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June 2008
You should consider the investment objectives, risks, charges and
expenses of the fund carefully before investing. For a free copy of a
prospectus, which contains this and other information, visit our website at
www.kineticsfunds.com or call 1-800-930-3828. You should read the
prospectus carefully before you invest. Please read the important
disclosure at the end of this portfolio commentary.
(Click here for most recent and complete performance information)
(Click here for the most recent portfolio holdings)
Dear Fellow Shareholders,
During the second quarter of 2008, Kinetics Multi-Disciplinary Fund ( No-Load Class) declined by 3.00%, compared to the S&P 500 Index, which declined by 2.73%, and Nasdaq Composite, which had a slight increase of 0.61%.
An Introduction to the Multi-Disciplinary Fund, a fixed income hybrid offering by Kinetics Mutual Funds, Inc., is necessary due to the style variation relative to our other offerings. This new Fund represents exposure, in part, to the Kinetics Paradigm Portfolio’s equity holdings through the selling of put options while investing cash premiums in corporate debt securities. The volatility of this Fund is intended to be less than a pure equity investment, but more than a pure debt investment.
The Investment Adviser uses a bottom-up approach in managing the portfolio, which means that the focus is on the analysis of individual securities. By engaging in quantitative and qualitative analysis of individual securities, the investment team examines a company’s current relative valuation and earnings potential and assesses the company’s competitive positioning.
“Total Return” sought by the Fund consists of income earned on the portfolio’s investment, plus capital appreciation, if any. The Fund utilizes a two-part investment strategy, which includes fixed-income and derivatives components.
The Fund may invest up to 90% of its net assets in selling equity put options. The put options that are written (sold) 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 Fund 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 Fund. The Fund 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 Fund may hold equity securities in limited circumstances. For example, if put options are exercised against the Fund, in connection with a corporate restructuring of an issuer or convertible securities. However, the Fund will not invest directly in equity securities. There are no limitations on the amount that the Fund may invest or hold in any single issuer; however, the Fund currently intends to limit its investments at the time of purchase to 10% of the Fund’s assets in any single position.
We thank you for your confidence and believe you will be rewarded for it.
The Kinetics Investment Team
Disclosure
Past performance 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, biotechnology and water related stocks are subject to a rate of change in technology, obsolescence, regulation and competition that is generally higher than that of other industries, and have experienced extreme price and volume fluctuations.
International investing 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 Fund 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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