KINETICS MUTUAL FUNDS INC, 485BPOS, 1999-12-23

KINETICS MUTUAL FUNDS INC
485BPOS, 1999-12-23

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Filed with the Securities and Exchange Commission on December 23, 1999

1933 Act Registration File No. 333-78275
1940 Act File No. 811-09303

SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |_|

Pre-Effective Amendment No. |_|

Post-Effective Amendment No. 2 |X|

and

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

Amendment No. 5 |X|

(Check appropriate box or boxes.)

KINETICS MUTUAL FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)

1311 Mamaroneck Avenue
White Plains, New York 10605
(Address and Zip Code of Principal Executive Offices)

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

Lee Schultheis
1311 Mamaroneck Avenue
White Plains, New York 10605
(Name and Address of Agent for Service)

With a copy to:
Thomas R. Westle, Esq.
Spitzer & Feldman P.C.
405 Park Avenue
New York, New York 10022

As soon as practical after the
effective date of this
Registration Statement
Approximate Date of Proposed
Public Offering

Shares of Common Stock
(Title of Securities Being Registered)

It is proposed that this filing will become effective

X immediately upon filing pursuant to paragraph (b)

__ on ___________ pursuant to paragraph (b)

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

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

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

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

<PAGE>

THE INTERNET FUND
THE INTERNET INFRASTRUCTURE FUND
THE INTERNET EMERGING GROWTH FUND
THE INTERNET GLOBAL GROWTH FUND
THE INTERNET NEW PARADIGM FUND

EACH A SERIES OF KINETICS MUTUAL FUNDS, INC.

[LOGO]

PROSPECTUS & APPLICATION
DECEMBER 23, 1999

<PAGE>

KINETICS MUTUAL FUNDS, INC.

PROSPECTUS & APPLICATION
DECEMBER 23, 1999

This combined prospectus discusses each of the following series of Kinetics
Mutual Funds, Inc. (collectively referred to as the "Funds.")

THE INTERNET FUND (the "Internet Fund") is a no-load, non-diversified investment
company which seeks to provide investors with long-term capital growth by
investing primarily in the equity securities of domestic and foreign companies
engaged in the Internet and Internet-related activities.

THE INTERNET INFRASTRUCTURE FUND (the "Infrastructure Fund") is a no-load,
non-diversified investment company which seeks to provide investors with
long-term capital growth by investing primarily in the equity securities of
domestic and foreign companies engaged in the development and implementation of
hardware, software and communications technologies that support the growing
infrastructure and activities of the Internet.

THE INTERNET EMERGING GROWTH FUND (the "Emerging Fund") is a no-load,
non-diversified investment company which seeks to provide investors with
long-term capital growth by investing primarily in the equity securities of
small and medium capitalization domestic and foreign emerging companies engaged
in the Internet and Internet-related activities.

THE INTERNET GLOBAL GROWTH FUND (the "Global Fund") is a no-load,
non-diversified investment company which seeks to provide investors with
long-term capital growth by investing primarily in the equity securities of
foreign and U.S. companies engaged in the Internet and Internet-related
activities.

THE INTERNET NEW PARADIGM FUND (the "New Paradigm Fund") is a no-load,
non-diversified investment company which seeks to provide investors with
long-term capital growth by investing primarily in the equity securities of
domestic and foreign companies that the investment adviser believes will reduce
their costs, extend the reach of their distribution channels and experience
significant growth in their assets or revenues as a result of increased
involvement in or growth of the Internet.

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

Investment Adviser
KINETICS ASSET MANAGEMENT, INC.

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

Risk/Return Summary of the Internet Fund.......................................4
Risk/Return Summary of the Internet Infrastructure Fund........................5
Risk/Return Summary of the Internet Emerging Growth Fund.......................6
Risk/Return Summary of the Internet Global Growth Fund.........................7
Risk/Return Summary of the Internet New Paradigm Fund..........................8
Who May Want to Invest.........................................................9
Performance of the Internet Fund..............................................10
Fees and Expenses of the Funds................................................11
Investment Objective and Strategies of the Internet Fund......................12
Investment Objective and Strategies of the Internet Infrastructure Fund.......13
Investment Objective and Strategies of the Internet Emerging Growth Fund......14
Investment Objective and Strategies of the Internet Global Growth Fund........15
Investment Objective and Strategies of the Internet New Paradigm Fund.........16
Main Risks of the Funds.......................................................17
Management of the Funds.......................................................20
Valuation of Fund Shares......................................................21
How To Purchase Shares........................................................21
How To Redeem Shares..........................................................23
Exchange Privilege............................................................24
Distribution and Taxes........................................................25
Distribution of Shares........................................................26
Master/Feeder Fund Structure..................................................27
Counsel and Independent Auditors..............................................27
Financial Highlights..........................................................28

<PAGE>

RISK/RETURN SUMMARY OF THE INTERNET FUND
- -------------------------------------------------------------------------------

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

PRINCIPAL INVESTMENT STRATEGIES
The Internet Fund seeks to achieve its investment objective by investing
primarily in common stocks, convertible securities, warrants and other equity
securities having the characteristics of common stocks, such as American
Depositary Receipts and International Depositary Receipts of domestic and
foreign companies that provide products or services designed for the Internet.

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

PRINCIPAL RISKS OF INVESTING IN THE INTERNET FUND
Investing in common stocks has inherent risks that could cause you to lose
money. The principal risks of investing in the Internet Fund are listed below
and could adversely affect the Internet Fund's net asset value, total return,
and the value of your investment.

- - Stock Market Risks: Stock mutual funds are subject to stock market risks and
significant fluctuations in value. If the stock market declines in value, the
Internet Fund is likely to decline in value and you could lose money on your
investment.

- - Stock Selection Risks: The portfolio securities selected by the investment
adviser may decline in value or not increase in value when the stock market in
general is rising and may fail to meet the Internet Fund's investment objective.

- - Liquidity Risks: The investment adviser may not be able to sell portfolio
securities at an optimal time or price.

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

- - Internet Industry Specific Risks: Companies that conduct business on the
Internet or derive a substantial portion of their revenues from Internet-related
activities in general are subject to a rate of change in technology and
competition which is generally higher than that of other industries.

- - Small and Medium-Size Company Risks: The Internet Fund may invest in the
equity securities of small, medium and large-sized companies. Small and
medium-size companies often have narrower markets and more limited managerial
and financial resources than do larger, more established companies. As a result,
their performance can be more volatile and they face a greater risk of business
failure, which could increase the volatility of the Internet Fund's portfolio.

- - Foreign Securities Risks: The Internet Fund may invest in foreign securities,
which can carry higher returns but involve more risks than those associated with
domestic investments. Additional risks associated with investment foreign
securities include currency fluctuations, political and economic instability,
differences in financial reporting standards and less stringent regulation of
securities markets.

<PAGE>

- - Non-Diversification Risks: As a non-diversified investment company, more of
the Internet Fund's assets may be concentrated in the common stock of any single
issuer, which may make the value of the Internet Fund's shares more susceptible
to certain risks than shares of a more diversified mutual fund.

RISK/RETURN SUMMARY OF THE INTERNET INFRASTRUCTURE FUND
- -------------------------------------------------------------------------------

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

PRINCIPAL INVESTMENT STRATEGIES
The Infrastructure Fund seeks to achieve its investment objective by investing
primarily in common stocks, convertible securities, warrants and other equity
securities having the characteristics of common stocks, such as American
Depositary Receipts and International Depositary Receipts of domestic and
foreign companies engaged in the development and implementation of hardware,
software and communications technologies that support the growing infrastructure
and activities of the Internet.

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

PRINCIPAL RISKS OF INVESTING IN THE INFRASTRUCTURE FUND
Investing in common stocks has inherent risks that could cause you to lose
money. The principal risks of investing in the Infrastructure Fund are listed
below and could adversely affect the Infrastructure Fund's net asset value,
total return and the value of your investment.

- - Stock Market Risks: Stock mutual funds are subject to stock market
risks and significant fluctuations in value. If the stock market declines in
value, the Infrastructure Fund is likely to decline in value and you could lose
money on your investment.

- - Stock Selection Risks: The portfolio securities selected by the
investment adviser may decline in value or not increase in value when the stock
market in general is rising and may fail to meet the Infrastructure Fund's
investment objective.

- - Liquidity Risks: The investment adviser may not be able to sell portfolio
securities at an optimal time or price.

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

- - Internet Industry Specific Risks: Internet and Internet support-related
companies in general are subject to a rate of change in technology, which is
generally higher than that of other industries. Similarly, internet-related
industries use many products and services of companies engaged in computer
hardware and software-related activities and are also subject to relatively high
risks of rapid obsolescence caused by progressive technological advances.

- - Small-and Medium-Size Company Risks: The Infrastructure Fund may
invest in the equity securities of small, medium and large-sized companies.
Small and medium-size companies often have narrower

<PAGE>

markets and more limited managerial and financial resources than larger, more
established companies. As a result, their performance can be more volatile and
they face a greater risk of business failure, which could increase the
volatility of the Infrastructure Fund's portfolio.

- - Foreign Securities Risks: The Infrastructure Fund may invest in foreign
securities, which can carry higher returns but involve more risks than those
associated with domestic investments. Additional risks associated with
investment in foreign securities include currency fluctuations, political and
economic instability, differences in financial reporting standards and less
stringent regulation of securities markets.

- - Non-Diversification Risks: As a non-diversified investment company,
more of the Infrastructure Fund's assets may be concentrated in the common stock
of any single issuer, which may make the value of the Infrastructure Fund's
shares more susceptible to certain risks than shares of a more diversified
mutual fund.

RISK/RETURN SUMMARY
OF THE INTERNET EMERGING GROWTH FUND
- -------------------------------------------------------------------------------

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

PRINCIPAL INVESTMENT STRATEGIES
The Emerging Fund seeks to achieve its investment objective by investing
primarily in common stocks, convertible securities, warrants and other equity
securities having the characteristics of common stocks, such as American
Depositary Receipts and International Depositary Receipts of small and medium
capitalization domestic and foreign emerging companies engaged in the Internet
and Internet-related activities.

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

PRINCIPAL RISKS OF INVESTING IN THE EMERGING FUND
Investing in common stocks has inherent risks that could cause you to lose
money. The principal risks of investing in the Emerging Fund are listed below
and could adversely affect the Emerging Fund's net asset value, total return,
and the value of your investment.

- - Stock Market Risks: Stock mutual funds are subject to stock market
risks and significant fluctuations in value. If the stock market declines in
value, the Emerging Fund is likely to decline in value and you could lose money
on your investment.

- - Stock Selection Risks: The portfolio securities selected by the
investment adviser may decline in value or not increase in value when the stock
market in general is rising and may fail to meet the Emerging Fund's investment
objective.

- - Liquidity Risks: The investment adviser may not be able to sell portfolio
securities at an optimal time or price.

<PAGE>

similar industries may share common characteristics and are more likely to react
comparably to industry-specific market or economic developments.

- - Internet Industry Specific Risks: Companies that conduct business on
the Internet or derive a substantial portion of their revenues from
Internet-related activities in general are subject to a rate of change in
technology and competition which is generally higher than that of other
industries.

- - Emerging, Small and Mid-Sized Company Risks: The Emerging Fund invests
in the equity securities of emerging, small and mid-sized companies. Small and
mid-sized companies generally have a market capitalization of less than $1
billion. Emerging companies are those with operating histories of less than
three years. Investing in emerging, small and mid-sized companies presents
greater risks than investing in securities of larger, more established
companies. These companies may be developing or marketing new products or
services for which markets are not yet established and may never be established.
They may also lack depth or experience of management and may have difficulty
generating or obtaining funds necessary for growth and development of their
business. Due to these and other factors, these companies may suffer significant
losses.

- - Foreign Securities Risks: The Emerging Fund may invest in foreign
securities, which can carry higher returns but involve more risks than those
associated with domestic investments. Additional risks associated with investing
in foreign securities include currency fluctuations, political and economic
instability, differences in financial reporting standards and less stringent
regulation of securities markets.

- - Non-Diversification Risks: As a non-diversified investment company,
more of the Emerging Fund's assets may be concentrated in the common stock of
any single issuer, which may make the value of the Emerging Fund's shares more
susceptible to certain risks than shares of a more diversified mutual fund.

RISK/RETURN SUMMARY OF THE INTERNET GLOBAL GROWTH FUND
- -------------------------------------------------------------------------------

INVESTMENT OBJECTIVE
The investment objective of The Internet Global Growth Fund is long-term growth
of capital.

PRINCIPAL INVESTMENT STRATEGIES
The Global Fund seeks to achieve its investment objective by investing primarily
in common stocks, convertible securities, warrants and other equity securities
having the characteristics of common stocks, such as American Depositary
Receipts and International Depositary Receipts of companies located in at least
three countries which are engaged in the Internet and Internet-related
activities.

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

PRINCIPAL RISKS OF INVESTING IN THE GLOBAL FUND
Investing in common stocks has inherent risks that could cause you to lose
money. The principal risks of investing in the Global Fund are listed below and
could adversely affect the Global Fund's net asset value, total return, and the
value of your investment.

- - Stock Market Risks: Stock mutual funds are subject to stock market
risks and significant fluctuations in value. If the stock market declines in
value, the Global Fund is likely to decline in value and you could lose money on
your investment.

<PAGE>

- - Stock Selection Risks: The portfolio securities selected by the
investment adviser may decline in value or not increase in value when the stock
market in general is rising and may fail to meet the Global Fund's investment
objective.

- - Liquidity Risks: The investment adviser may not be able to sell portfolio
securities at an optimal time or price.

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

- - Internet Industry Specific Risks: Companies that conduct business on
the Internet or derive a substantial portion of their revenues from
Internet-related activities in general are subject to a rate of change in
technology and competition which is generally higher than that of other
industries.

- - Small and Medium-Size Company Risks: The Global Fund may invest in the
equity securities of small, medium and large-sized companies. Small and
medium-size companies often have narrower markets and more limited managerial
and financial resources than do larger, more established companies. As a result,
their performance can be more volatile and they face a greater risk of business
failure, which could increase the volatility of the Global Fund's portfolio.

- - Foreign Securities Risks: The Global Fund may invest in foreign
securities, which can carry higher returns but involve more risks than those
associated with domestic investments. Additional risks associated with
investment in foreign securities include currency fluctuations, political and
economic instability, differences in financial reporting standards and less
stringent regulation of securities markets.

- - Non-Diversification Risks: As a non-diversified investment company,
more of the Global Fund's assets may be concentrated in the common stock of any
single issuer, which may make the value of the Global Fund's shares more
susceptible to certain risks than shares of a more diversified mutual fund.

RISK/RETURN SUMMARY OF THE INTERNET NEW PARADIGM FUND
- -------------------------------------------------------------------------------

INVESTMENT OBJECTIVE
The investment objective of The Internet New Paradigm Fund is long-term growth
of capital.

PRINCIPAL INVESTMENT STRATEGIES
The New Paradigm Fund seeks to achieve its investment objective by investing
primarily in common stocks, convertible securities, warrants and other equity
securities having the characteristics of common stocks, such as American
Depositary Receipts and International Depositary Receipts of domestic and
foreign companies. The New Paradigm Fund will invest in companies that the
investment Adviser believes will reduce their costs, extend the reach of their
distribution channels and experience significant growth in their assets or
revenues as a result of increased involvement in or growth of the Internet.

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

<PAGE>

PRINCIPAL RISKS OF INVESTING IN THE NEW PARADIGM FUND
Investing in common stocks has inherent risks that could cause you to lose
money. The principal risks of investing in this New Paradigm Fund are listed
below and could adversely affect the New Paradigm Fund's net asset value, total
return, and the value of your investment.

- - 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 and you could lose money on your
investment.

- - Stock Selection Risks: The portfolio securities selected by the
investment adviser may decline in value or not increase in value when the stock
market in general is rising and may fail to meet the New Paradigm Fund's
investment objective.

- - Liquidity Risks: The investment adviser may not be able to sell portfolio
securities at an optimal time or price.

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

- - Internet Industry Specific Risks: Companies that conduct business on
the Internet or derive a substantial portion of their revenues from
Internet-related activities in general are subject to a rate of change in
technology and competition which is generally higher than that of other
industries.

- - Small-and Medium-Size Company Risks: The New Paradigm Fund may invest
in the equity securities of small, medium and large-sized companies. Small and
medium-size companies often have narrower markets and more limited managerial
and financial resources than do larger, more established companies. As a result,
their performance can be more volatile and they face a greater risk of business
failure, which could increase the volatility of the New Paradigm Fund's
portfolio.

- - Foreign Securities Risks: The New Paradigm Fund may invest in foreign
securities, which can carry higher returns but involve more risks than those
associated with domestic investments. Additional risks associated with
investment in foreign securities include currency fluctuations, political and
economic instability, differences in financial reporting standards and less
stringent regulation of securities markets.

- - Non-Diversification Risks: As a non-diversified investment company,
more of the New Paradigm Fund's assets may be concentrated in the common stock
of any single issuer, which may make the value of the New Paradigm Fund's shares
more susceptible to certain risks than shares of a more diversified mutual fund.

WHO MAY WANT TO INVEST
- -------------------------------------------------------------------------------

These Funds may be appropriate for investors who:
- - wish to invest for the long term.
- - want to diversify their portfolios.
- - want to allocate some portion of their long-term investments to growth
equity investing.
- - are willing to accept the volatility associated with equity investing.

<PAGE>

PERFORMANCE OF THE INTERNET FUND
- -------------------------------------------------------------------------------

The bar chart and table shown below illustrate the variability of the Internet
Fund's returns. The bar chart indicates the risks of investing in the Internet
Fund by showing the changes in the Internet Fund's performance from year to year
(on a calendar year basis). The table shows how the Internet 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 Internet
Fund's past performance is not necessarily an indication of how the Internet
Fund will perform in the future.

[BAR CHART]
The Internet Fund
Calendar Year Returns as of 12/31

Year
----

1997 12.74%
1998 196.14%

Total return for the nine months ended September 30, 1999 was 88.42%

- -------------------- ------ -------- -----------
BEST QUARTER: Q1 1999 93.07%
- -------------------- ------ -------- -----------
WORST QUARTER: Q1 1997 -21.23%
- -------------------- ------ -------- -----------

AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/98
- ----------------------------------------------- ------------ -------------------
1 YEAR SINCE INCEPTION1
- ----------------------------------------------- ------------ -------------------

The Internet Fund (WWWFX) 196.14% 68.45%
S&P 500 Index (with dividends reinvested)2 28.58% 31.42%
NASDAQ Composite Index3 39.95% 31.33%
- ----------------------------------------------- ------------ -------------------
</TABLE>

1 The Internet 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 Internet Fund's 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.

Because the Infrastructure Fund, the Emerging Fund, the Global Fund, and the New
Paradigm Fund have no operating history, there is no performance information
available for these Funds at this time.

FEES AND EXPENSES OF THE FUNDS
- -------------------------------------------------------------------------------

As an investor, you pay certain fees and expenses if you buy and hold shares of
the Funds. These fees and expenses are described in the table below and are
further explained in the example that follows.

FEE TABLE
- -----------------------------------------------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES1
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) INTERNET INFRASTRUCTURE EMERGING GLOBAL NEW PARADIGM
- -----------------------------------------------------------------------------------------------------------------------

Maximum Sales Charge (Load) None None None None None
Imposed on Purchases
(as a percentage of offering price)

Maximum Deferred Sales Charge None None None None None
(Load)
(as a percentage of offering price)

Maximum Sales Charge (Load) on None None None None None
Reinvested Dividends

Redemption Fee None None None None None
(as a percentage of amount redeemed,
if applicable)

Exchange Fee2 None None None None None

Maximum Account Fee3 None None None None None

<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
ESTIMATED ANNUAL OPERATING
EXPENSES
(EXPENSES DEDUCTED FROM FUND ASSET)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>

Management Fees 1.25% 1.25% 1.25% 1.25% 1.25%

Distribution (Rule 12b-1) Fees None None None None None

Other Expenses 0.75% 0.75% 0.75% 0.75% 0.75%
---------------------------------------------------------------------
Estimated Total Annual Fund 2.00%4 2.00% 2.00% 2.00% 2.00%
Operating Expenses
=====================================================================
</TABLE>

1 Although no sales loads or transaction fees are charged, you will be assessed
fees for outgoing wire transfers, returned checks and exchanges executed by
telephone between a Fund and any other series of Kinetics Mutual Fund, Inc.

2 The Funds' Transfer Agent charges a transaction fee of $5 to shareholders
who exchange their shares by telephone in any Fund for shares in any other
series of Kinetics Mutual Funds, Inc.

3 Accounts of IRA Trustees are assessed a $12.50 annual fee.

4 The investment adviser has voluntarily agreed to limit the total annual
operating expenses of the Internet Fund so that it does not exceed more than
2.00% of the Internet Fund's average daily net assets on an annualized basis
for the year ending December 31, 2000. This voluntary cap may be terminated by
the investment adviser after that date.

EXAMPLE

THIS EXAMPLE IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN THE FUNDS
WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS.

THE EXAMPLE ASSUMES THAT YOU INVEST $10,000 IN THE FUNDS FOR THE TIME PERIODS
INDICATED AND THEN REDEEM ALL OF YOUR SHARES AT THE END OF THESE PERIODS. THE
EXAMPLE ALSO ASSUMES THAT YOUR INVESTMENT HAS A 5% RATE OF RETURN EACH YEAR AND
THAT THE FUNDS' OPERATING EXPENSES REMAIN THE SAME. ALTHOUGH YOUR ACTUAL COSTS
MAY BE HIGHER OR LOWER, BASED ON THESE ASSUMPTIONS YOUR COST WOULD BE:

1 YEAR 3 YEARS 5 YEAR 10 YEAR
------ ------- ------ -------

THE FUNDS $203 $627 $1,078 $2,327

</TABLE>

<PAGE>

INVESTMENT OBJECTIVE AND STRATEGIES OF THE INTERNET FUND
- -------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Internet Fund is long-term growth of capital.

INVESTMENT STRATEGIES
To achieve the Internet Fund's objective, under normal circumstances, at least
65% of the Internet Fund's total assets will be invested in common stocks,
convertible securities, warrants and other equity securities having the
characteristics of common stocks, such as American Depositary Receipts ("ADRs")
and International Depositary Receipts ("IDRs"), of domestic and foreign
companies that are engaged in the Internet and Internet-related activities.

Portfolio securities will be selected by the investment adviser from companies
that are engaged in the development of hardware, software and telecommunications
solutions that enable the transaction of business on the Internet by individuals
and companies engaged in private and commercial use of the Internet as well as
companies that offer products and services primarily via the Internet.
Accordingly, the Internet Fund seeks to invest in the equity securities of
companies whose research and development efforts may result in higher stock
values. These companies may be large, medium or small in size if in the
investment adviser's opinion, the companies meet the Internet Fund's investment
criteria. Such companies include, but are not limited to the following:

o Internet Service Providers: Companies that provide users with access to
the Internet.
o Software Companies: Companies that produce, manufacture and develop tools
to access the Internet, enable Internet users to enhance the speed,
integrity and storage of data on the Internet, facilitate information
distribution and gathering on the Internet, and to secure Internet-based
transactions.
o Computer Hardware Companies: Companies that develop and produce computer
and network hardware such as modems, switchers and routers, and those that
develop and manufacture workstations and personal communications systems
used to access the Internet and provide Internet services.
o E-Commerce: Companies that remove a substantial portion of their revenue
from sales of products and services conducted via the Internet.
o Content Developers: Companies that supply proprietary information and
entertainment content, such as games, music, video, graphics, news, etc.
on the Internet

The investment adviser selects portfolio securities by evaluating a company's
positioning and the business model as well as its ability to grow and expand its
activities via the Internet or achieve competitive advantage in
cost/profitability and brand image leveraging via use of the Internet. The
investment adviser also considers a company's fundamentals by reviewing its
balance sheets, corporate revenues, earnings and dividends. The investment
adviser also looks at the amount of capital a company currently expends on
research and development. The investment adviser believes that dollars invested
in research and development today frequently have significant bearing on future
growth.

TEMPORARY INVESTMENTS
To respond to adverse market, economic, political or other conditions, the
Internet Fund may invest up to 100% of its assets in high quality U.S.
short-term debt securities and 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

<PAGE>

o U.S. Government securities (i.e., U.S. Treasury obligations)
o repurchase agreements

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

INVESTMENT OBJECTIVE AND STRATEGIES
OF THE INTERNET INFRASTRUCTURE FUND
- -------------------------------------------------------------------------------

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

INVESTMENT STRATEGIES
To achieve the Infrastructure Fund's objective, under normal circumstances, at
least 65% of the Infrastructure Fund's total assets will be invested in common
stocks, convertible securities, warrants and other equity securities having the
characteristics of common stocks, such as American Depositary Receipts ("ADRs")
and International Depositary Receipts ("IDRs"), of domestic and foreign
companies that are engaged in the development and implementation of hardware,
software and communications technologies that support the growing infrastructure
and activities of the Internet.

Portfolio securities will be selected by the investment adviser from companies
that are engaged in supplying hardware, software and telecommunications
solutions that enable the transaction of business on the Internet by individuals
and companies engaged in private and commercial use of the Internet. These
companies may be large, medium or small in size if, in the investment adviser's
opinion, the companies meet the Infrastructure Fund's investment criteria. Such
companies include, but are not limited to the following:

o Computer Hardware Companies: Companies that develop and produce computer
and network hardware that enable users of the Internet to conduct personal
and commercial activities.

o Computer Software Companies: Companies that produce, manufacture and
develop the tools that enable Internet users to enhance the speed,
security, integrity and storage of data on the Internet.

o Telecommunications Companies: Companies that primarily engage in the
development of the telecommunications transmission lines and software
technologies that enhance the reach and band-width technologies of Internet
users.

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

<PAGE>

TEMPORARY INVESTMENTS
To respond to adverse market, economic, political or other conditions, the
Infrastructure Fund may invest up to 100% of its assets in high quality U.S.
short-term debt securities and 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 (i.e., U.S. Treasury obligations)
o repurchase agreements

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

INVESTMENT OBJECTIVE AND STRATEGIES
OF THE INTERNET EMERGING GROWTH FUND
- -------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Emerging Fund is long-term growth of capital.

INVESTMENT STRATEGIES
To achieve the Emerging Fund's objective, under normal circumstances, at least
65% of the Emerging Fund's total assets will be invested in common stocks,
convertible securities, warrants and other equity securities having the
characteristics of common stocks, such as American Depositary Receipts ("ADRs")
and International Depositary Receipts ("IDRs"), of small and medium
capitalization, emerging companies that are engaged in the Internet and
Internet-related activities.

Portfolio securities will be selected by the investment adviser from emerging,
small and medium sized companies that are engaged in the development of
hardware, software and telecommunications solutions that enable the transaction
of business on the Internet by individuals and companies engaged in private and
commercial use of the Internet as well as companies that offer products and
services primarily via the Internet. Accordingly, the Emerging Fund seeks to
invest in the equity securities of companies whose research and development
efforts may result in higher stock values. Such companies include, but are not
limited to the following:

o Internet Service Providers: Companies that provide users with access to
the Internet.

o Software Companies: Companies that produce, manufacture and develop tools
to access the Internet, enable Internet users to enhance the speed,
integrity and storage of data on the Internet, facilitate information
distribution and gathering on the Internet, and to secure Internet-based
transactions.

o Computer Hardware Companies: Companies that develop and produce computer
and network hardware such as modems, switchers and routers, and those that
develop and manufacture workstations and personal communications systems
used to access the Internet and provide Internet services.

o E-Commerce: Companies that sell retail products and services primarily
via the Internet.

<PAGE>

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

The investment adviser selects portfolio securities by evaluating a company's
positioning and business model as well as its ability to grow and expand its
activities via the Internet or achieve a greater competitive advantage in
cost/profitability and brand image leveraging via use of the Internet. The
investment adviser also considers a company's fundamentals by reviewing its
balance sheets, corporate revenues, earnings and dividends. The investment
adviser also looks at the amount of capital a company currently expends on
research and development. The investment adviser believes that dollars invested
in research and development today frequently have significant bearing on future
growth.

TEMPORARY INVESTMENTS
To respond to adverse market, economic, political or other conditions, the
Emerging Fund may invest up to 100% of its assets in high quality domestic
short-term debt securities and 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 (i.e., U.S. Treasury obligations)

o repurchase agreements

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

INVESTMENT OBJECTIVE AND STRATEGIES
OF THE INTERNET GLOBAL GROWTH FUND
- -------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Global Fund is long-term growth of capital.

INVESTMENT STRATEGIES
To achieve the Global Fund's objective, under normal circumstances, at least 65%
of the Global Fund's total assets will be invested in common stocks, convertible
securities, warrants and other equity securities having the characteristics of
common stocks, such as American Depositary Receipts ("ADRs") and International
Depositary Receipts ("IDRs"), of companies in at least three different countries
that are engaged in the Internet and Internet-related activities.

Portfolio securities will be selected by the investment adviser from domestic
and international companies that are engaged in the development of hardware,
software and telecommunications solutions that enable the transaction of
business on the Internet by individuals and companies engaged in private and
commercial use of the Internet as well as companies that offer products and
services primarily via the Internet. These companies may be large, medium or
small in size if, in the investment adviser's opinion, the companies meet the
Global Fund's investment criteria. Accordingly, the Global Fund seeks to invest
in the equity securities of companies whose research and development efforts may
result in higher stock values. Such companies include, but are not limited to
the following:

o Internet Service Providers: Companies that provide users with access to
the Internet.

<PAGE>

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

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

TEMPORARY INVESTMENTS
To respond to adverse market, economic, political or other conditions, the Fund
may invest up to 100% of its assets in high quality U.S. short-term debt
securities and 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 (i.e., U.S. Treasury obligations)
o repurchase agreements

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

INVESTMENT OBJECTIVE AND STRATEGIES
OF THE INTERNET NEW PARADIGM FUND
- -------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the New Paradigm Fund is long-term growth of
capital.

INVESTMENT STRATEGIES
To achieve the New Paradigm Fund's objective, under normal circumstances, at
least 65% of the New Paradigm Fund's total assets will be invested in common
stocks, convertible securities, warrants and other equity securities having the
characteristics of common stocks, such as American Depositary Receipts ("ADRs")
and International Depositary Receipts ("IDRs"), of domestic and foreign
companies with business models that stand to benefit from the utilization and
growth of the Internet.

Portfolio securities will be selected by the investment adviser from companies
that are engaged in various industries where the growth of the Internet will
enable an increase in the growth of traditional business

<PAGE>

lines, entry into new distribution channels, an ability to leverage brand
identity, and an improvement in the underlying cost/profitability dynamics of
the business. These companies may be large, medium or small in size if, in the
investment adviser's opinion, the companies meet the New Paradigm Fund's
investment criteria. Accordingly, the Fund seeks to invest in the equity
securities of companies whose research and development efforts may result in
higher stock values. Such companies include, but are not limited to the
following:

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

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

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

The investment adviser selects portfolio securities by evaluating a company's
positioning and the traditional business lines as well as its ability to expand
its activities via the Internet or achieve competitive advantage in
cost/profitability and brand image leveraging via use of the Internet. The
investment adviser also considers a company's fundamentals by reviewing its
balance sheets, corporate revenues, earnings and dividends.

TEMPORARY INVESTMENTS
To respond to adverse market, economic, political or other conditions, the New
Paradigm Fund may invest up to 100% of its assets in high quality U.S.
short-term debt securities and money market instruments. The New Paradigm 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 (i.e., U.S. Treasury obligations)
o repurchase agreements

To the extent the New Paradigm Fund engages in this temporary, defensive
strategy, the New Paradigm Fund may not achieve its investment objective.

MAIN RISKS OF THE FUNDS
- -------------------------------------------------------------------------------

INVESTING IN MUTUAL FUNDS
All mutual funds carry risk, which may cause you to lose money on your
investment in one or more of the Funds. The following describes the primary
risks of investing in each Fund due to each Fund's specific investment objective
and strategies. As all investment securities are subject to inherent market
risks and fluctuations in value due to earnings, economic and political
conditions and other factors, no Fund can give any assurance that its investment
objective will be achieved. In addition, you should be aware that, with the
exception of The Internet Fund, none of the Funds have any operating history.

MARKET RISK
The net asset value of each Fund will fluctuate based on changes in the value of
its underlying portfolio. The stock market is generally susceptible to volatile
fluctuations in market price. Market prices of

<PAGE>

securities in which the Funds invest may be adversely affected by an issuer's
having experienced losses or by the lack of earnings or by the issuer's failure
to meet the market's expectations with respect to new products or services, or
even by factors wholly unrelated to the value or condition of the issuer. The
value of the securities held by each Fund is also subject to the risk that a
specific segment of the stock market does not perform as well as the overall
market. Under any of these circumstances, the value of each Fund's shares and
total return will fluctuate, and your investment may be worth more or less than
your original cost when you redeem your shares.

INTERNET INDUSTRY SPECIFIC RISKS
The value of each Fund's shares will be susceptible to factors affecting the
Internet such as heightened regulatory scrutiny and impending changes in
government policies which may have a material effect on the products and
services of this industry. Furthermore, securities of companies in this industry
tend to be more volatile than securities of companies in other industries.
Competitive pressures and changing demand may have a significant effect on the
financial condition of Internet companies. These companies spend heavily on
research and development and are especially sensitive to the risk of product
obsolescence. The occurrence of any of these factors, individually or
collectively, may adversely affect the value of a Fund's shares and your
investment.

YEAR 2000 ISSUE
Like other mutual funds, financial and business organizations and individuals
around the world, each Fund may be adversely affected if the computer systems
used by the investment adviser, the administrator and other 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 believe that they have adequately
addressed the Year 2000 Issue with respect to computer systems that they use.
The investment adviser and administrator have also obtained reasonable
assurances that comparable steps have been taken by the Funds' other major
service providers.

Although there can be no assurance at this time that there will be no adverse
impact on any Fund, the Funds' service providers have advised the Funds that
they believe that they are prepared for the Year 2000. However, there can be no
assurance that the computer systems of the companies in which the Funds each
invest (especially those of foreign companies) will be timely converted or that
the value of such investments will not be adversely affected by the Year 2000
Issue. Foreign issuers, capital markets and economies may be more susceptible to
Year 2000 Issues than domestic companies. If the computer systems of the
companies in which the Funds each invest, including those of foreign companies,
are not adequately prepared for the Year 2000, each Fund's net asset value and
total return could be adversely affected.

OTHER SECURITIES THE FUND MIGHT PURCHASE
Under normal market conditions, each Fund will invest at least 65% of its total
assets in equity securities, consisting of common stocks, convertible
securities, warrants and securities having the characteristics of common stocks.
If the investment adviser believes that market conditions warrant a temporary
defensive posture, a Fund may invest without limitation in high quality,
short-term debt securities and money market instruments. These short-term debt
securities and money market instruments include commercial paper, certificates
of deposit, bankers' acceptances, and U.S. Government securities and repurchase
agreements. More information about these investments is disclosed in the
Statement of Additional Information ("SAI").

SECURITIES LENDING
Each Fund may lend its portfolio securities to broker-dealers by entering
directly into lending arrangements with such broker-dealers or indirectly
through repurchase agreements, amounting to no more than 25% of its assets.
Repurchase transactions will be fully collateralized at all times with cash

<PAGE>

and/or short-term debt obligations. These transactions involve some risk to a
Fund if the other party should default on its obligation and the Fund is delayed
or prevented from recovering the collateral. In the event the original seller
defaults on its obligation to repurchase, the Funds will seek to sell the
collateral, which could involve costs or delays. To the extent proceeds from the
sale of collateral are less than the repurchase price, each Fund forced to sell
such collateral in this manner would suffer a loss.

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

INVESTMENT IN SMALL AND MID-CAP COMPANIES
Each Fund may invest in small or mid-cap companies. Accordingly, a Fund may be
subject to the additional risks associated with investment in companies with
small or mid-sized capital structures (generally a market cap of $5 billion or
less). The market prices of the securities of such companies tend to be more
volatile than those of larger companies. Further, these securities tend to trade
at a lower volume than those of larger more established companies. If a Fund is
heavily invested in these securities and the value of these securities suddenly
decline, the net asset value of that Fund and your investment will be more
susceptible to significant losses.

FOREIGN SECURITIES
Investing in foreign securities can carry higher returns than those associated
with domestic investments. However, foreign securities may be substantially
riskier than domestic investments. The economies of foreign countries may differ
from the U.S. economy in such respects as growth of gross domestic product, rate
of inflation, currency depreciation, capital reinvestment, resource
self-sufficiency, and balance of payments position. Furthermore, the economies
of developing countries generally are heavily dependent on international trade
and, accordingly, have been, and may continue to be, adversely affected by trade
barriers, exchange controls, managed adjustments in relative currency values and
other protective measures imposed or negotiated by the countries with which they
trade. These economies also have been, and may continue to be, adversely
affected by economic conditions in the countries with which they trade.

The Funds may be required to obtain prior governmental approval for foreign
investments in some countries under certain circumstances. Governments may
require approval to invest in certain issuers or industries deemed sensitive to
national interests, and the extent of foreign investment in certain debt
securities and domestic companies may be subject to limitation. Individual
companies may also limit foreign ownership to prevent, among other things,
violation of foreign investment limitations.

Some foreign investments may risk being subject to repatriation controls that
could render such securities illiquid. Other countries might undergo
nationalization, expropriation, political changes, governmental regulation,
social instability or diplomatic developments (including war) that could
adversely affect the economies of such countries or the value of the investments
in those countries. For this reason, funds that invest primarily in the
securities of a single country will be greatly impacted by any political,
economic or regulatory developments affecting the value of the securities.
Additional risks include currency fluctuations, political and economic
instability, differences in financial reporting standards and less stringent
regulation of securities markets.

FUND BORROWING
Each Fund may leverage up to 5% of its assets to fund investment activities or
to achieve higher returns. Each Fund may borrow money from banks for temporary
or emergency purposes in order to meet

<PAGE>

redemption requests. To reduce its indebtedness, a Fund may have to sell a
portion of its investments at a time when it may be disadvantageous to do so. In
addition, interest paid by a Fund on borrowed funds would decrease the net
earnings of both that Fund and your investment.

MANAGEMENT OF THE FUNDS
- -------------------------------------------------------------------------------

INVESTMENT ADVISER
Each Fund's investment adviser is Kinetics Asset Management, Inc. ("Kinetics" or
the "investment adviser"), 477 Madison Avenue, 16th Floor, New York, New York,
10022. The management and affairs of each Fund is supervised by the Board of
Directors whose names and general background information appear in the SAI. The
investment adviser conducts investment research and supervision for each Fund
and is responsible for the purchase and sale of securities for each Fund's
portfolio. The investment adviser receives an annual fee from each Fund for its
services of 1.25% of such Fund's average daily net assets.

Peter B. Doyle is the Chairman of the Board of Directors of Kinetics. He is also
the Chief Investment Strategist. Steven R. Samson is the President and Chief
Executive Officer of Kinetics. Mr. Samson has more than 24 years experience in
the mutual fund and financial services industries. Lee Schultheis is Managing
Director and Chief Operating Officer of Kinetics. Mr. Schultheis has more than
20 years of experience in the mutual fund and financial services industries.

PORTFOLIO MANAGERS

PETER B. DOYLE is the Chief Investment Strategist for all of the Funds. Mr.
Doyle also serves as the Portfolio Manager for the New Paradigm Fund and is a
Co-Portfolio Manager of the Internet Fund with assets in excess of $1 billion.
He is primarily responsible for the day-to-day management of these Funds' assets
and securities. In early 1996, Mr. Doyle co-founded Kinetics, the investment
adviser to the Funds. Mr. Doyle also co-founded and is a Managing Director of
Horizon Asset Management, Inc., a New York based investment management and
research firm, since 1994. From 1988 through late 1994, Mr. Doyle was an
Investment Officer in Bankers Trust Company's Investment Services Group, where
he was responsible for managing approximately $250 million in assets. During his
tenure at Bankers Trust Company, Mr. Doyle served on the Finance and Utility
research sub-groups. Mr. Doyle holds a Masters of Business Administration from
Fordham University and a Bachelor of Science in Economics from St. John's
University.

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

TINA LARSSON is the Portfolio Manager for the Global Fund. Ms. Larsson is also
an Analyst of the Spin-off Report, a research service that focuses on spin-offs.
In this position, Ms. Larsson develops, writes, and markets institutional
research for distribution and is in charge of the research staff. Ms. Larsson
received a Bachelor of Science in Finance in 1987 and a Masters of Business
Administration from Pace University in 1999.

STEVEN TUEN, CFA, is Co-Portfolio Manager and Executive Adviser of the Internet
Fund. Mr. Tuen also serves as Portfolio Manager of the Emerging Fund. Mr. Tuen's
primary duties include research and analysis of equity securities for investment
by the Funds. From 1996 to 1999, Mr. Tuen was an Analyst

<PAGE>

and the Director of Research of IPO Value Monitor, a research service that
focuses on initial public offerings. From 1989 to 1996, Mr. Tuen was an Analyst
at Bankers Trust Company where he became Portfolio Manager of the Private
Banking Group. Mr. Tuen received a Bachelor degree in Business Administration
from the City University of New York in 1991 and became a Chartered Financial
Analyst in 1995.

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

Shares of each Fund are sold at its net asset value per share ("NAV"), which is
determined by each Fund as of the close of regular trading (generally 4:00 p.m.
eastern time) on each day that the New York Stock Exchange (the "Exchange") is
open for unrestricted business. Purchase and redemption requests are priced at
the next NAV calculated after receipt and acceptance of a completed purchase or
redemption request. The NAV is determined by dividing the value of a 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 each Fund, including management,
administration and shareholder servicing fees, which are accrued daily.

Each 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 in accordance with procedures approved by the Board of Directors.
Each Fund may use independent pricing services to assist in calculating the NAV
of such Fund's shares.

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

HOW TO PURCHASE SHARES
- -------------------------------------------------------------------------------

IN GENERAL
Shares of each Fund are sold at NAV, without a sales charge, and will be
credited to a shareholder's account at the NAV 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. Each Fund reserves the right to reject any
purchase order if, in its opinion, it is in a Fund's best interest to do so. A
service fee of $25.00 will be deducted from a Fund account for any purchases
that do not clear due to insufficient funds.

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 a
Fund toll free at (800) 930-3828. This option allows investors to move money
from their bank account to their Fund account upon request. Only bank

<PAGE>

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.

AUTOMATIC INVESTMENT PLAN
Once an account has been established, you may purchase shares of a Fund through
an Automatic Investment Plan ("AIP"). 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.

To be eligible for this plan, your bank must be a domestic institution that is
an ACH member. Any Fund may modify or terminate the AIP at any time. The first
AIP purchase will take place no earlier than 15 days after the Transfer Agent
has received your request.

PURCHASE BY MAIL
To purchase a Fund's 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 [NAME OF FUND] c/o Kinetics Mutual Funds, Inc. to:

Regular Mail: Overnight or Express Mail:
- ------------ --------------------------
Kinetics Mutual Fund, Inc. Kinetics Mutual Fund, Inc.
[NAME OF FUND] [NAME OF FUND]
c/o Firstar Mutual Fund services, LLC c/o Firstar Mutual Fund services, LLC
P.O. BOX 701 P.O. BOX 701
Milwaukee, WI 53201 Milwaukee, WI 53202

PURCHASE BY WIRE
Before wiring any funds please call (800) 930-3828 to notify the Fund in which
you are investing that the wire is coming and to verify the proper wire
instructions so that the wire is properly applied when received. No Fund is
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 Services, LLC
o ACCOUNT: 112-952-137
o FURTHER CREDIT: Kinetics Mutual Funds, Inc.
[NAME OF FUND]
(Shareholder Name/Account Registration)
(Shareholder Account Number)

Immediately send a completed New Account Application Form to the Fund at the
above address to have all accurate information recorded to your account.

SUBSEQUENT INVESTMENTS
You may add to your account at any time by purchasing shares by mail, by
telephone, or by wire (minimum $100). You must call to notify each Fund in which
you are invested at (800) 930-3828 before wiring. A remittance form, which is
attached to your individual account statement, should accompany

<PAGE>

any investments made through the mail. All purchase requests must include your
shareholder account number.

INDIVIDUAL RETIREMENT ACCOUNTS
You may invest in any Fund by establishing a tax-sheltered individual retirement
account. Each Fund offers Traditional IRA, Roth IRA, and Educational IRA. For
additional information on IRA options, please call (800) 930-3828.

INVESTING THROUGH BROKERS OR AGENTS
You may invest in each Fund through brokers or agents who have entered into
selling agreements with the Funds' distributor. The broker or agent may set
their own initial and subsequent investment minimums. You may be charged a fee
if you use a broker or agent to buy or redeem shares of the Fund.

HOW TO REDEEM SHARES
- -------------------------------------------------------------------------------

IN GENERAL
You may redeem part or all of each Fund's shares on any business day that the
Fund calculates its NAV. To redeem shares, you must contact the Fund in which
you are invested 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 after the close of the Exchange
(currently 4:00 pm EST) will be treated as though received on the next business
day.

Each Fund will generally mail 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" (see below). Note, however, that when a purchase order has been
made by check, or ACH purchase, a Fund will not be able to honor your redemption
request until the check or ACH purchase has cleared. This may take up to 12
days.

Redemption requests will be sent to the address of record. If the proceeds of
redemption are requested to be 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, the request must be in writing with your signature
guaranteed. Signature guarantees can be obtained from banks and securities
dealers, but not from a notary public. Each Fund is not responsible for interest
lost on redemption amounts due to lost or misdirected mail.

WRITTEN REDEMPTION
Most redemptions can be executed by the investor furnishing an unconditional
written request to each Fund in which he is invested to redeem his or her shares
at the current NAV. Redemption requests in writing should be sent to the
Transfer Agent at:

Requests for redemption in "good order" 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,

<PAGE>

o indicate your account registration number, and
o include the investor's social security number or tax identification
number.

TELEPHONE REDEMPTION
If you are authorized to perform telephone transactions (either through your New
Account Application Form or by subsequent arrangement in writing with a Fund)
you may redeem shares in any amount, but not less than $100 by instructing the
Fund in which you are invested by phone at (800) 930-3828. A signature guarantee
is required of all shareholders in order to qualify for or to change telephone
redemption privileges.

NOTE: Neither the Funds nor any of their 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, each Fund
will each 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 Form

WIRE REDEMPTION
Wire transfers may be arranged to redeem shares. However, the transfer agent
charges a $12 fee per wire redemption against your account for this service. The
minimum wire redemption amount 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 regular intervals. Money 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
shares of a Fund, 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
Each 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
NAV of the Fund or unless the shareholder is an active participant in the AIP.
Each Fund will provide shareholders with written notice 30 days prior to
redeeming the shareholder's 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.

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

You can exchange your shares in any Fund for shares in any other series of
Kinetics Mutual Funds, Inc. If the exchange is requested via telephone, a $5 per
exchange transaction cost will be assessed. You should carefully read the
prospectus of a fund before exchanging shares into that fund. Be advised that
exercising the exchange privilege consists of two transactions: a sale of shares
in one fund and the purchase of shares in another. Further, exchanges may have
certain tax consequences and you could

<PAGE>

realize short- or long-term capital gains or losses. Exchanges are generally
made only between identically registered accounts unless you send written
instructions with a signature guarantee requesting otherwise. You should request
your exchange prior to market close to obtain that day's closing NAV. Exchange
requests received after the close of the Exchange (currently 4:00 pm EST) will
be treated as though received on the next business day.

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

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

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

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

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

Each Fund intends to pay any dividends from investment company taxable income
and distributions representing capital gain at least annually, usually in
November. Each Fund will advise each shareholder annually of the amounts of
dividends from investment company taxable income and of net capital gain
distributions reinvested or paid in cash to the shareholder during the calendar
year.

If you select Option 1 or Option 2 and the U.S. Postal Service cannot deliver
your distribution checks, or if your distribution checks remain uncashed for six
months, your distribution checks be will reinvested in your account at the then
current NAV and your election will be converted to the purchase of additional
shares.

TAXES
Each 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 a 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), each Fund
will generally 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
shareholders. 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, each Fund intends to make
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 a Fund in October, November, or December of that year to
shareholders of record on a date in such a month and paid by a Fund during
January of the following calendar year. Such distributions will be taxable to
shareholders 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 shareholders
as ordinary income. Distributions of net capital gains designated by a Fund as
capital gains dividends are taxable as long-term

<PAGE>

capital gains regardless of the length of time a shareholder 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 shareholder reinvests the
distributions in additional shares or elects to receive them in cash.
Shareholders 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.

An exchange is not a tax-free transaction. An exchange of shares pursuant to a
Fund's exchange privilege is treated the same as an ordinary sale and purchase
for federal income tax purposes and you will realize a capital gain or loss.

On the account application, you will be asked to certify that your social
security number or taxpayer identification number is correct and that you are
not subject to backup withholding for failing to report income to the IRS. If
you are subject to backup withholding or you did not certify your taxpayer
identification number, the IRS requires each Fund to withhold 31% of any
dividend and redemption or exchange proceeds. Each Fund reserves the right to
reject any application that does not include a certified social security or
taxpayer identification number.

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

DISTRIBUTOR
T.O. Richardson Securities, Inc., 2 Bridgewater Road, Farmington Connecticut,
06032 is the distributor for the shares of each Fund. T.O. Richardson
Securities, Inc., is a registered broker-dealer and member of the National
Association of Securities Dealers, Inc. and serves as the distributor for
numerous registered investment companies across the United States.

SHAREHOLDER SERVICING AGENT
Kinetics is also responsible for paying various shareholder-servicing agents for
performing shareholder servicing functions and maintaining shareholder accounts.
These agents have written shareholder-servicing agreements with Kinetics and
perform these functions on behalf of their clients who own shares of the Funds.
For this service, Kinetics receives an annual shareholder-servicing fee from
each Fund equal to 0.25% of each Fund's average daily net assets.

FUND ADMINISTRATOR
Kinetics also serves as Administrator to each Fund. Kinetics will be entitled to
receive an annual administration fee equal to 0.15% of each Fund's average daily
net assets, out of which it will be responsible for the payment of a portion of
such fees to Firstar Mutual Fund Services, LLC ("Firstar") for certain
sub-administrative services rendered to each Fund by Firstar.

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

<PAGE>

MASTER/FEEDER FUND STRUCTURE
- -------------------------------------------------------------------------------

ELECTION TO INVEST FUND ASSETS PURSUANT TO MASTER/FEEDER STRUCTURE
In lieu of investing directly, each Fund is authorized to seek to achieve its
investment objective by converting to a Master/Feeder Fund Structure pursuant to
which each Fund would invest all of its investable assets in an investment
company having substantially the same investment objectives and policies as such
Fund. The Master/Feeder Fund Structure is an arrangement that allows several
investment companies with different shareholder-related features or distribution
channels, but having substantially the same investment objective, policies and
restrictions, to combine their investments by investing all of their assets in
the same portfolio instead of managing them separately thus achieving certain
economies of scale. There is no present intention to convert any Fund to a
Master/Feeder Fund Structure.

The SAI contains more information about each Fund, the Master/Feeder Fund
Structure and the types of securities in which each Fund may invest.

COUNSEL AND INDEPENDENT AUDITORS
- -------------------------------------------------------------------------------
Legal matters in connection with the issuance of shares of common stock of each
Fund are passed upon by Spitzer & Feldman P.C., 405 Park Avenue, New York, New
York 10022. McCurdy & Associates, CPA's, Inc., 27955 Clemens Road, Westlake,
Ohio 44145, have been selected as independent auditors for the Funds.

FINANCIAL HIGHLIGHTS OF THE INTERNET FUND
- -------------------------------------------------------------------------------
The financial highlights table set forth below is intended to help you
understand the Internet Fund's financial performance for the Internet 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
Internet Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by Lilling & Company LLP whose report, along with
the Internet Fund's financial statements that are included in the Internet
Fund's annual report, is available upon request.

For the period October
For the year ended For the year ended 21, 1996 (1) through
December 31, 1998 December 31, 1997 December 31, 1996
-------------------------------------- ---------------------- -------------------- ------------------------

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 10.50 0.59 (0.31)
(both realized and unrealized) ----- ---- ------

Total from investment operations 10.42 0.60 (0.29)

Dividends (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 3.08% 3.60% 6.73%(3)
assets (excluding waivers)

Net ratio of expenses to average net 3.08% 0.08% 0.21%(3)
assets

Gross ratio of net income (loss) to (2.92)% (3.33)% (4.51)%

Net ratio of net income (loss) to (2.92)% 0.19% 2.01%(3)
average net assets

Portfolio turnover rate 80% 50% 0%(3)

</TABLE>

1 Commencement of Operations
2 Not Annualized
3 Annualized

The Infrastructure Fund, the Emerging Fund, the Global Fund and the New Paradigm
Fund have not commenced operations to date, therefore, no financial highlights
are reported for these Funds.

<PAGE>

KINETICS MUTUAL FUNDS, INC.
THE INTERNET FUND
THE INTERNET INFRASTRUCTURE FUND
THE INTERNET EMERGING GROWTH FUND
THE INTERNET GLOBAL GROWTH FUND
THE INTERNET NEW PARADIGM FUND

INVESTMENT ADVISER, Kinetics Asset Management, Inc.
ADMINISTRATOR, AND 1311 Mamaroneck Avenue
SHAREHOLDER SERVICING White Plains, NY 10605
AGENT

LEGAL COUNSEL Spitzer & Feldman P.C.
405 Park Avenue
New York, NY 10022

INDEPENDENT AUDITORS McCurdy and Associates CPA's, Inc.
27955 Clemens Road
Westlake, OH 44145

TRANSFER AGENT, Firstar Mutual Fund Services, LLC
FUND ACCOUNTANT, 615 East Michigan Street
SUB-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 Funds free of charge:

STATEMENTS OF ADDITIONAL INFORMATION (SAI) DATED DECEMBER 23, 1999
The SAI's for each Fund provides more details about each Fund's policies and
management. Each Fund's SAI is incorporated by reference into this Prospectus.

ANNUAL AND SEMI-ANNUAL REPORT
Each Fund's annual and semi-annual reports provide the most recent financial
reports and portfolio listings. The annual report contains a discussion of the
market conditions and investment strategies that affected each Fund's
performance during the last fiscal year.

TELEPHONE: INTERNET:
(800) 930-3828 http://www.sec.gov (text only version)
http://www.kineticsfunds.com
MAIL:
Kinetics Mutual Funds, Inc.
c/o Firstar Mutual Fund Services, LLC
P.O. Box 701
Milwaukee, WI 53201-0701

SEC:
You may review and obtain copies of Kinetic Mutual Funds information (including
the SAIs) at the SEC Public Reference Room in Washington, D.C. Please call
1-202-942-8090 for information relating to the operation of the Public Reference
Room. Reports and other information about each Fund are available on the EDGAR
Database on the SEC's Internet site at http://www.sec.gov. Copies of the
information may be obtained, after paying a duplicating fee, by electronic
request at the following E-mail address: [email protected], or by writing the
Public Reference Section, Securities and Exchange Commission, Washington, D.C.
20549-0102.
1940 Act File No. 811-09303

<PAGE>
[LOGO]
Kinetics Mutual Funds, Inc.
PURCHASE APPLICATION

Mail To: Overnight Express Mail To:
Kinetics Mutual Funds, Inc. Kinetics Mutual Funds, Inc.
c/o Firstar Mutual Fund Services, LLC c/o Firstar Mutual Fund Services, LLC
PO Box 701 615 E. Michigan St., 3rd Floor
Milwaukee, WI 53201-0701 Milwaukee, WI 53202-5207

Use this form for individual, custodial, trust, profit sharing or pension plan
accounts. Do not use this form for Kinetics Mutual Funds, Inc. sponsored IRA or
SEP IRA accounts. For any additional information please call Kinetics Mutual
Funds, Inc. at 1-800-930-3828.

A. INVESTMENT CHOICES

Please indicate the amount you wish to invest $ ______________ ($1,000.00
minimum per fund)
<TABLE>
<CAPTION>
DISTRIBUTION OPTIONS
Capital Gains & Capital Gains Capital Gains Dividend
Dividends Reinvested & and Dividends Reinvested &
Reinvested Dividends in Cash* Capital Gains
in Cash* Paid to Cash
<S> <C> <C> <C> <C> <C>
Initial Investment
Amount
// The Internet Fund (067-067) $________________ / / / / / / / /
// The Internet Global Growth Fund (067-070) $________________ / / / / / / / /
// The Internet New Paradigm Fund (067-069) $________________ / / / / / / / /
// The Internet Infrastructure Fund (067-068) $________________ / / / / / / / /
// The Internet Emerging Growth Fund $________________ / / / / / / / /

*Unless otherwise indicated, cash distributions will be
mailed to the address in Section C

- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
B. REGISTRATION

<S> <C> <C> <C> <C>
// 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.
</TABLE>

- -------------------------------------------------------------------------------

C. MAILING ADDRESS

--------------------------------------------- --------------
STREET APT/SUITE

----------------------------------- -------- --------------
CITY STATE ZIP

-------------------------------- ---------------------------
DAYTIME PHONE # EVENING PHONE #

// Duplicate Confirmation to:
-------------------------- ------- ------------------------
FIRST NAME M.I. LAST NAME

--------------------------------------------- --------------
STREET APT/SUITE

----------------------------------- -------- --------------
CITY STATE ZIP

[2970] M 12/98

<PAGE>

D. TELEPHONE/INTERNET OPTIONS

// NO, I DO NOT WANT THE TELEPHONE EXCHANGE OPTION. Telephone exchange
privileges automatically apply to each shareholder of record unless
otherwise indicated.

// ONLINE OPTIONS. If you have chosen telephone options for your account, you
may also elect to access your account online. (A Personal Identification
Number (PIN) will be mailed to your address of record.)

- --------------------------------------------------------------------------------

E. TELEPHONE OPTIONS

Your signed Application must be received at least 15 business days prior to
initial transaction.

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.

// TELEPHONE REDEMPTION.
// Check to address shown on your account
// Via federal wire to your bank account below ($12.00 charge for each wire
transfer)
// Via EFT, at no charge, to your bank account below (funds are typically
credited 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#

- --------------------------------------------------------------------------------

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 Kinetics Mutual Funds, Inc. 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.

- --------------------------------------------------------------------------------
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 Kinetics Mutual Funds, Inc. $_______________
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 [C] 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.

<PAGE>
H. SIGNATURE AND CERTIFICATION REQUIRED BY THE INTERNAL REVENUE SERVICE

I have received and read the Prospectus for the Kinetics Mutual Funds, Inc. (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 D, E, F, 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

- --------------------------------------------------------------------------------
I. DEALER INFORMATION (If applicable)
Please be sure to complete representative's first name and middle initial.

- ----------------------------------- -------------------------------------------
DEALER NAME REPRESENTATIVE'S LAST NAME FIRST NAME MI

DEALER HEAD OFFICE REPRESENTATIVE'S BRANCH OFFICE

- ----------------------------------- -------------------------------------------
ADDRESS ADDRESS

- ----------------------------------- -------------------------------------------
CITY/STATE/ZIP CITY/STATE/ZIP

- ----------------------------------- -------------------------------------------
TELEPHONE NUMBER TELEPHONE NUMBER REP'S A.E. NUMBER

- --------------------------------------------------------------------------------

J. E-MAIL

Please provide an E-Mail address if possible. This will be used to provide
important fund or fund related information.

- -------------------------------------

<PAGE>

THE INTERNET FUND
a series of Kinetics Mutual Funds, Inc.

477 Madison Avenue, 16th Floor
New York, NY 10022
(800) 930-3828

December 23, 1999

STATEMENT OF ADDITIONAL INFORMATION

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.

This Statement of Additional Information ("SAI") is not a prospectus and should
be read in conjunction with the Fund's current Prospectus dated December 23,
1999. To obtain a copy of the Prospectus, please write the Fund at the address
set forth above or call the telephone number shown above.

<PAGE>

THE INTERNET FUND

The Fund................................................................3
Investment Objective, Strategies, and Risks.............................3
Investment Policies and Associated Risks................................3
Investment Restrictions.................................................5
Temporary Investments...................................................6
Portfolio Turnover......................................................7
Management of the Fund..................................................7
Control Persons and Principal Holders of Securities.....................9
Investment Adviser......................................................9
Administrative Services................................................10
Custodian..............................................................11
Capitalization.........................................................11
Valuation of Shares....................................................11
Purchasing Shares......................................................12
Redemption of Shares...................................................12
Brokerage..............................................................13
Taxes..................................................................14
Performance Information................................................14
Independent Auditors...................................................16
Financial Statements...................................................16
Appendix...............................................................17

2
<PAGE>

The Fund
- --------------------------------------------------------------------------------

The Internet Fund (the "Fund") is a series of Kinetics Mutual Funds, Inc., a
Maryland corporation, incorporated on March 26, 1999. The Fund's principal
office is located at 477 Madison Avenue, 16th Floor, New York, New York 10022.
The Fund is a non-diversified, open-end management investment company.

Investment Objective, Strategies, and Risks
- --------------------------------------------------------------------------------

The Fund's primary investment objective is long-term growth of capital. Except
during temporary, defensive periods, at least 65% of the Fund's total assets
will be invested in securities of companies that provide products or services
designed for the Internet. The Fund is designed for long-term investors who
understand and are willing to accept the risk of loss involved in investing in a
mutual fund seeking long-term capital growth.

Investment Policies and Associated Risks
- --------------------------------------------------------------------------------

The following paragraphs provide a more detailed description of the Fund's
investment policies and their associated risks identified in the Prospectus.
Unless otherwise noted, the policies described in this SAI are not fundamental
and may be changed by the Board of Directors.

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

Convertible Debt Securities
The 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. See "Appendix" to this Statement of Additional Information for a
description of debt security ratings.

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.

3
<PAGE>

Credit risk relates to the ability of the issuer to meet interest and principal
payments, as they come due. The ratings given a security by Moody's and S&P
provide a generally useful guide as to such credit risk. The lower the rating
given a security by such rating service, the greater the credit risk such rating
service perceives to exist with respect to such security. Increasing the amount
of Fund assets invested in 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.

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

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

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

4
<PAGE>

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

Election to Invest Fund Assets Pursuant to Master/Feeder Fund Structure
In lieu of investing directly, the Fund is authorized to seek to achieve its
investment objective by converting to a Master/Feeder Fund Structure pursuant to
which the Fund would invest all of its investable assets in an investment
company having substantially the same investment objective and policies as the
Fund. The Master/Feeder Fund Structure is an arrangement that allows several
investment companies with different shareholder-related features or distribution
channels, but having substantially the same investment objective, policies and
restrictions, to combine their investments by investing all of their assets in
the same portfolio instead of managing them separately.

Conversion to a Master/Feeder Fund Structure may serve to attract other
collective investment vehicles with different shareholder servicing or
distribution arrangements and with shareholders that would not have invested in
the Fund. In this event, additional assets may allow for operating expenses to
be spread over a larger asset base. In addition, a Master/Feeder Fund Structure
may serve as an alternative for large, institutional investors in the Fund who
may prefer to offer separate, proprietary investment vehicles and who otherwise
might establish such vehicles outside of the Fund's current operational
structure. Conversion to a Master/Feeder Fund Structure may also allow the Fund
to stabilize its expenses and achieve certain operational efficiencies. No
assurance can be given, however, that the Master/Feeder Fund Structure will
result in the Fund stabilizing its expenses or achieving greater operational
efficiencies.

The Fund's methods of operation and shareholder services would not be materially
affected by its investment in another investment company ("Master Portfolio")
having substantially the same investment objective and polices as the Fund,
except that the assets of the Fund may be managed as part of a larger pool. If
the Fund invested all of its assets in a Master Portfolio, it would hold only
beneficial interests in the Master Portfolio; the Master Portfolio would
directly invest in individual securities of other issuers. The Fund would
otherwise continue its normal operation. The Board would retain the right to
withdraw the Fund's investment from its corresponding Master Portfolio at any
time it determines that it would be in the best interest of shareholders; the
Fund would then resume investing directly in individual securities of other
issuers or invest in another Master Portfolio.

There is no present intention to convert the Fund to a Master/ Feeder Fund
structure. The Board of Directors has authorized this fundamental investment
policy to facilitate such a conversion in the event that the Board of Directors
determines that such a conversion is in the best interest of the Fund's
shareholders. If the Board so determines, it will consider and evaluate specific
proposals prior to the implementation of the conversion to a Master/Feeder Fund
Structure. Further, the Fund's Prospectus and Statement of Additional
Information would be amended to reflect the implementation of the Fund's
conversion and its shareholders would be notified.

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.

5
<PAGE>

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 50% 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.

4. 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.

5. 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.

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

7. The 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.

8. 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 and related companies, the national
economy and market conditions, the Fund may, as a temporary defensive measure,
invest without limitation, in short-term debt securities and money market
securities with a rating of A2-P2 or higher.

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

6
<PAGE>

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 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 shareholders 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.

Management of the Fund
- --------------------------------------------------------------------------------
Board of Directors
The Fund is managed by a Board of Directors. The Fund's Board of Directors
consist of eight individuals, five of whom are not "interested persons" of the
Fund as that term is defined in the Investment Company Act of 1940, as amended
(the "1940 Act"). The Directors are fiduciaries for the Fund's shareholders and
are governed by the laws of the State of Maryland 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 over at
least the last five years.

- --------------------------- --------- ------------------------ -------------------------------------------
<S> <C> <C> <C>
Name and Address Age Position Principal Occupation
during the Past Five Years
- --------------------------- --------- ------------------------ -------------------------------------------
*Steven R. Samson 45 President & President and CEO, Kinetics Asset
342 Madison Avenue Chairman of Management, Inc. (1999 to Present);
New York, NY 10173 the Board President, The Internet Fund, Inc. (1999
to Present); Managing Director, Chase
Manhattan Bank (1993 to 1999).
- --------------------------- --------- ------------------------ -------------------------------------------
*Kathleen Campbell 34 Director Attorney, Campbell and Campbell,
2 Madison Avenue Counselors-at-Law (1995 to Present).
Valhalla, NY 10595
- --------------------------- --------- ------------------------ -------------------------------------------
*Murray Stahl 46 Independent Director President, Horizon Asset Management,
342 Madison Avenue an investment adviser (1994 to
New York, NY 10173 Present).
- --------------------------- --------- ------------------------ -------------------------------------------
Steven T. Russell 36 Independent Director Attorney and Counselor at Law,
146 Fairview Avenue Steven Russell Law Firm (1994 to
Bayport, NY 117045 Present); Professor of Business Law,
Suffolk County Community College
(1997 to Present).
- --------------------------- --------- ------------------------ -------------------------------------------
Douglas Cohen, C.P.A. 36 Independent Director Wagner, Awerma & Strinberg, LLP
6 Saywood Lane Certified Public Accountant (1997 to
Stonybrook, NY 11790 present); Leon D. Alpern & Co. (1985
to 1997)
- --------------------------- --------- ------------------------ -------------------------------------------

7
<PAGE>
<CAPTION>

- --------------------------- --------- ------------------------ -------------------------------------------
<S> <C> <C> <C>
Name and Address Age Position Principal Occupation
during the Past Five Years
- --------------------------- --------- ------------------------ -------------------------------------------
William J. Graham 37 Independent Director Attorney, Bracken & Margolin, LLP
20 Franklin Boulevard (1997 to Present).
Long Beach, NY 11561 Gabor & Gabor (1995 to 1997)
- --------------------------- --------- ------------------------ -------------------------------------------
Joseph E. Breslin 45 Independent Director Senior Vice President, Marketing &
One State Street Sales, IBJ Whitehall Financial Group, a
New York, NY 10004 financial services company (1999 to
Present); formerly President, J.E.
Breslin & Co., an investment
management consulting firm (1994 to
1999).
- --------------------------- --------- ------------------------ -------------------------------------------
John J. Sullivan 68 Independent Director Retired; Senior Advisor, Long Term
31 Hemlock Drive Credit Bank of Japan, Ltd.; Executive
Sleepy Hollow, NY 10591 Vice President, LTCB Trust Company.
- --------------------------- --------- ------------------------ -------------------------------------------
Lee W. Schultheis 43 Vice President & Managing Director & COO of Kinetics
342 Madison Avenue Treasurer Asset Management (1999 to Present);
New York, NY 10173 President & Director of Business.
Development, Vista Fund Distributors,
Inc. (1995 to 1999); Managing
Director, Forum Financial Group, a
mutual fund services company.
- --------------------------- --------- ------------------------ -------------------------------------------
</TABLE>

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

Compensation
For their service as Directors, the Independent Directors receive a fee of $5000
per year and $1000 per meeting attended, as well as reimbursement for expenses
incurred in connection with attendance at such meetings. The "interested
persons" of the Fund receive no compensation for their service as Directors.
None of the executive officers receive compensation from the Fund.

- ---------------------------- ----------------- ----------------------- ---------------------- ------------------------
<S> <C> <C> <C> <C>
Name and Position Aggregate Pension or Retirement Estimated Annual Total Compensation
Compensation Retirement Benefits Benefits Upon from Fund and Fund
From Fund Accrued as Part of Retirement Complex Paid to
Fund Expenses Directors
- ---------------------------- ----------------- ----------------------- ---------------------- ------------------------
*Steven R. Samson None None None None
Chairman and Director
- ---------------------------- ----------------- ----------------------- ---------------------- ------------------------
*Kathleen Campbell None None None None
Director
- ---------------------------- ----------------- ----------------------- ---------------------- ------------------------
**Murray Stahl $3,844 None None $3,844
Independent Director
- ---------------------------- ----------------- ----------------------- ---------------------- ------------------------
Steven T. Russell $5,500 None None $5,500
Independent Director
- ---------------------------- ----------------- ----------------------- ---------------------- ------------------------
Douglas Cohen, CPA $6,094 None None $6,094
Independent Director
- ---------------------------- ----------------- ----------------------- ---------------------- ------------------------
William J. Graham $5,500 None None $5,500
Independent Director
- ---------------------------- ----------------- ----------------------- ---------------------- ------------------------

8
<PAGE>
<CAPTION>

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

** Murray Stahl became an "interested person" of the Fund (as defined under the
1940 Act) as of December 15, 1999. Previous to becoming an interested person,
Mr. Stahl received $3844 as total compensation from the Fund and Fund complex
for being an independent director.

Control Persons and Principal Holders of Securities
- --------------------------------------------------------------------------------

The following table provides the name and address of any person who owns of
record or beneficially 5% or more of the outstanding shares of the Portfolio as
of November 30, 1999 (a "principal shareholder"). A control person is one who
owns beneficially or through controlled companies more than 25% of the voting
securities of a company or acknowledges the existence of control.
<TABLE>
<CAPTION>

- ---------------------------- -------------------------- -------------------------- --------------------------
<S> <C> <C> <C>
Name and Address Shares % Ownership Type of Ownership
- ---------------------------- -------------------------- -------------------------- --------------------------
National Financial
Services Corp. 9,106,087,836 40.76% Record
200 Liberty Street
New York, NY 10281
- ---------------------------- -------------------------- -------------------------- --------------------------
National Finanical
Services Corp. 1,726,853,375 8.30% Record
55 Water Street
New York, NY 10041
- ---------------------------- -------------------------- -------------------------- --------------------------
DLJ/Pershing Group
One Pershing Plaza 1,189,201,848 5.71% Record
Jersey City, NJ 07399
- ---------------------------- -------------------------- -------------------------- --------------------------
</TABLE>

Management Ownership
As a group, the officers and directors of the Fund own less than 1% of the
outstanding shares of the Fund.

Investment Adviser
- --------------------------------------------------------------------------------

Kinetics Asset Management, Inc. ("Kinetics" or the "Adviser") is a New York
corporation that serves as the investment adviser to the Fund. Peter B. Doyle is
the Chairman of the Board of Directors and Chief Investment Strategist of
Kinetics. Steven R. Samson is the President and Chief Executive Officer of
Kinetics. Mr. Samson has over 24 years experience in the mutual funds and
financial services industries. Mr. Samson is also the President of The Internet
Fund, Inc. Mr. Lee Schultheis is the Managing Director and Chief Operating
Officer of Kinetics and has more than 20 years experience in the mutual funds
and financial services industries.

9
<PAGE>

On December 15, 1999 the Board of the Directors of the Fund approved a
management and advisory contract (the "Agreement") with Kinetics. This Agreement
continues on a year-to-year basis provided that specific approval is voted at
least annually by the Board of 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 Agreement nor "interested persons" as
defined in the 1940 Act at a meeting called for the purpose of voting on such
approval. The Adviser's investment decisions are made subject to the direction
and supervision of the Fund's Board of Directors. The Agreement may be
terminated at any time, without the payment of any penalty, by the Board of
Directors or by vote of a majority of the outstanding voting securities of the
Fund. Ultimate decisions as to the investment policy and as to individual
purchases and sales of securities are made by the Fund's officers and Directors.

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

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.

The Adviser receives a shareholder servicing fee pursuant to a Shareholder
Servicing Agreement in an amount equal to 0.25% of the Fund's average daily net
assets. The Adviser is responsible for paying a portion of these shareholder
servicing fees to various shareholder servicing agents which have a written
shareholder servicing agreement with the Adviser and which perform shareholder
servicing functions and maintenance of shareholder accounts on behalf of their
clients who own shares of the Fund.

Administrative Services
- --------------------------------------------------------------------------------

Kinetics also serves as Administrator of the Fund. Under an Administrative
Services Agreement with the Fund, Kinetics will be entitled to receive an annual
administration fee equal to 0.15% of the Fund's average daily net assets, of
which the Adviser will be responsible for the payment of a portion of such fees
to Firstar Mutual Fund Services, LLC ("Firstar") for certain sub-administrative
services rendered to the Fund by Firstar.

10
<PAGE>

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

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

|X| establish and maintain shareholders' accounts and records,

|X| process purchase and redemption transactions,

|X| process automatic investments of client account cash balances,

|X| answer routine client inquiries regarding the Fund,

|X| assist clients in changing dividend options,

|X| account designations, and addresses, and

|X| providing such other services as the Fund may reasonably request.

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
0.015% of the Fund's average daily net assets with a minimum annual fee of
$3,000.

Capitalization
- --------------------------------------------------------------------------------

The authorized capitalization of the Kinetics Mutual Funds, Inc. consists of 1
billion 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.

Valuation 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. EST) on each
day the New York Stock Exchange ("NYSE") is open for trading. The NYSE is closed
on the following holidays: New Year's Day, Martin Luther King, Jr.'s Day,
President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.

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 mean of the most
recent quoted bid and asked price.

11
<PAGE>

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.
Except for the Fund itself, the investment dealers that have an effective sales
agreement with the Fund are authorized to sell shares of 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 shareholder'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.

Investing Through Authorized Brokers or Dealers
The Fund may have to authorize one or more brokers to accept purchase orders on
a shareholder's behalf. Brokers are authorized to designate intermediaries to
accept orders on the Fund's behalf. An order is deemed to be received when an
authorized broker or agent accepts the order. Orders will be priced at the
Fund's NAV next computed after they are accepted by an authorized broker or
agent.

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 NYSE 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 NYSE 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 in "good order" to:

12
<PAGE>

The Internet Fund
Kinetics Mutual Funds, Inc.
c/o Firstar Mutual Fund Services
P.O. Box 701
Milwaukee, WI 53201-0701
(800) 930-3828

A written request in "good order" to redeem shares must include:

|X| the shareholder's name,

|X| the fund name,

|X| the account number,

|X| the share or dollar amount to be redeemed, and

|X| 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 shareholders request redemption proceeds be sent to an address other than
that on record with the funds or proceeds made payable other than to the
shareholder(s) of record, the written request must have signatures guaranteed
by:

|X| a trust company or commercial bank whose deposits are insured by the BIF,
which is administered by the FDIC;

|X| a member of the New York, Boston, American, Midwest, or Pacific Stock
Exchange;

|X| a savings bank or savings association whose deposits are insured by the
SAIF, which is administered by the FDIC; or

|X| 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.

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.

13
<PAGE>

Other than set forth above, the Fund has no fixed policy, formula, method or
criteria that it uses in allocating brokerage business to brokers furnishing
these materials and services. The Board of Directors evaluates and reviews the
reasonableness of brokerage commissions paid semiannually.

Taxes
- --------------------------------------------------------------------------------

Under provisions of Sub-Chapter M of the Internal Revenue Code of 1986 as
amended, the Fund, by paying out substantially all of its investment income and
realized capital gains, has been and intends to continue to be relieved of
federal income tax on the amounts distributed to shareholders. In order to
qualify as a "regulated investment company" under Sub-Chapter M, at least 90% of
the Fund's income must be derived from dividends, interest and gains from
securities transactions. No more than 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

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.

14
<PAGE>

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

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

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

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

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

Other Information
The 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:

15
<PAGE>

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.

Independent Auditors
- --------------------------------------------------------------------------------

McCurdy and Associates, CPA's, Inc., 27995 Clemens Road, Westlake, Ohio 44145,
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.

16
<PAGE>

Appendix
- --------------------------------------------------------------------------------

Standard & Poor's ("S&P") Corporate Bond Rating Definitions

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

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

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

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

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

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

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

Moody's Investors Service, Inc. Corporate Bond Rating Definitions

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

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

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

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

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

17
<PAGE>

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

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

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

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

Fitch Investors Service, Inc. Bond Rating Definitions

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

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

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

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

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

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

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

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

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

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

<PAGE>

THE INTERNET NEW PARADIGM FUND
a series of Kinetics Mutual Funds, Inc.

477 Madison Avenue, 16th Floor
New York, NY 10022
(800) 930-3828

December 23, 1999

STATEMENT OF ADDITIONAL INFORMATION

<PAGE>

THE INTERNET NEW PARADIGM FUND

The Fund...............................................................3
Investment Objective, Strategies, and Risks............................3
Investment Policies and Associated Risks...............................3
Investment Restrictions................................................5
Temporary Investments..................................................6
Portfolio Turnover.....................................................7
Management of the Fund.................................................7
Control Persons and Principal Holders of Securities....................9
Investment Adviser.....................................................9
Administrative Services...............................................10
Custodian.............................................................11
Capitalization........................................................11
Valuation of Shares...................................................11
Purchasing Shares.....................................................12
Redemption of Shares..................................................12
Brokerage.............................................................13
Taxes.................................................................13
Performance Information...............................................14
Independent Auditors..................................................16
Financial Statements..................................................16
Appendix..............................................................17

2
<PAGE>

The Fund
- --------------------------------------------------------------------------------

The Internet New Paradigm Fund (the "Fund") is a series of Kinetics Mutual
Funds, Inc., a Maryland corporation, incorporated on March 26, 1999. The Fund's
principal office is located at 477 Madison Avenue, 16th Floor, New York, New
York 10022. The Fund is a non-diversified, open-end management investment
company.

Investment Objective, Strategies, and Risks
- --------------------------------------------------------------------------------

Investment Policies and Associated Risks
- --------------------------------------------------------------------------------

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.

3
<PAGE>

4
<PAGE>

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.

5
<PAGE>

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.

5. 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.

6. The Fund will not invest in the securities of any one industry except
Internet and Internet-related, with the exception of securities issued or
guaranteed by the U.S. Government, its agencies, and instrumentality's, if
as a result, more than 20% of the Fund's total assets would be invested in
the securities of such industry. Except during temporary defensive periods,
at least 65% of the Fund's total assets will be invested in the securities
of domestic and foreign companies with business models that stand to
benefit from the utilization and growth of the Internet.

8. The Fund will not issue senior securities.

Temporary Investments
- --------------------------------------------------------------------------------

6
<PAGE>

Portfolio Turnover
- --------------------------------------------------------------------------------

Management of the Fund
- --------------------------------------------------------------------------------

Board of Directors
The Fund is managed by a Board of Directors. The Fund's Board of Directors
consist of eight individuals, five of whom are not "interested persons" of the
Fund as that term is defined in the Investment Company Act of 1940, as amended
(the "1940 Act"). The Directors are fiduciaries for the Fund's shareholders and
are governed by the laws of the State of Maryland 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 over at
least the last five years.

7
<PAGE>
<CAPTION>

- --------------------------- --------- ------------------------ -------------------------------------------
<S> <C> <C> <C>
Name and Address Age Position Principal Occupation
during the Past Five Years
- --------------------------- --------- ------------------------ -------------------------------------------
William J. Graham 37 Independent Director Attorney, Bracken & Margolin, LLP
20 Franklin Boulevard (1997 to Present).
Long Beach, NY 11561 Gabor & Gabor (1995 to 1997)
- --------------------------- --------- ------------------------ -------------------------------------------
Joseph E. Breslin 45 Independent Director Senior Vice President, Marketing &
One State Street Sales, IBJ Whitehall Financial Group, a
New York, NY 10004 financial services company (1999 to
Present); formerly President, J.E.
Breslin & Co., an investment
management consulting firm (1994 to
1999).
- --------------------------- --------- ------------------------ -------------------------------------------
John J. Sullivan 68 Independent Director Retired; Senior Advisor, Long Term
31 Hemlock Drive Credit Bank of Japan, Ltd.; Executive
Sleepy Hollow, NY 10591 Vice President, LTCB Trust Company.
- --------------------------- --------- ------------------------ -------------------------------------------
Lee W. Schultheis 43 Vice President & Managing Director & COO of Kinetics
342 Madison Avenue Treasurer Asset Management (1999 to Present);
New York, NY 10173 President & Director of Business.
Development, Vista Fund Distributors,
Inc. (1995 to 1999); Managing
Director, Forum Financial Group, a
mutual fund services company.
- --------------------------- --------- ------------------------ -------------------------------------------
</TABLE>

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

Compensation
For their service as Directors, the Independent Directors receive a fee of $5000
per year and $1000 per meeting attended, as well as reimbursement for expenses
incurred in connection with attendance at such meetings. The "interested
persons" of the Fund receive no compensation for their service as Directors.
Because the Fund has recently commenced investment operations, the Independent
Directors have not received any compensation at this time. None of the executive
officers receive compensation from the Fund.

- ---------------------------- ----------------- ----------------------- ---------------------- ------------------------
<S> <C> <C> <C> <C>
Name and Position Aggregate Pension or Retirement Estimated Annual Total Compensation
Compensation Retirement Benefits Benefits Upon from Fund Paid to
From Fund Accrued as Part of Retirement Directors
Fund Expenses
- ---------------------------- ----------------- ----------------------- ---------------------- ------------------------
*Steven R. Samson None None None None
Chairman and Director
- ---------------------------- ----------------- ----------------------- ---------------------- ------------------------
*Kathleen Campbell None None None None
Director
- ---------------------------- ----------------- ----------------------- ---------------------- ------------------------
**Murray Stahl None None None None
Independent Director
- ---------------------------- ----------------- ----------------------- ---------------------- ------------------------
Steven T. Russell None None None None
Independent Director
- ---------------------------- ----------------- ----------------------- ---------------------- ------------------------
Douglas Cohen, CPA None None None None
Independent Director
- ---------------------------- ----------------- ----------------------- ---------------------- ------------------------

8
<PAGE>
<CAPTION>
- ---------------------------- ----------------- ----------------------- ---------------------- ------------------------
<S> <C> <C> <C> <C>
Name and Position Aggregate Pension or Retirement Estimated Annual Total Compensation
Compensation Retirement Benefits Benefits Upon from Fund Paid to
From Fund Accrued as Part of Retirement Directors
Fund Expenses
- ---------------------------- ----------------- ----------------------- ---------------------- ------------------------
William J. Graham None None None None
Independent Director
- ---------------------------- ----------------- ----------------------- ---------------------- ------------------------
Joseph E. Breslin None None None None
Independent Director
- ---------------------------- ----------------- ----------------------- ---------------------- ------------------------
John J. Sullivan None None None None
Independent Director
- ---------------------------- ----------------- ----------------------- ---------------------- ------------------------
</TABLE>

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

Control Persons and Principal Holders of Securities
- --------------------------------------------------------------------------------

Currently, there are no control persons or principal holders of securities of
the Fund. Control persons are persons deemed to control the Fund because they
beneficently own in excess of 25% of the outstanding equity securities.
Principal holders are persons that beneficially own 5% more of the Fund's
outstanding shares.

Management Ownership
As a group, the officers and directors of the Fund own less than 1% of the
outstanding shares of the Fund.

Investment Adviser
- --------------------------------------------------------------------------------

9
<PAGE>

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.

Administrative Services
- --------------------------------------------------------------------------------

|X| establish and maintain shareholders' accounts and records,

|X| process purchase and redemption transactions,

|X| process automatic investments of client account cash balances,

|X| answer routine client inquiries regarding the Fund,

|X| assist clients in changing dividend options,

|X| account designations, and addresses, and

|X| providing such other services as the Fund may reasonably request.

10
<PAGE>

Custodian
- --------------------------------------------------------------------------------

Capitalization
- --------------------------------------------------------------------------------

Valuation of Shares
- --------------------------------------------------------------------------------

11
<PAGE>

Purchasing Shares
- --------------------------------------------------------------------------------

Redemption of Shares
- --------------------------------------------------------------------------------

To redeem shares, shareholders may send a written request in "good order" to:

The Internet New Paradigm Fund
Kinetics Mutual Funds, Inc.
c/o Firstar Mutual Fund Services
P.O. Box 701
Milwaukee, WI 53201-0701
(800) 930-3828