KINETICS MUTUAL
FUNDS, INC.
(logo)
THE INTERNET EMERGING GROWTH FUND
THE INTERNET INFRASTRUCTURE FUND
THE INTERNET NEW PARADIGM FUND
THE INTERNET GLOBAL GROWTH FUND
ANNUAL REPORT
DECEMBER 31, 1999
www.kineticsfunds.com
Kinetics Mutual Funds, Inc.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<CAPTION>
THE INTERNET THE INTERNET THE INTERNET THE INTERNET
EMERGING GROWTH INFRASTRUCTURE NEW PARADIGM GLOBAL GROWTH
FUND FUND FUND FUND
<S> <C> <C> <C> <C>
Assets:
Cash $1,000 $1,000 $1,000 $1,000
Total assets 1,000 1,000 1,000 1,000
LIABILITIES:
Total liabilities 0 0 0 0
Total Net Assets $1,000 $1,000 $1,000 $1,000
NET ASSETS CONSIST OF:
Paid in capital $1,000 $1,000 $1,000 $1,000
Total Net Assets $1,000 $1,000 $1,000 $1,000
Shares outstanding
(1,000,000,000 shares authorized, $ 0.001 par value) 100 100 100 100
Net Asset Value, Redemption Price and Offering Price
Per Share $10.00 $10.00 $10.00 $10.00
</TABLE>
See Notes to the Financial Statements.
================================================================================
KINETICS MUTUAL FUNDS, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999
================================================================================
NOTE 1.
ORGANIZATION: Kinetics Mutual Funds, Inc. (the "Company") is registered under
the Investment Company Act of 1940, as amended (the "1940 Act") and was
incorporated in the state of Maryland on March 26, 1999. The Company is an
open-end management investment company issuing its shares in series, each series
representing a distinct portfolio with its own investment objective and
policies. The series presently authorized are The Internet Fund, The Medical
Fund, The Internet Emerging Growth Fund, The Internet Infrastructure Fund, The
Internet New Paradigm Fund, and The Internet Global Growth Fund (each a "Fund"
and collectively, the "Funds"). Each Fund is a "non-diversified" series of the
Company pursuant to the 1940 Act. The accompanying financial statements exclude
The Internet Fund and The Medical Fund; financial statements for these Funds are
reported on separately. Investment operations of the Funds began on December 31,
1999 (The Internet Emerging Growth Fund, The Internet Infrastructure Fund, The
Internet New Paradigm Fund and The Internet Global Growth Fund), October 21,
1996 (The Internet Fund), and September 30, 1999 (The Medical Fund).
The Internet Emerging Growth Fund 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 Infrastructure Fund 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
New Paradigm Fund seeks to provide investors with long-term capital growth by
investing primarily in the equity securities of domestic and foreign companies
that the investment advisor 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 Internet Global Growth Fund 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
following is a summary of significant accounting policies followed by the Funds
in the preparation of the financial statements.
NOTE 2.
SECURITY VALUATION: Portfolio securities that are listed on a U.S. securities
exchange (whether domestic or foreign) or The Nasdaq Stock Market ("NSM") for
which market quotations are readily available are valued at the last quoted sale
price as of 4:00 p.m., Eastern time on the day the valuation is made. Options,
futures, unlisted U.S. securities and listed U.S. securities not traded on the
valuation date for which market quotations are readily available are valued at
the most recent quoted bid price. Fixed-income securities (other than
obligations having a maturity of 60 days or less) are normally valued on the
basis of quotes obtained from pricing services, which take into account
appropriate factors such as institutional sized trading in similar groups of
securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics and other market data. Fixed-income securities purchased with
remaining maturities of 60 days or less are valued at amortized cost if it
reflects fair value. 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 Funds.
REPURCHASE AGREEMENTS: Each Fund may enter into repurchase agreements with banks
that are members of the Federal Reserve System or securities dealers who are
members of a national securities exchange or are primary dealers in U.S.
Government Securities. In connection with transactions in repurchase agreements,
it is the Company's policy that the Fund receive, as collateral, securities
whose market value, including accrued interest, at all times will be at least
equal to 100% of the amount invested by the Fund in each repurchase agreement.
If the seller defaults, and the value of the collateral declines, realization of
the collateral by the Fund may be delayed or limited.
WRITTEN OPTION ACCOUNTING: The Funds may write (sell) call options for trading
purposes. When a Fund writes (sells) an option, an amount equal to the premium
received by the Fund is included in the Statement of Assets and Liabilities as
an asset and an equivalent liability. The amount of the liability is
subsequently marked-to-market to reflect the current value of the option
written. By writing an option, the Fund may become obligated during the term of
the option to deliver or purchase the securities underlying the option at the
exercise price if the option is exercised. Option contracts are valued at the
average of the current bid and asked price reported on the day of valuation.
When an option expires on its stipulated expiration date or the Fund enters into
a closing purchase transaction, the Fund realizes a gain or loss if the cost of
the closing transaction differs from the premium received when the option was
sold without regard to any unrealized gain or loss on the underlying security,
and the liability related to such option is eliminated. When an option is
exercised, the premium originally received decreases the cost basis of the
underlying security (or increases the proceeds on security sold short) and the
Fund realizes a gain or loss from the sale of the security (or closing of the
short sale). As collateral for uncovered written options, the Fund is required
under the 1940 Act to maintain assets consisting of cash, cash equivalents or
liquid securities. This collateral is required to be adjusted daily to reflect
the market value of the purchase obligation for put options or the market value
of the instrument underlying the contract, but not less than the strike price,
for call options.
FEDERAL INCOME TAXES: It is the Company's policy to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and the
Company intends to distribute investment company net taxable income and net
capital gains to shareholders. Therefore, no federal income tax provision is
required.
EXPENSE ALLOCATION: Common expenses incurred by the Funds are allocated among
the Funds based upon (i) relative average net assets, (ii) as incurred on a
specific identification basis, or (iii) evenly among the Funds, depending on the
nature of the expenditure.
USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
DISTRIBUTIONS TO SHAREHOLDERS: Dividends from net investment income and
distributions of net realized capital gains, if any, will be declared and paid
at least annually.
OTHER: Security and shareholder transactions are recorded on trade date.
Realized gains and losses on sales of investments are calculated on the
identified cost basis. Dividend income and dividends and distributions to
shareholders are recorded on the ex-dividend date. Interest income is recognized
on the accrual basis. Generally accepted accounting principles require that
permanent financial reporting and tax differences relating to shareholder
distributions be reclassified to paid in capital.
NOTE 3.
INVESTMENT ADVISORY AGREEMENTS: The Funds have entered into an investment
advisory agreement with Kinetics Asset Management, Inc. (the "Adviser"), whereby
the Adviser receives an annual management fee of 1.25% of the Funds' average
daily net assets. The Adviser also receives a shareholder servicing fee pursuant
to a Shareholder Servicing Agreement in the amount equal to 0.25% of the Funds'
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 Funds. The Adviser serves as
Administrator to the Funds. Under an Administrative Services Agreement with the
Funds, the Adviser is entitled to receive an annual administration fee equal to
0.15% of the Funds' average daily net assets, of which the Adviser is
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 Funds by Firstar. During the period ended December 31, 1999, no expenses or
reimbursements have been incurred by The Internet Emerging Growth Fund, The
Internet Infrastructure Fund, The Internet New Paradigm Fund, and The Internet
Global Growth Fund.
NOTE 4.
CONTROL PERSONS: As of December 31, 1999, all of the outstanding shares of The
Internet Emerging Growth Fund, The Internet Infrastructure Fund, The Internet
New Paradigm Fund and The Internet Global Growth Fund were owned by Kinetics
Asset Management, Inc., a New York corporation that serves as the investment
adviser for the Funds. A shareholder that beneficially owns, directly or
indirectly, more than 25% of a Fund's voting securities may be deemed a "control
person" (as defined in the 1940 Act) of the Fund.
NOTE 5.
CAPITAL STOCK AND DISTRIBUTION: At December 31, 1999, the authorized
capitalization of the Company consisted of 1,000,000,000 shares of common stock
of $0.001 par value per share. There are no conversion or preemptive rights
applicable to any shares of the Company. 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. Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
THE INTERNET THE INTERNET THE INTERNET THE INTERNET
EMERGING GROWTH INFRASTRUCTURE NEW PARADIGM GLOBAL GROWTH
FUND FUND FUND FUND
<S> <C> <C> <C> <C>
SHARES SOLD: 100 100 100 100
SHARES REDEEMED: -- -- -- --
------------------------------------------------------------------------------
SHARES OUTSTANDING: 100 100 100 100
</TABLE>
INDEPENDENT AUDITOR'S REPORT
To The Shareholders and Board of Directors
Kinetics Mutual Funds, Inc.:
We have audited the accompanying statements of assets and liabilities of The
Internet Emerging Growth Fund, The Internet Infrastructure Fund, The Internet
New Paradigm Fund and The Internet Global Growth Fund (four of the portfolios
constituting Kinetics Mutual Funds, Inc.) as of December 31, 1999. These
financial statements are the responsibility of the Funds' management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statements of assets and liabilities are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the statements of assets and
liabilities. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. Our procedures included confirmation of cash
held by the custodian as of December 31, 1999, by correspondence with the
custodian. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the statements of assets and liabilities referred to above
present fairly, in all material respects, the financial position of each of the
respective portfolios constituting Kinetics Mutual Funds, Inc. as of December
31, 1999, in conformity with generally accepted accounting principles.
McCurdy & Associates CPA's, Inc.
Westlake, Ohio
January 18, 2000
KINETICS MUTUAL FUNDS, INC.
1311 Mamaroneck Avenue
White Plains, NY 10605
INVESTMENT ADVISER,
SHAREHOLDER SERVICING AGENT
AND ADMINISTRATOR
Kinetics Asset Management, Inc.
1311 Mamaroneck Avenue
White Plains, NY 10605
INDEPENDENT ACCOUNTANTS
McCurdy & Associates CPA's, Inc.
27955 Clemens Road
Westlake, OH 44145
DISTRIBUTOR
T.O. Richardson Securities, Inc.
2 Bridgewater Road
Farmington, CT 06032
SUB-ADMINISTRATOR,
FUND ACCOUNTANT AND
TRANSFER AGENT
Firstar Mutual Fund Services, LLC
615 East Michigan Street
Milwaukee, WI 53202
CUSTODIAN
Firstar Bank, N.A.
615 East Michigan Street
Milwaukee, WI 53202
THIS MATERIAL MUST BE PRECEDED OR ACCOMPANIED BY A PROSPECTUS.
