Filed with the Securities and Exchange Commission on April 30, 1999
1933 Act Registration File No. 333-03147
1940 Act File No. 811-07595
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|
Pre-Effective Amendment No. |_|
Post-Effective Amendment No. 5 |X|
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |X|
Amendment No. 5 |X|
THE INTERNET FUND, INC.
-----------------------
(Exact Name of Registrant as Specified in Charter)
344 Van Buren Street, North Babylon, New York 11704
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (516) 893-4200
With copy to:
Margaret B. Doyle Elaine E. Richards, Esquire
344 Van Buren Street Firstar Mutual Funds Services, LLC
North Babylon, NY 11704 615 East Michigan Street, 2nd Floor
(Name and Address of Agent for Service) Milwaukee, Wisconsin 53202
It is proposed that this filing will become effective
|_| immediately upon filing pursuant to paragraph (b)
|X| on April 30, 1999 pursuant to paragraph (b)
|_| 60 days after filing pursuant to paragraph (a)(1)
|_| on ___________ pursuant to paragraph (a)(1)
|_| 75 days after filing pursuant to paragraph (a)(2)
|_| on ___________ pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
|_| This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
The Internet Fund, Inc.
Prospectus & Application
April 30, 1999
The Internet Fund's primary investment
objective is long-term growth of capital
with current income as a secondary
consideration. To achieve its objective,
the fund will invest in common stocks and
securities convertible into common stocks of domestic and foreign companies
engaged in the Internet and Internet-related activities.
This Prospectus gives vital information about the fund.
For your own benefit and protection, please read it before you invest,
and keep it on hand for future reference.
Investment Adviser
Kinetics Assets Management, Inc.
Minimum Initial Investment -- $1,000
The Securities and Exchange Commission has not approved or
disapproved these securities or passed upon the adequacy of
the prospectus. Any representation to the contrary is a criminal offense.
<PAGE>
TABLE OF CONTENTS
Fund Summary 1
Past Performance Information 2
Fund Expenses 3
Investment Objectives and Strategies 4
Management of the Fund 5
Distribution of Shares 6
Pricing of Fund Shares 6
How To Purchase Shares 7
How To Redeem Shares 8
Distribution and Taxes 10
Financial Highlights 12
Year 2000 Issue 13
<PAGE>
THE INTERNET FUND, INC.
Fund Summary
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Investment Objectives
The Internet 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. The fund seeks to obtain current
income as a secondary objective.
Principal Investment Strategies
The fund's strategy to achieve its goal is to invest in companies that provide
products or services designed for the Internet. The fund's investment adviser
believes that the Internet offers unique investment opportunities because of its
ever-growing popularity among business and personal users alike. The Internet is
a collection of connected computers that allows commercial and professional
organizations, educational institutions, government agencies and consumers the
ability to communicate electronically, access and share information and conduct
business around the world. Keeping that in mind, the fund invests in common
stock and other securities of companies whose research and development efforts
with respect to Internet usage may result in higher stock values.
Principal Risks of Investing in the Fund
Investing in common stock has inherent risks, which could cause you to lose
money. The principal risks of investing in this fund are listed below and could
adversely affect the fund net asset value and total return.
o Stock Market Risks: Stock mutual funds are subject to stock market risks and
significant fluctuations in value. If the stock market declines in value, the
fund is likely to decline in value.
o Stock Selection Risks: The stocks selected by the investment adviser may
decline in value or not increase in value when the stock market in general is
rising.
o Liquidity Risks: The investment adviser may not be able to sell stocks at an
optimal time or price.
o Industry Risks: Mutual funds that invest in a particular industry carry a
risk that a group of related stocks will decline in price due to industry
specific developments. Companies in the same or similar industries may share
common characteristics and are more likely to react to industry specific
market or economic developments.
o Internet Specific Risks: Internet and Internet-related companies are
generally subject to the rate of change in technology, which is higher than
other industries. In addition, many 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.
o Management Risks: The investment adviser has no previous experience managing
a mutual fund.
1
<PAGE>
Who May Want to Invest
This fund may be appropriate for people who:
o wish to invest for a long term
o want to diversify their portfolios
o want to allocate some portion of their long-term investments to aggressive
equity investing
o are willing to accept a high degree of volatility and risk
Because the fund concentrates its investments in a single industry (i.e., the
Internet), its shares do not represent a complete investment program and the
value of the shares may fluctuate more than shares invested in a broader range
of industries.
Past Performance Information
- --------------------------------------------------------------------------------
The bar chart and table shown below illustrate the variability of the fund's
returns. The bar chart indicates the risks of investing in the fund by showing
the changes in the fund's performance from year to year (on a calendar year
basis). The table shows how the fund's average annual returns compare with those
of the S&P 500 Index and the NASDAQ Composite Index both of which represent
broad measures of market performance. The fund's past performance is not
necessarily an indication of how the fund will perform in the future.
Total Return as of 12/31
1997 12.74%
1998 196.14%
Best Quarter: Q4 1998 83.49%
Worst Quarter: Q1 1997 (21.23)%
2
<PAGE>
Average Annual Total Returns as of 12/31/98
1 Year Since Inception1
-------- --------------
The Internet Fund 196.14% 68.45%
S&P 500 Index(with dividends reinvested)2 28.58% 31.42%
NASDAQ Composite Index3 39.95% 31.33%
1 The fund commenced operation on October 21, 1996
2 The S&P 500 Index is an unmanaged index created by Standard & Poor's
Corporation that is considered to represent U.S. stock market performance
in general and is not an investment product available for purchase. The
fund returns presented above include operating expenses (such as management
fees, transaction costs, etc.) that reduce returns, while the return of the
S&P 500 Index does not. An individual who purchases an investment product
which attempts to mimic the performance of the S&P 500 Index will incur
expenses such as management fees, transaction costs, etc, that reduce
returns.
3 The NASDAQ Composite Index is a broad-based capitalization-weighted index
of all NASDAQ stocks.
Fund Expenses
- --------------------------------------------------------------------------------
As an investor, you pay certain fees and expenses in connection with the fund.
These fees are described in the table below and further explained in the example
that follows.
Fee Table
Shareholder Transaction Expenses
(fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price) None(1)
Maximum Deferred Sales Charge (Load)
(as percentage of offering price) None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends None
Redemption Fee2 None
Exchange Fee None
Annual Fund Operating Expenses
(expenses deducted from fund assets)
Management Fees 1.25%
Distribution and Service (12b-1) Fees None
Other Expenses 1.83%
----
Total Annual Fund Operating Expenses 3.08%
====
1 Accounts of IRA Trustees are assessed a $12.50 annual fee.
2 Although no sales loads or transaction fees are charged, you will be
assessed a $12.00 fee for outgoing wire transfers and a $25.00 fee
for returned checks.
3
<PAGE>
Expense Example
The example below is intended to help you compare the cost of investing in the
fund with the cost of investing in other mutual funds. The example assumes that:
1. You invest $10,000 in the fund for the time periods indicated and then redeem
all of your shares at the end of those periods,
2. Your investment has a 5% return each year, and
3. The fund's operating expenses remain the same.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
1 Year 3 Years 5 Years 10 Years
-------- -------- -------- --------
$311 $951 $1,616 $3,398
Investment Objectives and Strategies
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Investment Objectives
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 and foreign companies engaged in the Internet and
Internet-related activities or services. Current income is a secondary
objective.
Investment Strategies
Under normal circumstances, at least 80% of the fund's total assets will be
invested in the securities of companies engaged in Internet and Internet-related
activities. The fund's investment adviser believes that companies that provide
products or services designed for the Internet offer favorable investment
opportunities. 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. Accordingly, the fund seeks to invest
in common stock and convertible securities of companies whose research and
development efforts may result in higher stock values.
In addition to evaluating trends in corporate revenues, earnings and dividends,
the adviser measures the amount of capital a company currently expends on
research and development. 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:
o Internet Access Providers: Companies that provide users with access to the
Internet.
o Software Developers: Companies that develop software tools to access the
Internet, facilitate information distribution and gathering and to secure
Internet-based transactions, etc.
o 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.
4
<PAGE>
o Content Developers: Companies that supply information and entertainment
content, such as games, music and video on the Internet.
o Publishing Companies: Companies that provide information about the Internet
through publication of books, magazines and newspapers.
Temporary Investments
To respond to adverse market, economic, political or other conditions, the fund
may invest up to 100% of its assets in U.S. and foreign short-term money market
instruments. The fund may invest up to 35% of its assets in these securities to
maintain liquidity. Some of the short-term money instruments include:
o commercial paper
o certificates of deposit, demand and time deposits and banker's acceptance
o U.S. government securities
o repurchase agreements To the
extent the fund engages in this temporary, defensive strategy, the fund may not
achieve its investment objective. The Statement of Additional Information
contains more information about the fund and the types of securities in which it
may invest.
Management of the Fund
- --------------------------------------------------------------------------------
Investment Adviser
The fund's investment adviser is Kinetics Asset Management, Inc., 344 Van Buren
Street, North Babylon, New York, 11704. 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 adviser
conducts investment research and supervision for the fund and is responsible for
the purchase and sale of securities for the fund's portfolio. The adviser
receives an annual fee from the fund for its services of 1.25% of the fund's
average daily net assets.
Margaret B. Doyle is the president of Kinetics Asset Management, Inc. Ms. Doyle
has more than 29 years experience in a variety of professional and managerial
positions in education. Mr. Francis J. Alexander is the vice president of
Kinetics Asset Management, Inc. Mr. Alexander has more than 21 years of
investment experience managing portfolios.
On March 12, 1999, Kinetics Asset Management, Inc. entered into an agreement
under which its business and substantially all of its assets will be sold to
Lepercq, de Neuflize & Co. Incorporated ("Lepercq"), an investment adviser
registered under the Investment Advisers Act of 1940.
If effectuated, this transaction will result in an assignment of the Investment
Advisory Contract with the adviser to Lepercq. Under the Investment Company Act
of 1940, such an assignment will cause the Investment Advisory Contract between
the fund and the adviser to automatically terminate. Therefore, as a condition
to the closing of the purchase, the shareholders of the fund will be asked to
approve a new Investment Advisory Contract with Lepercq.
The adviser and Lepercq have indicated that the potential sale of the adviser
will have no immediate impact upon the adviser's performance of its
responsibilities and obligations. Furthermore, Ryan Jacob will continue as the
portfolio manager of the fund.
5
<PAGE>
Portfolio Managers
Ryan Jacob is the chief portfolio manager of the Internet Fund and is primarily
responsible for the day-to-day management of the fund's assets and securities.
He has been the portfolio manager for the fund since December of 1997. Mr. Jacob
served as an analyst for Horizon Asset Management from 1994 through 1998. He
also was an assistant portfolio manager in the private clients group at Bankers
Trust from 1992 through 1994. Prior to managing the portfolio for The Internet
Fund, Mr. Jacob was Director of Research for IPO Value Monitor, an investment
related newsletter. Mr. Jacob, a graduate of Drexel University, has over 8 years
of investment management experience.
Francis J. Alexander is a portfolio manager of the fund. Mr. Alexander assists
Mr. Jacob in the day-to-day management of the fund's assets and securities.
Mr. Alexander has been a portfolio manger of the fund since its inception.
Prior to managing the fund, Mr. Alexander served as a portfolio manager for
Alexander Capital Management since 1980. Mr. Alexander received his Bachelor
of Arts from Notre Dame University and his Master of Business Administration
from St. John's University.
Fund Administrator, Fund Accounting and Transfer Agent
Firstar Mutual Fund Services, LLC, 615 East Michigan Street, Milwaukee,
Wisconsin 53202 serves as the fund's administrator, accountant and transfer
agent. As such, Firstar provides certain shareholder services and record
management services as well as acts as the fund's dividend paying agent.
Custodian
Firstar Bank Milwaukee, N.A, an affiliate of Firstar Mutual Fund Services, LLC
located in Milwaukee, Wisconsin acts as custodian of the fund's assets.
Distribution of Shares
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T.O. Richardson Securities, Inc., 2 Bridgewater Road, Farmington, Connecticut,
06032 is the distributor for shares of the fund. T.O. Richardson is a registered
broker-dealer and member of the National Association of Securities Dealers,
Inc. T.O. Richardson is the distributor for a number of investment companies
around the country.
Pricing of Fund Shares
- --------------------------------------------------------------------------------
Shares of the fund are sold at their net asset value per share ("NAV"), which is
determined by the fund as of the close of regular trading (generally 4:00 p.m.
Eastern time) on each day that the New York Stock Exchange is open for
unrestricted business. Purchase and redemption requests are priced at the next
NAV calculated after receipt and acceptance of a completed purchase or
redemption request. The NAV is determined by dividing the value of the fund's
securities, cash and other assets, minus all expenses and liabilities, by the
number of shares outstanding (assets-liabilities/# of shares = NAV). The NAV
takes into account the expenses and fees of the fund, including management,
distribution and shareholder servicing fees, which are accrued daily.
The fund's portfolio securities are valued each day at the last quoted sales
price on the securities principal exchange. If market quotations are not readily
available, securities will be valued at their fair market value as determined in
good faith, or in accordance with procedures approved by the Board of Trustees.
The fund may use independent pricing services to assist in calculating the NAV.
6
<PAGE>
How To Purchase Shares
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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 for both Regular
Accounts and Individual Retirement Accounts is $1,000. The minimum subsequent
investment for both types of accounts is $100. 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. A service fee of $25 will be deducted from your fund
account for any purchases that do not clear due to insufficient funds.
Purchase By Mail
To purchase fund shares by mail, simply complete and sign the enclosed New
Account Application Form and mail it, along with a check or money order made
payable to The Internet Fund, to:
The Internet Fund For Overnight or Express Mail, send to:
c/o Firstar Mutual Fund Services, LLC The Internet Fund
P.O. Box 701 c/o Firstar Mutual Fund Services, LLC
Milwaukee, WI 53201-0701 615 East Michigan Street, 3rd Floor
Milwaukee, WI 53202
Purchase By Wire
Before wiring any funds please call 1-888-FUND-WWW (386-3999) to notify the fund
that the wire is coming and to verify the proper wire instructions so that the
wire is properly applied when received. The fund is not responsible for delays
resulting from the banking or Federal Reserve wire system. Please use the wiring
instructions as follow:
o Wire to: Firstar Bank Milwaukee, N.A.
o ABA Number: 0750-00022
o Credit: Firstar Mutual Fund Service, LLC
o Account: 112-952-137
o Further Credit: The Internet Fund
(Shareholder Account Number)
(Shareholder Name/Account Registration)
Immediately send a completed New Account Application form to the fund at the
above address to have all accurate information recorded to your account.
Investing by Telephone
If you have completed the Telephone Purchase Authorization section of the New
Account Application Form, you may purchase additional shares by telephoning the
fund toll-free at (888) FUND-WWW. This option allows investors to move money
from their bank account to their fund account upon request. Only bank accounts
held at domestic institutions that are Automated Clearing House (ACH) members
may be used for telephone transactions.
The minimum telephone purchase is $100. You may not use telephone transactions
for your initial purchase of fund shares.
7
<PAGE>
Automatic Investment Plan
Once an account has been established, you may purchase shares of the fund
through an Automatic Investment Plan. You can have money automatically
transferred from your checking, savings or bank money market account on a
weekly, bi-weekly, monthly, bi-monthly or quarterly basis.
o Minimum Initial Investment: $1,000
o Subsequent Automatic Investments: $ 100
To be eligible for this plan, your bank must be a domestic institution that is
an ACH member. The fund may modify or terminate this Plan at any time.
Subsequent Investments
You may add to your account at any time by purchasing shares by mail, by
telephone, or by wire. The minimum subsequent investment amount is $100. You
must call to notify the fund (1-888-FUND-WWW) before wiring. A remittance form,
which is attached to your individual account statement, should accompany any
investments made through the mail. All purchase requests must include your
shareholder account number.
Individual Retirement Accounts
You may invest in the fund by establishing a tax-sheltered individual retirement
account. The fund offers Traditional IRA, Roth IRA and Educational IRA. For
additional information on IRA options, please call 1-800-FUND-WWW.
How To Redeem Shares
- --------------------------------------------------------------------------------
In General
You may redeem part or all of your fund shares on any business day that the fund
calculates the net asset value. To redeem shares, you must contact the fund
either by mail or by phone to place a redemption order. You should request your
redemption prior to market close to obtain that day's closing NAV. Redemption
requests received by the Transfer Agent after the close of the New York Stock
Exchange (currently 4:00 pm, Eastern time) will be treated as though received on
the next business day.
The fund will normally mail the redeemed proceeds the next business day and, in
any event, no later than seven days after the receipt of a redemption request in
good order. Note, however, that when a purchase order has been made by check,
the fund will not be able to honor your redemption request until the check is
cleared. This may take up to 12 days.
Redemption requests will be sent to the address of record. If you request to
have your redemption proceeds sent to an address other than the address of
record, or if the address of record has been changed within 15 days of the
redemption request, you must put the request in writing and have your signature
guaranteed. Signature guarantees can be obtained from banks and securities
dealers, but not from a notary public. The fund is not responsible for interest
lost on redemption amounts due to lost or misdirected mail.
8
<PAGE>
Written Redemption
In most cases, you may provide an unconditional written request to the fund to
redeem your shares at the current NAV. Redemption requests in writing should be
sent to the Transfer Agent at:
The Internet Fund For Overnight or Express Mail, send to:
c/o Firstar Mutual Fund Services, LLC The Internet Fund
P.O. Box 701 c/o Firstar Mutual Fund Services, LLC
Milwaukee, WI 53201-0701 615 East Michigan Street, 3rd Floor
Milwaukee, WI 53202
Please send all redemption requests to the fund's Transfer Agent. If you send
requests to the fund, the fund must forward the requests to the Transfer Agent
and instructions for redemption will not be effective until received by the
Transfer Agent. Shares redeemed will be priced at the net asset value per share
next determined after the Transfer Agent accepts your complete redemption
request. The Transfer Agent cannot accept redemption requests that specify a
particular date for redemption or special redemption conditions.
Requests for redemption must
o indicate the name of the fund
o be signed exactly as the shares are registered, including the
signature of each owner
o specify the number of shares or dollar amount to be redeemed
o indicate your account registration number, and
o include the investor's social security number or tax identification
number
Telephone Redemption
If you are set up to perform telephone transactions (either through your New
Account Application or by subsequent arrangement in writing with the fund) you
may redeem shares in any amount not less than $100 by instructing the fund by
phone at 1-888-FUND-WWW. A signature guarantee is required of all shareholders
in order to qualify for or to change telephone redemption privileges.
Note: Neither the fund nor any of its service contractors will be liable for any
loss or expense in acting upon instructions that are reasonably believed to be
genuine. To confirm that all telephone instructions are genuine, the fund will
use reasonable procedures, such as requesting:
o That a shareholder correctly state his or her fund account number,
o The name in which his or her account is registered;
o The social security or tax identification number under which the
account is registered,
o Address of the account holder, as stated in the
New Account Application.
The fund reserves the right to refuse a telephone redemption request if it
believes it is advisable to do so. The fund may modify its procedures for
redeeming shares by telephone at any time and will notify shareholders of any
changes. During periods of substantial economic or market change, telephone
redemptions may be difficult to implement. If you are unable to contact the
Transfer Agent by telephone, you may also redeem shares by delivering your
redemption request to the Transfer Agent at the above addresses.
9
<PAGE>
Wire Redemption
Wire transfers may be arranged to redeem shares. However, the transfer agent
charges a $12 fee per wire redemption against your account. The minimum wire
redemption is $100.
Systematic Withdrawal Plan
If you own shares with a value of $10,000 or more, you may participate in the
Systematic Withdrawal Plan. The Systematic Withdrawal Plan allows you to make
automatic withdrawals from your account at $100 or greater at regular intervals.
Funds will be transferred from your fund account to the account you chose at the
interval you select on the New Account Application form. If you expect to
purchase additional fund shares, it may not be to your advantage to participate
in the Systematic Withdrawal Plan because of the possible adverse tax
consequences of making contemporaneous purchases and redemptions.
The Fund's Right to Redeem an Account
The fund reserves the right to redeem the shares of any shareholder whose
account balance is less than $500, other than as a result of a decline in the
value per share of the fund or if the shareholder is an active participant in
the AutoInvest Plan. The fund will provide a shareholder with a 30-day written
notice prior to redeeming the account.
IRA Redemption
If you are an IRA shareholder, you must indicate on your redemption request
whether or not to withhold federal income tax. Requests that do not indicate a
preference will be subject to withholding.
Distribution and Taxes
- --------------------------------------------------------------------------------
Distributions
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, you 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 check remains uncashed for six months, your distribution
check will be reinvested in your account at the then current net asset value and
your election will be converted to the purchase of additional shares.
10
<PAGE>
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. 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.
11
<PAGE>
Financial Highlights
- --------------------------------------------------------------------------------
The financial highlights table set forth below is intended to help you
understand the fund's financial performance for the fund's period of operations.
Most of the information reflects financial results with respect to a single fund
share. The total returns in the tables represent the rates that an investor
would have earned (or lost) on an investment in the fund (assuming reinvestment
of all dividends and distributions). This information has been audited by
Lilling & Company LLP whose report, along with the fund's financial statements
that are included in the fund's annual report, is available upon request.
<TABLE>
<CAPTION>
For the period
For the year ended For the year ended October 21, 1996(1) through
December 31, 1998 December 31, 1997 December 31, 1996
----------------- ----------------- -----------------
<S> <C> <C> <C>
Net asset value,
beginning of period $5.31 $4.71 $5.00
Net investment income (loss) (0.08) 0.01 0.02
Net gains or losses on securities
(both realized and unrealized) 10.50 0.59 (0.31)
------ ------ ------
Total from investment operations 10.42 0.60 (0.29)
Dividends
(from net investment income) (0.01) -- --
Distributions (from capital gains) -- -- --
------ ------ ------
Total distributions (0.01) -- --
Net asset value,
end of period $15.72 $5.31 $4.71
------ ------ ------
Total Return 196.14% 12.74% (5.80%)(2)
------ ------ ------
Net assets, end of period (000's) $22,159 $150 $113
Gross ratio of expenses to average
net assets (excluding waivers) 3.08% 3.60% 6.73%(3)
Net ratio of expenses to average
net assets 3.08% 0.08% 0.21%(3)
Gross ratio of net income (loss) to
average net assets (excluding
waivers) (2.92)% (3.33)% (4.51)%
Net ratio of net income (loss) to
average net assets (2.92)% 0.19% 2.01%(3)
Portfolio turnover rate 80% 50% 0%(3)
</TABLE>
1 Commencement of Operations
2 Not Annualized
3 Annualized
12
<PAGE>
Year 2000 Issue
- --------------------------------------------------------------------------------
Like other mutual funds, financial and business organizations and individuals
around the world, the fund could be adversely affected if the computer systems
used by the adviser, the administrator and other third party service providers
do not properly process and calculate date-related information and data from and
after January 1, 2000. This is commonly known as the "Year 2000 Issue." The
investment adviser and the administrator are taking steps that they believe are
reasonably designed to address the Year 2000 Issue with respect to computer
systems that they use. The investment adviser and administrator are also
obtaining reasonable assurances that comparable steps are being taken by the
fund's other major service providers. If the fund were to invest in securities
of foreign issuers, the fund would not be able to obtain reasonable assurances
that the foreign issuers were taking necessary steps to address the Year 2000
Issue.
Although there can be no assurance at this time that there will be no adverse
impact on the fund, the fund's service providers have advised the fund that they
have been actively working on necessary changes to their computer systems to
prepare for the year 2000. The fund's service providers expect that their
systems, and those of other parties they deal with, will be adapted in time for
that event. However, there can be no assurance that the computer systems of the
companies in which the fund invests will be timely converted or that the value
of such investments will not be adversely affected by the Year 2000 Issue.
13
<PAGE>
The Internet
Fund, Inc.
The Internet Fund
Purchase Application
Mail To: The Internet Fund Overnight Express Mail To: The Internet Fund
c/o Firstar Mutual c/o Firstar Mutual Fund Services, LLC
Fund Services, LLC 615 E. Michigan St., 3rd Floor
P.O. Box 701 Milwaukee, WI 53202-5207
Milwaukee, WI 53201-0701
Use this form for individual, custodial, trust, profit sharing or pension plan
accounts. Do not use this form for The Internet Fund sponsored IRA or SEP IRA
accounts. For any additional information please call
The Internet Fund at 888-386-3999.
- --------------------------------------------------------------------------------
A. Investment [ ]By check Payable to The Internet Fund. Amount $ ____________
($ 1,000.00 minimum).
- --------------------------------------------------------------------------------
B. Registration
[ ] Individual
- -------------- ------ ----------- -------------------- ---------------------
FIRST NAME M.I. LAST NAME SOCIAL SECURITY # BIRTHDATE (MO/DY/YR)
[ ] Joint Owner========================
- -------------- ------ ----------- -------------------- ---------------------
FIRST NAME M.I. LAST NAME SOCIAL SECURITY # BIRTHDATE (MO/DY/YR)
*Registration will be Joint Tenancy with Rights of Survivorship (JTWROS),
unless otherwise specified.
[ ] Gift to Minors
- ------------------------------------------- --------- -------------------------
CUSTODIAN'S FIRST NAME (ONLY ONE PERMITTED) MI LAST NAME
- ------------------------------------------- --------- -------------------------
MINOR'S FIRST NAME (ONLY ONE PERMITTED) MI LAST NAME
- ----------------------------- ------------------------------ ------------------
MINOR'S SOCIAL SECURITY # MINOR'S BIRTHDATE (MO/DY/YR) STATE OF RESIDENCE
[ ] Corporation/Trust**
- --------------------------------------------------------------------------------
NAME OF TRUSTEE(S) *(IF TO BE INCLUDED IN REGISTRATION)
[ ] Partnership*
- --------------------------------------------------------------------------------
NAME OF TRUST/CORPORATION/**PARTNERSHIP
[ ] Other Entity*
- ---------------------------------- --------------------------------------------
SOCIAL SECURITY #/TAX ID# DATE OF AGREEMENT (MO/DY/YR)
*Additional documentation and certification may be requested.
**Corporate Resolution is required.
C. Distribution Options:
Capital gains & dividends
will be reinvested if no
option is selected.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Capital Gains & Capital Gains & Capital Gains in Cash & Capital Gains Reinvested
Dividends Reinvested [ ] Dividends in Cash [ ] Dividends Reinvested [ ] & Dividends in Cash [ ]
</TABLE>
Unless otherwise indicated, cash distributions will be mailed to the address
in Section D.
D. Mailing Address
- --------------------------------- --------------------------------------
STREET APT/SUITE
- -------------------------------- ---------- -----------------------
CITY STATE ZIP
- -------------------------------- --------------------------------------
DAYTIME PHONE # EVENING PHONE #
q Duplicate Confirmation to:
- --------------------------------- --------------------------------------
STREET APT/SUITE
- -------------------------------- ---------- -----------------------
CITY STATE ZIP
- -------------------------------- --------------------------------------
DAYTIME PHONE # EVENING PHONE #
E. Telephone Options
Your signed Application
must be received at least 15
business days prior to initial
transaction.
[ ] Telephone Redemption.
[ ] Check to address shown [ ] Via EFT, at no charge, to
on your account your bank account below
[ ] Via federal wire to your bank account below (funds are typically
($12.00 charge for each wire transfer) creditied within two days
after redemption)
[ ] Telephone Purchase (EFT). Permits the purchase of shares using your bank
account to clear the transaction. (Minimum $100.00) Complete bank account
information below.
- --------------------------------------------------------------------------------
NAME(S) ON BANK ACCOUNT
- ------------------------------------ ----------------------------------------
BANK NAME ACCOUNT NUMBER
- ------------------------------------ ----------------------------------------
BANK ADDRESS BANK ROUTING/ABA#
<PAGE>
To ensure proper debiting/crediting of your bank account, an unsigned
voided check (for checking accounts) or a savings account deposit slip is
required with your Application.
F. Automatic
Investment
Plan
Your signed Application
must be received at least 15
business days prior to initial
transaction.
An unsigned voided check
(for checking accounts)
or a savings account
deposit slip is required
with your Application.
Please start my Automatic Investment Plan as described in the Prospectus
beginning: Month Year _____. I hereby instruct Firstar Mutual Fund Services,
LLC, Transfer Agent for The Internet Fund to automatically transfer $ __________
(minimum $100.00) directly from my checking, NOW, or savings account named below
on the __________ of each month or the first business day thereafter.
I understand that I will be assessed a $25 fee if the automatic purchase cannot
be made due to insufficient funds, stop payment, or for any other reason.
Automatic investment plan contributions to your IRA will be reported as current
year contributions.
- --------------------------------------------------------------------------------
NAME(S) ON BANK ACCOUNT
- ----------------------------------- -------------------------------------------
BANK NAME ACCOUNT NUMBER
- ----------------------------------- -------------------------------------------
BANK ADDRESS BANK ROUTING/ABA#
- ----------------------------------- -------------------------------------------
SIGNATURE OF BANK ACCOUNT OWNER SIGNATURE OF JOINT OWNER
G. Systematic
Withdrawals
I would like to withdraw from The Internet Fund $ __________ ($100.00
minimum) as follows:
[ ] I would like to have payments made to me on or
about the __________ day of each month, or
[ ] I would like to have
payments made to me on or about the __________ day of the months that I
have circled below:
Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec.
[ ] To have payments automatically deposited to your bank account.
Complete bank account information below. (A check will be mailed to the
address in Section D if this box is not checked.)
NAME(S) ON BANK ACCOUNT
- ----------------------------------- -------------------------------------------
BANK NAME ACCOUNT NUMBER
- ----------------------------------- -------------------------------------------
BANK ADDRESS BANK ROUTING/ABA#
To ensure proper crediting of your bank account, please attach a voided
check or a deposit slip. H. Signature and Certification Required by the Internal
Revenue Service I have received and read the Prospectus for The Internet Fund
(the "Fund"). I understand the Fund's investment objectives and policies and
agree to be bound by the terms of the Prospectus. I am of legal age in my state
of residence and have full authority to purchase shares of the Fund and to
establish and use any related privileges. Neither the Fund nor its transfer
agent will be responsible for the authenticity of transaction instructions
received by telephone, provided that reasonable security procedures have been
followed. By selecting the options in Section E, F, or G, I hereby authorize the
Fund to initiate credits and debits to my account at the bank indicated and for
the bank to credit or debit the same to such account through the Automated
Clearing House ("ACH") system. Under the penalty of perjury, I certify that (1)
the Social Security Number or Taxpayer Identification Number shown on this form
is my correct Taxpayer Identification Number, and (2) I am not subject to backup
withholding either as a result of a failure to report all interest or dividends,
or the IRS has notified me that I am no longer subject to backup withholding.
The IRS does not require your consent to any provision of this document other
than the certifications required to avoid backup withholding.
- ------------------------------------------- ------------------------------------
DATE (MO/DY/YR) SIGNATURE OF OWNER*
- ------------------------------------------- ------------------------------------
DATE (MO/DY/YR) SIGNATURE OF OWNER, IF ANY
*If shares are to be registered in (1) joint names, both persons should
sign, (2) a custodian for a minor, the custodian should sign, (3) a trust, the
trustee(s) should sign, or (4) a corporation or other entity, an officer should
sign and print name and title on space provided below.
- --------------------------------------------------------------------------------
PRINT NAME AND TITLE OF OFFICER SIGNING FOR A CORPORATION OR OTHER ENTITY
Internet Fund logo
Prospectus
& Application
--------------------------
April 30, 1999
Investment Adviser Kinetics Asset Management, Inc.
344 Van Buren Street
North Babylon, NY 11704
Legal Counsel Beckman, Millman, & Sanders LLP
116 John Street
New York, NY 10038
Independent Lilling & Company LLP
Accountants 10 Cuttermill Road
Great Neck, NY 11021
Transfer Agent, Firstar Mutual Fund Services, LLC
Fund Accountant, 615 East Michigan Street
Administrator Milwaukee, WI 53202
Custodian Firstar Bank Milwaukee, N.A.
615 East Michigan Street
Milwaukee, WI 53202
You may obtain the following and other information
on the Internet Fund, Inc. free of charge:
Statement of Additional Information
(SAI) dated April 30, 1999
The SAI for the fund provides more details about the fund's policies and
management. The fund's SAI, is incorporated by reference into this prospectus.
Annual and Semi-Annual Report
The annual and semi-annual reports provide the fund's most recent financial
reports and portfolio listings. The annual report contains a discussion of the
market conditions and investment strategies that affected the fund's performance
during the last fiscal year.
You may receive any of the above documents of
the documents of the Internet Fund, Inc. by:
Telephone: Toll-free (888) FUND-WWW (386-3999)
Internet: http://www.theinternetfund.com
http://www.sec.gov (text only version)
Mail: The Internet Fund
c/o Firstar Mutual Fund Services, LLC
P.O. Box 701
Milwaukee, WI 53201-0701
SEC: You may also receive a text only version of fund documents upon payment of
a duplicating fee, by writing the Public Reference Room, Securities and Exchange
Commission, Washington, D.C. 20549-6009. Information about the Fund (including
the SAI) can be reviewed and copied at the SEC's Public Reference Room in
Washington, D.C. Please call the SEC at 1-800-SEC-0330 for information relating
to the operation of the Public Reference Room.
1940 Act File No. 811-07595
<PAGE>
THE INTERNET FUND, INC.
344 Van Buren Street,
North Babylon, NY 11704
(516) 893-4200
(888) FUND-WWW
April 30, 1999
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional is not a prospectus but should be read in
conjunction with the Fund's current Prospectus dated April 30, 1999. To obtain
the Prospectus, please write the Fund or call either of the telephone numbers
shown above.
The Fund's audited financial statements for the fiscal year ended December 31,
1998 are incorporated by reference to the Fund's 1998 Annual Report.
1
<PAGE>
THE INTERNET FUND, INC.
The Fund.......................................................................3
Investment Objectives, Strategies and Risks....................................3
Investment Restrictions........................................................4
Temporary Investments..........................................................5
Portfolio Turnover.............................................................5
Management of the Fund.........................................................6
Control Persons and Principal Holders of Securities............................7
Investment Adviser.............................................................7
Administrative Services........................................................9
Custodian......................................................................9
Distributor....................................................................9
Capitalization.................................................................9
Pricing of Shares.............................................................10
Purchasing Shares.............................................................10
Redemption of Shares..........................................................11
Brokerage.....................................................................12
Taxes.........................................................................12
Performance Information.......................................................12
Auditors......................................................................14
Financial Statements..........................................................14
2
<PAGE>
The Fund
- --------------------------------------------------------------------------------
The Internet Fund, Inc. ( the "Fund") was incorporated in New York on March 12,
1996. The Fund's registered office is in North Babylon, New York; with its
principal office at 344 Van Buren Street, North Babylon, New York 11704. The
Fund is a diversified, open-end management investment company.
Investment Objectives, Strategies and Risks
- --------------------------------------------------------------------------------
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
and foreign companies engaged in the Internet and Internet-related activities
or services. Current income is a secondary objective.
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. 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.
Common and Preferred Stock
Common stocks are units of ownership of a corporation. Preferred stocks are
stocks that often pay dividends at a specific rate and have a preference over
common stocks in dividend payments and liquidation of assets. Some preferred
stocks may be convertible into common stock. Convertible securities are
securities that may be converted into or exchanged for a specified amount of
common stock of the same or different issuer within a particular period of time
at a specified price or formula.
Convertible Debt Securities
The 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. 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.
Fixed-Income Securities
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
3
<PAGE>
credit risk such rating service perceives to exist with respect to such
security. Increasing the amount of Fund assets invested in unrate 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.
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
to the extent 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 instrumentality's).
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.
4
<PAGE>
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.
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.
Temporary Investments
- --------------------------------------------------------------------------------
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
Portfolio Turnover
- --------------------------------------------------------------------------------
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.
5
<PAGE>
Management of the Fund
- --------------------------------------------------------------------------------
Board of Directors
The Fund is managed by a board of directors. The Fund's Board of Directors
consist of five individuals, two of whom are not "interested persons" of the
Fund as that term is defined in the 1940 Act. The directors are fiduciaries for
the fund's shareholders and are governed by the laws of the State of New York in
this regard. They establish policies for the operation of the Fund and appoint
the officers who conduct the daily business of the Fund.
Officers and directors are listed below with their addresses, present positions
with the Fund and principal occupations.
<TABLE>
<CAPTION>
===================================================================================================
Name and Address Age Position Principal Occupation
during the Past Five Years
===================================================================================================
<S> <C> <C> <C>
Margaret B. Doyle* 72 President, Treasurer, President, The Internet Fund, Inc. from
48 Gamecock Lane and Director 1996 to present. Retired Superintendent,
Bablyon, NY 11702 North Babylon USFD.
- ---------------------------------------------------------------------------------------------------
Francis J. Alexander* 54 Vice President, Vice President and Portfolio Manager, The
270 Greenwich Ave. Secretary and Director Internet Fund, Inc. from 1996 to present.
Greenwich, CT 06830 Portfolio Manager, Alexander Capital
Management, Inc. from 1980 to Present.
- ---------------------------------------------------------------------------------------------------
Murray Stahl 41 Director President, Horizon Asset Management from
342 Madison Avenue 1994 to present.
New York, NY 10017
- ---------------------------------------------------------------------------------------------------
Kathleen Campbell* 36 Director Counselor-at-law, Campbell & Campbell Law
13 Elm Road Offices from 1995 to present.
Scarsdale, NY 10583
- ---------------------------------------------------------------------------------------------------
Douglas Cohen, C.P.A. 36 Director Certified Public Accountant, Douglas
86 Samuel Street Cohen, C.P.A. from 1994 to present.
Ronkonkoma, NY 11779
- ---------------------------------------------------------------------------------------------------
</TABLE>
*This director is deemed to be an interested person as defined in the 1940 Act.
6
<PAGE>
Compensation
For their service as directors, the independent directors receive $99 per
meeting attended, as well as reimbursement for expenses incurred in connection
with attendance at such meetings. The interested trustees of the Fund receive no
compensation for their service as directors. The table below details the amount
of compensation received by the directors from the Fund for the past fiscal
year. Presently, none of the executive officers receive compensation from the
Fund.
Compensation
For their service as directors, the independent directors receive $99 per
meeting attended, as well as reimbursement for expenses incurred in connection
with attendance at such meetings. The interested trustees of the Fund receive no
compensation for their service as directors. The table below details the amount
of compensation received by the directors from the Fund for the past fiscal
year. Presently, none of the executive officers receive compensation from the
Fund.
================================================================================
Name and Position Aggregate Pension or Estimated Total
Compensation Retirement Annual Compensation
From Fund Benefits Benefits Upon from Fund Paid
Accrued As Retirement to Directors
Part of Fund
Expenses
================================================================================
Margaret B. Doyle* None None None None
Director,
President and
Treasurer
Francis J. None None None None
Alexander*
Director, Vice
President and
Secretary
Murray Stahl $198 None None $198
Director
Kathleen $297 None None $297
Campbell*(1)
Director
Douglas Cohen, $297 None None $297
C.P.A.
Director
- --------------------------------------------------------------------------------
* This director is deemed to be an interested person as defined in the 1940 Act.
(1) During the year ended December 31, 1998, Kathleen Campbell was classified as
a non-interested person, which is why she previously received compensation. In
1999, Ms. Campbell became the daughter-in-law of Margaret Doyle and, as a
result, the Fund chose to change her classification to an "interested" person.
Ms. Campbell will receive no compensation as a director during 1999.
Control Persons and Principal Holders of Securities
- --------------------------------------------------------------------------------
As of March 31, 1999, there were no control persons or principal holders of
securities of the Fund. Control persons are persons deemed to control the Fund
because they own beneficially over 25% of the outstanding equity securities.
Principal holders are persons that own beneficially 5% or more of the Fund's
outstanding equity securities.
Management Ownership
As of March 31, 1999, the officers and directors of the Fund as a group own less
than 1% of the outstanding shares of the Fund.
Investment Adviser
- --------------------------------------------------------------------------------
Kinetics Asset Management, Inc., is a New York corporation that serves as an
investment adviser to the Fund pursuant to a Advisory Contract dated April 5,
1996. Margaret B. Doyle is the president and treasurer of Kinetics Asset
Management, Inc. Ms. Doyle has more than 29 years experience in a variety of
professional and managerial positions in education. Mr. Francis J.
Alexander is vice president, secretary and a portfolio manager of Kinetics Asset
7
<PAGE>
Management, Inc. Mr. Alexander has more than 21 years of investment experience
as a portfolio manager.
This Advisory Contract continues 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. In either event, it must also be approved by a majority
of the directors of the Fund who are neither parties to the Contract nor
interested persons as defined in the Investment Company Act of 1940 at a meeting
called for the purpose of voting on such approval. The Investment Adviser's
decisions are made subject to direction of the Fund's Board of Directors. The
Contract 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.
Under the Contract, Kinetics Asset Management, Inc. furnishes investment advice
to the Fund by continuously reviewing the portfolio and recommends to the Fund
when, and to what extent, securities should be purchased or disposed. Pursuant
to the Contract, the Investment Adviser:
(1) renders research, statistical and Advisory services to the Fund;
(2) makes specific recommendations based on the Fund's investment
requirements;
(3) pays the salaries of those of the Fund's employees who may be officers or
directors or employees of the Investment Adviser.
For these services, the Fund has agreed to pay to Kinetics Asset Management,
Inc. an annual fee of 1.25% of the Fund's average daily net assets. 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. As
compensation for the services rendered by the Investment Adviser under the
Contract for the last two fiscal years and since commencement of operations, the
fund paid the following amounts:
October 21, 1996 to
December 31, 1996 December 31, 1997 December 31, 1998
----------------- ----------------- -----------------
$215 $2,058 $38,561
Fees of the custodian, administrator, fund accountant and transfer agent are
paid by the Fund. The Fund pays all other expenses, including:
o fees and expenses of directors not affiliated with the Adviser;
o legal and accounting fees;
o interest, taxes, and brokerage commissions; and
o record keeping and the expense of operating its offices.
As stated in the prospectus, on March 12, 1999, Kinetics Asset Management, Inc.
entered into an agreement under which its business and substantially all of its
assets will be sold to Lepercq, de Neuflize & Co. Incorporated ("Lepercq"), an
investment adviser registered under the Investment Advisers Act of 1940.
If effectuated, this transaction will result in an assignment of the Investment
Advisory Contract with the adviser to Lepercq. Under the Investment Company Act
of 1940, such an assignment will cause the Investment Advisory Contract between
the Fund and the adviser to automatically terminate. Therefore, as a condition
to the closing of the purchase, the shareholders of the Fund will be asked to
approve a new Investment Advisory Contract with Lepercq.
8
<PAGE>
The Adviser and Lepercq have indicated that the potential sale of the Adviser
will have no immediate impact upon the adviser's performance of its
responsibilities and obligations. Futhermore, Ryan Jacob will contine as the
portfolio manager of the Fund.
Administrative Services
- --------------------------------------------------------------------------------
Administrative services include, but are not limited to, providing office space,
equipment, telephone facilities, various personnel, including clerical and
supervisory, and computers, as is necessary or beneficial to provide compliance
services to the Fund. Since the Fund's inception, the Adviser has provided
administrative services at no additional cost to the Fund. Blue-sky services
(i.e., registering the Fund's securities in the various states) were provided by
Clearsky, Inc.
As of March 1, 1999, Firstar Mutual Fund Services, LLC, a subsidiary of Firstar
Bank Milwaukee, N.A., began providing administrative personnel and services
(including blue-sky services) to the Fund. Firstar provides these services at an
annual minimum fee of $40,000. Firstar Mutual Fund Services, LLC charges the
Fund an annual fee of 0.07% of average daily net assets on the first $200
million, 0.06% on the next $500 million and 0.04% on the balance. As of March 1,
1999, Firstar Mutual Fund Services, LLC also began serving as fund accountant
and transfer agent under separate agreements.
Custodian
- --------------------------------------------------------------------------------
Firstar Bank Milwaukee, N.A. is custodian for the securities and cash of the
Fund. Under the Custodian Agreement, Firstar Bank Milwaukee, N.A. holds the
Fund's portfolio securities in safekeeping and keeps all necessary records and
documents relating to its duties. The custodian receives an annual fee equal to
0.01% of the Fund's average daily net assets with a minimum annual fee of
$3,000.
Distributor
- --------------------------------------------------------------------------------
Pursuant to a Distribution Agreement dated April 15, 1999 between T.O.
Richardson Securities, Inc. (the "Distributor") and the Fund, the Distributor
distributes the Fund's shares. The Distributor is located at 2 Bridgewater Road,
Farmington, Connecticut 06032 and is a registered broker-dealer and member of
the National Association of Securities Dealers, Inc. The Distributor uses its
best efforts to distribute the Fund's shares, which shares are offered for sale
by the Fund continuously at net asset value per share without the imposition of
a sales charge. Until the Fund adopts a Rule 12b-1 Distribution Plan, all
expenses incurred by the Distributor will be paid by the Adviser.
Capitalization
- --------------------------------------------------------------------------------
The authorized capitalization of the Fund consists of 50,000,000 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-assessable. Each holder of common stock has one vote for each share
held. Voting rights are non-cumulative.
9
<PAGE>
Pricing of Shares
- --------------------------------------------------------------------------------
Shares of the Fund are sold on a continual basis at the net asset value per
share next computed following acceptance of an order by the Fund. The Fund's net
asset value per share for the purpose of pricing purchase and redemption orders
is determined at the close of normal trading (currently 4:00 p.m. Eastern Time)
on each day the New York Stock Exchange is open for trading. The NYSE is closed
on the following holidays: New Year's Day, Martin Luther King, Jr.'s Day,
President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
Securities listed on a U.S. securities exchange or Nasdaq for which market
quotations are readily available are valued at the last quoted sale price on the
day the valuation is made. Price information on listed securities is taken from
the exchange where the security is primarily traded. Options, futures, unlisted
U.S. securities and listed U.S. securities not traded on the valuation date for
which market quotations are readily available are valued at the most recent
quoted bid price.
Fixed-income securities (other than obligations having a maturity of 60 days or
less) are normally valued on the basis of quotes obtained from pricing services,
which take into account appropriate factors such as institutional sized trading
in similar groups of securities, yield, quality, coupon rate, maturity, type of
issue, trading characteristics and other market data. Fixed-income securities
purchased with remaining maturities of 60 days or less are valued at amortized
cost if it reflects fair value. In the event that amortized cost does not
reflect market, market prices as determined above will be used. Other assets and
securities for which no quotations are readily available (including restricted
securities) will be valued in good faith at fair value using methods determined
by the Board of Directors of the Fund.
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.
Stock Certificates and Confirmations
The Fund does not intend to issue stock certificates representing shares
purchased. 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.
Special Incentive Programs
At various times the Fund 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 Fund, or
participate in sales programs sponsored by the Fund. In addition, the Adviser,
in its discretion may from time to time, pursuant to objective criteria
established by the Adviser, 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.
10
<PAGE>
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.
Redemption of Shares
- --------------------------------------------------------------------------------
To redeem shares, shareholders may send a written request to:
The Internet Fund
c/o Firstar Mutual Fund Services, LLC
P.O. Box 701
Milwaukee, Wisconsin 53201-0701
The written letter of instructions must include:
o include the investor's social security number
or tax identification number,
o the fund name,
o the account number,
o the share or dollar amount to be redeemed, and
o signatures by all shareholders on the account.
The proceeds will be wired to the bank account of record or sent to the address
of record within seven days.
If a shareholder requests that redemption proceeds be sent to an address other
than that on record with the Fund or proceeds be made payable to someone other
than to the shareholder(s) of record, the written request must have signatures
guaranteed by:
o a trust company or commercial bank whose deposits are insured by the
BIF, which is administered by the FDIC;
o a member of the New York, Boston, American, Midwest, or Pacific
Stock Exchange;
o a savings bank or savings association whose deposits are insured by
the SAIF, which is administered by the FDIC; or
o any other "eligible guarantor institution" as defined in the
Securities Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.
11
<PAGE>
Brokerage
- --------------------------------------------------------------------------------
The Adviser 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 Adviser 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 Adviser, 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, 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 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.
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.
Performance Information
- --------------------------------------------------------------------------------
Total Return
Average annual total return quotations used in the Fund's advertising and
promotional materials are calculated according to the following formula:
P(1+T)n = ERV
12
<PAGE>
where P equals a hypothetical initial payment of $1,000; T equals average annual
total return; n equals the number of years; and ERV equals the ending redeemable
value at the end of the period of a hypothetical $1,000 payment made at the
beginning of the period.
Under the foregoing formula, the time periods used in advertising will be based
on rolling calendar quarters, updated to the last day of the most recent quarter
prior to submission of the advertising for publication. Average annual total
return, or "T" in the above formula, is computed by finding the average annual
compounded rates of return over the period that would equate the initial amount
invested to the ending redeemable value. Average annual total return assumes the
reinvestment of all dividends and distributions. The average annual total return
of the fund for one fiscal year and since commencement of operations is as
follows:
Since Commencement of Operations
1 Year ended 12/31/98 10/21/96 to 12/31/98
--------------------- --------------------
The Internet Fund's
Annualized Total Return 196.14% 68.45%
Cumulative Total Return
Cumulative total return represents the simple change in value of an investment
over a stated period and may be quoted as a percentage or as a dollar amount.
Total returns may be broken down into their components of income and capital
(including capital gains and changes in share price) in order to illustrate the
relationship between these factors and their contributions to total return.
The cumulative total return for the Internet Fund since commencement of
operations on October 21, 1996 to December 31, 1998 is 214.51%.
Other Information
The Fund's performance data quoted in advertising and other promotional
materials represents past performance and is not intended to predict or indicate
future results. The return and principal value of an investment in a Fund will
fluctuate, and an investor's redemption proceeds may be more or less than the
original investment amount.
If permitted by applicable law, the Fund may advertise the performance of
registered investment companies or private accounts that have investment
objectives, policies and strategies substantially similar to those of the Fund.
Comparison of Fund Performance
The performance of a Fund may be compared to data prepared by Lipper Analytical
Services, Inc., CDA Investment Technologies, Inc., Morningstar, Inc., the
Donoghue Organization, Inc. or other independent services which monitor the
performance of investment companies, and may be quoted in advertising in terms
of its ranking in each applicable universe. In addition, the Fund may use
performance data reported in financial and industry publications, including
Barron's, Business Week, Forbes, Fortune, Investor's Daily, IBC/Donoghue's Money
Fund Report, Money Magazine, The Wall Street Journal and USA Today.
The Fund may from time to time use the following unmanaged indices for
performance comparison purposes:
13
<PAGE>
o S&P 500 - The S&P 500 is a Fund of 500 stocks designed to mimic the
overall equity market's industry weightings. Most, but not all,
large capitalization stocks are in the index. There are also some
small capitalization names in the index. The list is maintained by
Standard & Poor's Corporation It is market capitalization weighted.
There are always 500 issuers in the S&P 500. Changes are made by
Standard & Poor's as needed.
o Russell 2000 - The Russell 2000 is composed of the 2,000 smallest
stocks in the Russell 3000, a market value weighted index of the
3,000 largest U.S. publicly-traded companies.
o The NASDAQ Composite Index - The NASDAQ Composite Index is a broad -
based capitalization - weighted index of all NASDAQ stocks.
Auditors
- --------------------------------------------------------------------------------
Lilling & Company LLP serves as the Fund's independent auditors, whose services
include examination of the Fund's financial statements and the performance of
other related audit and tax services.
Financial Statements
- --------------------------------------------------------------------------------
The audited financial statements for the Fund are incorporated by reference to
the Fund's Annual Report, for the year ended 1998, as filed with the Securities
and Exchange Commission on February 25, 1999.
14
<PAGE>
THE INTERNET FUND, INC.
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS
(a) Certificate of Incorporation filed October 17, 1996 is incorporated by
reference to Registrant's Pre-Effective Amendment No. 2 to the
Registration Statement.
(b) By-laws filed October 17, 1996 is incorporated by reference to
Registrant's Pre-Effective Amendment No. 2.
(c) Instruments Defining Rights of Security Holders. Not Applicable.
(d) Investment Advisory Contract between Registrant and Kinetics Asset
Management, Inc. dated April 5, 1996 is incorporated by reference to
Registrant's Pre-Effective Amendment No. 2 to the Registration Statement
filed October 17, 1996.
(e) Distribution Agreement between Registrant and T.O. Richardson Securities,
Inc. is filed with this amendment.
(f) Bonus or Profit Sharing Contracts. Not applicable.
(g) Custodian Contract between Registrant and Firstar Bank Milwaukee, N.A. is
filed with this amendment.
(h) Other Material Contracts
(1) Fund Administration Servicing Agreement between Registrant and
Firstar Mutual Fund Services, LLC is filed with this amendment.
(2) Fund Accounting Servicing Agreement between Registrant and Firstar
Mutual Fund Services, LLC is filed with this amendment.
(3) Transfer Agent Agreement between Registrant and Firstar Mutual Fund
Services, LLC is filed with this amendment.
(i) Legal Opinion is filed with this amendment.
(j) Other Opinions.
(1) Consent of Auditors filed with this amendment.
(k) Omitted Financial Statements. Not applicable.
(1) Initial Capital Understanding. Not applicable.
(m) Rule 12b-1 Plan. Not applicable.
(n) Financial Data Schedules is filed with this amendment.
(o) Rule 18f-3 Plan. Not applicable.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Registrant is not controlled by or under common control with any person.
ITEM 25. INDEMNIFICATION
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
the registrant, the registrant has been advised that, in the opinion of
the Securities and Exchange Commission, such indemnification is against
public policy as expressed in the
<PAGE>
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER:
Besides serving as investment adviser to the Fund, the Adviser is not
currently (and has not during the past two years) engaged in any other
business, profession, vocation or employment of a substantial nature.
Information regarding the business, vocation or employment of a
substantial nature of the Adviser and its officers is incorporated by
reference to the information contained in Part B of this Registration
Statement.
ITEM 27. PRINCIPAL UNDERWRITERS:
(a) The Fund acts as its own underwriter.
(b) Information regarding the Fund's directors is incorporated by
reference to the information contained under "Management of the
Fund" in Part B of this Registration Statement.
(c) None.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS:
All accounts and records required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and Rules 31a-1 through 31a-3 promulgated
thereunder are maintained at the following locations:
Records Relating to: Are located at:
-------------------- ---------------
(1) Registrant's fund accounting Firstar Mutual Funds Services, LLC
servicing agent, administrator and 615 East Michigan Street
transfer Milwaukee, Wisconsin 53202
(2) Registrant's investment adviser Kinetics Asset Management
344 Van Buren Street
North Babylon, NY 11704
(3) Registrant's custodian Firstar Bank Milwaukee, N.A.
777 E. Wisconsin Avenue
Milwaukee, WI 53202
ITEM 29. MANAGEMENT SERVICES.
Not applicable.
ITEM 30. UNDERTAKINGS:
Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, THE INTERNET FUND, INC.,
certifies that it meets all of the requirements for effectiveness of this
Amendment to its Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Amendment to its Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the Town of Babylon and State of New York, on the 30th day of
April, 1999.
THE INTERNET FUND, INC.
By: /s/ Margaret B. Doyle
--------------------------
Margaret B. Doyle, President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to its Registration Statement has been signed below by the following persons in
the capacity and on the date indicated:
NAME TITLE DATE
- ---- ----- ----
/s/Margaret B. Doyle Director, President and Treasurer April 30, 1999
- ------------------------
Margaret B. Doyle
/s/ Francis J. Alexander Director, Vice President and April 30, 1999
- ------------------------
Francis J. Alexander Secretary
/s/ Murray Stahl Director April 30, 1999
- ------------------------
Murray Stahl
/s/ Kathleen Campbell Director April 30, 1999
- ------------------------
Kathleen Campbell
/s/ Douglas Cohen, CPA Director April 30, 1999
- ------------------------
Douglas Cohen, CPA
EXHIBIT (g)
CUSTODIAN AGREEMENT
THIS AGREEMENT made on this fifth day of February, 1999, between
Kinetics Asset Management, Inc., a New York Corporation consisting of the
Internet Fund (hereinafter called the "Fund"), and Firstar Bank Milwaukee, N.A.
a corporation organized under the laws of the State of Wisconsin (hereinafter
called "Custodian"),
WHEREAS, the Fund desires that its securities and cash shall be
hereafter held and administered by Custodian pursuant to the terms of this
Agreement;
NOW, THEREFORE, in consideration of the mutual agreements herein
made, the Funds and Custodian agree as follows:
1. DEFINITIONS
The word "securities" as used herein includes stocks, shares,
bonds, debentures, notes, mortgages or other obligations, and any certificates,
receipts, warrants or other instruments representing rights to receive, purchase
or subscribe for the same, or evidencing or representing any other rights or
interests therein, or in any property or assets.
The words "officers' certificate" shall mean a request or
direction or certification in writing signed in the name of the Fund by any two
of the President, a Vice President, the Secretary and the Treasurer of the Fund,
or any other persons duly authorized to sign by the Board of Directors.
The word "Board" shall mean Board of Directors of The Internet
Fund.
2. NAMES, TITLES, AND SIGNATURES OF THE FUNDS' OFFICERS
An officer of the Fund will certify to Custodian the names and
signatures of those persons authorized to sign the officers' certificates
described in Section 1 hereof, and the names of the members of the Board Of
Directors, together with any changes which may occur from time to time.
ADDITIONAL SERIES. The Internet Fund is authorized to issue
separate Series of shares of beneficial interest representing interests in
separate investment portfolios. The parties intend that each portfolio
established by the Trust, now or in the future, be covered by the terms and
conditions of this agreement.
<PAGE>
3. RECEIPT AND DISBURSEMENT OF MONEY
A. Custodian shall open and maintain a separate account or
accounts in the name of the Fund, subject only to draft or order by Custodian
acting pursuant to the terms of this Agreement. Custodian shall hold in such
account or accounts, subject to the provisions hereof, all cash received by it
from or for the account of the Fund. Custodian shall make payments of cash to,
or for the account of, the Fund from such cash only:
(a) for the purchase of securities for the portfolio of the
Fund upon the delivery of such securities to Custodian,
registered in the name of the Fund or of the nominee of
Custodian referred to in Section 7 or in proper form for
transfer;
(b) for the purchase or redemption of shares of beneficial
interest of the Fund upon delivery thereof to Custodian,
or upon proper instructions from The Internet Fund, Inc.;
(c) for the payment of interest, dividends, taxes, investment
adviser's fees or operating expenses (including, without
limitation thereto, fees for legal, accounting, auditing
and custodian services and expenses for printing and
postage);
(d) for payments in connection with the conversion, exchange
or surrender of securities owned or subscribed to by the
Fund held by or to be delivered to Custodian; or
(e) for other proper corporate purposes certified by
resolution of the Board Of Directors of the Fund.
Before making any such payment, Custodian shall receive (and may
rely upon) an officers' certificate requesting such payment and stating that it
is for a purpose permitted under the terms of items (a), (b), (c), or (d) of
this Subsection A, and also, in respect of item (e), upon receipt of an
officers' certificate and a certified copy of a resolution of the Board
specifying the amount of such payment, setting forth the purpose for which such
payment is to be made, declaring such purpose to be a proper corporate purpose,
and naming the person or persons to whom such payment is to be made, provided,
however, that an officers' certificate and a certified copy of a resolution of
the Board need not precede the disbursement of cash for the purpose of
purchasing a money market instrument, or any other security with same or
next-day settlement, if the President, a Vice President, the Secretary or the
Treasurer of the Fund issues appropriate oral or facsimile instructions to
Custodian and an appropriate officers' certificate and a certified copy of a
resolution of the Board is received by Custodian within two business days
thereafter.
B. Custodian is hereby authorized to endorse and collect all
checks, drafts or other orders for the payment of money received by Custodian
for the account of the Fund.
<PAGE>
C. Custodian shall, upon receipt of proper instructions, make
federal funds available to the Fund as of specified times agreed upon from time
to time by the Fund and the custodian in the amount of checks received in
payment for shares of the Fund which are deposited into the Fund's account.
4. SEGREGATED ACCOUNTS
Custodian shall hold in a separate account, and physically
segregate at all times from those of any other persons, firms or corporations,
pursuant to the provisions hereof, all securities and other investments other
than cash and cash equivalents received by it for, or for the account of, the
Fund. All such securities and other investments are to be held or disposed of by
Custodian for, and subject at all times to the instructions of, the Fund
pursuant to the terms of this Agreement. Custodian shall have no power or
authority to assign, hypothecate, pledge or otherwise dispose of any such
securities or other investments, except pursuant to the directive of the Fund
and only for the account of the Fund as set forth in Section 5 of this
Agreement.
5. TRANSFER, EXCHANGE, REDELIVERY, ETC. OF SECURITIES
Custodian shall have sole power to release or deliver any
securities of the Fund held by it pursuant to this Agreement. Custodian agrees
to transfer, exchange or deliver securities held by it hereunder only:
(a) for sales of such securities for the account of the Fund
upon receipt by Custodian of payment therefor;
(b) when such securities are called, redeemed or retired or
otherwise become payable;
(c) for examination by any broker selling any such securities
in accordance with "street delivery" custom;
(d) in exchange for, or upon conversion into, other securities
alone or other securities and cash whether pursuant to any
plan or merger, consolidation, reorganization,
recapitalization or readjustment, or otherwise;
(e) upon conversion of such securities pursuant to their terms
into other securities;
(f) upon exercise of subscription, purchase or other similar
rights represented by such securities;
(g) for the purpose of exchanging interim receipts or
temporary securities for definitive securities;
(h) for the purpose of redeeming in kind shares of beneficial
interest of the Fund upon delivery thereof to Custodian;
or
(i) for other proper corporate purposes.
<PAGE>
As to any deliveries made by Custodian pursuant to items (a),
(b), (d), (e), (f), and (g), securities or cash receivable in exchange therefore
shall be deliverable to Custodian.
Before making any such transfer, exchange or delivery, Custodian
shall receive (and may rely upon) an officers' certificate requesting such
transfer, exchange or delivery, and stating that it is for a purpose permitted
under the terms of items (a), (b), (c), (d), (e), (f), (g), or (h) of this
Section 5 and also, in respect of item (i), upon receipt of an officers'
certificate and a certified copy of a resolution of the Board specifying the
securities to be delivered, setting forth the purpose for which such delivery is
to be made, declaring such purpose to be a proper corporate purpose, and naming
the person or persons to whom delivery of such securities shall be made,
provided, however, that an officers' certificate and a certified copy of a
resolution of the Board need not precede any such transfer, exchange or delivery
of a money market instrument, or any other security with same or next-day
settlement, if the President, a Vice President, the Secretary or the Treasurer
of the Fund issues appropriate oral or facsimile instructions to Custodian and
an appropriate officers' certificate and a certified copy of a resolution of the
Board is received by Custodian within two business days thereafter.
6. CUSTODIAN'S ACTS WITHOUT INSTRUCTIONS
Unless and until Custodian receives an officers' certificate to
the contrary, Custodian shall: (a) present for payment all coupons and other
income items held by it for the account of the Fund, which call for payment upon
presentation and hold the cash received by it upon such payment for the account
of the Fund; (b) collect interest and cash dividends received, with notice to
the Fund, for the account of the Fund; (c) hold for the account of the Fund
hereunder all stock dividends, rights and similar securities issued with respect
to any securities held by it thereunder; and (d) execute, as agent on behalf of
the Fund, all necessary ownership certificates required by the Internal Revenue
Code or the Income Tax Regulations of the United States Treasury Department or
under the laws of any state now or hereafter in effect, inserting the Fund's
name on such certificates as the owner of the securities covered thereby, to the
extent it may lawfully do so.
7. REGISTRATION OF SECURITIES
Except as otherwise directed by an officers' certificate,
Custodian shall register all securities, except such as are in bearer form, in
the name of a registered nominee of Custodian as defined in the Internal Revenue
Code and any Regulations of the Treasury Department issued hereunder or in any
provision of any subsequent federal tax law exempting such transaction from
liability for stock transfer taxes, and shall execute and deliver all such
certificates in connection therewith as may be required by such laws or
regulations or under the laws of any state. Custodian shall use its best efforts
to the end that the specific securities held by it hereunder shall be at all
times identifiable in its records.
The Fund shall from time to time furnish to Custodian appropriate
instruments to enable Custodian to hold or deliver in proper form for transfer,
or to register in the name of its registered nominee, any securities which it
may hold for the account of the Fund and which may from time to time be
registered in the name of the Fund.
8. VOTING AND OTHER ACTION
Neither Custodian nor any nominee of Custodian shall vote any of
the securities held hereunder by or for the account of the Fund, except in
accordance with the instructions contained in an officers' certificate.
Custodian shall promptly deliver, or cause to be executed and delivered, to the
Corporation all notices, proxies and proxy soliciting materials with relation to
such securities, such proxies to be executed by the registered holder of such
securities (if registered otherwise than in the name of the Fund), but without
indicating the manner in which such proxies are to be voted.
Custodian shall transmit promptly to the Fund all written
information (including, without limitation, pendency of calls and maturities of
securities and expirations of rights in connection therewith) received by
Custodian from issuers of the securities being held for the Fund. With respect
to tender or exchange offers, Custodian shall transmit promptly to the Fund all
written information received by Custodian from issuers of the securities whose
tender or exchange is sought and from the party (or his agent) making the tender
or exchange offer.
9. TRANSFER TAX AND OTHER DISBURSEMENTS
The Fund shall pay or reimburse Custodian from time to time for
any transfer taxes payable upon transfers of securities made hereunder, and for
all other necessary and proper disbursements and expenses made or incurred by
Custodian in the performance of this Agreement.
Custodian shall execute and deliver such certificates in
connection with securities delivered to it or by it under this Agreement as may
be required under the provisions of the Internal Revenue Code and any
Regulations of the Treasury Department issued thereunder, or under the laws of
any state, to exempt from taxation any exemptable transfers and/or deliveries of
any such securities.
<PAGE>
10. CONCERNING CUSTODIAN
Custodian shall be paid as compensation for its services pursuant
to this Agreement such compensation as may from time to time be agreed upon in
writing between the two parties. Until modified in writing, such compensation
shall be as set forth in Exhibit A attached hereto.
Custodian shall not be liable for any action taken in good faith
upon any certificate herein described or certified copy of any resolution of the
Board, and may rely on the genuineness of any such document which it may in good
faith believe to have been validly executed.
Custodian shall use reasonable care in providing services to the
Fund pursuant to this Agreement. The Fund agrees to indemnify and hold harmless
Custodian and its nominee from all taxes, charges, expenses, assessments, claims
and liabilities (including counsel fees) incurred or assessed against it or by
its nominee in connection with the performance of this Agreement, except such as
may arise from its or its nominee's own negligent action, negligent failure to
act or willful misconduct. Custodian is authorized to charge any account of the
Fund for such items.
In the event of any advance of cash for any purpose made by
Custodian resulting from orders or instructions of the Fund, or in the event
that Custodian or its nominee shall incur or be assessed any taxes, charges,
expenses, assessments, claims or liabilities in connection with the performance
of this Agreement, except such as may arise from its or its nominee's own
negligent action, negligent failure to act or willful misconduct, any property
at any time held for the account of the Fund shall be security therefore.
Custodian agrees to indemnify and hold harmless the Fund or their nominees from
all charges, expenses, assessments, claims and liabilities (including counsel
fees) incurred or assessed against the fund or their nominees in connection with
the performance of this agreement, except such as may arise from the Fund's, or
their nominees own negligent action, negligent failure to act, or willful
misconduct.
11. FOREIGN SUBCUSTODIANS
Custodian is hereby authorized to assign as subcustodians for the
Fund's securities and other assets maintained outside the United States the
foreign banking institutions and foreign securities depositories designated on
Schedule B hereto ("Foreign Subcustodians"), provided that, if the Custodian
utilizes the services of a Foreign Subcustodian, the Custodian shall remain
fully liable and responsible for any losses caused to the Fund by the Foreign
Subcustodian as fully as if the Custodian was directly responsible for any such
losses under the terms of this Agreement. Upon receipt of proper instructions
from the Fund, together with a certified resolution of the Board, Custodian and
the Fund may agree to amend Schedule B hereto from time to time to designate
additional foreign banking institutions and foreign securities depositories to
act as Foreign Subcustodians. Upon receipt of proper instructions from
Custodian, the Fund may instruct Custodian to cease the employment of any one or
more Foreign Subcustodians for maintaining custody of the Fund's assets.
Custodian shall limit the securities and other assets maintained
in the custody of Foreign Subcustodians to the following: (a) "foreign
securities," as defined in paragraph (c)(1) of Rule 17f-5 under the Investment
Company Act of 1940, as amended (the "1940 Act"); and (b) cash and cash
equivalents in such amounts as custodian or the Fund may determine to be
reasonably necessary to effect the Fund's foreign securities transactions.
Custodian shall identify on its books and records as belonging to the Fund, the
foreign securities of the Fund held by each Foreign Subcustodian.
Notwithstanding anything contained herein, if the Fund requires
the Custodian to engage specific Foreign Subcustodians for the safekeeping
and/or clearing of assets, the Fund agrees to indemnify and hold harmless
Custodian from all claims, expenses and liabilities incurred or assessed against
it in connection with the use of such Foreign Subcustodian in regard to the
Fund's assets, except as may arise from the Custodian's or the Foreign
Subcustodian's negligent action, negligent failure to act or willful misconduct.
<PAGE>
12. REPORTS BY CUSTODIAN
Custodian shall furnish the Fund daily with a statement
summarizing all transactions and entries for the account of Fund. Custodian
shall furnish to the Fund, at the end of every month, a list of the portfolio
securities showing the adjusted average cost of each issue and the market value
at the end of such month. Custodian shall furnish the Fund, at the close of each
quarter of the Fund's fiscal year, with a list showing cost and market values of
the securities held by it for the Fund hereunder, adjusted for all commitments
confirmed by the Fund as of such close, certified by a duly authorized officer
of Custodian. The books and records of Custodian pertaining to its actions under
this Agreement shall be open to inspection and audit at reasonable times by
officers of, and of auditors employed by, the Fund.
13. TERMINATION OR ASSIGNMENT
This Agreement may be terminated by the Fund, or by Custodian, on
sixty (60) days notice, given in writing and sent by registered mail to
Custodian at P.O. Box 2054, Milwaukee, Wisconsin 53201, or to the Fund at The
Internet Fund/Kinetics Asset Management, Inc., 344 Van Buren Street North
Babylon, NY 11704 as the case may be. Upon any termination of this Agreement,
pending appointment of a successor to Custodian or a vote of the shareholders of
the Fund to dissolve or to function without a custodian of its cash, securities
and other property, Custodian shall not deliver cash, securities or other
property of the Fund to the Fund, but may deliver them to a bank or trust
company of its own selection, having an aggregate capital, surplus and undivided
profits, as shown by its last published report of not less than Two Million
Dollars ($2,000,000) as a Custodian for the Fund to be held under terms similar
to those of this Agreement; provided, however, that Custodian shall not be
required to make any such delivery or payment until full payment shall have been
made by the Fund of all liabilities constituting a charge on or against the
properties then held by Custodian or on or against Custodian, and until full
payment shall have been made to Custodian of all its fees, compensation, costs
and expenses, subject to the provisions of Section 10 of this Agreement.
<PAGE>
This Agreement may not be assigned by Custodian without the
consent of the Fund, authorized or approved by a resolution of its Board Of
Directors.
14. DEPOSITS OF SECURITIES IN SECURITIES DEPOSITORIES
No provision of this Agreement shall be deemed to prevent the use
by Custodian of a central securities clearing agency or securities depository,
provided, however, that Custodian and the central securities clearing agency or
securities depository meet all applicable federal and state laws and
regulations, and the Board Of Directors of the Fund approves by resolution the
use of such central securities clearing agency or securities depository.
15. RECORDS
To the extent that Custodian in any capacity prepares or
maintains any records required to be maintained and preserved by the Fund
pursuant to the provisions of the Investment Company Act of 1940, as amended, or
the rules and regulations promulgated thereunder, Custodian agrees to make any
such records available to the Fund upon request and to preserve such records for
the periods prescribed in Rule 31a-2 under the Investment Company Act of 1940,
as amended.
Trustees and shareholders shall not be personally liable for
obligations of the Fund in connection with any matter arising from or in
connection with this agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed and their respective corporate seals to be affixed hereto as of
the date first above-written by their respective officers thereunto duly
authorized.
Executed in several counterparts, each of which is an original.
16. Firstar Bank Milwaukee, LLC, assumes no responsibilities for work on the
Internet Fund that was performed prior to our servicing begun.
Kinetics Asset Management Firstar Bank Milwaukee, N.A.
Sign: /s/ Margaret B. Doyle Sign: /s/ Joe D. Redwine
Print: Margaret B. Doyle Print: Joe D. Redwine
Title: President Title: Senior Vice President
Date: 2/17/99 Date: 2/26/99
Attest: /s/ Francis J. Alexander Attest: /s/ Paul Rock
DISTRIBUTION AGREEMENT
between
The Internet Fund
and
T. 0. Richardson Securities, Inc.
THIS AGREEMENT is made effective as of the 15th day of April, 1999, by
and between The Internet Fund, a New York Corporation (the "Fund") and T.O.
Richardson Securities, a corporation organized and existing under the laws of
the State of Connecticut ("TORS").
WHEREAS the Fund is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end management investment company,
and will register one or more distinct series of shares of beneficial interest
("Shares") for sale to the public under the Securities Act of 1933, as amended
(the "1933 Act"), and will qualify its shares for sale to the public under
various state securities laws; and
WHEREAS, TORS is registered as a broker-dealer under the Securities
Exchange Act of 1934, as amended (the "1934 Act") and under each state's
securities laws, and is also a member of the National Association of Securities
Dealers, Inc. (the "NASD"); and
WHEREAS the Fund desires to retain TORS as principal underwriter and
national distributor in connection with the offering and sale of the Shares of
each series listed on Schedule A (as amended from time to time) to this
Agreement and TORS is willing to act as principal underwriter and national
distributor for the Fund on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Fund hereby appoints TORS as its agent to be the
principal underwriter and national distributor of its Shares and to hold itself
out as available to receive and accept orders for the purchase and redemption of
the Shares on behalf of the Fund, subject to the terms and for the period set
forth in this Agreement. TORS hereby accepts such appointment and agrees to act
hereunder. The Fund understands that any solicitation activities conducted on
behalf of the Fund will be conducted primarily by employees of the Fund's
sponsor who shall become registered representatives of TORS
2. Services and Duties of TORS
(a) TORS agrees to distribute Shares on a best efforts basis from time
to time during the term of this Agreement as agent for the Fund and upon the
terms described in the Registration Statement. As used in this Agreement, the
term "Registration Statement" shall mean the currently effective registration
statement of the Fund, and any supplements thereto, under the 1933 Act and the
1940 Act.
(b) TORS, with the operational assistance of the Fund's transfer agent,
will hold itself available to receive purchase and redemption orders
satisfactory to T.O.R for shares and will accept such orders on behalf of the
Fund. Such purchase orders shall be deemed effective at the time and in the
manner set forth in the Registration Statement.
(c) TORS, with the operational assistance of the Fund's transfer agent,
shall make Shares available through the National Securities Clearing
Corporation's Fund/SERV System.
(d) TORS and its registered personnel shall provide to investors and
potential investors only such information regarding the Fund as the Fund shall
provide or approve. TORS shall review and file all proposed advertisements and
sales literature with regulators, as appropriate, and consult with the Fund
regarding any comments provided by regulators with respect to such materials.
(e) The offering price of the Shares shall be the price determined in
accordance with, and in the manner set forth in, the most-current Prospectus.
The Fund shall make available to TORS a statement of each computation of net
asset value and the details of entering into such computation.
(f) TORS in its sole discretion may repurchase Shares offered for sale
by the shareholders. Repurchase of Shares by TORS shall be at the price
determined in accordance with, and in the manner set forth in, the most current
Prospectus. At the end of each business day, T.O.R shall notify, by any
appropriate means, the Fund and its transfer agent of the orders for repurchase
of Shares received by TORS since the last such report, the amount to be paid for
such Shares, and the identity of the shareholders offering Shares for
repurchase. The Fund reserves the right to suspend such repurchase right upon
written notice to TORS. TORS further agrees to act as agent for the Fund to
receive and transmit promptly to the Fund's transfer agent shareholder requests
for redemption of Shares.
(g) TORS shall not be obligated to sell any certain number of Shares.
(h) TORS shall prepare reports for the Board regarding its activities
under this Agreement as from time to time shall be reasonably requested by the
Board.
(i) TORS shall at all times during the term of this Agreement remain
registered as a broker-dealer under the 1934 Act and with all 50 states, and
shall also remain a member in good standing of the NASD. TORS shall immediately
notify the Fund in writing if it receives written notification that such
registrations or membership have been temporarily or permanently suspended,
limited or terminated.
(j) TORS will serve as licensing/regulatory agent for employees and
other personnel of the Fund's sponsor, Kinetics Asset Management, Inc., who will
be registered as TORS broker-dealer representatives.
<PAGE>
3. Duties of the Fund.
(a) The Fund shall keep TORS fully informed of its affairs and shall
provide to TORS from time to time copies of all information, financial
statements, and other papers that TORS may reasonably request for use in
connection with the distribution of Shares, including, without limitation,
certified copies of any financial statements prepared for the Fund by its
independent public accountant and such reasonable number of copies of the most
current Prospectus, Statement of Additional Information ("SAI"), and annual and
interim reports as TORS may request, and the Fund shall fully cooperate in the
efforts of TORS to distribute and arrange for the distribution of Shares.
(b) The Fund shall maintain a currently effective Registration
Statement on Form N-1A with the Securities and Exchange Commission (the "SEC"),
satisfy proper notice filing and fee payment provisions of applicable states and
file such reports and other documents as may be required under applicable
federal and state laws. The Fund shall notify TORS in writing of the states in
which the Shares may be sold and shall notify TORS in writing of any changes to
such information. The Fund shall bear all expenses related to preparing and
typesetting such Prospectuses, SAI and other materials required by law and such
other expenses, including printing and mailing expenses, related to the Fund's
communication with persons who are shareholders.
(c) The Fund shall not use any advertisements or other sales materials
that have not been (i) submitted to TORS for its review and approval, and (ii)
if required, filed with the appropriate regulators.
(d) The Fund represents and warrants that its Registration Statement
and any advertisements and sales literature (excluding statements relating to
TORS and the services it provides that are based upon written information
furnished by TORS expressly for inclusion therein) of the Fund shall not contain
any untrue statement of material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading, and that all statements or information furnished to TORS pursuant to
Section 3(a) hereof, shall be true and correct in all material respects.
4. Other Fund Operating Agreements. The Fund and TORS further agree
that the Fund has entered into the Fund Administrative Servicing Agreement, Fund
Accounting Servicing Agreement, Transfer Agent Servicing Agreement, Custodian
Servicing Agreement, and Fulfillment Services Agreement with Firstar Mutual Fund
Services, LLC of Milwaukee, Wisconsin ("FMFS"), copies of which are in the hands
of the parties hereto and to which reference may be had (which agreements are
herein collectively referred to as the "Fund Operating Agreements.") The Fund
agrees to maintain the Fund Operating Agreements in effect during the term of
this Agreement. The parties hereto agree that TORS is a third party beneficiary
to the Fund Operating Agreements and that portions of the duties and services to
be provided by TORS hereunder can be performed by FMFS for TORS' and the Fund's
benefit. The Fund shall be responsible for all amounts due under the Fund
Operating Agreements and TORS shall not be responsible for duplication of duties
or services provided for in the Fund Operating Agreements or any fees or
expenses thereunder.
5. Other Broker-Dealers. TORS in its discretion shall enter into
agreements to sell Shares to such registered and qualified retail dealers, as
reasonably requested by the Fund. In making agreements with such dealers, TORS
shall act only as principal and not as agent for the Fund. The form of any such
dealer agreement shall be mutually agreed upon and approved by the Fund and
TORS.
6. Withdrawal of Offering. The Fund reserves the right at any time to
withdraw all offerings of any or all Shares by written notice to TORS at its
principal office. No Shares shall be offered by either TORS or the Fund under
any provisions of this Agreement and no orders for the purchase of Shares
hereunder shall be accepted by the Fund if and so long as effectiveness of the
Registration Statement then in effect or any necessary amendments thereto shall
be suspended under any of the provisions of the 1933 Act, or if and so long as a
current prospectus as required by Section 5(b)(2) of the 1933 Act is not on file
with the SEC.
7. Services Not Exclusive. The services furnished by TORS hereunder are
not to be deemed exclusive. TORS shall be free to furnish similar services to
others so long as its services under this Agreement are not impaired thereby.
The Fund reserves the right to (i) sell Shares to investors on applications
received and accepted by the Fund; (ii) issue Shares in connection with a
merger, consolidation, or recapitalization of the Fund; (iii) issue additional
Shares to holders of Shares; or (iv) issue Shares in connection with any offer
of exchange permitted by Section 11 of the 1940 Act.
8. Expenses of the Fund. The Fund shall bear all costs and expenses of
registering the Shares with the SEC and state and other regulatory bodies, and
shall assume expenses related to communications with shareholders of the Fund
including, but not limited to, (i) fees and disbursements of its counsel and
independent public accountant; (ii) the preparation, filing, and printing of
Registration Statements and/or Prospectuses or SAIs; (iii) the preparation and
mailing of annual and interim reports, Prospectuses, SAIs, and proxy materials
to shareholders; (iv) such other expenses related to the communications with
persons who are shareholders of the Fund; and (v) the qualifications of Shares
for sale under the securities laws of such jurisdictions as shall be selected by
the Fund pursuant to the Paragraph 3(b) hereof, and the costs and expenses
payable to each jurisdiction for continuing qualification therein. In addition,
the Fund shall bear all costs of preparing, printing, mailing, and filing any
advertisements and sales literature. TORS does not assume responsibility for any
expenses not assumed hereunder.
9. Compensation. As compensation for the services performed and the
expenses assumed by TORS under this Agreement including, but not limited to, any
commissions paid for sales of Shares, TORS shall be entitled to the fees and
expenses set forth in Schedule B to this Agreement which are payable promptly
after the last day of each month. Such fees shall be paid to TORS by the Fund
pursuant to its Rule 12b-1 plan or, if Rule 12b-1 payments are not sufficient to
pay such fees and expenses, or if the Rule 12b-1 plan is discontinued, or if the
Fund's sponsor, Kinetics Asset Management, Inc. otherwise determines that Rule
12b-1 fees shall not, in whole or in part, be used to pay TORS, Kinetics Asset
Management, Inc. shall be responsible for the payment of the amount of such fees
not covered by Rule 12b-1 payments. Kinetics Asset Management, Inc. will arrange
for the monthly payment to be paid directly from their advisory fee by Firstar's
Fund Administration and Compliance department until such time that a 12b-1 plan
is in effect.
10. Status of TORS. TORS is an independent contractor and shall be
agent of the Fund only with respect to the sale and redemption of Shares.
11. Indemnification.
(a) The Fund agrees to indemnify, defend, and hold TORS, its officers,
and directors, and any person who controls TORS within the meaning of Section 15
of the 1933 Act, free and harmless from and against any and all claims, demands,
or liabilities, and expenses (including the cost of investigating or defending
such claims, demands, liabilities, and any counsel fees incurred in connection
therewith) that TORS, its officers and directors, or any such controlling person
may incur under the 1933 Act, or under common law or otherwise, arising out of
or based upon any (i) alleged untrue statement of a material fact contained in
the Registration Statement, Prospectus, SAI, or sales literature; (ii) alleged
omission to state a material fact required to be stated in the Fund's
registration statement or necessary to make the statements therein not
misleading; or (iii) failure by the Fund to comply with the terms of the
Agreement; provided, that in no event shall anything contained herein be so
construed as to protect TORS against any liability to the Fund or its
shareholders to which TORS would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of its duties or
by reason of its reckless disregard of its obligations under this Agreement.
(b) The Fund shall not be liable to TORS under this Agreement with
respect to any claim made against TORS or any person indemnified unless TORS or
other such person shall have notified the Fund in writing of the claim within a
reasonable time after the summons or other first written notification giving
information of the nature of the claim shall have been served upon TORS or such
other person (or after TORS or other person shall have received notice of
service on any designated agent). However, failure to notify the Fund of any
claim shall not relieve the Fund from any liability that it may have to TORS or
any person against whom such action is brought otherwise than on account of this
Agreement.
(c) The Fund shall be entitled to participate at its own expense in the
defense or, if it so elects, to assume the defense of any suit brought to
enforce any claims subject to this Agreement. If the Fund elects to assume the
defense of any such claim, the defense shall be conducted by counsel chosen by
the Fund and satisfactory indemnified defendants in the suit whose consent shall
not be unreasonably withheld. In the event that the Fund elects to assume the
defense of any suit and retain counsel, the indemnified defendants shall bear
the fees and expenses of any additional counsel retained by them. If the Fund
does not elect to assume the defense of a suit, it will reimburse the
indemnified defendants for the reasonable fees and expenses of any counsel
retained by the indemnified defendants. The Fund agrees to promptly notify TORS
of the commencement of any litigation or proceedings against it or any of its
officers and directors in connection with the issuance or sale of any of its
Shares.
(d) TORS agrees to indemnify, defend, and hold the Fund, its officers
and directors, and any person who controls the Fund within the meaning of
Section 15 of the 1933 Act, free and harmless from and against any and all
claims, demands, liabilities, and expenses (including the cost of investigating
or defending against such claims, demands, or liabilities, and any counsel fees
incurred in connection therewith) that the Fund, its directors and officers, or
any such controlling person may incur under the 1933 Act, or under common law or
otherwise, resulting from TORS' willful misfeasance, bad faith, or gross
negligence in the performance of its obligations and duties under this
Agreement, or arising out of or based upon any alleged untrue statement of a
material fact contained in information furnished in writing by TORS to the Fund
for use in the Registration Statement, Prospectus, or SAI arising out of or
based upon any alleged omission to state a material fact in connection with such
information required to be stated in any such document or necessary to make such
information not misleading.
(e) TORS shall be entitled to participate, at its own expense, in the
defense or, if it so elects, to assume the defense of any suit brought to
enforce the claim, but if TORS elects to assume the defense, the defense shall
be conducted by counsel chosen by TORS and satisfactory to the indemnified
defendants whose approval shall not be unreasonably withheld. In the event that
TORS elects to assume the defense of any suit and retain counsel, the defendants
in the suit shall bear the fees and expenses of any additional counsel retained
by them. If TORS does not elect to assume the defense of any suit, it will
reimburse the indemnified defendants in the suit for the reasonable fees and
expenses of any counsel retained by them.
12. Duration and Termination.
(a) This Agreement shall become effective on the date first written
above or such later date as indicated in Schedule A and, will continue in effect
for a minimum of one year from the above written date. Thereafter, if not
terminated, this Agreement shall continue in effect for successive annual
periods, provided that such continuance is specifically approved at least
annually (i) by a vote of a majority of the Fund's Board who are neither
interested persons (as defined in the 1940 Act) of the Fund ("Independent
Trustees") or TORS cast in person at a meeting called for the purpose of voting
on such approval, and (ii) by the Board or by vote of a majority of the
outstanding voting securities of the Fund.
(b) Notwithstanding the foregoing, this Agreement may be terminated in
its entirety at any time, without the payment of any penalty, by vote of the
Board, by vote of a majority of the Independent Trustees, or by vote of a
majority of the outstanding voting securities of the Fund on sixty days' written
notice to TORS or by TORS at any time, without the payment of any penalty, on
sixty days' written notice to the Fund. This Agreement will automatically
terminate in the event of its assignment.
13. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged, or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge, or termination is sought. This Agreement may be amended with the
approval of the Board or of a majority of the outstanding voting securities of
the Fund; provided, that in either case, such amendment also shall be approved
by a majority of the Independent trustees/directors.
14. Limitation of Liability. The Board and shareholders of the Fund
shall not be personally liable for obligations of the Fund in connection with
any matter arising from or in connection with this Agreement. This Agreement is
not binding upon any trustee, officer, or shareholder of the Fund individually,
and no such person shall be individually liable with respect to any action or
inaction resulting from this Agreement.
15. Notice. Any notice required or permitted to be given by either
party to the other shall be deemed sufficient upon receipt in writing at the
other party's principal offices.
16. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule, or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors. As used in this
Agreement, the terms "majority of the outstanding voting securities,"
"interested person," and "assignment" shall have the same meaning as such terms
have in the 1940 Act.
17. Governing Law. This Agreement shall be construed in accordance with
the laws of the State of New York and the 1940 Act (without regard, however, to
the conflicts of law principles). To the extent that the applicable laws of the
state of New York conflict with the applicable provisions of the 1940 Act, the
latter shall control.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated as of the day and year first above
written.
The Internet Fund/Kinetics T. O. Richardson Securities, Inc.
Asset Management, Inc.
By: /s/ Margaret B. Doyle By: /s/ Sam Bailey
Print: Margaret B. Doyle Print: Sam Bailey
Title: President Title: President
Date: 4/15/99 Date: 4/15/99
Attest: Francis J. Alexander Attest: Katie Russo
<PAGE>
SCHEDULE A
to the
DISTRIBUTION AGREEMENT
between
The Internet Fund
and
T.O. Richardson Securities, Inc.
Pursuant to Section 1 of the Distribution Agreement between The
Internet Fund ("Fund") and T.O. Richardson Securities ("TORS"), the Fund hereby
appoints TORS as its agent to be the principal underwriter of Fund with respect
to its following series:
The Internet Fund
Dated: April 15, 1999
<PAGE>
SCHEDULE B
to the
DISTRIBUTION AGREEMENT
between
The Internet Fund
and
T.O. Richardson Securities, Inc.
As compensation pursuant to Section 9 of the Distribution Agreement
between The Internet Fund ("Fund") and T.O. Richardson Securities, Inc.
("TORS"), the Fund shall pay to TORS the sum of :
1. an annual fee of $16,000 for the first series of the Fund and
$12,000 for each series or class thereafter or .01% (1 basis
point) of the average daily net assets of each series,
computed daily and paid monthly, whichever is greater;
2. an annual compliance fee of $500 for each employee of the
Fund's investment adviser who is designated by the Fund to
become a series 6 or series 7 registered representative of
TORS (compliance costs for other types of licenses may vary) ,
as well as the ongoing license fees and incidental costs
associated with such registrations;
3. the compensation paid by TORS to such registered
representatives in accordance with compensation schedules, as
agreed upon by TORS and the Fund from time to time;
4. the reasonable fees associated with listing and maintaining
shares on the National Securities Clearing Corporation's
Fund/SERV System, on a "pass through" basis, as agreed upon by
TORS and the Fund and as reflected in the attached NSCC fee
schedule, which may change without notice; and
5. incidental expenses associated with printing and distribution
advertising and sales literature;
6. fees for legal review of advertisements and sales literature
at the rate of $150 per job for the first ten pages of an
advertisement and $20 per page thereafter, plus NASD filing
fees which are billed on an out of pocket basis;
7. plus out of pocket expenses including, but not limited to
travel Expenses and retention of records.
Dated: April 15, 1999
EXHIBIT (h)(1)
FUND ADMINISTRATION SERVICING AGREEMENT
This Agreement is made and entered into on this fifteenth day of February, 1999,
by and between Kinetics Asset Management, Inc., a New York Corporation
consisting of The Internet Fund (hereinafter referred to as the "Fund") and
Firstar Mutual Fund Services, LLC, a corporation organized under the laws of the
State of Wisconsin (hereinafter referred to as "FMFS").
WHEREAS, The Fund are an open-ended management investment companies which are
registered under the Investment Company Act of 1940;
WHEREAS, FMFS is a LLC and, among other things, is in the business of providing
fund administration services for the benefit of its customers;
NOW, THEREFORE, the Fund and FMFS do mutually promise and agree as follows:
I. Appointment of Administrator
The Fund hereby appoints FMFS as Administrator of the Fund on the terms
and conditions set forth in this Agreement, and FMFS hereby accepts
such appointment and agrees to perform the services and duties set
forth in this Agreement in consideration of the compensation provided
for herein.
II. Duties and Responsibilities of FMFS
A. General Fund Management
1. Act as liaison among all fund service providers
2. Coordinate board communication by:
a. Assisting fund counsel in establishing meeting agendas
b. Preparing board reports based on financial and
administrative data
c. Evaluating independent auditor
d. Securing and monitoring fidelity bond and director and
officers liability coverage, and
making the necessary SEC filings relating thereto
e. record board minutes
3. Audits
a. Prepare appropriate schedules and assist independent
auditors
b. Provide information to SEC and facilitate audit
process
c. Provide office facilities
4. Assist in overall operations of the Fund
<PAGE>
B. Compliance
1. Regulatory Compliance
a. Monthly, quarterly and intra month spot checks as
needed to monitor compliance with
Investment Company Act of 1940 requirements
1) Asset diversification tests
2) Total return and SEC yield calculations
3) Maintenance of books and records under Rule 31a-3
4) Code of ethics
b. Periodically monitor Fund's compliance with the
policies and investment limitations of
the Fund as set forth in its prospectus and statement
of additional information
2. Blue Sky Compliance
a. Prepare and file with the appropriate state securities
authorities any and all required compliance filings
(including initial filings) relating to the
registration of the securities of the Funds so as to
enable the Funds to make a continuous offering of its
shares
b. Monitor status and maintain registrations in each
state
3. SEC Registration and Reporting
a. Update prospectus and statement of additional
information; proxy statements, and
Rule 24f-2 notice. Submit to firm's counsel as needed.
b. Prepare Annual and semiannual reports
4. IRS Compliance
a. Monthly, quarterly and intra month spot checks as
needed to monitor the Fund's status as a regulated
investment company under Subchapter M through review
of the following:
1) Asset diversification requirements
2) Qualifying income requirements
3) Distribution requirements
b. Monitor short short testing
c. Calculate required distributions (including excise tax
distributions)
<PAGE>
C. Financial Reporting
1. Provide financial data required by the fund's prospectus and
statement of additional information
2. Prepare financial reports for shareholders, the board, the
SEC, and independent auditors
3. Supervise the Fund's Custodian and Fund Accountants in the
maintenance of the Fund's general ledger and in the
preparation of the Fund's financial statements including
oversight of expense accruals and payments, of the
determination of net asset value of the Fund's net assets
and of the Fund's shares, and of the declaration and payment
of dividends and other distributions to shareholders
D. Tax Reporting
1. Prepare and file on a timely basis appropriate federal and
state tax returns including forms 1120/8610 with any
necessary schedules
2. Prepare state income breakdowns where relevant
3. File 1099 Miscellaneous for payments to directors and other
service providers
4. Monitor wash losses
5. Calculate eligible dividend income for corporate
shareholders
III. Compensation
The Fund agrees to pay FMFS for performance of the duties listed in
this Agreement and the fees and out-of-pocket expenses as set forth in
the attached Schedule A.
These fees may be changed from time to time, subject to mutual written
Agreement between the Fund and FMFS.
The Fund agrees to pay all fees and reimbursable expenses within ten
(10) business days following the mailing of the billing notice.
IV. Additional Series
In the event that Kinetics Asset Management a New York Corporation
which is organized as a series fund currently offering one fund: The
Internet Fund, establishes one or more series of shares with respect to
which it desires to have FMFS render fund administration services,
under the terms hereof, it shall so notify FMFS in writing, and if FMFS
agrees in writing to provide such services, such series will be subject
to the terms and conditions of this Agreement, and shall be maintained
and accounted for by FMFS on a discrete basis. The fund currently
covered by this Agreement is The Internet Fund.
<PAGE>
V. Performance of Service; Limitation of Liability
A. FMFS shall exercise reasonable care and to act in good faith
in the performance of its duties under this Agreement. FMFS shall not
be liable for any error of judgment or mistake of law or for any loss
suffered by the Fund in connection with matters to which this Agreement
relates, including losses resulting from mechanical breakdowns or the
failure of communication or power supplies beyond FMFS's control,
except a loss resulting from FMFS's refusal or failure to comply with
the terms of this Agreement or from bad faith, negligence, or willful
misconduct on its part in the performance of its duties under this
Agreement. Notwithstanding any other provision of this Agreement, the
Fund shall indemnify and hold harmless FMFS from and against any and
all claims, demands, losses, expenses, and liabilities (whether with or
without basis in fact or law) of any and every nature (including
reasonable attorneys' fees) which FMFS may sustain or incur or which
may be asserted against FMFS by any person other than the Fund arising
out of any action taken or omitted to be taken by it in performing the
services hereunder (i) in accordance with the foregoing standards, or
(ii) in reliance upon any written or oral instruction for a proper
corporate purpose provided to FMFS by any duly authorized officer of
the Fund, such duly authorized officer to be included in a list of
authorized officers furnished to FMFS and as amended from time to time
in writing by resolution of the Board of Directors of the Fund.
In the event of a mechanical breakdown or failure of
communication or power supplies beyond its control, FMFS shall take all
reasonable steps to minimize service interruptions for any period that
such interruption continues beyond FMFS's control. FMFS will make every
reasonable effort to restore any lost or damaged data and correct any
errors resulting from such a breakdown at the expense of FMFS. FMFS
agrees that it shall, at all times, have reasonable contingency plans
with appropriate parties, making reasonable provision for emergency use
of electrical data processing equipment to the extent appropriate
equipment is available. Representatives of the Funds shall be entitled
to inspect FMFS's premises and operating capabilities at any time
during regular business hours of FMFS, upon reasonable notice to FMFS.
Regardless of the above, FMFS reserves the right to
reprocess and correct administrative errors at its own expense.
B. In order that the indemnification provisions contained in this
section shall apply, it is understood that if in any case the Fund may
be asked to indemnify or hold FMFS harmless, the Fund shall be fully
and promptly advised of all pertinent facts concerning the situation in
question, and it is further understood that FMFS will use all
reasonable care to notify the Fund promptly concerning any situation
which presents or appears likely to present the probability of such a
claim for indemnification against the Fund. The Fund shall have the
option to defend FMFS against any claim which may be the subject of
this indemnification. In the event that the Fund so elects, it will so
notify FMFS and thereupon the Fund shall take over complete defense of
the claim, and FMFS shall in such situation initiate no further legal
or other expenses for which it shall seek indemnification under this
section. FMFS shall in no case confess any claim or make any compromise
in any case in which the Fund will be asked to indemnify FMFS except
with the Fund's prior written consent.
<PAGE>
C. FMFS shall indemnify and hold the Fund harmless from and
against any and all claims, demands, losses, expenses, and liabilities
(whether with or without basis in fact or law) of any and every nature
(including reasonable attorneys' fees) which may be asserted against
the Fund by any person arising out of any action taken or omitted to be
taken by FMFS as a result of FMFS's refusal or failure to comply with
the terms of this Agreement, its bad faith, negligence, or willful
misconduct.
VI. Confidentiality
FMFS agrees on behalf of itself and its employees and agents to treat
confidentially all information relating to the Fund's business which is
received by FMFS during the course of rendering any service hereunder.
The Agent agrees on behalf of itself and its employees and agents to
treat confidentially all records and other information relative to the
Fund and its shareholders and shall not disclose to any other party,
except after prior notification to and approval in writing by the Fund,
which approval shall not be unreasonably withheld and may not be
withheld where the Agent may be exposed to civil or criminal contempt
proceedings for failure to comply after being requested to divulge such
information by duly constituted authorities.
VII. Data Necessary to Perform Service
The Fund's or its agent, which may be FMFS, shall furnish to FMFS the
data necessary to perform the services described herein at times and in
such form as mutually agreed upon.
VIII. Terms of Agreement
This Agreement shall become effective as of the date hereof and,
unless sooner terminated as provided herein, shall continue
automatically in effect for successive annual periods. The Agreement
may be terminated by either party upon giving ninety (90) days prior
written notice to the other party or such shorter period as is mutually
agreed upon by the parties.
IX. Duties in the Event of Termination
In the event that, in connection with termination, a successor to any
of FMFS's duties or responsibilities hereunder is designated by the
Fund by written notice to FMFS, FMFS will promptly, upon such
termination and at the expense of the Fund, transfer to such successor
all relevant books, records, correspondence, and other data established
or maintained by FMFS under this Agreement in a form reasonably
acceptable to the Fund (if such form differs from the form in which
FMFS has maintained, the Fund shall pay any expenses associated with
transferring the data to such form), and will cooperate in the transfer
of such duties and responsibilities, including provision for assistance
from FMFS's personnel in the establishment of books, records, and other
data by such successor.
<PAGE>
X. Choice of Law
This Agreement shall be construed in accordance with the laws of the
State of Wisconsin.
XI. Notices
Notices of any kind to be given by either party to the other party
shall be in writing and shall be duly given if mailed or delivered as
follows: Notice to FMFS shall be sent to Mutual Fund Services located
at 615 East Michigan Street, Milwaukee, Wisconsin 53202 and notice to
the Fund shall be sent to The Internet Fund/Kinetics Asset Management
Inc. 344 Van Buren Street North Babylon, NY 11704.
XII. Records
FMFS shall keep records relating to the services to be performed
hereunder, in the form and manner, and for such period as it may deem
advisable and is agreeable to the Fund but not inconsistent with the
rules and regulations of appropriate government authorities, in
particular, Section 31 of the Investment Company Act of 1940 as amended
(the "Investment Company Act"), and the rules thereunder. FMFS agrees
that all such records prepared or maintained by FMFS relating to the
services to be performed by FMFS hereunder are the property of the Fund
and will be preserved, maintained, and made available with such section
and rules of the Investment Company Act and will be promptly
surrendered to the Fund on and in accordance with its request.
[Directors and Shareholders shall not be personally liable for
obligations of the Fund in connection with any matter arising from or
in connection with this agreement.]
<PAGE>
XIII. This servicing agreement can not be assigned without consent of The
Internet Fund.
XIV. FMFS assumes no responsibilities for work done prior to our acceptance
date for custody, fund accounting, fund administration, transfer agency
and fulfillment.
Kinetics Asset Management Firstar Mutual Fund Services, LLC
By: /S/ MARGARET B. DOYLE By: /S/ JOE D.
REDWINE
Title: PRESIDENT Title: President
Date: 2/17/99 Date:
2/26/99
Attest: /S/ FRANCIS J. ALEXANDER Attest: /S/ PAUL
ROCK
EXHIBIT (h)(2)
FUND ACCOUNTING SERVICING AGREEMENT
This contract between Kinetics Asset Management, Inc., a New York Corporation
consisting of The Internet Fund, (hereinafter called "Fund"), and Firstar Mutual
Fund Services, LLC, a Wisconsin corporation, hereinafter called "FMFS," is
entered into on this third day of February, 1999.
WHEREAS, the Fund, is an open-ended management investment company
registered under the Investment Company Act of 1940; and
WHEREAS, Firstar Mutual Fund Services, LLC ("FMFS") is in the business
of providing, among other things, mutual fund accounting services to investment
companies;
NOW, THEREFORE, the parties do mutually promise and agree as follows:
1. SERVICES. FMFS agrees to provide the following mutual fund
accounting services to the Funds:
A. Portfolio Accounting Services:
(1) Maintain portfolio records on a trade date +1 basis
using security trade information communicated from the investment
manager on a timely basis.
(2) For each valuation date, obtain prices from a pricing
source approved by the Board of Directors and apply those prices
to the portfolio positions. For those securities where market
quotations are not readily available, the Board of Directors
shall approve, in good faith, the method for determining the fair
value for such securities.
(3) Identify interest and dividend accrual balances as of
each valuation date and calculate gross earnings on investments
for the accounting period.
(4) Determine gain/loss on security sales and identify
them as to short-short, short- or long-term status; account for
periodic distributions of gains or losses to shareholders and
maintain undistributed gain or loss balances as of each valuation
date.
B. Expense Accrual and Payment Services:
(1) For each valuation date, calculate the expense accrual
amounts as directed by the Fund as to methodology, rate or dollar
amount.
<PAGE>
(2) Record payments for Fund expenses upon receipt of
written authorization from the Fund.
(3) Account for fund expenditures and maintain expense
accrual balances at the level of accounting detail, as agreed
upon by FMFS and the Fund.
(4) Provide expense accrual and payment reporting.
C. Fund Valuation and Financial Reporting Services:
(1) Account for Fund share purchases, sales, exchanges,
transfers, dividend reinvestments, and other Fund share activity
as reported by the transfer agent on a timely basis.
(2) Apply equalization accounting as directed by the
Fund.
(3) Determine net investment income (earnings) for the
Fund as of each valuation date. Account for periodic
distributions of earnings to shareholders and maintain
undistributed net investment income balances as of each valuation
date.
(4) Maintain a general ledger for the Fund in the form as
agreed upon.
(5) For each day the Fund are open as defined in the
prospectus, determine the net asset value according to the
accounting policies and procedures set forth in the prospectus.
(6) Calculate per share net asset value, per share net
earnings, and other per share amounts reflective of fund
operation at such time as required by the nature and
characteristics of the Fund.
(7) Communicate, at an agreed upon time, the per share
price for each valuation date to parties as agreed upon from time
to time.
(8) Prepare monthly reports which document the adequacy of
accounting detail to support month-end ledger balances.
D. Tax Accounting Services:
(1) Maintain accounting records for the investment
portfolio of the Fund to support the tax reporting required for
IRS-defined regulated investment companies.
(2) Maintain tax lot detail for the investment portfolio.
<PAGE>
(3) Calculate taxable gain/loss on security sales using
the tax lot relief method designated by the Fund.
(4) Provide the necessary financial information to support
the taxable components of income and capital gains distributions
to the transfer agent to support tax reporting to the
shareholders.
E. Compliance Control Services:
(1) Support reporting to regulatory bodies and support
financial statement preparation by making the fund accounting
records available to the Kinetics Asset Management, Inc., the
Securities and Exchange Commission, and the outside auditors.
(2) Maintain accounting records according to the
Investment Company Act of 1940 and regulations provided
thereunder.
2. PRICING OF SECURITIES. For each valuation date, obtain prices from a
pricing source selected by FMFS but approved by the Fund's Board and apply those
prices to the portfolio positions and to value collateral held with respect to
repurchase agreements and securities loans. For those securities where market
quotations are not readily available, the Fund's Board shall approve, in good
faith, the method for determining the fair value for such securities in
accordance with the method determined by the Fund's Board of Directors.
If the Fund desires to provide a price which varies from the
pricing source, the Fund shall promptly notify and supply FMFS with the
valuation of any such security on each valuation date. All pricing changes made
by the Fund will be in writing and must specifically identify the securities to
be changed by CUSIP, name of security, new price or rate to be applied, and, if
applicable, the time period for which the new prices are effective.
3. CHANGES IN ACCOUNTING PROCEDURES. Any resolution passed by the Board
of Directors that affects accounting practices and procedures under this
agreement shall be effective upon written receipt and acceptance by the FMFS.
4. CHANGES IN EQUIPMENT, SYSTEMS, SERVICE, ETC. FMFS reserves the right
to make changes from time to time, as it deems advisable, relating to its
services, systems, programs, rules, operating schedules and equipment, so long
as such changes do not adversely affect the service provided to the Funds under
this Agreement.
5. COMPENSATION. FMFS shall be compensated for providing the services
set forth in this Agreement in accordance with the Fee Schedule attached hereto
as Exhibit A and as mutually agreed upon and amended from time to time.
6. PERFORMANCE OF SERVICE.
<PAGE>
A. FMFS shall exercise reasonable care and act in good
faith in the performance of its duties under this Agreement. FMFS
shall not be liable for any error of judgment or mistake of law
or for any loss suffered by the Funds in connection with matters
to which this Agreement relates, including losses resulting from
mechanical breakdowns or the failure of communication or power
supplies beyond FMFS's control, except a loss resulting from
FMFS's refusal or failure to comply with the terms of this
Agreement or from bad faith, negligence, or willful misconduct on
its part in the performance of its duties under this Agreement.
Notwithstanding any other provision of this Agreement, the Fund
shall indemnify and hold harmless FMFS from and against any and
all claims, demands, losses, expenses, and liabilities (whether
with or without basis in fact or law) of any and every nature
(including reasonable attorneys' fees) which FMFS may sustain or
incur or which may be asserted against FMFS by any person arising
out of any action taken or omitted to be taken by it in
performing the services hereunder (i) in accordance with the
foregoing standards, or (ii) in reliance upon any written or oral
instruction for a proper corporate purpose provided to FMFS by
any duly authorized officer of the Fund, such duly authorized
officer to be included in a list of authorized officers furnished
to FMFS and as amended from time to time in writing by resolution
of the Board of Directors of the Fund.
In the event of a mechanical breakdown or failure of
communication or power supplies beyond its control, FMFS shall
take all reasonable steps to minimize service interruptions for
any period that such interruption continues beyond FMFS's
control. FMFS will make every reasonable effort to restore any
lost or damaged data and correct any errors resulting from such a
breakdown at the expense of FMFS. FMFS agrees that it shall, at
all times, have reasonable contingency plans with appropriate
parties, making reasonable provision for emergency use of
electrical data processing equipment to the extent appropriate
equipment is available. Representatives of the Fund shall be
entitled to inspect FMFS's premises and operating capabilities at
any time during regular business hours of FMFS, upon reasonable
notice to FMFS.
Regardless of the above, FMFS reserves the right to
reprocess and correct administrative errors at its own expense.
B. In order that the indemnification provisions contained
in this section shall apply, it is understood that if in any case
the Fund may be asked to indemnify or hold FMFS harmless, the
Fund shall be fully and promptly advised of all pertinent facts
concerning the situation in question, and it is further
understood that FMFS will use all reasonable care to notify the
Fund promptly concerning any situation which presents or appears
likely to present the probability of such a claim for
indemnification against the Fund. The Fund shall have the option
to defend FMFS against any claim which may be the subject of this
indemnification. In the event that the Fund so elects, it will so
notify FMFS and thereupon the Fund shall take over complete
defense of the claim, and FMFS shall in such situation initiate
no further legal or other expenses for which it shall seek
indemnification under this section. FMFS shall in no case confess
any claim or make any compromise in any case in which the Fund
will be asked to indemnify FMFS except with the Fund's prior
written consent.
<PAGE>
C. FMFS shall indemnify and hold the Fund harmless from
and against any and all claims, demands, losses, expenses, and
liabilities (whether with or without basis in fact or law) of any
and every nature (including reasonable attorneys' fees) which may
be asserted against the Fund by any person arising out of any
action taken or omitted to be taken by FMFS as a result of FMFS's
refusal or failure to comply with the terms of this Agreement,
its bad faith, negligence, or willful misconduct.
7. RECORDS. FMFS shall keep records relating to the services to be
performed hereunder, in the form and manner, and for such period as it may deem
advisable and is agreeable to the Funds but not inconsistent with the rules and
regulations of appropriate government authorities, in particular, Section 31 of
The Investment Company Act of 1940 as amended (the "Investment Company Act"),
and the rules thereunder. FMFS agrees that all such records prepared or
maintained by FMFS relating to the services to be performed by FMFS hereunder
are the property of the Fund and will be preserved, maintained, and made
available with such section and rules of the Investment Company Act and will be
promptly surrendered to the Funds on and in accordance with its request.
8. CONFIDENTIALITY. FMFS shall handle in confidence all information
relating to the Fund's business, which is received by FMFS during the course of
rendering any service hereunder.
9. DATA NECESSARY TO PERFORM SERVICES. The Fund or its agent, which may
be FMFS, shall furnish to FMFS the data necessary to perform the services
described herein at times and in such form as mutually agreed upon.
10. NOTIFICATION OF ERROR. The Fund will notify FMFS of any balancing or
control error caused by FMFS within three (3) business days after receipt of any
reports rendered by FMFS to the Fund, or within three (3) business days after
discovery of any error or omission not covered in the balancing or control
procedure, or within three (3) business days of receiving notice from any
shareholder.
11. ADDITIONAL SERIES. In the event that the Fund establishes one or
more series of shares with respect to which it desires to have FMFS render
accounting services, under the terms hereof, it shall so notify FMFS in writing,
and if FMFS agrees in writing to provide such services, such series will be
subject to the terms and conditions of this Agreement, and shall be maintained
and accounted for by FMFS on a discrete basis. The portfolios currently covered
by this Agreement are: The Internet Fund.
12. TERM OF AGREEMENT. This Agreement may be terminated by either party
upon giving ninety (90) days prior written notice to the other party or such
shorter period as is mutually agreed upon by the parties. However, this
Agreement may be replaced or modified by a subsequent agreement between the
parties.
<PAGE>
13. DUTIES IN THE EVENT OF TERMINATION. In the event that in connection
with termination a Successor to any of FMFS's duties or responsibilities
hereunder is designated by the The Internet Fund, Inc. by written notice to
FMFS, FMFS will promptly, upon such termination and at the expense of the
Internet Fund, Inc., transfer to such Successor all relevant books, records,
correspondence and other data established or maintained by FMFS under this
Agreement in a form reasonably acceptable to the Internet Fund, Inc. (if such
form differs from the form in which FMFS has maintained the same, the Internet
Fund, Inc., shall pay any expenses associated with transferring the same to such
form), and will cooperate in the transfer of such duties and responsibilities,
including provision for assistance from FMFS's personnel in the establishment of
books, records and other data by such successor.
14. NOTICES. Notices of any kind to be given by either party to the
other party shall be in writing and shall be duly given if mailed or delivered
as follows: Notice to FMFS shall be sent to Firstar Mutual Fund Services, LLC
located at 615 East Michigan Street, Milwaukee, Wisconsin 53202 and notice to
the Fund shall be sent to Kinetics Asset Management Inc. 344 Van Buren Street
North Babylon, NY 11704.
15. CHOICE OF LAW. This Agreement shall be construed in accordance with
the laws of the State of Wisconsin. Directors and shareholders shall not be
personally liable for obligations of the Fund in connection with any matter
arising from or in connection with this agreement.
16. This servicing agreement can not be assigned without consent of The
Internet Fund, Inc.
IN WITNESS WHEREOF, the due execution hereof on the date first above
written.
Kinetics Asset Management Inc. Firstar Mutual Fund Services, LLC
By /S/ MARGARET B. DOYLE By /S/ JOE D. REDWINE
Title: PRESIDENT Title: President
Date: 2/17/99 Date: 2/26/99
Attest: /S/ FRANCIS J. ALEXANDER Attest: /S/ PAUL
ROCK
EXHIBIT (h)(3)
TRANSFER AGENT AGREEMENT
THIS AGREEMENT is made and entered into on this fifth day of February,
1999, by and between Kinetics Asset Management, Inc., a New York Corporation
consisting of The Internet Fund, (hereinafter referred to as the "Fund") and
Firstar Mutual Fund Services, LLC, a corporation organized under the laws of the
State of Wisconsin (hereinafter referred to as the "Agent").
WHEREAS, the Fund is an open-ended management investment company which
is registered under the Investment Company Act of 1940; and
WHEREAS, the Agent is a LLC and, among other things, is in the business
of administering transfer and dividend disbursing agent functions for the
benefit of its customers;
NOW, THEREFORE, the Fund and the Agent do mutually promise and agree as
follows:
1. TERMS OF APPOINTMENT; DUTIES OF THE AGENT
Subject to the terms and conditions set forth in this Agreement, the
Fund hereby employs and appoints the Agent to act as transfer agent and dividend
disbursing agent.
The Fund is authorized to issue separate Series of shares of beneficial
interest representing interests in separate investment portfolios. The parties
intend that each portfolio established by the Corporation, now or in the future,
be covered by the terms and conditions of this agreement.
The Agent shall perform all of the customary services of a transfer
agent and dividend disbursing agent, and as relevant, agent in connection with
accumulation, open account or similar plans (including without limitation any
periodic investment plan or periodic withdrawal program), including but not
limited to:
A. Receive orders for the purchase of shares, with prompt delivery,
where appropriate, of payment and supporting documentation to the
Fund's custodian;
B. Process purchase orders and issue the appropriate number of
certificated or uncertificated shares with such uncertificated
shares being held in the appropriate shareholder account;
C. Process redemption requests received in good order and, where
relevant, deliver appropriate documentation to the Fund's
custodian;
D. Pay monies (upon receipt from the Fund's custodian, where
relevant) in accordance with the instructions of redeeming
shareholders;
E. Process transfers of shares in accordance with the shareowner's
instructions;
F. Process exchanges between funds within the same family of funds
if applicable;
<PAGE>
G. Issue and/or cancel certificates as instructed; replace lost,
stolen or destroyed certificates upon receipt of satisfactory
indemnification or surety bond;
H. Prepare and transmit payments for dividends and distributions
declared by the Funds;
<PAGE>
I. Make changes to shareholder records, including, but not limited
to, address changes in plans (i.e., systematic withdrawal,
automatic investment, dividend reinvestment, etc.);
J. Record the issuance of shares of the Fund and maintain, pursuant
to Securities Exchange Act of 1934 Rule 17Ad-10(e), a record of
the total number of shares of the Funds which are authorized,
issued and outstanding and such other records as are required to
be maintained by a transfer agent for open-end registered
investment companies by the rules under the Securities Exchange
Act of 1934, as amended;
K. Prepare shareholder meeting lists and, if applicable, mail,
receive and tabulate proxies;
L. Mail shareholder reports and prospectuses to current
shareholders;
M. Prepare and file U.S. Treasury Department forms 1099 and other
appropriate information returns required with respect to
dividends and distributions for all shareholders;
N. Provide shareholder account information upon request and prepare
and mail confirmations and statements of account to shareholders
for all purchases, redemptions and other confirmable
transactions as agreed upon with the Fund; and
O. Provide a Blue Sky System which will enable the Fund to monitor
the total number of shares sold in each state. In addition, the
Fund shall identify to the Agent in writing those transactions
and assets to be treated as exempt from the Blue Sky reporting to
the Fund for each state. The responsibility of the Agent for the
Fund's Blue Sky state registration status is solely limited to
the initial compliance by the Fund and the reporting of such
transactions to the Fund.
The foregoing services shall be provided in a manner consistent
with the policies of the Fund as communicated to the Agent.
2. COMPENSATION
The Fund agrees to pay the Agent for performance of the duties listed in
this Agreement; the fees and out-of-pocket expenses include, but are not limited
to the following: printing, postage, forms, stationery, record retention,
mailing, insertion, programming, labels, shareholder lists and proxy expenses.
These fees and reimbursable expenses may be changed from time to time
subject to mutual written agreement between the Fund and the Agent.
The Fund agrees to pay all fees and reimbursable expenses within ten
(10) business days following the mailing of the billing notice. Conversion fees
are considered reimbursable and need to be quoted on a per client basis and
therefore are not part of Firstar's fee schedules.
<PAGE>
3. REPRESENTATIONS OF AGENT
The Agent represents and warrants to the Fund that:
A. It is a corporation company duly organized, existing and in good
standing under the laws of Wisconsin;
B. It is a registered transfer agent under the Securities Exchange
Act of 1934, as amended.
C. It is duly qualified to carry on its business in the state of
Wisconsin;
D. It is empowered under applicable laws and by its charter and
bylaws to enter into and perform this Agreement;
E. All requisite corporate proceedings have been taken to
authorize it to enter and perform this Agreement;
F. It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement; and
G. It will comply with all applicable requirements of the Securities
Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the Investment Company Act of 1940, as amended, and any
laws, rules, and regulations of governmental authorities having
jurisdiction.
4. REPRESENTATIONS OF THE FUND
The Fund represent and warrants to the Agent that:
A. The Fund is an open-ended management investment company under the
Investment Company Act of 1940;
B. The Fund is a New York Corporation organized, existing, and in
good standing under the laws of New York;
C. The Fund is empowered under applicable laws and by its
Declaration of Corporation and bylaws to enter into and perform
this Agreement;
D. All necessary proceedings required by the Declaration of
Corporation have been taken to authorize the Fund to enter into
and perform this Agreement;
E. The Fund will comply with all applicable requirements of the
Securities Act of 1933, as amended, Securities Exchange Act of
1934, as amended, the Investment Company Act of 1940, as amended,
and any laws, rules and regulations of governmental authorities
having jurisdiction; and
<PAGE>
F. A registration statement under the Securities Act of 1933 is
currently effective and will remain effective, and appropriate
state securities law filings have been made and will continue to
be made, with respect to all shares of the Funds being offered
for sale.
5. COVENANTS OF THE FUND AND AGENT
The Fund shall furnish the Agent a certified copy of the resolution of
the Board of Directors of the Fund authorizing the appointment of the Agent and
the execution of this Agreement. The Fund shall provide to the Agent a copy of
the Declaration of Corporation, bylaws of the Fund, and all amendments.
The Agent shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable. To the extent
required by Section 31 of the Investment Company Act of 1940, as amended, and
the rules thereunder, the Agent agrees that all such records prepared or
maintained by the Agent relating to the services to be performed by the Agent
hereunder are the property of the Fund and will be preserved, maintained and
made available in accordance with such section and rules and will be surrendered
to the Fund on and in accordance with its request.
6. INDEMNIFICATION; REMEDIES UPON BREACH
The Agent shall exercise reasonable care and act in good faith in the
performance of its duties under this Agreement. The Agent shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the Fund
in connection with matters to which this Agreement relates, including losses
resulting from mechanical breakdowns or the failure of communication or power
supplies beyond the Agent's control, except a loss resulting from the Agent's
refusal or failure to comply with the terms of this Agreement or from bad faith,
negligence, or willful misconduct on its part in the performance of its duties
under this Agreement. Notwithstanding any other provision of this Agreement, the
Fund shall indemnify and hold harmless the Agent from and against any and all
claims, demands, losses, expenses, and liabilities (whether with or without
basis in fact or law) of any and every nature (including reasonable attorneys'
fees) which the Agent may sustain or incur or which may be asserted against the
Agent by any person arising out of any action taken or omitted to be taken by it
in performing the services hereunder (i) in accordance with the foregoing
standards, or (ii) in reliance upon any written or oral instruction for a proper
corporate purpose provided to the Agent by any duly authorized officer of the
Fund, such duly authorized officer to be included in a list of authorized
officers furnished to the Agent and as amended from time to time in writing by
resolution of the Board Of Directors of the Fund.
Further, the Fund will indemnify and hold the Agent harmless against any
and all losses, claims, damages, liabilities or expenses (including reasonable
counsel fees and expenses) resulting from any claim, demand, action, or suit as
a result of the negligence of the Fund (unless contributed to by the Agent's
breach of this Agreement or other Agreements between the Fund and the Agent, or
the Agent's own negligence or bad faith); or as a result of the Agent acting
upon telephone instructions relating to the exchange or redemption of shares
received by the Agent and reasonably believed by the Agent under a standard of
care customarily used in the industry to have originated from the record owner
of the subject shares; or as a result of acting in reliance upon any genuine
instrument or stock certificate signed, countersigned, or executed by any person
or persons authorized to sign, countersign, or execute the same.
In the event of a mechanical breakdown or failure of communication or
power supplies beyond its control, the Agent shall take all reasonable steps to
minimize service interruptions for any period that such interruption continues
beyond the Agent's control. The Agent will make every reasonable effort to
restore any lost or damaged data and correct any errors resulting from such a
breakdown at the expense of the Agent. The Agent agrees that it shall, at all
times, have reasonable contingency plans with appropriate parties, making
reasonable provision for emergency use of electrical data processing equipment
to the extent appropriate equipment is available. Representatives of the Fund
shall be entitled to inspect the Agent's premises and operating capabilities at
any time during regular business hours of the Agent, upon reasonable notice to
the Agent.
<PAGE>
Regardless of the above, the Agent reserves the right to reprocess and
correct administrative errors at its own expense.
In order that the indemnification provisions contained in this section
shall apply, it is understood that if in any case the Fund may be asked to
indemnify or hold the Agent harmless, the Fund shall be fully and promptly
advised of all pertinent facts concerning the situation in question, and it is
further understood that the Agent will use all reasonable care to notify the
Fund promptly concerning any situation which presents or appears likely to
present the probability of such a claim for indemnification against the Fund.
The Fund shall have the option to defend the Agent against any claim which may
be the subject of this indemnification. In the event that the Fund so elect, the
Fund will so notify the Agent and thereupon the Fund shall take over complete
defense of the claim, and the Agent shall in such situation initiate no further
legal or other expenses for which it shall seek indemnification under this
section. The Agent shall in no case confess any claim or make any compromise in
any case in which the Fund will be asked to indemnify the Agent except with the
Fund's prior written consent.
The Agent shall indemnify and hold the Fund harmless from and against
any and all claims, demands, losses, expenses, and liabilities of any and every
nature (including reasonable attorneys' fees) which may be asserted against the
Fund by any person arising out of any action taken or omitted to be taken by the
Agent as a result of the Agent's refusal or failure to comply with the terms of
this Agreement, its bad faith, negligence, or willful misconduct.
7. CONFIDENTIALITY
The Agent agrees on behalf of itself and its employees and agents to
treat confidentially all records and other information relative to the Fund and
its shareholders and shall not disclose to any other party, except after prior
notification to and approval in writing by the Fund, which approval shall not be
unreasonably withheld and may not be withheld where the Agent may be exposed to
civil or criminal contempt proceedings for failure to comply after being
requested to divulge such information by duly constituted authorities.
8. RECORDS
The Agent shall keep records relating to the services to be performed
hereunder, in the form and manner, and for such period as it may deem advisable
and is agreeable to the Fund but not inconsistent with the rules and regulations
of appropriate government authorities, in particular, Section 31 of The
Investment Company Act of 1940, as amended (the "Investment Company Act"), and
the rules thereunder. The Agent agrees that all such records prepared or
maintained by the Agent relating to the services to be performed by the Agent
hereunder are the property of the Fund and will be preserved, maintained, and
made available with such section and rules of the Investment Company Act and
will be promptly surrendered to the Fund on and in accordance with its request.
<PAGE>
9. WISCONSIN LAW TO APPLY
This Agreement shall be construed and the provisions thereof interpreted
under and in accordance with the laws of the state of Wisconsin.
10. AMENDMENT, ASSIGNMENT, TERMINATION AND NOTICE
A. This Agreement may be amended by the mutual written consent of
the parties.
B. This Agreement may be terminated upon ninety (90) day's written
notice given by one party to the other.
C. This Agreement and any right or obligation hereunder may not be
assigned by either party without the signed, written consent of
the other party.
D. Any notice required to be given by the parties to each other
under the terms of this Agreement shall be in writing, addressed
and delivered, or mailed to the principal place of business of
the other party. If to the agent, such notice should be sent
to Firstar Corporation Company/Mutual Fund Services located at
615 East Michigan Street, Milwaukee, Wisconsin 53202. If to the
Fund, such notice should be sent to Kinetics Asset Management
Inc. located at 344 Van Buren Street, North Babylon, NY 11704.
E. In the event that the Fund give to the Agent its written
intention to terminate and appoint a successor transfer agent,
the Agent agrees to cooperate in the transfer of its duties and
responsibilities to the successor, including any and all relevant
books, records and other data established or maintained by the
Agent under this Agreement.
F. Should the Fund exercise its right to terminate, except where
such termination follows a breach of this Agreement by the Agent,
all out-of-pocket expenses associated with the movement of
records and material will be paid by the Fund. Trustees and
shareholders shall not be personally liable for obligations of
the Fund in connection with any matter arising from or in
connection with this agreement.
G. Firstar Mutual Fund Services, LLC assumes no responsibilities for
any prior work performed by other vendors prior to Firstar
assuming responsibilities for transfer agency, custody, fund
accounting, administration and fulfillment.
Kinetics Asset Management Inc. Firstar Mutual Fund Services, LLC
By: /S/ MARGARET B. DOYLE By: /S/ JOE D.
REDWINE
Print: MARGARET B. DOYLE Print: JOE D.
REDWINE
Title: PRESIDENT Title: President
Date: 2/17/99 Date:
2/26/99
Attest: /S/ FRANCIS J. ALEXANDER Attest: /S/ PAUL
ROCK
Exhibit (j)(1)
Lilling & Company LLP
Certified Public Accountants
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 February 15, 1999 on our examination of the financial statements of such
Company. We also consent to the reference to our firm in such Post-Effective
Amendment.
/s/ Lilling & Company LLP
CERTIFIED PUBLIC ACCOUNTANTS
February 15, 1999
Ten Cutter Mill Road, Great Neck, NY 11021-3201
o (516) 829-1099 o Fax (516) 829-1065
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<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
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