees, expenses or taxes) |
-18.36% |
5.23% |
7.98% |
5.83% |
|
The
Paradigm Fund (KNPCX) Advisor Class
C |
|
|
| |
|
Return Before
Taxes |
27.22% |
16.96% |
15.63% |
11.72% |
|
S&P
500®
Index (reflects no deductions for fees, expenses or
taxes) |
-18.11% |
9.42% |
12.56% |
8.96% |
|
MSCI ACWI Index (reflects no deductions
for fees, expenses or taxes) |
-18.36% |
5.23% |
7.98% |
7.17% |
(1)The Paradigm Fund’s
Advisor Class A shares commenced operations on April 26,
2001 and Advisor Class C shares
commenced operations on June 28,
2002. The returns for the two
indices in this column have been calculated since the inception date of the
Paradigm Fund’s Advisor Class A shares and Advisor Class C shares, as
applicable.
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.
|
|
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|
|
|
|
|
| |
| Investment
team member |
Primary
Title |
Years
of Service with the Fund |
| Peter
B. Doyle |
Co-Portfolio
Manager |
24 |
| Murray
Stahl |
Co-Portfolio
Manager |
24 |
| Steven
Bregman |
Co-Portfolio
Manager |
7 |
| James
Davolos |
Investment
Team Member |
17 |
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. You may qualify for sales charge discounts
for Advisor Class A shares if you and your family invest, or agree to invest in
the future, at least $50,000
in Advisor Class A shares of the Kinetics Funds. More
information about these and other discounts is available from your financial
professional and in the sections titled “Description of Advisor Classes”
beginning on page 94 of the Fund’s prospectus, in Appendix A to this Prospectus
- Financial Intermediary Sales Charge Variations, and “Purchasing Shares”
beginning on page 59 of the Fund’s statement of additional
information.
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|
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| |
|
Fee
Table(1) |
| |
|
SHAREHOLDER
FEES
(fees paid directly from your
investment) |
Advisor
Class A |
Advisor
Class C |
|
Maximum
Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price) |
5.75% |
None |
|
Maximum
Deferred Sales Charge (Load) (as a percentage of original purchase price
or redemption price, whichever is less) |
None |
1.00% |
|
Redemption
Fee (as a percentage of amount redeemed on shares held for 30 days or
less, if applicable) |
2.00% |
2.00% |
|
|
|
|
|
|
|
|
| |
|
ANNUAL
FUND OPERATING EXPENSES
(expenses
that you pay each year as a percentage of the value of your
investment) |
Advisor
Class A |
Advisor
Class C |
|
Management
Fees(1) |
1.25% |
1.25% |
|
Distribution
and Service (Rule 12b-1) Fees(2) |
0.50% |
1.00% |
| Other
Expenses |
0.19% |
0.19% |
|
Total
Annual Fund Operating Expenses |
1.94% |
2.44% |
|
Fee
Waiver and/or Expense Reimbursements (3) |
-0.05% |
-0.05% |
|
Total
Annual Fund Operating Expenses after Fee Waiver and/or Expense
Reimbursements |
1.89% |
2.39% |
(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.
(2)The Board of Directors
(the “Board”) of Kinetics Mutual Funds, Inc. has approved a Rule 12b-1
Distribution Plan that allows the Fund to pay up to 0.50% and 0.75% of the
average daily net asset value (“NAV”) of the Advisor Class A shares and Advisor
Class C shares, respectively, as compensation to the distributor or other
qualified recipients, pursuant to the Plan. However, at the present time, the
Fund is only assessing 0.25% and 0.75% under the Rule 12b-1 Distribution Plan
for Advisor Class A shares and Advisor Class C shares, respectively. In
addition, the Board has approved a Shareholder Servicing Plan for Advisor Class
A and Advisor Class C shares that provides for an annual shareholder servicing
fee equal to 0.25% of the average daily net assets attributable to Advisor Class
A shares and Advisor Class C shares.
(3)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
1.89%
and 2.39%, excluding AFFE, for Advisor Class A shares and Advisor Class C
shares, respectively. These waivers and reimbursements are in effect until
April 30,
2024, 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:
|
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|
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| |
|
| 1
Year |
3
Years |
5
Years |
10
Years |
|
Advisor
Class A (if
you redeem your shares at the end of the period) |
$756 |
$1,145 |
$1,557 |
$2,705 |
|
Advisor
Class C (if
you redeem your shares at the end of the period) |
$242 |
$756 |
$1,296 |
$2,772 |
|
Advisor
Class C
(if you do not
redeem your shares at the end of the period) |
$345 |
$756 |
$1,296 |
$2,772 |
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 6% 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 $5.8
billion as of March 31, 2023. 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 bitcoins exclusively through a
Delaware statutory trust (“Grayscale Bitcoin Trust”) that offers exposure to
bitcoin. Grayscale Bitcoin Trust offers shares on an ongoing basis through
private placements pursuant to the exemption from registration provided by
Rule 506(c) under Regulation D of the Securities Act of 1933, as amended.
Bitcoins are a digital commodity 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 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 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 Investment
Company Act of 1940 (the “1940 Act”) relating to affiliated transactions and
custody. 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.
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 45.1% of its net assets in the Texas Pacific Land
Corporation (the “Land Corporation”) as of March 31, 2023. 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 four
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 Bitcoin
Risks:
The value of the Small Cap Portfolio’s investment in the Grayscale Bitcoin Trust
directly and indirectly through its Subsidiary is subject to fluctuations in the
value of bitcoins. The value of bitcoins is determined by the supply of and
demand for bitcoins in the global market for the trading of bitcoins, which
consists of transactions on electronic bitcoin exchanges (“Bitcoin Exchanges”).
Pricing on Bitcoin Exchanges and other venues can be volatile and can adversely
affect the value of the Grayscale Bitcoin Trust. Currently, there is relatively
small use of bitcoins in the retail and commercial marketplace in comparison to
the relatively large use of bitcoins by speculators, thus contributing to price
volatility that could adversely affect the Small Cap Portfolio’s investment in
the Grayscale Bitcoin Trust. Bitcoin transactions are irrevocable, and stolen or
incorrectly transferred bitcoins may be irretrievable. As a result, any
incorrectly executed bitcoin transactions could adversely affect the value of
the Small Cap Portfolio’s investment in the Grayscale Bitcoin Trust.
Shares
of the Grayscale Bitcoin Trust may trade at a premium or discount to the net
asset value of the Grayscale Bitcoin Trust.
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 Standard & Poor’s, 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. Recently, there have been inflationary
price movements and rising interest rates. 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 Regulatory
Risk:
Bitcoin is generally not subject to the same degree of regulation as are
registered U.S. securities. The reporting, accounting and auditing standards for
Bitcoin may differ from the standards for registered U.S. securities.
Furthermore, countries, including the United States, may in the future curtail
or outlaw the acquisition, use or redemption of bitcoins.
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, 2022, the Portfolio had
52.4% 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), 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, (after taking into account any
sales charges) 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 place. If fee
waivers were not in place, the Small Cap Fund’s performance would be reduced.
The bar chart shows how the performance of Advisor Class A shares (the Class
with the longest period of annual returns) has varied from year to year. The
returns for Advisor Class C shares were different than the returns shown below
because each Class of shares has different
expenses.
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 – Advisor Class A
Calendar
Year Returns as of 12/31
Sales charges are not reflected in
the bar chart. If these amounts were reflected, returns would be less than those
shown.
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| Best
Quarter: |
Q1 2021 |
60.38% |
| Worst
Quarter: |
Q1 2020 |
-34.43% |
The after-tax returns for the
Small Cap Fund’s Advisor Class A shares 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. After-tax returns are shown
for Advisor Class A shares only. After-tax returns for Advisor Class C shares
will differ.
Average Annual Total Returns as of
12/31/2022
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| 1
Year |
5
Years |
10
Years |
Since
Inception(1) |
|
The
Small Cap Opportunities Fund
(KSOAX) Advisor Class
A |
|
|
| |
|
Return Before
Taxes |
24.07% |
19.19% |
17.07% |
11.14% |
|
Return After Taxes on
Distributions |
24.07% |
19.09% |
17.03% |
10.97% |
| Return After Taxes on Distributions and
Sale of Fund Shares |
14.25% |
15.63% |
14.63% |
9.76% |
|
S&P
600®
SmallCap Index
(reflects no deductions for
fees, expenses or taxes) |
-16.10% |
5.88% |
10.82% |
9.28% |
|
S&P
500®
Index
(reflects
no deductions for fees, expenses or taxes) |
-18.11% |
9.42% |
12.56% |
8.02% |
|
The
Small Cap Fund (KSOCX) Advisor Class
C |
|
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| |
|
Return Before
Taxes |
29.98% |
20.01% |
17.18% |
9.67% |
|
S&P
600®
SmallCap Index (reflects no deductions for fees, expenses or
taxes) |
-16.10% |
5.88% |
10.82% |
8.07% |
|
S&P
500®
Index
(reflects
no deductions for fees, expenses or taxes) |
-18.11% |
9.42% |
12.56% |
8.47% |
(1)The Small Cap
Opportunities Fund’s Advisor Class A shares commenced operations on
December 31,
2001 and Advisor Class C shares
commenced operations on February 16,
2007. The returns for the two
indices in this column have been calculated since the inception date of Advisor
Class A shares and Advisor Class C shares, as
applicable.
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.
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| Investment
team member |
Primary
Title |
Years
of Service with the Fund |
| Peter
B. Doyle |
Co-Portfolio
Manager |
23 |
| Murray
Stahl |
Co-Portfolio
Manager |
23 |
| Matthew
Houk |
Co-Portfolio
Manager |
12 |
| James
Davolos |
Investment
Team Member |
17 |
| Steven
Bregman |
Investment
Team Member |
7 |
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.
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| 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. You may qualify for sales charge discounts
for Advisor Class A shares if you and your family invest, or agree to invest in
the future, at least $50,000
in Advisor Class A shares of the Kinetics Funds. More
information about these and other discounts is available from your financial
professional and in the sections titled “Description of Advisor Classes”
beginning on page 94 of the Fund’s prospectus, in Appendix A to this Prospectus
- Financial Intermediary Sales Charge Variations, and “Purchasing Shares”
beginning on page 59 of the Fund’s statement of additional
information.
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Fee
Table(1) |
| |
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SHAREHOLDER
FEES
(fees paid directly from your
investment) |
Advisor
Class A |
Advisor
Class C |
|
Maximum
Sales Charge (Load) Imposed on Purchases
(as a percentage of offering
price) |
5.75% |
None |
|
Maximum
Deferred Sales Charge (Load) (as a percentage of original purchase price
or redemption price, whichever is less) |
None |
1.00% |
|
Redemption
Fee (as a percentage of amount redeemed on shares held for 30 days or
less, if applicable) |
2.00% |
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) |
Advisor
Class A |
Advisor
Class C |
|
Management
Fees(1) |
1.25% |
1.25% |
|
Distribution
and Service (Rule 12b-1) Fees(2) |
0.50% |
1.00% |
| Other
Expenses |
0.26% |
0.26% |
| Total
Annual Fund Operating Expenses |
2.01% |
2.51% |
|
Fee
Waiver and/or Expense Reimbursements(3) |
-0.36% |
-0.36% |
|
Total
Annual Fund Operating Expenses after Fee Waiver and/or Expense
Reimbursements |
1.65% |
2.15% |
(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.
(2)The Board of Directors
(the “Board”) of Kinetics Mutual Funds, Inc. has approved a Rule 12b-1
Distribution Plan that allows the Fund to pay up to 0.50% and 0.75% of the
average daily net asset value (“NAV”) of the Advisor Class A shares and Advisor
Class C shares, respectively, as compensation to the distributor or other
qualified recipients, pursuant to the Plan. However, at the present time, the
Fund is only assessing 0.25% and 0.75% under the Rule 12b-1 Distribution Plan
for Advisor Class A shares and Advisor Class C shares, respectively. In
addition, the Board has approved a Shareholder Servicing Plan for Advisor Class
A shares and Advisor Class C shares that provides for an annual shareholder
servicing fee equal to 0.25% of the average daily net assets attributable to
Advisor Class A shares and Advisor Class C shares.
(3)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
1.65% and 2.15% of the Fund’s average daily net assets, excluding acquired fund
fees and expenses (“AFFE”), taxes, brokerage commissions, extraordinary items
and interest, for Advisor Class A shares and Advisor Class C shares,
respectively. 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,
2024, 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:
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| 1
Year |
3
Years |
5
Years |
10
Years |
|
Advisor
Class A (if
you redeem your shares at the end of the period) |
$733 |
$1,136 |
$1,564 |
$2,751 |
|
Advisor
Class C (if
you redeem your shares at the end of the period) |
$218 |
$747 |
$1,303 |
$2,819 |
|
Advisor
Class C
(if you do not
redeem your shares at the end of the period) |
$318 |
$747 |
$1,303 |
$2,819 |
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 13% 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 bitcoins exclusively
through a Delaware statutory trust (“Grayscale Bitcoin Trust”) that offers
exposure to bitcoin. Grayscale Bitcoin Trust offers shares on an ongoing basis
through private placements pursuant to the exemption from registration provided
by Rule 506(c) under Regulation D of the Securities Act of 1933, as amended.
Bitcoins are a digital commodity 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 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. 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. 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 Investment Company Act of 1940 (the “1940 Act”) relating to
affiliated transactions and custody. 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.
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 48.6% of its net assets in the Texas Pacific
Land Corporation (the “Land Corporation”) as of March 31, 2023. 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 four 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 Bitcoin
Risks:
The value of the Market Opportunities Portfolio’s investment in the Grayscale
Bitcoin Trust directly and indirectly through its Subsidiaries is subject to
fluctuations in the value of bitcoins. The value of bitcoins is determined by
the supply of and demand for bitcoins in the global market for the trading of
bitcoins, which consists of transactions on electronic bitcoin exchanges
(“Bitcoin Exchanges”). Pricing on Bitcoin Exchanges and other venues can be
volatile and can adversely affect the value of the Grayscale Bitcoin Trust.
Currently, there is relatively small use of bitcoins in the retail and
commercial marketplace in comparison to the relatively large use of bitcoins by
speculators, thus contributing to price volatility that could adversely affect
the Market Opportunities Portfolio’s investment in the Grayscale Bitcoin Trust.
Bitcoin transactions are irrevocable, and stolen or incorrectly transferred
bitcoins may be irretrievable. As a result, any incorrectly executed bitcoin
transactions could adversely affect the value of the Market Opportunities
Portfolio’s investment in the Grayscale Bitcoin Trust. Shares of the Grayscale
Bitcoin Trust may trade at a premium or discount to the net asset value of the
Grayscale Bitcoin Trust.
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, 2022, the
Portfolio had 63.3% invested in the Mining, Quarrying, and Oil and Gas
Extraction 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 Standard & Poor’s, 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. Recently, there have been inflationary
price movements and rising interest rates. 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 Regulatory
Risk:
Bitcoin is generally not subject to the same degree of regulation as are
registered U.S. securities. The reporting, accounting and auditing standards for
Bitcoin may differ from the standards for registered U.S. securities.
Furthermore, countries, including the United States, may in the future curtail
or outlaw the acquisition, use or redemption of bitcoins.
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),
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 (after taking into account any sales charges) 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. The bar chart shows how the performance of
Advisor Class A shares (the Class with the longest period of annual returns) has
varied from year to year. The returns for Advisor Class C shares were different
than the returns shown below because each Class of shares has different
expenses. 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 – Advisor Class A
Calendar
Year Returns as of 12/31
Sales charges are not reflected in
the bar chart. If these amounts were reflected, returns would be less than those
shown.
|
|
|
|
|
|
|
|
|
|
|
| |
| Best
Quarter: |
Q1 2021 |
45.79% |
| Worst
Quarter: |
Q1 2020 |
-21.64% |
The after-tax returns for the
Market Opportunities Fund’s Advisor Class A shares 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. After-tax returns are shown
for Advisor Class A shares only. After-tax returns for Advisor Class C shares
will differ.
Average Annual Total Returns as of
12/31/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 1
Year |
5
Years |
10
Years |
Since
Inception(1) |
|
The
Market Opportunities Fund (KMKAX) Advisor Class
A |
|
|
| |
|
Return Before
Taxes |
8.10% |
12.38% |
14.74% |
10.18% |
|
Return After Taxes on
Distributions |
7.79% |
11.57% |
14.30% |
9.85% |
|
Return After Taxes on Distributions and
Sale of Fund Shares |
5.01% |
9.50% |
12.27% |
8.61% |
|
S&P 500® Index (reflects no deductions for
fees, expenses or taxes) |
-18.11% |
9.42% |
12.56% |
8.88% |
|
MSCI EAFE Index (reflects no deductions
for fees, expenses or taxes) |
-14.45% |
1.54% |
4.67% |
3.30% |
|
The
Market Opportunities Fund (KMKCX) Advisor Class
C |
|
|
| |
|
Return Before
Taxes |
13.12% |
13.16% |
14.84% |
8.93% |
|
S&P 500® Index (reflects no
deductions for fees, expenses, or taxes) |
-18.11% |
9.42% |
12.56% |
8.47% |
|
MSCI EAFE Index (reflects no deductions
for fees, expenses or taxes) |
-14.45% |
1.54% |
4.67% |
2.12% |
(1)The Market Opportunities
Fund’s Advisor Class A shares commenced operations on January 31,
2006 and Advisor Class C share
commenced operations on February 16,
2007. The returns for the two
indices in this column have been calculated since the inception date of Advisor
Class A shares and Advisor Class C shares, as
applicable.
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 |
17 |
| Murray
Stahl |
Co-Portfolio
Manager |
17 |
| Eric
Sites |
Investment
Team Member |
12 |
| James
Davolos |
Investment
Team Member |
17 |
| Steven
Bregman |
Investment
Team Member |
7 |
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.
|
|
| |
| 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 bitcoins exclusively through the
Grayscale Bitcoin Trust that offers exposure to bitcoin. Grayscale Bitcoin Trust
offers shares on an ongoing basis through private placements pursuant to the
exemption from registration provided by Rule 506(c) under Regulation D of the
Securities Act of 1933, as amended. Bitcoins are a digital commodity 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.
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
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 bitcoins exclusively through the
Grayscale Bitcoin Trust that offers exposure to bitcoin. Grayscale Bitcoin Trust
offers shares on an ongoing basis through private placements pursuant to the
exemption from registration provided by Rule 506(c) under Regulation D of the
Securities Act of 1933, as amended. Bitcoins are a digital commodity 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 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.
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
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 bitcoins exclusively through the
Grayscale Bitcoin Trust that offers exposure to bitcoin. Grayscale Bitcoin Trust
offers shares on an ongoing basis through private placements pursuant to the
exemption from registration provided by Rule 506(c) under Regulation D of the
Securities Act of 1933, as amended. Bitcoins are a digital commodity 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 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.
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
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.
|
|
| |
| 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 $5.80 billion as of March 31, 2023.
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 bitcoins exclusively through the
Grayscale Bitcoin Trust that offers exposure to bitcoin. Grayscale Bitcoin Trust
offers shares on an ongoing basis through private placements pursuant to the
exemption from registration provided by Rule 506(c) under Regulation D of the
Securities Act of 1933, as amended. Bitcoins are a digital commodity 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 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.
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
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.
|
|
| |
| 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 bitcoins exclusively
through the Grayscale Bitcoin Trust that offers exposure to bitcoin. Grayscale
Bitcoin Trust offers shares on an ongoing basis through private placements
pursuant to the exemption from registration provided by Rule 506(c) under
Regulation D of the Securities Act of 1933, as amended. Bitcoins are a digital
commodity 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 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. 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
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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| 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.
Bitcoin
Risk—Internet Fund, Global Fund, Paradigm Fund, Small Cap Opportunities Fund,
Market Opportunities Fund
The
value of each Portfolio’s investment in the Grayscale Bitcoin Trust directly or
indirectly through its Subsidiaries is subject to fluctuations in the value of
bitcoins. The value of bitcoins is determined by the supply of and demand for
bitcoins in the global market for the trading of bitcoins, which consists of
transactions on Bitcoin Exchanges. Pricing on Bitcoin Exchanges and other venues
can be volatile and can adversely affect the value of the Grayscale Bitcoin
Trust. Currently, there is relatively small use of
bitcoins
in the retail and commercial marketplace in comparison to the relatively large
use of bitcoins by speculators, thus contributing to price volatility that could
adversely affect a Portfolio’s investment in the Grayscale Bitcoin Trust.
Bitcoin transactions are irrevocable, and stolen or incorrectly transferred
bitcoins may be irretrievable. As a result, any incorrectly executed bitcoin
transactions could adversely affect the value of a Portfolio’s investment in the
Grayscale Bitcoin Trust. Shares of the Grayscale Bitcoin Trust have historically
traded, and may continue to trade, at a significant discount or premium to net
asset value, and the price of the Grayscale Bitcoin Trust may go down even if
the price of the underlying asset, bitcoin, increases or 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.
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.
Currency
Risk – All Funds
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.
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 Standard & Poor’s, 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.
Foreign
Securities – All Funds
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
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.
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.
The
SEC recently 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 new 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.
An
outbreak of respiratory disease caused by a novel coronavirus was first detected
in China in December 2019 and spread internationally. Since then the number of
cases has fluctuated and new “variants” have been confirmed around the world.
The outbreak resulted in closing borders and quarantines, enhanced health
screenings, cancellations, disrupted supply chains and customer activity, and
produced general concern and uncertainty. The impact of this coronavirus, and
other epidemics and pandemics that may arise in the future, could affect
national and global economies, individual companies and the market in general in
a manner that cannot be foreseen at the present time. Health crises caused by
the outbreak may heighten other pre-existing political, social and economic
risks in a country or region. In the event of a pandemic or an outbreak, there
can be no assurance that the Funds, the Portfolios and their service providers
will be able to maintain normal business operations for an extended period of
time or will not lose the services of key personnel on a temporary or long-term
basis due to illness or other reasons. Although vaccines for COVID-19 are
available, the full impacts of a pandemic or disease outbreaks are unknown and
the pace of recovery may vary from market to market.
Russia’s
recent military interventions in Ukraine have led to, and may lead to additional
sanctions being levied by the United States, European Union and other countries
against Russia. Russia’s military incursion and the resulting sanctions could
adversely affect global energy and financial markets and thus could affect the
value of the Portfolio’s investments, even beyond any direct exposure the
Portfolios may have to Russian issuers or the adjoining geographic regions. The
extent and duration of the military action, sanctions and resulting market
disruptions are impossible to predict, but could be substantial. Any such
disruptions caused by Russian military action or resulting sanctions may magnify
the impact of other risks described in this Prospectus.
Non-Diversification
Risks—All Funds except the Global Fund
Each
Portfolio, except the Global Portfolio, and each Fund, except the Global 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
–
The Paradigm Fund, The Small Cap Fund and The Market Opportunities 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.
Regulatory
Risk—Internet Fund, Global Fund, Paradigm Fund, Small Cap Opportunities Fund,
Market Opportunities Fund
Bitcoin
is generally not subject to the same degree of regulation as are registered U.S.
securities. The reporting, accounting and auditing standards for Bitcoin may
differ from the standards for registered U.S. securities. Furthermore,
countries, including the U.S., may in the future curtail or outlaw the
acquisition, use or redemption of bitcoins.
Sector
Concentration Risk
– The
Internet Fund,
The
Paradigm Fund, The Small Cap Fund, and The Market Opportunities 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, 2022, the Internet
Portfolio,
Paradigm Portfolio, Small Cap Portfolio and Market Opportunities Portfolio had
33.6%, 70.9%, 52.4% and 63.3% invested in the Mining, Quarrying, and Oil and Gas
Extraction sector, respectively.
Securities
Lending Risks—All Funds
Each
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—Internet Fund, Global Fund, Paradigm Fund, Small Cap
Opportunities Fund, Market Opportunities 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, 2023, the
Internet Fund, Global Fund, 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
Each
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—Internet Fund, Global Fund, Paradigm Fund, Small Cap Opportunities Fund,
Market Opportunities 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—Internet Fund, Global Fund, Paradigm Fund, Small Cap Opportunities Fund,
Market Opportunities 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. During the period
2006-2011, the IRS issued a number of private letter rulings to other funds in
which the IRS ruled that income derived from a fund’s investment in a CFC such
as a Cayman Subsidiary will generally constitute qualifying income for the fund,
even if the CFC itself engages in transactions that would not generate
qualifying income if they were engaged in by the fund itself and even if the
earnings of the CFC are not distributed
to
the fund each year. In 2011, however, the IRS suspended the issuance of such
private letter rulings pending further review of the subject. 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—Internet Fund, Global Fund, Paradigm Fund, Small Cap Opportunities Fund,
Market Opportunities Fund
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—Internet Fund, Global Fund, Paradigm Fund, Small Cap Opportunities Fund,
Market Opportunities Fund
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 $6.95 billion in assets as of March 31, 2023. 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. 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. However, as a result of fee waivers for certain Funds, the advisory fees
paid to the Investment Adviser for the fiscal year ended December 31, 2022, were
as follows:
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| Advisory
Fees
(as a percentage of average net assets) |
| Internet
Fund |
1.25% |
| Global
Fund |
0.57% |
| Paradigm
Fund |
1.22% |
| Small
Cap Opportunities Fund |
1.20% |
| Market
Opportunities Fund |
0.89% |
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, 2022.
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, and Eric Sites. 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 |
|
Peter
B. Doyle |
Co-Portfolio
Manager |
Investment
Team Member |
Co-Portfolio
Manager |
Co-Portfolio
Manager |
Co-Portfolio
Manager |
|
Steven
Tuen |
Investment
Team Member |
Co-Portfolio
Manager |
N/A |
N/A |
N/A |
|
Murray
Stahl |
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 |
|
James
Davolos |
Co-Portfolio
Manager |
Investment
Team Member |
Investment
Team Member |
Investment
Team Member |
Investment
Team Member |
|
Matthew
Houk |
N/A |
N/A |
N/A |
Co-Portfolio
Manager |
N/A |
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Eric
Sites |
N/A |
N/A |
N/A |
N/A |
Investment
Team Member |
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.
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 Class of each Fund 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
Shares
of each Fund are sold at NAV plus any applicable sales charge, and will be
credited to a shareholder’s account based on 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 Advisor 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 plus any applicable sales charge 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:
|
|
|
|
|
| |
| 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. A financial intermediary
may impose different sales charge discounts. Sales
charge discount variations specific to financial intermediaries are described in
Appendix A to this Prospectus - Financial Intermediary Sales Charge Variations
(“Appendix A”).
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. Advisor Class A and Advisor Class
C shares of 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.,
Advisor Class A shares for Advisor Class A 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. In all
cases, shareholders will be required to pay a sales charge only
once.
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.
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 of
income attributable to each Cayman Subsidiary will generally not be “qualifying
dividends.”
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.
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 (“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, 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
W-8BEN-
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.
Rule
12b-1 Plans
Each
Fund has adopted separate Retail Distribution Plans pursuant to Rule 12b-1 under
the 1940 Act (the “12b-1 Plan”), which allows each Fund to pay distribution fees
for the sale and distribution of its Advisor Class A shares and Advisor Class C
shares. Under the 12b-1 Plan for Advisor Class A shares, the Fund may pay up to
0.50% of the average daily NAV of Advisor Class A shares to the distributor or
other qualified recipients. At the present time however, the Advisor Class A
shares pay 12b-1 fees equal to 0.25% of the average daily NAV. Under the 12b-1
Plan for Advisor Class C shares, the Fund may pay up to 0.75% of the average
daily NAV of Advisor Class C shares to the distributor or other qualified
recipients. As these fees are paid out of the Fund’s assets on an on-going
basis, over time these fees will increase the cost of your investment and may
cost you more than paying other types of sales charges.
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. For Advisor Class A shares, KFD, in its
role as distributor and principal underwriter, receives the difference between
any applicable sales charge and dealers reallowance.
Shareholder
Servicing Agents
Pursuant
to separate shareholder servicing plans, 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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| Description
of Advisor Classes |
This
Prospectus offers two Classes of shares of the Funds – Advisor Class A shares
and Advisor Class C shares.
Set
forth below is information about the manner in which the Funds offer shares. A
financial intermediary may offer Fund shares subject to variations in or
elimination of the Fund sales charges (“variations”), provided such variations
are described in Appendix A. All variations described in Appendix A are applied
by the identified financial intermediary. Sales charge variations may apply to
purchases, sales, exchanges and reinvestments of Fund shares and a shareholder
transacting in Fund shares through an intermediary identified on Appendix A
should read the terms and conditions of Appendix A carefully. A variation that
is specific to a particular financial intermediary is not applicable to shares
held directly with the Funds or through another intermediary. Please consult
your financial intermediary with respect to any variations listed in
Appendix A.
Each
Fund also offers a No Load Class of shares through a separate prospectus. The No
Load Class of shares may be purchased without the imposition of any sales
charges or Rule 12b-1 fees. Each Fund has also registered an Institutional Class
of Shares, which is currently being offered under a separate prospectus by the
Paradigm Fund, the Small Cap Fund, and the Market Opportunities Fund. The Funds’
Advisor Classes of shares are sold through broker-dealers and other financial
intermediaries that provide investment services to the Funds’ shareholders. You
should always discuss with your broker-dealer or financial advisor the
suitability of your investment.
Advisor
Class A Shares
Advisor
Class A shares are retail shares that may be purchased by individuals or IRAs.
With Advisor Class A shares, you will pay a sales charge when you invest
unless you qualify for a reduction or waiver of the sales charge. Advisor Class
A shares may impose a Rule 12b-1 fee of up to 0.50% (currently limited to
0.25%) of average daily net assets, which is assessed against the Advisor Class
A shares of each Fund.
If
you purchase Advisor Class A shares of a Fund you will pay the NAV per share
next determined after your order is received plus a sales charge (shown in
percentages below) depending on the amount of your investment. The sales charge
is calculated as follows:
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|
| |
| Amount
of Transaction |
Sales
Charge as a % of Offering Price |
Sales
Charge as a % of Net Asset Value |
Dealers
Reallowance as a % of Offering Price |
| At
Least |
But
Less than |
| $0 |
$50,000 |
5.75% |
6.10% |
5.25% |
| $50,000 |
$100,000 |
4.75% |
4.99% |
4.25% |
| $100,000 |
$250,000 |
3.75% |
3.90% |
3.25% |
| $250,000 |
$500,000 |
2.75% |
2.83% |
2.25% |
| $500,000 |
$1,000,000 |
2.25% |
2.30% |
1.75% |
| $1,000,000 |
and
above |
0.00% |
0.00% |
0.00%* |
*If
you purchase $1 million or more worth of Advisor Class A shares, you will pay no
initial sales charge. A sales charge does not apply to shares that you purchase
through reinvestment of dividends or distributions.
The
offering price includes the sales charge paid at the time of investment. Because
of rounding in the calculation of the “offering price,” the actual sales charge
you pay may be more or less than that calculated using the percentages shown
above. The distributor will receive all sales charges and Rule 12b-1 fees
for the purchase of Advisor Class A shares of the Fund without a dealer of
record. The distributor will also receive the difference between the sales
charge and dealers reallowance.
Waivers
– Advisor Class A Shares
You
will not have to pay a sales charge on purchases of Advisor Class A shares
if:
ª You
are an employee of a broker-dealer or agent that has a selling agreement with
the distributor;
ª You
buy Advisor Class A shares under a wrap program or other all inclusive fee
program offered by your broker-dealer or agent; or
ª The
sales charge is waived by a broker-dealer or agent who has entered into an
agreement with the Fund’s distributor that allows for load-waived Class A shares
purchases.
Please
consult your broker-dealer or agent to determine whether you may be eligible for
these waivers.
For
the sales charge variations applicable to shares offered through specific
financial intermediaries, please see Appendix A.
Reducing
Your Sales Charge – Advisor Class A Shares
You
can reduce the sales charge on purchases of Advisor Class A shares
by:
ª purchasing
larger quantities of shares or putting a number of purchases together to obtain
the quantity discounts indicated above;
ª signing
a letter of intent that you intend to purchase more than $50,000 worth of shares
over the next 13 months (see “Letter of Intent – Advisor Class A Shares”
below);
ª using
the reinvestment privilege, which allows you to redeem shares and then
immediately reinvest them without a sales charge within 60 days;
ª combining
concurrent purchases of Advisor Class A shares from different Funds to obtain
the quantity discounts indicated above; and
ª through
rights of accumulation as discussed below.
Please
note that certain broker-dealers may reduce your sales charges under certain
circumstances. Consult your broker-dealer.
Rights
of Accumulation – Advisor Class A Shares
You
may combine your new purchase of Advisor Class A shares with other Advisor Class
A shares currently owned by you, your spouse, and/or your children under age 21
for the purpose of qualifying for the lower initial sales charge rates that
apply to larger purchases. The applicable sales charge for the new purchase is
based on the total of your current purchase and the current NAV of all other
shares you, your spouse and/or your children under age 21 own. You may combine
only the holdings at the firm at which you are making the current purchase for
the right of accumulation sales charge reduction. You will need to notify the
Fund or your financial intermediary at the time of purchase of any other
accounts that exist.
Letter
of Intent – Advisor Class A Shares
By
signing a Letter of Intent (“LOI”) you can reduce your Advisor Class A sales
charge. Your individual purchases will be made at the applicable sales charge
based on the amount you intend to invest over a 13-month period. The LOI will
apply to all purchases of Advisor Class A shares. Any shares purchased within 90
days of the date you sign the letter of intent may be used as credit toward
completion, but the reduced sales charge will only apply to new purchases made
on or after that date. Purchases resulting from the reinvestment of dividends
and capital gains do not apply toward fulfillment of the LOI. Shares equal to
5.75% of the amount of the LOI will be held in escrow during the 13-month
period. If, at the end of that time the total amount of purchases made is less
than the amount intended, you will be required to pay the difference between the
reduced sales charge and the sales charge applicable to the individual purchases
had the LOI not been in effect. This amount will be obtained from redemption of
the escrow shares. Any remaining escrow shares will be released to
you.
If
you establish an LOI with the Funds you can aggregate your accounts as well as
the accounts of your immediate family members under age 21. You will need to
provide written instruction with respect to the other accounts whose purchases
should be considered in fulfillment of the LOI. You will need to notify the Fund
or your financial intermediary at the time of purchase of any other accounts
that exist.
Advisor
Class C Shares
Advisor
Class C shares are retail shares and may be purchased by individuals or IRAs.
Advisor Class C shares impose a Rule 12b‑1 fee of 0.75% of average daily
net assets.
Effective
April 2021, Advisor Class C shares will convert automatically into Advisor Class
A shares on the 3rd business day of the month following the eighth anniversary
of the month on which the purchase order was accepted, provided that the Fund or
the financial intermediary through which a shareholder purchased Advisor Class C
shares has records verifying that the Advisor Class C shares have been held for
at least eight years. Group retirement plans held in an omnibus record keeping
platform through a financial intermediary that does not track participant-level
share lot aging may not convert Advisor Class C shares to Advisor Class A
shares.
If
you purchase Advisor Class C shares of any of the Funds, you will pay the NAV
per share next determined after your order is received. There is no initial
sales charge on this Class at the time you purchase your shares. The distributor
may pay your broker or agent a 1.00% up-front sales commission, which includes
an advance of the first year’s Rule 12b-1 fees and shareholding servicing fees.
The distributor will retain Rule 12b-1 fees and shareholder servicing fees in
the first year to reimburse itself for paying your broker or agent the 1.00%
up-front sales commission.
If
you sell your Advisor Class C shares within 12 months of purchase, you will have
to pay a contingent deferred sales charge (“CDSC”) of 1.00%, which is applied to
the NAV of the shares on the date of original purchase or on the date of
redemption, whichever is less. A financial intermediary may impose different
CDSC waivers. CDSC waiver variations specific to certain financial
intermediaries are described in Appendix A.
The
distributor will receive all sales charges and Rule 12b-1 fees for the purchase
of Advisor Class C shares of the Fund without a dealer of record.
Additional
information regarding sales load breakpoints is available in the Funds’ SAI. The
Funds also provide information regarding the purchase of shares, sales charges
and breakpoint eligibility free of charge on their website at www.kineticsfunds.com.
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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. 1-3 Year Credit Bond Index measures the performance of investment
grade corporate debt and sovereign, supranational, local authority and non-U.S.
agency bonds that are U.S. dollar denominated and have a remaining maturity of
greater than or equal to one year and less than three years.
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 Standard & Poor’s Corporation 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, 2023, 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 2023, it covers 2,888
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 Fund share. 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, 2022.
The
financial highlights tables set forth below are for the Advisor Class A shares
and Advisor Class C shares of the Internet Fund, Global Fund, Paradigm Fund,
Small Cap Fund, and Market Opportunities Fund.
The
Internet Fund – Advisor Class A
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| 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 |
For
the
Year Ended
December 31,
2018 |
|
|
PER
SHARE DATA:(1) |
|
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| |
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| |
| Net
Asset Value, Beginning of Year |
$55.20 |
|
| $48.42 |
|
| $31.03 |
|
| $25.00 |
|
| $49.27 |
|
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| Income
from Investment Operations: |
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| |
|
Net
investment income (loss)(2) |
(0.39) |
|
| (0.91) |
|
| (0.35) |
|
| (0.31) |
|
| (0.57) |
|
| |
| Net
realized and unrealized gain (loss) on investments |
(13.13) |
|
| 8.17 |
|
| 17.74 |
|
| 6.83 |
|
| (12.97) |
|
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| Total
from Investment Operations |
(13.52) |
|
| 7.26 |
|
| 17.39 |
|
| 6.52 |
|
| (13.54) |
|
| |
| Redemption
Fees |
0.01 |
|
| 0.04 |
|
| 0.00 |
|
(5) |
— |
|
| 0.03 |
|
| |
| Less
Distributions: |
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| From
net realized gains |
(0.38) |
|
| (0.52) |
|
| — |
|
| (0.49) |
|
| (10.76) |
|
| |
| Total
Distributions |
(0.38) |
|
| (0.52) |
|
| — |
|
| (0.49) |
|
| (10.76) |
|
| |
| Net
Asset Value, End of Year |
$41.31 |
|
| $55.20 |
|
| $48.42 |
|
| $31.03 |
|
| $25.00 |
|
| |
|
Total
return(3) |
(24.47) |
% |
| 15.06 |
% |
| 56.04 |
% |
| 26.08 |
% |
| (27.47) |
% |
| |
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| SUPPLEMENTAL
DATA AND RATIOS |
|
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| Net
assets, end of Year (000’s) |
$2,302 |
|
| $5,620 |
|
| $2,864 |
|
| $2,296 |
|
| $2,481 |
|
| |
|
Ratio
of operating expenses to average net assets: |
2.02 |
% |
| 1.96 |
% |
| 2.07 |
% |
| 2.09 |
% |
| 2.09 |
% |
| |
| Ratio
of net investment income (loss) to average net assets: |
(0.85) |
% |
| (1.54) |
% |
| (1.05) |
% |
| (1.01) |
% |
| (1.30) |
% |
| |
|
Portfolio
turnover rate(4) |
19 |
% |
| 4 |
% |
| 1 |
% |
| 1 |
% |
| 15 |
% |
| |
(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)The
total return calculation does not reflect the 5.75% front end sales charge on
Advisor Class A shares.
(4)Portfolio
turnover of The Internet Portfolio.
(5)Amount
calculated is less than $0.005.
The
Internet Fund – Advisor Class C
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 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 |
For
the
Year Ended
December 31,
2018 |
|
|
PER
SHARE DATA:(1) |
|
|
|
| |
|
|
|
|
| |
| Net
Asset Value, Beginning of Year |
$45.86 |
|
| $40.49 |
|
| $26.08 |
|
| $21.18 |
|
| $44.24 |
|
| |
| Income
from Investment Operations: |
|
|
|
|
|
|
|
|
|
| |
|
Net
investment income (loss)(2)
|
(0.51) |
|
| (1.00) |
|
| (0.43) |
|
| (0.39) |
|
| (0.70) |
|
| |
| Net
realized and unrealized gain (loss) on investments |
(10.90) |
|
| 6.85 |
|
| 14.84 |
|
| 5.78 |
|
| (11.61) |
|
| |
| Total
from Investment Operations |
(11.41) |
|
| 5.85 |
|
| 14.41 |
|
| 5.39 |
|
| (12.31) |
|
| |
| Redemption
Fees |
0.00 |
|
(4) |
0.04 |
|
| 0.00 |
|
(4) |
— |
|
| 0.01 |
|
| |
| Less
Distributions: |
|
|
|
|
|
|
|
|
|
| |
|
From
net realized gains |
(0.38) |
|
| (0.52) |
|
| — |
|
| (0.49) |
|
| (10.76) |
|
| |
|
Total
Distributions |
(0.38) |
|
| (0.52) |
|
| — |
|
| (0.49) |
|
| (10.76) |
|
| |
| Net
Asset Value, End of Year |
$34.07 |
|
| $45.86 |
|
| $40.49 |
|
| $26.08 |
|
| $21.18 |
|
| |
| Total
return |
(24.87) |
% |
| 14.52 |
% |
| 55.25 |
% |
| 25.45 |
% |
| (27.86) |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
| |
| SUPPLEMENTAL
DATA AND RATIOS |
|
|
|
|
|
|
|
|
|
| |
| Net
assets, end of Year (000’s) |
$ |
1,247 |
|
| $ |
1,893 |
|
| $ |
1,560 |
|
| $ |
943 |
|
| $ |
1,065 |
|
| |
|
Ratio
of operating expenses to average net assets: |
2.52 |
% |
| 2.46 |
% |
| 2.57 |
% |
| 2.59 |
% |
| 2.59 |
% |
| |
| Ratio
of net investment income (loss) to average net assets: |
(1.35) |
% |
| (2.04) |
% |
| (1.55) |
% |
| (1.51) |
% |
| (1.80) |
% |
| |
|
Portfolio
turnover rate(3) |
19 |
% |
| 4 |
% |
| 1 |
% |
| 1 |
% |
| 15 |
% |
| |
(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)Portfolio
turnover of The Internet Portfolio.
(4)Amount
calculated is less than $0.005.
The
Global Fund – Advisor Class A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 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 |
For
the
Year Ended
December 31,
2018 |
|
PER
SHARE DATA:(1) |
|
|
|
|
|
|
|
|
| |
| Net
Asset Value, Beginning of Year |
$9.31 |
|
| $8.23 |
|
| $6.60 |
|
| $5.45 |
|
| $7.15 |
| |
| Income
from Investment Operations: |
|
|
|
|
|
|
|
|
| |
|
Net
investment income (loss)(2) |
0.00 |
|
(3) |
(0.11) |
|
| (0.05) |
|
| (0.02) |
|
| (0.04) |
| |
| Net
realized and unrealized gain (loss) on investments |
(0.63) |
|
| 1.44 |
|
| 1.68 |
|
| 1.17 |
|
| (1.66) |
| |
| Total
from Investment Operations |
(0.63) |
|
| 1.33 |
|
| 1.63 |
|
| 1.15 |
|
| (1.70) |
| |
| Redemption
Fees |
0.00 |
|
(3) |
0.00 |
|
(3) |
0.00 |
|
(3) |
0.00 |
|
(3) |
0.00 |
|
(3) |
| Less
Distributions: |
|
|
|
|
|
|
|
|
| |
| From
net investment income |
— |
|
| (0.22) |
|
| — |
|
| — |
|
| — |
| |
| From
net realized gains |
(0.13) |
|
| (0.03) |
|
| — |
|
| — |
|
| 0.00 |
|
(3) |
| Total
Distributions |
(0.13) |
|
| (0.25) |
|
| — |
|
| — |
|
| 0.00 |
|
(3) |
| Net
Asset Value, End of Year |
$8.55 |
|
| $9.31 |
|
| $8.23 |
|
| $6.60 |
|
| $5.45 |
| |
|
Total
return(4) |
(6.79) |
% |
| 16.16 |
% |
| 24.70 |
% |
| 21.10 |
% |
| (23.72) |
% |
|
|
|
|
|
|
|
|
|
|
|
| |
| SUPPLEMENTAL
DATA AND RATIOS |
|
|
|
|
|
|
|
|
| |
| Net
assets, end of Year (000’s) |
$ |
840 |
|
| $ |
595 |
|
| $ |
574 |
|
| $ |
1,331 |
|
| $ |
1,012 |
| |
| Ratio
of operating expenses to average net assets: |
|
|
|
|
|
|
|
|
| |
| Before
expense reimbursement |
2.32 |
% |
| 2.33 |
% |
| 2.70 |
% |
| 2.78 |
% |
| 2.78 |
% |
|
| After
expense reimbursement |
1.64 |
% |
| 1.64 |
% |
| 1.64 |
% |
| 1.64 |
% |
| 1.64 |
% |
|
| Ratio
of net investment income (loss) to average net assets: |
(0.00)% |
| (1.15) |
% |
| (0.71) |
% |
| (0.24) |
% |
| (0.55) |
% |
|
|
Portfolio
turnover rate(5) |
57 |
% |
| 7 |
% |
| 8 |
% |
| 5 |
% |
| 28 |
% |
|
(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)The
total return calculation does not reflect the 5.75% front end sales charge on
Advisor Class A shares.
(5)Portfolio
turnover of The Global Portfolio.
The
Global Fund – Advisor Class C
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 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 |
For
the
Year Ended
December 31,
2018 |
| |
|
PER
SHARE DATA:(1) |
|
|
|
|
|
| |
|
|
|
| |
| Net
Asset Value, Beginning of Year |
$8.64 |
|
| $7.67 |
|
| $6.18 |
|
| $5.12 |
| $6.76 |
|
|
|
| |
| Income
from Investment Operations: |
|
|
|
|
|
|
| |
|
|
| |
|
Net
investment income (loss)(2) |
(0.04) |
|
| (0.15) |
|
| (0.07) |
|
| (0.04) |
| (0.07) |
|
|
|
| |
| Net
realized and unrealized gain (loss) on investments |
(0.58) |
|
| 1.33 |
|
| 1.56 |
|
| 1.10 |
| (1.57) |
|
|
|
| |
| Total
from Investment Operations |
(0.62) |
|
| 1.18 |
|
| 1.49 |
|
| 1.06 |
| (1.64) |
|
|
|
| |
| Redemption
Fees |
0.00 |
|
(3) |
0.00 |
|
(3) |
0.00 |
|
(3) |
— |
| — |
|
|
|
| |
| Less
Distributions: |
|
|
|
|
|
|
| |
|
|
| |
|
From
net investment income |
— |
|
| (0.18) |
|
| — |
|
| — |
| — |
|
|
|
| |
|
From
net realized gains |
(0.13) |
|
| (0.03) |
|
| — |
|
| — |
| 0.00 |
|
(3) |
|
| |
| Total
Distributions |
(0.13) |
|
| (0.21) |
|
| — |
|
| — |
| 0.00 |
|
(3) |
|
| |
| Net
Asset Value, End of Year |
$7.89 |
|
| $8.64 |
|
| $7.67 |
|
| $6.18 |
| $5.12 |
|
|
|
| |
| Total
return |
(7.21) |
% |
| 15.44 |
% |
| 24.11 |
% |
| 20.70 |
% |
(24.20) |
% |
|
|
| |
| SUPPLEMENTAL
DATA AND RATIOS |
|
|
|
|
|
|
| |
|
|
| |
| Net
assets, end of Year (000’s) |
$6,574 |
|
| $7,439 |
|
| $5,982 |
|
| $4,969 |
| $4,284 |
|
|
|
| |
|
Ratio
of operating expenses to average net assets: |
|
|
|
|
|
|
| |
|
|
| |
|
Before
expense reimbursement |
2.82 |
% |
| 2.83 |
% |
| 3.20 |
% |
| 3.28 |
% |
3.28 |
% |
|
|
| |
| After
expense reimbursement |
2.14 |
% |
| 2.14 |
% |
| 2.14 |
% |
| 2.14 |
% |
2.14 |
% |
|
|
| |
|
Ratio
of net investment income (loss) to average net assets: |
(0.50) |
% |
| (1.65) |
% |
| (1.21) |
% |
| (0.74) |
% |
(1.05) |
% |
|
|
| |
|
Portfolio
turnover rate(4) |
57 |
% |
| 7 |
% |
| 8 |
% |
| 5 |
% |
28 |
% |
|
|
| |
(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 – Advisor Class A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 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 |
For
the
Year Ended
December 31,
2018 |
| |
|
PER
SHARE DATA:(1) |
|
|
| |
|
|
|
|
|
|
| |
| Net
Asset Value, Beginning of Year |
$70.44 |
|
| $51.99 |
| $51.47 |
|
| $39.95 |
|
| $46.99 |
|
|
|
| |
| Income
from Investment Operations: |
|
|
|
|
|
|
|
|
|
|
| |
|
Net
investment income (loss)(2) |
(0.31) |
|
| (0.83) |
| 0.07 |
|
| (0.47) |
|
| (0.61) |
|
|
|
| |
|
Net
realized and unrealized gain (loss) on investments |
20.62 |
|
| 20.49 |
| 1.51 |
|
| 12.52 |
|
| (2.12) |
|
|
|
| |
| Total
from Investment Operations |
20.31 |
|
| 19.66 |
| 1.58 |
|
| 12.05 |
|
| (2.73) |
|
|
|
| |
| Redemption
Fees |
0.00 |
|
(3) |
0.01 |
| 0.00 |
|
(3) |
0.00 |
|
(3) |
0.00 |
|
(3) |
|
| |
| Less
Distributions: |
|
|
|
|
|
|
|
|
|
|
| |
| From
net investment income |
— |
|
| — |
| (0.07) |
|
| — |
|
| — |
|
|
|
| |
| From
net realized gains |
(1.85) |
|
| (1.22) |
| (0.99) |
|
| (0.53) |
|
| (4.31) |
|
|
|
| |
| Total
Distributions |
(1.85) |
|
| (1.22) |
| (1.06) |
|
| (0.53) |
|
| (4.31) |
|
|
|
| |
| Net
Asset Value, End of Year |
$88.90 |
|
| $70.44 |
| $51.99 |
|
| $51.47 |
|
| $39.95 |
|
|
|
| |
|
Total
return(4) |
28.86 |
% |
| 37.83 |
% |
3.05 |
% |
| 30.15 |
% |
| (5.79) |
% |
|
|
| |
| SUPPLEMENTAL
DATA AND RATIOS |
|
|
|
|
|
|
|
|
|
|
| |
| Net
assets, end of Year (000’s) |
$188,033 |
|
| $155,851 |
| $94,179 |
|
| $115,580 |
|
| $95,503 |
|
|
|
| |
| Ratio
of operating expenses to average net assets: |
|
|
|
|
|
|
|
|
|
|
| |
| Before
expense reimbursement |
1.92 |
% |
| 1.93 |
% |
1.97 |
% |
| 1.97 |
% |
| 1.98 |
% |
|
|
| |
| After
expense reimbursement |
1.89 |
% |
| 1.89 |
% |
1.89 |
% |
| 1.89 |
% |
| 1.89 |
% |
|
|
| |
| Ratio
of net investment income (loss) to average net assets: |
(0.41) |
% |
| (1.13) |
% |
0.17 |
% |
| (0.97) |
% |
| (1.18) |
% |
|
|
| |
|
Portfolio
turnover rate(5) |
0 |
% |
| 1 |
% |
1 |
% |
| 1 |
% |
| 3 |
% |
|
|
| |
(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)The
total return calculation does not reflect the 5.75% front end sales charge on
Advisor Class A shares.
(5)Portfolio
turnover of The Paradigm Portfolio.
The
Paradigm Fund – Advisor Class C
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 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 |
For
the
Year Ended
December 31,
2018 |
| |
|
PER
SHARE DATA:(1) |
|
|
|
|
|
|
|
|
|
|
| |
| Net
Asset Value, Beginning of Year |
$64.28 |
|
| $47.77 |
| $47.54 |
|
| $37.12 |
|
| $44.21 |
|
|
|
| |
| Income
from Investment Operations: |
|
|
|
|
|
|
|
|
|
|
| |
|
Net
investment loss(2) |
(0.63) |
|
| (1.08) |
| (0.14) |
|
| (0.66) |
|
| (0.81) |
|
|
|
| |
|
Net
realized and unrealized gain (loss) on investments |
18.76 |
|
| 18.80 |
| 1.36 |
|
| 11.61 |
|
| (1.97) |
|
|
|
| |
| Total
from Investment Operations |
18.13 |
|
| 17.72 |
| 1.22 |
|
| 10.95 |
|
| (2.78) |
|
|
|
| |
| Redemption
Fees |
0.00 |
|
(3) |
0.01 |
| 0.00 |
|
(3) |
0.00 |
|
(3) |
0.00 |
|
(3) |
|
| |
| Less
Distributions: |
|
|
|
|
|
|
|
|
|
|
| |
| From
net investment income |
— |
|
| — |
| — |
|
| — |
|
| — |
|
|
|
| |
| From
net realized gains |
(1.85) |
|
| (1.22) |
| (0.99) |
|
| (0.53) |
|
| (4.31) |
|
|
|
| |
| Total
Distributions |
(1.85) |
|
| (1.22) |
| (0.99) |
|
| (0.53) |
|
| (4.31) |
|
|
|
| |
| Net
Asset Value, End of Year |
$80.56 |
|
| $64.28 |
| $47.77 |
|
| $47.54 |
|
| $37.12 |
|
|
|
| |
| Total
return |
28.22 |
% |
| 37.11 |
% |
2.56 |
% |
| 29.49 |
% |
| (6.27) |
% |
|
|
| |
| SUPPLEMENTAL
DATA AND RATIOS |
|
|
|
|
|
|
|
|
|
|
| |
| Net
assets, end of Year (000’s) |
$84,135 |
|
| $71,948 |
| $84,597 |
|
| $113,300 |
|
| $100,718 |
|
|
|
| |
|
Ratio
of operating expenses to average net assets: |
|
|
|
|
|
|
|
|
|
|
| |
| Before
expense reimbursement |
2.42 |
% |
| 2.43 |
% |
2.47 |
% |
| 2.47 |
% |
| 2.48 |
% |
|
|
| |
| After
expense reimbursement |
2.39 |
% |
| 2.39 |
% |
2.39 |
% |
| 2.39 |
% |
| 2.39 |
% |
|
|
| |
|
Ratio
of net investment loss to average net assets: |
(0.91) |
% |
| (1.63) |
% |
(0.33) |
% |
| (1.47) |
% |
| (1.68) |
% |
|
|
| |
|
Portfolio
turnover rate(4) |
0 |
% |
| 1 |
% |
1 |
% |
| 1 |
% |
| 3 |
% |
|
|
| |
(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 – Advisor Class A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 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 |
For
the
Year Ended
December 31,
2018 |
| |
|
PER
SHARE DATA:(1) |
|
|
| |
|
|
|
|
|
|
|
| |
| Net
Asset Value, Beginning of Year |
$95.24 |
| $64.41 |
|
| $63.12 |
|
| $49.81 |
|
| $49.81 |
|
|
|
|
| |
| Income
from Investment Operations: |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Net
investment income (loss)(2) |
(0.20) |
| (1.12) |
|
| 0.28 |
|
| (0.43) |
|
| (0.48) |
|
|
|
|
| |
| Net
realized and unrealized gain on investments |
30.30 |
| 33.24 |
|
| 1.01 |
|
| 13.74 |
|
| 0.48 |
|
|
|
|
| |
| Total
from Investment Operations |
30.10 |
| 32.12 |
|
| 1.29 |
|
| 13.31 |
|
| — |
|
|
|
|
| |
| Redemption
Fees |
0.03 |
| 0.05 |
|
| 0.00 |
|
(3) |
0.00 |
|
(3) |
0.00 |
|
(3) |
|
|
| |
| Less
Distributions: |
|
|
|
|
|
|
|
|
|
|
|
| |
| From
net investment income |
— |
| (1.34) |
|
| — |
|
| — |
|
| — |
|
|
|
|
| |
| Total
Distributions |
— |
| (1.34) |
|
| — |
|
| — |
|
| — |
|
|
|
|
| |
| Net
Asset Value, End of Year |
$125.37 |
| $95.24 |
|
| $64.41 |
|
| $63.12 |
|
| $49.81 |
|
|
|
|
| |
|
Total
return(4) |
31.64 |
% |
49.94 |
% |
| 2.04 |
% |
| 26.72 |
% |
| 0.00 |
% |
|
|
|
| |
| SUPPLEMENTAL
DATA AND RATIOS |
|
|
|
|
|
|
|
|
|
|
|
| |
| Net
assets, end of Year (000’s) |
$23,920 |
| $14,755 |
|
| $8,172 |
|
| $11,986 |
|
| $10,505 |
|
|
|
|
| |
| Ratio
of operating expenses to average net assets: |
|
|
|
|
|
|
|
|
|
|
|
| |
| Before
expense reimbursement |
1.94 |
% |
1.95 |
% |
| 2.03 |
% |
| 2.00 |
% |
| 1.99 |
% |
|
|
|
| |
| After
expense reimbursement |
1.89 |
% |
1.89 |
% |
| 1.89 |
% |
| 1.89 |
% |
| 1.89 |
% |
|
|
|
| |
| Ratio
of net investment income (loss) to average net assets: |
(0.18) |
% |
(1.18) |
% |
| 0.53 |
% |
| (0.73) |
% |
| (0.85) |
% |
|
|
|
| |
|
Portfolio
turnover rate(5) |
6 |
% |
3 |
% |
| 0 |
% |
| 4 |
% |
| 3 |
% |
|
|
|
| |
(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)The
total return calculation does not reflect the 5.75% front end sales charge on
Advisor Class A shares.
(5)Portfolio
turnover of The Small Cap Opportunities Portfolio.
The
Small Cap Opportunities Fund – Advisor Class C
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 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 |
For
the
Year Ended
December 31,
2018 |
| |
|
PER
SHARE DATA:(1) |
|
|
|
|
| |
|
|
| |
| Net
Asset Value, Beginning of Year |
$90.20 |
| $60.85 |
| $59.93 |
|
| $47.53 |
| $47.77 |
|
|
|
| |
| Income
from Investment Operations: |
|
|
|
|
| |
|
|
| |
|
Net
investment income (loss)(2) |
(0.69) |
| (1.49) |
| 0.02 |
|
| (0.69) |
| (0.73) |
|
|
|
| |
| Net
realized and unrealized gain on investments |
28.60 |
| 31.38 |
| 0.90 |
|
| 13.09 |
| 0.49 |
|
|
|
| |
| Total
from Investment Operations |
27.91 |
| 29.89 |
| 0.92 |
|
| 12.40 |
| (0.24) |
|
|
|
| |
| Redemption
Fees |
0.03 |
| 0.05 |
| 0.00 |
|
(3) |
— |
| 0.00 |
|
(3) |
|
| |
| Less
Distributions: |
|
|
|
|
| |
|
|
| |
| From
net investment income |
— |
| (0.59) |
| — |
|
| — |
| — |
|
|
|
| |
| Total
Distributions |
— |
| (0.59) |
| — |
|
| — |
| — |
|
|
|
| |
| Net
Asset Value, End of Year |
$118.14 |
| $90.20 |
| $60.85 |
|
| $59.93 |
| $47.53 |
|
|
|
| |
| Total
return |
30.98 |
% |
49.20 |
% |
1.53 |
% |
| 26.09 |
% |
(0.50) |
% |
|
|
| |
| SUPPLEMENTAL
DATA AND RATIOS |
|
|
|
|
| |
|
|
| |
| Net
assets, end of Year (000’s) |
$12,234 |
| $9,219 |
| $8,684 |
|
| $10,544 |
| $8,373 |
|
|
|
| |
| Ratio
of operating expenses to average net assets: |
|
|
|
|
| |
|
|
| |
| Before
expense reimbursement |
2.44 |
% |
2.45 |
% |
2.53 |
% |
| 2.50 |
% |
2.49 |
% |
|
|
| |
| After
expense reimbursement |
2.39 |
% |
2.39 |
% |
2.39 |
% |
| 2.39 |
% |
2.39 |
% |
|
|
| |
| Ratio
of net investment income (loss) to average net assets: |
(0.68) |
% |
(1.68) |
% |
0.03 |
% |
| (1.23) |
% |
(1.35) |
% |
|
|
| |
|
Portfolio
turnover rate(4) |
6 |
% |
3 |
% |
0 |
% |
| 4 |
% |
3 |
% |
|
|
| |
(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 – Advisor Class A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 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 |
For
the
Year Ended
December 31,
2018 |
|
|
PER
SHARE DATA:(1) |
|
|
|
|
|
|
|
|
|
| |
| Net
Asset Value, Beginning of Year |
$39.54 |
|
| $31.36 |
| $26.29 |
|
| $21.49 |
|
| $26.41 |
|
|
| |
| Income
from Investment Operations: |
|
|
|
|
|
|
|
|
|
| |
|
Net
investment income (loss)(2) |
(0.03) |
|
| (0.43) |
| 0.04 |
|
| (0.07) |
|
| (0.21) |
|
|
| |
|
Net
realized and unrealized gain (loss) on investments |
5.83 |
|
| 9.10 |
| 5.04 |
|
| 4.89 |
|
| (2.72) |
|
|
| |
| Total
from Investment Operations |
5.80 |
|
| 8.67 |
| 5.08 |
|
| 4.82 |
|
| (2.93) |
|
|
| |
| Redemption
Fees |
0.00 |
|
(3) |
0.02 |
| 0.00 |
|
(3) |
— |
|
| 0.00 |
|
(3) |
| |
| Less
Distributions: |
|
|
|
|
|
|
|
|
|
| |
|
From
net investment income |
— |
|
| (0.47) |
| (0.01) |
|
| (0.02) |
|
| — |
|
|
| |
|
From
net realized gains |
(0.53) |
|
| (0.04) |
| — |
|
| — |
|
| (1.99) |
|
|
| |
| Total
Distributions |
(0.53) |
|
| (0.51) |
| (0.01) |
|
| (0.02) |
|
| (1.99) |
|
|
| |
| Net
Asset Value, End of Year |
$44.81 |
|
| $39.54 |
| $31.36 |
|
| $26.29 |
|
| $21.49 |
|
|
| |
|
Total
return(4) |
14.69 |
% |
| 27.70 |
% |
19.31 |
% |
| 22.42 |
% |
| (11.10) |
% |
|
| |
| SUPPLEMENTAL
DATA AND RATIOS |
|
|
|
|
|
|
|
|
|
| |
| Net
assets, end of Year (000’s) |
$9,794 |
|
| $8,786 |
| $6,442 |
|
| $6,868 |
|
| $6,426 |
|
|
| |
| Ratio
of operating expenses to average net assets: |
|
|
|
|
|
|
|
|
|
| |
| Before
expense reimbursement |
2.01 |
% |
| 2.00 |
% |
2.10 |
% |
| 2.09 |
% |
| 2.11 |
% |
|
| |
| After
expense reimbursement |
1.65 |
% |
| 1.65 |
% |
1.65 |
% |
| 1.65 |
% |
| 1.89 |
% |
|
| |
| Ratio
of net investment income (loss) to average net assets: |
(0.07) |
% |
| (1.04) |
% |
0.15 |
% |
| (0.26) |
% |
| (0.78) |
% |
|
| |
|
Portfolio
turnover rate(5) |
13 |
% |
| 2 |
% |
2 |
% |
| 4 |
% |
| 8 |
% |
|
| |
(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)The
total return calculation does not reflect the 5.75% front end sales charge on
Advisor Class A shares.
(5)Portfolio
turnover of The Market Opportunities Portfolio.
The
Market Opportunities Fund – Advisor Class C
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 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 |
For
the
Year Ended
December 31,
2018 |
| |
|
PER
SHARE DATA:(1) |
|
|
| |
|
|
|
| |
| Net
Asset Value, Beginning of Year |
$37.72 |
|
| $29.79 |
| $25.10 |
|
| $20.61 |
| $25.53 |
|
| |
| Income
from Investment Operations: |
|
|
|
|
|
|
|
| |
|
Net
investment income (loss)(2) |
(0.22) |
|
| (0.60) |
| (0.08) |
|
| (0.18) |
| (0.33) |
|
| |
|
Net
realized and unrealized gain (loss) on investments |
5.54 |
|
| 8.65 |
| 4.77 |
|
| 4.67 |
| (2.60) |
|
| |
| Total
from Investment Operations |
5.32 |
|
| 8.05 |
| 4.69 |
|
| 4.49 |
| (2.93) |
|
| |
| Redemption
Fees |
0.00 |
|
(4) |
0.02 |
| 0.00 |
|
(4) |
— |
| — |
|
| |
| Less
Distributions: |
|
|
|
|
|
|
|
| |
|
From
net investment income |
— |
|
| (0.10) |
| — |
|
| — |
| — |
|
| |
|
From
net realized gains |
(0.53) |
|
| (0.04) |
| — |
|
| — |
| (1.99) |
|
| |
| Total
Distributions |
(0.53) |
|
| (0.14) |
| — |
|
| — |
| (1.99) |
|
| |
| Net
Asset Value, End of Year |
$42.51 |
|
| $37.72 |
| $29.79 |
|
| $25.10 |
| $20.61 |
|
| |
| Total
return |
14.12 |
% |
| 27.06 |
% |
18.69 |
% |
| 21.79 |
% |
(11.48) |
% |
| |
| SUPPLEMENTAL
DATA AND RATIOS |
|
|
|
|
|
|
|
| |
| Net
assets, end of Year (000’s) |
$12,610 |
|
| $11,087 |
| $9,392 |
|
| $10,051 |
| $8,517 |
|
| |
| Ratio
of operating expenses to average net assets: |
|
|
|
|
|
|
|
| |
| Before
expense reimbursement |
2.51 |
% |
| 2.50 |
% |
2.60 |
% |
| 2.59 |
% |
2.61 |
% |
| |
| After
expense reimbursement |
2.15 |
% |
| 2.15 |
% |
2.15 |
% |
| 2.15 |
% |
2.39 |
% |
| |
| Ratio
of net investment income (loss) to average net assets: |
(0.57) |
% |
| (1.54) |
% |
(0.35) |
% |
| (0.76) |
% |
(1.28) |
% |
| |
|
Portfolio
turnover rate(3) |
13 |
% |
| 2 |
% |
2 |
% |
| 4 |
% |
8 |
% |
| |
(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)Portfolio
turnover of The Market Opportunities Portfolio.
(4)Amount
calculated is less than $0.005.
Appendix
A
Financial
Intermediary Sales Charge Variations
The
availability of certain sales charge waivers and discounts will depend on
whether you purchase your shares directly from a Fund or through a financial
intermediary. Specific intermediaries may have different policies and procedures
regarding the availability of front-end sales charge waivers or CDSC waivers,
which are discussed below. In all instances, it is the shareholder’s
responsibility to notify the Fund or the shareholder’s financial intermediary at
the time of purchase of any relationship or other facts qualifying the purchaser
for sales charge waivers or discounts. For waivers and discounts not available
through a particular intermediary listed below, shareholders will have to
purchase Fund shares directly from a Fund or through another intermediary to
receive Fund imposed waivers or discounts. Please see “Description of Advisor
Classes” starting on page 94 of this Prospectus for information about such
waivers and discounts.
Merrill
Lynch, Pierce, Fenner & Smith Incorporated (“Merrill Lynch”)
Shareholders
purchasing Fund shares through a Merrill Lynch platform or account will be
eligible only for the following sales charge waivers (front-end sales charge
waivers and contingent deferred, or back-end, sales charge waivers) and
discounts, which may differ from those disclosed elsewhere in the Funds’
Prospectuses or SAI.
|
|
| |
|
Front-end
Sales Charge Waivers on Class A Shares available at Merrill
Lynch
The
front-end sales charge on Advisor Class A shares of the Funds available
through Merrill Lynch are waived for the following purchases:
|
|
•Employer-sponsored
retirement, deferred compensation and employee benefit plans (including
health savings accounts) and trusts used to fund those plans, provided
that the plan is a group plan (more than one participant), the shares are
not held in a commission-based brokerage account and shares are held in
the name of the plan through an omnibus account.
•Shares
purchased by a 529 Plan (does not include 529 Plan units or 529-specific
share classes or equivalents)
•Shares
purchased through a Merrill Lynch affiliated investment advisory
program
•Shares
exchanged due to the holdings moving from a Merrill Lynch affiliated
investment advisory program to a Merrill brokerage (non-advisory) account
pursuant to Merrill Lynch’s policies relating to sales load discounts and
waivers.
•Shares
purchased by third party investment advisors on behalf of their advisory
clients through Merrill Lynch’s platform
•Shares
of funds purchased through the Merrill Edge Self-Directed
platform
•Shares
purchased through reinvestment of capital gains distributions and dividend
reinvestment when purchasing shares of the same fund (but not any other
fund within the Kinetics Mutual Funds family)
•Shares
exchanged from Class C (i.e., level-load) shares of the same fund pursuant
to Merrill Lynch’s policies relating to sales load discounts and
waivers
•Employees
and registered representatives of Merrill Lynch or its affiliates and
their family members
•Directors
or Trustees of the Fund, and employees of the Funds’ investment adviser or
any of its affiliates, as described in this Prospectus
•Eligible
shares purchased from the proceeds of redemptions within the same Kinetics
Mutual Funds family, provided (1) the repurchase occurs within 90 days
following the redemption, (2) the redemption and purchase occur in the
same account, and (3) redeemed shares were subject to a front-end or
deferred sales load (known as Rights of Reinstatement. Automated
transactions (i.e.,
systematic purchases and withdrawals) and purchases made after shares are
automatically sold to pay Merrill Lynch’s account maintenance fees are not
eligible for reinstatement |
|
|
| |
|
CDSC
Waivers on Advisor Class A and Advisor Class C Shares available at Merrill
Lynch |
|
•Death
or disability of the shareholder
• Shares
sold as part of a systematic withdrawal plan as described in the Funds’
Prospectus
•Return
of excess contributions from an IRA Account
•Shares
sold as part of a required minimum distribution for IRA and retirement
accounts pursuant to the Internal Revenue Code
•Shares
sold to pay Merrill Lynch fees but only if the transaction is initiated by
Merrill Lynch
•Shares
acquired through a right of reinstatement
•Shares
held in retirement brokerage accounts, that are exchanged for a lower cost
share class due to transfer to a fee based account or platform (applicable
to Advisor Class A and Advisor Class C shares only)
•Shares
received through an exchange due to the holdings moving from a Merrill
Lynch affiliated investment advisory program to a Merrill Lynch brokerage
(non-advisory) account pursuant to Merrill Lynch’s policies relating to
sales load discounts and waivers |
|
|
| |
|
Front-end
Sales Charge Discounts Available at Merrill Lynch: Breakpoints, Rights of
Accumulation & Letters of Intent |
|
•Breakpoints
as described in this Prospectus.
•Rights
of Accumulation (ROA) which entitle shareholders to breakpoint discounts
as described in the Fund’s prospectus will be automatically calculated
based on the aggregated holding of fund family assets held by accounts
(including 529 program holdings, where applicable) within the purchaser’s
household at Merrill Lynch. Eligible fund family assets not held at
Merrill Lynch may be included in the ROA calculation only if the
shareholder notifies his or her financial advisor about such assets
•Letters
of Intent (LOI) which allow for breakpoint discounts based on anticipated
purchases within the Kinetics Mutual Funds family, through Merrill Lynch,
over a 13-month period of time |
Morgan
Stanley Smith Barney LLC (“Morgan Stanley”)
Effective
July 1, 2018, shareholders purchasing Fund shares through a Morgan Stanley
Wealth Management transactional brokerage account will be eligible only for the
following front-end sales charge waivers with respect to Class A shares, which
may differ from and may be more limited than those disclosed elsewhere in this
Fund’s Prospectus or SAI.
Front-end
Sales Charge Waivers on Class A Shares available at Morgan Stanley Wealth
Management
•Employer-sponsored
retirement plans (e.g., 401(k) plans, 457 plans, employer-sponsored 403(b)
plans, profit sharing and money purchase pension plans and defined benefit
plans). For purposes of this provision, employer-sponsored retirement plans do
not include SEP IRAs, Simple IRAs, SAR-SEPs or Keogh plans
•Morgan
Stanley employee and employee-related accounts according to Morgan Stanley’s
account linking rules
•Shares
purchased through reinvestment of dividends and capital gains distributions when
purchasing shares of the same fund
•Shares
purchased through a Morgan Stanley self-directed brokerage account
•Class
C (i.e.,
level-load) shares that are no longer subject to a contingent deferred sales
charge and are converted to Class A shares of the same fund pursuant to Morgan
Stanley Wealth Management’s share class conversion program
•Shares
purchased from the proceeds of redemptions within the same fund family, provided
(i) the repurchase occurs within 90 days following the redemption, (ii) the
redemption and purchase occur in the same account, and (iii) redeemed shares
were subject to a front-end or deferred sales charge.
Raymond
James & Associates, Inc., Raymond James Financial Services, Inc. and each
entity’s affiliates (“Raymond James”)
Effective
March 1, 2019, shareholders purchasing fund shares through a Raymond James
platform or account, or through an introducing broker-dealer or independent
registered investment adviser for which Raymond James provides trade execution,
clearance, and/or custody services, will be eligible only for the following load
waivers (front-end sales charge waivers and contingent deferred, or back-end,
sales charge waivers) and discounts, which may differ from those disclosed
elsewhere in this Fund’s prospectus or SAI.
Front-end
sales load waivers on Class A shares available at Raymond James
•Shares
purchased in an investment advisory program.
•Shares
purchased within the same fund family through a systematic reinvestment of
capital gains distributions and dividend reinvestment when purchasing shares of
the same fund (but not any other fund within the fund family).
•
Employees and registered representatives of Raymond James or its affiliates and
their family members as designated by Raymond James.
•Shares
purchased from the proceeds of redemptions within the same fund family, provided
(1) the repurchase occurs within 90 days following the redemption, (2) the
redemption and purchase occur in the same account, and (3) redeemed shares were
subject to a front-end or deferred sales load (known as Rights of
Reinstatement).
•A
shareholder in the Fund’s Class C shares will have their shares converted at net
asset value to Class A shares (or the appropriate share class) of the Fund if
the shares are no longer subject to a CDSC and the conversion is in line with
the policies and procedures of Raymond James.
CDSC
Waivers on Classes A, B and C shares available at Raymond James
•Death
or disability of the shareholder.
•Shares
sold as part of a systematic withdrawal plan as described in the fund’s
prospectus.
•Return
of excess contributions from an IRA Account.
•Shares
sold as part of a required minimum distribution for IRA and retirement accounts
due to the shareholder reaching the qualified age based on applicable IRS
regulations as described in the fund’s prospectus.
•Shares
sold to pay Raymond James fees but only if the transaction is initiated by
Raymond James.
•Shares
acquired through a right of reinstatement.
Front-end
load discounts available at Raymond James: breakpoints, and/or rights of
accumulation, and/or letters of intent
•Breakpoints
as described in this prospectus.
•Rights
of accumulation which entitle shareholders to breakpoint discounts will be
automatically calculated based on the aggregated holding of fund family assets
held by accounts within the purchaser’s household at Raymond James. Eligible
fund family assets not held at Raymond James may be included in the calculation
of rights of accumulation only if the shareholder notifies his or her financial
advisor about such assets.
•Letters
of intent which allow for breakpoint discounts based on anticipated purchases
within a fund family, over 13-month time period. Eligible fund family assets not
held at Raymond James may be included in the calculation of letters of intent
only if the shareholder notifies his or her financial advisor about such
assets.
Janney
Montgomery Scott LLC ("Janney")
Shareholders
purchasing Fund shares through a Janney Montgomery platform or account will be
eligible only for the following sales charge waivers (front-end sales charge
waiver and contingent deferred, or back-end, sales charge waivers) and
discounts, which may differ from those disclosed elsewhere in this Fund's
Prospectus or SAI.
Front-end
sales charge* waivers on Class A shares available at Janney:
• Shares
purchased through reinvestment of capital gains distributions and dividend
reinvestment when purchasing shares of the same fund (but not any other fund
within the fund family).
• Shares
purchased by employees and registered representatives of Janney or its
affiliates and their family members as designated by Janney.
• Shares
purchased from the proceeds of redemptions within the same fund family, provided
(1) the repurchase occurs within ninety (90) days following the redemption, (2)
the redemption and purchase occur in the same account, and (3) redeemed shares
were subject to a front-end or deferred sales load (i.e., right of
reinstatement).
• Employer-sponsored
retirement plans (e.g., 401(k) plans, 457 plans, employer-sponsored 403(b)
plans, profit sharing and money purchase pension plans and defined benefit
plans). For purposes of this provision, employer-sponsored retirement plans do
not include SEP IRAs, Simple IRAs, SAR-SEPs or Keogh plans.
• Shares
acquired through a right of reinstatement.
• Class
C shares that are no longer subject to a contingent deferred sales charge and
are converted to Class A shares of the same fund pursuant to Janney’s policies
and procedures.
CDSC
waivers on Class A and C shares available at Janney:
• Shares
sold upon the death or disability of the shareholder.
• Shares
sold as part of a systematic withdrawal plan as described in the fund’s
Prospectus.
• Shares
purchased in connection with a return of excess contributions from an IRA
account.
• Shares
sold as part of a required minimum distribution for IRA and other retirement
accounts due to the shareholder reaching age 72 as described in the fund’s
Prospectus.
• Shares
sold to pay Janney fees but only if the transaction is initiated by
Janney.
• Shares
acquired through a right of reinstatement.
• Shares
exchanged into the same share class of a different fund.
Front-end
sales charge* discounts available at Janney: breakpoints, rights of
accumulation, and/or letters of intent:
• Breakpoints
as described in the fund’s Prospectus.
• Rights
of accumulation (“ROA”), which entitle shareholders to breakpoint discounts,
will be automatically calculated based on the aggregated holding of fund family
assets held by accounts within the purchaser’s household at Janney. Eligible
fund family assets not held at Janney may be included in the ROA calculation
only if the shareholder notifies his or her financial advisor about such
assets.
• Letters
of intent which allow for breakpoint discounts based on anticipated purchases
within a fund family, over a 13-month time period. Eligible fund family assets
not held at Janney Montgomery Scott may be included in the calculation of
letters of intent only if the shareholder notifies his or her financial advisor
about such assets.
*Also
referred to as an “initial sales charge.”
Kinetics
Mutual Funds, Inc.
|
|
|
|
|
| |
| The
Internet Fund |
The
Small Cap Opportunities Fund |
|
The
Global Fund
|
The
Market Opportunities Fund |
| The
Paradigm 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, 2023
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
The
annual
and semi-annual
reports for each Fund provide the most recent financial reports and portfolio
listings. The annual report contains a discussion of the market conditions and
investment strategies that significantly affected each Fund’s performance during
the last fiscal year.
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
