KINETICS PORTFOLIOS TRUST, POS AMI, 2000-09-15

KINETICS PORTFOLIOS TRUST
POS AMI, 2000-09-15

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Filed with the Securities and Exchange Commission on September 15, 2000

1940 Act File No. 811-09303

SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |_|

Pre-Effective Amendment No. |_|

Post-Effective Amendment No. |_|

and

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |X|

Amendment No. 2 |X|

(Check appropriate box or boxes.)

KINETICS PORTFOLIOS TRUST
-------------------------
(Exact Name of Registrant as Specified in Charter)

1311 Mamaroneck Ave
White plains, New York 10605
-------------------------------------------------------
(Address and Zip Code of Principal Executive Offices)

(800) 930-3828
-------------------------------------------------------
Registrant's Telephone Number, including Area Code

Lee Schultheis
1311 Mamaroneck Ave
White plains, New York 10605
-------------------------------------------------------
(Name and Address of Agent for Service)

WITH A COPY TO:
---------------
Thomas R. Westle, Esq.
Spitzer & Feldman P.C.
405 Park Avenue
New York, New York 10022

Interests offered pursuant to this registration statement are issued solely
to eligible investors in private placement transactions and do not involve any
"public offering" within the meaning of Section 4(2) of the 1933 Act.
---------------------------------------------------------------------------
Approximate Date of Proposed Public Offering

Interests
---------
(Title of Securities Being Registered)

It is proposed that this filing will become effective

_____ immediately upon filing pursuant to paragraph (b)

_____ on ___________ pursuant to paragraph (b)

_____ 60 days after filing pursuant to paragraph (a)(1)

_____ on ___________ pursuant to paragraph (a)(1)

_____ 75 days after filing pursuant to paragraph (a)(2)

_____ on ___________ pursuant to paragraph (a)(2) of Rule 485.

THE INTERNET PORTFOLIO
THE INTERNET INFRASTRUCTURE PORTFOLIO
THE INTERNET EMERGING GROWTH PORTFOLIO
THE INTERNET GLOBAL GROWTH PORTFOLIO
THE NEW PARADIGM PORTFOLIO
THE MEDICAL PORTFOLIO
THE SMALL CAP OPPORTUNITIES PORTFOLIO
THE MIDDLE EAST GROWTH PORTFOLIO
THE ASIA TECHNOLOGY PORTFOLIO
THE KINETICS GOVERNMENT MONEY MARKET PORTFOLIO

EACH A SERIES OF KINETICS PORTFOLIOS TRUST
A DELAWARE BUSINESS TRUST

[LOGO]

PROSPECTUS

SEPTEMBER 15, 2000

EXPLANATORY NOTE

This Prospectus is being filed as a part of the Registration Statement filed by
the Trust pursuant to Section 8(b) of the Investment Company Act of 1940, as
amended ("1940 Act"). Nevertheless, beneficial interests of each portfolio
series of the Trust are not being registered under the Securities Act of 1933,
as amended (the "1933 Act"), because such interests are issued solely to
eligible investors in private placement transactions that do not involve any
"public offering" within the meaning of Section 4(2) of the 1933 Act.
Accordingly, investments in any of the portfolio series of the Trust described
hereunder may currently be made only by regulated investment companies,
unregulated foreign investment companies, U.S. and non-U.S. institutional
investors, S corporations, segregated asset accounts, and certain qualified
pension and retirement plans. No part of this Prospectus or of the Trust's
Registration Statement constitutes an offer to sell, or the solicitation of an
offer to buy any beneficial interests of any of the portfolio series described
hereunder or any other portfolio series of the Trust.

Responses to Items 1, 2, 3, 5 and 9 of Part A and Items 23(e) and (i)-(k) of
Part C have been omitted pursuant to paragraph B.2.(b) of the General
Instructions to Form N-1A.

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.

TABLE OF CONTENTS
<S> <C>

Investment Objective, Strategies and Risks of the Internet Portfolio...................3
Investment Objective, Strategies and Risks of the Infrastructure Portfolio.............6
Investment Objective, Strategies and Risks of the Emerging Growth Portfolio............9
Investment Objective, Strategies and Risks of the Global Growth Portfolio.............12
Investment Objective, Strategies and Risks of the New Paradigm Portfolio..............15
Investment Objective, Strategies and Risks of the Medical Portfolio...................18
Investment Objective, Strategies and Risks of the Small Cap Portfolio.................21
Investment Objective, Strategies and Risks of the Middle East Portfolio...............23
Investment Objective, Strategies and Risks of the Asia Technology Portfolio...........26
Investment Objective, Strategies and Risks of the Government Money Market Portfolio...29
Main Risks of the Portfolios..........................................................31
Management of the Portfolios..........................................................34
Valuation of Portfolio Shares.........................................................36
Purchase of Shares....................................................................37
Redemption of Shares..................................................................37
Exchange Privilege....................................................................38
Distribution and Taxes................................................................38
Distribution of Shares................................................................40
Counsel and Independent Auditors......................................................40

</TABLE>

[LOGO] KINETICS MUTUAL FUNDS, INC.

PROSPECTUS

This Prospectus gives vital information about each Portfolio. For your own
benefit and protection, please read it before you invest and keep it on hand for
future reference.

INVESTMENT ADVISER
Kinetics Asset Management, Inc.

SEPTEMBER 15, 2000

OVERVIEW

This combined prospectus discusses each of the following series (each a
"Portfolio" and collectively the "Portfolios") of Kinetics Portfolios Trust (the
"Trust"). Except for the Kinetics Government Money Market Fund, each Portfolio
is a no-load, non-diversified investment company.

THE INTERNET PORTFOLIO (the "Internet Portfolio") seeks to provide investors
with long-term capital growth by investing primarily in the equity securities of
U.S. and foreign companies engaged in a broad range of Internet-related
activities.

THE INTERNET INFRASTRUCTURE PORTFOLIO (the "Infrastructure Portfolio") seeks to
provide investors with long-term capital growth by investing primarily in the
equity securities of U.S. and foreign companies engaged in developing and
implementing hardware, software and communications technologies that support the
growing infrastructure and activities of the Internet.

THE INTERNET EMERGING GROWTH PORTFOLIO (the "Emerging Growth Portfolio") seeks
to provide investors with long-term capital growth by investing primarily in the
equity securities of small and medium capitalization U.S. and foreign growth
companies engaged in business on the Internet and Internet-related activities.

THE INTERNET GLOBAL GROWTH PORTFOLIO (the "Global Growth Portfolio") seeks to
provide investors with long-term capital growth by investing primarily in the
equity securities of U.S. and foreign companies engaged in business on the
Internet and Internet-related activities.

THE NEW PARADIGM PORTFOLIO (the "New Paradigm Portfolio") seeks to provide
investors with long-term capital growth by investing primarily in the equity
securities of U.S. and foreign companies that the investment adviser believes
are well positioned to reduce their costs, extend the reach of their
distribution channels and experience significant growth in revenues as a result
of the companies increased involvement in, or growth of, the Internet.

THE MEDICAL PORTFOLIO (the "Medical Portfolio") seeks to provide investors with
long-term capital growth by investing primarily in the equity securities of U.S.
and foreign companies engaged in medical research, pharmaceutical treatments and
related medical technology with a focus on companies engaged in cancer research
and drug development.

THE SMALL CAP OPPORTUNITIES PORTFOLIO (the "Small Cap Portfolio") seeks to
provide investors with long-term capital growth by investing primarily in the
equity securities of U.S. and foreign small capitalization companies that
provide attractive valuation opportunities due to special situations such as
lack of institutional ownership, lack of significant analyst coverage, or
companies with sound fundamentals that have experienced a short-term earnings
shortfall.

THE MIDDLE EAST PORTFOLIO (the "Middle East Portfolio) seeks to provide
investors with long-term capital growth by investing primarily in the equity
securities of foreign companies domiciled in the Middle East region of the globe
and U.S. companies engaged in significant business activities in the Middle
East.

THE ASIA TECHNOLOGY PORTFOLIO (the "Asia Technology Portfolio") seeks to provide
investors with long-term capital growth by investing primarily in the equity
securities of companies located or operating primarily in Asia engaged in
technology related business activities. PLEASE NOTE: THE ASIA TECHNOLOGY
PORTFOLIO WILL COMMENCE OPERATIONS ON OCTOBER 20, 2000.

THE KINETICS GOVERNMENT MONEY MARKET PORTFOLIO (the "Government Money Market
Portfolio") is a no-load, diversified investment company that seeks to provide
investors with current income consistent with the preservation of capital and
maintenance of liquidity by investing primarily in money market instruments
issued or guaranteed, as to principal and interest, by the U.S. Government, its
agencies or instrumentalities.

The Statement of Additional Information contains more information about the
Portfolios and the types of securities in which they may invest.

INVESTMENT OBJECTIVE, STRATEGIES AND RISKS OF THE INTERNET PORTFOLIO
--------------------------------------------------------------------------------

INVESTMENT OBJECTIVE
The investment objective of the Internet Portfolio is long-term growth of
capital. The Internet Portfolio seeks to obtain current income as a secondary
objective.

PRINCIPAL INVESTMENT STRATEGIES
To achieve the Internet Portfolio's investment objective, under normal
circumstances, at least 65% of the Internet Portfolio's total assets will be
invested in common stocks, convertible securities, warrants and other equity
securities having the characteristics of common stocks, such as American
Depositary Receipts ("ADRs") and International Depositary Receipts ("IDRs"), of
U.S. and foreign companies that are engaged in the Internet or are otherwise
engaged in Internet-related activities. The Internet Portfolio may also write
and sell options on securities in which it invests for hedging purposes and/or
direct investment.

The investment adviser believes that the Internet offers unique investment
opportunities due to its ever-growing use and popularity among business and
personal users alike. The Internet is a collection of connected computers that
allows commercial and professional organizations, educational institutions,
government agencies and consumers to communicate electronically, access and
share information and conduct business around the world.

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. Such companies include, but are not limited to, the
following:

o CONTENT DEVELOPERS: Companies that supply proprietary information and
entertainment content, such as games, music, video, graphics, news, etc. on
the Internet.

o 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.

o 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.

o VENTURE CAPITAL: Companies that invest in pre-IPO and start-up stage
companies with business models related to the internet.

o INTERNET SERVICE PROVIDERS: Companies that provide users with access to the
Internet.

o INTERNET PORTALS: Companies that provide users with search-engine services
to access various sites by category on the Internet.

o WIRELESS/BROADBAND ACCESS: Companies that provide the infrastructure to
enable high-speed and wireless communication of data via the Internet.

o E-COMMERCE: Companies that derive a substantial portion of their revenue
from sales of products and services conducted via the Internet.

o 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.

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 spends on
research and development. The investment adviser believes that dollars invested
in research and development today frequently have significant bearing on future
growth.

TEMPORARY INVESTMENTS
To respond to adverse market, economic, political or other conditions, the
Internet Portfolio may invest up to 100% of its assets in high quality U.S.
short-term debt securities and money market instruments. The Internet Portfolio
may invest up to 35% of its assets in these securities to maintain liquidity.
Some of these short-term instruments include:

o commercial paper
o certificates of deposit, demand and time deposits and banker's acceptance
o U.S. Government securities (i.e., U.S. Treasury obligations)
o repurchase agreements

To the extent that the Internet Portfolio engages in a temporary, defensive
strategy, the Internet Portfolio may not achieve its investment objective.

PRINCIPAL RISKS OF INVESTMENT
Investing in common stocks has inherent risks that could cause you to lose
money. The principal risks of investing in the Internet Portfolio are listed
below and could adversely affect the net asset value, total return and the value
of the Internet Portfolio and your investment.

o 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.

o 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
investment objective.

o LIQUIDITY RISKS: The investment adviser may not be able to sell portfolio
securities at an optimal time or price.

o INDUSTRY RISKS: Mutual funds that invest in a particular industry carry a
risk that a group of industry-related stocks will decline in price due to
industry specific developments. Companies in the same or similar industries
may share common characteristics and are more likely to react comparably to
industry specific market or economic developments.

o INTERNET INDUSTRY SPECIFIC RISKS: 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.

o SMALL AND MEDIUM-SIZE COMPANY RISKS: The Internet Portfolio may invest in
the equity securities of small, medium and large-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.

o FOREIGN SECURITIES RISKS: The Internet Portfolio may invest in foreign
securities, which 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, differences in financial reporting standards and
less stringent regulation of securities markets.

o NON-DIVERSIFICATION RISKS: As a non-diversified investment company, more of
the Internet Portfolio's assets may be concentrated in the common stock of
any single issuer, which may make the value of the Internet Portfolio's
shares and therefore, the Internet Fund's shares, more susceptible to
certain risks than shares of a diversified mutual fund.

o OPTION TRANSACTION RISKS: The Internet Portfolio may write and sell options
on securities in which it invests for hedging purposes and/or direct
investment. Options contain certain special risks including the imperfect
correlation between the value of the option and the value of the underlying
asset.

INVESTMENT OBJECTIVE, STRATEGIES AND RISKS OF THE INFRASTRUCTURE PORTFOLIO
--------------------------------------------------------------------------------

INVESTMENT OBJECTIVE
The investment objective of the Infrastructure Portfolio is long-term growth of
capital.

INVESTMENT STRATEGIES
To achieve the Infrastructure Portfolio's investment objective, under normal
circumstances, at least 65% of the Infrastructure Portfolio's total assets will
be invested in common stocks, convertible securities, warrants and other equity
securities having the characteristics of common stocks, such as ADRs and IDRs,
of U.S. and foreign companies that are engaged in the development and
implementation of hardware, software and communications technologies that
support the growing infrastructure and activities of the Internet. The
Infrastructure Portfolio may also write and sell options on securities in which
it invests for hedging purposes and/or direct investment.

Infrastructure Portfolio securities will be selected by the investment adviser
from companies that provide 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. These companies
may be large, medium or small in size if, in the investment adviser's opinion,
the companies meet the Infrastructure Portfolio's investment criteria. Such
companies include, but are not limited to the following:

o WIRELESS/BROADBAND ACCESS: Companies that provide the infrastructure to
enable high-speed and wireless communication of data via the Internet.

o E-COMMERCE: Companies that derive a substantial portion of their revenue
from sales of services conducted via the internet.

o TELECOMMUNICATIONS COMPANIES: 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.

The investment adviser selects portfolio securities by evaluating a company's
positioning and both the current percentage and growth in percentage of
resources that it spends in the Internet infrastructure marketplace. The
investment adviser also considers a company's fundamentals by reviewing its
balance sheets, corporate revenues, earnings and dividends.

TEMPORARY INVESTMENTS
To respond to adverse market, economic, political or other conditions, the
Infrastructure Portfolio may invest up to 100% of its assets in high quality
U.S. short-term debt securities and money market instruments. The Infrastructure
Portfolio may invest up to 35% of its assets in these securities to maintain
liquidity. Some of these short-term instruments include:

o commercial paper
o certificates of deposit, demand and time deposits and banker's acceptance
o U.S. Government securities (i.e., U.S. Treasury obligations)
o repurchase agreements

To the extent that the Infrastructure Portfolio engages in a temporary,
defensive strategy, the Infrastructure Portfolio may not achieve its investment
objective.

PRINCIPAL RISKS OF INVESTMENT
Investing in common stocks has inherent risks that could cause you to lose
money. The principal risks of investing in the Infrastructure Portfolio are
listed below and could adversely affect the net asset value, total return and
value of the Infrastructure Portfolio and your investment.

o 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 Infrastructure Portfolio is likely to decline in value and you
could lose money on your investment.

o LIQUIDITY RISKS: The investment adviser may not be able to sell portfolio
securities at an optimal time or price.

o INDUSTRY RISKS: Mutual funds that invest in a particular industry carry a
risk that a group of industry-related securities will decline in price due
to industry specific developments. Companies in the same or similar
industries may share common characteristics and are more likely to react
comparably to industry specific market or economic developments.

o SMALL AND MEDIUM-SIZE COMPANY RISKS: The Infrastructure Portfolio may
invest in the equity securities of small, medium and large-size companies.
Small and medium-size 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 Infrastructure Portfolio's portfolio.

o FOREIGN SECURITIES RISKS: The Infrastructure Portfolio may invest in
foreign securities, which 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, differences in financial reporting
standards and less stringent regulation of securities markets.

o NON-DIVERSIFICATION RISKS: As a non-diversified investment company, more of
the Infra-structure Portfolio's assets may be concentrated in the common
stock of any single issuer, which may make the value of the Infrastructure
Portfolio's shares and, therefore the Infrastructure Fund's shares, more
susceptible to certain risks than shares of a diversified mutual fund.

o OPTION TRANSACTION RISKS: The Infrastructure Portfolio may write and sell
options on securities in which it invests for hedging purposes and/or
direct investment. Options contain certain special risks including the
imperfect correlation between the value of the option and the value of the
underlying asset.

INVESTMENT OBJECTIVE, STRATEGIES AND RISKS OF THE EMERGING GROWTH PORTFOLIO
--------------------------------------------------------------------------------

INVESTMENT OBJECTIVE
The investment objective of the Emerging Growth Portfolio is long-term growth of
capital.

INVESTMENT STRATEGIES
To achieve the Emerging Growth Portfolio's investment objective, under normal
circumstances, at least 65% of the Emerging Growth Portfolio's total assets will
be invested in common stocks, convertible securities, warrants and other equity
securities having the characteristics of common stocks, such as ADRs and IDRs of
small and medium capitalization emerging companies that are engaged in the
Internet and Internet-related activities. The Emerging Growth Portfolio may also
write and sell options on securities in which it invests for hedging purposes
and/or direct investment.

Emerging Growth Portfolio securities will be selected by the investment adviser
from emerging, small and medium-sized 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 Emerging
Growth 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:

o VENTURE CAPITAL: Companies that invest in pre-IPO and start-up stage
companies with business models related to the Internet.

o CONTENT DEVELOPERS: Companies that supply proprietary information and
entertainment content, such as games, music, video, graphics, news, etc.
on the Internet.

o INTERNET SERVICE PROVIDERS: Companies that provide users with access to the
Internet.

o INTERNET PORTALS: Companies that provide users with search-engine services
to access various sites by category on the Internet.

o WIRELESS/BROADBAND ACCESS: Companies that provide the infrastructure to
enable high-speed and wireless communication of data via the Internet.

o E-COMMERCE: Companies that derive a substantial portion of their revenue
from sales of products and services conducted via the Internet.

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 greater 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 spends on
research and development. The investment adviser believes that dollars invested
in research and development today frequently have significant bearing on future
growth.

TEMPORARY INVESTMENTS
To respond to adverse market, economic, political or other conditions, the
Emerging Growth Portfolio may invest up to 100% of its assets in high quality
U.S. short-term debt securities and money market instruments. The Emerging
Growth Portfolio may invest up to 35% of its assets in these securities to
maintain liquidity. Some of these short-term instruments include:

o commercial paper
o certificates of deposit, demand and time deposits and banker's acceptance
o U.S. Government securities (i.e., U.S. Treasury obligations)
o repurchase agreements

To the extent that the Emerging Growth Portfolio engages in a temporary,
defensive strategy, the Emerging Growth Portfolio may not achieve its investment
objective.

PRINCIPAL RISKS OF INVESTMENT
Investing in common stocks has inherent risks that could cause you to lose
money. The principal risks of investing in the Emerging Growth Portfolio are
listed below and could adversely affect the net asset value, total return and
value of the Emerging Growth Portfolio and your investment.

o 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 Emerging Growth Portfolio is likely to decline in value and you
could lose money on your investment.

o LIQUIDITY RISKS: The investment adviser may not be able to sell portfolio
securities at an optimal time or price.

o EMERGING, SMALL AND MEDIUM-SIZE COMPANY RISKS: The Emerging Growth
Portfolio invests in the equity securities of emerging, small and
medium-size companies. Small and medium-size companies generally have a
market capitalization of less than $5 billion. Emerging companies are
those with operating histories of less than three years. Investing in
emerging, small and medium-size companies presents greater risks than
investing in securities of larger, more established companies. These
companies may be developing or marketing new products or services for which
markets are not yet established and may never be established. They may also
lack depth or experience of management and may have difficulty generating
or obtaining funds necessary for growth and development of their business.
Due to these and other factors, these companies may suffer significant
losses.

o FOREIGN SECURITIES RISKS: The Emerging Growth Portfolio may invest in
foreign securities, which can carry higher returns but involve more risks
than those associated with U.S. investments. Additional risks associated
with investing in foreign securities include currency fluctuations,
political and economic instability, differences in financial reporting
standards and less stringent regulation of securities markets.

o NON-DIVERSIFICATION RISKS: As a non-diversified investment company, more of
the Emerging Growth Portfolio's assets may be concentrated in the common
stock of any single issuer, which may make the value of the Emerging Growth
Portfolio's shares and, therefore the Emerging Growth Fund's shares more
susceptible to certain risks than shares of a diversified mutual fund.

o OPTION TRANSACTION RISKS: The Emerging Growth Portfolio may write and sell
options on securities in which it invests for hedging purposes and/or
direct investment. Options contain certain special risks including the
imperfect correlation between the value of the option and the value of the
underlying asset.

INVESTMENT OBJECTIVE, STRATEGIES AND RISKS OF THE GLOBAL GROWTH PORTFOLIO
--------------------------------------------------------------------------------

INVESTMENT OBJECTIVE
The investment objective of the Global Growth Portfolio is long-term growth of
capital.

INVESTMENT STRATEGIES
To achieve the Global Growth Portfolio's investment objective, under normal
circumstances, at least 65% of the Global Growth Portfolio's total assets will
be invested in common stocks, convertible securities, warrants and other equity
securities having the characteristics of common stocks, such as ADRs and IDRs,
of companies in at least three different countries that are engaged in the
Internet and Internet-related activities. The Global Growth Portfolio may also
write and sell options on securities in which it invests for hedging purposes
and/or direct investment.

Global Growth Portfolio securities will be selected by the investment adviser
from U.S. and international 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. These companies may be large, medium or
small in size if, in the investment adviser's opinion, the companies meet the
Global Growth Portfolio's investment criteria. Accordingly, the Global Growth
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:

o CONTENT DEVELOPERS: Companies that supply proprietary information and
entertainment content, such as games, music, video, graphics, news, etc. on
the Internet.

o VENTURE CAPITAL: Companies that invest in pre-IPO and start-up stage
companies with business models related to the Internet.

o INTERNET SERVICE PROVIDERS: Companies that provide users with access to the
Internet.

o INTERNET PORTALS: Companies that provide users with search-engine services
to access various sites by category on the Internet.

o WIRELESS/BROADBAND ACCESS: Companies that provide the infrastructure to
enable high-speed and wireless communication of data via the Internet.

o E-COMMERCE: Companies that derive a substantial portion of their revenue
from sales of products and services conducted via the Internet.

TEMPORARY INVESTMENTS
To respond to adverse market, economic, political or other conditions, the
Global Growth Portfolio may invest up to 100% of its assets in high quality U.S.
short-term debt securities and money market instruments. The Global Growth
Portfolio may invest up to 35% of its assets in these securities to maintain
liquidity. Some of these short-term instruments include:

o commercial paper
o certificates of deposit, demand and time deposits and banker's acceptance
o U.S. Government securities (i.e., U.S. Treasury obligations)
o repurchase agreements

To the extent that the Global Growth Portfolio engages in a temporary, defensive
strategy, the Global Growth Portfolio may not achieve its investment objective.

PRINCIPAL RISKS OF INVESTMENT
Investing in common stocks has inherent risks that could cause you to lose
money. The principal risks of investing in the Global Growth Portfolio are
listed below and could adversely affect the net asset value, total return and
value of the Global Growth Portfolio and your investment.

o 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 Growth Portfolio is likely to decline in value and you
could lose money on your investment.

o LIQUIDITY RISKS: The investment adviser may not be able to sell portfolio
securities at an optimal time or price.

o INDUSTRY RISKS: Mutual funds that invest in a particular industry carry a
risk that a group of industry related securities will decline in price due
to industry specific developments. Companies in the same or similar
industries may share common characteristics and are more likely to react
comparably to industry specific market or economic developments.

o SMALL AND MEDIUM-SIZE COMPANY RISKS: The Global Growth Portfolio may invest
in the equity securities of small, medium and large-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 Growth Portfolio's assets.

o FOREIGN SECURITIES RISKS: The Global Growth Portfolio may invest in foreign
securities, which 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, differences in financial reporting standards and
less stringent regulation of securities markets.

o NON-DIVERSIFICATION RISKS: As a non-diversified investment company, more of
the Global Growth Portfolio's assets may be concentrated in the common
stock of any single issuer, which may make the value of the Global Growth
Portfolio's shares and, therefore the Global Growth Fund's shares more
susceptible to certain risks than shares of a diversified mutual fund.

o OPTION TRANSACTION RISKS: The Global Growth Portfolio may write and sell
options on securities in which it invests for hedging purposes and/or
direct investment. Options contain certain special risks including the
imperfect correlation between the value of the option and the value of the
underlying asset.

INVESTMENT OBJECTIVE, STRATEGIES AND RISKS OF THE NEW PARADIGM PORTFOLIO
--------------------------------------------------------------------------------

INVESTMENT OBJECTIVE
The investment objective of the New Paradigm Portfolio is long-term growth of
capital.

INVESTMENT STRATEGIES
To achieve the New Paradigm Portfolio's investment objective, under normal
circumstances, at least 65% of the New Paradigm Portfolio's total assets will be
invested in common stocks, convertible securities, warrants and other equity
securities having the characteristics of common stocks, such as ADRs and IDRs,
of U.S. and foreign companies. The New Paradigm Portfolio will invest in
companies that the investment adviser believes will reduce their costs, extend
the reach of their distribution channels and experience significant growth in
their assets or revenues as a result of increased involvement in, or growth of,
the Internet. The New Paradigm Portfolio may also write and sell options on
securities in which it invests for hedging purposes and/or direct investment.

New Paradigm Portfolio securities will be selected by the investment adviser
from companies that are engaged in various industries where the growth of the
Internet 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 New Paradigm Portfolio's
investment criteria. Accordingly, the New 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:

o RETAILERS: Companies that sell retail products and services via traditional
stores, catalogues, telemarketing, and web-site means.

o MEDIA: Companies that provide print, broadcast, cable, satellite and
web-based information and entertainment content.

o FINANCIAL SERVICES: Companies that engage in financial service transactions
such as banking, credit cards, investment services, etc.

o REAL ESTATE DEVELOPMENT: Companies that provide commercial real estate
property and services.

o BUSINESS SERVICES: Companies that provide business-to-business products and
services.

o TRAVEL & LEISURE: Companies that provide transportation and recreational
services.

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 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.

TEMPORARY INVESTMENTS
To respond to adverse market, economic, political or other conditions, the New
Paradigm Portfolio may invest up to 100% of its assets in high quality U.S.
short-term debt securities and money market instruments. The New Paradigm
Portfolio may invest up to 35% of its assets in these securities to maintain
liquidity. Some of these short-term instruments include:

o commercial paper
o certificates of deposit, demand and time deposits and banker's acceptance
o U.S. Government securities (i.e., U.S. Treasury obligations)
o repurchase agreements

To the extent that the New Paradigm Portfolio engages in a temporary, defensive
strategy, the New Paradigm Portfolio may not achieve its investment objective.

PRINCIPAL RISKS OF INVESTMENT
Investing in common stocks has inherent risks that could cause you to lose
money. The principal risks of investing in the New Paradigm Portfolio are listed
below and could adversely affect the net asset value, total return and value of
the New Paradigm Portfolio and your investment.

o 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 New Paradigm Portfolio is likely to decline in value and you
could lose money on your investment.

o LIQUIDITY RISKS: The investment adviser may not be able to sell portfolio
securities at an optimal time or price.

o SMALL AND MEDIUM-SIZE COMPANY RISKS: The New Paradigm Portfolio may invest
in the equity securities of small, medium and large-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 New Paradigm Portfolio's assets.

o FOREIGN SECURITIES RISKS: The New Paradigm Portfolio may invest in foreign
securities, which 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, differences in financial reporting standards and
less stringent regulation of securities markets.

o NON-DIVERSIFICATION RISKS: As a non-diversified investment company, more of
the New Paradigm Portfolio's assets may be concentrated in the common stock
of any single issuer, which may make the value of the New Paradigm
Portfolio's shares and, therefore the New Paradigm Fund's shares, more
susceptible to certain risks than shares of a diversified mutual fund.

o OPTION TRANSACTION RISKS: The New Paradigm Portfolio may write and sell
options on securities in which it invests for hedging purposes and/or
direct investment. Options contain certain special risks including the
imperfect correlation between the value of the option and the value of the
underlying asset.

INVESTMENT OBJECTIVE, STRATEGIES AND RISKS OF THE MEDICAL PORTFOLIO
--------------------------------------------------------------------------------

INVESTMENT OBJECTIVE
The investment objective of the Medical Portfolio is long-term growth of
capital.

INVESTMENT STRATEGIES
To achieve the Medical Portfolio's investment objective, at least 65% of the
Portfolio's total assets will be invested in common stocks, convertible
securities, warrants and other equity securities having the characteristics of
common stocks, such as ADRs and IDRs, of U.S. and foreign companies engaged in
the medical research, pharmaceutical and technology industries and related
medical technology industries, generally, with an emphasis toward companies
engaged in cancer research and drug development. The Medical Portfolio may also
write and sell options on securities in which it invests for hedging purposes
and/or direct investment.

The Medical Portfolio's investment adviser believes that favorable investment
opportunities are available through companies that are developing technology,
products, and/or services for cancer research and treatment and related medical
activities. Accordingly, the Medical Portfolio seeks to invest in the equity
securities of companies whose research and development efforts may result in
higher stock values.

Medical Portfolio securities will be selected from companies that are engaged in
the medical industry generally, including companies engaged in cancer research
and treatment, biopharmaceutical research and the development of medical
instruments for therapeutic purposes. These companies may be large, medium or
small in size if in the investment adviser's opinion, the companies meet the
Medical Portfolio's investment criteria. Such companies include, but are not
limited to the following:

o PHARMACEUTICAL DEVELOPMENT: Companies that develop drugs and medications
for the treatment and prevention of cancer and other disease.

o SURGICAL AND MEDICAL INSTRUMENT MANUFACTURERS AND DEVELOPERS: Companies
that produce, manufacture and develop the tools used by health care
providers in the delivery of medical care and procedures for the treatment
of cancer and other diseases.

o PHARMACEUTICAL MANUFACTURERS: Companies that primarily engage in the mass
production of existing drugs and medicines including drugs and medicines
for the treatment of cancer and other diseases.

o BIOTECH & MEDICAL RESEARCH: Companies that primarily research and develop
new methods and procedures in the provision of health care related services
for the treatment of cancer and other diseases.

The investment adviser selects portfolio securities by evaluating a company's
positioning and resources that it currently expends on research and development
looking for a significant percentage, or large amount, of capital invested into
research and treatment of cancer and other diseases. The investment adviser also
considers a company's fundamentals by reviewing its balance sheets, corporate
revenues, earnings and dividends. The investment advisor also looks at the
amount of capital a company spends on research and development because the
investment adviser believes that such expenditures frequently have significant
bearing on future growth.

TEMPORARY INVESTMENTS
To respond to adverse market, economic, political or other conditions, the
Medical Portfolio may invest up to 100% of its assets in high quality U.S.
short-term debt securities and money market instruments. The Medical Portfolio
may invest up to 35% of its assets in these securities to maintain liquidity.
Some of these short-term instruments include:

o commercial paper
o certificates of deposit, demand and time deposits and banker's acceptances
o U.S. Government securities (i.e., U.S. Treasury obligations)
o repurchase agreements

To the extent that the Medical Portfolio engages in a temporary, defensive
strategy, the Medical Portfolio may not achieve its investment objective.

PRINCIPAL RISKS OF INVESTMENT
Investing in common stocks has inherent risks that could cause you to lose
money. The principal risks of investing in the Medical Portfolio are listed
below and could adversely affect the net asset value, total return and value of
the Medical Portfolio and your investment.

o 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 Medical Portfolio is likely to decline in value and you could
lose money on your investment.

o STOCK SELECTION RISKS: The stocks 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 Medical Portfolio's investment
objective.

o LIQUIDITY RISKS: The investment adviser may not be able to sell portfolio
securities at an optimal time or price.

o INDUSTRY RISKS: Mutual funds that invest in a particular industry carry a
risk that a group of industry-related stocks will decline in price due to
industry-specific developments. Companies in the same or similar industries
may share common characteristics and are more likely to react to
industry-specific market or economic developments.

o SPECIFIC RISKS OF THE MEDICAL INDUSTRY: Medical and pharmaceutical-related
companies in general are subject to the rate of change in technology, which
is generally higher than that of other industries. Similarly, cancer
research-related industries use many products and services of companies
engaged in the medical and pharmaceutical related activities and are also
subject to relatively high risks of rapid obsolescence caused by
progressive scientific and technological advances. Further, the medical
research and development industry is subject to strict regulatory scrutiny
and ongoing legislative action.

o SMALL AND MEDIUM-SIZE COMPANY RISKS: The Medical Portfolio may invest in
the stocks of small, medium and large-size companies. Small and medium-size
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 Medical
Portfolio's assets.

o FOREIGN SECURITIES RISKS: The Medical Portfolio may invest in foreign
securities, which can carry higher returns but involve more risks than
those associated with U.S. investments. Additional risks include currency
fluctuations, political and economic instability, differences in financial
reporting standards and less stringent regulation of securities markets.

o NON-DIVERSIFICATION RISKS: As a non-diversified investment company, more of
the Medical Portfolio's assets may be concentrated in the common stock of
any single issuer, which may make the value of the Medical Portfolio's
shares, and, therefore, the Medical Fund's shares, more susceptible to
certain risks than shares of a more diversified mutual fund.

o OPTION TRANSACTION RISKS: The Medical Portfolio may write and sell options
on securities in which it invests for hedging purposes and/or direct
investment. Options contain certain special risks including the imperfect
correlation between the value of the option and the value of the underlying
asset.

INVESTMENT OBJECTIVE, STRATEGIES AND RISKS OF THE SMALL CAP PORTFOLIO
--------------------------------------------------------------------------------

INVESTMENT OBJECTIVE
The investment objective of the Small Cap Portfolio is long-term growth of
capital.

INVESTMENT STRATEGIES
To achieve the Small Cap Portfolio's investment objective, under normal
circumstances, at least 65% of the Small Cap Portfolio's total assets will be
invested in common stocks, convertible securities, warrants and other equity
securities having the characteristics of common stocks, such as ADRs and IDRs,
of U.S. and foreign small capitalization companies that provide attractive
valuation opportunities. The Small Cap Portfolio may also write and sell options
on securities in which it invests for hedging purposes and/or direct investment.

The Small Cap Portfolio's investment adviser believes that favorable investment
opportunities are available through companies that exhibit a number of the
following characteristics: have a market capitalization under $1 billion, 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:

o MEDIA: Companies that provide print, broadcast, cable, satellite and
web-based information and entertainment content.

o FINANCIAL SERVICES: Companies that engage in financial service transactions
such as banking, credit cards, investment services, etc.

o RETAILERS: Companies that sell retail products and services via traditional
stores, catalogues, telemarketing, and web-site means.

o MANUFACTURING AND CONSUMER PRODUCTS: Companies that manufacture and
distribute products to retail outlets.

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.

TEMPORARY INVESTMENTS
To respond to adverse market, economic, political or other conditions, the Small
Cap Portfolio may invest up to 100% of its assets in high quality U.S.
short-term debt securities and money market instruments. The Small Cap Portfolio
may invest up to 35% of its assets in these securities to maintain liquidity.
Some of these short-term money market instruments include:

o commercial paper
o certificates of deposit, demand and time deposits and banker's acceptance
o U.S. Government securities (i.e., U.S. Treasury obligations)
o repurchase agreements

To the extent that the Small Cap Portfolio engages in this temporary, defensive
strategy, the Small Cap Portfolio may not achieve its investment objective.

PRINCIPAL RISKS OF INVESTMENT
Investing in common stocks has inherent risks that could cause you to lose
money. The principal risks of investing in the Small Cap Portfolio are listed
below and could adversely affect the net asset value, total return and value of
the Small Cap Portfolio and your investment.

o 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 is likely to decline in value and you could
lose money on your investment.

o LIQUIDITY RISKS: The investment adviser may not be able to sell portfolio
securities at an optimal time or price.

o SMALL COMPANY RISKS: The Small Cap Portfolio may invest in the stocks of
small-sized companies. Small-sized 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.

o FOREIGN SECURITIES RISKS: The Small Cap Portfolio may invest in foreign
securities, which can carry higher returns but involve more risks than
those associated with U.S. investments. Additional risks associated with
investing in foreign securities include currency fluctuations, political
and economic instability, differences in financial reporting standards and
less stringent regulation of securities markets.

o NON-DIVERSIFICATION RISKS: As a non-diversified investment company, more of
the Small Cap Portfolio's assets may be concentrated in the common stock of
any single issuer, which may make the value of the Small Cap Portfolio's
shares, and therefore, the Small Cap Fund's shares, more susceptible to
certain risks than shares of a more diversified mutual fund.

o OPTION TRANSACTION RISKS: The Small Cap Portfolio may write and sell
options on securities in which it invests for hedging purposes and/or
direct investment. Options contain certain special risks including the
imperfect correlation between the value of the option and the value of the
underlying asset.

INVESTMENT OBJECTIVE, STRATEGIES AND RISKS OF THE MIDDLE EAST PORTFOLIO
--------------------------------------------------------------------------------

INVESTMENT OBJECTIVE
The investment objective of the Middle East Portfolio is long-term growth of
capital.

INVESTMENT STRATEGIES
To achieve the Middle East Portfolio's objective, under normal circumstances, at
least 65% of the Middle East Portfolio's total assets will be invested in common
stocks, convertible securities, warrants and other equity securities having the
characteristics of common stocks, such as ADRs and IDRs, of foreign and U.S.
companies that are engaged in business activities in the "Middle East". The
Middle East Portfolio may also write and sell options on securities in which it
invests for hedging purposes and/or direct investment. The Middle East Portfolio
defines the "Middle East" to be that region ranging from Morocco on the North
African coast, including Algeria, Tunisia, Libya, Egypt, Sudan and Chad, to the
Persian Gulf region, including Israel , Lebanon, Jordan, Syria, Iraq, Iran,
Saudi Arabia, Yemen, People's Republic of Yemen, Oman, United Arab Emirates,
Qatar and Kuwait). Based on their gross domestic products and stock market
capitalizations, it is expected that Israel and Egypt will represent the largest
country investments in the Middle East Portfolio.

The Middle East Portfolio's investment adviser believes that the Middle East
offers significant investment opportunities. The Middle East region is
characterized by wide variations in wealth, physical resources, economic
development and demographics, among other fundamental measures. Some of these
nations, notably Israel, have attained world-class status in areas such as
technological innovation. This great divergence is encompassed in a relatively
small region and is coupled with varying degrees of progress in economic
development, privatization, and financial market deregulation.

The Middle East's positioning in the technology and bio-technology sectors and
the historical constraints on valuation due to geo-political turmoil have
created many attractive investment valuations. Historically, political risk has
been manifested in local financial markets in the form of significant valuation
discounts, particularly on an episodic short-term basis. Improved prospects for
political stability in the region and the anticipation of progress in peace
negotiations has historically resulted in significant appreciation in many of
these markets. The recent advent of the Internet has provided many technology
and bio-technology companies, with a strong track record for innovation, the
ability to communicate electronically, access and share information and conduct
business around the world.

Middle East Portfolio securities will be selected from foreign or U.S. companies
that are organized under the laws of Middle East nations or which, at the time
of investment are determined to hold a significant portion of their assets in or
derive a significant proportion of their gross revenues from Middle East
nations. These companies may be large, medium or small in size if, in the
investment adviser's opinion, the companies meet the Middle East Portfolio's
investment criteria. Accordingly, the Middle East Portfolio seeks to invest in
securities of companies whose research and development efforts may result in
higher stock values. Such companies include, but are not limited to the
following:

o COMPUTER SOFTWARE: Companies that produce, manufacture and develop tools to
enhance the speed, integrity and storage of data, facilitate information
distribution and gathering, provide secure electronic transactions, and
operate other computer and telecommunications-based applications, for U.S.
and export markets.

o 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,
for U.S. and export markets.

o INTERNET: Companies that develop, produce and sell products and services
via and in support of the Internet, especially in local markets.

o PHARMACEUTICAL AND BIOTECHNOLOGY: Companies that develop and market drug
and medical treatment products and technologies, especially for the export
marketplace.

o LOCAL RETAIL FRANCHISE: Companies that benefit from regulatory, cultural or
physical characteristics specific to the region, such as non-alcoholic
brewers, air conditioning distributors and financial institutions.

o GROWTH IN POPULATION/WEALTH: Companies that benefit from local demographic
trends in fields such as real estate, mortgage banking, telecommunications
and food manufacturers/distributors.

The investment adviser selects portfolio securities by evaluating a company's
positioning and the business model as well as its ability to grow and expand its
business. The investment adviser also 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. The investment adviser believes that dollars invested
in research and development today frequently have significant bearing on future
growth.

TEMPORARY INVESTMENTS

To respond to adverse market, economic, political or other conditions, the
Middle East Portfolio may invest up to 100% of its assets in high quality U.S.
short-term debt securities and money market instruments. The Middle East
Portfolio may invest up to 35% of its assets in these securities to maintain
liquidity. Some of these short-term money market instruments include:

o commercial paper
o certificates of deposit, demand and time deposits and banker's acceptance
o U.S. government securities (i.e., U.S. Treasury obligations)
o repurchase agreements

To the extent that the Middle East Portfolio engages in this temporary,
defensive strategy, the Middle East Portfolio may not achieve its investment
objective.

PRINCIPAL RISKS OF INVESTMENT

Investing in common stocks has inherent risks that could cause you to lose
money. The principal risks of investing in the Middle East Portfolio are listed
below and could adversely affect the net asset value, total return and value of
the Middle East Portfolio and your investment.

o 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 Middle East Portfolio is likely to decline in value and you
could lose money on your investment.

o LIQUIDITY RISKS: The investment adviser may not be able to sell portfolio
securities at an optimal time or price.

o INDUSTRY RISKS: Mutual funds that invest in a particular industry carry a
risk that a group of industry-related stocks will decline in price due to
industry-specific development. Companies in the same or similar industries
may share common characteristics and are more likely to react to
industry-specific market or economic developments.

o TECHNOLOGY AND BIOTECHNOLOGY INDUSTRY SPECIFIC RISKS: Companies that
conduct business on the technology and bio-technology fields are subject to
the rate of change in technology and scientific innovation, as well as
competition, which is generally higher than that of other industries.

o SMALL AND MEDIUM-SIZED COMPANY RISKS: The Middle East Portfolio may invest
in the stocks of small, medium and large-sized 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 Middle East Portfolio's assets.

o POLITICAL RISKS: The Middle East Portfolio will invest in securities of
foreign countries that have experienced historical periods of political
instability. These securities carry higher returns but involve more risks
than those associated with U.S. investments.

o FOREIGN SECURITIES RISKS: The Middle East Portfolio will invest in foreign
securities, which can carry higher returns but involve more risks than
those associated with U.S. investments. Additional risks include currency
fluctuations, political and economic instability, differences in financial
reporting standards and less stringent regulation of securities markets.

o EMERGING MARKET RISKS: The Middle East Portfolio will invest in emerging as
well as developed markets in the Middle East. Countries in emerging markets
can have relatively unstable government economies based on only a few
industries, and securities markets that trade a small number of issues.

o NON-DIVERSIFICATION RISKS: As a non-diversified investment company, more of
the Middle East Portfolio's assets may be concentrated in the common stock
of any single issuer, which may make the value of the Middle East
Portfolio's shares, and, therefore, the Middle East Fund's shares, more
susceptible to certain risks than shares of a more diversified mutual fund.

o OPTION TRANSACTION RISKS: The Middle East Portfolio may write and sell
options on securities in which it invests for hedging purposes and/or
direct investment. Options contain certain special risks including the
imperfect correlation between the value of the option and the value of the
underlying asset.

INVESTMENT OBJECTIVE, STRATEGIES AND RISKS OF THE ASIA TECHNOLOGY PORTFOLIO
--------------------------------------------------------------------------------

INVESTMENT OBJECTIVE
The investment objective of the Asia Technology Portfolio is long-term growth of
capital.

INVESTMENT STRATEGIES
To achieve the Asia Technology Portfolio's investment objective, under normal
circumstances, at least 65% of the Asia Technology Portfolio's total assets will
be invested in the equity securities of Asia companies that the portfolio
manager believes is engaged in technology related business activities. Such
companies may use technology extensively in the development of new or improved
products or processes or, alternatively, may benefit from the commercialization
of technological advances, although they may not be involved in research and
development. The Asia Technology Portfolio may also, from time to time, utilize
certain derivatives for hedging purposes and/or direct investment.

Under normal circumstances, the Asia Technology Portfolio will invest in at
least three different Asian countries. The Asia Technology Portfolio considers
Asian companies to include companies that are organized under the laws of any
country in the Asian region, including Sri Lanka, Hong Kong, Pakistan, Japan,
Thailand, Malaysia, Brunei, China, Cambodia, Taiwan, India, Indonesia, South
Korea, the Philippines, Singapore, Vietnam and Myanmar. The sub-adviser also
considers companies to be Asian if the Asia Technology Portfolio's sub-adviser,
determines that they: (1) derive at least 50% of their revenues from goods
produced or sold, investments made or services performed in or with one or more
of the Asian countries; (2) maintain at least 50% of their assets in one or more
Asian countries; or (3) have securities which are traded principally on the
stock exchange in an Asian country.

The Asia Technology Portfolio is not restricted with respect to its allocation
of the Asia Technology Portfolio's assets among Asian countries. The sub-adviser
will determine such allocation in its discretion based on various factors such
as the prospects for economic growth, expected inflation levels, government
policies and the range of available investment opportunities.

The companies in which the Asia Technology Portfolio invests may be large,
medium or small in size if, in the adviser's opinion, the companies meet the
Asia Technology Portfolio's investment criteria. Furthermore, portfolio
securities will be selected from a wide variety of industries. Industries likely
to be represented in the investment portfolio include the Internet, computers
and computer peripherals, software, electronic components and systems,
communications equipment and services, semiconductors, media and information
services, pharmaceuticals, hospital supply and medical devices, biotechnology
products, environmental services, chemical products and synthetic materials and
defense and aerospace products and services.

Asia Technology Portfolio securities are selected based on a rigorous bottom-up
approach to identify undervalued stocks. The sub-adviser will emphasize
intensive research and stock picking as the basis of a disciplined and
systematic approach to identifying such under-priced securities. Fundamental
parameters that are value and/or growth oriented are used to screen the stock
universe to identify companies that are likely to outperform. In addition,
regular company visits are an intrinsic part of the screening process. Other
investment techniques such as top-down macro analysis and market valuation are
used by the sub-adviser to support asset allocation decisions among the various
Asian countries listed above. Quantitative tools are used by the sub-adviser to
help identify and manage the Asia Technology Portfolio's exposure to different
risk factors. The sub-adviser considers whether to sell a particular security
when any of these factors materially change.

The Asia Technology Portfolio may from time to time utilize certain
sophisticated investment techniques, including derivatives. Derivatives are
financial instruments which derive their value from the performance of an
underlying asset--another security, a commodity, or an index. Examples of these
include:

o FORWARD FOREIGN EXCHANGE CONTRACTS. When the Asia Technology Portfolio buys
a foreign security, it generally does so in a foreign currency. That
currency has a price, and that price fluctuates. In order to reduce the
risk of currency price swings or for other purposes, the Portfolio may buy
forward foreign exchange contracts on foreign currencies. These contracts
"lock in" a price for the currency at a certain future date. The Asia
Technology Portfolio may also use put and call options on foreign
currencies.

o OPTIONS AND WARRANTS. An option is a contract giving the owner the right to
buy ("call option") or sell ("put option") a security at a designated price
("strike price") on a certain date. A warrant is the equivalent of a call
option written by the issuer of the underlying security.

o FUTURES CONTRACTS. Futures contracts obligate one party to deliver and the
other party to purchase a specific quantity of a commodity or a financial
instrument at a designated future date, time and place. Stock index futures
contracts call for a cash payment based on the increase or decrease in the
value of an index. The Asia Technology Portfolio may enter into foreign
currency forward contracts, repurchase agreements, ARINs, and certain other
types of futures, options and derivatives with banks, brokerage firms and
other investors in over-the-counter markets, not through any exchange.

TEMPORARY INVESTMENTS
To respond to adverse market, economic, political or other conditions, the Asia
Technology Portfolio may invest up to 100% of its assets in high quality, debt
and money market instruments issued or guaranteed by U.S. or Asian issuers or
governments, their agencies or instrumentalities. The Asia Technology Portfolio
may invest up to 35% of its assets in these securities to maintain liquidity. To
the extent that the Asia Technology Portfolio engages in this temporary,
defensive strategy, the Asia Technology Portfolio may not achieve its investment
objective.

PRINCIPAL RISKS OF INVESTMENT
Investing in common stocks has inherent risks that could cause you to lose
money. The principal risks of investing in the Asia Technology Portfolio are
listed below and could adversely affect the net asset value, total return and
value of the Asia Technology Portfolio and your investment.

o 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 Asia Technology Portfolio is likely to decline in value and you
could lose money on your investment.

o STOCK SELECTION RISKS: The stocks selected by the sub-adviser may decline
in value or not increase in value when the stock market in general is
rising and may fail to meet the Asia Technology Portfolio's investment
objective.

o LIQUIDITY RISKS: The sub-adviser may not be able to sell investment
securities at an optimal time or price.

o INDUSTRY RISKS: Mutual funds that invest in a particular industry carry a
risk that a group of industry-related stocks will decline in price due to
industry-specific development. Companies in the same or similar industries
may share common characteristics and are more likely to react to
industry-specific market or economic developments.

o TECHNOLOGY INDUSTRY SPECIFIC RISKS: Companies that conduct business in the
technology industries are subject to government regulation and the rate of
change in technology and scientific innovation, as well as competition,
which is generally higher than that of other industries.

o SMALL AND MEDIUM-SIZED COMPANY RISKS: The Asia Technology Portfolio may
invest in the stocks of small, medium and large-sized companies. Small and
medium-sized 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 Asia Technology Portfolio's assets.

o POLITICAL RISKS: The Asia Technology Portfolio invests in securities of
foreign countries that have experienced historical periods of political
instability. These securities carry higher returns but involve more risks
than those associated with U.S. investments.

o FOREIGN SECURITIES RISKS: The Asia Technology Portfolio invests in foreign
securities, which can carry higher returns but involve more risks than
those associated with U.S. investments. Additional risks include currency
fluctuations, political and economic instability, differences in financial
reporting standards and less stringent regulation of securities markets.

o EMERGING MARKETS RISKS: The Asia Technology Portfolio invests in emerging
as well as developed markets in Asia. Countries in emerging markets can
have relatively unstable government economies based on only a few
industries, and securities markets that trade a small number of issues.

o NON-DIVERSIFICATION RISKS: As a non-diversified investment company, more of
the Asia Technology Portfolio's assets may be concentrated in the common
stock of any single issuer, which may make the value of the Asia Technology
Portfolio's shares more susceptible to certain risks than are shares of a
more diversified mutual fund.

o DERIVATIVES RISKS: The Asia Technology Portfolio may utilize derivatives
for hedging purposes and/or direct investment. Derivatives contain certain
special risks including the imperfect correlation between the value of the
derivative instrument and the value of the underlying asset.

INVESTMENT OBJECTIVE, STRATEGIES AND RISKS OF THE GOVERNMENT MONEY MARKET
PORTFOLIO
--------------------------------------------------------------------------------

INVESTMENT OBJECTIVE
The investment objective of the Government Money Market Portfolio is to provide
current income consistent with the preservation of capital and maintenance of
liquidity.

INVESTMENT STRATEGIES
The Government Money Market Portfolio seeks to achieve its investment objective
by investing all of its investable assets in high quality, U.S.
dollar-denominated short-term obligations that have been determined by the
investment adviser, subject to the approval of the Government Money Market
Portfolio's Board of Trustees, to present minimal credit risk. The Government
Money Market Portfolio invests exclusively in obligations issued or guaranteed
by the U.S. Government, its agencies or instrumentalities and repurchase
agreements that are fully collateralized by such obligations ("U.S. Government
Securities"). U.S. Government Securities include direct obligations of the U.S.
Treasury, such as Treasury Bills, Treasury Notes and Treasury Bonds. The
Government Money Market Portfolio seeks to maintain a constant $1.00 net asset
value per share.

U.S. Government Securities are high quality instruments guaranteed as to
principal and interest and issued by the U.S. Treasury or by an agency or
instrumentality of the U.S. Government. Not all U.S. Government Securities are
backed by the full faith and credit of the United States however. Some are
backed by the right of the issuer to borrow from the U.S. Treasury; others are
backed by the discretionary authority of the U.S. Government to purchase the
agencies' obligations; while others are supported only by the credit of the
instrumentality. In the case of securities not backed by the full faith and
credit of the United States, the Government Money Market Portfolio must look
principally to the agency issuing or guaranteeing the obligation for ultimate
repayment.

Yields on short-, intermediate- and long-term U.S. Government Securities are
dependent on a variety of factors, including the general conditions of the money
and bond markets, the size of a particular offering and the maturity of the
obligation. Debt securities with longer maturities tend to produce higher
capital appreciation and depreciation than do obligations with shorter
maturities and lower yields. The market value of U.S. Government Securities
generally varies inversely with changes in interest rates. An increase in
interest rates, therefore, generally would reduce the market value of the
Government Money Market Portfolio's investments in U.S. Government Securities,
while a decline in interest rates generally would increase the market value of
the Government Money Market Portfolio's investments in these securities.

Under a repurchase agreement, the Government Money Market Portfolio purchases a
U.S. Government Security and simultaneously agrees to sell the security back to
the seller at a mutually agreed-upon future price and date, normally one day or
a few days later. The resale price is greater than the purchase price,
reflecting an agreed-upon market interest rate premium during the Government
Money Market Portfolio's holding period. While the maturities of the underlying
securities in repurchase agreement transactions may be more than one year, the
term of each repurchase agreement will always be less than one year. The
Government Money Market Portfolio may enter into repurchase agreements with
banks that are members of Federal Reserve System or securities dealers who are
members of a national securities exchange or are primary dealers in U.S.
Government Securities. The investment adviser monitors the creditworthiness of
each firm that is a party to a repurchase agreement with the Government Money
Market Portfolio.

PRINCIPAL RISKS OF INVESTMENT
The principal risks of investing in the Government Money Market Portfolio are
listed below and could adversely affect the net asset value, total return and
value of the Government Money Market Portfolio and your investment.

o INTEREST RATE RISKS: The rate of income will vary from day to day
depending on short-term interest rates. It is possible that a major change
in interest rates could cause the value of your investment to decline. The
values of the obligations held by the Portfolio can be expected to vary
inversely with changes in prevailing interest rates. Although the
investment policies of the Fund and Portfolio are designed to minimize
these changes and to maintain a net asset value of $1.00 per share, there
is no assurance that these policies will be successful.

o CREDIT RISKS: Changes in the credit quality rating or changes in an
issuer's financial condition can also affect the Portfolio. A default on a
security held, or a repurchase agreement entered into, by the Portfolio
could cause the value of your investment in the Fund to decline.

o REPURCHASE AGREEMENT RISKS: One of the risks of investing in repurchase
agreements is that the seller may not repurchase the securities from the
Portfolio, which may result in the Portfolio selling the security for less
than the price agreed upon with the seller. Another risk of repurchase
agreements is that the seller may default or file for bankruptcy under
which circumstances the Portfolio might have to wait through lengthy court
actions before selling the securities. In the event of a default or
bankruptcy by the seller, the Portfolio will liquidate those securities
held under the repurchase agreement, which securities constitute
collateral for the seller's obligation to repurchase the securities.

MAIN RISKS OF THE PORTFOLIOS
--------------------------------------------------------------------------------

The principal risks of investing in each Portfolio are described previously in
this Prospectus. The following list provides more detail about some of those
risks, along with information on additional types of risks which may apply to
the Portfolios.

INVESTING IN MUTUAL FUNDS--ALL PORTFOLIOS
All mutual funds carry risks that may cause you to lose money on your investment
in one or more of the Portfolios. The following describes the primary risks to
each Portfolio based on 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, the Portfolios can give no assurance that its investment
objective will be achieved.

MARKET RISK--ALL PORTFOLIOS OTHER THAN THE GOVERNMENT MONEY MARKET PORTFOLIO
The net asset value 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 by the 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 the Portfolios is also subject to the risk that a
specific segment of the stock market does 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
Portfolio may be worth more or less than your original cost when you redeem your
shares.

INTERNET INDUSTRY SPECIFIC RISKS--THE INTERNET PORTFOLIO, THE INFRASTRUCTURE
PORTFOLIO, THE EMERGING GROWTH PORTFOLIO, THE GLOBAL GROWTH PORTFOLIO, AND THE
NEW PARADIGM PORTFOLIO The value of each 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 a Portfolio's shares and your
investment in the corresponding Fund.

MEDICAL RESEARCH INDUSTRY-SPECIFIC RISKS--THE MEDICAL PORTFOLIO
Medical and pharmaceutical-related companies in general are subject to the rate
of change in technology, which is generally higher than that of other
industries. Similarly, cancer research-related industries use many products and
services of companies engaged in medical and pharmaceutical-related activities
and are also subject to relatively high risks of rapid obsolescence caused by
progressive scientific and technological advances. Medical research and
development is also subject to strict regulatory scrutiny and ongoing
legislative action.

OTHER SECURITIES A PORTFOLIO MIGHT PURCHASE--ALL PORTFOLIOS OTHER THAN THE
GOVERNMENT MONEY MARKET PORTFOLIO Under normal market conditions, each Portfolio
invests at least 65% of its total assets in equity securities, consisting of
common stocks, convertible securities, warrants and securities having the
characteristics of common stocks. If the investment adviser believes that market
conditions warrant a temporary defensive posture, a Portfolio may invest without
limitation in high quality, short-term debt securities and money market
instruments. These short-term debt securities and money market instruments
include commercial paper, certificates of deposit, bankers' acceptances, and
U.S. Government securities and repurchase agreements. (For the Asia Technology
Portfolio, short-term debt securities and money market instruments may be issued
by Asian governments, their agencies or instrumentalities.)

SECURITIES LENDING--ALL PORTFOLIOS OTHER THAN THE GOVERNMENT MONEY MARKET
PORTFOLIO 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
its assets. 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 forced to sell such collateral in this manner would suffer a
loss.

NON-DIVERSIFICATION--ALL PORTFOLIOS OTHER THAN THE GOVERNMENT MONEY MARKET
PORTFOLIO Each Portfolio is classified as "non-diversified" under federal
securities laws which means that one-half of each Portfolio's assets may be
invested in two or more stocks while the other half is spread out among various
investments not exceeding 5% of a Portfolio's total assets. As a result of their
non-diversified status, a Portfolio's shares may be more susceptible to adverse
changes in the value of the securities of a particular company than would be the
shares of a diversified investment company.

INVESTMENT IN SMALL AND MEDIUM-SIZE COMPANIES--ALL PORTFOLIOS OTHER THAN THE
GOVERNMENT MONEY MARKET PORTFOLIO 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 decline,
the net asset value of that Portfolio and your investment in the corresponding
Fund will be more susceptible to significant losses.

FOREIGN SECURITIES--ALL PORTFOLIOS OTHER THAN THE GOVERNMENT MONEY MARKET
PORTFOLIO 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 U.S. 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. For this reason, Portfolios that invest primarily in the
securities of a single country will be greatly impacted by any political,
economic or regulatory developments affecting the value of the securities.
Additional risks include currency fluctuations, political and economic
instability, differences in financial reporting standards and less stringent
regulation of securities markets.

EMERGING MARKET RISKS--THE MIDDLE EAST PORTFOLIO AND THE ASIA TECHNOLOGY
PORTFOLIO Securities issued or traded in emerging markets generally entail
greater risks than securities issued or traded in developed markets. For
example, their prices can be significantly more volatile than prices in
developed countries. Emerging market economies may also experience more severe
downturns (with corresponding currency devaluations) than developed economies.
Emerging market countries may have relatively unstable governments and may
present the risk of nationalization of businesses, expropriation, confiscatory
taxation or, in certain instances, reversion to closed market, centrally planned
economies.

Because the Middle East Portfolio and the Asia Technology Portfolio invest in
emerging markets regions, these Portfolio returns will be significantly more
volatile and may differ substantially from the overall U.S. market generally.
Your investment in either of these Portfolios has the risk that market changes
or other factors affecting Asian and/or Middle Eastern region countries,
including political instability and unpredictable economic conditions, may have
a more significant effect on these Portfolios' net asset values than would be
the case for a mutual fund invested in U.S. securities.

REGIONAL RISKS--THE MIDDLE EAST AND THE ASIA TECHNOLOGY PORTFOLIO
Certain risks associated with international investments and investing in
smaller, developing capital markets are heightened for investments in Asian
and/or Middle Eastern region countries. For example, some of the currencies of
Asian countries have experienced steady devaluations relative to the U.S.
dollar, and major adjustments have been made in certain of these currencies
periodically. Although there is a trend toward less government involvement in
commerce, governments of many Asian countries have exercised and continue to
exercise substantial influence over many aspects of the private sector. In
certain cases, the government still owns or controls many companies, including
some of the largest in the country. The same may be true of Middle Eastern
region countries. Accordingly, government actions in the future could have a
significant effect on economic conditions in Asian and Middle Eastern region
countries, which could affect private sector companies and the Portfolios, as
well as the value of the Portfolios' investment securities.

PORTFOLIO BORROWING--ALL PORTFOLIOS
Each Portfolio may leverage up to 5% of its assets to Portfolio 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 the Portfolio.

DERIVATIVES RISK--ALL PORTFOLIOS OTHER THAN THE GOVERNMENT MONEY MARKET
PORTFOLIO Each Portfolio may invest in derivatives such as options and futures.
The successful use of the investment practices described above depends on the
portfolio manager's ability to forecast stock price movements and/or currency
exchange rate movements correctly. Should stock prices or exchange rates 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 futures contracts
and options on futures contracts, there are no daily price fluctuation limits
for certain options and forward contracts, and adverse market movements could
therefore continue to an unlimited extent over a period of time. In addition,
the correlation between movements in the prices of futures contracts, options
and forward contracts and movements in the prices of the securities and
currencies hedged or used for cover will not be perfect and could produce
unanticipated losses.

A Portfolio's ability to dispose of its positions in futures contracts, options,
and forward contracts depends on the availability of liquid markets in such
instruments. Markets in options and futures with respect to a number of types of
securities and currencies are relatively new and still developing, and there is
no public market for forward contracts. It is impossible to predict the amount
of trading interest that may exist in various types of futures contracts,
options, and forward contracts. 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 currencies or portfolio securities covering an option written by the
Portfolio until the option expires or it delivers the underlying security,
futures contract or currency upon exercise. Therefore, no assurance can be given
that the Portfolios will be able to utilize these instruments effectively. In
addition, a Portfolio's ability to engage in options and futures transactions
may be limited by tax considerations and the use of certain hedging techniques
may adversely impact the characterization of income to the Portfolio for U.S.
federal income tax purposes.

MANAGEMENT OF THE PORTFOLIOS
--------------------------------------------------------------------------------

INVESTMENT ADVISER
Each Portfolio's investment adviser is Kinetics Asset Management, Inc.
("Kinetics" or the "investment adviser"), 1311 Mamaroneck Avenue, Suite 130,
White Plains, New York, 10605. The management and affairs of each Portfolio is
supervised by the Board of Trustees whose names and general background
information appear in the SAI. The investment adviser conducts investment
research and supervision for each Portfolio and is responsible for the purchase
and sale of securities in the investment portfolio of each Portfolio. The
investment adviser receives an annual fee from each Portfolio for its services
of 1.25% of each Portfolio's average daily net assets. The investment adviser
has entered into a Research Agreement with Horizon Asset Management, Inc.
("Horizon Asset Management"), a New York based investment management and
research firm, for which it is responsible for the payment of all fees owing to
Horizon Asset Management.

Steven R. Samson is the President and Chief Executive Officer of Kinetics.
Mr. Samson has more than 24 years experience in the mutual fund and financial
services industries. Lee Schultheis is the Chief Operating Officer of Kinetics.
Mr. Schultheis is has more than 20 years of experience in the mutual fund and
financial services industries.

SUB-ADVISER - THE ASIA TECHNOLOGY PORTFOLIO
The investment adviser has entered into a sub-advisory agreement with UOB Global
Capital LLC (the "sub-adviser"), to assist it in the day-to-day management of
the investment portfolio. The sub-adviser determines which securities will be
purchased, retained or sold for the Asia Technology Portfolio, places orders for
the Asia Technology Portfolio and provides the investment adviser with
information on international investment and economic developments. The
investment adviser pays the sub-adviser .625% of the Asia Technology Portfolio's
management fee of 1.25% of average daily net assets.

The sub-adviser is located at 592 Fifth Avenue, Suite 602, New York, New York,
10036. The sub-adviser has entered into an arrangement with its affiliate, UOB
Asset Management Ltd. (UOBAM), pursuant to which UOBAM has agreed to make
available certain of its investment, operations and compliance personnel to the
sub-adviser. UOBAM is located at UOB Plaza 2, 80 Raffles Place, #03-00,
Singapore 048624. At December 31, 1999, together with its affiliates, the
sub-adviser had discretionary management authority over approximately $2.17
billion in assets.

PORTFOLIO MANAGERS

PETER B. DOYLE is the Chief Investment Strategist for all of the Portfolios
other than the Asia Technology Portfolio. Mr. Doyle also serves as the
Portfolio Manager for the New Paradigm Portfolio and is a Co-Portfolio Manager
of the Internet, Medical, Small Cap and Middle East Portfolios. He is primarily
responsible for the day-to-day management of each of these Portfolios' assets
and securities. In early 1996, Mr. Doyle co-founded Kinetics, the investment
adviser to the Portfolios. Previously, Mr. Doyle co-founded and has been a
Managing Director of Horizon Asset Management. From 1988 through late 1994,
Mr. Doyle was an Investment Officer in Bankers Trust Company's Investment
Services Group, where he was responsible for managing approximately $250 million
in assets. During his tenure at Bankers Trust Company, Mr. Doyle served on the
Finance and Utility research sub-groups. Mr. Doyle holds a Bachelor of Science
in Economics from St. John's University and a Masters of Business Administration
from Fordham University.

BRUCE P. ABEL is Co-Portfolio Manager of the Medical Portfolio. Mr. Abel's
primary duties include research and analysis of developing scientific
technologies and innovations in the medical, bio-technical and pharmaceutical
industries specific to cancer research and treatment. Prior to joining Kinetics
in 1999, Mr. Abel was employed with Brookhaven National Laboratory since 1989
where he worked researching, developing and implementing technical and
scientific programs and systems in the areas of nuclear physics, computer
programming, and industrial design. During that time, Mr. Abel was also a
freelance writer for Academic Science News and Review, researching, reporting,
and providing scholarly analysis and insight on a myriad of issues and
developments in the fields of science and technology. Mr. Abel has over ten
years experience in the fields of science, chemistry, physics, and engineering.
Mr. Abel holds a Masters Degree in Mechanical Engineering with an emphasis on
Nuclear Engineering, and has also studied extensively in the areas of Applied
Mathematics, Hydrodynamics, Aerodynamics, and Physics.

FRED A. FROEWISS is the Portfolio Manager of the Infrastructure Portfolio.
Mr. Froewiss also serves as Co-Portfolio Manager of the New Paradigm and Small
Cap Portfolios. Prior to joining Kinetics in 1999, Mr. Froewiss was the Vice
President of Investments at Janney Montgomery Scott, LLC from 1992 to 1999.
Earlier, Mr. Froewiss spent 10 years as a Portfolio Manager in the Private
Banking Division of Citibank. He started his career at IBM Corp. in the
controller's office. Mr. Froewiss holds a Bachelor of Science in Accounting and
a Masters of Business Administration from Pace University.

TINA LARSSON is the Portfolio Manager for the Global Growth Portfolio.
Ms. Larsson also serves as Co-Portfolio Manager of the Internet Portfolio and
the Emerging Growth Portfolio. From 1996 to 1999, Ms. Larsson was an analyst at
Horizon Asset Management for the Spin-Off Report, a research service that
focuses on spin-offs, and for developing institutional market research.
Ms. Larsson joined Kinetics in 1999 as an analyst for the Internet Fund and
became Portfolio Manager of the Global Growth Portfolio when the Global Growth
Portfolio commenced investment operations in December of 1999. Ms. Larsson holds
a Bachelors of Science in Finance and a Masters of Business Administration from
Pace University.

STEVEN TUEN, CFA, is Co-Portfolio Manager of and Executive Adviser to the
Internet Portfolio. Mr. Tuen also serves as Portfolio Manager of the Emerging
Growth Portfolio and Co-Portfolio Manager of the Infrastructure Portfolio. Mr.
Tuen's primary duties include research and analysis of equity securities for
investment by each of these Portfolios. From 1996 to 1999, Mr. Tuen was an
analyst and the Director of Research of the IPO Value Monitor, a research
service that focuses on initial public offerings. From 1989 to 1996, Mr. Tuen
was an analyst at Bankers Trust Company where he became a portfolio manager in
the Private Banking Group. Mr. Tuen holds a Bachelor of Science in Business
Administration from the City University of New York and is a Chartered Financial
Analyst.

MURRAY STAHL is Co-Portfolio Manager of the New Paradigm, Medical, Small Cap,
and Middle East Portfolios. Mr. Stahl is Chairman and a co-founder of Horizon
Asset Management. Previously, he was with Bankers Trust Company for 16 years as
a portfolio manager and research analyst, and managed approximately $600 million
of individual, trust and institutional client assets. As the senior fund
manager, he directed the investments of three of the bank's Common Trust Funds,
the Special opportunity, Utility, and Tangible Assets Funds. Mr. Stahl also
served as a member of the Equity Strategy Group as well as the Investment
Strategy Group, which established asset allocation development. Mr. Stahl holds
a Bachelor of Arts in Economics and a Masters of Arts in History from the City
University of New York and a Masters of Business Administration from Pace
University.

STEVEN M. BREGMAN, CPA, is Co-Portfolio Manager of the Global Growth and
Middle East Portfolio. Mr. Bregman, 41, was a co-founder and is a President of
Horizon Asset Management. From 1987 through late 1994, Mr. Bregman was an
Investment Officer in Bankers Trust Company's Private Clients Group, where he
managed in excess of $600 million of equity and fixed-income assets.
Mr. Bregman was one of a five-manager group responsible for managing the bank's
largest individual relationships and for setting equity investment guidelines
for the Private Bank. Mr. Bregman served in a variety of new product
development projects. Mr. Bregman received a Bachelor of Arts in Economics
from the City University of New York.

THIO BOON KIAT is the portfolio manger of the Asia Technology Fund's Portfolio.
Thio Boon Kiat joined the UOB Group in 1994 and who has been a portfolio manager
with the sub-adviser since April 2000. Under the supervision of Daniel Chan, a
member of the sub-adviser's Investment Committee, he is primarily responsible
for the day-to-day management of the Fund's investment portfolio. Mr. Thio, who
also serves as the Head of the Global Technology/Telecom Sector Investment Team
of UOB Asset Management Ltd. (UOBAM), has over 6 years of investment experience.
Previously, he worked in the Special Investments department at the Government of
Singapore Investment Corp. Prior to that he spent 6 years as a naval officer for
the Singapore Ministry of Defense. He holds a BBA from the National University
of Singapore and is a Certified Financial Analyst.

VALUATION OF PORTFOLIO SHARES
--------------------------------------------------------------------------------

Shares of each Portfolio are sold at its net asset value per share ("NAV"),
which is determined by each Portfolio 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. In the case of the
Government Money Market Portfolio, the NAV is determined as of 12:00 p.m.
Eastern time. Purchase and redemption requests are priced at the next NAV
calculated after receipt and acceptance of a completed purchase or redemption
request. The NAV is determined by dividing the value of a Portfolio's
securities, cash and other assets, minus all expenses and liabilities, by the
number of shares outstanding (assets-liabilities/ # of shares = NAV). The NAV
takes into account the expenses and fees of each Portfolio, including
management, administration and shareholder servicing fees, which are accrued
daily.

Each Portfolio's securities (other than the Government Money Market Portfolio)
are valued each day at the last quoted sales price on the securities principal
exchange. If market quotations are not readily available, securities will be
valued at their fair market value as determined in good faith in accordance with
procedures approved by the Board of Trustees. Each Portfolio other than the
Government Money Market Portfolio may use independent pricing services to assist
in calculating the NAV of such Portfolio's shares.

The Government Money Market Portfolio will utilize the amortized cost method in
valuing its portfolio securities. This method involves valuing a security at its
cost adjusted by a constant amortization of maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the instrument. The purpose of this method of calculation is to facilitate the
maintenance of a consistent net asset value per share for the Government Money
Market Portfolio of $1.00. However, there is no assurance that the $1.00 net
asset value per share will be maintained.

TRADING IN FOREIGN SECURITIES

Trading in foreign securities may be completed at times when the Exchange is
closed. In computing the NAV of each Portfolio that trades foreign securities,
the investment adviser values foreign securities at the latest closing price on
the exchange on which they are traded immediately prior to the closing of the
Exchange. Certain foreign currency exchange rates may also be determined at the
latest rate prior to the closing of the Exchange. Prices of foreign securities
quoted in foreign currencies are translated into U.S. dollars at current rates.
Occasionally, events that affect these values and exchange rates may occur
between the times at which they are determined and the closing of the Exchange.
If such events materially affect the value of portfolio securities, these
securities may be valued at their fair value as determined in good faith by the
Board of Trustees.

PURCHASE OF SHARES
--------------------------------------------------------------------------------

Shares of beneficial interest in each Portfolio are sold without a sales load,
at the NAV next determined after an order is received by a Portfolio. Shares in
a Portfolio are sold solely in private placement transactions that do not
involve any "public offering" within the meaning of Section 4(2) of the 1933
Act. Investments in the Portfolio may be made only by regulated investment
companies, unregulated foreign investment companies, U.S. and non-U.S.
institutional investors, S corporations, segregated asset accounts, insurance
company separate accounts, and certain qualified pension and retirement plans.
This Registration Statement does not constitute an offer to sell, or the
solicitation of an offer to buy, any "security" within the meaning of the 1933
Act.

There is no minimum initial or subsequent investment in the Portfolio. The
Portfolio reserves the right to cease accepting investments at any time or to
reject any investment order.

REDEMPTION OF SHARES
--------------------------------------------------------------------------------

An investor in a Portfolio may redeem all or any portion of its investment at
the NAV next determined after a redemption request in good order is received by
such Portfolio. The proceeds of a redemption will be paid by the Portfolio in
federal funds normally on the Business Day that the redemption is effected, but
in any event within three business days, except as extensions may be permitted
by law.

Each Portfolio reserves the right to pay redemptions in kind. Unless requested
by an investor or deemed by the Adviser to be in the best interests of the
investors in a Portfolio as a group, the Portfolio will not pay a redemption in
kind to an investor, except in situations where that investor may pay
redemptions in kind.

The right of any investor to receive payment with respect to any redemption may
be suspended, or the payment of the redemption proceeds postponed, during any
period in which the NYSE is closed or trading on the NYSE is restricted or to
the extent otherwise permitted by the 1940 Act.

EXCHANGE PRIVILEGE
--------------------------------------------------------------------------------

You can exchange your shares in a Portfolio for shares of any other Portfolio
offered by Kinetics Portfolios Trust at no charge. You should carefully read the
prospectus of a portfolio before exchanging shares into that portfolio. Be
advised that exercising the exchange privilege consists of two transactions: a
sale of shares in one portfolio and the purchase of shares in another. Further,
exchanges may have certain tax consequences and you could realize short- or
long-term capital gains or losses. Exchanges are generally made only between
identically registered accounts unless you send written instructions with a
signature guarantee requesting otherwise. You should request your exchange prior
to market close to obtain that day's closing NAV. Exchange requests received
after the close of the Exchange will be treated as though received on the next
business day.

Call (800) 930-3828 to learn more about the other Kinetics Portfolios and about
exercising your exchange privilege.

DISTRIBUTION AND TAXES
--------------------------------------------------------------------------------

DISTRIBUTIONS

Distributions (whether treated for tax purposes as ordinary income or long-term
capital gains) to shareholders of each Portfolio are generally paid in
additional shares of the Portfolio in which shareholders are already invested,
with no sales charge, based on the Portfolio's NAV as of the close of business
on the record date for such distributions. However, you may elect on the
application form to receive distributions as follows:

OPTION 1: To receive income dividends and capital gain distributions in
additional Portfolio shares, or

OPTION 2: To receive all income dividends and capital gain distributions in
cash.

Each Portfolio intends to pay any dividends from investment company taxable
income and distributions representing capital gain at least annually, usually in
December. Each Portfolio 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 select Option 1 or Option 2 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 Portfolio and your election will be converted to
the purchase of additional shares.

TAXES
None of the Portfolios is required to pay federal income taxes on its ordinary
income and capital gain because each Portfolio is treated as a partnership for
federal income tax purposes. All interest, dividends and gains and losses of a
Portfolio are deemed to "pass through" to its shareholders, regardless of
whether such interest, dividends or gains are distributed by the Portfolio or
the Portfolio realizes losses. Under each Portfolio's operational method, it is
not subject to any federal income tax. However, each shareholder in a Portfolio
will be taxed on its proportionate share (as determined in accordance with the
Trust's Declaration of Trust and the Internal Revenue Code, as amended) of the
Portfolio's ordinary income and capital gain, to the extent that the shareholder
is subject to tax on its income. The Trust will inform shareholders of each
Portfolio of the amount and nature of such income or gain.

The foregoing discussion relates only to federal income tax law. Income from a
Portfolio also may be subject to foreign, state and local taxes, and the
treatment under foreign, state and local income tax laws may differ from the
federal income tax treatment. Shareholders should consult their tax advisors
with respect to particular questions of federal, foreign, state and local
taxation.

DISTRIBUTION OF SHARES
--------------------------------------------------------------------------------

PRIVATE PLACEMENT AGENT
Kinetics Funds Distributor, Inc. ("KFDI"), serves as the private placement agent
for the shares of the Portfolio on a best efforts basis. KFDI is a registered
broker-dealer and member of the National Association of Securities Dealers, Inc.
Beneficial interests in the Portfolio are issued continuously.

PORTFOLIO ADMINISTRATOR
Kinetics also serves as Administrator to the Portfolios. Kinetics will be
entitled to receive an annual administration fee equal to 0.10% of each
Portfolio's average daily net assets. Out of these fees, Kinetics will be
responsible for the payment of a portion of such fees to Firstar Mutual Fund
Services, LLC ("Firstar") for certain sub-administrative services rendered to
the Portfolio by Firstar.

CUSTODIAN, TRANSFER AGENT, DIVIDEND DISBURSING AGENT AND PORTFOLIO ACCOUNTANT
Firstar Bank, N.A. serves as Custodian for each Portfolio's cash and securities.
The Custodian does not assist in, and is not responsible for, investment
decisions involving assets of the Portfolios. Firstar, each Portfolios'
Sub-Administrator, also acts as each Portfolio's Transfer Agent, Dividend
Disbursing Agent and Portfolio Accountant.

COUNSEL AND INDEPENDENT AUDITORS
--------------------------------------------------------------------------------

Legal matters in connection with the issuance of shares of beneficial interests
of the Trust are passed upon by Spitzer & Feldman P.C., 405 Park Avenue, New
York, New York. PricewaterhouseCoopers LLP, 100 East Wisconsin Avenue, Suite
1500, Milwaukee, Wisconsin has been selected as the independent auditor for the
Trust for the year ending December 31, 2000.

KINETICS PORTFOLIOS TRUST

STATEMENT OF ADDITIONAL INFORMATION

September 15, 2000

The Internet Portfolio
The Internet Infrastructure Portfolio
The Internet Emerging Growth Portfolio
The Internet Global Growth Portfolio
The New Paradigm Portfolio
The Medical Portfolio
The Small Cap Opportunities Portfolio
The Middle East Growth Portfolio
The Asia Technology Portfolio
The Kinetics Government Money Market Portfolio

Each of the series (individually a "Portfolio" and
collectively the "Portfolios") of Kinetics Portfolios Trust

This Statement of Additional Information ("SAI") provides general information
about each of the Portfolios. This SAI is not a prospectus and should be read in
conjunction with the Portfolios' current Prospectuses dated September 15, 2000,
as supplemented and amended from time to time, which is incorporated hereto by
reference. To obtain a copy of the Prospectuses providing general information
about the Portfolios, please write or call the Portfolios at the address or
telephone number shown below.

KINETICS PORTFOLIO TRUST
C/O FIRSTAR MUTUAL FUNDS SERVICES, LLC
P.O. BOX 701
MILWAUKEE, WI 53201-0701
PHONE: (800) 930-3828

This SAI is being filed as a part of the Registration Statement filed by the
Trust pursuant to Section 8(b) of the Investment Company Act of 1940, as amended
("1940 Act"). Nevertheless, beneficial interests of each portfolio series of the
Trust are not being registered under the Securities Act of 1933, as amended
("1933 Act"), because such interests are issued solely to in private placement
transactions to eligible investors that do not involve any "public offering"
within the meaning of Section 4(2) of the 1933 Act. Accordingly, investments in
the Portfolios may currently be made only by regulated investment companies,
unregulated foreign investment companies, U.S. and non-U.S. institutional
investors, S corporations, segregated asset accounts and certain qualified
pension and retirement plans. Neither this SAI nor the Registration Statement as
a whole constitutes an offer to sell or the solicitation of an offer to buy any
beneficial interests in this Portfolio or any other portfolio series of the
Trust.

TABLE OF CONTENTS

GENERAL INFORMATION ABOUT KINETICS PORTFOLIO TRUST............................1
DESCRIPTION OF THE PORTFOLIOS.................................................2
INVESTMENT RESTRICTIONS.......................................................4
INVESTMENT POLICIES AND ASSOCIATED RISKS......................................6
TEMPORARY INVESTMENTS.........................................................14
PORTFOLIO TURNOVER............................................................14
MANAGEMENT OF THE PORTFOLIOS..................................................15
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES...........................17
INVESTMENT ADVISERS...........................................................17
ADMINISTRATIVE SERVICES.......................................................19
CUSTODIAN.....................................................................20
VALUATION OF SHARES...........................................................20
PURCHASING SHARES.............................................................21
REDEMPTION OF SHARES..........................................................21
BROKERAGE.....................................................................22
TAXES.........................................................................23
PERFORMANCE INFORMATION.......................................................24
INDEPENDENT AUDITORS..........................................................25
FINANCIAL STATEMENTS..........................................................26
APPENDIX......................................................................28

GENERAL INFORMATION ABOUT KINETICS PORTFOLIO TRUST
--------------------------------------------------------------------------------

Kinetics Portfolios Trust (the "Trust") is a business trust organized pursuant
to a Declaration of Trust under the laws of the State of Delaware on March 14,
2000. The Portfolio's principal business office is located at 1311 Mamaroneck
Avenue, White Plains, New York 10605. Kinetics Portfolios Trust (the "Trust") is
a Delaware business trust, established on March 14, 2000. The Trust is comprised
of several series of mutual funds, all of which are non-diversified, open-end
management investment companies.

CAPITALIZATION

The authorized capitalization of Kinetics Portfolio Trust consists of an
unlimited number of beneficial interests with no par value. Each share has equal
dividend, distribution and liquidation rights. There are no conversion or
preemptive rights applicable to any shares of the Portfolio. All shares issued
are fully paid and non-assessable. Each holder of beneficial interests has one
vote for each share held. Each investor in a Portfolio is entitled to
participate equally in the Portfolio's earnings and assets and to vote in
proportion to the amount of its investment in the Portfolio. Voting rights are
non-cumulative.

Each Portfolio investor is entitled to a vote in proportion to the amount
of its investment therein. Portfolio investors will vote together in certain
circumstances (e.g., election of the Trustees and ratification of auditors, as
required by the 1940 Act and the rules thereunder). One ore more Portfolios
could control the outcome of these votes. Investors do not have cumulative
voting rights, and investors holding more than 50% of the aggregate beneficial
interests in the Trust or in a Portfolio, as the case may be, may control the
outcome of votes. The Trust is not required and has no current intention to hold
annual meetings of investors, but the Trust will hold special meetings of
investors when (1) a majority of the Trustees determines to do so or (2)
investors holding at least 10% of the interests in a Portfolio (if the meeting
relates solely to that Portfolio), or investors holding at least 10% of the
aggregate interests in the Trust (if the meeting relates to the Trust and
not specifically to a Portfolio) requests in writing a meeting of investors.
Changes in fundamental policies or limitations will be submitted to investors
for approval.

The Trust is organized as a business trust under the laws of the State of
Delaware. Investors in a Portfolio will be held personally liable for its
obligations and liabilities, subject, however, to indemnification by the Trust
in the event that there is imposed upon an investor a greater portion of the
liabilities and obligations than its proportionate beneficial interest in the
Portfolio. The Declaration of Trust also provides that, subject to the
provisions of the 1940 Act, the Trust may maintain insurance (for example,
fidelity bonding and errors and omissions insurance) for the protection of the
Portfolio, investors, Trustees, officers, employees, and agents covering
possible tort and other liabilities. Thus, the risk of an investor incurring
financial loss on account of such liability would be limited to circumstances in
which the Portfolio had inadequate insurance and was unable to meet its
obligation out of its assets.

DESCRIPTION OF THE PORTFOLIOS
--------------------------------------------------------------------------------

The investment objectives listed below are fundamental objectives and therefore
cannot be changed without the approval of shareholders.

THE INTERNET PORTFOLIOS

The INTERNET PORTFOLIO, INTERNET INFRASTRUCTURE PORTFOLIO, INTERNET EMERGING
GROWTH PORTFOLIO and INTERNET GLOBAL GROWTH PORTFOLIO are all non-diversified
portfolios with the same primary investment objective of long-term growth of
capital. The Portfolios are designed for long-term investors who understand and
are willing to accept the risk of loss involved in investing in a mutual fund
seeking long-term capital growth. Except during temporary defensive periods,
each Portfolio invests at least 65% of its total assets in securities of
companies that provide products or services designed for the Internet. The
Portfolios should not be used as a trading vehicle.

THE NEW PARADIGM PORTFOLIO

The NEW PARADIGM PORTFOLIO is a non-diversified portfolio with a primary
investment objective of long-term growth of capital. The Portfolio is designed
for long-term investors who understand and are willing to accept the risk of
loss involved in investing in a mutual fund seeking long-term capital growth.
Except during temporary defensive periods, the Portfolio invests at least 65% of
its total assets in securities of domestic and foreign companies with business
models that stand to benefit from the utilization and growth of the Internet.
This Portfolio should not be used as a trading vehicle.

THE MEDICAL PORTFOLIO

The MEDICAL PORTFOLIO is a non-diversified portfolio with a primary investment
objective of long-term growth of capital. Except during temporary defensive
periods, the Portfolio invests at least 65% of its total assets in securities of
domestic and foreign companies engaged in the medical research, pharmaceutical
and technology industries and related medical technology industries, generally,
with an emphasis toward companies engaged in cancer research and drug
development. The Portfolio is designed for long-term investors who understand
and are willing to accept the risk of loss involved in investing in a mutual
fund seeking long-term capital growth. This Portfolio should not be used as a
trading vehicle.

THE SMALL CAP OPPORTUNITIES PORTFOLIO

The SMALL CAP OPPORTUNITIES PORTFOLIO is a non-diversified portfolio with a
primary investment objective of long-term growth of capital. The Portfolio is
designed for long-term investors who understand and are willing to accept the
risk of loss involved in investing in a mutual fund seeking long-term capital
growth. Except during temporary, defensive periods, at least 65% of the
Portfolio's total assets will be invested in securities of U.S. and foreign
small capitalization companies that provide attractive valuation opportunities
due to lack of institutional ownership, lack of significant analyst coverage, or
a short-term earnings disappointments. This Portfolio should not be used as a
trading vehicle.

THE MIDDLE EAST GROWTH PORTFOLIO

The MIDDLE EAST GROWTH PORTFOLIO is a non-diversified fund with a primary
investment objective of long-term growth of capital. The Portfolio is designed
for long-term investors who understand and are willing to accept the risk of
loss involved in investing in a mutual fund seeking long-term capital growth.
Except during temporary, defensive periods, at least 65% of the Portfolio's
total assets will be invested in securities of foreign and U.S. companies that
are engaged in business activities in the Middle East. This Portfolio should not
be used as a trading vehicle.

THE ASIA TECHNOLOGY PORTFOLIO

The ASIA TECHNOLOGY PORTFOLIO is a non-diversified portfolio with a primary
investment objective of long-term growth of capital. The Portfolio is designed
for long-term investors who understand and are willing to accept the risk of
loss involved in investing in a mutual fund seeking long-term capital growth.
Except during temporary, defensive periods, at least 65% of the Portfolio's
total assets will be invested, without regard to size or industry, in the equity
securities of Asian companies that the portfolio manager believes will benefit
significantly from technological advances or improvements. Such companies may
use technology extensively in the development of new or improved products or
processes or, alternatively, may benefit from the commercialization of
technological advances, although they may not be involved in research and
development. The Portfolio may also, from time to time, utilize certain
derivatives for hedging purposes and/or direct investment. This Portfolio should
not be used as a trading vehicle.

Under normal circumstances, the Portfolio will invest in at least three
different Asian countries. The Portfolio considers Asian companies to include
companies that are organized under the laws of any country in the Asian region,
including the Sri Lanka, Hong Kong, Pakistan, Japan, Thailand, Malaysia, Brunei,
China, Cambodia, Taiwan, India, Indonesia, South Korea, the Philippines,
Singapore, Vietnam and Myanmar. The Portfolio also considers companies to be
Asian if UOB Global Capital LLC, the Portfolio's sub-adviser, determines that
they: (a) derive at least 50% of their revenues from goods produced or sold,
investments made or services performed in or with one or more of the Asian
countries; (b) maintain at least 50% of their assets in one or more Asian
countries; or (c) have securities that are traded principally on the stock
exchange in an Asian country.

THE KINETICS GOVERNMENT MONEY MARKET PORTFOLIO

The KINETICS GOVERNMENT MONEY MARKET PORTFOLIO is a diversified portfolio
with a primary objective to provide current income consistent with the
preservation of capital and maintenance of liquidity. The Portfolio also seeks
to achieve its investment objective in strict compliance with applicable laws
and regulations, including the provisions and regulations of the 1940 Act. In
particular, the Portfolio will comply with the various requirements of Rule
2a-7, which regulates money market mutual funds. The Portfolio will also
determine the effective maturity of their investments, as well as their ability
to consider a security as having received the requisite short-term ratings by
any nationally recognized statistical rating organization (NRSRO) according to
Rule 2a-7. The Portfolio may change these operational policies to reflect
changes in the laws and regulations without the approval of shareholders.

INVESTMENT RESTRICTIONS
--------------------------------------------------------------------------------

The investment restrictions of a Portfolio may be changed only with the approval
of the holders of a majority of a Portfolio's outstanding voting securities. As
used in this SAI, "a majority of a Portfolio's outstanding voting securities"
means the lesser of (1) 67% of the shares of common stock/beneficial interest of
a Portfolio represented at a meeting at which more than 50% of the outstanding
shares are present, or (2) more than 50% of the outstanding shares of common
stock/beneficial interest of a Portfolio.

1. The Portfolios will not act as underwriter for securities of other
issuers.

2. The Portfolios will not make loans.

3. With respect to 50% of its total assets, the Portfolios (other than the
KINETICS GOVERNMENT MONEY MARKET PORTFOLIO) will not invest in the
securities of any issuer if as a result the Portfolios hold more than 10%
of the outstanding securities or more than 10% of the outstanding voting
securities of such issuer. With respect to 75% of the KINETICS GOVERNMENT
MONEY MARKET PORTFOLIO'S total assets, the KINETICS GOVERNMENT MONEY MARKET
PORTFOLIO will not invest more than 5% of its total assets in securities of
any one issuer other than U.S. Government Securities.

4. The Portfolios will not borrow money or pledge, mortgage, or hypothecate
its assets except to facilitate redemption requests that might otherwise
require the untimely disposition of portfolio securities and then only from
banks and in amounts not exceeding the lesser of 10% of their total assets
valued at cost or 5% of its total assets valued at market at the time of
such borrowing, pledge, mortgage, or hypothecation and except that the
Portfolios may enter into futures contracts and related options.

5. The Portfolios will not invest more than 10% of the value of their net
assets in illiquid securities, restricted securities, and other securities
for which market quotations are not readily available. This policy shall
not be deemed violated to the extent that the Portfolios invest all of
their investable assets in the respective Portfolios.

6. The INTERNET PORTFOLIO, INTERNET INFRASTRUCTURE PORTFOLIO, INTERNET
EMERGING GROWTH PORTFOLIO and INTERNET GLOBAL GROWTH PORTFOLIO will not
invest in the securities of any one industry except the Internet and
Internet-related industries, with the exception of securities issued or
guaranteed by the U.S. Government, its agencies, and instrumentality's, if
as a result, more than 20% of the Portfolios' total assets would be
invested in the securities of such industries. Except during temporary
defensive periods, at least 65% of the Portfolio's' total assets will be
invested in the securities of domestic and foreign companies that are
engaged in the Internet and Internet-related activities.

7. The NEW PARADIGM PORTFOLIO will not invest in the securities of any one
industry, with the exception of securities issued or guaranteed by the U.S.
Government, its agencies, and instrumentalities, if as a result, more than
20% of the Portfolio's total assets would be invested in the securities and
such industries.

8. The MEDICAL PORTFOLIO will not invest in the securities of any one industry
except in domestic and foreign companies engaged in the medical research,
pharmaceutical and technology industries and related medical technology
industries, generally, with an emphasis toward companies engaged in cancer
research and drug development, with the exception of securities issued or
guaranteed by the U.S. Government, its agencies, and instrumentalities, if
as a result, more than 20% of the Portfolio's total assets would be
invested in the securities of such industry. Except during temporary
defensive periods, not less than 65% of the Portfolio's total assets will
be invested in the securities of companies engaged in the medical research,
pharmaceutical and technology industries and related technology industries,
generally, with an emphasis toward publicly traded entities engaged in
cancer research and drug development.

9. The SMALL CAPITAL OPPORTUNITIES PORTFOLIO will not invest in the securities
of any one industry, with the exception of securities issued or guaranteed
by the U.S. Government, its agencies, and instrumentalities, if as a
result, more than 20% of the Portfolio's total assets would be invested in
the securities of such industry. Except during temporary defensive periods,
at least 65% of the Portfolio's total assets will be invested in the
securities of domestic and foreign small capitalization companies that
provide attractive valuation opportunities due to lack of institutional
ownership, lack of significant analyst coverage, or a short-term earnings
disappointments.

10. The MIDDLE EAST GROWTH PORTFOLIO will not invest in the securities of any
one industry except in foreign and U.S. companies that are engaged in
business activities in the Middle East, with the exception of securities
issued or guaranteed by the U.S. Government, its agencies, and
instrumentalities if, as a result, more than 20% of the Portfolio's total
assets would be invested in the securities of such industry. Except during
temporary defensive periods, at least 65% of the Portfolio's total assets
will be invested in the securities of foreign and U.S. companies that are
engaged in business activities in the Middle East.

11. The ASIA TECHNOLOGY PORTFOLIO will not invest in the securities of any one
industry except in Asian companies that the portfolio manager believes will
benefit significantly from technological advances or improvements, with the
exception of securities issued or guaranteed by the U.S. Government, its
agencies, and instrumentalities if, as a result, more than 20% of the
Portfolio's total assets would be invested in the securities of such
industry. Except during temporary defensive periods, at least 65% of the
Portfolio's total assets will be invested in the securities of Asian
companies that the portfolio manager believes will benefit significantly
from technological advances or improvements.

12. The KINETICS GOVERNMENT MONEY MARKET PORTFOLIO will not invest in the
securities of any one industry with the exception of securities issued or
guaranteed by the U.S. Government, its agencies, and instrumentalities, if
as a result, more than 25% of the Portfolio's total assets would be
invested in the securities of such industry.

13. The Portfolios will not purchase or sell commodities or commodity
contracts, or invest in oil, gas or mineral exploration or development
programs or real estate except that the Portfolios may purchase and sell
securities of companies that deal in oil, gas, or mineral exploration or
development programs or interests therein.

14. The Portfolios will not issue senior securities.

If a percentage limitation is satisfied at the time of investment, a later
increase or decrease in such percentage resulting from a change in value in the
portfolio securities held by a Portfolio will not constitute a violation of
such limitation. However, in the event that a Portfolio's holdings in illiquid
securities reach 15% of the value of its net assets, the Adviser is authorized
by the Board of Trustees to make such adjustments as necessary to reduce the
holdings of illiquid securities to comply with the guidelines of paragraph
number 5 above.

INVESTMENT POLICIES AND ASSOCIATED RISKS
--------------------------------------------------------------------------------

The following paragraphs provide a more detailed description of the Portfolios'
investment policies and risks identified in the Prospectus. Unless otherwise
noted, the policies described in this SAI pertain to all of the Portfolios other
than the KINETICS GOVERNMENT MONEY MARKET PORTFOLIO. Furthermore, unless
otherwise noted, the policies described in this SAI are not fundamental and may
be changed by the Board of Trustees of the Trust without shareholder approval.

COMMON AND PREFERRED STOCK

Common stocks are units of ownership of a corporation. Preferred stocks are
stocks that often pay dividends at a specific rate and have a preference over
common stocks in dividend payments and liquidation of assets. Some preference
stocks may be convertible into common stock. Convertible securities are
securities that may be converted into or exchanged for a specified amount of
common stock of the same or different issuer within a particular period of time
at a specified price or formula.

CONVERTIBLE DEBT SECURITIES

The Portfolios may invest in debt securities convertible into common stocks.
Debt purchased by the Portfolios will consist of obligations of medium-grade or
higher, having at least adequate capacity to pay interest and repay principal.
Non-convertible debt obligations will be rated BBB or higher by S&P, or Baa or
higher by Moody's. Convertible debt obligations will be rated B or higher by S&P
or B or higher by Moody's. Securities rated Baa by Moody's are considered by
Moody's to be medium-grade securities and have adequate capacity to pay
principal and interest. Bonds in the lowest investment grade category (BBB) have
speculative characteristics, with changes in the economy or other circumstances
more likely to lead to a weakened capacity of the bonds to make principal and
interest payments than would occur with bonds rated in higher categories.
Securities rated B are referred to as "high-risk" securities, generally lack
characteristics of a desirable investment, and are deemed speculative with
respect to the issuer's capacity to pay interest and repay principal over a long
period of time. See "Appendix" to this Statement of Additional Information for a
description of debt security ratings.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

The Portfolios may purchase securities on a when-issued, delayed-delivery or
forward commitment basis. These transactions generally involve the purchase of a
security with payment and delivery due at some time in the future. A Portfolio
does not earn interest on such securities until settlement and bears the risk of
market value fluctuations in between the purchase and settlement dates. If the
seller fails to complete the sale, a Portfolio may lose the opportunity to
obtain a favorable price and yield. While the Portfolios will generally engage
in such when-issued, delayed-delivery and forward commitment transactions with
the intent of actually acquiring the securities, a Portfolio may sometimes sell
such a security prior to the settlement date.

The Portfolios may also sell securities on a delayed-delivery or forward
commitment basis. If Portfolios do so, they will not participate in future
gains or losses on the security. If the other party to such a transaction fails
to pay for the securities, the Portfolio could suffer a loss.

RESTRICTED AND ILLIQUID SECURITIES

Each Portfolio may invest in a limited amount of restricted securities.
Restricted securities are securities that are thinly traded or whose resale is
restricted by federal securities laws. Restricted securities are any securities
in which the Portfolios may invest pursuant to their investment objective and
policies but which are subject to restrictions on resale under federal
securities laws.

FIXED-INCOME SECURITIES

The fixed-income securities in which the Portfolios may invest are generally
subject to two kinds of risk: credit risk and market risk.

CREDIT RISK relates to the ability of the issuer to meet interest and principal
payments, as they come due. The ratings given a security by Moody's and S&P
provide a generally useful guide as to such credit risk. The lower the rating
given a security by such rating service, the greater the credit risk such rating
service perceives to exist with respect to such security. Increasing the amount
of Portfolio assets invested in unrated or lower-grade securities, while
intended to increase the yield produced by those assets, will also increase the
credit risk to which those assets are subject.

MARKET RISK relates to the fact that the market values of securities in which
the Portfolios may invest generally will be affected by changes in the level of
interest rates. An increase in interest rates will tend to reduce the market
values of such securities, whereas a decline in interest rates will tend to
increase their values. Medium- and lower-rated securities (Baa or BBB and lower)
and non-rated securities of comparable quality tend to be subject to wilder
fluctuations in yields and market values than higher-rated securities.
Medium-rated securities (those rated Baa or BBB) have speculative
characteristics while lower-rated securities are predominantly speculative. The
Portfolios are not required to dispose of debt securities whose ratings are
downgraded below these ratings subsequent to the Portfolios' purchase of the
securities. Relying in part on ratings assigned by credit agencies in making
investments will not protect the Portfolios from the risk that the fixed-income
securities in which the Portfolios invest will decline in value. Credit ratings
represent evaluations of the safety of principal, dividend and interest payments
on preferred stocks and debt securities, not the market values of such
securities, and such ratings may not be changed on a timely basis to reflect
subsequent events.

At no time will the Portfolios have more than 5% of their respective total
assets invested in any fixed-income securities that are unrated or rated below
investment grade either at the time of purchase or as a result of a reduction in
rating after purchase.

DEPOSITARY RECEIPTS. The Portfolios may invest in American Depositary Receipts
("ADRs") or other forms of depositary receipts, such as International Depositary
Receipts ("IDRs"). Depositary receipts are typically issued in connection with a
U.S. or foreign bank or trust company and evidence ownership of underlying
securities issued by a foreign corporation. Investments in these types of
securities involve certain inherent risks generally associated with investments
in foreign securities, including the following:

POLITICAL AND ECONOMIC FACTORS. Individual foreign economies of certain
countries may differ favorably or unfavorably from the United States economy in
such respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency, diversification and balance of payments
position. The internal politics of certain foreign countries may not be as
stable as those of the United States. Governments in certain foreign countries
also continue to participate to a significant degree, through ownership interest
or regulation, in their respective economies. Action by these governments could
include restrictions on foreign investment, nationalization, expropriation of
goods or imposition of taxes, and could have a significant effect on market
prices of securities and payment of interest. The economies of many foreign
countries are heavily dependent upon international trade and are accordingly
affected by the trade policies and economic conditions of their trading
partners. Enactment by these trading partners of protectionist trade legislation
could have a significant adverse effect upon the securities markets of such
countries.

CURRENCY FLUCTUATIONS. A change in the value of any foreign currency
against the U.S. dollar will result in a corresponding change in the U.S. dollar
value of an ADR's underlying portfolio securities denominated in that currency.
Such changes will affect the Portfolio to the extent that the Portfolio is
invested in ADRs comprised of foreign securities.

TAXES. The interest and dividends payable on certain foreign securities
comprising an ADR may be subject to foreign withholding taxes, thus reducing the
net amount of income to be paid to the Portfolios and that may ultimately be
available for distribution to the Portfolio's shareholders.

DERIVATIVES

BUYING CALL AND PUT OPTIONS. The Portfolios may purchase call options. Such
transaction may be entered into in order to limit the risk of a substantial
increase in the market price of the security that each Portfolio intends to
purchase. Prior to its expiration, a call option may be sold in a closing sale
transaction. Any profit or loss from the sale will depend on whether the amount
received is more or less than the premium paid for the call option plus the
related transaction cost.

The Portfolios may purchase put options. By buying a put, each Portfolio has the
right to sell the security at the exercise price, thus limiting its risk of risk
of loss through a decline in the market value of the security until the put
expires. The amount of any appreciation in the value of the underlying security
will be partially offset by the amount of the premium paid for the put option
and any related transaction cost. Prior to its expiration, a put option may be
sold in a closing sale transaction and any profit or loss from the sale will
depend on whether the amount received is more or less than the premium paid for
the put option plus the related transaction costs.

WRITING (SELLING) CALL AND PUT OPTIONS. The Portfolios may write covered options
on equity and debt securities and indices. This means that, in the case of call
options, so long as each Portfolio is obligated as the writer of a call option,
it will own the underlying security subject to the option and, in the case of
put options, it will, through its custodian, deposit and maintain either cash or
securities with a market value equal to or greater than the exercise price of
the option.

Covered call options written by the Portfolios give the holder the right to buy
the underlying securities from the Portfolios as a stated exercise price. A call
option written by the Portfolios is "covered" if the Portfolios own the
underlying security that is subject to the call or has an absolute and immediate
right to acquire that security without additional cash consideration (or for
additional cash consideration held in a segregated account by its custodian
bank) upon conversion or exchange of other securities held in its portfolio. A
call option is also covered if the Portfolios hold a call on the same security
and in the same principal amount as the call written where the exercise price of
the call held (a) is equal to or less than the exercise price of the call
written or (b) is greater than the exercise price of the call written if the
difference is maintained by the Portfolios in cash and high grade debt
securities in a segregated account with its custodian bank. The Portfolios may
purchase securities, which may be covered with call options solely on the basis
of considerations consistent with the investment objectives and policies of the
Portfolios. The Portfolios' turnover may increase through the exercise of a call
option; this will generally occur if the market value of a "covered" security
increases and the Fund has not entered in to a closing purchase transaction.

As a writer of an option, each Portfolio receives a premium less a commission,
and in exchange foregoes the opportunity to profit from any increase in the
market value of the security exceeding the call option price. The premium serves
to mitigate the effect of any depreciation in the market value of the security.
The premium paid by the buyer of an option will reflect, among other things, the
relationship of the exercise price to the market price, the volatility of the
underlying security, the remaining term of the option, the existing supply and
demand, and the interest rates.

The writer of a call option may have no control over when the underlying
securities must be sold because the writer may be assigned an exercise notice at
any time prior to the termination of the obligation. Exercise of a call option
by the purchaser will cause each Portfolio to forego future appreciation of the
securities covered by the option. Whether or not an option expires unexercised,
the writer retains the amount of the premium. This amount may, in the case of a
covered call option, be offset by a decline in the market value of the
underlying security during the option period. If a call option is exercised, the
writer experiences a profit or loss from the sale of the underlying security.
Thus during the option period, the writer of a call option gives up the
opportunity for appreciation in the market value of the underlying security or
currency above the exercise price. It retains the risk of the loss should the
price of the underlying security or foreign currency decline. Writing call
options also involves risks relating to each Portfolio's ability to close out
the option it has written.

Each Portfolio may write exchange-traded call options on its securities. Call
options may be written on portfolio securities indices, or foreign currencies.
With respect to securities and foreign currencies, the Portfolio may write call
and put options on an exchange or over-the-counter. Call options on portfolio
securities will be covered since the Portfolio will own the underlying
securities. Call option on securities indices will be written only to hedge in
an economically appropriate way portfolio securities that are not otherwise
hedged with options or financial futures contracts and will be "covered" by
identifying the specific portfolio securities being hedged. Options on foreign
currencies will be covered by securities denominated in that currency. Options
on securities indices will be covered by securities that substantially
replicated the movement of the index.

A put option on a security, security index, or foreign currency gives the
purchaser of the option, in return for the premium paid to the writer (seller),
the right to sell the underlying security, index, or foreign currency at the
exercise price at any time during the option period. When each Portfolio writes
a secured put option, in will gain a profit in the amount of the premium, less a
commission, so long as the price of the underlying security remains above the
exercise price. However, each Portfolio remains obligated to purchase the
underlying security from the buyer of the put option (usually in the event the
price of the security falls bellows the exercise price) at any time during the
option period. If the price of the underlying security falls below the exercise
price, the Portfolios may realize a loss in the amount of the difference between
the exercise price and the sale price of the security, less the premium
received. Upon exercise by the purchaser, the writer of a put option has the
obligation to purchase the underlying security or foreign currency at the
exercise price. A put option on a securities index is similar to a put option on
an individual security, except that the value of the option depends on the
weighted value of the group of securities comprising the index and all
settlements are made in cash.

During the option period, the writer of a put option has assumed the risk that
the price of the underlying security or foreign currency will decline below the
exercise price. However, the writer of the put option has retained the
opportunity for an appreciated above the exercise price should the market price
of the underlying security or foreign currency increase. Writing put options
also involves risks relating to the Portfolios' ability to close out the option
that it has written.

The writer of an option who wishes to terminate his or her obligation may effect
a "closing purchase transaction" by buying an option of the same series as the
option previously written. The effect of the purchase is that the clearing
corporation will cancel the writer's position. However, a writer may not effect
a closing purchase transaction after being notified of the exercise of an
option. There is also no guarantee that the Portfolios will be able to effect a
closing purchase transaction for the options it has written.

Effecting a closing purchase transaction in the case of a written call option
will permit the Portfolios to write another call option on the underlying
security with a different exercise price, expiration date, or both. Effecting a
closing purchase transaction will also permit the Portfolios to use cash or
proceeds from the investments. If a Portfolio desires to sell a particular
security from its portfolio on which it has written a call option, it will
effect a closing purchase transaction before or at the same time as the sale of
the security.

The Portfolios will realize a profit from a closing purchase transaction if the
price of the transaction is less than the premium received from writing the
option. Likewise, the Portfolios will realize a loss from a closing purchase
transaction if the price of the transaction is more than the premium received
from writing the option. Because increases in the market price of a call option
will generally reflect increases in the market price of the underlying security,
any loss resulting from the repurchase of a call option is likely to be offset
in whole or in part by appreciation of the underlying security owned by a
Portfolio.

WRITING OVER-THE-COUNTER ("OTC") OPTIONS. The Portfolios may engage in options
transactions that trade on the OTC market to the same extent that it intends to
engage in exchange traded options. Just as with exchange traded options, OTC
options give the holder the right to buy an underlying security from, or sell an
underlying security to, an option writer at a stated exercise price. However,
OTC options differ from exchange traded options in certain material respects.

OTC options are arranged directly with dealers and not, as is the case with
exchange traded options, through a clearing corporation. Thus, there is a risk
of non-performance by the dealer. Because there is no exchange, pricing is
typically done by reference to information obtained from market makers. Since
OTC options are available for a greater variety of securities and in a wider
range of expiration dates and exercise prices, the writer of an OTC option is
paid the premium in advance by the dealer.

A writer or purchaser of a put or call option can terminate it voluntarily only
by entering into a closing transaction. There can be no assurance that a
continuously liquid secondary market will exist for any particular option at any
specific time. Consequently, the Portfolios may be able to realize the value of
an OTC option it has purchased only by exercising it or entering into a closing
sale transaction with the dealer that issued it. Similarly, when a Portfolio
writes an OTC option, it generally can close out that option prior to its
expiration only by entering into a closing purchase transaction with the dealer
to which it originally wrote to option. If a covered call option writer cannot
effect a closing transaction, it cannot sell the underlying security or foreign
currency until the option expires or the option is exercised. Therefore, the
writer of a covered OTC call option may not be able to sell an underlying
security even though it might otherwise be advantageous to do so. Likewise, the
writer of a secured OTC put option may be unable to sell the securities pledged
to secure the put for other investment purposes while it is obligated as a put
writer. Similarly, a purchaser of an OTC put or call option might also find it
difficult to terminate its position on a timely basis in the absence of a
secondary market.

The staff of the Securities and Exchange Commission has often taken the position
that purchased OTC options and the assets used to "cover" written OTC options
are illiquid securities. The Portfolios will adopt procedures for engaging in
OTC options transactions for the purpose of reducing any potential adverse
effect of such transactions on the liquidity of the Portfolios.

FUTURES CONTRACTS. The Portfolios may buy and sell stock index
futures contracts traded on domestic stock exchanges to hedge the value of its
portfolio against changes in market conditions. A stock index futures contract
is an agreement between two parties to take or make delivery of an amount of
cash equal to a specified dollar amount, times the difference between the stock
index value at the close of the last trading day of the contract and the price
at which the futures contract is originally struck. A stock index futures
contract does not involve the physical delivery of the underlying stocks in the
index. Although stock index futures contracts call for the actual taking or
delivery or cash, in most cases a Portfolio expects to liquidate its stock
index futures positions through offsetting transactions, which may result in a
gain or a loss, before cash settlement is required.

Each Portfolio will incur brokerage fees when it purchases and sells stock index
futures contracts, and at the time a Portfolio purchases or sells a stock
index futures contract, it must make a good faith deposit known as the "initial
margin". Thereafter, a Portfolio may need to make subsequent deposits, known
as "variation margin", to reflect changes in the level of the stock index. Each
Portfolio may buy or sell a stock index futures contract so long as the sum of
the amount of margin deposits on open positions with respect to all stock index
futures contracts does not exceed 5% of a Portfolio's net assets.

To the extent a Portfolio enters into a stock index futures contract, it will
maintain with its custodian bank (to the extent required by the rules of the
SEC) assets in a segregated account to cover its obligations. Such assets may
consist of cash, cash equivalents, or high quality debt securities from its
portfolio in an amount equal to the difference between the fluctuating market
value of such futures contract and the aggregate value of the initial and
variation margin payments.

RISKS ASSOCIATED WITH OPTIONS AND FUTURES. Although the Portfolios may write
covered call options and purchase and sell stock index futures contracts to
hedge against declines in market value of their portfolio securities, the use of
these instruments involves certain risks. As the writer of covered call options,
each Portfolio receives a premium but loses any opportunity to profit from an
increase in the market price of the underlying securities declines, though the
premium received may partially offset such loss.

Although stock index futures contracts may be useful in hedging against adverse
changes in the value of each Portfolio's investment securities, they are
derivative instruments that are subject to a number of risks. During certain
market conditions, purchases and sales of stock index futures contracts may not
completely offset a decline or rise in the value of each Portfolio's
investments. In the futures markets, it may not always be possible to execute a
buy or sell order at the desired price, or to close out an open position due to
market conditions, limits on open positions and/or daily price fluctuations.
Changes in the market value of each Portfolio's investment securities may differ
substantially from the changes anticipated by a Portfolio when it established
its hedged positions, and unanticipated price movements in a futures contract
may result in a loss substantially greater than such Portfolio's initial
investment in such a contract.

Successful use of futures contracts depends upon the sub-adviser's ability to
correctly predict movements in the securities markets generally or of a
particular segment of a securities market. No assurance can be given that the
sub-adviser's judgment in this respect will be correct.

The CFTC and the various exchanges have established limits referred to as
"speculative position limits" on the maximum net long or net short position that
any person may hold or control in a particular futures contract. Trading limits
are imposed on the number of contracts that any person may trade on a particular
trading day. An exchange may order the liquidation of positions found to be in
violation of these limits and it may impose sanctions or restrictions. These
trading and positions limits will not have an adverse impact on a Portfolio's
strategies for hedging its securities.

INVESTMENT POLICIES AND RISKS OF THE KINETICS GOVERNMENT MONEY MARKET PORTFOLIO
The following paragraphs provide a more detailed description of the Kinetics
Government Money Market Portfolio's (for the purpose of this section, the
"Portfolio") investment policies and risks identified in the Prospectus. Unless
otherwise noted, the policies described below are not fundamental and may be
changed by the Board of Trustees of the Trust without shareholder approval.

REPURCHASE AGREEMENTS. The Portfolio may invest in repurchase agreements which
are arrangements with banks, brokers/dealers, and other recognized financial
institutions to sell securities to the Portfolio and to repurchase them at a
mutually agreed upon time and price within one year from the date of
acquisition. The Portfolio or its custodian will take possession of the
securities subject to the terms of the repurchase agreements, and these
securities will be marked to market daily. To the extent that the original
seller does not repurchase the securities from the Portfolio, the Portfolio
could receive less than the repurchase price on any sale of such securities.

In the event that such a defaulting seller filed for bankruptcy or became
insolvent, disposition of such securities by the Portfolio might be delayed
pending court action. The Portfolio believes that under the regular procedures
normally in effect for custody of the Portfolio's assets subject to repurchase
agreements, a court of competent jurisdiction would rule in favor of the
Portfolio and allow retention or disposition of such securities. The Portfolio
will only enter into repurchase agreements with banks and other recognized
financial institutions, such as broker/dealers, which are deemed by the
Portfolio's adviser to be creditworthy pursuant to guidelines established by the
Board of Trustees.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Portfolio may purchase
short-term obligations on a when-issued or delayed delivery basis. These
transactions are arrangements in which the Portfolio purchases securities with
payment and delivery scheduled for a future time. The seller's failure to
complete these transactions may cause the Portfolio to miss a price or yield
considered advantageous. Settlement dates may be a month or more after entering
into these transactions and the market values of the securities purchased may
vary from the purchase prices.

The Portfolio may dispose of a commitment prior to settlement if the investment
adviser deems it appropriate to do so. In addition, the Portfolio may enter into
transactions to sell its purchase commitments to third parties at current market
values and simultaneously acquire other commitments to purchase similar
securities at later dates. The Portfolio may realize short-term profits or
losses upon the sale of such commitments.

These transactions are made to secure what is considered to be an advantageous
price or yield for the Portfolio. No fees or other expenses, other than normal
transaction costs, are incurred. However, liquid assets of the Portfolio
sufficient to make payment for the securities to be purchased are segregated on
the Portfolio's records at the trade date. These assets are marked to market
daily and are maintained until the transaction is settled. The Portfolio does
not intend to engage in when-issued and delayed delivery transactions to an
extent that would cause the segregation of more than 20% of the total value of
its assets.

OTHER MONEY MARKET FUNDS. As an efficient means of carrying out the investment
policies, the Portfolio may invest in the securities of other money market
funds. A disadvantage to investing in other money market funds is that they also
carry certain expenses such as management fees. As a result, any investment by
the Portfolio in shares of other money market funds may duplicate certain
shareholder expenses.

MORE ABOUT THE ASIA TECHNOLOGY PORTFOLIO'S INVESTMENT IN TECHNOLOGY AND SCIENCE
DRIVEN COMPANIES. The sub-adviser for the ASIA TECHNOLOGY PORTFOLIO believes
that because of rapid advances in technology, science, and biotechnology, an
investment in companies with business operations in these areas will offer
substantial opportunities for long-term capital appreciation. Of course, prices
of common stocks of even the best managed, most profitable corporations are
subject to market risk, which means their stock prices can decline. In addition,
swings in investor psychology or significant trading by large institutional
investors can result in price fluctuations. Industries likely to be represented
in the portfolio include the Internet, computers, networking and internetworking
software, computer aided design, telecommunications, media and information
services, medical devices and biotechnology. The Portfolio may also invest in
the stocks of companies that should benefit from the commercialization of
technological advances, although they may not be directly involved in research
and development.

The technology, science, and biotechnology areas have exhibited and continue to
exhibit rapid growth due to the mass adoption of the Internet, both through
increasing demand for existing products and services and the broadening of the
technology market. In general, the stocks of large capitalized companies that
are well established in the technology market can be expected to grow with the
market and will frequently be found in the Portfolio's cache of investment
securities. The expansion of technology and its related industries, however,
also provides a favorable environment for investment in small to medium
capitalized companies. The Portfolio's investment policies are not limited to
any minimum capitalization requirement and the Portfolio may hold securities
without regard to the capitalization of the issuer. The sub-adviser's overall
stock selection for the Portfolio is not based on the capitalization or size of
the company but rather on an assessment of the company's fundamental prospects.

Companies in the rapidly changing fields of technology, science, and
biotechnology face special risks. For example, their products or services may
not prove commercially successful or may become obsolete quickly. The value of
the Portfolio's shares may be susceptible to factors affecting the technology
and science areas and to greater risk and market fluctuation than an investment
in a fund that invests in a broader range of portfolio securities not
concentrated in any particular industry. As such, the Portfolio is not an
appropriate investment for individuals who are not long-term investors and who,
as their primary objective, require safety of principal or stable income from
their investments. The technology, science, and biotechnology areas may be
subject to greater governmental regulation than many other areas and changes in
governmental policies and the need for regulatory approvals may have a material
adverse effect on these areas. Additionally, companies in these areas may be
subject to risks of developing technologies, competitive pressures and other
factors and are dependent upon consumer and business acceptance as new
technologies evolve.

TEMPORARY INVESTMENTS
--------------------------------------------------------------------------------

Due to the changing nature of the Internet and related companies, the national
economy and market conditions, the INTERNET PORTFOLIO, INTERNET INFRASTRUCTURE
PORTFOLIO, INTERNET EMERGING GROWTH PORTFOLIO, INTERNET GLOBAL GROWTH PORTFOLIO
and NEW PARADIGM PORTFOLIO may, as a temporary defensive measure, invest without
limitation, in short-term debt securities and money market securities with a
rating of A2-P2 or higher.

Due to the changing nature of the medical research, biopharmaceutical and
treatment industry, the national economy and market conditions, the MEDICAL
PORTFOLIO may, as a temporary defensive measure, invest without limitation, in
short-term money market securities with a rating of A2-P2 or higher.

In order to have funds available for redemption and investment opportunities,
the Portfolios, except the KINETICS GOVERNMENT MONEY MARKET PORTFOLIO, may also
hold a portion of their assets in cash or U.S. short-term money market
instruments. Certificates of deposit purchased by the Portfolios will be those
of U.S. banks having total assets at the time of purchase in excess of $1
billion, and bankers' acceptances purchased by the Portfolios will be guaranteed
by U.S. or foreign banks having total assets at the time of purchase in excess
of $1 billion. The Portfolios anticipate that not more than 10% of its total
assets will be so invested or held in cash at any given time, except when the
Portfolios are in a temporary defensive posture.

PORTFOLIO TURNOVER
--------------------------------------------------------------------------------

In order to qualify for the beneficial tax treatment afforded regulated
investment companies, and to be relieved of Federal tax liabilities, both the
Funds and the Portfolios must distribute substantially all of their net income
to shareholders generally on an annual basis. Thus, the Portfolios may have to
dispose of portfolio securities under disadvantageous circumstances to generate
cash or borrow cash in order to satisfy the distribution requirement. The
Portfolios do not trade in securities for short-term profits but, when
circumstances warrant, securities may be sold without regard to the length of
time they have been held.

MANAGEMENT OF THE PORTFOLIOS
--------------------------------------------------------------------------------

BOARD OF TRUSTEES

The management and affairs of the Portfolios are supervised by the Board of
Trustees of the Trust. The Board consists of the same eight individuals, five of
whom are not "interested persons" of the Trust as that term is defined in the
Investment Company Act of 1940, as amended (the "1940 Act"). The Trustees are
fiduciaries for the Portfolios' shareholders and are governed by the laws of the
State of Delaware in this regard. Each Board establishes policies for the
operation of the Portfolios and appoints the officers who conduct the daily
business of the Portfolios. Officers and Trustees of the Trust are listed below
with their addresses, present positions with the Trust and principal occupations
over at least the last five years.

<TABLE>
<CAPTION>
----------------------------------- --------- ------------------------- ------------------------------------------
NAME AND ADDRESS AGE POSITION WITH THE PRINCIPAL OCCUPATION
COMPANY AND TRUST DURING THE PAST FIVE YEARS
----------------------------------- --------- ------------------------- ------------------------------------------
<S> <C> <C> <C>
*Steven R. Samson 46 President & Chairman of President and CEO, Kinetics Asset
25 Holly Place the Boards Management, Inc. (1999 to Present);
Briarcliff, NY 10510 President, The Internet Fund, Inc. (1999
to Present); Managing Director, Chase
Manhattan Bank (1993 to 1999).
----------------------------------- --------- ------------------------- ------------------------------------------
*Kathleen Campbell 35 Trustee Attorney, Campbell and Campbell,
68 East Hartsdale Avenue Counselors-at-Law (1995 to Present).
Hartsdale, NY 10530
----------------------------------- --------- ------------------------- ------------------------------------------
*Murray Stahl 47 Trustee President, Horizon Asset Management, an
30 Haights Cross Road investment adviser (1994 to Present).
Chappaqua, NY 10514
----------------------------------- --------- ------------------------- ------------------------------------------
Steven T. Russell 37 Independent Trustee Attorney and Counselor at Law, Steven
146 Fairview Avenue Russell Law Firm (1994 to Present);
Bayport, NY 11705 Professor of Business Law, Suffolk
County Community College (1997 to
Present).
----------------------------------- --------- ------------------------- ------------------------------------------
Douglas Cohen, C.P.A. 37 Independent Trustee Wagner, Awerma & Strinberg, LLP
6 Saywood Lane Certified Public Accountant (1997 to
Stonybrook, NY 11790 present); Leon D. Alpern & Co. (1985 to
1997)
----------------------------------- --------- ------------------------- ------------------------------------------
William J. Graham 38 Independent Trustee Attorney, Bracken & Margolin, LLP (1997
856 Hampshire Road to Present).
Bayshore, NY 11706 Gabor & Gabor (1995 to 1997)
----------------------------------- --------- ------------------------- ------------------------------------------
Joseph E. Breslin 46 Independent Trustee Senior Vice President, Marketing &
54 Woodland Drive Sales, IBJ Whitehall Financial Group, a
Rye Brook, NY 10573 financial services company (1999 to
Present); formerly President, J.E.
Breslin & Co., an investment management
consulting firm (1994 to 1999).
----------------------------------- --------- ------------------------- ------------------------------------------
John J. Sullivan 69 Independent Trustee Retired; Senior Advisor, Long Term
31 Hemlock Drive Credit Bank of Japan, Ltd.; Executive
Sleepy Hollow, NY 10591 Vice President, LTCB Trust Company.
----------------------------------- --------- ------------------------- ------------------------------------------
Lee W. Schultheis 44 Vice President & Managing Director & COO of Kinetics
54 Kelsey Ridge Road Treasurer of the Trust Asset Management (1999 to Present);
Freeport, ME 04032 President & Director of Business.
Development, Vista Fund Distributors,
Inc. (1995 to 1999); Managing Director,
Forum Financial Group, a mutual fund
services company.
----------------------------------- --------- ------------------------- ------------------------------------------
</TABLE>

* "Interested persons" as defined in the 1940 Act.

COMPENSATION

For their service as Trustees of the Trust, the Independent Trustees receive an
aggregate fee of $15,000 per year and $1,000 per meeting attended, as well as
reimbursement for expenses incurred in connection with attendance at such
meetings. In addition, each committee chairman of the Trust (such as the Audit
Committee or Pricing Committee) receives an additional fee of $5,000 per year
for his service as chairman. The "interested persons" who serve as Trustees of
the Trust receive no compensation for their service as Trustees. None of the
executive officers receive compensation from the Portfolios. The following
tables provide compensation information for the Directors/Trustees for the
year-ended December 31, 1999.

<TABLE>
<CAPTION>
KINETICS PORTFOLIOS TRUST
COMPENSATION TABLE
---------------------------- ----------------- ----------------------- ---------------------- ------------------------
NAME AND POSITION AGGREGATE PENSION OR RETIREMENT ESTIMATED ANNUAL TOTAL COMPENSATION
COMPENSATION BENEFITS ACCRUED AS BENEFITS UPON FROM PORTFOLIO AND
FROM PORTFOLIOS PART OF PORTFOLIO RETIREMENT PORTFOLIO COMPLEX PAID
EXPENSES TO TRUSTEES**
---------------------------- ----------------- ----------------------- ---------------------- ------------------------
<S> <C> <C> <C> <C>
Steven R. Samson* None None None None
Chairman and Trustee

Kathleen Campbell* None None None None
Trustee

Murray Stahl*** None None None None
Trustee

Steven T. Russell None None None None
Independent Trustee

Douglas Cohen, CPA None None None None
Independent Trustee

William J. Graham None None None None
Independent Trustee

Joseph E. Breslin None None None None
Independent Trustee

John J. Sullivan None None None None
Independent Trustee
---------------------------- ----------------- ----------------------- ---------------------- ------------------------
</TABLE>

* "Interested person" as defined under the 1940 Act.

** Includes compensation paid by Kinetics Portfolios Trust

*** Murray Stahl became an "interested person" of the Fund (as defined under the
1940 Act) as of December 15, 1999. Previous to becoming an interested person,
Mr. Stahl received $3,844 as total compensation from the Fund and Fund complex
for being an independent director.

MANAGEMENT OWNERSHIP

The percentage of the Portfolio's interests owned or controlled by the executive
officers and/or Trustees of the Portfolios is less than 1% of the interest of
the Portfolio.

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
--------------------------------------------------------------------------------

A control person is one who owns beneficially or through controlled companies
more than 25% of the voting securities of a company or acknowledge the existence
of control. As of the commencement of investment operations, the Portfolios
could be deemed to be under the control of Kinetics Mutual Funds, Inc. through
its series, The Internet Fund, The Internet Infrastructure Fund, The Internet
Emerging Growth Fund, The Internet Global Growth Fund, The Internet New Paradigm
Fund, The Small Cap Opportunities Fund, The Middle East Growth Fund, The Medical
Fund, The Asian Technology Fund, and The Kinetics Government Money Market Fund
(each a "Fund" and collectively the "Funds"). Kinetics Mutual Funds, Inc., was
the sole investor in the Portfolio as of the date of this SAI. Similarly, as of
such time, Kinetics Mutual Funds, Inc. through the Funds, was the owner of 100%
of the value of the outstanding interests in the Trust. Any investor owing more
than 50% of the value of the outstanding interests in the Portfolio may take
actions without the approval of any other investor who invests in the Portfolio.

INVESTMENT ADVISERS
--------------------------------------------------------------------------------

Kinetics Asset Management, Inc. ("Kinetics" or the "Adviser") is a New York
corporation that serves as the investment adviser to the Portfolios. Steven R.
Samson is the President and Chief Executive Officer of Kinetics. Mr. Samson has
over 24 years experience in the mutual funds and financial services industries.
Mr. Lee Schultheis is the Chief Operating Officer of Kinetics and has more than
20 years experience in the mutual funds and financial services industries.

On April 25, 2000, the Board of the Trustees of the Trust, on behalf of the
Portfolios, approved a management and advisory contract (the "Agreement") with
Kinetics. This Agreement continues on a year-to-year basis provided that
specific approval is voted at least annually by the Board of Trustees of the
Trust or by the vote of the holders of a majority of the outstanding voting
securities of the Portfolios. In either event, it must also be approved by a
majority of the trustees of the Portfolio who are neither parties to the
Agreement nor "interested persons" as defined in the 1940 Act at a meeting
called for the purpose of voting on such approval. The Adviser's investment
decisions are made subject to the direction and supervision of the Board of
Trustees. The Agreement may be terminated at any time, without the payment of
any penalty, by the Board of Trustees or by vote of a majority of the
outstanding voting securities of the Portfolios. Ultimate decisions as to the
investment policy and as to individual purchases and sales of securities are
made by the Portfolio's officers and the Trustees.

Under the Agreement, Kinetics furnishes investment advice to the Portfolios by
continuously reviewing the portfolio and recommending to the Portfolios to what
extent, securities should be purchased or disposed. Pursuant to the Agreement,
the Adviser:

(1) renders research, statistical and advisory services to the Portfolios;
(2) makes specific recommendations based on the Portfolios' investment
requirements;
(3) pays the salaries of those of the Portfolios' employees who may be officers
or directors or employees of the investment adviser.

SUB-ADVISER

On June 20, 2000, the Board of Trustees, on behalf of the ASIA TECHNOLOGY
PORTFOLIO, approved a sub-advisory agreement between the Adviser and UOB Global
Capital LLC (the "sub-adviser"), pursuant to which the sub-adviser will assist
it in the day-to-day management of the investment portfolio. The sub-advisory
agreement continues on a year-to-year basis provided that specific approval is
voted at least annually by the Board of Trustees of the Trust or by the vote of
the holders of a majority of the outstanding voting securities of the Portfolio.
In either event, it must also be approved by a majority of the trustees of the
Portfolio who are neither parties to the Agreement nor "interested persons" as
defined in the 1940 Act at a meeting called for the purpose of voting on such
approval. The Agreement may be terminated at any time, without the payment of
any penalty, by the Board of Trustees or by vote of a majority of the
outstanding voting securities of the Portfolio. In the event that the Advisory
Agreement under any circumstances, the sub-advisory agreement shall also
automatically be terminated.

The sub-adviser determines which securities will be purchased, retained or sold
for the ASIA TECHNOLOGY Portfolio, places orders for the Portfolio and provides
the investment adviser with information on international investment and economic
developments

The sub-adviser is located at 592 Fifth Avenue, Suite 602, New York, New York
10036. The sub-adviser has entered into an arrangement with its affiliate, UOB
Asset Management Ltd. (UOBAM), pursuant to which UOBAM has agreed to make
available certain of its investment, operations and compliance personnel to the
sub-adviser. UOBAM is located at UOB Plaza 2, 80 Raffles Place, #03-00,
Singapore 048624. At December 31, 1999, together with its affiliates, the
sub-adviser had discretionary management authority over approximately $2.17
billion in assets.

Under the Sub Advisory Agreement, Kinetics supervises the sub-adviser which, in
turn, furnishes investment advice to the Fund by continuously reviewing the
portfolio and recommending to the Fund when, and to what extent, securities
should be purchased or disposed. The sub-adviser's investment decisions are made
subject to the direction and supervision of the Adviser and the Board of
Trustees. Ultimate decisions as to the investment policy and as to individual
purchases and sales of securities are made by the Portfolio's officers and the
Trustees. Pursuant to the Agreement, the Adviser is responsible directly, or
indirectly through the sub-adviser, for:

(1) rendering research, statistical and advisory services to the Portfolio;
(2) making specific recommendations based on the Portfolio's investment
requirements; and
(3) paying the salaries of those of the Portfolio's employees who may be
officers or directors or employees of the investment adviser.

ADVISORY FEES

For the above services, the Portfolios have each agreed to pay to Kinetics an
annual fee of 1.25%, (or 0.50% in the case of the KINETICS GOVERNMENT MONEY
MARKET FUND) of the Portfolios' average daily net assets. All fees are computed
on the average daily closing net asset value ("NAV") of the Portfolio and are
payable monthly. The fee is higher than the fee paid by most other funds.

SUB-ADVISORY FEES

For the ASIA TECHNOLOGY PORTFOLIO, the investment adviser pays the sub-adviser's
fees of 0.625% of the Portfolio's management fee of 1.25% of average daily net
assets out of the Adviser's annual advisory fees. All fees are computed on the
average daily closing net asset value ("NAV") of the Portfolio and are payable
monthly.

Kinetics has also entered into a Research Agreement with Horizon Assets
Management, Inc. ("Horizon") for which it is solely responsible for the payment
of all fees owing to Horizon.

Fees of the custodian, administrator, fund accountant and transfer agent are
paid by the Funds or by the Portfolios or by the Funds and the Portfolios
jointly, as more fully described below. The Funds pay all other expenses,
including:

o fees and expenses of directors not affiliated with the Adviser;
o legal and accounting fees;
o interest, taxes, and brokerage commissions; and
o record keeping and the expense of operating its offices.

PRIVATE PLACEMENT AGENT

Kinetics Funds Distributor, Inc. ("KFDI"), serves as the private placement agent
for the shares of the Portfolio on a best efforts basis. KFDI is a registered
broker-dealer and member of the National Association of Securities Dealers, Inc.
Beneficial Interests in the Portfolio are issued continuously.

ADMINISTRATIVE SERVICES
--------------------------------------------------------------------------------

Kinetics also serves as Administrator of the Funds and the Portfolios. Under an
Administrative Services Agreement with the Funds, Kinetics will be entitled to
receive an annual administration fee equal to 0.10% of the Portfolios' average
daily net assets of which Kinetics will be responsible for the payment of a
portion of such fees to Firstar Mutual Fund Services, LLC ("Firstar") for
certain sub-administrative services rendered to the Portfolios by Firstar.

Firstar, located at 615 East Michigan Street, Milwaukee, Wisconsin 53202, also
serves as the Funds' accountant and transfer agent. As such, Firstar provides
certain shareholder services and record management services as well as acts as
the Portfolios' dividend disbursement agent.

Administrative services include, but are not limited to, providing office space,
equipment, telephone facilities, various personnel, including clerical and
supervisory, and computers, as is necessary or beneficial to:

|X| establish and maintain shareholders' accounts and records,
|X| process purchase and redemption transactions,
|X| process automatic investments of client account cash balances,
|X| answer routine client inquiries regarding the Portfolios,
|X| assist clients in changing dividend options,
|X| account designations, and addresses, and
|X| providing such other services as the Portfolios may reasonably request.

CUSTODIAN
--------------------------------------------------------------------------------

Firstar Bank, N.A. ("Firstar Bank") is custodian for the securities and cash of
the Portfolios. Under a Custody Agreement, Firstar Bank holds the Portfolios'
assets in safekeeping and keeps all necessary records and documents relating to
its duties.

VALUATION OF SHARES
--------------------------------------------------------------------------------

Unless otherwise noted, the following applies to all the Portfolios except the
KINETICS GOVERNMENT MONEY MARKET PORTFOLIO.

Shares of the Portfolios are sold on a continual basis at the NAV per share next
computed following acceptance of an order by the Portfolios. The Portfolios' NAV
per share for the purpose of pricing purchase and redemption orders is
determined at the close of normal trading (currently 4:00 p.m. Eastern Time) on
each day the New York Stock Exchange ("NYSE") is open for trading. The NYSE is
closed on the following holidays: New Year's Day, Martin Luther King, Jr.'s Day,
President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.

The Portfolios' investment securities are valued each day at the last quoted
sales price on the securities principal exchange. If market quotations are not
readily available, securities will be valued at their fair market value as
determined in good faith in accordance with procedures approved by the Board of
Trustees. The Portfolios may use independent pricing services to assist in
calculating the NAV of the Portfolio's shares.

The Portfolios' investment securities that are listed on a U.S. securities
exchange or NASDAQ for which market quotations are readily available are valued
at the last quoted sale price on the day the valuation is made. Price
information on listed securities is taken from the exchange where the security
is primarily traded. Options, futures, unlisted U.S. securities and listed U.S.
securities not traded on the valuation date for which market quotations are
readily available are valued at the mean of the most recent quoted bid and asked
price.

Fixed-income securities (other than obligations having a maturity of 60 days or
less) are normally valued on the basis of quotes obtained from pricing services,
which take into account appropriate factors such as institutional sized trading
in similar groups of securities, yield, quality, coupon rate, maturity, type of
issue, trading characteristics and other market data. Fixed-income securities
purchased with remaining maturities of 60 days or less are valued at amortized
cost if it reflects fair value. In the event that amortized cost does not
reflect market, market prices as determined above will be used. Other assets and
securities for which no quotations are readily available (including restricted
securities) will be valued in good faith at fair value using methods determined
by the Board of Trustees of the Portfolios.

Shares of the KINETICS GOVERNMENT MONEY MARKET PORTFOLIO are sold on a continual
basis at its NAV, which is determined by the Portfolio as of 12:00 p.m. Eastern
time each day the NYSE is open for unrestricted business. The KINETICS
GOVERNMENT MONEY MARKET PORTFOLIO will utilize the amortized cost method in
valuing its portfolio securities. This method involves valuing a security at its
cost adjusted by a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the instrument. The purpose of this method of calculation is to facilitate the
maintenance of a consistent net asset value per share for the Portfolio of
$1.00. However, there is no assurance that the $1.00 net asset value per share
will be maintained.

PURCHASING SHARES
--------------------------------------------------------------------------------

Shares of beneficial interest in the Portfolios are sold without a sales load, a
the NAV next determined after an order is received by the Portfolios. Shares in
the Portfolios are sold solely in private placement transactions that do not
involve any "public offering" within the meaning of Section 4(2) of the 1933
Act. Investments in the Portfolios may be made only by regulated investment
companies, unregulated foreign investment companies, U.S. and non-U.S.
institutional investors, S corporations, insurance company separate accounts,
and certain qualified pension and retirement plans. This Registration Statement
does not constitute an offer to seel, or the solicitation of any offer to buy,
any "security" within the meaning of the 1933 Act.

There is no minimum initial or subsequent investment in the Portfolios. The
Portfolios reserve the right to cease accepting investments at any time or to
reject any investment order.

REDEMPTION OF SHARES
--------------------------------------------------------------------------------

An investor in the Portfolios may redeem all or any portion of its investment at
the NAV next determined after a redemption request in good order is received by
a Portfolio. The proceeds of a redemption will be paid by the Portfolios in
federal funds normally on the Business Day that the redemption is effected, but
in any event within three business days, except as extensions may be permitted
by law.

The Portfolios reserve the right to pay redemptions in kind. Unless requested by
an investor or deemed by the Adviser to be in the best interests of the
investors in a Portfolio as a group, the Portfolios will not pay a redemption in
kind to an investor, except in situations where that investor may pay
redemptions in kind.

BROKERAGE
--------------------------------------------------------------------------------

The Portfolios' assets are invested by the Adviser in a manner consistent with
its investment objective, strategies, policies and restrictions and with any
instructions the Board of Trustees may issue from time to time. Within this
framework, the Adviser is responsible for making all determinations as to the
purchase and sale of portfolio securities and for taking all steps necessary to
implement securities transactions on behalf of the Portfolios.

Transactions on U.S. stock exchanges, commodities markets and futures markets
and other agency transactions may involve the payment by the Adviser on behalf
of the Portfolios of negotiated brokerage commissions. Such commissions vary
among different brokers. A particular broker may charge different commissions
according to such factors as the difficulty and size of the transaction.
Transactions in foreign investments often involve the payment of fixed brokerage
commissions, which may be higher than those in the United States. There is
generally no stated commission in the case of securities traded in the
over-the-counter markets, but the price paid by the Adviser usually includes an
undisclosed dealer commission or mark-up. In underwritten offerings, the price
paid by the Adviser on behalf of the Portfolios includes a disclosed, fixed
commission or discount retained by the underwriter or dealer.

U.S. Government securities generally are traded in the over-the-counter market
through broker-dealers. A broker-dealer is a securities firm or bank that makes
a market for securities by offering to buy at one price and sell at a slightly
higher price. The difference between the prices is known as a spread.

In placing orders for the purchase and sale of portfolio securities for the
Portfolios, the Adviser seeks to obtain the best price and execution, taking
into account such factors as price, size of order, difficulty and risk of
execution and operational facilities of the firm involved. For securities traded
in the over-the-counter markets, the Adviser deals directly with the dealers who
make markets in these securities unless better prices and execution are
available elsewhere. The Adviser negotiates commission rates with brokers based
on the quality and quantity of services provided in light of generally
prevailing rates, and while the Adviser generally seeks reasonably competitive
commission rates, the Portfolio does not necessarily pay the lowest commissions
available. The Board of Trustees periodically reviews the commission rates and
allocation of orders.

When consistent with the objectives of best price and execution, business may be
placed with broker-dealers who furnish investment research or services to the
Adviser. Such research or services include advice, both orally and in writing,
as to the value of securities; the advisability of investing in, purchasing or
selling securities; and the availability of securities, or purchasers or sellers
of securities; as well as analyses and reports concerning issues, industries,
securities, economic factors and trends, portfolio strategy and the performance
of accounts. To the extent portfolio transactions are effected with
broker-dealers who furnish research services to the Adviser, the Adviser
receives a benefit, not capable of evaluation in dollar amounts, without
providing any direct monetary benefit to the Portfolio from these transactions.
The Adviser believes that most research services obtained by it generally
benefit several or all of the investment companies and private accounts which it
manages, as opposed to solely benefiting one specific managed fund or account.

The Trust, on behalf of a Portfolio, may also enter into arrangements, commonly
referred to as "broker/service arrangements" with broker-dealers pursuant to
which a broker-dealer agrees to pay the cost of certain products or services
provided to the Portfolio in exchange for fund brokerage. Under a typical
brokerage/service arrangement, a broker agrees to pay a portion the Portfolio's
custodian, administrative or transfer agency fees, etc., and, in exchange, the
Portfolio agrees to direct a minimum amount of brokerage to the broker. The
Adviser, on behalf of the Trust, usually negotiates the terms of the contract
with the service provider, which is paid directly by the broker.

The same security may be suitable for a Portfolio, another portfolio series of
the Trust or other private accounts managed by the Adviser. If and when a
Portfolio and two or more accounts simultaneously purchase or sell the same
security, the transactions will be allocated as to price and amount in
accordance with arrangements equitable to the Portfolios and the accounts. The
simultaneous purchase or sale of the same securities by a Portfolio and other
accounts may have a detrimental effect on a Portfolio, as this may affect the
price paid or received by a Portfolio or the size of the position obtainable or
able to be sold by a Portfolio.

Consistent with the Conduct Rules of the National Association of Securities
Dealers, Inc. and subject to seeking the most favorable price and execution
available and such other policies as the Trustees may determine, the Adviser may
consider sales of shares of a Portfolio as a factor in the selection of
broker-dealers to execute portfolio transactions for a Portfolio.

TAXES
--------------------------------------------------------------------------------

The Portfolios will be classified for federal income tax purposes as
partnerships that are not "publicly traded partnerships." As a result, the
Portfolios are not subject to federal income tax; instead, each Interestholder
in a Portfolio is required to take into account in determining its federal
income tax liability its share of the particular Portfolio's income, gains,
losses, deductions, and credits, without regard to whether it has received any
cash distributions from a Portfolio. The Portfolios are also not subject to
Delaware income or franchise tax.

A holder of beneficial interest in a Portfolio (an "Interestholder") is deemed
to own a proportionate share of that Portfolio's assets and to earn a
proportionate share of that Portfolio's income, for, among other things,
purposes of determining whether the Interestholder satisfies the requirements to
qualify as a regulated investment company ("RIC"). Accordingly, the Portfolios
intend to conduct their operations so that their Interestholders that invest
substantially all of their assets in a Portfolio and intend to qualify as RICs
should be able to satisfy all those requirements.

Distributions to an Interestholder from a Portfolio (whether pursuant to a
partial or complete withdrawal or otherwise) will not result in the
Interestholder's recognition of any gain or loss for federal income tax
purposes, except that: (1) gain will be recognized to the extent any cash that
is distributed exceeds the Interestholder's basis for its interest in a
Portfolio before the distribution; (2) income or gain will be recognized if the
distribution is in liquidation of the Interestholder's entire interest in a
Portfolio and includes a disproportionate share of any unrealized receivables
held by a Portfolio; (3) loss will be recognized to the extent that a
liquidation distribution consisting solely of cash and/or unrealized receivables
is less than the Interestholder's basis for its interest in a Portfolio prior to
the distribution; and (4) gain or loss may be recognized on a distribution to an
Interestholder that contributed property to a Portfolio. An Interestholder's
basis for its interest in a Portfolio generally will equal the amount of cash
and the basis of any property it invests in a Portfolio, increased by the
Interestholder's share of that Portfolio's net income and gains and decreased by
(a) the amount of cash and the basis of any property the Portfolio distributes
to the Interestholder and (b) the Interestholder's share of the Portfolio's
losses.

The income tax and estate tax consequences to a non-U.S. Interestholder entitled
to claim the benefits of an applicable tax treaty may be different from those
described herein. Non-U.S. Interestholders may be required to provide
appropriate documentation to establish their entitlement to the benefits of such
a treaty. Non-U.S. Interestholders are advised to consult their own tax advisers
with respect to the particular tax consequences to them of an investment in the
Portfolios.

The foregoing discussion relates only to federal income tax law. Income from the
Portfolios also may be subject to foreign, state and local taxes, and their
treatment under foreign, state and local income tax laws may differ from the
federal income tax treatment. Interestholders should consult their tax advisors
with respect to particular questions of federal, state and local taxation.

PERFORMANCE INFORMATION
--------------------------------------------------------------------------------

TOTAL RETURN

Average annual total return quotations used in the Portfolios' advertising and
promotional materials are calculated according to the following formula:

P(1+T)n = ERV

where P equals a hypothetical initial payment of $1,000; T equals average annual
total return; n equals the number of years; and ERV equals the ending redeemable
value at the end of the period of a hypothetical $1,000 payment made at the
beginning of the period.

Under the foregoing formula, the time periods used in advertising will be based
on rolling calendar quarters, updated to the last day of the most recent quarter
prior to submission of the advertising for publication. Average annual total
return, or "T" in the above formula, is computed by finding the average annual
compounded rates of return over the period that would equate the initial amount
invested to the ending redeemable value. Average annual total return assumes the
reinvestment of all dividends and distributions.

CUMULATIVE TOTAL RETURN

Cumulative total return represents the simple change in value of an investment
over a stated period and may be quoted as a percentage or as a dollar amount.
Total returns may be broken down into their components of income and capital
(including capital gains and changes in share price) in order to illustrate the
relationship between these factors and their contributions to total return.

YIELD

Annualized yield quotations used in a Portfolio's advertising and promotional
materials are calculated by dividing that Portfolio's interest income for a
specified thirty-day period, net of expenses, by the average number of shares
outstanding during the period, and expressing the result as an annualized
percentage (assuming semi-annual compounding) of the NAV per share at the end of
the period. Yield quotations are calculated according to the following formula:

YIELD = 2[(a-b + 1)6 - 1]
---
c-d

where "a" equals dividends and interest earned during the period; "b" equals
expenses accrued for the period, net of reimbursements; "c" equals the average
daily number of shares outstanding during the period that are entitled to
receive dividends; and "d" equals the maximum offering price per share on the
last day of the period.

For purposes of these calculations, the maturity of an obligation with one or
more call provisions is assumed to be the next date on which the obligation
reasonably can be expected to be called or, if none, the maturity date.

OTHER INFORMATION

The Portfolios' performance data quoted in advertising and other promotional
materials represents past performance and is not intended to predict or indicate
future results. The return and principal value of an investment in the
Portfolios will fluctuate, and an investor's redemption proceeds may be more or
less than the original investment amount.

If permitted by applicable law, the Portfolios may advertise the performance of
registered investment companies or private accounts that have investment
objectives, policies and strategies substantially similar to those of the Funds.

COMPARISON OF PORTFOLIO PERFORMANCE

The performance of the Portfolios, other than the KINETICS GOVERNMENT MONEY
MARKET PORTFOLIO, may be compared to data prepared by Lipper Analytical
Services, Inc., CDA Investment Technologies, Inc., Morningstar, Inc., the
Donoghue Organization, Inc. or other independent services which monitor the
performance of investment companies, and may be quoted in advertising in terms
of its ranking in each applicable universe. In addition, the Portfolio may use
performance data reported in financial and industry publications, including
Barron's, Business Week, Forbes, Fortune, Investor's Daily, IBC/Donoghue's Money
Fund Report, Money Magazine, The Wall Street Journal and USA Today.

The Portfolios may from time to time use the following unmanaged indices for
performance comparison purposes:

o S&P 500 - The S&P 500 is an index of 500 stocks designed to mimic the overall
equity market's industry weightings. Most, but not all, large capitalization
stocks are in the index. There are also some small capitalization names in the
index. The list is maintained by Standard & Poor's Corporation. It is market
capitalization weighted. There are always 500 issuers in the S&P 500. Changes
are made by Standard & Poor's as needed.

o NASDAQ Composite - The NASDAQ Composite Index is a broad-based capitalization
- weighted index of all NASDAQ stocks.

INDEPENDENT AUDITORS
--------------------------------------------------------------------------------

PricewaterhouseCoopers LLP, 100 East Wisconsin Avenue, Suite 1500, Milwaukee,
Wisconsin 53202, serves as the Fund's independent auditors, who services include
examination of the Fund's financial statements and the performance of other
related audit and tax services.

FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

ASSETS

Cash $100,000
----------------
NET ASSETS $100,000
----------------

Report of Independent Accountants

To the Shareholder and Board of Trustees of
Kinetics Portfolios Trust

In our opinion, the accompanying statement of assets and liabilities presents
fairly, in all material respects, the financial position of Kinetics Portfolios
Trust (hereafter referred to as the "Trust") at April 27, 2000, in conformity
with accounting principles generally accepted in the United States. This
financial statement is the responsibility of the Trust's management; our
responsibility is to express an opinion on this financial statement based on our
audit. We conducted our audit of this financial statement in accordance with
auditing standards generally accepted in the United States which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statement is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for the opinion expressed above.

PricewaterhouseCoopers LLP
Milwaukee, Wisconsin

April 27, 2000

The accompanying notes are an integral part of this financial statement.

1. ORGANIZATION

The Kinetics Portfolios Trust (the "Trust") was organized as a Delaware
Business Trust on March 14, 2000 and is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end management
investment company issuing its beneficial interests in series, each series
representing a distinct portfolio with its own investment objectives and
policies. The series currently authorized are The Internet Portfolio, The
Internet Emerging Growth Portfolio, The Internet Global Growth Portfolio,
The Internet New Paradigm Portfolio, The Internet Infrastructure Portfolio,
The Medical Portfolio, The Kinetics Government Money Market Portfolio, The
Small Cap Opportunities Portfolio and The Middle East Growth Portfolio (the
"Portfolios"). Pursuant to the 1940 Act, the Portfolios are
"non-diversified" series of the Trust. The Trust has had no operations
other than the contribution by Kinetics Asset Management, Inc., the
Portfolios' Adviser ("Adviser"), of $100,000, representing a beneficial
interest in the Trust. The Portfolios have had no operations through April
27, 2000. On April 28, 2000, the Trust intends to distribute the Adviser's
$100,000 contribution to the Portfolios, at which time the Adviser will
become a partner in each of the Portfolios. In addition, on April 28, 2000
various feeder funds ("Funds") sponsored by the Adviser will invest their
investable assets in the corresponding Portfolios under a master-feeder
capital structure.

2. SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION COSTS

Expenses in connection with the organization of the Trust have been
absorbed by the Funds prior to their conversion to the master-feeder
capital structure. Accordingly, no statement of operations of the Trust has
been provided.

FEDERAL INCOME TAXES

Each Portfolio intends to qualify as a partnership for federal income tax
purposes. Therefore, the Portfolios believe they will not be subject to any
federal income tax on their income and net realized capital gains (if any).
However, each investor in the Portfolios will be taxed on its allocable
share of the Portfolio's income and capital gains for purposes of
determining its federal income tax liability.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities in
the financial statements. Actual results could differ from those estimates.

3. INVESTMENT ADVISER

The Trust has an Investment Advisory Agreement (the "Agreement") with
Kinetics Asset Management, Inc. (the "Adviser"), with whom certain officers
and trustees of the Trust are affiliated, to furnish investment advisory
services to the Portfolios. Under the terms of the Agreement, the
Portfolios compensate the Adviser for its management services at the annual
rate of 1.25% of the Portfolio's average daily net assets, except for The
Kinetics Government Money Market Portfolio, which compensates the Adviser
at a rate of 0.50% of the Portfolio's average daily net assets.

The Adviser also serves as administrator to the Portfolios. Under an
Administrative Services Agreement with the Trust on behalf of the
Portfolios, the Adviser receives an annual administration fee equal to
0.10% of the Portfolio's average daily net assets from which the Adviser
will be responsible for the payment of a portion of such fees to Firstar
Mutual Fund Services, LLC ("Firstar") for certain sub-administrative
services rendered to the Portfolios by Firstar.

APPENDIX
--------------------------------------------------------------------------------

STANDARD & POOR'S ("S&P") CORPORATE BOND RATING DEFINITIONS

AAA-Debt rated "AAA" has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.

AA-Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the higher-rated issues only in small degree.

A-Debt rated "A" has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.

BBB-Debt rated "BBB" is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher-rated categories.

BB, B, CCC, CC-Debt rated "BB", "B", "CCC", and "CC" is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. "BB" indicates the
lowest degree of speculation and "CC" the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties of major risk exposures to adverse
conditions.

CI-The rating "CI" is reversed for income bonds on which no interest is being
paid.

D-Debt rated "D" is in default, and payment of interest and/or repayment of
principal is in arrears.

MOODY'S INVESTORS SERVICE, INC. CORPORATE BOND RATING DEFINITIONS

AAA-Bonds which are rated "Aaa" are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

AA-Bonds which are rated "Aa" are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present that
make the long-term risks appear somewhat larger than in Aaa securities.

A-Bonds which are rated "A" possess many favorable investment attributes and are
to be considered as upper medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the near future.

BAA-Bonds which are rated "Baa" are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and, in
fact, have speculative characteristics as well.

BA-Bonds which are "Ba" are judged to have speculative elements; their future
cannot be considered well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.

B-Bonds which are rated "B" generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

CAA-Bonds which are rated "Caa" are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.

CA-Bonds which are "Ca" represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.

C-Bonds which are rated "C" are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

FITCH INVESTORS SERVICE, INC. BOND RATING DEFINITIONS

AAA-Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.

AA-Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated "AAA." Because bonds rated in the "AAA" and
"AA" categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated "F-1+."

A-Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered strong, but
may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.

BBB-Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds, and therefore impair timely
payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.

BB-Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified which could assist the
obligor in satisfying its debt service requirements.

B-Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.

CCC-Bonds have certain identifiable characteristics which, if not remedied, may
lead to default. The ability to meet obligations requires an advantageous
business and economic environment.

CC-Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.

C-Bonds are in imminent default in payment of interest or principal.

DDD, DD, AND D-Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. "DDD"
represents the highest potential for recovery on these bonds, and "D" represents
the lowest potential for recovery.

KINETICS PORTFOLIOS TRUST
PART C
OTHER INFORMATION

ITEM 23. EXHIBITS

(a) CERTIFICATE OF TRUST AND DECLARATION OF TRUST1

(b) BY-LAWS1

(c) INSTRUMENTS DEFINING RIGHTS OF SECURITY HOLDERS. Incorporated by reference
to the Declaration of Trust and the By-Laws.

(d) INVESTMENT ADVISORY AGREEMENTS between Registrant, on behalf of each series,
and Kinetics Asset Management, Inc.1

(e) UNDERWRITING CONTRACTS. Not Applicable

(f) BONUS OR PROFIT SHARING CONTRACTS. Not applicable.

(g) CUSTODIAN CONTRACT between Registrant and Firstar Bank, N.A. 2

(h) OTHER MATERIAL CONTRACTS

(1) ADMINISTRATIVE SERVICES AGREEMENT between Registrant and Kinetics Asset
Management, Inc.1

(2) FUND ACCOUNTING SERVICING AGREEMENT between Registrant and Firstar
Mutual Fund Services, LLC2

(3) TRANSFER AGENT AGREEMENT between Registrant and Firstar Mutual Fund
Services, LLC2

(4) AGREEMENT OF THE JOINT INSUREDS between Registrant and The Internet
Fund, Inc.

(5) PLACEMENT AGENCY Agreement between Registrant and Kinetics Funds
Distributors, Inc.1

(i) LEGAL OPINION

(1) OF SPITZER & FELDMAN P.C. (TRUST COUNSEL)1

(2) OF RICHARDS, LAYTON & FINGER ON MATTERS PERTAINING TO DELAWARE LAW1

(j) OTHER OPINIONS.

(1) CONSENT OF AUDITORS 1

(k) OMITTED FINANCIAL STATEMENTS. Not applicable.

(l) INITIAL CAPITAL UNDERSTANDING. Not Applicable.

(m) RULE 12B-1 PLAN. Not applicable.

(n) FINANCIAL DATA SCHEDULES - Not applicable.

(o) RULE 18F-3 PLAN. Not applicable.

1 Filed May 1, 2000 with N-1A.

2 Filed May 23, 2000 with the Amendment No. 1.

ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT

Registrant is not controlled by or under common
control with any person.

ITEM 25. INDEMNIFICATION

Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to trustees, officers
and controlling persons of the Registrant, the Registrant has
been advised that, in the opinion of the Securities and
Exchange Commission, such indemnification is against public
policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer
or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such
trustee, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it
is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.

ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER:

Besides serving as investment adviser to the Portfolios and to
Kinetics Mutual Funds, Inc., the Adviser is not currently (and
has not during the past two years) engaged in any other
business, profession, vocation or employment of a substantial
nature. Information regarding the business, vocation or
employment of a substantial nature of the Adviser and its
officers is incorporated by reference to the information
contained in Part B of this Registration Statement.

ITEM 27. PRINCIPAL UNDERWRITERS:

(a) As of this date of filing, Kinetics Funds Distributors,
Inc. ("KFDI"), is the private placement agent for shares of
the Registrant.

(b) To the best of Registrant's knowledge, as of the date of
filing, Lee W. Schultheis is the President and sole director
of KFDI. The address of KFDI is 1311 Mamaroneck Avenue,
White Plains, New York 10605. Mr. Schultheis is the Vice
President and Treasurer of the Registrant.

ITEM 28. LOCATION OF ACCOUNTS AND RECORDS:

All accounts and records required to be maintained by Section
31(a) of the Investment Company Act of 1940 and Rules 31a-1
through 31a-3 promulgated thereunder are maintained at the
following locations:

RECORDS RELATING TO: ARE LOCATED AT:
-------------------- ---------------
(1) Registrant's portfolio accounting Firstar Mutual Funds Services, LLC
servicing agent, and sub-administrator 615 East Michigan Street
Milwaukee, Wisconsin 53202

(2) Registrant's investment adviser, Kinetics Asset Management, Inc
administrator 1311 Mamaroneck Avenue
White Plains, NY 10605

(3) Registrant's custodian Firstar Bank, N.A.
777 E. Wisconsin Avenue
Milwaukee, WI 53202

ITEM 29. MANAGEMENT SERVICES:

Not applicable.

ITEM 30. UNDERTAKINGS:

Not applicable.

SIGNATURES

Pursuant to the requirements of the Investment Company Act of 1940, the
Registrant, KINETICS PORTFOLIOS TRUST, has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of White Plains and State of New York, on the 15th day
of September, 2000.

KINETICS PORTFOLIOS TRUST

/S/ STEVEN R. SAMSON
-----------------------
Steven R. Samson, President