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The Multi-Disciplinary Fund seeks to achieve its investment objective of
total return by investing all of its investable assets in the
Multi-Disciplinary Portfolio. "Total Return" sought by the
Multi-Disciplinary Portfolio consists of income earned on the
Multi-Disciplinary Portfolio's investment, plus capital appreciation, if
any. The Multi-Disciplinary Portfolio utilizes a two-part investment
strategy, which includes fixed-income and derivatives components. Under
normal circumstances, the Multi-Disciplinary Portfolio will invest at least
65% of its net assets in fixed-income securities and in derivatives.
There is no limit on the amount of assets the Multi-Disciplinary Portfolio
may invest in fixed-income securities. Fixed-income securities include
corporate bonds and debentures, convertible debt securities, and debt
securities of foreign issuers. The Multi-Disciplinary Portfolio's
fixed-income component focuses primarily on investment-grade corporate
bonds, issued principally in the United States. Bonds held by the
Multi-Disciplinary Portfolio generally are senior secured or senior
unsecured and have durations of 0-5 years. However, there is no limit as to
the maturities or credit ratings associated with such bonds. The
Multi-Disciplinary Portfolio may also invest up to 40% of its total assets
at the time of purchase in debt securities of emerging market countries.
The Multi-Disciplinary Portfolio may invest up to 5% of its total assets in
junk bonds, including defaulted bonds. The Multi-Disciplinary Portfolio
utilizes a proprietary credit spread/relative value model to select
positions and a portfolio construction and investment process that relies on
value identification and diversification.
The Multi-Disciplinary Portfolio may invest up to 90% of its net assets in
selling equity put options. The Multi-Disciplinary Portfolio may also
invest more than 5% in U.S. Treasury note futures; selling or buying equity
calls, bond calls, and bond put options; and credit default swaps, as well
as other derivatives, to manage risk or to enhance return. The
Multi-Disciplinary Portfolio will not invest more than 15% of its net assets
in instruments that are not deemed liquid. In connection with the
Multi-Disciplinary Portfolio's positions in derivatives, the
Multi-Disciplinary Portfolio will segregate liquid assets or will otherwise
cover its position in accordance with applicable Securities and Exchange
Commission ("SEC") requirements.
The Multi-Disciplinary Portfolio's option strategy component focuses on the
use of options on companies that the Investment Adviser believes have unique
business attributes and/or long-term unique fundamental business
characteristics. The companies considered by the Investment Adviser for
various option strategies undergo a fundamental analysis review by the
Investment Adviser's research team, including but not limited to valuation,
credit analysis, and earnings quality.
Put options and call options typically have similar structural
characteristics and operational mechanics regardless of the underlying
instrument on which they are purchased or sold. A put option gives the
purchaser of the option, upon payment of a premium, the right to sell, and
the seller the obligation to buy, the underlying security, index, currency
or other instrument at the exercise price. A call option, upon payment of a
premium, gives the purchaser of the option the right to buy, and the seller
the obligation to sell, the underlying instrument at the exercise price.
The put options that the Multi-Disciplinary Portfolio writes (sells) on
specific underlying equity securities are generally traded on a national
securities exchange. They provide a specific date on which the holder may
exercise its rights under the options, and are commonly referred to as
"European-style" options. By writing put options, the Multi-Disciplinary
Portfolio receives income in the form of cash premiums from the purchasers
of these options in exchange for providing the purchasers with the right to
potentially sell an underlying security to the Multi-Disciplinary Portfolio.
The Multi-Disciplinary Portfolio is not expected to make a cash payment if
the prevailing market value of the underlying equity securities on an
expiration date exceeds the strike price of the put option that the
Multi-Disciplinary Portfolio has written.
The Multi-Disciplinary Portfolio may hold equity securities in limited
circumstances. For example, if put options are exercised against the
Multi-Disciplinary Portfolio, in connection with a corporate restructuring
of an issuer or convertible securities. However, the Multi-Disciplinary
Portfolio will not invest directly in equity securities.
There are no limitations on the amount that the Multi-Disciplinary Portfolio
may invest or hold in any single issuer; however, the Multi-Disciplinary
Portfolio currently intends to limit its investments at the time of purchase
to 10% of the Multi-Disciplinary Portfolio's assets in any single position.
The Investment Adviser uses a bottom-up approach in managing the
Multi-Disciplinary Fund, which means that the focus is on the analysis of
individual securities. By engaging in quantitative and qualitative analysis
of individual securities, the Investment Adviser examines a company's
current relative valuation and earning potential and assesses the company's
competitive positioning.
The Investment Adviser may sell a security due to changes in credit
characteristics or outlook, as well as changes in portfolio strategy or cash
flow needs. A security may also be sold and replaced with one that presents
a better value or risk/reward profile. The Investment Adviser may actively
trade Multi-Disciplinary Portfolio securities.
The Multi-Disciplinary Portfolio may invest up to 20% of its total assets at
the time of purchase 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.
Disclosure
Past performance and does not guarantee future results. Due to market volatility, current performance may be more or less than for the rankings shown. Investment return and principal value will vary, and an investment in the fund can lose money.
Because the Funds [other than The Paradigm Fund and The Small Cap Opportunities Fund] invest in a single industry, their shares do not represent a complete investment program. Internet and biotechnology stocks are subject to a rate of change in technology, obsolescence and competition that is generally higher than that of other industries, and have experienced extreme price and volume fluctuations.
International investing [for The Global Fund] presents special risks including currency exchange fluctuation, government regulations, and the potential for political and economic instability. The Fund's share price is expected to be more volatile than that of a U.S.-only fund. Because smaller companies [for The Global and Small Cap Opportunities Fund] often have narrower markets and limited financial resources, they present more risk than larger, more well established companies.
Non-investment grade debt securities [for all Funds], i.e., junk bonds, are subject to greater credit risk, price volatility and risk of loss than investment grade securities. Further, options contain special risks including the imperfect correlation between the value of the option and the value of the underlying asset. 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 may face a greater risk of business failure.
As non-diversified and single industry funds, the value of their shares may fluctuate more than shares invested in a broader range of industries and companies.
Unlike other investment companies that directly acquire and manage their own portfolios of securities, the Funds pursue their investment objectives by investing all of their investable assets in a corresponding portfolio series of Kinetics Portfolios Trust.
Distributor: Kinetics Funds Distributor, Inc. is an affiliate of Kinetics Asset Management, Inc., and is not an affiliate of Kinetics Mutual Funds, Inc.
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