UNITED STATES
Securities and Exchange Commission
Washington, DC. 20549
FORM N-1A
Registration Statement Under the securities act of 1933 X
and
The Investment Company Act of 1940 X
Post-Effective Amendment Number 3
The Internet Fund, Inc.
(Exact Name of Registrant as Specified in Charter)
344 Van Buren Street, North Babylon N.Y. 11704
(Address of Principal Executive Offices)
516 893-4200
(Registrants Telephone Number)
Margaret B. Doyle, 344 Van Buren Street, North Babylon,NY 11704
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: on 03/04/96
pursuant to rule 485 paragraph (b) POS
Calculation of Registration Fee Under the Securities Act of 1933
Title of Securities Amount Being Proposed Max Proposed Max Amount of
being Registered Registered Offering Aggregate Registra-
Price Offering Price tion Fee
None being requested at this time.
The Registrant hereby amends this Registration Statement on such date
or dates that may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states
that this Registration Statement shall thereafter become effective in
accordance with Section 8(A) of the Securities Act of 1933 or until this
Registration Statement shall become effective on such date as the
Commission acting to section 8(A) may determine.
<PAGE>
Cross Reference Sheet
INFORMATION REQUIRED CAPTIONS IN FILING
Part C: OTHER INFORMATION
Item 24. Financial Statements & Exhibits Financial Statements &
Exhibits
Item 25. Persons Controlled by/or under Control Persons
Common Control
Item 26. Number of Holders of Securities Number of Shareholders
Item 27. Indemnifications Indemnification
Item 28. Business & Other Connections of Activities of Investment
Advisor
Advisor
Item 29 Principal Underwriters Principal Underwriter
Item 30. Location of Accounts & Records Location of Accounts &
Records
Item 31. Management Services Not Applicable
Item 32. Undertakings Not Applicable
<PAGE>
THE INTERNET FUND, INC.
344 Van Buren Street,
North Babylon, NY 11704
(516) 893-4200
(888) FUND-WWW
March 9, 1998
PROSPECTUS
The Internet Fund, Inc. (the "Fund") is a diversified, open-end
management investment company. The Fund's primary investment
objective is long-term growth of capital, a goal it seeks by
investing primarily in the common stocks and securities
convertible into common stocks of domestic and foreign
companies engaged in the Internet and Internet-related activities.
Current income is a secondary objective. No assurance can be
given that the Fund will realize its objectives. This Prospectus sets
forth certain information about The Internet Fund, Inc., that a
prospective investor should know before investing. Investors
should read and retain this Prospectus for future reference.
A STATEMENT OF ADDITIONAL INFORMATION about
the Fund dated March 9, 1998, has been filed with the Securities and
Exchange Commission and contains further information about the
Fund. A copy of the Statement of Additional Information may be
obtained without charge by calling or writing the Fund at the
telephone number or address listed above. The Statement of
Additional Information is incorporated herein by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED
OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSIONER NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSIONER PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
THE INTERNET FUND, INC.
Investment Adviser:
Kinetics Asset Management, Inc.
Distributor:
The Fund serves as its own distributor.
FUND EXPENSES . . . . . . . . . . . . . . . . . . . . . . .3
FINANCIAL HIGHLIGHTS. . . . . . . . . . . . . . . . . . . .4
INVESTMENT OBJECTIVES AND POLICIES. . . . . . . . . . . . .4
OTHER INVESTMENTS AND INVESTMENT
PRACTICES. . . . . . . . . . . . . . . . . . . . . . .5
RISK FACTORS. . . . . . . . . . . . . . . . . . . . . . . .6
INVESTMENTS RESTRICTIONS. . . . . . . . . . . . . . . . . .7
PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . .8
MANAGEMENT OF THE FUND. . . . . . . . . . . . . . . . . . .9
PURCHASING SHARES . . . . . . . . . . . . . . . . . . . . 11
DISTRIBUTION AND TAXES. . . . . . . . . . . . . . . . . . 12
REDEMPTION AND REPURCHASE OF SHARES . . . . . . . . . . . 14
DETERMINATION OF NET ASSET VALUE. . . . . . . . . . . . . 15
STOCKHOLDER SERVICES. . . . . . . . . . . . . . . . . . . 16
GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . 16
SHARE PURCHASE APPLICATION. . . . . . . . . . . . . . . . 18
No dealer, salesman, or any other person has been authorized to
give any information or to make any representations, other than
those contained in this Prospectus, in connection with the offer
contained in this Prospectus and, if given or made, such other
information or representations must not be relied upon as having
been authorized by the Fund or its Distributor. This Prospectus
does not constitute an offer by the Fund or by the Distributor to sell
or a solicitation of an offer to buy any of the securities offered
hereby in any jurisdiction to any person to whom it is unlawful for
the fund or the Distributor to make such offer or solicitation in
such jurisdiction.
<PAGE>
FUND EXPENSES
Shareholder Transaction Expenses
FUND EXPENSES
Shareholder Transaction Expenses
Sales Load on Purchases (as a percentage of offering price) - None
Sales Load on Reinvested Dividends (as a percentage of offering price) - None
Deferred Sales Load - None
Redemption Fee - None
Exchange Fee - None
IRA Trustee Fees (per account) - $10 annually
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management and Administration Fees - 1.25%
12b-1 Fees* - 0.25%
Other Expenses - 0.50%
-----
Total Fund Operating Expenses - 2.00%
EXAMPLE
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end of
each time period:
1 year 3 years 5 years 10 years
$20 $63 $108 $234
* Under the rules of the National Association of Securities
Dealers, Inc. (The "NASD"), a 12b-1 fee may be treated as a
sales charge for certain purposes under those rules. Because
a 12b-1 fee is an annual fee charged against the assets of a
Fund, long-term stockholders may indirectly pay more in total
sales charges than the economic equivalent of the maximum
front-end sales charge permitted by rules of the NASD (see
"Distributor").
The purpose of the foregoing table is to assist investors in
understanding the various costs and expenses that an investor in
the Fund will bear directly or indirectly.
THE EXAMPLE WHICH IMMEDIATELY FOLLOWS THE
TABLE USES THE "TOTAL FUND OPERATING
EXPENSES" FIGURE ABOVE AND ASSUMES IT WILL
REMAIN CONSTANT OVER THE ILLUSTRATED
PERIOD. THE EXAMPLE SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL FUND EXPENSES MAY BE
GREATER OR LESSER THAN THOSE SHOWN IN THE
EXAMPLE OR IN THE TABLE.
<PAGE>
CONDENSED FINANCIAL INFORMATION
Selected per share and ratios to average net assets data over the past five
years have been calculated using the weighted average number of shares outstand-
ing for the respective periods.
Years Ended December 31
1997 1996* 1994 1993
Net asset value - beginning $4.67 $ - - -
Investment operations income
Net investment income (loss) .01 ( .31) - -
Net realized gain (loss) (.16) - - -
Net unrealized gain (loss) .41 ( .32)
on securities
Total income (loss) from
investment operations .26 ( .63) - -
Capital Stock Transactions
Net proceeds from sales of shares 5.33 5.30 - -
Shares redeemed (4.95) -
----------------------------------------------
.38 5.30
NET ASSET VALUE - END $5.31 $4.67
_______________________________________________
-----------------------------------------------
Total return $ .26 (.63) - -
_______________________________________________
-----------------------------------------------
*-period from October 21, 1996 (date operations
Commenced) to December 31, 1996
See notes to financial statements.
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The Fund's primary investment objective is long-term growth
of capital, a goal it seeks by investing primarily in common stocks
and securities convertible into common stocks of domestic
companies engaged in the Internet and Internet-related activities or
services. Current income is a secondary objective. No assurance
can be given that the Fund will realize its objectives. See "Taxes."
Except during temporary defensive periods, not less than 80%
of the Fund's total assets will be invested in the securities of
companies engaged in Internet and Internet-related
activities, and, except during temporary defensive periods, the
Fund would normally expect at least 90% of its total assets to be
so invested. As a diversified investment company, at least 75% of
the Fund's total assets are required to be invested in securities
limited in respect of any one issuer to not more than 5% of the
Fund's total assets and to not more than 10% of the issuer's voting
securities.
The Adviser believes that favorable investment opportunities
are offered by companies that provide products or services
designed for the Internet. The Internet is a global 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. The Adviser believes that the
dramatic growth of Internet activity will provide many investment
opportunities. Accordingly, the Fund seeks to invest in common
stock, and other securities, of companies whose research and
development efforts, in the opinion of the Adviser, may result in
higher stock values.
An important yardstick the Adviser employs in making portfolio
selections, in addition to evaluating trends in corporate revenues,
earnings, and dividends, is the amount of capital currently being
expended on research and development, and the nature thereof.
The Adviser believes that dollars invested in research and
development today frequently have significant bearing on future
growth.
Portfolio securities generally will be selected from companies
in the following groups:
Internet Access Providers - Companies that provide users with
access to the Internet.
Software Developers - Companies that develop software tools
to access the Internet, to facilitate information distribution and
gathering, to secure Internet-based transactions, etc.
<PAGE>
Hardware Manufactures - Companies that develop and
manufacture communication equipment, such as modems, switches
and routers, used to access the Internet, and those that develop and
manufacture workstations and Personal Communications Systems
used to access the Internet and provide Internet services.
Content Developers - Companies that supply information and
entertainment content, such as games, music, and video, on the
Internet.
Publishing Companies - Companies that provide information
about the Internet through publication of books, magazines, and
newspapers.
OTHER INVESTMENTS AND INVESTMENT
PRACTICES
Due to the changing nature of the Internet, the national
economy, and market conditions, the Fund may, as a temporary
defensive measure, invest, without limitation as to the amount, in
money market securities with a rating of A2-P2 or higher.
In order to have funds available for redemption and investment
opportunities, the Fund may also hold a portion of its portfolio in
cash or U.S. short-term money market instruments. Certificates of
deposit purchased by the Fund 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 Fund will be guaranteed by
U.S. or foreign banks having total assets at the time of purchase in
excess of $1 billion. The Fund anticipates that not more than 10%
of its total assets will be so invested in money market instruments
or held in cash at any given time, except when the Fund is in a
temporary defensive posture. The Fund may invest in debt
securities convertible into common stocks. Debt purchased by the
Fund 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 at the time of purchase. Convertible
debt obligations will be rated B or higher by S&P or B or higher by
Moody's at the time of purchase. 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" of the Statement of Additional
Information" for a description of debt security ratings.
<PAGE>
The fixed-income securities in which the Fund 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 Fund
assets invested in unrated or lower-grade securities, while intended
to increase the yield produced by those assets, also will 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 Fund 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 Fund is not required to dispose of
debt securities whose ratings are downgraded below these ratings
subsequent to the Fund's purchase of the securities. Relying in part
on ratings assigned by credit agencies in making investments will
not protect the Fund from the risk that fixed-income securities in
which the Fund invests will decline in value, since credit ratings
represent evaluations of the safety of principal, and 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 Fund have more than 5% of its total assets
invested in any fixed-income securities that are unrated or are rated
below investment grade either at the time of purchase or as a result
of a reduction in rating after purchase.
In order to qualify for the beneficial tax treatment afforded
regulated investment companies, and to be relieved of Federal tax
liabilities, the Fund must distribute substantially all of its net
income to stockholders generally on an annual basis. Thus, the
Fund may have to dispose of portfolio securities under
disadvantageous circumstances to generate cash or borrow cash in
order to satisfy the distribution requirement.
The Fund does 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.
For more information concerning these investment practices,
see "Investment Objectives and Policies" in, and Appendix B, to
the Statement of Additional Information.
<PAGE>
RISK FACTORS
There can be no assurance that a portfolio consisting primarily
of securities issued by companies engaged in the Internet and
Internet-related activities will achieve the Fund's investment
objectives. Because the Fund concentrates its investments in this
area, its shares do not represent a complete investment program
and their value may fluctuate more than shares invested in a
broader range of industries. The value of Fund shares will also be
especially susceptible to factors affecting companies engaged in
Internet and Internet-related activities. Such companies are
generally subject to the rate of change in technology which is
higher than in other industries. Changes in governmental policies,
such as telephone and cable regulations, freedom of speech, and
anti-trust regulations, may have a material effect on the demand for
Internet services. Many of the products and services of companies
engaged in the Internet and Internet-related activities are also
subject to relatively high risks of rapid obsolescence caused by
progressive scientific and technological advances.
Management has no previous experience managing a mutual
fund, see Management of the Fund.
INVESTMENT RESTRICTIONS
The Fund is subject to certain investment restrictions described
here and in the Statement of Additional Information, which may be
changed only with the approval of the holders of a majority of the
Fund's outstanding shares.
1. The Fund will not act as underwriter for securities of
other issuers except insofar as the Fund may be
deemed an underwriter in selling its own portfolio
securities.
2. The Fund will not make loans. The purchase of a
portion of a readily marketable issue of publicly
distributed bonds, debentures or other debt securities
will not be considered the making of a loan.
3. With respect to 75% of its total assets, the Fund will not
invest more than 5% of its assets in the securities of any
one issuer (except securities issued or guaranteed by the
U.S. Government, its agencies, and instrumentalities).
4. With respect to 75% of its total assets, the Fund will not
invest in the securities of any issuer if as a result the
Fund holds more than 10% of the outstanding securities
or more than 10% of the outstanding voting securities of
such issuer.
5. The Fund will not borrow money or pledge, mortgage,
or hypothecate its assets except to facilitate redemption
requests that might otherwise require untimely
disposition of portfolio securities and then only from
banks and in amounts not exceeding the lesser of 10% of
its 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 Fund
may enter into futures contracts and related options.
6. The Fund will not invest more than 10% of the value of
its net assets in illiquid securities, restricted securities,
and other securities for which market quotations are not
readily available.
<PAGE>
7. The Fund will not invest in the securities of any one
industry, except the Internet and Internet-related
industries (and except securities issued or guaranteed by
the U.S. Government, its agencies, and instrumentalities)
if as a result more than 20% of the Fund's total assets
would be invested in the securities of such industry.
Except during temporary defensive periods, not less than
80% of the Fund's total assets will be invested in the
securities of companies engaged in Internet
and Internet-related activities, and, except during
temporary defensive periods, the Fund would normally
expect at least 90% of its total assets to be so invested.
8. The Fund 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 Fund may purchase and sell securities of
companies that deal in oil, gas, or mineral exploration or
development programs or interests therein.
9. The Fund 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 Fund's portfolio securities will not
constitute a violation of such limitation.
PERFORMANCE INFORMATION
The Fund may from time to time include figures indicating the
Fund's yield, total return, or average annual total return in
advertisements or reports to stockholders or prospective investors.
Quotations of the Fund's yield will be based on all investment
income per share earned during a given 30-day period (including
dividends and interest), less expenses accrued during the period
("net investment income"), and will be computed by dividing net
investment income by the maximum public offering price per share
on the last day of the period. Average annual return and total return
figures represent the increase (decrease) in the value of an
investment in the Fund over a specified period. Both calculations
assume that all income dividends and capital gain distributions
during the period are reinvested at net asset value in additional
Fund shares. Quotations of the average annual total return reflect
the deduction of a proportional share of Fund expenses on an
annual basis. The results, which are annualized, represent an
average annual compounded rate of return on a hypothetical
investment in the Fund over a period of 1, 5, and 10 years ending
on the most recent calendar quarter (but not for a period greater
than the life of the Fund). Quotations of total return, which are not
annualized, represent historical earnings and asset value
fluctuations. Total return is based on past performance and is not
a guarantee of future results.
<PAGE>
Performance information for the Fund may be compared, in
reports and promotional literature, to: (I) the Standard & Poor's
500 Stock Index ("S&P 500 "), the Dow Jones Industrial Average
("DJIA") and the National Association of Securities Dealers
Automated Quotations ("the NASDAQ") Composite Index; (ii)
other groups of mutual funds tracked by Lipper Analytical
Services, the widely used independent research firm that ranks
mutual funds by overall performance, investment objectives, and
sets; and (iii) the Consumer Price Index (measure of inflation) to
assess the real rate of return from an investment in the Fund. Un-
managed indices may assume the reinvestment of dividends but
generally do not reflect deductions for administrative and
management costs and expenses.
Performance information for the Fund reflects only the
performance of a hypothetical investment in the Fund during the
particular time period on which the calculations are based.
Performance information should be considered in the light of the
Fund's investment objectives and polices, the types and quality of
the Fund's portfolio investments, market conditions during the
particular time period, and operating expenses. Such information
should not be considered as a representation of the Fund's future
performance. For a description of the methods used to determine
the Fund's yield, average annual total return and total return, see
the Statement of Additional Information.
MANAGEMENT OF THE FUND
The Fund is an open-end diversified management investment
company, commonly called a mutual fund. Through the purchase
of shares of the Fund, investors with goals similar to the
investment objectives of the Fund can participate in the investment
performance of the portfolio of investments held by the Fund. The
management and affairs of the Fund are supervised by its Board of
Directors whose name and general background information appear
in the Statement of Additional Information. The Board meets six
times a year to review Fund's progress and status.
Adviser
Kinetics Asset Management, Inc., is a New York corporation
that acts as an Investment Adviser to the Fund. Margaret B. Doyle
is the president of Kinetics Asset Management, Inc. Ms. Doyle
has more than 28 years experience in a variety of professional and
managerial positions in education. Mr. Francis J.
Alexander is an officer of Kinetics Asset Management, Inc., and
a portfolio manager. Mr. Alexander has more than 20 years of
investment experience as a portfolio manager.
<PAGE>
Officers and Directors of the Fund
Officers and directors of the Fund, together with their addresses
and principal occupations during the past five years, are:
Name and Address Position Principal Occupation Past
Five Years
Margaret B. Doyle President President
48 Gamecock Lane Interested Director The Internet Fund, Inc.
Babylon, NY 11702 Treasurer Retired Superintendent
North Babylon USFD
Francis J. Alexander Vice President Vice President
270 Greenwich Ave. Interested Director Portfolio manager
Greenwich, CT 06830 Secretary The Internet Fund, Inc.
Portfolio Manager
Alexander Capital
Management, Inc.
Murray Stahl Non-interested Director President
342 Madison Avenue Horizon Asset Management
New York, NY 10017
Kathleen Campbell Non-interested Director Councellor-at-Law
13 Elm Road
Scarsdale, NY 10583
Douglas Cohen, C.P.A. Non-interested Director Certified Public Accountant
86 Samuel Street
Ponkonkoma, NY 11779
A total of $0 has been paid in 1997 to officers and directors of the Fund to
compensate for travel expenses associated with their Fund duties.
The fund does not compensate those officers and directors that
are affiliated with the Investment Adviser except as they may
benefit through payment of the Advisory fee.
Expenses
The Fund's expenses are accrued daily and are deducted from
its total income before dividends are paid. These expenses include,
but are not limited to: fees paid to the Adviser and the
Administrator; taxes; legal fees; custodian and auditing fees;
reimbursement of the costs incurred by the Administrator in
providing pricing and accounting services to the Fund; and printing
and other miscellaneous expenses paid by the Fund. The Adviser
and Administrator have agreed that in any fiscal year in which the
aggregate expenses of the Fund (including advisory,
administrative, and transfer agency fees, but excluding, to the
extent permitted by applicable state law, interest, local, state, and
Federal taxes, sales charges, distribution plan expenses, and
extraordinary expenses as determined by the Fund's directors who
are not "interested persons" of the Administrator or the Fund's
investment adviser as defined in the 1940 Act) exceed the expense
limitation of any state having jurisdiction over the Fund, the fees
paid to the Adviser and Administrator hereunder will be reduced
pro rata (but not below zero)) to the extent require by such expense
limitation. The Adviser and the Administrator have each agreed to
bear their pro rata share of any such fee reduction based on the
percentage that such person's fee bears to the total fees paid by the
Fund to the Adviser under the Investment Advisory Agreement and
to the Administrator under the Administration Agreement.
<PAGE>
Distributor
The Fund acts as its own transfer agent and custodian.
The Investment Company Act of 1940 prohibits a fund from
acting as a distributor of securities of which it is an issuer, except
through an underwriter or pursuant to a written distribution plan
meeting certain standards. Pursuant to these provisions, the Fund
has adopted the Plan, under which monthly payments made by the
Fund to the Distributor may not exceed an amount computed at an
annual rate of 0.25% of the Fund's average net assets. Of this
amount, at the end of each calendar quarter the Distributor may
reallocate to broker-dealers (which may include the Distributor
itself), financial institutions or other industry professionals
(collectively, the "Service Organizations") fees at annual rates of
up to 0.25% of the average net assets of Fund shares owned by
stockholders for whom the Service Organizations are the dealers
or holders of record and with whom the Service Organizations
have a servicing relationship pursuant to a Service Agreement or
a Dealer Agreement with the Distributor. Normally the expenses
paid by the Distributor will exceed the fees received by the
Distributor under the Plan (said fees will not be offset by any sales
charges received by the Distributor).
The staff of the Securities and Exchange Commission (the
"SEC") has proposed amendments to Rule 12b-1. If the Rule is
amended as proposed or in some other manner, it may be necessary
for the Fund to consider amending the Plan and any related
agreements.
PURCHASING SHARES
Shares of the Fund are sold in a continuous offering and may be
purchased on any business day though authorized investment
dealers or directly from the Fund's Distributor. Except for the Fund
itself, only the Distributor and investment dealers that have a sales
agreement with the Distributor are authorized to sell shares of the
Fund. For further information, reference is made to the caption
"Distributor" in the Fund's Statement of Additional Information.
Shares of the Fund are sold at net asset value, without a sales
charge, and will be credited to a stockholder's account at the net
asset value next computed after an order is received. The minimum
initial investment is $1,000, and the minimum investment for
subsequent purchases is $100. The Fund does not intend to issue
stock certificates representing shares purchased. The Fund's
management reserves the right to reject any purchase order if, in its
opinion, it is in the Fund's best interest to do so.
An account may be opened by mailing a check or other
negotiable bank draft (payable to The Internet Fund, Inc.) for
$1,000 or more together with the completed investment application
form to the Fund. Subsequent investments in the amount of $100
or more may be mailed directly to the Fund. All such investments
are effected at the net asset value of Fund shares next computed
following receipt of payment by the Fund. Confirmations of the
opening of an account and of all subsequent transactions in the
account are forwarded by the Fund to the stockholder's address of
record.
<PAGE>
At various times the Distributor may implement programs under
which a dealer's sales force may be eligible to win nominal awards
for certain sales efforts or recognition program conforming to
criteria established by the Distributor, or participates in sales
programs sponsored by the Distributor. In addition, the Adviser,
the Administrator, and/or the Distributor in their discretion may
from time to time, pursuant to objective criteria established by the
Adviser, the Administrator, and/or the distributor, sponsor
programs designed to reward selected dealers for certain services
or activities that are primarily intended to result in the sale of
shares of the Fund. These programs will not change the price you
pay for your shares or the amount that the Fund will receive from
such sale.
Payment for all orders to purchase Fund shares must be received
by the Fund's Transfer Agent within three business days after such
orders are placed.
Investing Through Authorized Dealers
If any authorized dealer receives an order of at least $1,000, the
dealer may contact the Fund directly. Orders received by dealers
by the close of trading on the New York Stock Exchange on a
business day that are transmitted to the Fund by 4:00 p.m. EST on
that day will be effected at the net asset value per share determined
as of the close of trading on the New York Stock Exchange on that
day. Otherwise, the orders will be effected at the next determined
net asset value. It is the dealer's responsibility to transmit orders so
that they will be received by the Distributor before 4:00 p.m. EST.
After each investment, the stockholder and the authorized
investment dealer will receive confirmation statements of the
number of shares purchased and owned.
Telephone Purchase Authorization (Investing by Phone)
Stockholders who have completed the Telephone Purchase
Authorization section of the Investment Application Form may
purchase additional shares by telephoning the Fund at (516) 893-
4200, or toll-free at (888) FUND-WWW. The minimum telephone
purchase is $100 and the maximum is the greater of $100 or three
times the net asset value of shares (for which certificates have not
been issued) held by the stockholder on the day preceding such
telephone purchase for which payment has been received. The
telephone purchase will be effected at the net asset value next
computed after receipt of the call by the Fund. Payment for the
telephone purchase must be received by the Fund within three
business days after the order is placed. If payment is not received
within three business days after the order is placed, the stockholder
will be liable for all losses incurred as a result of the purchases.
<PAGE>
DISTRIBUTION AND TAXES
Payment Options
Distributions (whether treated for tax purposes as ordinary
income or long-term capital gains) to stockholders of the Fund are
paid in additional shares of the Fund, with no sales charge, based
on the Fund's net asset value as of the close of business on the
record date for such distributions. However, a stockholder may
elect on the application form to receive distributions as follows:
Option 1. To receive income dividends in cash and
capital gain distributions in additional Fund
shares, or
Option 2. To receive all income dividends and capital
gain distributions in cash.
The Fund intends to pay any dividends from investment
company taxable income and distributions representing capital gain
at least annually, usually in November. The Fund will advise each
stockholder annually of the amounts of dividends from investment
company taxable income and of net capital gain distributions
reinvested or paid in cash to the stockholder during the calendar
year.
If you select Option 1 or Option 2 and the U.S. Postal Service
cannot deliver your checks, or if your checks remain uncashed for
six months, your distribution checks will reinvested in your
account at the then current net asset value and your election will be
converted to the purchase of additional shares.
Taxes
The Fund intends to continue to qualify and elect to be taxed as
a regulated investment company under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"). In any
taxable year in which the Fund so qualifies and distributes at least
90% of its investment company taxable income (which includes,
among other items, dividends, interest, and the excess of realized
net short-term capital gain over realized net long-term capital loss),
the Fund generally will be relieved of Federal income tax on its
investment company taxable income and net capital gain (the
excess of realized net long-term capital gain over realized net
short-term capital loss) distributed to stockholders. Amounts not
distributed on a timely basis in accordance with a calendar
distribution requirement are also subject to a nondeductible 4%
excise tax. To prevent application of the excise tax, the Fund
intends to make its distributions in accordance with the calendar
year distribution requirement. A distribution will be treated as paid
on December 31 of the calendar year if it is declared by the Fund
in October, November, or December of that year to stockholders
of record on a date in such a month and paid by the Fund during
January of the following calendar year. Such distributions will be
taxable to stockholders in the calendar year the distributions are
declared, rather than the calendar year in which the distributions
are received.
Distributions from investment company taxable income are
taxable to stockholders as ordinary income. Distributions of net
capital gains designated by the Fund as capital gains dividends are
taxable as long-term capital gains regardless of the length of time
a stockholder may have held shares of the Fund. The tax treatment
of distributions treated as ordinary income or capital gains will be
the same whether the stockholder reinvests the distributions in
additional shares or elects to receive them in cash.
<PAGE>
Stockholders will be notified each year of the amounts and
nature of dividends and distributions, including the amount (if any)
for that year that has been designated as capital gains distributions.
Investors should consult their tax advisers for specific information
on the tax consequences of particular types of distributions.
As a means of earning additional income, the Fund may write
covered options on the securities in its portfolio.
Upon the sale, redemption, or other disposition of shares of the
Fund, a stockholder generally will realize a taxable gain or loss
depending upon his basis in the shares. Such gain or loss will be
treated as a capital gain or loss if the shares are capital assets in the
stockholder's hands and generally will be long-term or short-term,
depending upon the stockholders's holding period for the shares.
Any loss realized as the result of sale or exchange will be
disallowed to the extent that the shares disposed of are replaced
(including shares acquired pursuant to the reinvestment plan)
within a period of 61 days, beginning 30 days before and ending 30
days after the shares are disposed of. In such a case, the basis of
the shares acquired will be adjusted to reflect the disallowed loss.
Any loss realized by a stockholder on a disposition of Fund shares
held by the stockholder for six months or less will be treated as a
long-term capital loss to the extent of any capital gains dividends
received by the stockholder with respect to such shares.
The Fund may be required to withhold Federal income tax at the
rate of 31% of all taxable distributions (including gross proceeds
from the redemption of Fund shares) payable to stockholders who
fail to provide the Fund with their correct taxpayer identification
number, or to make required certifications, or where the Fund or
the stockholder has been notified by the Internal Revenue Service
that the stockholder is subject to backup withholding. Corporate
stockholders and certain other stockholders specified in the Code
generally are exempt from such backup withholding. Backup
withholding is not an additional tax. Any amounts withheld may be
credited against the stockholder's Federal income tax liability.
REDEMPTION AND REPURCHASE OF SHARES
Generally, stockholders may require the Fund to redeem their
shares by sending a written request, signed by the record owner(s),
to The Internet Fund, Inc., 344 Van Buren Street,North Babylon, NY
11704. In addition, certain expedited redemption methods
described below are available. The written request with the
stockholder's signature guaranteed by an "eligible guarantor
institution" as defined in Rule 17Ad-15 under the Securities
Exchange Act of 1934. Eligible guarantor institutions include
banks, brokers, dealers, credit unions, national securities
exchanges, registered securities associations, clearing agencies,
and savings associations. A broker-dealer guaranteeing signatures
must be a member of a clearing corporation or maintain net capital
of at least $100,000. Credit unions must be authorized to issue
signature guarantees. Signature guarantees will be accepted from
any eligible guarantor institution that participates in a signature
guarantee program. No signature guarantees for shares for which
no certificates have been issued are required when an application
is on file at the Transfer Agent. However, if the proceeds of the
redemption are to be paid to someone other than the registered
holder, or to other than the stockholder's address of record, or if
the shares are to be transferred, the owner's signature must be
guaranteed as specified above. The redemption price shall be the
net asset value per share next computed after receipt of the
redemption request. See "Determination of Net Asset Value."
<PAGE>
The Fund reserves the right to pay any portion of a redemption
request in excess of $500,000 in readily marketable securities
from the Fund's portfolio. In this case, the stockholders may incur
brokerage charges on the sale of the securities.
The right of redemption and payment of redemption proceeds
are subject to suspension for any period during which the New
York Stock Exchange is closed, other than customary weekend and
holiday closings, or when trading on the New York Stock
Exchange is restricted as determined by the Securities and
Exchange commission; during any period when an emergency as
defined by the rules and regulations of the Securities and Exchange
Commission exists; or during any period when the Securities and
Exchange Commission has by order permitted such suspension.
The Fund will not mail redemption proceeds until checks
(including certified checks or cashier's checks) received for the
shares purchased have cleared, which can be as long as 15 days.
The value of shares on repurchase or redemption may be more
or less than the investor's cost depending upon the market value of
the Fund's portfolio securities at the time of redemption.
DETERMINATION OF NET ASSET VALUE
The net asset value per shares is computed daily, Monday
through Friday, as of the close of regular trading on the New York
Stock Exchange, which is currently 4:00 p.m., Eastern time, except
that the net asset value will not be computed on the following
holidays: New Year's Day, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
and Christmas Day. The Fund's net asset value also will be
determined on any day in which there is sufficient trading in its
portfolio securities that the net asset value might be affected
materially, but only if on any such day the Fund is required to sell
or redeem shares. The net asset value per share is computed by
dividing the value of the securities held by the Fund plus any cash
or other assets (less accrued expenses) by the total number of the
Fund's shares outstanding at such time. The net asset value so
computed will be used for all purchase orders and redemption
requests received between such computation and the preceding
computation.
To the extent sales prices are available, securities that are traded
on a recognized stock exchange are valued at the last sale price on
that exchange prior to the time when assets are valued or prior to
the close of trading on the New York Stock Exchange. In the event
that there are no sales, the last available sale price will be used. If
a security is traded on more than one exchange, the Administrator
will use the latest price on the exchange where the stock is
primarily traded. If there is no sale that day or if the security is not
listed, the security is valued at its last sale quotation. The
calculation of the Fund's net asset value per share may not take
place contemporaneously with the times noted above for
determining the prices of certain of the Fund's portfolio securities,
including foreign securities. If an event materially effecting the
value of such securities occured between the time when their prices
are determined and the time the Fund's net asset value is
calculated, such securities will be valued at fair value as
determined in good faith by the directors. Also, for any security for
which application of the preceding methods of valuation results in
a price for a security that is deemed not to be representative of the
market value of such security, the security will be valued at fair
value in the best judgment of the Administrator under the
supervision and responsibility of the Board of Directors.
<PAGE>
Call option contracts written on portfolio securities will be
priced at the latest sales price on the principal exchange on which
such options are normally traded or, if there have been no sales on
such exchange on that day, at the closing asked price. Short-term
investments having a maturity of 60 days or less are valued on the
basis of amortized cost. All other assets and securities held by the
Fund (including restricted securities) are valued at fair value as
determined in good faith by the Administrator under the
supervision and responsibility of the Board of Directors.
STOCKHOLDER SERVICES
The Internet Fund, Inc., provides its stockholders with a number
of services and conveniences designed to assist investors in the
management of their investments. These stockholder services
include the following:
Tax-Deferred Retirement Plans
Individual Retirement Accounts (for individuals who wish to
make limited contributions, which may be tax deductible in certain
circumstances, to a tax-deferred account for retirement).
Dividends and distributions will be automatically reinvested
without a sales charge. For further details, including fees charged,
tax consequences, and redemption information, see the specific
plan documents, which can be obtained from the Fund.
Investors should consult with their tax adviser before
establishing any of the tax-deferred retirement plans described
above.
<PAGE>
GENERAL INFORMATION
The Internet Fund, Inc., was incorporated in the State of New York
on March 20,1996, as an open-end diversified management
investment company, as defined in the Investment Company Act
of 1940, as amended. Its authorized capitalization currently
consists of ten million full and fractional shares of Common Stock,
$0.001 value per share. The Articles of Incorporation of the Fund
authorize the Board of Directors to classify or reclassify any
unissued shares of the Fund into one or more additional classes by
setting or changing in any one or more respects, from time to time
before the issuance thereof, their respective preferences,
conversion or other rights, voting powers, restrictions, limitations
as to dividends, qualification and terms and conditions of
redemption. All Fund shares are of the same class, with equal
rights and privileges. The Articles of Incorporation further
authorize the directors to classify or reclassify in a similar manner
any particular class of Fund shares into one or more series.
Stockholders are entitled to one vote for each full Fund share held
and fractional votes for fractional Fund shares held. Each Fund
share is entitled to participate equally in any dividend or
distribution declared by the Fund's Board of Directors and in the
net distributable assets of the Fund on liquidation. Fund shares
have no preemptive, conversion, or exchange rights. When issued
for payment as described in this Prospectus, Fund shares will be
fully paid and nonassessable. Fund share have noncumulative
voting rights and, accordingly, the holders of more than 50% of the
Fund's outstanding shares may elect all of the directors. The Fund
is not required to hold regular annual meetings, and will do so only
when required by law. Stockholders may, in accordance with the
By-Laws of the Fund, cause a meeting of stockholders to be held
for the purpose of voting on the removal of directors.
The Fund's securities are held by UMB Bank of Kansas City, MO.
Inquiries by stockholders of the Fund should be addressed to the
Fund at the address stated on the cover page of this Prospectus.
<PAGE>
SHARE PURCHASE APPLICATION
Please make checks payable to:The Internet Fund, Inc.
344 Van Buren Street
North Babylon, NY 11704
Amount of Investment attached $ (Minimum purchase $1,000)
All applications are accepted in New York and under New York laws.
Instructions
Fill in where applicable
Do not use this form to open an IRA account
- -----------------------------------------------------------------------------
Individual
Use Line 1
1. Individual
First Name Initial Last Name Social Security Number
- -----------------------------------------------------------------------------
Joint Account
Use Lines 1 and 2
2. Joint Tenant
First Name Initial Last Name Social Security Number
- -----------------------------------------------------------------------------
Gift to Minors
Use Line 3
3. Uniform Gift to Minors
Custodian's Name (Only one allowed by law) Minor's State of Residence
Minor's Name (Only one allowed by law) Minor's Social Security Number
- --------------------------------------------------------------------------------
Other
(Corporations, Trusts,
Plans, Associations and
Partnerships)
Use Line 4
4. Tax Identification Code
Full Address
Number and Street City State Zip Code
- --------------------------------------------------------------------------------
Citizen of: United States Other (Specify)
- --------------------------------------------------------------------------------
Home Telephone No. Busines Telephone No.
- --------------------------------------------------------------------------------
Signature Date
Individual (or Custodian) Corporate Officer or Trustee
Joint Tenant ( if any) Title of Corporate Officer or Trustee
The undersigned certify that I / we have full authority and legal capacity to
purchase shares of the Fund and affirm that I / we have received a current
Prospectus for the Interent Fund and agree to be bound by its terms.
DIVIDEND DIRECTION
Reinvest all distributions Pay in cash
- --------------------------------------------------------------------------------
<PAGE>
Form W-9
(October 1983)
Department of Treasury
Internal Revenue Service
Name as shown on account (if joint account, give joint owner's name)
Address
City, State and Zip code
Part I. - Taxpayer Identification Number Part II. -
Backup
Witholding
Enter the taxpayer identification number in the OR
appropriate box. For most individual taxpayers,
this is the social security number.
Certification. - Under the penalties of perjury, I certify that the
information provided on this form is true, correct and complete
Signature: Date:
- -------------------------------------------------------------------------------
THE INTERNET FUND, INC.
344 Van Buren Street,
North Babylon, NY 11704
(516) 893-4200
(888) FUND-WWW
March 9, 1998
STATEMENT OF ADDITIONAL INFORMATION
This Statement is not a prospectus but should be read in conjunction
with the Fund's current Prospectus dated March 9,1996. To obtain the
Prospectus, please write the Fund or call either of the telephone numbers
that are shown above.
The Internet Fund, Inc. (the "Fund") is a diversified, open-end
management investment company. The Fund's primary investment
objective is long-term growth of capital, a goal it seeks by investing
primarily in the common stocks and securities convertible into common
stocks of domestic and foreign companies engaged in the Internet and
Internet-related activities. Current income is a secondary objective. No
assurance can be given that the Fund will realize its objectives. The
Prospectus sets forth certain information about The Internet Fund, Inc., that
a prospective investor should know before investing. Investors should read
and retain this Prospectus for future reference.
<PAGE>
THE INTERNET FUND, INC.
THE FUND. . . . . . . . . . . . . . . . . . . . . . . . . .2
INVESTMENT OBJECTIVES AND POLICIES. . . . . . . . . . . . .2
OTHER INVESTMENTS AND INVESTMENT PRACTICES. . . . . . . . .3
INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . .5
INVESTMENT ADVISER. . . . . . . . . . . . . . . . . . . . .6
OFFICERS AND DIRECTORS OF THE FUND. . . . . . . . . . . . .7
CAPITALIZATION. . . . . . . . . . . . . . . . . . . . . . .8
PURCHASING SHARES . . . . . . . . . . . . . . . . . . . . .8
RETIREMENT PLANS. . . . . . . . . . . . . . . . . . . . . .9
REDEMPTION OF SHARES. . . . . . . . . . . . . . . . . . . 10
BROKERAGE . . . . . . . . . . . . . . . . . . . . . . . . 10
TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . 11
THE FUND
The Internet Fund, Inc. (also referred to as the "Fund" was incorporated
in New York on March 20, 1996. The Fund's registered office is in
North Babylon, NY; mail may be addressed to 344 Van Buren Street,
North Babylon, NY 10591.
INVESTMENT OBJECTIVES AND POLICIES
The Fund's primary investment objective is long-term growth of capital,
a goal it seeks by investing primarily in common stocks and securities of
domestic companies engaged in the Internet and Internet-related activities
or services. Current income is a secondary objective. No assurance can be
given that the Fund will realize its objectives. See "Taxes."
Except during temporary defensive periods, not less than 80% of the
Fund's total assets will be invested in the securities of companies
engaged in Internet and Internet-related activities, and, except during
temporary defensive periods, the Fund would normally expect at least 90%
of its total assets to be so invested. As a diversified investment company,
at least 75% of the Fund's total assets are required to be invested in
securities limited in respect of any one issuer to not more than 5% of the
Fund's total assets and to not more than 10% of the issuer's voting
securities.
The Adviser believes that favorable investment opportunities are offered
by companies that provide products or services designed for the Internet.
The Internet is a global 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. The Adviser believes that the
dramatic growth of Internet activity will provide many investment
opportunities. Accordingly, the Fund seeks to invest in common stock, and
other securities, of companies whose research and development efforts, in
the opinion of the Adviser, may result in higher stock values.
<PAGE>
An important yardstick the Adviser employs in making portfolio
selections, in addition to evaluating trends in corporate revenues, earnings,
and dividends, is the amount of capital currently being expended on
research and development, and the nature thereof. The Adviser believes
that dollars invested in research and development today frequently have
significant bearing on future growth.
Portfolio securities generally will be selected from companies in the
following groups:
Internet Access Providers - Companies that provide users with access
to the Internet.
Software Developers - Companies that develop software tools to access
the Internet, to facilitate information distribution and gathering, to secure
Internet-based transactions, etc.
Hardware Manufactures - Companies that develop and manufacture
communication equipment, such as modems, switches, and routers, used to
access the Internet, and those that develop and manufacture workstations
and personal computers used to access the Internet and provide Internet
services.
Content Developers - Companies that supply information and
entertainment content, such as games, music, and video, on the Internet.
Publishing Companies - Companies that provide information about the
Internet through publication of books, magazines, and newspapers.
OTHER INVESTMENTS AND INVESTMENT
PRACTICES
Due to the changing nature of the Internet, the national economy and
market conditions, the Fund may, as a temporary defensive measure, invest
without limitation as to the amount in money market securities with a rating
of A2-P2 or higher.
In order to have funds available for redemption and investment
opportunities, the Fund may also hold a portion of its portfolio in cash or
U.S. short-term money market instruments. Certificates of deposit
purchased by the Fund 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 Fund will be guaranteed by U.S. or foreign banks having
total assets at the time of purchase in excess of $1 billion. The Fund
anticipates that not more than 10% of its total assets will be so invested in
money market instruments or held in cash at any given time, except when
the Fund is in a temporary defensive posture. The Fund may invest in debt
securities convertible into common stocks. Debt purchased by the Fund 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.
<PAGE>
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" of the Statement of Additional
Information" for a description of debt security ratings.
The fixed-income securities in which the Fund 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
Fund assets invested in unrated or lower-grade securities, while intended
to increase the yield produced by those assets, also will 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 Fund 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 Fund is not required to dispose of debt securities whose
ratings are downgraded below these ratings subsequent to the Fund's
purchase of the securities. Relying in part on ratings assigned by credit
agencies in making investments will not protect the Fund from the risk that
fixed-income securities in which the Fund invests will decline in value,
since credit ratings represent evaluations of the safety of principal, and
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 Fund have more than 5% of its total assets invested
in any fixed-income securities that are unrated or are rated below
investment grade either at the time of purchase or as a result of a reduction
in rating after purchase.
In order to qualify for the beneficial tax treatment afforded regulated
investment companies, and to be relieved of Federal tax liabilities, the Fund
must distribute substantially all of its net income to stockholders generally
on an annual basis. Thus, the Fund may have to dispose of portfolio
securities under disadvantageous circumstances to generate cash or borrow
cash in order to satisfy the distribution requirement.
<PAGE>
The Fund does 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.
INVESTMENT RESTRICTIONS
The Fund is subject to certain investment restrictions described here,
which may be changed only with the approval of the holders of a majority
of the Fund's outstanding shares.
1. The Fund will not act as underwriter for securities of other
issuers except insofar as the Fund may be deemed an
underwriter in selling its own portfolio securities.
2. The Fund will not make loans. The purchase of a portion of a
readily marketable issue of publicly distributed bonds,
debentures or other debt securities will not be considered the
making of a loan.
3. With respect to 75% of its total assets, the Fund will not invest
more than 5% of its assets in the securities of any one issuer
(except securities issued or guaranteed by the U.S. Government,
its agencies, and instrumentalities).
4. With respect to 75% of its total assets, the Fund will not invest
in the securities of any issuer if as a result the Fund holds more
than 10% of the outstanding securities or more than 10% of the
outstanding voting securities of such issuer.
5. The Fund will not borrow money or pledge, mortgage, or
hypothecate its assets except to facilitate redemption requests
that might otherwise require untimely disposition of portfolio
securities and then only from banks and in amounts not
exceeding the lesser of 10% of its 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 Fund may enter into futures contracts and related options.
6. The Fund will not invest more than 10% of the value of its net
assets in illiquid securities, restricted securities, and other
securities for which market quotations are not readily available.
7. The Fund will not invest in the securities of any one industry,
except the Internet and Internet-related industries (and except
securities issued or guaranteed by the U.S. Government, its
agencies, and instrumentalities) if as a result more than 20% of
the Fund's total assets would be invested in the securities of
such industry. Except during temporary defensive periods, not
less than 80% of the Fund's total assets will be invested in the
securities of companies engaged in Internet and
Internet-related activities, and, except during temporary
defensive periods, the Fund would normally expect at least 90%
of its total assets to be so invested.
<PAGE>
8. The Fund 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 Fund may
purchase and sell securities of companies that deal in oil, gas,
or mineral exploration or development programs or interests
therein.
9. The Fund 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 Fund's portfolio securities will not constitute a violation of such
limitation.
INVESTMENT ADVISER
Kinetics Asset Management, Inc., is a New York corporation that acts
as an Investment Adviser to the Fund. Margaret B. Doyle is the president of
Kinetics Asset Management, Inc. Ms. Doyle has more than 28 years
experience in a variety of professional and managerial positions in the
software industry. Mr. Francis J. Alexander is an officer of Kinetics Asset
Management, Inc., and a portfolio manager. Mr. Alexander has more than
20 years of investment experience as a portfolio manager.
On December 20, 1997, the Board of the Directors of the Fund approved a
management and advisory contract with the Kinetics Asset Management,
Inc. This Agreement will continue on a year-to-year basis provided that
specific approval is voted at least annually by the Board of Directors of the
Fund or by the vote of the holders of a majority of the outstanding voting
securities of the Fund, but, in either event, it must also be approved by a
majority of the directors of the Fund who are neither parties to the
agreement nor interested persons as defined in the Investment Company
Act of 1940 at a meeting called for the purpose of voting on such approval.
Under the Agreement, Kinetics Asset Management, Inc., will furnish
investment advice to the Directors of the Fund on the basis of a continuous
review of the portfolio and recommend to the Fund when and to what
extent securities should be purchased or disposed. The Agreement may be
terminated at any time, without the payment of any penalty, by the Board
of Directors or by vote of a majority of the outstanding voting securities of
the Fund. Ultimate decisions as to the investment policy and as to
individual purchases and sales of securities are made by the Fund's officers
and directors. For these services the Fund has agreed to pay to Kinetics
Asset Management, Inc., a fee of 1.25% per year on the net assets of the
Fund. All fees are computed on the average daily closing net asset value of
the Fund and are payable monthly. The fee is higher than the fee paid by
most other funds. Not withstanding, the Investment Advisor has agreed to
absorb all expenses incurred by the Fund until 15 days after the date the
Fund became operational.
<PAGE>
Pursuant to its contract with the Fund, the Investment Advisor is
required to render research, statistical, and Advisory services to the Fund;
to make specific recommendations based on the Fund's investment
requirements; and to pay the salaries of those of the Fund's employees who
may be officers or directors or employees of the Investment Advisor. Fees,
if any, of the custodian, registrar, and transfer agents shall be paid by the
Fund. The Fund pays all other expenses, including fees and expenses of
directors not affiliated with the Advisor; legal and accounting fees; interest,
taxes, and brokerage commissions, record keeping and the expense of
operating its offices. The Investment Advisor has paid the initial
organizational costs of the Fund and will reimburse the Fund for any and
all losses incurred because of purchase reneges.
OFFICERS AND DIRECTORS OF THE FUND
Officers and directors of the Fund, together with their addresses and
principal occupations during the past five years, are:
Name and Address Position Principal Occupation Past Compensa-
Five Years tion
Margaret B. Doyle President President $0
48 gamecock Lane Interested Director The Internet Fund, Inc.
Babylon, NY 11702 Treasurer Retired Superintendent
North Babylon UFSD
Francis J. Alexander Vice President Vice President $0
270 Greenwich Ave. Interested Director Portfolio manager
Greenwich, CT 06830 Secretary The Internet Fund, Inc.
Portfolio Manager
Alexander Capital
Management, Inc.
Murray Stahl Non-interested President $0
342 Madison Avenue Director Horizon Asset Management
New York, NY 10017
Kathleen Campbell Non-interested Councellor-at-Law $99
13 Elm Road Director
Scarsdale, NY 10583
Douglas Cohen, CPA Non-interested Certified Public Accountant $99
86 Samuel Street Director
Ponkonkoma, NY 11779
A total of $297 has been paid in 1996 to officers and directors of the Fund to
compensate for travel expenses associated with their Fund duties.
The fund does not compensate its officers and directors who are
affiliated with the Investment Adviser except as they may benefit through
payment of the Advisory fee.
CAPITALIZATION
Description of Common Stock: The authorized capitalization of the
Fund consists of 10,000,000 shares of common stock of $0.001 par value
per share. Each share has equal dividend, distribution, and liquidation
rights. There are no conversion or preemptive rights applicable to any
shares of the Fund. All shares issued are fully paid and non-accessible.
Voting Rights: Each holder of common stock has one vote for each
share held. Voting rights are non-cumulative, which means that the holders
of a majority of shares of common stock can elect all directors of the Fund
if they so choose, and the holders of the remaining shares will not be able
to elect any person as a director.
PURCHASING SHARES
Shares of the Fund are sold in a continuous offering and may be
purchased on any business day though authorized investment dealers or
directly from the Fund's Distributor. Except for the Fund itself, only the
Distributor and investment dealers that have a sales agreement with the
Distributor are authorized to sell shares of the Fund. For further
information, reference is made to the caption "Distributor" in the Fund's
Statement of Additional Information.
<PAGE>
Shares of the Fund are sold at net asset value, without a sales charge,
and will be credited to a stockholder's account at the net asset value next
computed after an order is received. The minimum initial investment is
$1,000, and the minimum investment for subsequent purchases is $100.
The Fund does not intend to issue stock certificates representing shares
purchased. The Fund's management reserves the right to reject any
purchase order if, in its opinion, it is in the Fund's best interest to do so.
An account may be opened by mailing a check or other negotiable bank
draft (payable to The Internet Fund, Inc.) for $1,000 or more together with
the completed investment application form to the Fund. Subsequent
investments in the amount of $100 or more may be mailed directly to the
Fund. All such investments are effected at the net asset value of Fund
shares next computed following receipt of payment by the Fund.
Confirmations of the opening of an account and of all subsequent
transactions in the account are forwarded by the Fund to the stockholder's
address of record.
At various times the Distributor may implement programs under which
a dealer's sales force may be eligible to win nominal awards for certain
sales efforts or recognition program conforming to criteria established by
the Distributor, or participate in sales programs sponsored by the
Distributor. In addition, the Adviser, the Administrator, and/or the
Distributor in their discretion may from time to time, pursuant to objective
criteria established by the Adviser, the Administrator, and/or the
Distributor, sponsor programs designed to reward selected dealers for
certain services or activities that are primarily intended to result in the sale
of shares of the Fund. These program will not change the price you pay for
your shares or the amount that the Fund will receive from such sale.
Payment for all orders to purchase Fund shares must be received by the
Fund's Transfer Agent within three business days after such orders are
placed.
Investing Through Authorized Dealers
If any authorized dealer receives an order of at least $1,000, the dealer
may contact the Fund directly. Orders received by dealers by the close of
trading on the New York Stock Exchange on a business day that are
transmitted to the Fund by 4:00 p.m. EST on that day will be effected at the
net asset value per share determined as of the close of trading on the New
York Stock Exchange on that day. Otherwise, the orders will be effected at
the next determined net asset value. It is the dealer's responsibility to
transmit orders so that they will be received by the Distributor before 4:00
p.m. EST.
After each investment, the stockholder and the authorized investment
dealer will receive confirmation statements of the number of shares
purchased and owned.
<PAGE>
Telephone Purchase Authorization (Investing by Phone)
Stockholders who have completed the Telephone Purchase
Authorization section of the Investment Application Form may purchase
additional shares by telephoning the Fund at (516) 893-4200, or toll-free at
(888) FUND-WWW. The minimum telephone purchase is $100 and the
maximum is the greater of $100 or three times the net asset value of shares
(for which certificates have not been issued) held by the stockholder on the
day preceding such telephone purchase for which payment has been
received. The telephone purchase will be effected at the net asset value
next computed after receipt of the call by the Fund. Payment for the
telephone purchase must be received by the Fund within three business
days after the order is placed. If payment is not received within three
business days after the order is placed, the stockholder will be liable for all
losses incurred as a result of the purchases.
RETIREMENT PLANS
Individual Retirement Account: Persons who earn compensation and are
not active participants (and who do not have a spouse who is an active
participant) in an employer maintained retirement plan may establish
Individual Retirement Accounts (IRA) using Fund shares. Annual
contributions, limited to the lesser of $2,000 or 100% of compensation, are
tax deductible from gross income to the degree permitted by the Internal
Revenue Service's regulations. This IRA deduction is also retained for
individual taxpayers and married couples with adjusted gross incomes
within certain specified limits. All individuals may make nondeductible
IRA contributions to separate accounts to the extent that they are not
eligible for a deductible contribution.
Earnings under the IRA are reinvested and are tax-deferred until
withdrawals begin. The maximum annual contribution may be increased to
$2,250 if you have a spouse who earns no compensation during the taxable
year. A separate and independent spousal IRA must be maintained.
You may begin to make non-penalty withdrawals as early as age 59
or as late as age 70. In the event of death or disability, withdrawals may
be made before age 59 without penalty.
A Disclosure Statement is required by U.S. Treasury Regulations. This
Statement describes the general provisions of the IRA and is forwarded to
all prospective IRAs. There is no fee to open and there is a $10 annual fee
charged to maintain an Internet Fund IRA. All IRAs may be revoked within
7 days of their establishment with no penalty.
REDEMPTION OF SHARES
The Fund will redeem all or any part of the shares of any shareholder
who tenders a request for redemption. In either case, proper endorsements
guaranteed either by a national bank or a member firm of the New York
Stock Exchange will be required unless the shareholder is known to
management.
<PAGE>
The redemption price is the net asset value per share next determined
after notice is received by the Fund for redemption of shares. The proceeds
received by the shareholder may be more or less than his cost of such
shares, depending upon the net asset value per share at the time of
redemption and the difference should be treated by the shareholder as a
capital gain or loss for federal income tax purposes.
Payment by the Fund will ordinarily be made within three business days
after tender. The Fund may suspend the right of redemption or postpone the
date of payment if: The New York Stock Exchange is closed for other than
customary weekend or holiday closings, or when trading on the New York
Stock Exchange is restricted as determined by the Securities and Exchange
Commission or when the Securities and Exchange Commission has
determined that an emergency exists, making disposal of fund securities or
the valuation of net assets not reasonably practicable. The Fund intends to
make payments in cash; however, the Fund reserves the right to make
payments in kind.
BROKERAGE
The Fund requires all brokers to effect transactions in portfolio
securities in such a manner as to get prompt execution of the orders at the
most favorable price.
The Fund selects brokers who, in addition to meeting primary
requirements of execution and price, may furnish statistical or other factual
information and services, which, in the opinion of the management, are
helpful or necessary to the Fund's normal operations. Information or
services may include economic studies, industry studies, statistical analysis,
corporate reports, or other forms of assistance to the Fund or its Adviser.
No effort is made to determine the value of these services or the amount
they might have reduced expenses of the Adviser.
Other than set forth above, the Fund has no fixed policy, formula,
method, or criteria that it uses in allocating brokerage business to brokers
furnishing these materials and services. The Board of Directors evaluates
and reviews the reasonableness of brokerage commissions paid
semiannually.
TAXES
Under provisions of Sub-Chapter M of the Internal Revenue Code of
1986 as amended, the Fund, by paying out substantially all of its investment
income and realized capital gains, has been and intends to continue to be
relieved of federal income tax on the amounts distributed to shareholders.
In order to qualify as a "regulated investment company" under Sub-Chapter
M, at least 90% of the Fund's income must be derived from dividends,
interest and gains from securities transactions, no more than 30% of the
Fund's profits may be derived from sales of securities held less than three
months, and no more than 50% of the Fund's assets may be in security
holdings that exceed 5% of the total assets of the Fund at the time of
purchase.
<PAGE>
Distribution of any net long-term capital gains realized by the Fund will
be taxable to the shareholder as long-term capital gains, regardless of the
length of time Fund shares have been held by the investor. All income
realized by the Fund, including short-term capital gains, will be taxable to
the shareholder as ordinary income. Dividends from net income will be
made annually or more frequently at the discretion of the Fund's Board of
Directors. Dividends received shortly after purchase of shares by an
investor will have the effect of reducing the per share net asset value of his
shares by the amount of such dividends or distributions and, although in
effect a return of capital, are subject to federal income taxes.
The Fund is required by federal law to withhold 31% of reportable
payments (which may include dividends, capital gains, distributions, and
redemptions) paid to shareholders who have not complied with IRS
regulations. In order to avoid this withholding requirement, you must certify
on a W-9 tax form supplied by the Fund that your Social Security or
Taxpayer Identification Number provided is correct and that you are not
currently subject to back-up withholding, or that you are exempt from back-
up withholding.
<PAGE>
THE INTERNET FUND, INC.
REPORT ON AUDIT OF FINANCIAL STATEMENTS
REPORT ON EXAMINATION OF SECURITIES PURSUANT TO RULES
UNDER THE 1940 ACT
REPORT ON INTERNAL CONTROL
DECEMBER 31, 1997
Lilling & Co.
Certified Public Accountants
Ten Cutter Mill Road
Great Neck, NY 11021
INDEPENDENT AUDITORS' REPORT
To the Shareholders and
Board of Directors
The Internet Fund, Inc.
We have audited the accompanying statement of assets and liabilities of The
Internet Fund, Inc. including the schedule of portfolio investments, as of
December 31, 1997, and the related statements of operations, changes in net
assets, and cash flows for the period from December 31, 1996
to December 31, 1997. These financial statements and per share
data are the responsibility of the Fund's management. Our responsibility is
to express an opinion on these financial statements and per share data and
ratios based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether financial statements and per share
data are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1997, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements and selected per share data referred
to above present fairly, in all material respects, the financial position of
The Internet Fund, Inc. as of December 31, 1997, the results of its operations
and its cash flows, the changes in its net assets, and the selected per share
data for the period indicated above, in conformity with generally accepted
accounting principles.
CERTIFIED PUBLIC ACCOUNTANTS
February 22, 1998
<PAGE>
REPORT ON EXAMINATION OF SECURITIES PURSUANT TO
RULES UNDER THE 1940 ACT
To The Board of Directors of
The Internet Fund, Inc.
We have examined the investment accounts shown by the books and records of
The Internet Fund, Inc. for the period from December 31, 1996
to December 31, 1997. It is
understood that this report is solely for the use of management and the
Securities and Exchange Commission and should not be used for any other
purpose.
Securities owned as of the close of business on December 31,1997, shown by the
books and records audited by us, which we counted and inspected, were located
in the vault of The Bank of New York, Tarrytown, New York, except for
securities purchased but not received on that date, as to which we obtained
confirmation from the brokers, and transfer agents, respectively.
Because the above procedures do not constitute an audit in accordance with
generally accepted auditing standards, we do not express an opinion on the
investment accounts referred to above. In connection with the procedures
referred to above, no matters came to our attention that caused us to believe
that the specified accounts should be adjusted. Had we performed additional
procedures or had we audited the financial statements in accordance with
generally accepted auditing standards, matters might have come to our
attention that would have been reported to you. This report relates
only to the investments specified above and does not extend to any financial
statements of The Internet Fund, Inc. taken as a whole.
CERTIFIED PUBLIC ACCOUNTANTS
February 22, 1998
<PAGE>
INDEPENDENT AUDITORS REPORT ON INTERNAL CONTROL
Board of Directors
The Internet Fund, Inc.
In planning and performing our audit of the financial statements of The
Internet Fund, Inc. for the year ended December 31, 1997, we considered its
internal control structure, including procedures for the purpose of expressing
our opinion on the financial statements and to comply with the requirements
of Form N-SAR, not to provide assurance on the internal control structure.
The management of The Internet Fund, Inc. is responsible for establishing and
maintaining and internal control structure. In fulfilling this responsibility,
estimates and judgements by management are required to assess the expected
benefits and related costs of internal control structure policies and
procedures. Two of the objectives of an internal control structure are to
provide management with reasonable, but not absolute, assurance that assets
are safeguarded against loss from unauthorized used or disposition and
transactions are executed in accordance with management's authorization and
recorded properly to permit preparation of financial statements in conformity
with generally accepted accounting principles.
Because of inherent limitations in any internal control structure, errors or
irregularities may occur and may be detected. Also, projection of any
evaluation of the structure to future periods is subject to the risk that it
may become inadequate because of changes in conditions or that the
effectiveness of the design and operation may deteriorate.
Our consideration of the internal control structure would not necessarily
disclose all matters in the internal control structure that might be material
weaknesses under standards established by the American Institute of Certified
Public Accountants. A material weakness is a condition which the design or
operation of the specific internal control structure elements does not reduce
to a relatively low level the risk that errors or irregularities in amounts
that would be material in relation to the financial statements being audited
may occur and not be detected within a timely period by employees in the
normal course of performing their assigned functions.
However, we noted no matters involving the internal control structure,
including procedures for safeguarding securities, that we consider to be
material weaknesses as defined above as of December 31, 1997.
This report is intended solely for the information and use of management and
the Securities and Exchange Commission.
Certified Public Accountants
February 22, 1998
<PAGE>
THE INTERNET FUND, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization
The Internet Fund, Inc. (the "Fund") is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The financial statements have been prepared in conformity with generally
accepted accounting principles which permit management to make certain
estimates and assumptions at the date of the financial statements.
Significant accounting policies of the Fund are as follows:
Security valuations
The Fund values securities for which exchange quotations are readily available
at the last recorded sales price, or if the security is not traded on an
exchange, at the closing bid price. Short term investments are valued at cost,
approximating market value.
Income taxes
The Fund's policy is to comply with the requirements of the Internal Revenue
Code that are applicable to regulated investment companies and to distribute
all of its taxable income to its shareholders. Therefore, no provision for
income taxes will be required.
2. CAPITAL SHARES TRANSACTIONS
Transactions in capital stock as of December 31, 1997 are as follows:
Capital Paid in
Stock Capital Total
Shares issued
(24,844) $ 24 $132,611 $132,635
Shares redeemed ( 20) (102,430) (102,450)
(20,000)
Net increase $ 4 $ 30,181 $ 30,185
<PAGE>
THE INTERNET FUND, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
3. FEES AND OTHER RELATED PARTY TRANSACTIONS
The Fund has entered into an investment advisory agreement with Kinetics
Asset Management, Inc. (Kinetics), whereby Kinetics will receive management
and administration fees. Ms. Margaret B. Doyle, the president of the Fund,
is also the president of Kinetics.
<PAGE>
THE INTERNET FUND, INC.
INVESTMENTS IN SECURITIES
DECEMBER 31, 1997
Shares Value
Common Stocks
Computer Related, 94.3%
Amati Communications Corp. 500 $ 9,844
Ascend Communications, Inc. 100 2,456
Axent Technologies Inc. 100 1,700
CMG Information Services, Inc. 100 11,900
CNET Inc 100 2,875
Cendant Corporation 300 10,237
Cisco systems, Inc. 150 8,362
Cybercash, Inc. 100 1,250
First Virtual Holdings, Inc. 300 882
Information Resource Engineer'g, Inc 300 1,744
Lycos, Inc. 125 5,125
Mecklermedia Corp. 200 4,850
Microsoft Corp 100 12,919
Netopia, Inc. 100 4,600
Netscape Communications Corp. 200 4,850
Network Associates 100 5,268
Onsale, Inc. 300 5,363
Peapod Inc. 200 1,275
PSINET Inc. 1000 5,125
Raptor Systems, Inc. 300 3,919
Security Dynamics tech, Inc. 300 10,725
3D Labs Inc. 600 13,950
Verilink Corp. 100 600
Verity, Inc. 200 975
Yahoo!, Inc. 150 10,387
TOTAL COMMON STOCKS (Cost $137,254) $141,181
See notes to financial statements.
<PAGE>
THE INTERNET FUND, INC.
FINANCIAL HIGHLIGHTS AND RELATED RATIOS
YEARS ENDED DECEMBER 31, 1997
1997 1996
NET ASSET VALUE - BEGINNING $4.67 $ -
Income from investment operations:
Net investment income gain(loss) .01 ( .31)
Net unrealized gain (loss) .41 ( .32)
on securities
Total income (loss) from .26 ( .63)
investment operations
CAPITAL STOCK TRANSACTIONS
Net proceeds from sales of shares 5.33 5.30
Shares redeemed (4.95) -
.38 5.30
NET ASSET VALUE - END $5.31 $ 4.67
Total return .26 $( .63)
*-period from October 21, 1996 (date operations
commenced) to December 31, 1996
<PAGE>
THE INTERNET FUND,INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
ASSETS
Investments in securities (cost $137,254) $ 141,181
Cash 7,980
Due from clearing broker 593
$ 149,754
LIABILITIES
Net assets (equivalent to $5.31 per share
based on 28,202 shares outstanding,
10,000,000 shares authorized $.001 par value) $ 149,754
Composition of net assets
Shares of common stock $ 28
Paid in capital 157,107
Undistributed net income (loss) ( 3,398)
Net unrealized appreciation
of investments 3,927
NET ASSETS, DECEMBER 31, 1997 $ 149,754
<PAGE>
THE INTERNET FUND,INC.
STATEMENT OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997 and 1996
1997 1996*
Investment Income:
Interest income $ 325 $ 1,498
Expenses:
Operating expenses 128 9,043
Investment income(loss)net 197 ( 7,545)
Net Realized(Loss) (4,510)
securities transactions
Net change in unrealized
appreciation (depreciation)
of investments 11,701 ( 7,774)
Net gain(loss) on 7,191 ( 7,774)
investments
Net increase (decrease)
in net assets resulting
from operations 7,388 $( 15,319)
* -period from October 21, 1996
(date operations commenced) to December 31, 1996
<PAGE>
THE INTERNET FUND,INC.
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1997 AND 1996
1997 1996*
Increase (decrease) in net assets:
From Operations:
Net investment income (loss) $ 197 $( 7,545)
Net gain on investments 7,191 ( 7,774)
Net increase (decrease) in net assets 7,388 (15,319)
resulting from operations
From Share transactions:
Cash flows from financing activities:
Net proceeds from sales of shares 132,635 127,500
Net distributions to shareholders (102,450) -
Net increase in net assets derived from 30,185 127,500
Share transactions
NET INCREASE IN NET ASSETS 37,573 112,181
NET ASSETS - BEGINNING 112,181 -
NET ASSETS - END $ 149,754 $ 112,181
*-period from October 21, 1996 (date operations
commenced) to December 31,1996
<PAGE>
THE INTERNET FUND,INC.
STATEMENT OF OPERATIONS
PERIOD FROM OCTOBER 21, 1996 (DATE OPERATIONS COMMENCED)
TO DECEMBER 31, 1996
Investment Income:
Interest income $ 1,498
Expenses:
Professional fees 1,250
Registration and filing fees 6,095
Other operating expenses 1,698
9,043
Investment income (loss) - net ( 7,545)
Net change in unrealized depreciation
of investments ( 7,774)
Net gain (loss) on investments ( 7,774)
Net increase (decrease) in net assets
resulting from operations $( 15,319)
See notes to financial statements.
<PAGE>
FORM N-1A
PART C - OTHER INFORMATION
Contents Page #
1. Financial Statements & Exhibits ............................. 1
2. Control Persons ............................................. 1
3. Number of Shareholders ...................................... 1
4. Indemnification ............................................. 1
5. Activities of Investment Advisor ............................ 1
6. Principal Underwriters ...................................... 1
7. Location of Accounts & Records .............................. 1
8. Management Services ......................................... 1
9. Distribution Expenses ....................................... 1
10. Undertakings ................................................ 1
11. Auditor's Consent ........................................... 2
12. Signatures .................................................. 3
Exhibits
Reimbursement Agreements - Officers/Directors ................ 10 ii
-i-
<PAGE>
1. a. Financial Statements - Condensed financial information on a per share
basis is presented in Part A for 1997. All other financial statements are
presented in Part B. These include:
STATEMENT OF ASSETS AND LIABILITIES - DECEMBER 31, 1997
STATEMENT OF OPERATIONS - for period December 31, 1996 -December 31, 1997
STATEMENT OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DEC. 31, 1997
SCHEDULE OF INVESTMENTS IN SECURITIES DECEMBER 31, 1997
Financial Highlights - Decemeber 31, 1997
b. Exhibits
(3.i) Articles of Incorporation
(3.ii) By-Laws
(10.i) Investment Advisory Contract
(10.ii) Reimbursement Agreements with Officers and/or Directors
(99.1) Opinion of Counsel Concerning Fund Securities
All exhibits are incorporated by reference to post-effective amendment no. 25
of the Securities Act of 1933 except exhibit (10.ii) which is attached.
2. Control Persons - Not applicable
3. Number of Shareholders - There were 12 shareholders of the Internet
Fund, Inc. as of December 31, 1997.
4. Indemnification - Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to directors, officers & controlling
persons of the registrant, the registrant has been advised that, in the o-
pinion of the Securities and Exchange Commission, such indemnification is a-
gainst public policy as expressed in the Act and is, therefore, unenforce-
able. 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
director, officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, of-
ficer or controlling person in connection with the securities being register-
ed, the registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate jur-
isdiction 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.
5. Activities of Investment Advisor - Kinetics Asset Management's
activity at the present time is performance on its Investment Advisory Con-
tract currently effective with the Internet Fund, Inc.
6. Principal Underwriter - The Fund acts as its own underwriter.
7. Location of Accounts & Records -All fund records are held at corporate head-
quarters- 344 Van Buren Street,North Babylon,NY 11704,with the exception of
security certificates that are held at the custodian bank UMB Bank of
Kansas City, MO.
8. Not applicable
9. Distribution Expenses - The fund currently bears no distribution expenses.
10. Not applicable
- 1 -
<PAGE>
Lilling & Co.
Certified Public Accountants
Ten Cutter Mill Road
Great Neck, NY 11021
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the inclusion by reference in Post-Effective Amendment No. 36 to
the Registration Statement on Form N-1A of the Internet Fund,Inc of our report
dated Feb 22, 1998 on our examination of the Financial Statements of such
Company.We also consent to the reference to our firm in such Post-Effective
Ammendment.
Lilling & Co. (Signature)
February 22, 1998
- 2 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Invest-
ment Company Act of 1940, the Internet FUND, Inc. certifies that it
meets all of the requirements for effectiveness of this Registration Stat
ement and has duly caused this amendment to the Registration Statement to
be signed on its behalf by the undersigned,thereunto duly authorized,in
Town of Babylon, In the State of New York, on the day of March 8, 1998.
The Internet FUND, INC.
Margaret B. Doyle
President
<PAGE>
THE INTERNET FUND, INC.
Margaret B. Doyle,
President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
Name Title Signatures Date
Margaret B. Doyle President
Francis J. Alexander Vice President
Murray Stahl Non-interested
Director
Kathleen Campbell Non-interested
Director
Douglas Cohen, CPA Non-interested
Director
