Kinetics Asset Management, Inc. ("Kinetics") serves as the investment adviser to Kinetics Mutual Funds, Inc. ("Funds"). The Funds were created in order to provide investors with an intelligent method of recognizing undervalued situations. As a specialized investment management firm, Kinetics represents a unique amalgam of investment management and research capabilities. Since inception in 1996, Kinetics has consistently sought out securities which have distinctive return characteristics.

Kinetics' mission is to recognize securities that have unique return characteristics and favorable risk reward profiles. This methodology entails rigorous proprietary research, emphasizing non-codependence of holdings and a margin-of-safety approach to investing. The following investment criteria is applied to companies in which Kinetics invests:

• Exploitation of very large potential markets
  
• Defensible barriers to entry
  
• Strong business model and balance sheet
  
• High potential returns on investment capital
  
• Strong and innovative management team
  

Kinetics' investment strategy is value oriented with a long-term investment horizon. Kinetics will invest in companies it believes are undervalued and that are attaining high returns on equity. Unlike the typical Wall Street approach, Kinetics records its positions as fractional ownership in the underlying companies.

Kinetics' flagship fund, the Paradigm Fund, is a classical all-cap value fund introduced in December 1999. In March of 2000, Kinetics launched the Small Cap Opportunities Fund enabling investors to invest in companies that have little or no institutional ownership, and which have a market capitalization of less than $3 billion at the time of purchase.

In December of 1999, Kinetics introduced the Internet Emerging Growth Fund allowing investors the opportunity to participate in emerging opportunities with the Internet. In 1996, Kinetics Internet Fund was introduced and it remains today as one of the original Internet mutual funds.

The most recent addition to Kinetics Mutual Fund Family, the Kinetics Market Opportunities Fund, commenced operations in February 2006, and seeks to invest in U.S. and foreign companies involved in capital markets or related to capital markets, including public and private exchanges, as well as companies involved in the gaming industry.

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