Kinetics Portfolios Trust N-CSRS Certified semi-annual shareholder report (management investment company)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number 811-09303 & 811-09923

Kinetics Mutual Funds, Inc. & Kinetics Portfolios Trust

(Exact name of registrant as specified in charter)

16 New Broadway
Sleepy Hollow, NY 10591

(Address of principal executive offices) (Zip code)

U.S. Bancorp Fund Services, LLC
615 E. Michigan Street
Milwaukee, WI 53202

(Name and address of agent for service)

(800) 930-3828

Registrant’s telephone number, including area code

Date of fiscal year end: December 31, 2007

Date of reporting period: June 30, 2007

Item 1.  Report to Stockholders.

 

[KINETICS MUTUAL FUNDS, INC. LOGO]

 June 30, 2007 www.kineticsfunds.com

Semi-Annual Report

 The Internet Fund
 The Internet Emerging Growth Fund
 The Paradigm Fund
 The Medical Fund
 The Small Cap Opportunities Fund
 The Kinetics Government Money Market Fund
 The Market Opportunities Fund
 The Water Infrastructure Fund

LOGO Each a series of Kinetics Mutual Funds, Inc.

(Kinetics Mutual Funds, Inc.)

KINETICS MUTUAL FUNDS, INC.

Table of Contents

June 30, 2007

	Page
Shareholders’ Letter		2
Year 2007 Semi-Annual Investment Commentary		5
KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS
Expense Example		9
Statement of Assets & Liabilities		15
Statement of Operations		19
Statements of Changes in Net Assets		23
Notes to Financial Statements		34
Financial Highlights		48
KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS
Allocation of Portfolio Assets		63
Portfolio of Investments The Internet Portfolio		67
Portfolio of Investments The Internet Emerging Growth Portfolio		72
Portfolio of Investments The Paradigm Portfolio		76
Portfolio of Investments The Medical Portfolio		89
Portfolio of Investments The Small Cap Opportunities Portfolio		92
Portfolio of Investments The Kinetics Government Money Market Portfolio		102
Portfolio of Investments The Market Opportunities Portfolio		103
Portfolio of Options Written The Paradigm Portfolio		108
Statement of Assets & Liabilities		109
Statement of Operations		113
Statements of Changes in Net Assets		117
Notes to Financial Statements		121
Certification
906 Certification

1

KINETICS MUTUAL FUNDS, INC.

Shareholders’ Letter

Dear Fellow Shareholders:

We are pleased to present the Kinetics Mutual Funds’ Semi-Annual Report for the period ending June 30, 2007. On balance, the Kinetics Family of Mutual Funds had laudable results for the first half of 2007, with gains of 9.73% for The Paradigm Fund, 15.45% for the Small-Cap Opportunities Fund, 13.86% for the Market Opportunities Funds, 7.51% for the Internet Fund, 12.78% for the Medical Fund, and 2.40% for the Emerging Internet Fund. This compares with first-half 2007 total returns, of 6.95% and 8.17% for the S&P 500 Index and the NASDAQ Composite Index, respectively. The Water Infrastructure Fund began operations on the last business day of the six month period ending June 30, 2007.

During the first half of 2007, the performance of the Kinetics Funds, was driven by the underlying business operations of the investments held in the various funds. These investments included publicly-traded exchanges, investment banks, asset management firms, electric and natural gas utilities, energy companies involved in oil and gas production, diversified holding companies, various infrastructure and financial Chinese companies along with other operating enterprises. In general, our portfolios, irrespective of industries or sectors, consist of businesses that exhibit high returns on equity, long product life cycles and a differentiated or highly competitive position in their respective product or service markets. Our investment philosophy and strategy is to purchase such enterprises at discount to their long-term intrinsic values and to permit their business plans to come to fruition.

We continue to inform our shareholders through our website, www.kineticsfunds.com. This website provides a broad array of information, including recent portfolio holdings, quarterly investment commentaries, newsflashes, recent performance data, and online access to account information.

Kinetics offers the following funds to investors:

The Paradigm Fund focuses on companies that currently have, or which should soon have, sustainable high returns on equity. The Fund has produced attractive returns over the last 71/2 years.

2

The Small Cap Opportunities Fund focuses on undervalued and special situation small capitalization equities that have the potential for rewarding long-term investment results.

The Medical Fund is a sector fund, offering an investment in scientific discovery within the promising field of medical research, particularly in the development of cancer treatments and therapies. As a sector fund, The Medical Fund is likely to have heightened volatility.

The Internet Fund is a sector fund that focuses on companies engaged in the internet and Internet-related activities. As such, this Fund has been, and is likely to continue to be, quite volatile. The Internet Fund is not designed to be a major component of one’s equity exposure. We view this Fund’s holdings as publicly traded venture capital and are quite aware that many of these investments will not fulfill their early promise. However, we expect that, over time, some small percentage will develop into excellent investments, allowing the fund to produce overall satisfactory, albeit lumpy, returns.

The Internet Emerging Growth Fund focuses upon early life cycle companies that are positioned on the edge of the curve in the evolution on Internet-related technology. The statements made above about the Internet Fund are equally applicable to this fund.

The Market Opportunities Fund focuses on those companies that benefit from increasing transactional volume, such as publicly-traded exchanges, or that act as facilitators, such as gaming companies, airports and publicly-traded toll roads.

The Water Infrastructure Fund is a sector fund that invests in global companies engaged in water infrastructure and natural resources with a specific water theme, as well as related activities. This Fund is sub-advised by Aqua Terra Asset Management, LLC.

3

The Kinetics Government Money Market Fund is a short-term investment vehicle.

-s- Peter B. Doyle

Peter B. Doyle

President

Kinetics Mutual Funds, Inc.

(1)	The S&P 500 Index is a broad based unmanaged index of 500 stocks, which is widely recognized as representative of the equity market in general. You cannot invest directly in an index.
(2)	The NASDAQ Composite Index is a market capitalization-weighted index that is designed to represent the performance of the National Market System which includes over 5,000 stocks traded only over-the-counter and not on an exchange. You cannot invest directly in an index.

4

KINETICS MUTUAL FUNDS, INC.

Investment Commentary

Dear Fellow Shareholders,

As of the end of July, the equity markets have experienced heightened negative volatility. The proximate causes of the recent declines include problems in the sub-prime lending market, rising oil prices, weaker than expected housing numbers, and uneven earnings results for the second quarter. These issues will, in great probability, have a dampening effect on the consumer and, hence, on the economy. However, in the words of J.P. Morgan, Sr., uttered after a period of declining securities prices, “It always stops raining”. As stated in the past, we do not hold a view regarding the prospects for the overall market. Rather, we select our portfolios based on the business operations of the companies we own. From this perspective, we remain optimistic, despite any recent turmoil.

Equities investing, which constitutes deferred consumption, requires patience because stock price movements in the short term, 1 to 2 years, are often random. To allow the business operations of the companies one owns to start generating decent returns requires a 3 to 5 year time horizon, if not longer. Thus, as always, we would counsel any investor with cash needs expected to develop in less than 3 years to invest in more conservative alternatives, such as U.S. Treasuries. The preceding comment is merely the recognition of the nature of stock investing and not a prediction of what is going to unfold in the shorter term. Too frequently, investors experience a poor investment result even when they are with capable managers, primarily because the time horizon of the investor is out of sync with the parameters of stock investing and/or because the individual investor is chasing recent past performance.

Our holdings in Chinese stocks, which are owned liberally in various funds, are not an expression of our knowledge of China, but rather, a portfolio construction concept. We believe there is virtually no global asset class that one can invest in today that will not be, or that currently is not, influenced by China’s development. The economic story of our lifetimes may well be the industrialization of more than half the world’s population (China, India, and other developing countries). Even two-year U.S. Treasury notes would likely be affected should China stop investing its considerable excess reserves in U.S. Treasuries. Thus, as allocators of

5

capital, we understand that constructing a “U.S. only” portfolio does not exempt us from the competitive pressures of China’s development. Our role is to make sure that we, and you, are compensated for that risk. In order to best benefit from this risk, we thought it prudent to own companies that would provide us with substantial rewards should China continue to develop into an economic giant. We have chosen to invest in Chinese companies that derive the overwhelming majority of their earnings from within China proper for three main reasons. First, we find the underlying economics of these businesses compelling. Second, we believe expressing our exposure in this fashion gives us an effective put against the dollar’s decline. Should the dollar continue its decline, we believe it will most likely be in relation to various Asian currencies. Third, we believe the world’s global indices will eventually be reconfigured to include a greater exposure to China. China, which by some measures is the world’s second largest economy, is grossly underweighted in global indices. As our representation of foreign securities has grown in certain funds, the performance of those funds, will, on occasion, be out of sync with what is happening in the U.S. stock market. Note that portfolio composition is subject to change.

We thank you for your continued support as we endeavor to produce satisfying investment results.

-s- Peter B. Doyle

Peter B. Doyle

Chief Investment Strategist

6

Disclosure

This material is intended to be reviewed in conjunction with a current prospectus, which includes all fees and expenses that apply to a continued investment program, as well as information regarding the risk factors, policies and objectives of the Funds. Read it carefully before investing.

Mutual Fund investing involves risk. Principal loss is possible. Because the Funds [other than The Paradigm Fund, The Small Cap Opportunities Fund, The Market Opportunities Fund and The Kinetics Government Money Market Fund] invest in a single industry or geographic region, their shares are subject to a higher degree of risk than funds with a higher level of diversification. Internet and biotechnology stocks are subject to a rate of change in technology, obsolescence and competition that is generally higher than that of other industries and have experienced extreme price and volume fluctuations. Past performance is no guarantee of future performance.

Because smaller companies [for The Internet Emerging Growth Fund and The Small Cap Opportunities Fund] often have narrower markets and limited financial resources, they present more risk than larger, more well established, companies.

As non-diversified [other than The Kinetics Government Money Market Fund] and single industry funds, the value of their shares may fluctuate more than shares invested in a broader range of industries and companies.

An investment in the Kinetics Government Money Market Fund is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund.

Unlike other investment companies that directly acquire and manage their own portfolios of securities, The Kinetics Mutual Funds pursue their investment objectives by investing all of their investable assets in a corresponding portfolio series of Kinetics Portfolios Trust.

The information concerning the Funds included in the shareholder report contains certain forward-looking statements about the factors that may affect the performance of the Funds in the future. These

7

statements are based on Fund management’s predictions and expectations concerning certain future events and their expected impact on the Funds, such as performance of the economy as a whole and of specific industry sectors, changes in the levels of interest rates, the impact of developing world events, and other factors that may influence the future performance of the Funds. Management believes these forward-looking statements to be reasonable, although they are inherently uncertain and difficult to predict. Actual events may cause adjustments in portfolio management strategies from those currently expected to be employed.

Distributor:  Kinetics Funds Distributor, Inc. is not an affiliate of Kinetics Mutual Funds, Inc. Kinetics Funds Distributor, Inc. is an affiliate of Kinetics Asset Management, Inc., Investment Adviser to Kinetics Mutual Funds, Inc.

January 1, 2007 — Kinetics Asset Management, Inc.

8

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Expense Example

June 30, 2007 (Unaudited)

Shareholders incur two type of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvestments of dividends or other distributions made by the Fund, redemption fees, and exchange fees, and (2), ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses. This example is intended to help investors understand the ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from January 1, 2007 to June 30, 2007.

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. Unlike other mutual funds that directly acquire and manage their own portfolio securities, each Feeder Fund invests all of its investable assets in a corresponding Master Portfolio, a separately registered investment company. The Master Portfolio, in turn, invests in securities. With this type of organization, expenses can accrue specifically to the Master Portfolio or the Feeder Fund or both. The Adviser for the Master Portfolios has directed a certain amount of the Master Portfolio’s trades to brokers believed to provide the best execution and, as a result, the Master Portfolios have generated direct brokerage credits to reduce certain service provider fees. Each Feeder Fund records its proportionate share of the Master Portfolio’s expenses, including directed brokerage credits, on a daily basis. Any expense reductions include Feeder Fund-specific expenses as well as the expenses allocated from the Master Portfolio.

The Feeder Funds will charge shareholder fees for outgoing wire transfers, returned checks, and exchanges executed by telephone between the Feeder Fund and any other series of Kinetics Mutual Funds, Inc. The Feeder Fund’s transfer agent charges a $5.00 transaction fee to shareholder accounts for telephone exchanges between any two series of Kinetics Mutual Funds, Inc. The Feeder Fund’s transfer agent does not charge a transaction fee for written exchange requests. IRA accounts are assessed a $15.00 annual fee. Finally, as a disincentive to market-timing transactions, the Feeder Funds will assess a 2.00% fee on certain redemption or exchange of Fund shares held for less than thirty days after purchase. These fees will be paid to the Feeder Funds to help offset transaction costs. The Feeder Funds reserve the right to waive the

9

redemption fee, subject to their sole discretion, in instances deemed not to be disadvantageous to the Feeder Funds or shareholders.

You may use the information provided in the first line, together with the amounts you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Feeder Funds’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which are not the Feeder Funds’ actual returns. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Feeder Funds and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

10

Expense Example

			Ending Account		Expenses Paid
	Beginning Account		Value		During Period*
	Value (1/1/07)		(6/30/07)		(1/1/07 to 6/30/07)
The Internet Fund
No Load Class Actual — before expense reimbursement	$	1,000.00	$	1,075.10	$	10.75
No Load Class Actual — after expense reimbursement	$	1,000.00	$	1,075.10	$	10.70
No Load Class Hypothetical (5% return before expenses) — before expense reimbursement	$	1,000.00	$	1,014.43	$	10.44
No Load Class Hypothetical (5% return before expenses) — after expense reimbursement	$	1,000.00	$	1,014.48	$	10.39
Advisor Class A Actual — before expense reimbursement	$	1,000.00	$	1,073.70	$	12.03
Advisor Class A Actual — after expense reimbursement	$	1,000.00	$	1,073.70	$	11.98
Advisor Class A Hypothetical (5% return before expenses) — before expense reimbursement	$	1,000.00	$	1,013.19	$	11.68
Advisor Class A Hypothetical (5% return before expenses) — after expense reimbursement	$	1,000.00	$	1,013.24	$	11.63
Advisor Class C Actual — before expense reimbursement**	$	1,000.00	$	1,056.20	$	10.72
Advisor Class C Actual — after expense reimbursement**	$	1,000.00	$	1,056.20	$	10.68
Advisor Class C Hypothetical (5% return before expenses) — before expense reimbursement**	$	1,000.00	$	1,014.37	$	10.50
Advisor Class C Hypothetical (5% return before expenses) — after expense reimbursement**	$	1,000.00	$	1,014.40	$	10.46
The Internet Emerging Growth Fund
No Load Class Actual — before expense reimbursement	$	1,000.00	$	1,024.00	$	20.58
No Load Class Actual — after expense reimbursement	$	1,000.00	$	1,024.00	$	7.38
No Load Class Hypothetical (5% return before expenses) — before expense reimbursement	$	1,000.00	$	1,004.46	$	20.38
No Load Class Hypothetical (5% return before expenses) — after expense reimbursement	$	1,000.00	$	1,017.50	$	7.35
The Paradigm Fund
No Load Class Actual — before expense reimbursement	$	1,000.00	$	1,097.30	$	8.74
No Load Class Actual — after expense reimbursement	$	1,000.00	$	1,097.30	$	8.74
No Load Class Hypothetical (5% return before expenses) — before expense reimbursement	$	1,000.00	$	1,016.46	$	8.40
No Load Class Hypothetical (5% return before expenses) — after expense reimbursement	$	1,000.00	$	1,016.46	$	8.40
Advisor Class A Actual — before expense reimbursement	$	1,000.00	$	1,096.40	$	10.03

11

			Ending Account		Expenses Paid
	Beginning Account		Value		During Period*
	Value (1/1/07)		(6/30/07)		(1/1/07 to 6/30/07)
Advisor Class A Actual — after expense reimbursement	$	1,000.00	$	1,096.40	$	10.03
Advisor Class A Hypothetical (5% return before expenses) — before expense reimbursement	$	1,000.00	$	1,015.22	$	9.64
Advisor Class A Hypothetical (5% return before expenses) — after expense reimbursement	$	1,000.00	$	1,015.22	$	9.64
Advisor Class C Actual — before expense reimbursement	$	1,000.00	$	1,093.30	$	12.61
Advisor Class C Actual — after expense reimbursement	$	1,000.00	$	1,093.30	$	12.61
Advisor Class C Hypothetical (5% return before expenses) — before expense reimbursement	$	1,000.00	$	1,012.74	$	12.13
Advisor Class C Hypothetical (5% return before expenses) — after expense reimbursement	$	1,000.00	$	1,012.74	$	12.13
Institutional Class Actual — before expense reimbursement	$	1,000.00	$	1,098.60	$	8.48
Institutional Class Actual — after expense reimbursement	$	1,000.00	$	1,098.60	$	7.70
Institutional Class Hypothetical (5% return before expenses) — before expense reimbursement	$	1,000.00	$	1,016.71	$	8.15
Institutional Class Hypothetical (5% return before expenses) — after expense reimbursement	$	1,000.00	$	1,017.46	$	7.40
The Medical Fund
No Load Class Actual — before expense reimbursement	$	1,000.00	$	1,127.80	$	13.61
No Load Class Actual — after expense reimbursement	$	1,000.00	$	1,127.80	$	7.23
No Load Class Hypothetical (5% return before expenses) — before expense reimbursement	$	1,000.00	$	1,012.00	$	12.87
No Load Class Hypothetical (5% return before expenses) — after expense reimbursement	$	1,000.00	$	1,018.00	$	6.85
Advisor Class A Actual — before expense reimbursement	$	1,000.00	$	1,126.40	$	14.92
Advisor Class A Actual — after expense reimbursement	$	1,000.00	$	1,126.40	$	8.54
Advisor Class A Hypothetical (5% return before expenses) — before expense reimbursement	$	1,000.00	$	1,010.76	$	14.11
Advisor Class A Hypothetical (5% return before expenses) — after expense reimbursement	$	1,000.00	$	1,016.76	$	8.10
Advisor Class C Actual — before expense reimbursement**	$	1,000.00	$	1,074.40	$	12.68
Advisor Class C Actual — after expense reimbursement**	$	1,000.00	$	1,074.40	$	8.07
Advisor Class C Hypothetical (5% return before expenses) — before expense reimbursement**	$	1,000.00	$	1,012.57	$	12.30

12

			Ending Account		Expenses Paid
	Beginning Account		Value		During Period*
	Value (1/1/07)		(6/30/07)		(1/1/07 to 6/30/07)
Advisor Class C Hypothetical (5% return before expenses) — after expense reimbursement**	$	1,000.00	$	1,017.01	$	7.85
The Small Cap Opportunities Fund
No Load Class Actual — before expense reimbursement	$	1,000.00	$	1,154.50	$	9.19
No Load Class Actual — after expense reimbursement	$	1,000.00	$	1,154.50	$	8.97
No Load Class Hypothetical (5% return before expenses) — before expense reimbursement	$	1,000.00	$	1,016.27	$	8.60
No Load Class Hypothetical (5% return before expenses) — after expense reimbursement	$	1,000.00	$	1,016.46	$	8.40
Advisor Class A Actual — before expense reimbursement	$	1,000.00	$	1,153.10	$	10.52
Advisor Class A Actual — after expense reimbursement	$	1,000.00	$	1,153.10	$	10.33
Advisor Class A Hypothetical (5% return before expenses) — before expense reimbursement	$	1,000.00	$	1,015.03	$	9.84
Advisor Class A Hypothetical (5% return before expenses) — after expense reimbursement	$	1,000.00	$	1,015.22	$	9.64
Advisor Class C Actual — before expense reimbursement**	$	1,000.00	$	1,074.20	$	9.40
Advisor Class C Actual — after expense reimbursement**	$	1,000.00	$	1,074.20	$	9.25
Advisor Class C Hypothetical (5% return before expenses) — before expense reimbursement**	$	1,000.00	$	1,015.73	$	9.14
Advisor Class C Hypothetical (5% return before expenses) — after expense reimbursement**	$	1,000.00	$	1,015.87	$	8.99
Institutional Class Actual — before expense reimbursement	$	1,000.00	$	1,155.70	$	8.93
Institutional Class Actual — after expense reimbursement	$	1,000.00	$	1,155.70	$	7.91
Institutional Class Hypothetical (5% return before expenses) — before expense reimbursement	$	1,000.00	$	1,018.66	$	8.36
Institutional Class Hypothetical (5% return before expenses) — after expense reimbursement	$	1,000.00	$	1,019.36	$	7.41
The Kinetics Government Money Market Fund
No Load Class Actual — before expense reimbursement	$	1,000.00	$	1,019.70	$	37.81
No Load Class Actual — after expense reimbursement	$	1,000.00	$	1,019.70	$	4.91
No Load Class Hypothetical (5% return before expenses) — before expense reimbursement	$	1,000.00	$	987.35	$	37.20
No Load Class Hypothetical (5% return before expenses) — after expense reimbursement	$	1,000.00	$	1,019.93	$	4.91

13

			Ending Account		Expenses Paid
	Beginning Account		Value		During Period*
	Value (1/1/07)		(6/30/07)		(1/1/07 to 6/30/07)
The Market Opportunities Fund
No Load Class Actual — before expense reimbursement	$	1,000.00	$	1,138.60	$	11.03
No Load Class Actual — after expense reimbursement	$	1,000.00	$	1,138.60	$	9.23
No Load Class Hypothetical (5% return before expenses) — before expense reimbursement	$	1,000.00	$	1,014.48	$	10.39
No Load Class Hypothetical (5% return before expenses) — after expense reimbursement	$	1,000.00	$	1,016.17	$	8.70
Advisor Class A Actual — before expense reimbursement	$	1,000.00	$	1,137.00	$	12.35
Advisor Class A Actual — after expense reimbursement	$	1,000.00	$	1,137.00	$	10.54
Advisor Class A Hypothetical (5% return before expenses) — before expense reimbursement	$	1,000.00	$	1,013.24	$	11.63
Advisor Class A Hypothetical (5% return before expenses) — after expense reimbursement	$	1,000.00	$	1,014.94	$	9.94
Advisor Class C Actual — before expense reimbursement**	$	1,000.00	$	1,051.60	$	10.77
Advisor Class C Actual — after expense reimbursement**	$	1,000.00	$	1,051.60	$	9.38
Advisor Class C Hypothetical (5% return before expenses) — before expense reimbursement**	$	1,000.00	$	1,014.29	$	10.57
Advisor Class C Hypothetical (5% return before expenses) — after expense reimbursement**	$	1,000.00	$	1,015.65	$	9.21

Note:  Each Feeder Fund records its proportionate share of the respective Master Portfolio’s expenses, including directed brokerage credits, on a daily basis. Any expense reductions includes Feeder Fund-specific expenses as well as the expenses allocated for the Master Portfolio.

*

Expenses are equal to the Fund’s annualized expense ratio before expense reimbursement and after expense reimbursement respectively of 2.09% and 2.08% for The Internet Fund No Load Class, 2.34% and 2.33% for The Internet Fund Advisor Class A, 4.10% and 1.47% for The Internet Emerging Growth Fund No Load Class, 1.68% and 1.68% for The Paradigm Fund No Load Class, 1.93% and 1.93% for The Paradigm Fund Advisor Class A, 2.43% and 2.43% for The Paradigm Fund Advisor Class C, 1.63% and 1.48% for The Paradigm Fund Institutional Class, 2.58% and 1.37% for The Medical Fund No Load Class, 2.83% and 1.62% for The Medical Fund Advisor Class A, 1.72% and 1.68% for The Small Cap Opportunities Fund No Load Class, 1.97% and 1.93% for The Small Cap Opportunities Fund Advisor Class A, and 1.67% and 1.48% for The Small Cap Opportunities Institutional Class, 7.55% and .98% for The Kinetics Government Money Market Fund, 2.08% and 1.74% for The Market Opportunities Fund No Load Class, 2.33% and 1.99% for The Market Opportunities Fund Advisor Class A, multiplied by the average account value over the period, multiplied by 181/365.

**

Expenses paid during period 2/16/07 — 6/30/07 and are equal to the Fund’s annualized expense ratio before expense reimbursement and after expense reimbursement of 2.84% and 2.83% respectively for The Internet Fund Advisor Class C, 3.33% and 2.12% for The Medical Fund Advisor Class C, 2.47% and 2.43% for The Small Cap Opportunities Fund Advisor Class C, 2.86% and 2.49% for The Market Opportunities Fund Advisor Class C, multiplied by the average account value over the period, multiplied by 134/365 (to reflect the inception date to the end of the semi-annual period).

14

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Statement of Assets & Liabilities

June 30, 2007 (Unaudited)

				The Internet
	The Internet			Emerging Growth
	Fund			Fund
ASSETS:
Investments in the Master Portfolios, at value*	$	131,844,405		$	3,886,647
Receivable from Adviser		—			8,107
Receivable for Master Portfolio interest sold		48,077			—
Receivable for Fund shares sold		49,692			—
Prepaid expenses and other assets		28,256			11,878
Total assets		131,970,430			3,906,632
LIABILITIES:
Payable to Directors and Officers		993			18
Payable for Fund shares repurchased		97,769			—
Payable for service fees		27,515			824
Payable for distribution fees		85			—
Accrued expenses and other liabilities		134,186			11,813
Total liabilities		260,548			12,655
Net assets	$	131,709,882		$	3,893,977
NET ASSETS CONSIST OF:
Paid in capital	$	276,448,495		$	14,248,116
Accumulated net investment loss		(1,199,515	)		(22,745	)
Accumulated net realized loss on investments, options and written option contracts		(193,906,757	)		(11,251,325	)
Net unrealized appreciation on:
Investments		50,367,659			919,931
Net Assets	$	131,709,882		$	3,893,977
CALCULATION OF NET ASSET VALUE PER SHARE — NO LOAD CLASS:
Net assets	$	131,350,118		$	3,893,977
Shares outstanding		4,269,399			760,514
Net asset value per share (offering and redemption price)	$	30.77		$	5.12
CALCULATION OF NET ASSET VALUE PER SHARE — ADVISOR CLASS A:
Net assets	$	325,338
Shares outstanding		10,729
Net asset value per share	$	30.32
Offering price per share ($30.32 divided by .9425)	$	32.17
CALCULATION OF NET ASSET VALUE PER SHARE — ADVISOR CLASS C:
Net assets	$	34,426
Shares outstanding		1,137
Net asset value per share (offering and redemption price)	$	30.28

*  Each Feeder Fund invests its assets directly in the corresponding Master Portfolio. The financial statements for the Master portfolios, along with the portfolio of investments in securities, are contained elsewhere in this report and should be read in conjunction with the Feeder Fund’s financial statements.

See Notes to the Financial Statements.

15

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Statement of Assets & Liabilities

June 30, 2007 (Unaudited)

	The Paradigm			The Medical
	Fund			Fund
ASSETS:
Investments in the Master Portfolios, at value*	$	3,154,662,803		$	20,230,915
Receivable from Adviser		—			16,400
Receivable for Fund shares sold		14,750,745			409,349
Prepaid expenses and other assets		134,772			29,652
Total assets		3,169,548,320			20,686,316
LIABILITIES:
Payable for Master Portfolio interest purchased		12,214,172			398,779
Payable to Directors and Officers		19,916			116
Payable for Fund shares repurchased		2,536,573			10,570
Payable for service fees		524,663			4,114
Payable for distribution fees		164,766			296
Accrued expenses and other liabilities		579,631			21,079
Total liabilities		16,039,721			434,954
Net assets	$	3,153,508,599		$	20,251,362
NET ASSETS CONSIST OF:
Paid in capital	$	2,548,894,279		$	19,214,819
Accumulated net investment gain (loss)		(885,947	)		129,158
Accumulated net realized gain on investments, options and written option contracts		12,658,583			725,042
Net unrealized appreciation on:
Investments		592,812,911			182,343
Written option contracts		28,773			—
Net Assets	$	3,153,508,599		$	20,251,362
CALCULATION OF NET ASSET VALUE PER SHARE — NO LOAD CLASS:
Net assets	$	1,958,565,174		$	18,926,468
Shares outstanding		69,200,226			940,857
Net asset value per share (offering and redemption price)	$	28.30		$	20.12
CALCULATION OF NET ASSET VALUE PER SHARE — ADVISOR CLASS A:
Net assets	$	305,617,724		$	1,238,636
Shares outstanding		10,940,667			62,910
Net asset value per share	$	27.93		$	19.69
Offering price per share ($27.93 divided by .9425 and $19.69 divided by .9425, respectively)	$	29.63		$	20.89
CALCULATION OF NET ASSET VALUE PER SHARE — ADVISOR CLASS C:
Net assets	$	189,224,189		$	86,258
Shares outstanding		6,929,602			4,390
Net asset value per share (offering and redemption price)	$	27.31		$	19.65
CALCULATION OF NET ASSET VALUE PER SHARE — INSTITUTIONAL CLASS:
Net assets	$	700,101,512
Shares outstanding		24,739,394
Net asset value per share (offering and redemption price)	$	28.30

*  Each Feeder Fund invests its assets directly in the corresponding Master Portfolio. The financial statements for the Master portfolios, along with the portfolio of investments in securities, are contained elsewhere in this report and should be read in conjunction with the Feeder Fund’s financial statements.

See Notes to the Financial Statements.

16

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Statement of Assets & Liabilities

June 30, 2007 (Unaudited)

				The Kinetics
	The Small Cap			Government
	Opportunities			Money Market
	Fund			Fund
ASSETS:
Investments in the Master Portfolios, at value*	$	886,921,488		$	1,057,591
Receivable from Adviser		—			5,653
Receivable for Master Portfolio interest sold		—			115,306
Receivable for Fund shares sold		3,201,407			—
Prepaid expenses and other assets		79,699			11,522
Total assets		890,202,594			1,190,072
LIABILITIES:
Payable for Master Portfolio interest purchased		2,757,911			—
Payable for dividend to Shareholders		—			191
Payable to Directors and Officers		5,142			5
Payable for Fund shares repurchased		443,496			115,000
Payable for service fees		130,618			227
Payable for distribution fees		4,668			—
Accrued expenses and other liabilities		215,784			9,948
Total liabilities		3,557,619			125,371
Net assets	$	886,644,975		$	1,064,701
NET ASSETS CONSIST OF:
Paid in capital	$	702,700,361		$	1,064,701
Accumulated net investment gain		356,572			—
Accumulated net realized loss on investments, options and written option contracts		(2,077,516	)		—
Net unrealized appreciation on:
Investments		185,665,558			—
Net Assets	$	886,644,975		$	1,064,701
CALCULATION OF NET ASSET VALUE PER SHARE — NO LOAD CLASS:
Net assets	$	575,185,240		$	1,064,701
Shares outstanding		18,501,426			1,064,701
Net asset value per share (offering and redemption price)	$	31.09		$	1.00
CALCULATION OF NET ASSET VALUE PER SHARE — ADVISOR CLASS A:
Net assets	$	22,783,918
Shares outstanding		739,576
Net asset value per share	$	30.81
Offering price per share ($30.81 divided by .9425)	$	32.69
CALCULATION OF NET ASSET VALUE PER SHARE — ADVISOR CLASS C:
Net assets	$	694,386
Shares outstanding		22,521
Net asset value per share (offering and redemption price)	$	30.83
CALCULATION OF NET ASSET VALUE PER SHARE — INSTITUTIONAL CLASS:
Net assets	$	287,981,431
Shares outstanding		9,259,203
Net asset value per share (offering and redemption price)	$	31.10

*  Each Feeder Fund invests its assets directly in the corresponding Master Portfolio. The financial statements for the Master portfolios, along with the portfolio of investments in securities, are contained elsewhere in this report and should be read in conjunction with the Feeder Fund’s financial statements.

See Notes to the Financial Statements.

17

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Statement of Assets & Liabilities

June 30, 2007 (Unaudited)

	The Market		The Water
	Opportunities		Infrastructure
	Fund		Fund
ASSETS:
Investments in the Master Portfolios, at value*	$	56,640,024	$	400,100
Receivable from Adviser		28,844		—
Receivable for Fund shares sold		781,578		400,100
Prepaid expenses and other assets		28,917		—
Total assets		57,479,363		800,200
LIABILITIES:
Payable for Master Portfolio interest purchased		752,862		400,100
Payable to Directors and Officers		252		—
Payable for Fund shares repurchased		28,716		—
Payable for service fees		11,189		—
Payable for distribution fees		5,752		—
Accrued expenses and other liabilities		16,117		—
Total liabilities		814,888		400,100
Net assets	$	56,664,475	$	400,100
NET ASSETS CONSIST OF:
Paid in capital	$	50,775,045	$	400,100
Accumulated net investment income		52,190		—
Accumulated net realized gain on investments, options and written option contracts		374,374		—
Net unrealized appreciation on:
Investments		5,462,866		—
Net Assets	$	56,664,475	$	400,100
CALCULATION OF NET ASSET VALUE PER SHARE — NO LOAD CLASS:
Net assets	$	30,927,126	$	100,100
Shares outstanding		2,253,618		10,010
Net asset value per share (offering and redemption price)	$	13.72	$	10.00
CALCULATION OF NET ASSET VALUE PER SHARE — ADVISOR CLASS A:
Net assets	$	23,362,400	$	100,000
Shares outstanding		1,706,949		10,000
Net asset value per share	$	13.69	$	10.00
Offering price per share ($13.69 divided by .9425 and $10.00 divided by .9425, respectively)	$	14.53	$	10.61
CALCULATION OF NET ASSET VALUE PER SHARE — ADVISOR CLASS C:
Net assets	$	2,374,949	$	100,000
Shares outstanding		173,838		10,000
Net asset value per share (offering and redemption price)	$	13.66	$	10.00
CALCULATION OF NET ASSET VALUE PER SHARE — INSTITUTIONAL CLASS:
Net Assets			$	100,000
Shares outstanding				10,000
Net asset value per share (offering and redemption price)			$	10.00

*  Each Feeder Fund invests its assets directly in the corresponding Master Portfolio. The financial statements for the Master portfolios, along with the portfolio of investments in securities, are contained elsewhere in this report and should be read in conjunction with the Feeder Fund’s financial statements.

See Notes to the Financial Statements.

18

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Statement of Operations

For the Six Months Ended June 30, 2007 (Unaudited)

				The Internet
	The Internet			Emerging
	Fund			Growth Fund
INVESTMENT INCOME ALLOCATED FROM MASTER PORTFOLIOS:
Dividends†	$	242,959		$	72,417
Interest		364,738			24,455
Income from securities lending		853,853			8,009
Expenses only from Master Portfolio‡		(872,559	)		(42,859	)
Net investment income from Master Portfolio		588,991			62,022
EXPENSES:
Distribution fees — Advisor Class A		334			—
Distribution fees — Advisor Class C		87			—
Shareholder servicing fees and expenses		357,437			13,886
Reports to shareholders		88,217			3,881
Administration fees		19,279			589
Professional fees		15,750			11,467
Directors’ and Officers’ fees and expenses		1,671			60
Registration fees		20,338			9,618
Fund accounting fees		3,310			41
Other expenses		1,855			40
Total expenses		508,278			39,582
Less, expense reimbursement		—			(52,712	)
Net expenses		508,278			(13,130	)
Net investment income		80,713			75,152
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS ALLOCATED FROM MASTER PORTFOLIOS:
Net realized gain on:
Investments and foreign currency		4,805,398			96,558
Written option contracts expired or closed		6,984			1,956
Net change in unrealized appreciation (depreciation) of:
Investments and foreign currency		4,761,812			(72,325	)
Written option contracts		(6,947	)		(5,659	)
Net gain on investments		9,567,247			20,530
Net increase in net assets resulting from operations	$	9,647,960		$	95,682
† Net of Foreign Taxes Withheld of:	$	17,324		$	1,529
‡ Net of expense reduction of:	$	9,878		$	398

See Notes to the Financial Statements.

19

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Statement of Operations

For the Six Months Ended June 30, 2007 (Unaudited)

	The Paradigm			The Medical
	Fund			Fund
INVESTMENT INCOME ALLOCATED FROM MASTER PORTFOLIOS:
Dividends†	$	13,654,785		$	104,947
Interest		10,299,987			52,215
Income from securities lending		5,191,556			75,056
Expenses allocated from Master Portfolio‡		(17,846,118	)		(122,409	)
Net investment income from Master Portfolio		11,300,210			109,809
EXPENSES:
Distribution fees — Advisor Class A		302,812			1,300
Distribution fees — Advisor Class C		564,570			136
Shareholder servicing fees and expenses		3,294,565			47,149
Shareholder servicing fees — Institutional Class		587,739			—
Reports to shareholders		273,070			8,401
Administration fees		358,071			2,489
Professional fees		18,768			14,526
Directors’ and Officers’ fees and expenses		49,589			237
Registration fees		113,222			18,430
Fund accounting fees		69,203			445
Other expenses		26,003			255
Total expenses		5,657,612			93,368
Less, expense waiver for Institutional Class service fees		(440,804	)		—
Less, expense reimbursement		—			(94,810	)
Net expenses		5,216,808			(1,442	)
Net investment income		6,083,402			111,251
REALIZED AND UNREALIZED GAIN ON INVESTMENTS ALLOCATED FROM MASTER PORTFOLIOS:
Net realized gain on:
Investments and foreign currency		12,866,516			1,333,066
Net change in unrealized appreciation of:
Investments and foreign currency		229,787,367			382,078
Written option contracts		29,628			—
Net gain on investments		242,683,511			1,715,144
Net increase in net assets resulting from operations	$	248,766,913		$	1,826,395
† Net of Foreign Taxes Withheld of:	$	869,215		$	5,549
‡ Net of expense reduction of:	$	33,803		$	10,052

See Notes to the Financial Statements.

20

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Statement of Operations

For the Six Months Ended June 30, 2007 (Unaudited)

				The Kinetics
	The Small Cap			Government
	Opportunities			Money Market
	Fund			Fund
INVESTMENT INCOME ALLOCATED FROM MASTER PORTFOLIOS:
Dividends†	$	3,386,782		$	—
Interest		2,350,502			28,674
Income from securities lending		807,326			—
Expenses only from Master Portfolio‡		(4,533,264	)		(15,660	)
Net investment income from Master Portfolio		2,011,346			13,014
EXPENSES:
Distribution fees — Advisor Class A		21,175			—
Distribution fees — Advisor Class C		830			—
Shareholder servicing fees and expenses		743,594			4,032
Shareholder servicing fees — Institutional Class		252,434			—
Reports to shareholders		156,602			3,273
Administration fees		102,735			161
Professional fees		10,614			10,017
Directors’ and Officers’ fees and expenses		12,337			20
Registration fees		56,373			10,423
Fund accounting fees		18,247			29
Other expenses		6,060			40
Total expenses		1,381,001			27,995
Less, expense waiver for Institutional Class service fees		(189,325	)		—
Less, expense reimbursement		—			(37,991	)
Net expenses		1,191,676			(9,996	)
Net investment gain		819,670			23,010
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS ALLOCATED FROM MASTER PORTFOLIOS:
Net realized loss on:
Investments and foreign currency		(403,147	)		—
Net change in unrealized appreciation of:
Investments and foreign currency		97,523,765			—
Net gain on investments		97,120,618			—
Net increase in net assets resulting from operations	$	97,940,288		$	23,010
† Net of Foreign Taxes Withheld of:	$	93,732		$	—
‡ Net of expense reduction of:	$	130,228		$	—

See Notes to the Financial Statements.

21

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Statement of Operations

For the Six Months Ended June 30, 2007 (Unaudited)

	The Market			The Water
	Opportunities			Infrastructure
	Fund			Fund
INVESTMENT INCOME ALLOCATED FROM MASTER PORTFOLIOS:
Dividends†	$	263,714		$	—
Interest		81,059			—
Income from securities lending		84,748			—
Expenses only from Master Portfolio‡		(286,604	)		—
Total investment income		142,917			—
EXPENSES:
Distribution fees — Advisor Class A		21,241			—
Distribution fees — Advisor Class C		3,900			—
Shareholder servicing fees and expenses		64,861			—
Reports to shareholders		2,805			—
Administration fees		5,485			—
Professional fees		11,230			—
Directors’ and Officers’ fees and expenses		566			—
Registration fees		19,463			—
Fund accounting fees		1,004			—
Other expenses		183			—
Total expenses		130,738			—
Less, expense reimbursement		(63,572	)		—
Net expenses		67,166			—
Net investment income		75,751			—
REALIZED AND UNREALIZED GAIN ON INVESTMENTS ALLOCATED FROM MASTER PORTFOLIOS:
Net realized gain on:
Investments and foreign currency		374,430			—
Net change in unrealized appreciation (depreciation) of:
Investments and foreign currency		3,738,169			—
Net gain on investments		4,112,599			—
Net increase in net assets resulting from operations	$	4,188,350		$	—
† Net of Foreign Taxes Withheld of:	$	18,848		$
‡ Net of Expense Reduction of:	$	—		$

(+)Commencement of operations.

See Notes to the Financial Statements.

22

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Statements of Changes in Net Assets

	The Internet Fund						The Internet Emerging Growth Fund
	For the			For the			For the			For the
	Six Months Ended			Year Ended			Six Months Ended			Year Ended
	June 30, 2007			December 31, 2006			June 30, 2007			December 31, 2006
	(Unaudited)						(Unaudited)
OPERATIONS:
Net investment income (loss)	$	80,713		$	(414,895	)	$	75,152		$	105,171
Net realized gain (loss) on sale of investments, foreign currency and written option contracts expired or closed		4,812,382			(11,569,467	)		98,514			161,804
Net change in unrealized appreciation (depreciation) of investments, foreign currency and written options		4,754,865			34,152,415			(77,984	)		306,665
Net increase in net assets resulting from operations		9,647,960			22,168,053			95,682			573,640
DISTRIBUTIONS TO SHAREHOLDERS — NO LOAD CLASS:
Net investment income		—			(517,032	)		—			(136,199	)
Net realized gains		—			—			—			—
Total distributions		—			(517,032	)		—			(136,199	)
DISTRIBUTIONS TO SHAREHOLDERS — ADVISOR CLASS A:
Net investment income		—			(886	)		N/A			N/A
Net realized gains		—			—			N/A			N/A
Total distributions		—			(886	)		N/A			N/A
DISTRIBUTIONS TO SHAREHOLDERS — ADVISOR CLASS C:
Net investment income		—			N/A			N/A			N/A
Net realized gains		—			N/A			N/A			N/A
Total distributions		—			N/A			N/A			N/A
CAPITAL SHARE TRANSACTIONS — NO LOAD CLASS:
Proceeds from shares sold		1,508,271			7,562,932			744,764			769,344
Redemption fees		1,903			4,836			869			494
Proceeds from shares issued to holders in reinvestment of dividends		—			489,767			—			130,660
Cost of shares redeemed		(16,797,915	)		(40,922,715	)		(938,395	)		(1,242,514	)
Net increase (decrease) in net assets resulting from capital share transactions		(15,287,741	)		(32,865,180	)		(192,762	)		(342,016	)
CAPITAL SHARE TRANSACTIONS — ADVISOR CLASS A:
Proceeds from shares sold		87,920			75,593			N/A			N/A
Redemption fees		—			—			N/A			N/A
Proceeds from shares issued to holders in reinvestment of dividends		—			853			N/A			N/A
Cost of shares redeemed		(17,037	)		(175,218	)		N/A			N/A
Net increase (decrease) in net assets resulting from capital share transactions		70,883			(98,772	)		N/A			N/A

See Notes to the Financial Statements.

23

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Statements of Changes in Net Assets — (Continued)

	The Internet Fund						The Internet Emerging Growth Fund
	For the			For the			For the			For the
	Six Months Ended			Year Ended			Six Months Ended			Year Ended
	June 30, 2007			December 31, 2006			June 30, 2007			December 31, 2006
	(Unaudited)						(Unaudited)
CAPITAL SHARE TRANSACTIONS — ADVISOR CLASS C:
Proceeds from shares sold	$	32,058		$	N/A			N/A			N/A
Redemption fees		1			N/A			N/A			N/A
Proceeds from shares issued to holders in reinvestment of dividends		—			N/A			N/A			N/A
Cost of shares redeemed		(59	)		N/A			N/A			N/A
Net increase in net assets resulting from capital share transactions		32,000			N/A			N/A			N/A
TOTAL INCREASE (DECREASE) IN NET ASSETS:		(5,536,898	)		(11,313,817	)		(97,080	)		95,425
NET ASSETS:
Beginning of period		137,246,780			148,560,597			3,991,057			3,895,632
End of period*	$	131,709,882		$	137,246,780		$	3,893,977		$	3,991,057
*Including undistributed net investment (loss) of:	$	(1,199,515	)	$	(1,280,228	)	$	(22,745	)	$	(97,897	)
CHANGES IN SHARES OUTSTANDING — NO LOAD CLASS:
Shares sold		51,063			281,558			147,766			159,298
Shares issued in reinvestments of dividends and distributions		—			17,089			—			26,237
Shares redeemed		(569,196	)		(1,522,811	)		(184,953	)		(267,914	)
Net decrease in shares outstanding		(518,133	)		(1,224,164	)		(37,187	)		(82,379	)
CHANGES IN SHARES OUTSTANDING — ADVISOR CLASS A:
Shares sold		2,998			2,829			N/A			N/A
Shares issued in reinvestments of dividends and distributions		—			30			N/A			N/A
Shares redeemed		(582	)		(6,847	)		N/A			N/A
Net increase (decrease) in shares outstanding		2,416			(3,988	)		N/A			N/A
CHANGES IN SHARES OUTSTANDING — ADVISOR CLASS C:
Shares sold		1,139			N/A			N/A			N/A
Shares issued in reinvestments of dividends and distributions		—			N/A			N/A			N/A
Shares redeemed		(2	)		N/A			N/A			N/A
Net increase in shares outstanding		1,137			N/A			N/A			N/A

See Notes to the Financial Statements.

24

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Statements of Changes in Net Assets

	The Paradigm Fund						The Medical Fund
	For the			For the			For the			For the
	Six Months Ended			Year Ended			Six Months Ended			Year Ended
	June 30, 2007			December 31, 2006			June 30, 2007			December 31, 2006
	(Unaudited)						(Unaudited)
OPERATIONS:
Net investment income	$	6,083,402		$	7,033,356		$	111,251		$	47,405
Net realized gain on sale of investments, foreign currency and written option contracts expired or closed		12,866,516			3,336,525			1,333,066			574,749
Net change in unrealized appreciation of investments, foreign currency and written options		229,816,995			299,451,652			382,078			1,519,670
Net increase in net assets resulting from operations		248,766,913			309,821,533			1,826,395			2,141,824
DISTRIBUTIONS TO SHAREHOLDERS — NO LOAD CLASS:
Net investment income		—			(7,752,890	)		—			(29,493	)
Net realized gains		—			(1,951,888	)		—			(1,007,832	)
Total distributions		—			(9,704,778	)		—			(1,037,325	)
DISTRIBUTIONS TO SHAREHOLDERS — ADVISOR CLASS A:
Net investment income		—			(835,845	)		—			—
Net realized gains		—			(277,929	)		—			(46,983	)
Total distributions		—			(1,113,774	)		—			(46,983	)
DISTRIBUTIONS TO SHAREHOLDERS — ADVISOR CLASS C:
Net investment income		—			(191,431	)		—			N/A
Net realized gains		—			(179,607	)		—			N/A
Total distributions		—			(371,038	)		—			N/A
DISTRIBUTIONS TO SHAREHOLDERS — INSTITUTIONAL CLASS:
Net investment income		—			(3,655,628	)		N/A			N/A
Net realized gains		—			(752,983	)		N/A			N/A
Total distributions		—			(4,408,611	)		N/A			N/A
CAPITAL SHARE TRANSACTIONS — NO LOAD CLASS:
Proceeds from shares sold		779,502,611			989,227,927			6,396,496			3,881,822
Redemption Fees		64,718			104,341			2,806			994
Proceeds from shares issued to holders in reinvestment of dividends		—			9,224,894			—			1,022,003
Cost of shares redeemed		(315,526,398	)		(259,427,544	)		(4,709,597	)		(4,338,605	)
Net increase in net assets resulting from capital share transactions		464,040,931			739,129,618			1,689,705			566,214

See Notes to the Financial Statements.

25

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Statements of Changes in Net Assets — (Continued)

	The Paradigm Fund						The Medical Fund
	For the			For the			For the			For the
	Six Months Ended			Year Ended			Six Months Ended			Year Ended
	June 30, 2007			December 31, 2006			June 30, 2007			December 31, 2006
	(Unaudited)						(Unaudited)
CAPITAL SHARE TRANSACTIONS — ADVISOR CLASS A:
Proceeds from shares sold	$	117,853,133		$	113,300,685		$	533,262		$	204,936
Redemption Fees		7,470			5,690			9			—
Proceeds from shares issued to holders in reinvestment of dividends		—			981,046			—			46,400
Cost of shares redeemed		(17,311,424	)		(17,958,062	)		(121,804	)		(138,769	)
Net increase in net assets resulting from capital share transactions		100,549,179			96,329,359			411,467			112,567
CAPITAL SHARE TRANSACTIONS — ADVISOR CLASS C:
Proceeds from shares sold		65,367,208			65,168,046			86,054			N/A
Redemption Fees		2,000			736			1			N/A
Proceeds from shares issued to holders in reinvestment of dividends		—			350,484			—			N/A
Cost of shares redeemed		(5,664,532	)		(4,713,754	)		(40	)		N/A
Net increase in net assets resulting from capital share transactions		59,704,676			60,805,512			86,015			N/A
CAPITAL SHARE TRANSACTIONS — INSTITUTIONAL CLASS:
Proceeds from shares sold		179,317,710			446,762,333			N/A			N/A
Redemption Fees		1,070			247			N/A			N/A
Proceeds from shares issued to holders in reinvestment of dividends		—			4,252,037			N/A			N/A
Cost of shares redeemed		(43,202,898	)		(26,140,810	)		N/A			N/A
Net increase in net assets resulting from capital share transactions		136,115,882			424,873,807			N/A			N/A
TOTAL INCREASE IN NET ASSETS:		1,009,177,581			1,615,361,628			4,013,582			1,736,297
NET ASSETS:
Beginning of period		2,144,331,018			528,969,390			16,237,780			14,501,483
End of period*	$	3,153,508,599		$	2,144,331,018		$	20,251,362		$	16,237,780
*Including undistributed net investment income (loss):	$	(885,947	)	$	(6,969,349	)	$	129,158		$	17,907
CHANGES IN SHARES OUTSTANDING — NO LOAD CLASS:
Shares sold		29,045,977			42,294,455			315,221			218,519
Shares issued in reinvestments of dividends and distributions		—			358,361			—			57,000
Shares redeemed		(11,717,613	)		(11,381,595	)		(245,066	)		(242,534	)
Net increase in shares outstanding		17,328,364			31,271,221			70,155			32,985

See Notes to the Financial Statements.

26

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Statements of Changes in Net Assets — (Continued)

	The Paradigm Fund						The Medical Fund
	For the			For the			For the			For the
	Six Months Ended			Year Ended			Six Months Ended			Year Ended
	June 30, 2007			December 31, 2006			June 30, 2007			December 31, 2006
	(Unaudited)						(Unaudited)
CHANGES IN SHARES OUTSTANDING — ADVISOR CLASS A:
Shares sold		4,379,814			4,933,611			28,646			11,659
Shares issued in reinvestments of dividends and distributions		—			38,654			—			2,641
Shares redeemed		(636,380	)		(784,736	)		(6,440	)		(7,801	)
Net increase in shares outstanding		3,743,434			4,187,529			22,206			6,499
CHANGES IN SHARES OUTSTANDING — ADVISOR CLASS C:
Shares sold		2,493,689			2,889,662			4,392			N/A
Shares issued in reinvestments of dividends and distributions		—			14,058			—			N/A
Shares redeemed		(217,724	)		(210,239	)		(2	)		N/A
Net increase in shares outstanding		2,275,965			2,693,481			4,390			N/A
CHANGES IN SHARES OUTSTANDING — INSTITUTIONAL CLASS:
Shares sold		6,640,897			20,096,058			N/A			N/A
Shares issued in reinvestments of dividends and distributions		—			165,385			N/A			N/A
Shares redeemed		(1,593,956	)		(1,105,467	)		N/A			N/A
Net increase in shares outstanding		5,046,941			19,155,976			N/A			N/A

See Notes to the Financial Statements.

27

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Statements of Changes in Net Assets

							The Kinetics Government
	The Small Cap Opportunities Fund						Money Market Fund
	For the			For the			For the			For the
	Six Months Ended			Year Ended			Six Months Ended			Year Ended
	June 30, 2007			December 31, 2006			June 30, 2007			December 31, 2006
	(Unaudited)						(Unaudited)
OPERATIONS:
Net investment income	$	819,670		$	497,700		$	23,010		$	44,708
Net realized loss on sale of investments, foreign currency and written option contracts expired or closed		(403,147	)		(400,497	)		—			—
Net change in unrealized appreciation of investments, foreign currency and written options		97,523,765			69,114,777			—			—
Net increase in net assets resulting from operations		97,940,288			69,211,980			23,010			44,708
DISTRIBUTIONS TO SHAREHOLDERS — NO LOAD CLASS:
Net investment income		—			(499,880	)		(23,010	)		(44,708	)
Net realized gains		—			—			—			—
Total distributions		—			(499,880	)		(23,010	)		(44,708	)
DISTRIBUTIONS TO SHAREHOLDERS — ADVISOR CLASS A:
Net investment income		—			(11,747	)		N/A			N/A
Net realized gains		—			—			N/A			N/A
Total distributions		—			(11,747	)		N/A			N/A
DISTRIBUTIONS TO SHAREHOLDERS — ADVISOR CLASS C:
Net investment income		—			N/A			N/A			N/A
Net realized gains		—			N/A			N/A			N/A
Total distributions		—			N/A			N/A			N/A
DISTRIBUTIONS TO SHAREHOLDERS — INSTITUTIONAL CLASS:
Net investment income		—			(619,610	)		N/A			N/A
Net realized gains		—			—			N/A			N/A
Total distributions		—			(619,610	)		N/A			N/A
CAPITAL SHARE TRANSACTIONS — NO LOAD CLASS:
Proceeds from shares sold		315,663,579			231,889,125			472,362			1,483,806
Redemption fees		35,047			49,305			—			—
Proceeds from shares issued to holders in reinvestment of dividends		—			449,467			21,259			43,276
Cost of shares redeemed		(69,353,497	)		(51,220,132	)		(854,376	)		(1,153,683	)
Net increase (decrease) in net assets resulting from capital share transactions		246,345,129			181,167,765			(360,755	)		373,399

See Notes to the Financial Statements.

28

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Statements of Changes in Net Assets — (Continued)

							The Kinetics Government
	The Small Cap Opportunities Fund						Money Market Fund
	For the			For the			For the			For the
	Six Months Ended			Year Ended			Six Months Ended			Year Ended
	June 30, 2007			December 31, 2006			June 30, 2007			December 31, 2006
	(Unaudited)						(Unaudited)
CAPITAL SHARE TRANSACTIONS — ADVISOR CLASS A:
Proceeds from shares sold	$	9,126,880		$	8,331,786			N/A			N/A
Redemption fees		1,159			179			N/A			N/A
Proceeds from shares issued to holders in reinvestment of dividends		—			10,531			N/A			N/A
Cost of shares redeemed		(1,134,108	)		(3,144,103	)		N/A			N/A
Net increase in net assets resulting from capital share transactions		7,993,931			5,198,393			N/A			N/A
CAPITAL SHARE TRANSACTIONS — ADVISOR CLASS C:
Proceeds from shares sold		713,688			N/A			N/A			N/A
Redemption fees		689			N/A			N/A			N/A
Proceeds from shares issued to holders in reinvestment of dividends		—			N/A			N/A			N/A
Cost of shares redeemed		(44,047	)		N/A			N/A			N/A
Net increase in net assets resulting from capital share transactions		670,330			N/A			N/A			N/A
CAPITAL SHARE TRANSACTIONS — INSTITUTIONAL CLASS:
Proceeds from shares sold		60,493,484			118,326,043			N/A			N/A
Redemption fees		2,380			1			N/A			N/A
Proceeds from shares issued to holders in reinvestment of dividends		—			458,157			N/A			N/A
Cost of shares redeemed		(17,711,896	)		(11,089,755	)		N/A			N/A
Net increase in net assets resulting from capital share transactions		42,783,968			107,694,446			N/A			N/A
TOTAL INCREASE (DECREASE) IN NET ASSETS:		395,733,646			362,141,347			(360,755	)		373,399
NET ASSETS:
Beginning of period		490,911,329			128,769,982			1,425,456			1,052,057
End of period*	$	886,644,975		$	490,911,329		$	1,064,701		$	1,425,456
*Including undistributed net investment income (loss) of:	$	356,572		$	(463,098	)	$	—		$	—
CHANGES IN SHARES OUTSTANDING — NO LOAD CLASS:
Shares sold		10,875,435			9,482,826			472,362			1,483,806
Shares issued in reinvestments of dividends and distributions		—			16,690			21,259			43,276
Shares redeemed		(2,360,124	)		(2,176,444	)		(854,376	)		(1,153,683	)
Net increase (decrease) in shares outstanding		8,515,311			7,323,072			(360,755	)		373,399

See Notes to the Financial Statements.

29

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Statements of Changes in Net Assets — (Continued)

							The Kinetics Government
	The Small Cap Opportunities Fund						Money Market Fund
	For the			For the			For the		For the
	Six Months Ended			Year Ended			Six Months Ended		Year Ended
	June 30, 2007			December 31, 2006			June 30, 2007		December 31, 2006
	(Unaudited)						(Unaudited)
CHANGES IN SHARES OUTSTANDING — ADVISOR CLASS A:
Shares sold		313,032			351,729			N/A		N/A
Shares issued in reinvestments of dividends and distributions		—			394			N/A		N/A
Shares redeemed		(39,288	)		(135,387	)		N/A		N/A
Net increase in shares outstanding		273,744			216,736			N/A		N/A
CHANGES IN SHARES OUTSTANDING — ADVISOR CLASS C:
Shares sold		24,042			N/A			N/A		N/A
Shares issued in reinvestments of dividends and distributions		—			N/A			N/A		N/A
Shares redeemed		(1,521	)		N/A			N/A		N/A
Net increase in shares outstanding		22,521			N/A			N/A		N/A
CHANGES IN SHARES OUTSTANDING — INSTITUTIONAL CLASS:
Shares sold		2,088,050			5,013,952			N/A		N/A
Shares issued in reinvestments of dividends and distributions		—			17,017			N/A		N/A
Shares redeemed		(616,871	)		(461,586	)		N/A		N/A
Net increase in shares outstanding		1,471,179			4,569,383			N/A		N/A

See Notes to the Financial Statements.

30

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Statements of Changes in Net Assets

	The Market Opportunities Fund						The Water Infrastructure Fund
	For the			From January 31,			From June 29, 2007ˆ
	Six Months Ended			2006(+) through			through
	June 30, 2007			December 31, 2006			June 30, 2007
	(Unaudited)						(Unaudited)
OPERATIONS:
Net investment income	$	75,751		$	20,887		$	—
Net realized gain on sale of investments, foreign currency and written option contracts expired or closed		374,430			26			—
Net change in unrealized appreciation of investments, foreign currency and written options		3,738,169			1,724,697			—
Net increase in net assets resulting from operations		4,188,350			1,745,610			—
DISTRIBUTIONS TO SHAREHOLDERS — NO LOAD CLASS:
Net investment income		—			(22,877	)		—
Net realized gains		—			—			—
Total distributions		—			(22,877	)		—
DISTRIBUTIONS TO SHAREHOLDERS — ADVISOR CLASS A:
Net investment income		—			(21,653	)		—
Net realized gains		—			—			—
Total distributions		—			(21,653	)		—
DISTRIBUTIONS TO SHAREHOLDERS — ADVISOR CLASS C:
Net investment income		—			N/A			—
Net realized gains		—			N/A			—
Total distributions		—			N/A			—
DISTRIBUTIONS TO SHAREHOLDERS — INSTITUTIONAL CLASS
Net investment income		N/A			N/A			—
Net realized gains		N/A			N/A			—
Total distributions		N/A			N/A			—
CAPITAL SHARE TRANSACTIONS — NO LOAD CLASS:
Proceeds from shares sold		22,600,762			7,234,940			100,100
Redemption fees		1,946			1,277			—
Proceeds from shares issued to holders in reinvestment of dividends		—			22,528			—
Cost of shares redeemed		(1,768,054	)		(238,682	)		—
Net increase in net assets resulting from capital share transactions		20,834,654			7,020,063			100,100

(+)Commencement of operations.

See Notes to the Financial Statements.

31

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Statements of Changes in Net Assets — (Continued)

	The Market Opportunities Fund						The Water Infrastructure Fund
	For the			From January 31,			From June 29, 2007ˆ
	Six Months Ended			2006(+) through			through
	June 30, 2007			December 31, 2006			June 30, 2007
	(Unaudited)						(Unaudited)
CAPITAL SHARE TRANSACTIONS — ADVISOR CLASS A:
Proceeds from shares sold	$	13,262,779		$	9,041,894		$	100,000
Redemption fees		306			—			—
Proceeds from shares issued to holders in reinvestment of dividends		—			20,168			—
Cost of shares redeemed		(1,494,600	)		(198,365	)		—
Net increase in net assets resulting from capital share transactions		11,768,485			8,863,697			100,000
CAPITAL SHARE TRANSACTIONS — ADVISOR CLASS C:
Proceeds from shares sold		2,307,917			N/A			100,000
Redemption fees		403			N/A			—
Proceeds from shares issued to holders in reinvestment of dividends		—			N/A			—
Cost of shares redeemed		(20,174	)		N/A			—
Net increase in net assets resulting from capital share transactions		2,288,146			N/A			100,000
CAPITAL SHARE TRANSACTIONS — INSTITUTIONAL CLASS:
Proceeds from shares sold		N/A			N/A			100,000
Redemption fees		N/A			N/A			—
Proceeds from shares issued to holders in reinvestment of dividends		N/A			N/A			—
Cost of shares redeemed		N/A			N/A			—
Net increase in net assets resulting from capital share transactions		N/A			N/A			100,000
TOTAL INCREASE IN NET ASSETS:		39,079,635			17,584,840			400,100
NET ASSETS:
Beginning of period		17,584,840			—			—
End of period*	$	56,664,475		$	17,584,840		$	400,100
*Including undistributed net investment income (loss) of:	$	52,190		$	(23,561	)	$	—
CHANGES IN SHARES OUTSTANDING — NO LOAD CLASS:
Shares sold		1,726,234			683,888			10,010
Shares issued in reinvestments of dividends and distributions		—			1,887			—
Shares redeemed		(135,854	)		(22,537	)		—
Net increase in shares outstanding		1,590,380			663,238			10,010

(+)Commencement of operations.

See Notes to the Financial Statements.

32

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Statements of Changes in Net Assets — (Continued)

	The Market Opportunities Fund						The Water Infrastructure Fund
	For the			From January 31,			From June 29, 2007ˆ
	Six Months Ended			2006(+) through			through
	June 30, 2007			December 31, 2006			June 30, 2007
	(Unaudited)						(Unaudited)
CHANGES IN SHARES OUTSTANDING — ADVISOR CLASS A:
Shares sold		1,022,075			815,515			10,000
Shares issued in reinvestments of dividends and distributions		—			1,674			—
Shares redeemed		(112,033	)		(20,282	)		—
Net increase in shares outstanding		910,042			796,907			10,000
CHANGES IN SHARES OUTSTANDING — ADVISOR CLASS C:
Shares sold		175,490			N/A			10,000
Shares issued in reinvestments of dividends and distributions		—			N/A			—
Shares redeemed		(1,652	)		N/A			—
Net increase in shares outstanding		173,838			N/A			10,000
CHANGES IN SHARES OUTSTANDING — INSTITUTIONAL CLASS:
Shares sold		N/A			N/A			10,000
Shares issued in reinvestments of dividends and distributions		N/A			N/A			—
Shares redeemed		N/A			N/A			—
Net increase in shares outstanding		N/A			N/A			10,000

(+)Commencement of operations.

See Notes to the Financial Statements.

33

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Notes to Financial Statements

June 30, 2007 (Unaudited)

1.  Organization

Kinetics Mutual Funds, Inc. (the “Company”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), and is incorporated in the State of Maryland. The Company is an open-end management investment company issuing its shares in series. One billion shares are authorized for the Company with a par value of $0.001 per share. The series of the Company presently authorized are The Internet Fund (“Internet”), The Internet Emerging Growth Fund (“Emerging”),The Paradigm Fund (“Paradigm”), The Medical Fund (“Medical”), The Small Cap Opportunities Fund (“Small Cap”), The Market Opportunities Fund (“Market Opportunities”), The Water Infrastructure Fund (“Water Infrastructure”) and The Kinetics Government Money Market Fund (“Government”). Investment operations of the Company began on October 21, 1996 (Internet), September 30, 1999 (Medical), December 31, 1999 (Emerging and Paradigm), February 3, 2000 (Government), March 20, 2000 (Small Cap), January 31, 2006 (Market Opportunities) and June 29, 2007 (Water Infrastructure). Each series, unlike many other investment companies which directly acquire and manage their own portfolios of securities, seeks to achieve its investment objective by investing all of its investable assets in a corresponding portfolio series (each a “Master Portfolio” and collectively the “Master Portfolios”) of Kinetics Portfolios Trust (the “Trust”).

On April 28, 2000 (January 31, 2006 with respect to The Market Opportunities Fund and June 29, 2007 with respect to the Water Infrastructure Fund), each series in the Company entered into a master-feeder fund structure. By entering into this structure, each series (each a “Feeder Fund” and collectively, the “Feeder Funds”) invested all of its assets in a corresponding Master Portfolio which had the same investment objective as the Feeder Fund. Each Master Portfolio has multiple feeder funds. Each Feeder Fund receives a proportionate amount of interest in the Master Portfolio equal to its relative contribution of capital. Thus, each Feeder Fund is allocated its portion of income, gains (losses) and expenses from the Master Portfolio.

34

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Notes to Financial Statements — (Continued)

June 30, 2007 (Unaudited)

Each Feeder Fund’s respective interest in the corresponding Master Portfolio as of June 30, 2007 is as follows:

	Interest in
	Master Portfolio
Internet Fund		99.993%
Emerging Fund		99.800%
Paradigm Fund		98.485%
Medical Fund		99.923%
Small Cap Fund		99.996%
Government Fund		97.485%
Market Opportunities Fund		99.975%
Water Infrastructure Fund		80.000%

Prior to the conversion to a master-feeder fund structure, on April 28, 2000, each then existing series conducted its own investment operations.

Effective April 26, 2001, the Internet, Paradigm and Medical Funds issued an additional class of shares — Advisor Class A. Effective December 31, 2001, the Small Cap Fund issued an additional class of shares — Advisor Class A. Effective January 31, 2006, the Market Opportunities Fund began issuing Advisor Class A shares. Effective June 29, 2007, the Water Infrastructure Fund began issuing Advisor Class A shares. Advisor Class A shares are subject to an annual Rule 12b-1 fee of 0.25% of average daily net assets. The Advisor Class A shares are also subject to a front-end sales charge of 5.75%. Effective June 28, 2002 the Paradigm Fund issued an additional class of shares — Advisor Class C. Effective February 16, 2007 the Internet, Medical, Small Cap Opportunities and Market Opportunities Funds issued an additional class of shares — Advisor Class C. Effective June 29, 2007, the Water Infrastructure Fund began issuing Advisor Class C shares. Advisor Class C shares are subject to an annual Rule 12b-1 fee of 0.75% of average daily net assets. Effective May 27, 2005, the Paradigm Fund issued an additional class of shares — the Institutional Class. Effective August 12, 2005, the Small Cap Opportunities Fund issued an additional class of shares — the Institutional Class. Effective June 29, 2007, the Water Infrastructure Fund began issuing Institutional Class shares. The Institutional Class shares are subject to a service fee of 0.20% of average daily net assets. All other classes are subject to a service fee of 0.25% of average daily net assets. The No Load Class and the Institutional Class shares do not pay a 12b-1 fee or have a sales charge. Each class of shares for each Fund has identical rights and privileges except with respect to the Rule 12b-1 fees paid by the Advisor Class A and Class C shares, the sales charge on the Advisor Class A and Class C shares, the service fees paid by the

35

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Notes to Financial Statements — (Continued)

June 30, 2007 (Unaudited)

No Load Class, Advisor Class A and Advisor Class C versus those paid by the Institutional Class, voting rights on matters pertaining to a single class of shares and the exchange privileges of each class of shares. Shares of each Feeder Fund, except the Government Fund, will assess a 2.00% redemption fee (with exceptions) on shares redeemed or exchanged within 30 days of purchase.

Refer to the Master Portfolio’s financial statements to obtain information about the investment objective of the corresponding Feeder Fund. The financial statements of the Master Portfolios, including the portfolio of investments in securities, are contained elsewhere in this report and should be read in conjunction with the Feeder Funds’ financial statements.

2.  Significant Accounting Policies

Security Valuation

Master Portfolio securities (other than Government) that are listed on a U.S. securities exchange 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. All equity securities that are traded using the National Association of Securities Dealers’ Automated Quotation System (“NASDAQ”) are valued using the NASDAQ Official Closing Price (“NOCP”). In the event market quotations are not readily available or if events occur that may materially affect the value of a particular security between the time trading ends on a particular security and the close of regular trading on the New York Stock Exchange (“NYSE”), “fair value” will be determined. Purchased 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 bid and asked prices. 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.

Investments in The Kinetics Government Money Market Portfolio and instruments with remaining maturities of 60 days or less are valued at amortized cost, which approximates fair value. Other assets and securities for which no quotations are readily available (including restricted securities) are valued in good faith at fair value using methods determined by the Board of Trustees of

36

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Notes to Financial Statements — (Continued)

June 30, 2007 (Unaudited)

the Master Portfolios. At June 30, 2007, none of the Master Portfolios held securities which were fair valued.

Repurchase Agreements

Each Master Portfolio 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 Trust’s policy that the Master Portfolio 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 Master Portfolio in each repurchase agreement. If the seller defaults, and the value of the collateral declines, realization of the collateral by the Master Portfolio may be delayed or limited.

Written Option Accounting

The Master Portfolios may write (sell) call or put options for trading or hedging purposes. When a Master Portfolio writes an option, an amount equal to the premium received by the Master Portfolio 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 the option, the Master Portfolio 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 the valuation. When an option expires on its stipulated expiration date or the Master Portfolio enters into a closing purchase transaction, the Master Portfolio 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 the security sold short) and the Master Portfolio realizes a gain or loss from the sale of the security (or closing of the short sale). As collateral for uncovered written options, the Master Portfolio 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 for call options.

37

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Notes to Financial Statements — (Continued)

June 30, 2007 (Unaudited)

Foreign Currency Translations

The books and records of the Master Portfolios are maintained in U.S. dollars. For the Master Portfolios, foreign currency transactions are translated into U.S. dollars on the following basis: (i) market values of investment securities and other assets and liabilities are translated at the exchange rate of such currencies against the U.S. dollar, as provided by an approved pricing service, and (ii) purchases and sales of investment securities, dividend and interest income and certain expenses at the rates of exchange prevailing on the respective dates of such transactions. The Master Portfolios do not isolate and treat as ordinary income that portion of the results of operations arising as a result of changes in the exchange rate from the fluctuations arising from changes in the market prices of securities held during the period. However, for federal income tax purposes, the Master Portfolios do isolate and treat as ordinary income the effect of changes in foreign exchange rates arising from actual foreign currency transactions and the effect of changes in foreign exchange rates arising between trade date and settlement date.

Restricted Securities

The Master Portfolios may invest in restricted securities. These securities are valued by the Master Portfolios after giving due consideration to pertinent factors including recent private sales, market conditions and the issuer’s financial performance. The Master Portfolios have no right to require registration of unregistered securities. At June 30, 2007, the Master Portfolios did not hold any investment securities which were determined to be illiquid pursuant to the guidelines adopted by the Board of Trustees.

When-Issued Securities

The Master Portfolios may purchase securities on a when-issued or delayed delivery basis. Although the purchase amounts of these securities are established at the time the purchaser enters into the agreement, these securities may be delivered and paid for at a future date. The Master Portfolios record purchases of when-issued securities and reflect the values of such securities in determining net asset value in the same manner as other portfolio securities. The Master Portfolios maintain at all times cash or other liquid assets in an amount at least equal to the amount of outstanding commitments for when-issued securities.

Securities Lending

Each Master Portfolio may lend its portfolio securities to broker-dealers by entering directly into lending arrangements with such broker-dealers or indirectly through repurchase agreements with respect to no more than 331/3% of

38

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Notes to Financial Statements — (Continued)

June 30, 2007 (Unaudited)

the total assets of each Portfolio (including any collateral posted) or 50% of the total assets of each Portfolio (excluding any collateral posted). Securities lending and repurchase transactions will be fully collateralized at all times with cash and/or short-term debt obligations. The Master Portfolios receive interest on the collateral received as well as a fee for the securities loaned.

Expense Allocation

Common expenses incurred by Feeder Funds are allocated among the Feeder Funds (i) based upon relative average net assets, (ii) as incurred on a specific identification basis, or (iii) equally among the Feeder Funds, depending on the nature of the expenditure.

Each Feeder Fund records its proportionate share of the Master Portfolio’s expenses on a daily basis. In addition, each Feeder Fund accrues its own separate expenses. Any cap on expenses includes Feeder Fund-specific expenses as well as the expenses allocated from the Master Portfolio.

Federal Income Taxes

Each Master Portfolio will be treated as a partnership for federal income tax purposes. As such, each investor in the Portfolio will be subject to taxation on its share of the Portfolio’s ordinary income and capital gains. It is intended that the Portfolio’s assets will be managed so an investor in the Portfolio can satisfy the requirements of subchapter M of the Internal Revenue Code.

It is the Feeder Funds’ policy to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and the Feeder Funds intend to distribute investment company net taxable income and net capital gains to shareholders. Therefore, no federal income tax provision is recorded. Dividends from net investment income and distributions of net realized capital gains, if any, will be declared and paid at least annually. The character of distributions made during the year from net investment income or net realized gains may differ from the characterization for federal income tax purposes due to differences in the recognition of income, expenses and gain items for financial statement and tax purposes. Additionally, the Feeder Funds may utilize earnings and profits distributed to shareholders on redemption of shares as part of the dividends paid deduction for income tax purposes. Where appropriate, reclassifications between capital accounts are made for such differences that are permanent in nature.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management

39

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Notes to Financial Statements — (Continued)

June 30, 2007 (Unaudited)

to make estimates and assumptions that affect the reported amounts in the financial statements. Actual results could differ from those estimates.

Other

Realized gains and losses on the sale of investments are calculated on the identified cost basis. Dividend income is recorded on the ex-dividend date and interest income is recognized on the accrual basis. Other noncash dividends are recognized as investment income at the fair value of the property received. Withholding taxes on foreign dividends have been provided for in accordance with the Company’s understanding of the applicable country’s tax rules and rates.

3.  Investment Adviser

The Trust has entered into Investment Advisory Agreements (the “Agreements”) with Kinetics Asset Management, Inc. (the “Adviser”), with whom certain officers and trustees of the Trust are affiliated, to furnish investment advisory services to the Master Portfolios. Under the terms of the Agreements, the Master Portfolios compensate the Adviser for its management services at the annual rate of 1.25% of each Master Portfolio’s average daily net assets, except for The Kinetics Government Money Market Portfolio, which compensates the Adviser at an annual rate of 0.50% of the Master Portfolio’s average daily net assets.

The Adviser has voluntarily agreed to continue to pay certain operating expenses as deemed appropriate. The Adviser may discontinue the voluntary reimbursement at any time; these reimbursements are not subject to recapture. For the six months ended June 30, 2007, the amounts earned by the Adviser and the reimbursed expenses for the Feeder Funds are as follows:

	Internet		Emerging
Annual Advisory Rate		1.25%		1.25%
Expenses Reimbursed by Adviser	$	—	$	52,712

	Paradigm		Medical
Annual Advisory Rate		1.25%		1.25%
Expenses Reimbursed by Adviser	$	—	$	94,810

	Small Cap		Government
Annual Advisory Rate		1.25%		0.50%
Expenses Reimbursed by Adviser	$	—	$	37,991

40

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Notes to Financial Statements — (Continued)

June 30, 2007 (Unaudited)

	Market		Water
	Opportunities		Infrastructure
Annual Advisory Rate		1.25%		1.25%
Expenses Reimbursed by Adviser	$	63,572	$	—

The Adviser receives a shareholder servicing fee from the No Load, Class A and Class C shares of the Feeder Funds pursuant to a Shareholder Servicing Agreement in the amount equal to 0.25% of the Feeder Fund’s average daily net assets. For the Institutional Class the Adviser receives a shareholder servicing fee in the amount equal to 0.20% of the Institutional Class average daily net assets. At this time the Investment Adviser has contractually agreed to waive and/or reimburse the portion of the Institutional Class shareholder servicing fee in excess of 0.05% of its average daily net assets until at least May 1, 2008. For the six months ended June 30, 2007 the Adviser waived $440,804 and $189,325 in shareholder servicing fees for the Institutional Class of the Paradigm Fund and the Small Cap Opportunities Fund, respectively. The Adviser is responsible for paying a portion of these shareholder servicing fees to various agents that have a written shareholder servicing agreement with the Adviser and that perform shareholder servicing functions and maintenance of shareholder accounts on behalf of their clients who own shares of the Feeder Funds.

For the six months ended June 30, 2007, the Feeder Funds were allocated $24,000 for the services of the Chief Compliance Officer employed by the Adviser.

The Company, on behalf of the Funds, has adopted two Retail Distribution Plans pursuant to Rule 12b-1 under the 1940 Act (the “12b-1 Plans”). One Plan is for Advisor Class A shares, while the other Plan is for Advisor Classes B and C shares. Under the first Plan, Advisor Class A shares may pay up to an annual rate of 0.50% of the average daily net asset value of shares to the Distributor or other qualified recipients under the Plan. During the six months ended June 30, 2007, payments under the 12b-1 Plan for the Advisor Class A shares of the Internet, Paradigm, Medical, Small Cap and Market Opportunities Funds were limited to 0.25% of the average daily net asset value of such shares of such Funds. During the six months ended June 30, 2007, the Advisor Class A shares of the Internet, Paradigm, Medical, Small Cap and Market Opportunities Funds incurred expenses of $334, $302,812, $1,300, $21,175 and $21,241, respectively, pursuant to the 12b-1 Plan. Under the second Plan, Advisor Classes B and C shares pay an annual rate of 0.75% of the average daily net asset value of such shares. During the six months ended June 30, 2007, Internet, Paradigm,

41

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Notes to Financial Statements — (Continued)

June 30, 2007 (Unaudited)

Medical, Small Cap Opportunities and Market Opportunities Advisor Class C Shares incurred expenses of $87, $564,570, $136, $830 and $3,900, respectively, pursuant to the 12b-1 Plan. Through June 30, 2007, the Funds had not issued any Advisor Class B shares.

Kinetics Funds Distributor, Inc. (the “Distributor”) acts as the Fund’s principal underwriter in a continuous public offering of the Fund’s shares. The Distributor is an affiliate of the Adviser. For the six months ended June 30, 2007, the Distributor received $407, $315,565, $1,902, $19,781 and $52,759 from sales loads from the Internet, Paradigm, Medical, Small Cap and Market Opportunities Funds.

4.  Reclassification of Capital Accounts

Accounting principles generally accepted in the United States of America require that certain components of net assets relating to permanent differences be reclassified between financial and tax reporting. These reclassifications have no effect on net assets or net asset value per share. For the year ended December 31, 2006, each Fund recorded the following reclassifications to the accounts listed below:

	INCREASE (DECREASE)
				Accumulated
				Net			Accumulated
				Investment			Net Realized
	Paid-in-Capital			Income(Loss)			Loss
The Internet Fund	$	(2	)	$	1,895,091		$	(1,895,089	)
The Internet Emerging Growth Fund		—			32			(32	)
The Paradigm Fund		(25	)		(3,883	)		3,908
The Medical Fund		1			(5	)		4
The Small Cap Opportunities Fund		—			8,284			(8,284	)
The Kinetics Government Money Market Fund		—			—			—
The Market Opportunities Fund		—			82			(82	)

5.  Income Taxes

At December 31, 2006 the Internet, Emerging, Paradigm, Medical, Small Cap, Money Market and Market Funds had $273,295, $13,406, $1,159,307, $17,907, $1,618,109, $— and $141,268, respectively, of undistributed net investment income on a tax basis.

42

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Notes to Financial Statements — (Continued)

June 30, 2007 (Unaudited)

At December 31, 2006 the Paradigm and Medical Funds had $82,678 and $92,912, respectively, of accumulated gains on a tax basis.

At December 31, 2006, the Feeder Funds had accumulated net realized capital loss carryovers expiring in the following years.

Feeder Fund	2014		2013		2011		2010		2009		2008
Internet	$	16,077,777	$	6,777,871	$	—	$	140,178,775	$	34,119,306	$	—
Emerging		—		4,885		887,154		2,635,504		5,481,052		2,349,885
Paradigm		—		—		—		—		—		—
Medical		—		—		—		—		—		—
Small Cap		1,137,258		499,629		—		—		—		—
Money Market		—		—		—		—		—		—
Market		21		—		—		—		—		—

To the extent that the Feeder Funds realize future net capital gains, those gains will be offset by any unused capital loss carryovers. For the year ended December 31, 2006, Medical Fund and Emerging Fund utilized $22,109 and $138,311, respectively, of capital loss carryforward.

At December 31, 2006, the following Feeder Funds deferred, on a tax basis, post-October losses and straddle losses of:

Feeder Fund	Post-October Losses		Straddle Losses
Internet	$	254	$	647,971
Emerging		8,026		—
Paradigm		211,253		889
Medical		605,675		95,261
Small Cap		237		—
Money Market		—		—
Market		35		—

The tax components of dividends paid during the years ended December 31, 2006 and December 31, 2005, are:

	Internet				Emerging
	Ordinary Income		Long-Term Capital		Ordinary Income		Long-Term Capital
	Distribution		Gains Distribution		Distribution		Gains Distribution
2006	$	517,918	$	—	$	136,199	$	—
2005	$	1,219,980	$	—	$	160,455	$	—

	Paradigm				Medical
	Ordinary Income		Long-Term Capital		Ordinary Income		Long-Term Capital
	Distribution		Gains Distribution		Distribution		Gains Distribution
2006	$	12,435,794	$	3,162,407	$	29,493	$	1,054,815
2005	$	475,907	$	412,952	$	—	$	—

43

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Notes to Financial Statements — (Continued)

June 30, 2007 (Unaudited)

	Money Market
	Ordinary		Long-Term		Small Cap
	Income		Capital Gains		Ordinary Income		Long-Term Capital
	Distribution		Distribution		Distribution		Gains Distribution
2006	$	44,708	$	—	$	1,131,237	$	—
2005	$	21,059	$	—	$	436,587	$	391,110

	Market
	Ordinary Income		Long-Term Capital
	Distribution		Gains Distribution
2006	$	44,530	$	—
2005		N/A		N/A

6.  Tax Information (Unaudited)

The Internet, Emerging, Paradigm, Medical, Small Cap, and Market Opportunities Funds designate 28%, 27%, 91%, 100%, 57% and 23%, respectively, of dividends declared after December 31, 2006 from net investment income as qualified dividend income under the Jobs and Growth Tax Relief Reconciliation Act of 2003.

The Paradigm and Medical Funds hereby designate 80% and 3%, respectively, as ordinary income distributions and 20% and 97%, respectively, as long-term capital gain distributions for the purposes of the dividends paid deduction, which include earnings and profits distributed to shareholders on redemptions of Fund shares.

For corporate shareholders in the Funds, the percentage of ordinary dividend income distributed for the year ended December 31, 2006, which is designated as qualifying for the dividends-received deduction, is as follows: Internet 26%, Emerging 26%, Paradigm 47%, Medical 100%, Small Cap 42% and Market Opportunities 12%.

The Internet, Emerging, Paradigm, Medical, Small Cap, Money Market and Market Opportunities Funds designate 45%, 34%, 39%, 23%, 28%, 79% and 18%, respectively, of their ordinary income distributions for the fiscal year as interest-related dividends under Internal Revenue Code Section 871(k)(l)(C).

The Internet, Emerging, Paradigm, Medical, Small Cap, Money Market and Market Opportunities Funds designate 0%, 0%, 0%, 0%, 0%, 0% and 0%, respectively, of their ordinary income distributions as short-term capital gain distributions under Internal Revenue Code Section
871(k)(2)(C).

44

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Notes to Financial Statements — (Continued)

June 30, 2007 (Unaudited)

7.  New Accounting Pronouncements (Unaudited)

In June 2006, the Financial Accounting Standards Board (“FASB”) released FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Trusts’ tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. To the extent that a tax benefit of a position is not deemed to meet the more-likely-than-not threshold, the Trusts would report an income tax expense in the statement of operations. Adoption of FIN 48 is required as of the date of the last Net Asset Value (“NAV”) calculation in the first required financial statement reporting period for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. Management has evaluated the impact of FIN 48 and has determined there is no material impact to the financial statements.

In September 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements.” The Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. The Statement establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (2) the reporting entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and is to be applied prospectively as of the beginning of the fiscal year in which this Statement is initially applied. At this time, management is evaluating the implications of FAS 157, and the impact, if any, of this standard on the Trusts’ financial statements has not yet been determined.

8.  Information about Proxy Voting (Unaudited)

Information regarding how Kinetics Mutual Funds, Inc. votes proxies relating to portfolio securities is available without charge, upon request by calling toll-free at 1-800-930-3828 or by accessing the Funds’ website at www.kineticsfunds.com and by accessing the SEC’s website at www.sec.gov. Information regarding how the Funds voted proxies relating to portfolio securities during

45

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Notes to Financial Statements — (Continued)

June 30, 2007 (Unaudited)

the most recent twelve month period ended June 30, is available without charge, upon request, by calling toll-free at 1-800-930-3828 or by accessing the SEC’s website at www.sec.gov.

9.  Information about the Portfolio Holdings (Unaudited)

The Funds file their complete schedule of portfolio holdings for their first and third fiscal quarters with the SEC on Form N-Q. The Funds’ Form N-Q is available without charge, upon request, by calling toll-free at 1-800-930-3828. Furthermore, you can obtain the Form N-Q on the SEC’s website at www.sec.gov. Finally, the Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

46

(This page intentionally left blank)

47

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Financial Highlights

	The Internet Fund
	No Load Class			Advisor Class A			Advisor Class C			No Load Class			Advisor Class A
	Six Months			Six Months			February 16, 2007ˆ			For the			For the
	Ended			Ended			through			Year Ended			Year Ended
	June 30, 2007			June 30, 2007			June 30, 2007			December 31,			December 31,
	(Unaudited)			(Unaudited)			(Unaudited)			2006			2006
PER SHARE DATA(1)
Net Asset Value,
Beginning of Year	$	28.62		$	28.24		$	28.66		$	24.66		$	24.40
Income from Investment Operations:
Net investment income (loss)		0.02	(3)		(0.02	)(3)		(0.09	)(3)		(0.08	)(3)		(0.14	)(3)
Net realized and unrealized gain (loss) on investments		2.13			2.10			1.71			4.15			4.09
Total from investment operations		2.15			2.08			1.62			4.07			3.95
Redemption fees		0.00(4)			—			0.00(4	)		0.00(4)			—
Less Distributions:
From net investment income		—			—			—			(0.11	)		(0.11	)
Total distributions		—			—			—			(0.11	)		(0.11	)
Net Asset Value, End of Year	$	30.77		$	30.32		$	30.28		$	28.62		$	28.24
Total Return(2)		7.51	%(6)		7.37	%(6)		5.62	%(6)		16.50	%		16.18	%
SUPPLEMENTAL DATA AND RATIOS
Net assets, end of year (000’s)	$	131,350		$	325		$	34		$	137,012		$	235
Ratio of expenses to average net assets:
Before expense reimbursement		2.09	%(7)		2.34	%(7)		2.84	%(7)		1.98	%		2.23	%
After expense reimbursement		2.08	%(7)		2.33	%(7)		2.83	%(7)		1.85	%(5)		2.10%(5)
Ratio of net investment income (loss) to average net assets:
Before expense reimbursement		0.11	%(7)		(0.14	)%(7)		(0.82	)%(7)		(0.42	)%		(0.67	)%
After expense reimbursement		0.12	%(7)		(0.13	)%(7)		(0.81	)%(7)		(0.29	)%(5)		(0.54	)%(5)
Portfolio turnover rate		N/A			N/A			N/A			N/A			N/A

ˆ	Commencement of operations.
(1)	Information presented relates to a share of capital stock outstanding for each period.
(2)	The total return calculation does not reflect the 5.75% front end sales charge on Advisor Class A shares.
(3)	Net investment income (loss) per share represents net investment income (loss) divided by the average shares outstanding throughout the period.
(4)	The amount is less than $0.005 per share.
(5)	See footnote #3 for service provider, waiver discussion.
(6)	Not Annualized.
(7)	Annualized.

See Notes to the Financial Statements.

48

The Internet Fund
	No Load Class			Advisor Class A			No Load Class			Advisor Class A			No Load Class			Advisor Class A			No Load Class			Advisor Class A
	For the			For the			For the			For the			For the			For the			For the			For the
	Year Ended			Year Ended			Year Ended			Year Ended			Year Ended			Year Ended			Year Ended			Year Ended
	December 31,			December 31,			December 31,			December 31,			December 31,			December 31,			December 31,			December 31,
	2005			2005			2004			2004			2003			2003			2002			2002
	$	25.29		$	24.93		$	23.31		$	22.88		$	16.69		$	16.47		$	21.80		$	21.75
		0.11(3)			0.05	(3)		0.10(3)			0.05	(3)		0.03			(0.82	)		(0.08	)(3)		(0.12	)(3)
		(0.54	)		(0.44	)		2.25			2.23			6.66			7.23			(5.03	)		(5.16	)
		(0.43	)		(0.39	)		2.35			2.28			6.69			6.41			(5.11	)		(5.28	)
		0.00	(4)		0.00	(4)		—			—			—			—			—			—
		(0.20	)		(0.14	)		(0.37	)		(0.23	)		(0.07	)		—			—			—
		(0.20	)		(0.14	)		(0.37	)		(0.23	)		(0.07	)		—			—			—
	$	24.66		$	24.40		$	25.29		$	24.93		$	23.31		$	22.88		$	16.69		$	16.47
		(1.69	)%		(1.55	)%		10.06	%		9.95	%		40.11	%		38.92	%		(23.44	)%		(24.28	)%
	$	148,260		$	300		$	201,929		$	354		$	230,971		$	428		$	189,618		$	507
		2.35	%		2.60	%		2.37	%		2.62	%		2.39	%		2.64	%		2.42	%		2.67	%
		2.35	%		2.60	%		2.37	%		2.62	%		2.39	%		2.64	%		2.42	%		2.67	%
		0.46	%		0.21	%		0.44	%		0.19	%		0.11	%		(0.14	)%		(0.41	)%		(0.66	)%
		0.46	%		0.21	%		0.44	%		0.19	%		0.11	%		(0.14	)%		(0.41	)%		(0.66	)%
		N/A			N/A			N/A			N/A			N/A			N/A			N/A			N/A

See Notes to the Financial Statements.

49

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Financial Highlights

	The Internet
	Emerging Growth Fund
	For the			For the			For the			For the			For the			For the
	Six Months Ended			Year Ended			Year Ended			Year Ended			Year Ended			Year Ended
	June 30,			December 31,			December 31,			December 31,			December 31,			December 31,
	2007			2006			2005			2004			2003			2002
	(Unaudited)
PER SHARE DATA(1)
Net Asset Value,
Beginning of Year	$	5.00		$	4.43		$	4.50		$	4.28		$	3.24		$	4.30
Income from Investment Operations:
Net investment income (loss)		0.09			0.13			0.15			0.08			0.04			(0.08	)
Net realized and unrealized gain (loss) on investments		0.03			0.62			(0.03	)		0.25			1.05			(0.98	)
Total from investment operations		0.12			0.75			0.12			0.33			1.09			(1.06	)
Redemption fees		0.00	(2)		0.00	(2)		0.00	(2)		—			—			—
Less Distributions:
From net investment income		—			(0.18	)		(0.19	)		(0.11	)		(0.05	)		—
Total distributions		—			(0.18	)		(0.19	)		(0.11	)		(0.05	)		—
Net Asset Value, End of Year	$	5.12		$	5.00		$	4.43		$	4.50		$	4.28		$	3.24
Total Return		2.40	%(3)		16.90	%		2.65	%		7.67	%		33.56	%		(24.65)%
SUPPLEMENTAL DATA AND RATIOS
Net assets, end of year (000’s)	$	3,894		$	3,991		$	3,896		$	4,584		$	4,677		$	3,338
Ratio of expenses to average net assets:
Before expense reimbursement		4.10	%(4)		3.09	%		3.22	%		3.45	%		3.64	%		3.78	%
After expense reimbursement		1.47	%(4)		1.39	%(5)		2.69	%		2.67	%		2.74	%		2.74	%
Ratio of net investment income (loss) to average net assets:
Before expense reimbursement		1.09	%(4)		3.00	%		2.80	%		1.08	%		0.11	%		(3.03	)%
After expense reimbursement		3.72	%(4)		1.30	%(5)		3.33	%		1.84	%		1.01	%		(1.99	)%
Portfolio turnover rate		N/A			N/A			N/A			N/A			N/A			N/A

(1)	Information presented relates to a share of capital stock outstanding for each period.
(2)	The amount is less than $0.005 per share.
(3)	Not Annualized.
(4)	Annualized.
(5)	See footnote #3 for service provider, waiver discussion.

See Notes to the Financial Statements.

50

(This page intentionally left blank)

51

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Financial Highlights

	The Paradigm Fund
				Advisor			Advisor
	No Load Class			Class A			Class C			Institutional
	For the			For the			For the			For the
	Six Months			Six Months			Six Months			Six Months
	Ended			Ended			Ended			Ended
	June 30, 2007			June 30, 2007			June 30, 2007			June 30, 2007
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
PER SHARE DATA(1)
Net Asset Value, Beginning of Period	$	25.79		$	25.43		$	24.98		$	25.76
Income from Investment Operations:
Net investment income (loss)		0.06	(6)		0.03	(6)		(0.04	)(6)		0.09	(6)
Net realized and unrealized gain (loss) on investments		2.45			2.47			2.37			2.45
Total from investment operations		2.51			2.50			2.33			2.54
Redemption fees		0.00	(2)		0.00	(2)		0.00	(2)		0.00	(2)
Less Distributions:
From net investment income		—			—			—			—
From net realized gains		—			—			—			—
Total distributions		—			—			—			—
Net Asset Value, End of Period	$	28.30		$	27.93		$	27.31		$	28.30
Total Return(5)		9.73	%(3)		9.64	%(3)		9.33	%(3)		9.86	%(3)
SUPPLEMENTAL DATA AND RATIOS
Net assets, end of period (000’s)	$	1,958,565		$	305,618		$	189,224		$	700.102
Ratio of expenses to average net assets:
Before expense reimbursement and waivers(7)		1.68	%(4)		1.93	%(4)		2.43	%(4)		1.63	%(4)
After expense reimbursement		1.68	%(4)		1.93	%(4)		2.43	%(4)		1.48	%(4)
Ratio of net investment income (loss) to average net assets:
Before expense reimbursement		0.47	%(4)		0.22	%(4)		(0.28	)(4)		0.52	%(4)
After expense reimbursement		0.47	%(4)		0.22	%(4)		(0.28	)(4)		0.67	%(4)
Portfolio turnover rate		N/A			N/A			N/A			N/A

ˆ Commencement of operations.

(1) Information presented relates to a share of capital stock outstanding for each period.

(2) The amount is less than $0.005 per share.

(3) Not annualized.

(4) Annualized.

(5)	The total return calculation does not reflect the 5.75% front end sales charge on Advisor Class A shares.
(6)	Net investment income (loss) per share represents net investment income (loss) divided by the average shares outstanding throughout the period.
(7)	See footnote #3 for the Investment Adviser, waiver discussion.
(8)	See footnote #3 for service provider, waiver discussion.

See Notes to the Financial Statements.

52

The Paradigm Fund
				Advisor			Advisor			Institutional						Advisor
	No Load Class			Class A			Class C			Class			No Load Class			Class A
	For the			For the			For the			For the			For the			For the
	Year Ended			Year Ended			Year Ended			Year Ended			Year Ended			Year Ended
	December 31,			December 31,			December 31,			December 31,			December 31,			December 31,
	2006			2006			2006			2006			2005			2005
	$	20.33		$	20.08		$	19.76		$	20.31		$	17.54		$	17.40
		0.14(6)			0.08(6)			(0.03	)(6)		0.19(6)			(0.03	)(6)		(0.07	)(6)
		5.52			5.43			5.33			5.49			2.82			2.77
		5.66			5.51			5.30			5.68			2.79			2.70
		0.00(2)			0.00(2)			0.00(2)			—			0.03			0.00(2)
		(0.16	)		(0.12	)		(0.04	)		(0.19	)		(0.01	)		—
		(0.04	)		(0.04	)		(0.04	)		(0.04	)		(0.02	)		(0.02	)
		(0.20	)		(0.16	)		(0.08	)		(0.23	)		(0.03	)		(0.02	)
	$	25.79		$	25.43		$	24.98		$	25.76		$	20.33		$	20.08
		27.81	%		27.42	%		26.82	%		27.96	%		16.11	%		15.54	%
	$	1,337,761		$	183,031		$	116,226		$	507,314		$	418,914		$	60,421
		1.79	%		2.04	%		2.54	%		1.74	%		1.93	%		2.18	%
		1.63	%(8)		1.88	%(8)		2.38	%(8)		1.43	%(8)		1.69	%		1.94	%
		0.44	%		0.19	%		(0.31	)%		0.48	%		(0.41	)%		(0.66	)%
		0.60	%(8)		0.35	%(8)		(0.15	)%(8)		0.79	%(8)		(0.17	)%		(0.42	)%
		N/A			N/A			N/A			N/A			N/A			N/A

See Notes to the Financial Statements.

53

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Financial Highlights

	The Paradigm Fund
	Advisor			Institutional Class			No Load			Advisor			Advisor
	Class C			For the Period			Class			Class A			Class C
	For the			May 27, 2005ˆ			For the			For the			For the
	Year Ended			through			Year Ended			Year Ended			Year Ended
	December 31,			December 31,			December 31,			December 31,			December 31,
	2005			2005			2004			2004			2004
PER SHARE DATA(1)
Net Asset Value, Beginning of Period	$	17.21		$	18.13		$	14.91		$	14.82		$	14.73
Income from Investment Operations:
Net investment income (loss)		(0.17	)(6)		0.01	(6)		(0.06	)(6)		(0.10	)		(0.18	)
Net realized and unrealized gain (loss) on investments		2.74			2.23			3.17			3.16			3.14
Total from investment operations		2.57			2.24			3.11			3.06			2.96
Redemption fees		0.00	(2)		—			—			—			—
Less Distributions:
From net investment income		—			(0.04	)		(0.02	)		(0.02	)		(0.02	)
From net realized gains		(0.02	)		(0.02	)		(0.46	)		(0.46	)		(0.46	)
Total distributions		(0.02	)		(0.06	)		(0.48	)		(0.48	)		(0.48	)
Net Asset Value, End of Period	$	19.76		$	20.31		$	17.54		$	17.40		$	17.21
Total Return(6)		14.96	%		12.35	%(3)		20.84	%		20.63	%		20.08	%
SUPPLEMENTAL DATA AND RATIOS
Net assets, end of period (000’s)	$	38,740		$	10,895		$	89,313		$	26,525		$	9,426
Ratio of expenses to average net assets:
Before expense reimbursement and waivers(7)		2.68	%		1.88	%(4)		2.10	%		2.35	%		2.85	%
After expense reimbursement		2.44	%		1.49	%(4)		1.74	%		1.99	%		2.49	%
Ratio of net investment income (loss) to average net assets:
Before expense reimbursement		(1.16	)%		(0.37	)%(4)		(0.77	)%		(1.02	)%		(1.52	)%
After expense reimbursement		(.92	)%		0.02	%(4)		(0.41	)%		(0.66	)%		(1.16	)%
Portfolio turnover rate		N/A			N/A			N/A			N/A			N/A

ˆ Commencement of operations.

(1)	Information presented relates to a share of capital stock outstanding for each period.
(2)	The amount is less than $0.005 per share.

(3) Not annualized.

(4) Annualized.

(5)	The total return calculation does not reflect the 5.75% front end sales charge on Advisor Class A shares.
(6)	Net investment income (loss) per share represents net investment income (loss) divided by the average shares outstanding throughout the period.
(7)	See footnote #3 for the Investment Adviser, waiver discussion.
(8)	See footnote #3 for service provider, waiver discussion.

See Notes to the Financial Statements.

54

The Paradigm Fund
	No Load			Advisor			Advisor			No Load			Advisor			Advisor
	Class			Class A			Class C			Class			Class A			Class C
	For the			For the			For the			For the			For the			June 28, 2002(+)
	Year Ended			Year Ended			Year Ended			Year Ended			Year Ended			through
	December 31,			December 31,			December 31,			December 31,			December 31,			December 31,
	2003			2003			2003			2002			2002			2002
	$	10.12		$	10.07		$	10.05		$	10.61		$	10.58		$	10.64
		0.05			0.08			0.02			(0.14	)		(0.17	)		(0.11	)
		4.79			4.70			4.67			(0.35	)		(0.34	)		(0.48	)
		4.84			4.78			4.69			(0.49	)		(0.51	)		(0.59	)
		—			—			—			—			—			—
		(0.05	)		(0.03	)		(0.01	)		—			—			—
		—			—			—			—			—			—
		(0.05	)		(0.03	)		(0.01	)		—			—			—
	$	14.91		$	14.82		$	14.73		$	10.12		$	10.07		$	10.05
		47.87	%		47.47	%		46.68	%		(4.62	)%		(4.82	)%		(5.55	)(3)
	$	57,646		$	13,157		$	2,125		$	5,044		$	4,943		$	519
		2.24	%		2.49	%		2.99	%		2.97	%		3.22	%		3.72	%(4)
		1.74	%		1.99	%		2.49	%		2.74	%		2.99	%		3.49	%(4)
		0.57	%		0.32	%		(0.18	)%		(1.61	)%		(1.86	)%		(2.36	)%(4)
		1.07	%		0.82	%		0.32	%		(1.38	)%		(1.63	)%		(2.13	)%(4)
		N/A			N/A			N/A			N/A			N/A			N/A

See Notes to the Financial Statements.

55

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Financial Highlights

	The Medical Fund
	No Load Class			Advisor Class A			Advisor Class C
	For the Six			For the Six			February 16,			No Load Class			Advisor Class A
	Months Ended			Months Ended			2007ˆ through			For the			For the
	June 30,			June 30,			June 30,			Year Ended			Year Ended
	2007			2007			2007			December 31,			December 31,
	(Unaudited)			(Unaudited)			(Unaudited)			2006			2006
PER SHARE DATA(1)
Net Asset Value,
Beginning of Year	$	17.83		$	17.47		$	18.29		$	16.64		$	16.34
Income from Investment Operations:
Net investment income (loss)		0.12	(3)		0.10	(3)		0.07	(3)		0.06	(3)		0.01	(3)
Net realized and unrealized gain (loss) on investments		2.17			2.12			1.29			2.40			2.35
Total from investment operations		2.29			2.22			1.36			2.46			2.36
Redemption fees		0.00	(4)		0.00	(4)		0.00	(4)		0.00(4)			—
Less Distributions:
From net investment income		—			—			—			(0.04	)		—
From net realized gains		—			—			—			(1.23	)		(1.23	)
Total distributions		—			—			—			(1.27	)		(1.23	)
Net Asset Value, End of Year	$	20.12		$	19.69		$	19.65		$	17.83		$	17.47
Total Return(2)		12.78	%(6)		12.64	%(6)		7.44	%(6)		14.81	%		14.49	%
SUPPLEMENTAL DATA AND RATIOS
Net assets, end of year (000’s)	$	18,926		$	1,239		$	86		$	15,527		$	711
Ratio of expenses to average net assets:
Before expense reimbursement		2.58	%(7)		2.83	%(7)		3.33	%(7)		2.28	%		2.53	%
After expense reimbursement		1.37	%(7)		1.62	%(7)		2.12	%(7)		1.44	%(5)		1.69	%(5)
Ratio of net investment loss to average net assets:
Before expense reimbursement		0.09	%(7)		(0.16	)%(7)		(0.55	)%(7)		(0.51	)%		(0.76	)%
After expense reimbursement		1.30	%(7)		1.05	%(7)		0.66	%(7)		0.33	%(5)		0.08	%(5)
Portfolio turnover rate		N/A			N/A			N/A			N/A			N/A

ˆ Commencement of operations.

(1)	Information presented relates to a share of capital stock outstanding for each period.
(2)	The total return calculation does not reflect the 5.75% front end sales charge on Advisor Class A shares.
(3)	Net investment income (loss) per share represents net investment income (loss) divided by the average shares outstanding throughout the period.
(4)	The amount is less than $0.005 per share.
(5)	See footnote #3 for service provider, waiver discussion.
(6)	Not Annualized.
(7)	Annualized.

See Notes to the Financial Statements.

56

The Medical Fund
No Load			Advisor						Advisor			No Load			Advisor			No Load			Advisor
Class			Class A			No Load			Class A			Class			Class A			Class			Class A
For the			For the			Class			For the			For the			For the			For the			For the
Year			Year			For the			Year			Year			Year			Year			Year
Ended			Ended			Year Ended			Ended			Ended			Ended			Ended			Ended
December 31,			December 31,			December 31,			December 31,			December 31,			December 31,			December 31,			December 31,
2005			2005			2004			2004			2003			2003			2002			2002
$	16.76		$	16.49		$	15.67		$	15.47		$	12.72		$	12.61		$	18.06		$	18.01
	(0.18	)(3)		(0.22	)(3)		(0.10	)(3)		(0.11	)(3)		(0.25	)		(0.63	)		(0.21	)		(0.24	)
	0.06			0.07			1.19			1.13			3.20			3.49			(5.05	)		(5.08	)
	(0.12	)		(0.15	)		1.09			1.02			2.95			2.86			(5.26	)		(5.32	)
	0.00	(4)		—			—			—			—			—			—			—
	—			—			—			—			—			—			—			—
	—			—			—			—			—			—			(0.08	)		(0.08	)
	—			—			—			—			—			—			(0.08	)		(0.08	)
$	16.64		$	16.34		$	16.76		$	16.49		$	15.67		$	15.47		$	12.72		$	12.61
	(0.72	)%		(0.91	)%		6.96	%		6.59	%		23.19	%		22.68	%		(29.14	)%		(29.56)%
$	13,943		$	559		$	19,583		$	696		$	23,695		$	758		$	22,604		$	794
	2.48	%		2.73	%		2.54	%		2.79	%		2.52	%		2.77	%		2.55	%		2.80	%
	2.44	%		2.69	%		2.39	%		2.64	%		2.52	%		2.77	%		2.55	%		2.80	%
	(1.14	)%		(1.39	)%		(1.31	)%		(1.56	)%		(1.55	)%		(1.80	)%		(1.49	)%		(1.74	)%
	(1.10	)%		(1.35	)%		(1.16	)%		(1.41	)%		(1.55	)%		(1.80	)%		(1.49	)%		(1.74	)%
	N/A			N/A			N/A			N/A			N/A			N/A			N/A			N/A

See Notes to the Financial Statements.

57

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Financial Highlights

	The Small Cap Opportunities Fund
	No Load Class			Advisor Class A			Advisor Class C			Institutional Class
	For the Six			For the Six			February 16, 2007ˆ			For the Six
	Months Ended			Months Ended			through			Months Ended
	June 30,			June 30,			June 30,			June 30,
	2007			2007			2007			2007
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
PER SHARE DATA(3)
Net Asset Value, Beginning of Period	$	26.92		$	26.71		$	28.70		$	26.91
Income from Investment Operations:
Net investment income (loss)		0.02			(0.01	)(5)		(0.07	)(5)		0.05(5	)
Net realized and unrealized gain (loss) on investments		4.15			4.11			2.13			4.14
Total from investment operations		4.17			4.10			2.06			4.19
Redemption fees		0.00	(6)		0.00	(6)		0.07			0.00	(6)
Less Distributions:
From net investment income		—			—			—			—
From net realized gains		—			—			—			—
Total distributions		—			—			—			—
Net Asset Value, End of Period	$	31.09		$	30.81		$	30.83		$	31.10
Total Return(4)		15.45	%(1)		15.31	%(1)		7.42	%(1)		15.57	%(1)
SUPPLEMENTAL DATA AND RATIOS
Net assets, end of period (000’s)	$	575,185		$	22,784		$	694		$	287,981
Ratio of expenses to average net assets:
Before expense reimbursement		1.72	%(2)		1.97	%(2)		2.47	%(2)		1.67	%(2)
After expense reimbursement		1.68	%(2)		1.93	%(2)		2.43	%(2)		1.48	%(2)
Ratio of net investment income (loss) to average net assets:
Before expense reimbursement		0.13	%(2)		(0.12	)%(2)		(0.62	)%(2)		0.18	%(2)
After expense reimbursement		0.17	%(2)		(0.08	)%(2)		(0.58	)%(2)		0.37	%(2)
Portfolio turnover rate		N/A			N/A			N/A			N/A

ˆ  Commencement of operations.

(1) Not annualized.

(2) Annualized.

(3)	Information presented relates to a share of capital stock outstanding for each period.
(4)	The total return calculation does not reflect the 5.75% front end sales charge on Advisor Class A shares.
(5)	Net investment income (loss) per share represents net investment income (loss) divided by the average shares outstanding throughout the period.
(6)	The amount is less than $0.005 per share.
(7)	See footnote #3 for service provider, waiver discussion.

See Notes to the Financial Statements.

58

The Small Cap Opportunities Fund
																Institutional
	No Load			Advisor			Institutional			No Load			Advisor			Class			No Load			Advisor
	Class			Class A			Class			Class			Class A			For the Period			Class			Class A
	For the			For the			For the			For the			For the			August 12, 2005ˆ			For the			For the
	Year Ended			Year Ended			Year Ended			Year Ended			Year Ended			through			Year Ended			Year Ended
	December 31,			December 31,			December 31,			December 31,			December 31,			December 31,			December 31,			December 31,
	2006			2006			2006			2005			2005			2005			2004			2004
	$	21.02		$	20.89		$	21.00		$	18.69		$	18.63		$	20.48		$	16.55		$	16.50
		0.03	(5)		(0.03	)(5)		0.08	(5)		0.12	(5)		0.02	(5)		0.00	(5)(6)		0.22	(5)		0.18	(5)
		5.92			5.88			5.91			2.35			2.38			0.67			2.49			2.49
		5.95			5.85			5.99			2.47			2.40			0.67			2.71			2.67
		0.00	(6)		0.00	(6)		0.00	(6)		0.00	(6)		0.00	(6)		—			—			—
		(0.05	)		(0.03	)		(0.08	)		(0.01	)		(0.01	)		(0.02	)		(0.16	)		(0.13	)
		—			—			—			(0.13	)		(0.13	)		(0.13	)		(0.41	)		(0.41	)
		(0.05	)		(0.03	)		(0.08	)		(0.14	)		(0.14	)		(0.15	)		(0.57	)		(0.54	)
	$	26.92		$	26.71		$	26.91		$	21.02		$	20.89		$	21.00		$	18.69		$	18.63
		28.37	%		28.03	%		28.52	%		13.17	%		12.83	%		3.23	%(1)		16.40	%		16.17	%
	$	268,875		$	12,444		$	209,592		$	55,979		$	5,205		$	67,586		$	35,702		$	2,929
		1.83	%		2.08	%		1.78	%		1.93	%		2.16	%		1.77	%(2)		2.03	%		2.28	%
		1.58	%(7)		1.83	%(7)		1.38	%(7)		1.66	%		1.94	%		1.59	%(2)		1.74	%		1.99	%
		(0.14	)%		(0.39	)%		(0.09	)%		0.18	%		(0.17	)%		(0.21	)%(2)		1.01	%		0.76	%
		0.11	%(7)		(0.14	)%(7)		0.31	%(7)		0.45	%		0.06	%		(0.03	)%(2)		1.30	%		1.05	%
		N/A			N/A			N/A			N/A			N/A			N/A			N/A			N/A

See Notes to the Financial Statements.

59

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Financial Highlights

	The Small Cap Opportunities Fund
	No Load			Advisor			No Load			Advisor
	Class			Class A			Class			Class A
	For the			For the			For the			For the
	Year Ended			Year Ended			Year Ended			Year Ended
	December 31,			December 31,			December 31,			December 31,
	2003			2003			2002			2002
PER SHARE DATA(3)
Net Asset Value, Beginning of Period	$	10.04		$	10.03		$	14.50		$	14.50
Income from Investment Operations:
Net investment income (loss)		0.25			0.15			(0.18	)(5)		(0.20	)(5)
Net realized and unrealized gain (loss) on investments		6.43			6.47			(4.21	)		(4.20	)
Total from investment operations		6.68			6.62			(4.39	)		(4.40	)
Redemption fees		—			—			—			—
Less Distributions:
From net investment income		(0.17	)		(0.15	)		—			—
From net realized gains		—			—			(0.07	)		(0.07	)
Total distributions		(0.17	)		(0.15	)		(0.07	)		(0.07	)
Net Asset Value, End of Period	$	16.55		$	16.50		$	10.04		$	10.03
Total Return(4)		66.51	%		65.98	%		(30.28	)%		(30.35	)%
SUPPLEMENTAL DATA AND RATIOS
Net assets, end of period (000’s)	$	23,665		$	2,075		$	3,313		$	172
Ratio of expenses to average net assets:
Before expense reimbursement		2.34	%		2.59	%		2.95	%		3.20	%
After expense reimbursement		2.34	%		2.59	%		2.74	%		2.99	%
Ratio of net investment income (loss) to average net assets:
Before expense reimbursement		2.14	%		1.89	%		(1.59	)%		(1.84	)%
After expense reimbursement		2.14	%		1.89	%		(1.38	)%		(1.63	)%
Portfolio turnover rate		N/A			N/A			N/A			N/A

ˆ  Commencement of operations.

(1) Not annualized.

(2) Annualized.

(3)	Information presented relates to a share of capital stock outstanding for each period.
(4)	The total return calculation does not reflect the 5.75% front end sales charge on Advisor Class A shares.
(5)	Net investment income (loss) per share represents net investment income (loss) divided by the average shares outstanding throughout the period.
(6)	The amount is less than $0.005 per share.
(7)	See footnote #3 for service provider, waiver discussion.

See Notes to the Financial Statements.

60

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Financial Highlights

	The Kinetics Government Money Market Fund
	For the
	Six Months
	Ended			For the			For the			For the			For the			For the
	June 30,			Year Ended			Year Ended			Year Ended			Year Ended			Year Ended
	2007			December 31,			December 31,			December 31,			December 31,			December 31,
	(Unaudited)			2006			2005			2004			2003			2002
PER SHARE DATA(1)
Net Asset Value, Beginning of Year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Income from Investment Operations:
Net investment income		0.02			0.04			0.02			—			—			0.00(2)
Net realized and unrealized gain on investments		—			—			—			—			—			—
Total from investment operations		0.02			0.04			0.02			—			—			0.00(2)
Less Distributions:
From net investment income		(0.02	)		(0.04	)		(0.02	)		—			—			(0.00	)(2)
Total distributions		(0.02	)		(0.04	)		(0.02	)		—			—			(0.00	)(2)
Net Asset Value, End of Year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Total Return		1.97	%(4)		4.45	%		1.88	%		0.00	%		0.00	%		0.22	%
SUPPLEMENTAL DATA AND RATIOS
Net assets, end of year (000’s)	$	1,065		$	1,425		$	1,052		$	1,166		$	3,048		$	128,657
Ratio of expenses to average net assets:
Before expense reimbursement		7.55	%(5)		3.94	%(3)		5.08	%		2.11	%		1.32	%		1.29	%
After expense reimbursement		0.98	%(5)		0.22	%(3)		1.06	%		0.98	%		0.94	%		1.23	%
Ratio of net investment income (loss) to average net assets:
Before expense reimbursement		(2.59	)%(5)		0.73	%		(2.17	)%		(1.13	)%		(0.38	)%		0.13	%
After expense reimbursement		3.98	%(5)		4.45	%(3)		1.85	%		0.00	%		0.00	%		0.19	%
Portfolio turnover rate		N/A			N/A			N/A			N/A			N/A			N/A

(1)	Information presented relates to a share of capital stock outstanding for each period.
(2)	The amount listed is less than $0.005 per share.
(3)	See footnote #3 for service provider, waiver discussion.
(4)	Not Annualized.
(5)	Annualized.

See Notes to the Financial Statements.

61

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Financial Highlights

	The Market Opportunities Fund
	No Load Class			Advisor Class A			Advisor Class C
	For the Six			For the Six			February 16, 2007ˆ			No Load Class			Advisor Class A
	Months Ended			Months Ended			through			January 31, 2006ˆ			January 31, 2006ˆ
	June 30, 2007			June 30, 2007			June 30, 2007			through			through
	(Unaudited)			(Unaudited)			(Unaudited)			December 31, 2006			December 31, 2006
PER SHARE DATA(3)
Net Asset Value, Beginning of Period	$	12.05		$	12.04		$	12.99		$	10.00		$	10.00
Income from Investment Operations:
Net investment income		0.04	(5)		0.02	(5)		(0.00	)(5)(6)		0.04			0.02
Net realized and unrealized loss on investments		1.63			1.63			0.67			2.05			2.05
Total from investment operations		1.67			1.65			0.67			2.09			2.07
Redemption fees		0.00	(6)		0.00	(6)		0.00	(6)		0.00	(6)		—
Less Distributions:
From net investment income		—			—			—			(0.04	)		(0.03	)
Total distributions		—			—			—			(0.04	)		(0.03	)
Net Asset Value, End of Period	$	13.72		$	13.69		$	13.66		$	12.05		$	12.04
Total Return(4)		13.86	%(1)		13.70	%(1)		5.16	%(1)		20.85	%(1)		20.68	%(1)
SUPPLEMENTAL DATA AND RATIOS
Net assets, end of period (000’s)	$	30,927		$	23,362		$	2,375		$	7,994		$	9,591
Ratio of expenses to average net assets:
Before expense reimbursement		2.08	%(2)		2.33	%(2)		2.86	%(2)		2.68	%(2)		2.93	%(2)
After expense reimbursement		1.74	%(2)		1.99	%(2)		2.49	%(2)		1.46	%(2)(7)		1.71	%(2)(7)
Ratio of net investment income to average net assets:
Before expense reimbursement		0.20	%(2)		(0.05	)%(2)		(0.42	)%(2)		(0.76	)%(2)		(1.01	)%(2)
After expense reimbursement		0.54	%(2)		0.29	%(2)		(0.05	)(2)		0.46	%(2)(7)		0.21	%(2)(7)
Portfolio turnover rate		N/A			N/A			N/A			N/A			N/A

ˆ  Commencement of operations.

(1) Not annualized.

(2) Annualized.

(3)	Information presented relates to a share of capital stock outstanding for each period.
(4)	The total return calculation does not reflect the 5.75% front end sales charge on Advisor Class A shares.
(5)	Net investment income per share represents net investment income divided by the average shares outstanding throughout the period.
(6)	The amount is less than $0.005 per share.
(7)	See footnote #3 for service provider, waiver discussion.

See Notes to the Financial Statements.

62

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

ALLOCATION OF PORTFOLIO ASSETS

June 30, 2007 (Unaudited)

The Internet Portfolio

The Internet Emerging Growth Portfolio

63

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

ALLOCATION OF PORTFOLIO ASSETS

June 30, 2007 (Unaudited) — (Continued)

The Paradigm Portfolio

The Medical Portfolio

64

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

ALLOCATION OF PORTFOLIO ASSETS

June 30, 2007 (Unaudited) — (Continued)

The Small Cap Opportunities Portfolio

Government Money Market Portfolio

65

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

ALLOCATION OF PORTFOLIO ASSETS

June 30, 2007 (Unaudited) — (Continued)

The Market Opportunities Portfolio

66

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Internet Portfolio

Portfolio of Investments — June 30, 2007 (Unaudited)

COMMON STOCKS — 92.81%†	Shares		Value
Aerospace & Defense — 5.19%†
CACI International, Inc. — Class A*		140,000	$	6,839,000
Air Freight & Logistics — 2.88%†
Expeditors International of Washington, Inc.		92,000		3,799,600
Asian Exchanges — 6.28%†
Hong Kong Exchanges & Clearing Limited		204,000		2,882,904
Osaka Securities Exchange Co., Ltd.		144		666,639
Singapore Exchange Limited		740,000		4,737,547
				8,287,090
Asset Management — 0.76%†
US Global Investors, Inc.(1)		44,000		997,480
Brokerage & Investment Banking — 0.08%†
ICAP plc		10,000		99,201
Capital Markets — 0.86%†
Collins Stewart Plc*		4,000		17,752
LaBranche & Co Inc.*(1)		100,000		738,000
Penson Worldwide, Inc.*		2,000		49,060
State Street Corporation		2,000		136,800
SWS Group, Inc.		2,000		43,240
Thomas Weisel Partners Group, Inc.*		4,000		66,600
Tullett Prebon plc*		4,000		35,945
Van der Moolen Holding N.V. ADR*		10,172		50,962
				1,138,359
Commercial Services & Supplies — 4.41%†
Comdisco Holding Company, Inc.(1)		194,400		2,439,720
Ritchie Bros Auctioneers, Incorporated(1)		54,000		3,381,480
				5,821,200

See Notes to the Financial Statements.

67

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Internet Portfolio

Portfolio of Investments — June 30, 2007 (Unaudited) — (Continued)

	Shares		Value
Computers & Peripherals — 0.19%†
Apple, Inc.*		2,000	$	244,080
Derivative Exchanges — 7.84%†
CBOT Holdings, Inc. — Class A*		12,000		2,479,200
Chicago Mercantile Exchange Holdings Inc.		6,025		3,219,519
International Securities Exchange, Inc.		48,000		3,136,800
Nymex Holdings, Inc.(1)		12,000		1,507,560
				10,343,079
Diversified Consumer Services — 0.23%†
Apollo Group, Inc. — Class A*		2,000		116,860
Sotheby’s Holdings, Inc. — Class A		4,000		184,080
				300,940
Diversified Telecommunication Services — 11.15%†
Leucadia National Corporation		413,250		14,567,062
XO Holdings Inc.*		30,000		133,800
				14,700,862
European Exchanges — 1.85%†
Bolsas Y Mercados Espanoles*		6,000		352,846
Deutsche Boerse AG		4,000		449,347
Hellenic Exchanges S.A. Holding		4,000		105,028
London Stock Exchange Group PLC*		36,352		989,135
OMX AB		18,000		539,537
				2,435,893
Internet & Catalog Retail — 0.19%†
eBay, Inc.*		6,000		193,080
IAC/InterActiveCorp*		1,000		34,610
Overstock.com, Inc.*(1)		1,000		18,270
				245,960
Internet Software & Services — 0.74%†
Baidu.com, Inc. — ADR*		200		33,596
Google Inc. — Class A*		1,800		942,084
				975,680

See Notes to the Financial Statements.

68

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Internet Portfolio

Portfolio of Investments — June 30, 2007 (Unaudited) — (Continued)

	Shares		Value
IT Services — 10.59%†
CheckFree Corporation*		240,000	$	9,648,000
ManTech International Corporation — Class A*		140,000		4,316,200
				13,964,200
Leisure Equipment & Products — 0.01%†
Marvel Entertainment, Inc.*		322		8,205
Media — 22.97%†
Citadel Broadcasting Corp.		105		677
Disney Walt Co.		1,380		47,113
DreamWorks Animation SKG, Inc.*		92,000		2,653,280
Gemstar-TV Guide International, Inc.*		600,000		2,952,000
Getty Images, Inc.*		34,600		1,654,226
Groupe Bruxelles Lambert S.A.		20,000		2,498,207
Harris Interactive, Inc.*		300,000		1,605,000
Liberty Global, Inc. — Series C*		182,707		7,180,385
Liberty Global, Inc. — Class A*		120,257		4,935,347
PrimaCom AG ADR*		610,000		3,798,775
ProQuest Company*		5,000		47,700
The Washington Post Company — Class B		3,600		2,793,924
XM Satellite Radio Holdings, Inc. — Class A*		10,000		117,700
				30,284,334
Other Exchanges — 4.38%†
Australian Stock Exchange Limited		6,000		247,728
IntercontinentalExchange Inc.*		32,000		4,731,200
JSE Limited*		36,000		406,990
TSX Group Inc.		10,000		391,457
				5,777,375
Security Brokers, Dealers, And Flotation Companies — 0.05%†
GFI Group, Inc.*		1,000		72,480

See Notes to the Financial Statements.

69

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Internet Portfolio

Portfolio of Investments — June 30, 2007 (Unaudited) — (Continued)

	Shares		Value
U.S. Equity Exchanges — 12.16%†
Nasdaq Stock Market Inc.*		180,000	$	5,347,800
NYSE Euronext*		145,095		10,681,894
				16,029,694
Wireless Telecommunication Services — 0.00%†
Sunshine PCS Corp — Class A*		149,890		2,248
TOTAL COMMON STOCKS (cost $70,558,354)				122,366,960

PREFERRED STOCKS — 0.04%†
Adelphia Recovery Trust(1) (cost $583,300)	4,878,645	48,787

	Principal
CONVERTIBLE BONDS — 1.45%†	Amount
Diversified Telecommunication Services — 1.45%†
Level 3 Communications, Inc., CLB 6.000%, 03/15/2010	$	2,000,000	1,917,500
Media — 0.00%†
Adelphia Communications Corp.(1) 6.000%, 02/15/2006, Acquired on 2/10/2004 at $123,000 (Default Effective 8/12/2002)		200,000	848
TOTAL CONVERTIBLE BONDS (cost $1,530,301)			1,918,348

RIGHTS — 1.44%†	Shares
Commercial Services & Supplies — 1.44%†
Comdisco Holding Company, Inc. — Rights Expiration Date: 12/31/2050, Strike Price $1.00# (cost $3,253,775)		12,240,699	1,897,308

See Notes to the Financial Statements.

70

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Internet Portfolio

Portfolio of Investments — June 30, 2007 (Unaudited) — (Continued)

INVESTMENTS PURCHASED WITH
THE CASH PROCEEDS FROM
SECURITIES LENDING — 4.50%†	Shares		Value
Investment Companies — 4.50%†
Mount Vernon Securities Lending Trust — Prime Portfolio (cost $5,933,600)		5,933,600	$	5,933,600
TOTAL INVESTMENTS — 100.24%† (cost $81,859,330)			$	132,165,003

Percentages are stated as a percent of net assets.

* — Non-income producing security.

† — Calculated as a percentage of net assets.

# — Contingent value right (contingent upon profitability of company).

ADR — American Depository Receipt.

CLB — Callable Security.

(1) — This security or a portion of this security was out on loan at June 30, 2007. Total loaned securities had a market value of $5,667,951 at June 30, 2007.

See Notes to the Financial Statements.

71

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Internet Emerging Growth Portfolio

Portfolio of Investments — June 30, 2007 (Unaudited)

COMMON STOCKS — 82.94%†	Shares		Value
Aerospace & Defense — 5.09%†
SI International, Inc.*		6,000	$	198,120
Asian Exchanges — 3.21%†
Osaka Securities Exchange Co., Ltd.		27		124,995
Business Services — 3.12%†
Fidelity National Information Services		2,242		121,696
Capital Markets — 2.28%†
American Capital Strategies Ltd.		1,500		63,780
Thomas Weisel Partners Group, Inc.*		1,500		24,975
				88,755
Commercial Services & Supplies — 4.14%†
Comdisco Holding Company, Inc.		9,300		116,715
Deluxe Corporation		1,100		44,671
				161,386
Computers & Peripherals — 2.10%†
SanDisk Corp.*		1,672		81,828
Derivative Exchanges — 6.10%†
Chicago Mercantile Exchange Holdings Inc.		200		106,872
International Securities Exchange, Inc.		2,000		130,700
				237,572
Diversified Financial Services — 2.50%†
eSPEED, Inc. — Class A*		5,000		43,200
MarketAxess Holdings, Inc.*		3,000		53,970
				97,170
Diversified Telecommunication Services — 8.29%†
IDT Corporation — Class B(1)		3,000		30,960
IDT Corporation		3,000		30,150
Lict Corporation*		51		179,137
Warwick Valley Telephone Company		1,200		15,600
XO Holdings Inc.*		15,000		66,900
				322,747
Gaming — 1.52%†
Melco International Development Limited*		40,000		59,341
Holding Company — 5.13%†
Groupe Bruxelles Lambert S.A.		1,600		199,857

See Notes to the Financial Statements.

72

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Internet Emerging Growth Portfolio

Portfolio of Investments — June 30, 2007 (Unaudited) — (Continued)

	Shares		Value
Insurance — 3.11%+
Fidelity National Financial Inc. — Class A		5,102	$	120,917
Internet Software & Services — 2.80%†
Digital River, Inc.*		1,000		45,250
Websense, Inc.*		3,000		63,750
				109,000
IT Services — 1.44%†
Broadridge Financial Solutions, Inc.		2,000		38,240
Lionbridge Technologies, Inc.*		3,000		17,670
				55,910
Leisure Equipment & Products — 2.00%†
Aruze Corp.		2,500		77,766
Media — 16.70%†
Discovery Holding Company — Class A*		50		1,149
The E.W. Scripps Company — Class A		1,000		45,690
Gemstar-TV Guide International, Inc.*		5,000		24,600
Interactive Data Corporation		8,500		227,630
Liberty Global, Inc. — Series C*		30		1,179
Liberty Global, Inc. — Class A*		30		1,231
Liberty Media Holding Corporation — Capital Series A*		25		2,942
Liberty Media Holding Corporation — Interactive A*		126		2,814
Naspers Limited ADR		7,470		192,788
PrimaCom AG ADR*		4,750		29,581
RCN Corporation		5,661		106,370
Warner Music Group Corp.		1,000		14,450
				650,424
Security Brokers, Dealers, And Flotation Companies — 2.23%†
Cohen & Steers, Inc.		2,000		86,900
Software — 1.05%†
FactSet Research Systems, Inc.		600		41,010
Transportation Infrastructure — 5.01%†
Beijing Capital International Airport Co. Ltd.		90,000		126,611
Macquarie Airports		20,000		68,503
				195,114

See Notes to the Financial Statements.

73

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Internet Emerging Growth Portfolio

Portfolio of Investments — June 30, 2007 (Unaudited) — (Continued)

	Shares		Value
U.S. Equity Exchanges — 5.12%†
Nasdaq Stock Market Inc.*		3,000	$	89,130
Nyse Euronext*		1,500		110,430
				199,560
Wireless Telecommunication Services — 0.00%†
Sunshine PCS Corp — Class A*		6,000		90
TOTAL COMMON STOCKS (cost $2,152,272)				3,230,158

PREFERRED STOCKS — 0.07%†
Diversified Telecommunication Services — 0.07%†
PTV, Inc. — Series A, CLB, 10,000% (cost $3,774)	487	2,581

RIGHTS — 2.31%†
Commercial Services & Supplies — 2.31%†
Comdisco Holding Company, Inc. — Rights Expiration Date: 12/31/2050, Strike Price $1.00# (cost $245,273)	581,000	90,055

	Principal
SHORT-TERM INVESTMENTS — 14.14%†	Amount
US Government Agency Issues — 14.07%†
Federal Home Loan Bank Discount Note, 0.000%, due 07/02/2007	$	548,000	547,931
Investment Companies — 0.07%†
First American Prime Obligations Fund — Class I 5.001%		2,658	2,658
TOTAL SHORT-TERM INVESTMENTS (cost $550,589)			550,589

See Notes to the Financial Statements.

74

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Internet Emerging Growth Portfolio

Portfolio of Investments — June 30, 2007 (Unaudited) — (Continued)

INVESTMENTS PURCHASED WITH
THE CASH PROCEEDS FROM SECURITIES LENDING — 0.82%†	Shares	Value

INVESTMENTS PURCHASED WITH
THE CASH PROCEEDS FROM SECURITIES LENDING — 0.82%†	Shares		Value
Investment Companies — 0.82%†
Mount Vernon Securities Lending Trust — Prime Portfolio (cost $31,900)		31,900	$	31,900
TOTAL INVESTMENTS — 100.28%† (cost $2,983,808)			$	3,905,283

Percentages are stated as a percent of net assets.

* — Non-income producing security.

† — Calculated as a percentage of net assets.

# — Contingent value right (contingent upon profitability of company).

ADR — American Depository Receipt.

CLB — Callable Security.

(1) — This security or a portion of this security was out on loan at June 30, 2007. Total loaned securities had a market value of $29,928 at June 30, 2007.

See Notes to the Financial Statements.

75

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Paradigm Portfolio

Portfolio of Investments — June 30, 2007 (Unaudited)

COMMON STOCKS — 87.67%†	Shares		Value
Aerospace & Defense — 0.74%†
CACI International, Inc. — Class A*		488,000	$	23,838,800
Air Freight & Logistics — 0.16%†
Expeditors International of Washington, Inc.		124,000		5,121,200
Airlines — 0.28%†
China Eastern Airlines — Class H*		4,500,000		2,146,639
China Eastern Airlines Corporation Limited — ADR*(1)		32,000		1,526,752
China Southern Airlines Co. — Class H*		7,444,000		5,007,602
China Southern Airlines Company Limited — ADR*(1)		6,000		210,660
				8,891,653
Asian Exchanges — 5.48%†
Hong Kong Exchanges & Clearing Limited		7,370,000		104,151,959
Osaka Securities Exchange Co., Ltd.		4,700		21,758,376
Singapore Exchange Limited		7,736,000		49,526,572
				175,436,907
Asset Management — 7.01%†
Affiliated Managers Group, Inc.*		28,000		3,605,280
Ameriprise Financial, Inc.		80		5,086
BlackRock, Inc.		174,000		27,246,660
Brookfield Asset Management Inc — Class A		2,424,000		96,717,600
Eaton Vance Corp.		320,000		14,137,600
Franklin Resources, Inc.		106,000		14,041,820
Igm Financial, Inc.		42,000		2,041,155
Legg Mason, Inc.		300,000		29,514,000
Man Group plc		192,000		2,348,046
Nuveen Investments — Class A		84,000		5,220,600
Power Corporation of Canada		712,000		26,274,320
US Global Investors, Inc.(1)		154,000		3,491,180
				224,643,347
Auto Components — 0.61%†
Toyota Industries Corporation		420,000		19,545,990

See Notes to the Financial Statements.

76

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Paradigm Portfolio

Portfolio of Investments — June 30, 2007 (Unaudited) — (Continued)

	Shares		Value
Automobiles — 0.00%†
Great Wall Automobile Holdings Company Limited — Class H		20,000	$	29,057
Beverages — 0.30%†
Constellation Brands, Inc. — Class A*		1,800		43,704
Pernod Ricard SA		18,840		4,180,575
Remy Cointreau SA		3,600		270,177
Tsingtao Brewery Co Limited — Class H		2,060,000		5,005,627
				9,500,083
Brokerage & Investment Banking — 2.03%†
The Bear Stearns Companies Inc.		280,000		39,200,000
Greenhill & Co., Inc.(1)		39,800		2,734,658
ICAP plc		300,000		2,976,023
Lazard Ltd — Class A		442,100		19,907,763
				64,818,444
Business Services — 0.01%†
Fidelity National Information Services		4,406		239,158
Capital Markets — 5.51%†
American Capital Strategies Ltd.		78,000		3,316,560
The Bank of New York Company, Inc.*		1,112,000		46,081,280
Collins Stewart plc*		40,000		177,517
Fortress Investment Group LLC(1)		72,000		1,715,040
The Goldman Sachs Group, Inc.		309,200		67,019,100
Investors Financial Services Corp.		8,000		493,360
Jefferies Group, Inc.		454,000		12,248,920
KBW, Inc.*		18,000		528,840
LaBranche & Co Inc.*(1)		860,000		6,346,800
Lehman Brothers Holdings, Inc.		272,000		20,269,440
Penson Worldwide, Inc.*		10,000		245,300
State Street Corporation		252,000		17,236,800
SWS Group, Inc.		10,000		216,200
Tullett Prebon plc*		72,000		647,014
				176,542,171

See Notes to the Financial Statements.

77

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Paradigm Portfolio

Portfolio of Investments — June 30, 2007 (Unaudited) — (Continued)

	Shares		Value
Chemicals — 0.11%†
Novozymes A/S — Class B		200	$	23,279
Potash Corporation of Saskatchewan Inc.		1,200		93,564
Sigma-Aldrich Corp.		83,000		3,541,610
				3,658,453
Commercial Banks — 2.37%†
Bank Of China Ltd. — Class H*		10,320,000		5,120,933
Cathay General Bancorp(1)		128,000		4,293,120
Center Financial Corporation		220,000		3,722,400
China Construction Bank — Class H*		9,720,000		6,687,845
East West Bancorp, Inc.		128,000		4,976,640
Hanmi Financial Corporation		196,000		3,343,760
HDFC Bank Ltd. — ADR		8,000		674,080
ICICI Bank Limited — ADR		50,000		2,457,500
Industrial & Commercial Bank Of China — Class H*		7,620,000		4,229,435
M&T Bank Corporation		230,000		24,587,000
Macquarie Bank Limited		8,000		576,506
Nara Bancorp, Inc.		196,000		3,122,280
State Bank of India GDR		60,000		5,292,000
UCBH Holdings, Inc.		240,000		4,384,800
Wilshire Bancorp, Inc.		190,000		2,314,200
				75,782,499
Commercial Services & Supplies — 0.00%†
Equifax Inc.		100		4,442
SAIC, Inc.*		4,000		72,280
				76,722
Consumer Finance — 0.14%†
The Student Loan Corporation		21,900		4,465,410

See Notes to the Financial Statements.

78

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Paradigm Portfolio

Portfolio of Investments — June 30, 2007 (Unaudited) — (Continued)

	Shares		Value
Derivative Exchanges — 6.51%†
Bourse De Montreal, Inc.*		20,000	$	731,659
CBOT Holdings, Inc. — Class A*(1)		320,800		66,277,280
Chicago Mercantile Exchange Holdings Inc.		84,000		44,886,240
Climate Exchange plc*		14,000		520,101
Intercontinental Exchange Inc.*		304,000		44,946,400
International Securities Exchange, Inc.		651,000		42,542,850
Nymex Holdings, Inc.(1)		68,000		8,542,840
				208,447,370
Diversified Consumer Services — 0.48%†
H&R Block, Inc.		106,000		2,477,220
Sotheby’s Holdings, Inc. — Class A		280,000		12,885,600
				15,362,820
Diversified Financial Services — 0.07%†
Alliancebernstein Holding LP		25,200		2,194,668
Xinhua Finance Ltd.*		100		45,644
				2,240,312
Diversified Telecommunication Services — 0.03%†
China Netcom Group — Spon ADR		12,000		665,760
China Telecom Corp Ltd — Class H		200,000		117,659
China Telecom Corp Ltd. — ADR		4,000		236,640
				1,020,059
Electric Utilities — 4.30%†
Allegheny Energy, Inc.*		900,000		46,566,000
Datang International Power Generation Company Limited — Class H*		6,648,000		10,270,596
Huadian Power International Corporation — Class H		1,440,000		745,856
Huaneng Power International, Inc. — ADR(1)		612,000		28,427,400
Korea Electric Power Corporation ADR*		740,000		16,206,000
Sierra Pacific Resources*		2,024,000		35,541,440
				137,757,292

See Notes to the Financial Statements.

79

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Paradigm Portfolio

Portfolio of Investments — June 30, 2007 (Unaudited) — (Continued)

	Shares		Value
Electric, Gas, And Sanitary Services — 0.19%†
Unified Energy System ADR*		44,000	$	5,962,000
European Exchanges — 2.43%†
Bolsas Y Mercados Espanoles*		44,000		2,587,535
Deutsche Boerse AG		240,000		26,960,817
Hellenic Exchanges S.A. Holding		36,000		945,253
London Stock Exchange Group plc*		1,646,291		44,795,460
OMX AB		88,000		2,637,735
				77,926,800
Food Products — 0.00%†
TreeHouse Foods, Inc.*		3,600		95,796
Gaming — 2.35%†
International Game Technology		32,000		1,270,400
Las Vegas Sands Corp.*		221,400		16,912,746
Lottomatica Spa*		2,000		79,881
Melco International Development Limited*		736,000		1,091,876
MGM Mirage*		350,400		28,900,992
Wynn Resorts, Limited*		300,000		26,907,000
				75,162,895
Holding Company — 4.07%†
Berkshire Hathaway Inc.*		68		7,444,300
Berkshire Hathaway Inc. — Class B*		9,616		34,665,680
Leucadia National Corporation		2,136,000		75,294,000
Pargesa Holding AG — Class B*		80,000		8,959,476
Power Financial Corp.		108,000		4,101,009
				130,464,465
Hotels Restaurants & Leisure — 0.21%†
Melco Pbl Entertainment Limited — ADR*		45		565
Triarc Companies, Inc. — Class A		420,000		6,665,400
				6,665,965
Household Durables — 0.59%†
Fortune Brands, Inc.		4,000		329,480
Jarden Corporation*		434,000		18,666,340
				18,995,820

See Notes to the Financial Statements.

80

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Paradigm Portfolio

Portfolio of Investments — June 30, 2007 (Unaudited) — (Continued)

	Shares		Value
Independent Power Producers & Energy Traders — 1.72%†
Dynegy Inc.*		3,270,165	$	30,870,358
Mirant Corp*		570,000		24,310,500
				55,180,858
Insurance — 3.45%†
China Life Insurance Co., Limited — ADR*(1)		460,666		24,723,944
China Life Insurance Co., Limited — Class H		480,000		1,724,985
Fidelity National Financial Inc. — Class A		10,026		237,616
Great West Lifeco, Inc.		152,000		4,929,923
Markel Corporation*		57,000		27,619,920
PICC Property & Casualty Co Ltd*		1,440,000		1,173,112
Ping An Insurance Group Company of China Limited — Class H*		1,336,000		9,440,096
The Progressive Corporation		784,000		18,761,120
Wesco Financial Corporation		1,700		654,500
White Mountains Insurance Group Ltd.		35,000		21,210,700
				110,475,916
IT Services — 0.48%†
Broadridge Financial Solutions, Inc.		92,800		1,774,336
Mastercard, Inc. — Class A(1)		42,000		6,966,540
SRA International, Inc. — Class A*		2,400		60,624
Western Union Company		308,000		6,415,640
				15,217,140

See Notes to the Financial Statements.

81

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Paradigm Portfolio

Portfolio of Investments — June 30, 2007 (Unaudited) — (Continued)

	Shares		Value
Media — 2.74%†
Citadel Broadcasting Corp.		1,105	$	7,127
Disney Walt Co.		14,400		491,616
DreamWorks Animation SKG, Inc.*		374,000		10,786,160
The E.W. Scripps Company — Class A		64,000		2,924,160
EMI Group plc		783,181		4,214,878
Getty Images, Inc.*		50,000		2,390,500
Groupe Bruxelles Lambert S.A.		240,000		29,978,480
The McGraw-Hill Companies, Inc.		270,000		18,381,600
Warner Music Group Corp.		220,000		3,179,000
The Washington Post Company — Class B		19,800		15,366,582
				87,720,103
Metals & Mining — 2.47%†
Anglo American plc — ADR		1,548,000		45,418,320
China Coal Energy Company — Class H*		3,312,000		4,964,273
Commercial Metals Company		336,000		11,346,720
Freeport-mcmoran Copper & Gold		2,680		221,958
Rio Tinto PLC — ADR		44,000		13,469,280
Yanzhou Coal Mining Co. — Class H		1,348,000		2,058,410
Yanzhou Coal Mining Company Limited — ADR		22,000		1,679,990
				79,158,951
Multiline Retail — 1.78%†
Sears Holdings Corporation*		335,400		56,850,300
Multi-Utilities — 3.59%†
CenterPoint Energy, Inc.		1,000,000		17,400,000
CMS Energy Corporation		416,000		7,155,200
NRG Energy, Inc.*		536,000		22,281,520
Reliant Energy Inc.*		2,534,000		68,291,300
				115,128,020
Oil & Gas — 0.69%†
China Petroleum & Chemical — Class H		360,000		398,250
China Petroleum & Chemical Corp. — ADR(1)		56,000		6,251,840
Penn West Energy Trust(1)		466,000		15,550,420
				22,200,510

See Notes to the Financial Statements.

82

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Paradigm Portfolio

Portfolio of Investments — June 30, 2007 (Unaudited) — (Continued)

	Shares		Value
Oil, Gas & Consumable Fuels — 10.26%†
Cameco Corporation(1)		308,000	$	15,627,920
Canadian Natural Resources Ltd.(1)		584,000		38,748,400
Canadian Oil Sands Trust(1)		1,428,000		44,153,760
CNOOC Limited — ADR*		618,000		21,635,843
El Paso Corporation		1,748,000		30,118,040
Encana Corporation(1)		340,000		20,893,000
Imperial Oil Ltd.(1)		400,400		18,594,576
National Energy Group, Inc.*		46,000		230,920
Nexen Inc.		500,000		15,475,000
Norsk Hydro ASA — ADR		152,000		5,817,040
OAO Gazprom — ADR*		770,000		32,263,000
Petro-Canada		240,000		12,758,400
PetroChina Company Limited — ADR(1)		96,000		14,273,280
Petroleo Brasileiro S.A. — ADR		10,000		1,212,700
Statoil ASA — ADR		10,000		310,100
Suncor Energy, Inc.		500,600		45,013,952
Western Oil Sands Inc. — Class A*		344,000		11,463,976
				328,589,907
Other Exchanges — 1.06%†
Australian Stock Exchange Limited		466,000		19,240,200
JSE Limited*		500,000		5,652,635
New Zealand Exchange Limited		20,329		183,357
TSX Group Inc.		228,000		8,925,229
				34,001,421
Paper & Forest Products — 0.00%†
Pope Resources, L.P.		1,800		87,588
Pharmaceuticals — 0.05%†
Novo-Nordisk A/S — ADR(1)		14,200		1,542,972
Publishing — 0.75%†
John Wiley & Sons, Inc. — Class B		2,000		96,200
Moody’s Corporation		266,000		16,545,200
R.H. Donnelley Corporation*		96,000		7,274,880
				23,916,280

See Notes to the Financial Statements.

83

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Paradigm Portfolio

Portfolio of Investments — June 30, 2007 (Unaudited) — (Continued)

	Shares		Value
Real Estate — 4.65%†
Alexander’s, Inc.*(1)		28,000	$	11,319,000
American Real Estate Partners, L.P.		441,200		44,887,688
Forest City Enterprises, Inc. — Class A		1,080,400		66,422,992
Link Reit*		4,732,000		10,469,562
New World China Land Limited		400,000		340,188
Shun Tak Holdings Limited		716,000		1,053,049
SL Green Realty Corp.		45,400		5,624,606
The St. Joe Company(1)		12,000		556,080
Texas Pacific Land Trust		27,400		8,425,500
				149,098,665
Real Estate Investment Trusts — 0.82%†
Vornado Realty Trust		240,000		26,361,600
Road & Rail — 0.02%†
Guangshen Railway Company Limited — ADR(1)		12,000		485,400
Guangshen Railway Company Limited — Class H		360,000		286,372
				771,772
Security Brokers, Dealers, And Flotation Companies — 0.59%†
Cohen & Steers, Inc.(1)		366,000		15,902,700
GFI Group, Inc.*		42,000		3,044,160
				18,946,860
State Commercial Banks — 0.02%†
Preferred Bank Los Angeles		15,000		600,000
Telecommunications — 0.10%†
China Netcom Group Corp. HK Ltd.*		1,100,000		3,038,674
Telephone Communications, Except Radiotelephone — 0.00%†
China Unicom — ADR		2,000		34,460
Transportation By Air — 0.02%†
Grupo Aeroportuario del Pacifico SA — ADR		11,000		542,520

See Notes to the Financial Statements.

84

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Paradigm Portfolio

Portfolio of Investments — June 30, 2007 (Unaudited) — (Continued)

	Shares		Value
Transportation Infrastructure — 2.14%†
Anhui Expressway Co., Ltd. — Class H		5,180,000	$	4,365,690
Beijing Capital International Airport Co. Ltd.		26,388,000		37,122,468
Grupo Aeroportuario del Centro Norte — ADR*		12,000		329,640
Grupo Aeroportuario del Sureste Ser B — ADR		11,000		579,590
Hainan Meilan International Airport Company Limited — Class H*		756,000		771,547
Hopewell Holdings Limited*		108,000		440,608
Jiangsu Expressway Company Ltd. — Class H		5,880,000		5,940,761
Macquarie Airports		180,610		618,611
Shenzhen Expressway Company Limited — Class H		8,236,000		6,404,092
Sichuan Expressway Co. Limited — Class H		14,608,000		4,390,321
Zhejiang Expressway Co., Limited — Class H		6,956,000		7,463,787
				68,427,115
U.S. Equity Exchanges — 4.18%†
Nasdaq Stock Market Inc.*		1,670,000		49,615,700
Nyse Euronext*		1,146,552		84,409,159
				134,024,859
Wireless Telecommunication Services — 0.11%†
China Mobile (Hong Kong) Limited — ADR		8,000		431,200
China Mobile Ltd.		200,000		2,147,279
China Unicom Ltd.		640,000		1,101,698
				3,680,177
TOTAL COMMON STOCKS (cost $2,229,961,902)				2,808,288,156

See Notes to the Financial Statements.

85

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Paradigm Portfolio

Portfolio of Investments — June 30, 2007 (Unaudited) — (Continued)

	Principal
CONVERTIBLE BONDS — 1.31%†	Amount		Value
Independent Power Producers & Energy Traders — 1.31%†
Calpine Corporation, CLB(1)
4.750%, 11/15/2023 Acquired 11/30/2005 — 12/15/2006 at $21,543,989 (Default Effective 12/20/2005)*(1)
TOTAL CONVERTIBLE BONDS (cost $23,031,775)		35,000,000	$	41,929,750

CORPORATE BONDS — 0.18%†
Diversified Financial Services — 0.06%†
FINOVA Group Inc.
7.500%, 11/15/2009, Acquired 10/19/2006 — 11/21/2006 at $769,239 (Default Effective 4/29/2005)*	9,509,880	2,068,399
Independent Power Producers & Energy Traders — 0.02%†
Calpine Corp.
8.750%, 07/15/2007, CLB, Acquired 4/18/2006 and 5/03/2006 at $118,563 (Default Effective 12/20/2005)*	200,000	248,000
7.875%, 04/01/2008, Acquired 4/18/2006 — 5/10/2006 at $118,538 (Default Effective 12/20/2005)*	200,000	240,000
		488,000

See Notes to the Financial Statements.

86

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Paradigm Portfolio

Portfolio of Investments — June 30, 2007 (Unaudited) — (Continued)

	Principal
	Amount		Value
Multi-Utilities & Unregulated Power — 0.05%†
Calpine Corp.
7.625%, 04/15/2006, Acquired 4/18/2006 — 4/20/2006 at $61,031 (Default Effective 12/20/2005)*		100,000	$	120,000
10.500%, 05/15/2006, Acquired 4/7/2006 — 5/10/2006 at $181,375 (Default Effective 12/20/2005)*		300,000		375,000
8.500%, 02/15/2011, Acquired 7/5/2006 at $471,250 (Default Effective 12/20/2005)*		1,000,000		1,265,000
				1,760,000
Unit Investment Trusts, Face-amount Certificate Offices — 0.05%†
Calpine Canada Energy Finance Ulc
8.500%, 05/01/2008, Acquired 4/20/2006 and 7/13/2006 at $780,125 (Default Effective 12/20/2005)*		1,200,000		1,446,000
TOTAL CORPORATE BONDS (cost $5,468,613)				5,762,399

CALL OPTIONS
PURCHASED — 0.04%†	Contracts
Loews Corp
Expiration: January, 2009, Exercise Price: $25.000		446	1,237,650
Leucadia National Corp
Expiration: January, 2009, Exercise Price: $20.000		72	118,800
TOTAL PURCHASED OPTIONS (cost $1,434,454)			1,356,450

See Notes to the Financial Statements.

87

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Paradigm Portfolio

Portfolio of Investments — June 30, 2007 (Unaudited) — (Continued)

	Principal
SHORT-TERM INVESTMENTS — 10.17%†	Amount		Value
US Government Agency Issues — 10.09%†
Federal Home Loan Bank Discount Note 0.000%, due 07/02/2007	$	323,269,000	$	323,227,963
Investment Companies — 0.08%†
First American Prime Obligations Fund — Class I 5.001%		2,502,102		2,502,102
TOTAL SHORT-TERM INVESTMENTS (cost $325,730,065)				325,730,065

INVESTMENTS PURCHASED
WITH THE CASH PROCEEDS FROM
SECURITIES LENDING — 6.43%†	Shares
Investment Companies — 6.43%†
Mount Vernon Securities Lending Trust — Prime Portfolio (cost $205,982,162)		205,982,162		205,982,162
TOTAL INVESTMENTS — 105.80%† (cost $2,791,608,971)			$	3,389,048,982

Percentages are stated as a percent of net assets.

* — Non-income producing security.

† — Calculated as a percentage of net assets.

GDR — Global Depository Receipt

ADR — American Depository Receipt

CLB — Callable Security

(1) — This security or a portion of this security was out on loan at June 30, 2007. Total loaned securities had a market value of $200,409,673 at June 30, 2007.

See Notes to the Financial Statements.

88

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Medical Portfolio

Portfolio of Investments — June 30, 2007 (Unaudited)

COMMON STOCKS — 75.46%†	Shares		Value
Biotechnology — 25.43%†
AEterna Zentaris Inc.*		50,500	$	174,730
Albany Molecular Research, Inc.*		20,000		297,000
Arena Pharmaceuticals, Inc.*		14,000		153,860
AVAX Technologies, Inc.*		50,000		9,750
Avigen, Inc.*		27,000		166,050
Biogen Idec, Inc.*		15,250		815,875
Biomira, Inc.*(1)		47,000		48,410
Cell Genesys, Inc.*(1)		39,725		133,079
Coley Pharmaceuticals Group*(1)		25,000		90,500
Cubist Pharmaceuticals, Inc.*		2,000		39,420
CuraGen Corporation*		16,000		31,520
deCODE genetics, Inc.*(1)		11,000		41,085
Dendreon Corporation*(1)		24,000		169,920
Favrille Inc.*(1)		41,000		151,290
Human Genome Sciences, Inc.*		19,000		169,480
ImmunoGen, Inc.*		14,000		77,700
Invitrogen Corp.*		12,000		885,000
Isotechnika, Inc.*		40,000		64,586
Medarex, Inc.*		20,000		285,800
Metabasis Therapeutics, Inc.*(1)		27,000		189,000
Millennium Pharmaceuticals, Inc.*		40,296		425,928
Progenics Pharmaceuticals, Inc.*		2,200		47,454
Savient Pharmaceuticals Inc.*		35,000		434,700
Targeted Genetics Corp.*		1,000		2,720
Telik, Inc.*(1)		28,000		94,640
Vical Incorporated*		28,500		147,915
				5,147,412
Chemicals — 7.24%†
Atrium Biotechnologies, Inc.*		4,884		97,795
The Dow Chemical Co.		8,000		353,760
Lonza Group AG		11,000		1,013,999
				1,465,554
Health Care Equipment & Supplies — 0.04%†
Theragenics Corporation*		2,000		8,340

See Notes to the Financial Statements.

89

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Medical Portfolio

Portfolio of Investments — June 30, 2007 (Unaudited) — (Continued)

	Shares		Value
Health Care Providers & Services — 0.15%†
IMPATH Bankruptcy Liquidating Trust — Class A*(1)		26,000	$	29,380
Industrial Conglomerates — 2.50%†
Tyco International Ltd.		15,000		506,850
Pharmaceuticals — 40.10%†
Abbott Laboratories		16,000		856,800
Antigenics, Inc.*		892		2,551
Bristol-Meyers Squibb Company		17,000		536,520
China Pharmaceutical Group Limited*		1,440,000		462,247
Eli Lilly and Company		14,000		782,320
Epicept Corporation*(1)		2,039		4,384
Genzyme Corporation*		14,538		936,247
GlaxoSmithKline plc — ADR		18,673		977,905
Johnson & Johnson		13,000		801,060
Novartis AG — ADR		19,000		1,065,330
Pain Therapeutics, Inc.*		13,000		113,230
Pfizer, Inc.		5,000		127,850
Simcere Pharmaceutical Group — ADR*		18,000		253,980
Wyeth		20,900		1,198,406
				8,118,830
TOTAL COMMON STOCKS (cost $15,094,004)				15,276,366

RIGHTS — 0.00%†
Biotechnology — 0.00%†
OSI Pharmaceuticals, Inc.* Expiration Date: 06/28/2008, Strike Price $1.00#	13,932	21
TOTAL RIGHTS (cost $0)		21

See Notes to the Financial Statements.

90

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Medical Portfolio

Portfolio of Investments — June 30, 2007 (Unaudited) — (Continued)

	Principal
SHORT-TERM INVESTMENTS — 25.04%†	Amount		Value
US Government Agency Issues — 25.02%†
Federal Home Loan Bank Discount Note 0.000%, due 07/02/2007	$	5,066,000	$	5,065,357
Investment Companies — 0.02%†
First American Prime Obligations Fund — Class I 5.001%		5,095		5,095
TOTAL SHORT-TERM INVESTMENTS (cost $5,070,452)				5,070,452

INVESTMENTS PURCHASED WITH
THE CASH PROCEEDS FROM
SECURITIES LENDING — 4.56%†	Shares
Investment Companies — 4.56%†
Mount Vernon Securities Lending Trust — Prime Portfolio (cost $922,917)		922,917		922,917
TOTAL INVESTMENTS — 105.06%† (cost $21,087,373)			$	21,269,756

Percentages are stated as a percent of net assets.

* — Non-income producing security.

† — Calculated as a percentage of net assets.

# — Contingent value right (contingent upon profitability of company).

ADR — American Depository Receipt

(1) — This security or a portion of this security was out on loan at June 30, 2007. Total loaned securities had a market value of $776,196 at June 30, 2007.

See Notes to the Financial Statements.

91

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Small Cap Opportunities Portfolio

Portfolio of Investments — June 30, 2007 (Unaudited)

COMMON STOCKS — 88.76%†	Shares		Value
Aerospace & Defense — 1.63%†
Alliant Techsystems, Inc.*		1,000	$	99,150
Armor Holdings, Inc.*		2,400		208,488
Bombardier Inc.*		360,000		2,162,873
CACI International, Inc. — Class A*		246,000		12,017,100
				14,487,611
Airlines — 1.91%†
China Eastern Airlines — Class H*		2,440,000		1,163,956
China Eastern Airlines Corporation Limited — ADR*(1)		124,000		5,916,164
China Southern Airlines Co. — Class H*		7,796,000		5,244,393
China Southern Airlines Company Limited — ADR*(1)		132,000		4,634,520
				16,959,033
Asian Exchanges — 4.55%†
Hong Kong Exchanges & Clearing Limited		800,000		11,305,504
Osaka Securities Exchange Co., Ltd.		1,800		8,332,995
Singapore Exchange Limited		3,236,000		20,717,165
				40,355,664
Asset Management — 4.42%†
Eaton Vance Corp.		320,000		14,137,600
Invesco plc — ADR		40,000		1,034,000
Nuveen Investments — Class A		292,000		18,147,800
US Global Investors, Inc.(1)		258,000		5,848,860
				39,168,260
Beverages — 1.18%†
Tsingtao Brewery Co Limited — Class H		4,324,000		10,506,957
Brokerage & Investment Banking — 0.23%†
Greenhill & Co., Inc.(1)		29,200		2,006,332
Business Services — 0.00%†
Optionable, Inc.*		2,000		840

See Notes to the Financial Statements.

92

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Small Cap Opportunities Portfolio

Portfolio of Investments — June 30, 2007 (Unaudited) — (Continued)

	Shares		Value
Capital Markets — 5.87%†
American Capital Strategies Ltd.		6,000	$	255,120
Capital Southwest Corp.		12,600		1,962,954
Fcstone Group, Inc.*(1)		14,000		802,340
Fortress Investment Group LLC(1)		78,000		1,857,960
Guardian Capital Group Ltd.		2,000		24,971
International Assets Holding Corporation*(1)		162,200		3,771,150
Investors Financial Services Corp.		24,000		1,480,080
Jefferies Group, Inc.		552,000		14,892,960
KBW, Inc.*		54,000		1,586,520
LaBranche & Co Inc.*(1)		720,000		5,313,600
Penson Worldwide, Inc.*		360,000		8,830,800
SWS Group, Inc.		370,000		7,999,400
Thomas Weisel Partners Group, Inc.*		56,000		932,400
Van der Moolen Holding N.V. ADR*		468,427		2,346,819
				52,057,074
Commercial Banks — 3.80%†
Blom Bank S A L — ADR*		30,000		1,992,000
Cathay General Bancorp		144,000		4,829,760
Center Financial Corporation		220,000		3,722,400
East West Bancorp, Inc.		140,000		5,443,200
Farmers & Merchants Bank of Long Beach		31		206,150
First Bank of Delaware*		428,403		1,135,268
Hanmi Financial Corporation		244,062		4,163,698
Nara Bancorp, Inc.		256,000		4,078,080
UCBH Holdings, Inc.		272,000		4,969,440
Wilshire Bancorp, Inc.		258,000		3,142,440
				33,682,436
Commercial Services & Supplies — 0.61%†
Comdisco Holding Company, Inc.		9,000		112,950
First Advantage Corporation — Class A*		12,000		276,120
Loring Ward International Ltd.*		1,000		12,063
PICO Holdings, Inc.*		72,000		3,114,720
Ritchie Bros Auctioneers, Incorporated(1)		30,000		1,878,600
				5,394,453

See Notes to the Financial Statements.

93

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Small Cap Opportunities Portfolio

Portfolio of Investments — June 30, 2007 (Unaudited) — (Continued)

	Shares		Value
Computers & Peripherals — 0.01%†
Diebold, Inc.		2,000	$	104,400
Construction & Engineering — 1.04%†
Quanta Services, Inc.*		300,000		9,201,000
Consumer Finance — 0.03%†
The Student Loan Corporation		1,200		244,680
Containers & Packaging — 0.00%†
Viskase Companies, Inc.*		24,000		28,440
Derivative Exchanges — 4.64%†
Bourse De Montreal, Inc.*		20,000		731,659
Climate Exchange plc*		16,000		594,402
International Securities Exchange, Inc.		610,000		39,863,500
				41,189,561
Diversified Consumer Services — 1.70%†
Sotheby’s Holdings, Inc. — Class A		328,000		15,094,560
Diversified Financial Services — 0.02%†
Rhj International*		400		7,904
Xinhua Finance Ltd*		300		136,934
				144,838
Diversified Telecommunication Services — 0.15%†
Lict Corporation*		18		63,225
NeuStar, Inc. — Class A*		1,000		28,970
XO Holdings Inc.*		280,000		1,248,800
				1,340,995

See Notes to the Financial Statements.

94

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Small Cap Opportunities Portfolio

Portfolio of Investments — June 30, 2007 (Unaudited) — (Continued)

	Shares		Value
Electric Utilities — 4.65%†
Allegheny Energy, Inc.*		200,000	$	10,348,000
China Resources Power Holdings Company Limited		100,000		238,643
Datang International Power Generation Company Limited — Class H*		7,092,000		10,956,538
Huadian Power International Corporation — Class H		1,340,000		694,061
Sierra Pacific Resources*		1,080,000		18,964,800
				41,202,042
Electrical Apparatus And Equipment, Wiring Supplies, — 0.04%†
Smith & Wesson Holding Corp.*		20,000		335,000
Energy — 0.41%†
Siem Industries Inc.*		50,000		3,650,000
European Exchanges — 1.22%†
Hellenic Exchanges S.A. Holding		20,000		525,140
London Stock Exchange Group plc*		170,000		4,625,688
OMX AB		188,000		5,635,162
				10,785,990
Gaming — 0.20%†
Melco International Development Limited*		1,208,000		1,792,101
Gas Utilities — 0.59%†
Southern Union Company		160,263		5,222,955
Holding Company — 0.71%†
Bam Investments Corp.*		60,000		1,971,368
BNN Investments Ltd.*		131,000		4,304,154
				6,275,522
Hotels Restaurants & Leisure — 1.22%†
Triarc Companies, Inc. — Class A		682,000		10,823,340
Household Durables — 2.41%†
Jarden Corporation*		496,000		21,332,960

See Notes to the Financial Statements.

95

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Small Cap Opportunities Portfolio

Portfolio of Investments — June 30, 2007 (Unaudited) — (Continued)

	Shares		Value
Independent Power Producers & Energy Traders — 1.67%†
Dynegy Inc.*		1,536,000	$	14,499,840
Mirant Corp*		8,000		341,200
				14,841,040
Industrial Conglomerates — 0.17%†
Alleghany Corporation*		3,672		1,492,668
Insurance — 0.65%†
Covanta Holding Corporation*		156,000		3,845,400
National Western Life Insurance Company — Class A		1,600		404,672
RLI Corp.		8,000		447,600
Safety Insurance Group, Inc.		15,800		654,120
Wesco Financial Corporation		1,200		462,000
				5,813,792
IT Services — 0.45%†
Broadridge Finl Solutions, Inc.		120,000		2,294,400
ManTech International Corporation — Class A*		54,000		1,664,820
				3,959,220
Machinery — 0.18%†
American Railcar Inds, Inc.(1)		38,000		1,482,000
Oshkosh Truck Corporation		2,000		125,840
				1,607,840

See Notes to the Financial Statements.

96

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Small Cap Opportunities Portfolio

Portfolio of Investments — June 30, 2007 (Unaudited) — (Continued)

	Shares		Value
Media — 2.24%†
Courier Corporation		50,000	$	2,000,000
DreamWorks Animation SKG, Inc.*		268,000		7,729,120
Gemstar-TV Guide International, Inc.*		36,000		177,120
Getty Images, Inc.*		4,000		191,240
Idearc, Inc.		60,000		2,119,800
Interactive Data Corporation		12,000		321,360
Live Nation Inc.*		100,000		2,238,000
PrimaCom AG ADR*		54,000		336,285
Warner Music Group Corp.		328,000		4,739,600
				19,852,525
Metals & Mining — 3.13%†
China Coal Energy Company — Class H*		1,332,000		1,996,501
Commercial Metals Company		280,000		9,455,600
Fortescue Metals G*		24,000		687,737
Inmet Mining Corporation		154,000		11,912,321
Yanzhou Coal Mining Co. — Class H		1,332,000		2,033,978
Yanzhou Coal Mining Company Limited — ADR		22,000		1,679,991
				27,766,128
Multi-Utilities — 8.43%†
Aquila, Inc.*		1,464,000		5,987,760
CMS Energy Corporation		758,000		13,037,600
NRG Energy, Inc.*		44,000		1,829,080
Reliant Energy Inc.*		2,000,000		53,900,000
				74,754,440
Oil & Gas — 0.08%†
Atlas America, Inc.		14,000		752,220
Oil And Gas Extraction — 0.01%†
Keweenaw Land Association Ltd		300		66,900

See Notes to the Financial Statements.

97

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Small Cap Opportunities Portfolio

Portfolio of Investments — June 30, 2007 (Unaudited) — (Continued)

	Shares		Value
Oil, Gas & Consumable Fuels — 1.21%†
Alliance Holdings Gp Lp		4,000	$	119,040
Atlas Pipeline Holdings Lp(1)		34,000		1,422,900
Buckeye Gp Holdings Lp		68,000		2,263,040
National Energy Group, Inc.		256,000		1,285,120
Penn Virginia GP Holdings LP(1)		42,000		1,306,620
UTS Energy Corporation*		760,000		4,323,492
				10,720,212
Other Exchanges — 5.10%†
Australian Stock Exchange Limited		8,000		330,304
IntercontinentalExchange Inc.*		236,000		34,892,600
JSE Limited*		720,000		8,139,795
New Zealand Exchange Limited		206,988		1,866,927
				45,229,626
Paper & Forest Products — 0.00%†
Pope Resources, L.P.		600		29,196
Publishing — 1.99%†
John Wiley & Sons, Inc. — Class A		24,000		1,158,960
R.H. Donnelley Corporation*		208,246		15,780,882
Value Line, Inc.		15,400		676,060
				17,615,902
Real Estate — 9.65%†
Alexander’s, Inc.*		36,000		14,553,000
American Real Estate Partners, L.P.		450,800		45,864,392
Biloxi Marsh Lands Corporation		100		3,400
Forest City Enterprises, Inc. — Class A		42,000		2,582,160
HomeFed Corporation*		400		25,200
Link Reit*		4,112,000		9,097,810
New World China Land Limited		180,000		153,085
Shun Tak Holdings Limited		46,000		67,654
Solidere GDR		800		13,104
Tejon Ranch Co.*		3,200		141,440
Texas Pacific Land Trust		42,600		13,099,500
United Capital Corporation*		1,200		34,500
				85,635,245

See Notes to the Financial Statements.

98

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Small Cap Opportunities Portfolio

Portfolio of Investments — June 30, 2007 (Unaudited) — (Continued)

	Shares		Value
Road & Rail — 0.42%†
Guangshen Railway Company Limited — ADR(1)		46,000	$	1,860,700
Laidlaw International Inc.		54,000		1,865,700
				3,726,400
Security Brokers, Dealers, And Flotation Companies — 2.28%†
Cohen & Steers, Inc.		306,000		13,295,700
GFI Group, Inc.*		96,000		6,958,080
				20,253,780
Semiconductor & Semiconductor Equipment — 0.00%†
FEI Co.*		1,000		32,460
State Commercial Banks — 0.42%†
Preferred Bank Los Angeles		94,000		3,760,000
Tobacco — 0.04%†
Vector Group Ltd.(1)		16,972		382,379
Transportation Infrastructure — 3.76%†
Beijing Capital International Airport Co. Ltd.		16,140,000		22,705,648
Hainan Meilan International Airport Company Limited — Class H*		1,008,000		1,028,729
Hopewell Holdings Limited*		46,000		187,666
Macquarie Airports		862,610		2,954,545
Sichuan Expressway Co. Limited — Class H		19,820,000		5,956,747
Zhejiang Expressway Co., Limited — Class H		476,000		510,748
				33,344,083
U.S. Equity Exchanges — 3.64%†
Nasdaq Stock Market Inc.*		768,000		22,817,280
Nyse Euronext*		128,266		9,442,943
				32,260,223
TOTAL COMMON STOCKS (cost $606,130,703)				787,283,323

See Notes to the Financial Statements.

99

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Small Cap Opportunities Portfolio

Portfolio of Investments — June 30, 2007 (Unaudited) — (Continued)

	Principal
CONVERTIBLE BONDS — 1.54%†	Amount		Value
Independent Power Producers & Energy Traders — 1.54%†
Calpine Corporation, CLB 4.750%, 11/15/2023, Acquired on 11/30/2005 — 11/27/2006 at $3,639,755 (Default Effective 12/20/2005)* (cost $7,446,255)	$	12,000,000	$	13,710,000

CORPORATE BONDS — 0.07%†
Diversified Financial Services — 0.07%†
FINOVA Group Inc. 7.500%, 11/15/2009 (cost $896,768)	2,785,983	605,951

RIGHTS — 0.16%†	Shares
Commercial Services & Supplies — 0.16%†
Comdisco Holding Company, Inc. — Rights Expiration Date: 12/31/2050, Strike Price $1.00# (cost $2,836,438)		9,050,400	1,402,812

CALL OPTIONS
PURCHASED — 0.01%†	Contracts
Loews Corp Expiration: January, 2009, Exercise Price: $30.000 (cost $90,828)		36	84,060

	Principal
SHORT-TERM INVESTMENTS — 9.09%†	Amount
US Government Agency Issues — 9.09%†
Federal Home Loan Bank Discount Note 0.000%, due 07/02/2007	$	80,632,000	80,621,764
Investment Companies — 0.00%†
First American Prime Obligations Fund — Class I 5.001%		1,413	1,413

See Notes to the Financial Statements.

100

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Small Cap Opportunities Portfolio

Portfolio of Investments — June 30, 2007 (Unaudited) — (Continued)

	Shares		Value
TOTAL SHORT-TERM INVESTMENTS (cost $80,623,177)			$	80,623,177
INVESTMENTS PURCHASED WITH THE CASH PROCEEDS FROM SECURITIES LENDING — 2.82%†
Investment Companies — 2.82%†
Mount Vernon Securities Lending Trust — Prime Portfolio (cost $25,016,800)		25,016,800	$	25,016,800
TOTAL INVESTMENTS — 102.45%† (cost $723,040,969)			$	908,726,123

Percentages are stated as a percent of net assets.

* — Non-income producing security.

† — Calculated as a percentage of net assets.

# — Contingent value right (contingent upon profitability of company)

GDR — Global Depository Receipt

ADR — American Depository Receipt

CLB — Callable Security

(1) — This security or a portion of this security was out on loan at June 30, 2007. Total loaned securities had a market value of $23,811,670 at June 30, 2007.

See Notes to the Financial Statements.

101

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Kinetics Government Money Market Portfolio

Portfolio of Investments — June 30, 2007 (Unaudited)

US GOVERNMENT AGENCY	Principal
ISSUES — 111.24%†	Amount		Value
Federal Home Loan Bank Discount Note 0.000%, due 07/02/2007	$	1,207,000	$	1,206,847
TOTAL INVESTMENTS — 111.24%† (cost $1,206,847)			$	1,206,847

† — Calculated as a percentage of net assets.

102

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Market Opportunities Portfolio

Portfolio of Investments — June 30, 2007 (Unaudited)

COMMON STOCKS — 93.38%†	Shares		Value
Asian Exchanges — 11.65%†
Hong Kong Exchanges & Clearing Limited		216,000	$	3,052,486
Osaka Securities Exchange Co., Ltd.		180		833,300
Singapore Exchange Limited		424,000		2,714,486
				6,600,272
Asset Management — 17.00%†
BlackRock, Inc.		6,600		1,033,494
Brookfield Asset Management Inc — Class A		60,000		2,394,000
Eaton Vance Corp.		22,000		971,960
Federated Investors, Inc.		1,800		68,994
Franklin Resources, Inc.		8,400		1,112,748
Igm Financial, Inc.		3,000		145,797
Legg Mason, Inc.		4,800		472,224
Man Group Plc		16,000		195,670
Nuveen Investments — Class A		5,400		335,610
Power Corporation of Canada		60,200		2,221,509
US Global Investors, Inc.(1)		30,000		680,100
				9,632,106
Brokerage & Investment Banking — 3.23%†
The Bear Stearns Companies Inc.		6,000		840,000
Greenhill & Co., Inc.(1)		400		27,484
ICAP PLC		30,000		297,602
Lazard Ltd — Class A		14,800		666,444
				1,831,530

See Notes to the Financial Statements.

103

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Market Opportunities Portfolio

Portfolio of Investments — June 30, 2007 (Unaudited) — (Continued)

	Shares		Value
Capital Markets — 10.14%†
Affiliated Managers Group, Inc.*		3,000	$	386,280
American Capital Strategies Ltd.		4,000		170,080
Capital Southwest Corp.		200		31,158
Collins Stewart Plc*		6,000		26,628
Fcstone Group, Inc.*(1)		2,000		114,620
Fortress Investment Group LLC(1)		14,400		343,008
The Goldman Sachs Group, Inc.		7,000		1,517,250
International Assets Holding Corporation*		6,200		144,150
Investors Financial Services Corp.		3,000		185,010
Janus Capital Group, Inc.		200		5,568
KBW, Inc.*		9,600		282,048
LaBranche & Co Inc.*(1)		18,000		132,840
Lehman Brothers Holdings, Inc.		8,400		625,968
Penson Worldwide, Inc.*		18,000		441,540
State Street Corporation		12,000		820,800
SWS Group, Inc.		20,400		441,048
T. Rowe Price Group, Inc.		400		20,756
Tullett Prebon PLC*		6,000		53,918
				5,742,670
Commercial Banks — 5.97%†
Bank Of China Ltd. — Class H*		800,000		396,971
The Bank of New York Company, Inc.*		30,800		1,276,352
Cathay General Bancorp		3,600		120,744
Center Financial Corporation		6,000		101,520
China Construction Bank — Class H*		720,000		495,396
East West Bancorp, Inc.		3,600		139,968
Hanmi Financial Corporation		6,800		116,008
Industrial & Commercial Bank Of China — Class H*		720,000		399,632
Nara Bancorp, Inc.		7,000		111,510
UCBH Holdings, Inc.		7,600		138,852
Wilshire Bancorp, Inc.		7,200		87,696
				3,384,649

See Notes to the Financial Statements.

104

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Market Opportunities Portfolio

Portfolio of Investments — June 30, 2007 (Unaudited) — (Continued)

	Shares		Value
Derivative Exchanges — 5.39%†
CBOT Holdings, Inc. — Class A*		4,100	$	847,060
Chicago Mercantile Exchange Holdings Inc.		1,460		780,166
Climate Exchange plc*		12,000		445,801
Nymex Holdings, Inc.(1)		7,800		979,914
				3,052,941
Diversified Consumer Services — 1.17%†
Sotheby’s Holdings, Inc. — Class A		14,400		662,688
Diversified Financial Services — 1.41%†
Alliancebernstein Holding Lp		3,600		313,524
Bourse De Montreal, Inc.*		12,000		438,996
Xinhua Finance Ltd*		100		45,645
				798,165
European Exchanges — 9.15%†
Bolsas Y Mercados Espanoles*		10,200		599,838
Deutsche Boerse AG		9,200		1,033,498
Hellenic Exchanges S.A. Holding		12,000		315,084
London Stock Exchange Group PLC*		66,043		1,797,025
OMX AB		48,000		1,438,765
				5,184,210
Holding Company — 2.11%†
Bam Investments Corp.*		23,000		755,691
Berkshire Hathaway Inc.*		1		109,475
BNN Investments Ltd.*		10,000		328,561
				1,193,727
Insurance — 2.64%†
China Life Insurance Co., Limited — Class H		108,000		388,121
Great West Lifeco, Inc.		12,200		395,691
Ping An Insurance Group Company of China Limited — Class H*		36,000		254,374
Power Financial Corp.		12,000		455,668
				1,493,854
IT Services — 1.26%†
Broadridge Finl Solutions, Inc.		21,800		416,816
Mastercard, Inc. — Class A(1)		1,800		298,566
				715,382

See Notes to the Financial Statements.

105

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Market Opportunities Portfolio

Portfolio of Investments — June 30, 2007 (Unaudited) — (Continued)

	Shares		Value
Media — 0.29%†
The McGraw-Hill Companies, Inc.		2,400	$	163,392
Oil, Gas & Consumable Fuels — 0.05%†
National Energy Group, Inc.*		6,000		30,120
Other Exchanges — 12.28%†
Australian Stock Exchange Limited		60,000		2,477,279
Imarex Nos Asa*		1,000		18,272
IntercontinentalExchange Inc.*		9,000		1,330,650
JSE Limited*		180,000		2,034,949
New Zealand Exchange Limited		48,526		437,680
TSX Group Inc.		16,800		657,648
				6,956,478
Publishing — 0.28%†
Moody’s Corporation		2,400		149,280
Value Line, Inc.		200		8,780
				158,060
Real Estate — 0.86%†
American Real Estate Partners, L.P.		4,800		488,352
Security Brokers, Dealers, And Flotation Companies — 1.70%†
Cohen & Steers, Inc.		12,200		530,090
GFI Group, Inc.*		6,000		434,880
				964,970
State Commercial Banks — 0.19%†
Preferred Bank Los Angeles		2,700		108,000
Transportation Infrastructure — 0.01%†
Macquarie Airports		2,000		6,850
U.S. Equity Exchanges — 6.60%†
Nasdaq Stock Market Inc.*		48,000		1,426,080
Nyse Euronext*		31,431		2,313,950
				3,740,030
TOTAL COMMON STOCKS (cost $47,442,526)				52,908,446

See Notes to the Financial Statements.

106

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Market Opportunities Portfolio

Portfolio of Investments — June 30, 2007 (Unaudited) — (Continued)

CALL OPTIONS PURCHASED — 0.10%†	Contracts		Value
State Street Corp Expiration: January, 2009, Exercise Price: $40.000 (cost $56,394)		18	$	55,530

	Principal
SHORT-TERM INVESTMENTS — 5.37%†	Amount
US Government Agency Issues — 5.36%†
Federal Home Loan Bank Discount Note 0.000%, due 07/02/2007		3,039,000	3,038,614
Investment Companies — 0.01%†
First American Prime Obligations Fund — Class I 5.001%		3,183	3,183
TOTAL SHORT-TERM INVESTMENTS (cost $3,041,797)			3,041,797

INVESTMENTS PURCHASED WITH
THE CASH PROCEEDS FROM
SECURITIES LENDING — 4.42%†	Shares
Investment Companies — 4.42%†
Mount Vernon Securities Lending Trust —
Prime Portfolio (cost $2,503,200)		2,503,200		2,503,200
TOTAL INVESTMENTS — 103.27%† (cost $53,043,917)			$	58,508,973

Percentages are stated as a percent of net assets.

* — Non-income producing security.

† — Calculated as a percentage of net assets.

ADR — American Depository Receipt

(1) — This security or a portion of this security was out on loan at June 30, 2007. Total loaned securities had a market value of $2,395,478 at June 30, 2007.

See Notes to the Financial Statements.

107

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

Kinetics Paradigm Portfolio

Schedule of Options Written — June 30, 2007 (Unaudited)

PUT OPTIONS WRITTEN	Contracts		Value
Nymex Holdings, Inc
Expiration: January, 2008, Exercise Price: $125.00		20	$	21,800
Total Options Written (premiums received $49,938)			$	21,800

See Notes to the Financial Statements.

108

KINETICS MUTUAL FUNDS, INC. — MASTER INVESTMENT PORTFOLIOS

Statement of Assets & Liabilities

June 30, 2007 (Unaudited)

			The Internet
	The Internet		Emerging Growth
	Portfolio		Portfolio
ASSETS:
Investments, at value(1) (2)	$	132,165,003	$	3,905,283
Foreign currencies, at value(3)		45,935		—
Cash		4,362,617		18,712
Receivable for contributed capital		49,692		—
Receivable for investments sold		141,060		—
Dividends and interest receivable		190,602		7,190
Other assets		1,072,916		7,104
Total assets		138,027,825		3,938,289
LIABILITIES:
Payable to Adviser		137,795		4,130
Payable to Trustees and Officers		1,335		26
Payable for collateral received for securities loaned		5,933,600		31,900
Payable for withdrawn capital		97,769		—
Accrued expenses and other liabilities		4,002		7,781
Total liabilities		6,174,501		43,837
Net assets	$	131,853,324	$	3,894,452
(1) Cost of investments	$	81,859,330	$	2,983,808
(2) Includes loaned securities with a market value of	$	5,667,951	$	29,928
(3) Cost of foreign currencies	$	42,453	$	—

See Notes to the Financial Statements.

109

KINETICS MUTUAL FUNDS, INC. — MASTER INVESTMENT PORTFOLIOS

Statement of Assets & Liabilities

June 30, 2007 (Unaudited)

	The		The
	Paradigm		Medical
	Portfolio		Portfolio
ASSETS:
Investments, at value(1) (3)	$	3,389,048,982	$	21,269,756
Foreign currencies, at value(4)		1,162,869		—
Cash		16,515,537		205,602
Receivable for contributed capital		14,750,745		409,349
Dividends and interest receivable		3,100,813		19,774
Other assets		6,054,310		21,050
Total assets		3,430,633,256		21,925,531
LIABILITIES:
Written options, at value(2)		21,800		—
Payable to Adviser		3,236,439		20,499
Payable to Trustees and Officers		26,541		170
Payable for securities purchased		15,387,899		724,535
Payable for collateral received for securities loaned		205,982,162		922,917
Payable for withdrawn capital		2,536,573		10,570
Accrued expenses and other liabilities		244,311		1,498
Total liabilities		227,435,725		1,680,189
Net assets	$	3,203,197,531	$	20,245,342
(1) Cost of investments	$	2,791,608,971	$	21,087,373
(2) Premiums received	$	49,938	$	—
(3) Includes loaned securities with a market value of	$	200,409,673	$	776,196
(4) Cost of foreign currencies	$	1,089,672	$	—

See Notes to the Financial Statements.

110

KINETICS MUTUAL FUNDS, INC. — MASTER INVESTMENT PORTFOLIOS

Statement of Assets & Liabilities

June 30, 2007 (Unaudited)

			The Kinetics
	The Small Cap		Government
	Opportunities		Money Market
	Portfolio		Portfolio
ASSETS:
Investments, at value(1) (2)	$	908,726,123	$	1,206,847
Cash		3,640,430		421
Receivable for contributed capital		3,201,407		—
Dividends and interest receivable		1,141,132		—
Other assets		1,121,742		81
Total assets		917,830,834		1,207,349
LIABILITIES:
Payable to Adviser		885,096		465
Payable to Trustees and Officers		6,783		11
Payable for securities purchased		4,409,913		—
Payable for collateral received for securities loaned		25,016,800		—
Payable for withdrawn capital		443,496		115,306
Accrued expenses and other liabilities		113,790		6,683
Total liabilities		30,875,878		122,465
Net assets	$	886,954,956	$	1,084,884
(1) Cost of investments	$	723,040,969	$	1,206,847
(2) Includes loaned securities with a market value of	$	23,811,670	$	—

See Notes to the Financial Statements.

111

KINETICS MUTUAL FUNDS, INC. — MASTER INVESTMENT PORTFOLIOS

Statement of Assets & Liabilities

June 30, 2007 (Unaudited)

	The Market		The Water
	Opportunities		Infrastructure
	Portfolio		Portfolio
ASSETS:
Investments, at value(1) (2)	$	58,508,973	$	—
Foreign currencies, at value(3)		24,821		—
Cash		410,556		—
Receivable for contributed capital		781,578		500,100
Dividends and interest receivable		77,692		—
Other assets		85,972		—
Total assets		59,889,592		500,100
LIABILITIES:
Payable to Adviser		55,590		—
Payable to Trustees and Officers		325		—
Payable for securities purchased		628,777		—
Payable for collateral received for securities loaned		2,503,200		—
Payable for withdrawn capital		28,716		—
Accrued expenses and other liabilities		19,063		—
Total liabilities		3,235,671		—
Net assets	$	56,653,921	$	500,100
(1) Cost of investments	$	53,043,917	$	—
(2) Includes loaned securities with a market value of	$	2,395,478	$	—
(3) Cost of foreign currencies	$	23,818	$	—

See Notes to the Financial Statements.

112

KINETICS MUTUAL FUNDS, INC. — MASTER INVESTMENT PORTFOLIOS

Statement of Operations

For the Six Months Ended June 30, 2007 (Unaudited)

				The Internet
	The Internet			Emerging Growth
	Portfolio			Portfolio
INVESTMENT INCOME:
Dividends†	$	242,974		$	72,558
Interest		364,766			24,501
Income from securities lending		853,903			8,024
Total investment income		1,461,643			105,083
EXPENSES:
Investment advisory fees		830,936			25,236
Administration fees		14,464			856
Professional fees		15,238			10,954
Fund accounting fees		5,496			1,331
Trustee and Officers’ fees and expenses		1,880			68
Custodian fees and expenses		12,614			4,855
Other Expenses		1,863			40
Total expenses		882,491			43,340
Expense reduction*		(9,878	)		(399	)
Net expenses		872,613			42,941
Net investment income		589,030			62,142
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on:
Investments and foreign currency		4,805,641			96,722
Written option contracts expired or closed		6,985			1,959
Net change in unrealized appreciation (depreciation) of:
Investments and foreign currency		4,762,498			(72,424	)
Written option contracts		(6,948	)		(5,679	)
Net gain on investments		9,568,176			20,578
Net increase in net assets resulting from operations	$	10,157,206		$	82,720
† Net of Foreign Taxes Withheld of:	$	17,325		$	1,532

* See “Expenses Reduction” in the Notes to the Financial Statements.

See Notes to the Financial Statements.

113

KINETICS MUTUAL FUNDS, INC. — MASTER INVESTMENT PORTFOLIOS

Statement of Operations

For the Six Months Ended June 30, 2007 (Unaudited)

	The			The
	Paradigm			Medical
	Portfolio			Portfolio
INVESTMENT INCOME:
Dividends†	$	13,819,798		$	105,030
Interest		10,419,663			52,255
Income from securities lending		5,239,459			75,114
Total investment income		29,478,920			232,399
EXPENSES:
Investment advisory fees		17,068,158			108,355
Administration fees		453,467			1,781
Professional fees		28,259			13,478
Fund accounting fees		130,215			1,054
Trustee and Officers’ fees and expenses		59,317			290
Custodian fees and expenses		327,100			7,405
Other Expenses		26,002			202
Total expenses		18,092,518			132,565
Expense reduction*		(34,156	)		(10,059	)
Net expenses		18,058,362			122,506
Net investment income		11,420,558			109,893
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on:
Investments and foreign currency		12,939,591			1,334,234
Net change in unrealized appreciation of:
Investments and foreign currency		232,418,239			382,488
Written option contracts		29,000			—
Net gain on investments		245,386,830			1,716,722
Net increase in net assets resulting from operations	$	256,807,388		$	1,826,615
† Net of Foreign Taxes Withheld of:	$	880,344		$	5,553

* See “Expenses Reduction” in the Notes to the Financial Statements.

See Notes to the Financial Statements.

114

KINETICS MUTUAL FUNDS, INC. — MASTER INVESTMENT PORTFOLIOS

Statement of Operations

For the Six Months Ended June 30, 2007 (Unaudited)

				The Kinetics
	The Small Cap			Government
	Opportunities			Money Market
	Portfolio			Portfolio
INVESTMENT INCOME:
Dividends†	$	3,386,924		$	—
Interest		2,350,604			29,346
Income from securities lending		807,364			—
Total investment income		6,544,892			29,346
EXPENSES:
Investment advisory fees		4,403,389			2,936
Administration fees		103,662			244
Professional fees		12,379			9,562
Fund accounting fees		32,885			76
Trustee and Officers’ fees and expenses		14,653			30
Custodian fees and expenses		90,675			3,141
Other Expenses		6,051			40
Total expenses		4,663,694			16,029
Expense reduction*		(130,234	)		—
Net expenses		4,533,460			16,029
Net investment income		2,011,432			13,317
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on:
Investments and foreign currency		(403,111	)		—
Net change in unrealized appreciation of:
Investments and foreign currency		97,528,951			—
Net gain on investments		97,125,840			—
Net increase in net assets resulting from operations	$	99,137,272		$	13,317
† Net of Foreign Taxes Withheld of:	$	93,736		$	—

* See “Expenses Reduction” in the Notes to the Financial Statements.

See Notes to the Financial Statements.

115

KINETICS MUTUAL FUNDS, INC. — MASTER INVESTMENT PORTFOLIOS

Statement of Operations

For the Six Months Ended June 30, 2007 (Unaudited)

	The Market		The Water
	Opportunities		Infrastructure
	Portfolio		Portfolio
INVESTMENT INCOME:
Dividends†	$	263,800	$	—
Interest		81,087		—
Income from securities lending		84,773		—
Total investment income		429,660		—
EXPENSES:
Investment advisory fees		232,733		—
Administration fees		7,338		—
Professional fees		10,607		—
Fund accounting fees		5,795		—
Trustee and Officers’ fees and expenses		674		—
Custodian fees and expenses		29,372		—
Other Expenses		182		—
Total expenses		286,701		—
Expense reduction*		—		—
Net expenses		286,701		—
Net investment income		142,959		—
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on:
Investments and foreign currency		374,746		—
Net change in unrealized appreciation of:
Investments and foreign currency		3,739,608		—
Net gain on investments		4,114,354		—
Net increase in net assets resulting from operations	$	4,257,313	$	—
† Net of Foreign Taxes Withheld of:	$	18,854	$	—

* See “Expenses Reduction” in the Notes to the Financial Statements.

See Notes to the Financial Statements.

116

KINETICS MUTUAL FUNDS, INC. — MASTER INVESTMENT PORTFOLIOS

Statements of Changes in Net Assets

							The Internet
	The Internet Portfolio						Emerging Growth Portfolio
	For the						For the
	Six Months			For the			Six Months			For the
	Ended			Year Ended			Ended			Year Ended
	June 30, 2007			December 31,			June 30, 2007			December 31,
	(Unaudited)			2006			(Unaudited)			2006
OPERATIONS:
Net investment income	$	589,030		$	326,003		$	62,142		$	102,903
Net realized gain (loss) on sale of investments, foreign currency and written options		4,812,626			(11,570,086	)		98,681			162,004
Net change in unrealized appreciation (depreciation) of investments,foreign currency and written options		4,755,550			34,154,147			(78,103	)		307,369
Net increase in net assets resulting from operations		10,157,206			22,910,064			82,720			572,276
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM BENEFICIAL INTEREST TRANSACTIONS:
Contributions		25,968			4,187,471			538,473			678,821
Withdrawals		(15,632,904	)		(38,591,597	)		(713,845	)		(1,160,881	)
Net decrease in net assets resulting from beneficial interest transactions		(15,606,936	)		(34,404,126	)		(175,372	)		(482,060	)
Total increase (decrease) in net assets		(5,449,730	)		(11,494,062	)		(92,652	)		90,216
NET ASSETS:
Beginning of period		137,303,054			148,797,116			3,987,104			3,896,888
End of period	$	131,853,324		$	137,303,054		$	3,894,452		$	3,987,104

See Notes to the Financial Statements.

117

KINETICS MUTUAL FUNDS, INC. — MASTER INVESTMENT PORTFOLIOS

Statements of Changes in Net Assets

	The Paradigm Portfolio						The Medical Portfolio
	For the			For the			For the			For the
	Six Months			Year Ended			Six Months			Year Ended
	Ended			December 31,			Ended			December 31,
	June 30, 2007			2006			June 30, 2007			2006
	(Unaudited)						(Unaudited)
OPERATIONS:
Net investment income	$	11,420,558		$	11,447,187		$	109,893		$	64,301
Net realized gain on sale of investments, foreign currency and written options		12,939,591			3,329,122			1,334,234			575,494
Net change in unrealized appreciation of investments,foreign currency and written options		232,447,239			301,523,816			382,488			1,520,521
Net increase in net assets resulting from operations		256,807,388			316,300,125			1,826,615			2,160,316
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM BENEFICIAL INTEREST TRANSACTIONS:
Contributions		832,052,766			1,398,735,693			6,051,292			3,285,786
Withdrawals		(47,423,789	)		(82,493,045	)		(3,875,315	)		(3,740,306	)
Net increase (decrease) in net assets resulting from beneficial interest transactions		784,628,977			1,316,242,648			2,175,977			(454,520	)
Total increase in net assets		1,041,436,365			1,632,542,773			4,002,592			1,705,796
NET ASSETS:
Beginning of period		2,161,761,166			529,218,393			16,242,750			14,536,954
End of period	$	3,203,197,531		$	2,161,761,166		$	20,245,342		$	16,242,750

See Notes to the Financial Statements.

118

KINETICS MUTUAL FUNDS, INC. — MASTER INVESTMENT PORTFOLIOS

Statements of Changes in Net Assets

	The Small Cap Opportunities Portfolio						The Kinetics Government Money Market Portfolio
	For the						For the
	Six Months			For the			Six Months			For the
	Ended			Year Ended			Ended			Year Ended
	June 30, 2007			December 31,			June 30, 2007			December 31,
	(Unaudited)			2006			(Unaudited)			2006
OPERATIONS:
Net investment income	$	2,011,432		$	1,111,944		$	13,317		$	36,156
Net realized loss on sale of investments, foreign currency and written options		(403,111	)		(400,382	)		—			—
Net change in unrealized appreciation (depreciation) of investments,foreign currency and written options		97,528,951			69,120,933			—			—
Net increase in net assets resulting from operations		99,137,272			69,832,495			13,317			36,156
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM BENEFICIAL INTEREST TRANSACTIONS:
Contributions		309,328,594			305,126,355			438,016			1,321,498
Withdrawals		(12,572,726	)		(12,732,926	)		(804,808	)		(990,656	)
Net increase (decrease) in net assets resulting from beneficial interest transactions		296,755,868			292,393,429			(366,792	)		330,842
Total increase in net assets		395,893,140			362,225,924			(353,475	)		366,998
NET ASSETS:
Beginning of period		491,061,816			128,835,892			1,438,359			1,071,361
End of period	$	886,954,956		$	491,061,816		$	1,084,884		$	1,438,359

See Notes to the Financial Statements.

119

KINETICS MUTUAL FUNDS, INC. — MASTER INVESTMENT PORTFOLIOS

Statements of Changes in Net Assets

								The Water
								Infrastructure
								Portfolio
								From
	The Market Opportunities Portfolio							June 29,
	For the							2007(+)
	Six Months				From			through
	Ended				January 31, 2006(+)			June 30,
	June 30, 2007				through			2007
	(Unaudited)				December 31, 2006			(Unaudited)
OPERATIONS:
Net investment income	$	142,959			$	21,035		$	—
Net realized gain on sale of investments, foreign currency and written options		374,746				26			—
Net change in unrealized appreciation of investments,foreign currency and written options		3,739,608				1,726,740			—
Net increase in net assets resulting from operations		4,257,313				1,747,801			—
NET INCREASE IN NET ASSETS RESULTING FROM BENEFICIAL INTEREST TRANSACTIONS:
Contributions		35,454,361				16,071,080			500,100
Withdrawals		(638,822	)			(237,812	)		—
Net increase in net assets resulting from beneficial interest transactions		34,815,539				15,833,268			500,100
Total increase in net assets		39,072,852		��		17,581,069			500,100
NET ASSETS:
Beginning of period		17,581,069				—			—
End of period	$	56,653,921			$	17,581,069		$	500,100

(+)Commencement of operations.

See Notes to the Financial Statements.

120

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

Notes to Financial Statements

June 30, 2007 (Unaudited)

1.  Organization

The Kinetics Portfolios Trust (the “Trust”) was organized as a Delaware Statutory Trust on March 14, 2000 and is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company issuing its beneficial interests in series, each series representing a distinct portfolio with its own investment objectives and policies. The series currently authorized are The Internet Portfolio, The Internet Emerging Growth Portfolio, The Paradigm Portfolio, The Medical Portfolio, The Small Cap Opportunities Portfolio, The Kinetics Government Money Market Portfolio, The Market Opportunities Portfolio and The Water Infrastructure Portfolio (the “Master Portfolios”). Pursuant to the 1940 Act, the Master Portfolios, with the exception of The Kinetics Government Money Market Portfolio, are “non-diversified” series of the Trust. The Market Opportunities Portfolio commenced operations on January 31, 2006 and The Water Infrastructure Portfolio commenced operations on June 29, 2007. Each of the remaining Master Portfolios commenced operations on April 28, 2000.

Each Master Portfolio is a Master Investment Portfolio in a master-feeder fund structure. Each Master Portfolio has multiple feeder funds invested in the Master Portfolio. By contributing assets to the Master Portfolio, the feeder funds receive a beneficial interest in the Master Portfolio. The Master Portfolio then invests the contributed assets in portfolio securities and allocates income, gains (losses) and expenses to the feeder funds based on the funds’ proportionate interest in the Master Portfolio.

Each of the Master Portfolios, with the exception of The Kinetics Government Money Market Portfolio, seeks to provide investors with long-term capital growth. The Internet Portfolio invests primarily in the equity securities of U.S. and foreign companies engaged in the Internet and Internet-related activities. The Internet Emerging Growth Portfolio invests primarily in the equity securities of small and medium capitalization U.S. and foreign growth emerging companies engaged in the Internet and Internet-related activities. The Paradigm Portfolio invests primarily in the equity securities of U.S. and foreign companies that the investment adviser believes are undervalued and that have high returns on equity and are well positioned to reduce their costs, extend the reach of their distribution channels and experience significant growth in revenues. The Medical Portfolio invests primarily in the equity securities of U.S. and foreign companies engaged in medical research, pharmaceutical treatments and related medical technology with a focus on companies engaged in cancer research and drug development. The Small Cap

121

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

Notes to Financial Statements — (Continued)

June 30, 2007 (Unaudited)

Opportunities Portfolio invests primarily in the equity securities of U.S. and foreign small capitalization companies that provide attractive valuation opportunities due to special situations such as lack of institutional ownership, lack of significant analyst coverage or companies with sound fundamentals that have experienced a short-term earnings shortfall. The Market Opportunities Portfolio invests primarily in the equity securities of U.S. and foreign companies engaged in capital markets or related to capital markets or in the gaming industry. The Water Infrastructure Portfolio invests primarily in securities issued by U.S. and foreign companies involved in water infrastructure and natural resources with a specific water theme and related activities. The Kinetics Government Money Market Portfolio seeks to provide investors with current income consistent with the preservation of capital and maintenance of liquidity by investing in money market instruments issued by the U.S. Government, its agencies or instrumentalities.

2.  Significant Accounting Policies

Security Valuation

Master Portfolio securities (other than Government) that are listed on a U.S. securities exchange 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. All equity securities that are traded using the National Association of Securities Dealers’ Automated Quotation System (“NASDAQ”) are valued using the NASDAQ Official Closing Price (“NOCP”). In the event market quotations are not readily available or if events occur that may materially affect the value of a particular security between the time trading ends on a particular security and the close of regular trading on the NYSE, “fair value” will be determined. Purchased 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 bid and asked prices. 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. Investments in The Kinetics Government Money Market Portfolio and instruments purchased with remaining maturities of 60 days or less are valued at amortized cost, which approximates fair value. Other assets and securities for which no quotations are readily available (including restricted

122

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

Notes to Financial Statements — (Continued)

June 30, 2007 (Unaudited)

securities) will be valued in good faith at fair value using methods determined by the Board of Trustees of the Master Portfolios. At June 30, 2007, there were no fair valued securities held by the Master Portfolios.

Written Option Accounting

The Master Portfolios may write (sell) call or put options for trading or hedging purposes. When a Master Portfolio writes an option, an amount equal to the premium received by the Master Portfolio 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 the option, the Master Portfolio 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 the valuation. When an option expires on its stipulated expiration date or the Master Portfolio enters into a closing purchase transaction, the Master Portfolio 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 the security sold short) and the Master Portfolio realizes a gain or loss from the sale of the security (or closing of the short sale). As collateral for uncovered written options, the Master Portfolio 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 for call options.

Foreign Currency Translations

The books and records of the Master Portfolios are maintained in U.S. dollars. For the Master Portfolios, foreign currency transactions are translated into U.S. dollars on the following basis: (i) market value of investment securities and other assets and liabilities are translated at the exchange rate of such currencies against the U.S. dollar, as provided by an approved pricing service, and (ii) purchases and sales of investment securities, dividend and interest income and certain expenses at the rates of exchange prevailing on the respective dates of such transactions. The Master Portfolios do not isolate and treat as ordinary income that portion of the results of operations arising as a result of changes in the exchange rate from the fluctuations arising from changes in the

123

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

Notes to Financial Statements — (Continued)

June 30, 2007 (Unaudited)

market prices of securities held during the period. However, for federal income tax purposes, the Master Portfolios do isolate and treat as ordinary income the effect of changes in foreign exchange rates arising from actual foreign currency transactions and the effect of changes in foreign exchange rates arising between trade date and settlement date.

Restricted Securities

The Master Portfolios may invest in restricted securities. These securities are valued by the Master Portfolios after giving due consideration to pertinent factors including recent private sales, market conditions and the issuer’s financial performance. The Master Portfolios have no right to require registration of unregistered securities. At June 30, 2007, the Master Portfolios did not hold any investment securities which were determined to be illiquid pursuant to the guidelines adopted by the Board of Trustees.

When-Issued Securities

The Master Portfolios may purchase securities on a when-issued or delayed delivery basis. Although the purchase amounts of these securities are established at the time the purchaser enters into the agreement, these securities may be delivered and paid for at a future date. The Master Portfolios record purchases of when-issued securities and reflect the values of such securities in determining net asset value in the same manner as other portfolio securities. The Master Portfolios maintain at all times cash or other liquid assets in an amount at least equal to the amount of outstanding commitments for when-issued securities.

Expense Reduction

The Adviser has directed a certain amount of the Master Portfolios’ trades to brokers believed to provide the best execution and, as a result, it has generated directed brokerage credits to reduce certain service provider fees. For the six months ended June 30, 2007, the total expenses of The Internet Portfolio, The Internet Emerging Growth Portfolio, The Paradigm Portfolio, The Medical Portfolio and The Small Cap Opportunities Portfolio were reduced by $9,878, $399, $34,156, $10,059 and $130,234, respectively, by using directed brokerage credits. In accordance with the requirements of the Securities and Exchange Commission, such amounts are required to be shown as an expense and have been included in each of the service provider fees in the Statement of Operations.

In addition, to the directed brokerage credits, U.S. Bancorp Fund Services, LLC (“USBFS”), the Master Portfolios’ service provider, voluntarily agreed to

124

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

Notes to Financial Statements — (Continued)

June 30, 2007 (Unaudited)

waive all its service provider fees for the four months ended December 31, 2006 for consideration received through the Master Portfolios securities lending agreement. For the year ended December 31, 2006, the total expenses of The Internet Portfolio, The Internet Emerging Growth Portfolio, The Paradigm Portfolio, The Medical Portfolio, The Small Cap Opportunities Portfolio, The Market Opportunities Portfolio, and The Kinetics Government Money Market Portfolio were reduced by $53,882, $4,015, $780,229, $8,929, $156,016, $10,851 and $3,968, respectively.

Securities Lending

Each Master Portfolio may lend its portfolio securities to broker-dealers by entering directly into lending arrangements with such broker-dealers or indirectly through repurchase agreements with respect to no more than 331/3% of the total assets of each Portfolio (including any collateral posted) or 50% of the total assets of each Portfolio (excluding any collateral posted). Securities lending and repurchase transactions will be fully collateralized at all times with cash and/or short-term debt obligations. The Master Portfolios receive interest on the collateral received as well as a fee for the securities loaned.

Expense Allocation

Common expenses incurred by the Master Portfolios are allocated among the Master Portfolios (i) based upon relative average net assets, (ii) as incurred on a specific identification basis, or (iii) equally among the Master Portfolios, depending on the nature of the expenditure. All expenses incurred by the Master Portfolios are allocated to the feeder funds daily based on their proportionate interest in the Master Portfolio.

Federal Income Taxes

Each Master Portfolio will be treated as a partnership for federal income tax purposes. As such, each investor in the Portfolio will be subject to taxation on its share of the Portfolio’s ordinary income and capital gains. It is intended that the Portfolio’s assets will be managed so an investor in the Portfolio can satisfy the requirements of subchapter M of the Internal Revenue Code.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts in the financial statements. Actual results could differ from those estimates.

125

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

Notes to Financial Statements — (Continued)

June 30, 2007 (Unaudited)

Other

Realized gains and losses on the sale of investments are calculated on the identified cost basis. Dividend income is recorded on the ex-dividend date and interest income is recognized on the accrual basis.

3.  Investment Adviser

The Trust has entered into Investment Advisory Agreements (the “Agreements”) with Kinetics Asset Management, Inc. (the “Adviser”), with whom certain officers and trustees of the Trust are affiliated, to furnish investment advisory services to the Master Portfolios. Under the terms of the Agreements, the Master Portfolios compensate the Adviser for its management services at the annual rate of 1.25% of each Master Portfolio’s average daily net assets, except for The Kinetics Government Money Market Portfolio, which compensates the Adviser at a rate of 0.50% of the Master Portfolio’s average daily net assets. For the six months ended June 30, 2007, The Internet Portfolio, The Internet Emerging Growth Portfolio, The Paradigm Portfolio, The Medical Portfolio, The Small Cap Opportunities Portfolio, The Kinetics Government Money Market Portfolio and The Market Opportunities Portfolio incurred expenses of $830,936, $25,236, $17,068,158, $108,355, $4,403,389, $2,936 and $232,733, respectively, pursuant to the Investment Advisory Agreements.

For the six months ended June 30, 2007, the Trust was allocated $12,000 for the services of the Chief Compliance Officer employed by the Adviser.

4.   Approval of Investment Advisory Contracts by Trustees of Kinetics Portfolios Trust

At a meeting of the Board of Trustees held on March 5, 2007, the Board, including all of the Independent Trustees, approved the Agreements with respect to the Internet, Internet Emerging Growth, Paradigm, Medical, Small Cap Opportunities, Kinetics Government Money Market and Market Opportunities Portfolios. In reaching a decision to renew the Agreements, the Board of Trustees, including all of the Trustees who are not interested persons under the 1940 Act (the “Independent Trustees”), considered, among others (1) the nature, extent and quality of the services provided by the Adviser; (2) the performance of the Portfolios over 3 months, one, three and five year periods ended December 31, 2006 compared to the median of its relevant Lipper, Inc. (“Lipper”) peer group; (3) the contractual and actual compensation to be paid under the Agreements as compared to the compensation paid to relevant Lipper peer groups; (4) the expense ratios of the Master Portfolios, with

126

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

Notes to Financial Statements — (Continued)

June 30, 2007 (Unaudited)

expense waivers, as compared to expense ratios for relevant peer groups of Lipper portfolios; (5) the qualifications of the Adviser’s personnel, portfolio management capabilities and investment methodologies; (6) the Adviser’s operations, compliance program and policies with respect to Code of Ethics; (7) the financial condition of the Adviser; (8) the cost of services to be provided by the Adviser and the Adviser’s profitability from each Master Portfolio for the years ended December 31, 2006; (9) “fall-out” benefits to the Adviser and its affiliates from the relationship with the Master Portfolios; (10) the extent to which economies of scale are relevant given the Master Portfolios’ current asset size and current asset growth potential; and (11) that each Master Portfolio other than the Government Money Market Portfolio is designed for long-term investors. The Lipper peer group information was provided by U.S. Bancorp Fund Services, LLC, the Company’s administrator.

In addition, the Board of Trustees approved an investment advisory agreement for the Water Infrastructure Fund (which commenced operations on June 29, 2007). The Board considered many of the same factors listed above, except for performance data since the Fund is new. In addition, the Board of Trustees also considered the experience and qualifications of the Fund’s proposed sub-adviser, Aqua Terra Asset Management, LLC (the “Sub-Adviser”), which made a presentation to the Board. The Sub-Adviser distributed and reviewed information about, among other things, the Fund’s proposed investment team, water related investment themes and various water related funds, the Sub-Adviser’s experience managing mutual funds, its relationship with other investment advisers, estimated profitability and the expense structure of the new Fund.

The Board of Trustees, including a majority of the Independent Trustees, concluded that: they were satisfied with the quality of services provided by the Adviser in advising the Master Portfolios, based on the services that the Adviser would provide to each Portfolio under the applicable Investment Adviser Agreement and the expenses incurred by the Adviser on the performance of such services and considering the Advisers’ fee waivers and/or expense reimbursements with respect to the Portfolios, the compensation to be paid to the Adviser was fair and reasonable; the profits earned by the Adviser were reasonable in light of the nature, extent and quality of the services provided to each Master Portfolio; and that each Master Portfolio was not large enough to attain significant economies of scale.

127

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

Notes to Financial Statements — (Continued)

June 30, 2007 (Unaudited)

Based on the factors considered, the Board of Trustees, including a majority of the Independent Trustees, concluded that it was appropriate to renew the Agreements.

5. Securities Transactions

Purchases and sales of investment securities, other than short-term investments, for the six months ended June 30, 2007 were as follows:

	Purchases				Sales
	U.S.				U.S.
	Government		Other		Government		Other
The Internet Portfolio	$	—	$	5,025,081	$	—	$	22,165,363
The Internet Emerging Growth Portfolio		—		642,066		—		713,081
The Paradigm Portfolio		—		1,000,267,419		—		107,160,065
The Medical Portfolio		—		4,325,338		—		5,662,146
The Small Cap Opportunities Portfolio		—		316,373,934		—		18,527,053
The Market Opportunities Portfolio		—		40,634,232		—		4,015,188
The Water Infrastructure Portfolio		—		—		—		—

As of December 31, 2006, unrealized appreciation (depreciation) on investment securities for federal income tax purposes was as follows:

	Net
	Appreciation			Appreciated		Depreciated
	(Depreciation)			Securities		Securities
The Internet Portfolio	$	43,124,728		$	50,405,790	$	(7,281,062	)
The Internet Emerging Growth Portfolio		899,213			1,388,784		(489,571	)
The Paradigm Portfolio		356,760,476			387,296,063		(30,535,587	)
The Medical Portfolio		(200,134	)		3,437,271		(3,637,405	)
The Small Cap Opportunities Portfolio		86,037,758			95,291,671		(9,253,913	)
The Kinetics Government Money Market Portfolio		—			—		—
The Market Opportunities Portfolio		1,561,593			1,964,886		(403,293	)

At December 31, 2006, the cost of investments for federal income tax purposes was $105,842,180, $3,151,733, $2,014,892,517, $16,909,408, $445,493,550, $1,438,815 and $17,233,385 for The Internet Portfolio, The Internet Emerging Growth Portfolio, The Paradigm Portfolio, The Medical Portfolio, The Small Cap Opportunities Portfolio, The Kinetics Government Money Market Portfolio and The Market Opportunities Portfolio, respectively.

128

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

Notes to Financial Statements — (Continued)

June 30, 2007 (Unaudited)

For the six months ended June 30, 2007, the Master Portfolios wrote the following options:

	Number		Premium
	of Contracts		Amount
The Internet Portfolio
Outstanding at the Beginning of Year		5	$	6,985
Options Expired		5		6,985
Outstanding at June 30, 2007		—	$	—
The Internet Emerging Growth Portfolio
Outstanding at the Beginning of Year		40	$	22,479
Options Closed		40		22,479
Outstanding at June 30, 2007		—	$	—
The Paradigm Portfolio
Outstanding at the Beginning of Year		20	$	49,948
Options Written		—		—
Outstanding at June 30, 2007		20	$	49,938

6.  Portfolio Securities Loaned

As of June 30, 2007, the Master Portfolios had loaned securities that were collateralized by cash. The cash collateral is invested by the custodian in a money market pooled account approved by the Adviser. Although risk is mitigated by the collateral, the Master Portfolio could experience a delay in recovering its securities and possible loss of income or value if the borrower fails to return them. The Master Portfolio receives interest on the collateral received as well as a fee for the securities loaned. The Master Portfolios will continue to receive dividends and interest on all securities loaned. Gain or loss in the fair value of the securities loaned that may occur during the term of the loan will be accounted for by the Master Portfolios. The value of the securities on loan and the value of the related collateral at June 30, 2007, were as follows:

	Securities		Collateral
The Internet Portfolio	$	5,667,951	$	5,933,600
The Internet Emerging Growth Portfolio		29,928		31,900
The Paradigm Portfolio		200,409,673		205,982,162
The Medical Portfolio		776,196		922,917
The Small Cap Opportunities Portfolio		23,811,670		25,016,800
The Market Opportunities Portfolio		2,395,478		2,503,200

129

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

Notes to Financial Statements — (Continued)

June 30, 2007 (Unaudited)

7.  Selected Financial Highlights

Financial highlights for the Master Portfolios were as follows:

	The Internet Portfolio
	For the
	Six Months			For the			For the		For the		For the		For the
	Ended			Year Ended			Year Ended		Year Ended		Year Ended		Year Ended
	June 30,			December 31,			December 31,		December 31,		December 31,		December 31,
	2007			2006			2005		2004		2003		2002
	(Unaudited)
Ratio of expenses to average net assets:
Before expense reduction		1.33%	(1)		1.39%			1.45%		1.50%		1.51%		1.51%
After expense reduction		1.31%	(1)		1.33%	(3)		1.44%		1.44%		1.51%		1.51%
Ratio of net investment income to average net assets:
Before expense reduction		0.92%	(1)		0.17%			1.35%		1.30%		0.99%		0.50%
After expense reduction		0.94%	(1)		0.23%	(3)		1.36%		1.36%		0.99%		0.50%
Portfolio turnover rate		4%			11%			12%		42%		69%		41%

	The Internet Emerging Growth Portfolio
	For the
	Six Months			For the			For the		For the		For the		For the
	Ended			Year Ended			Year Ended		Year Ended		Year Ended		Year Ended
	June 30,			December 31,			December 31,		December 31,		December 31,		December 31,
	2007			2006			2005		2004		2003		2002
	(Unaudited)
Ratio of expenses to average net assets:
Before expense reduction		2.15%	(1)		1.62%			1.73%		1.78%		1.84%		1.83%
After expense reduction		2.13%	(1)		1.46%	(3)		1.72%		1.73%		1.84%		1.83%
Ratio of net investment income (loss) to average net assets:
Before expense reduction		3.06%	(1)		2.78%			4.30%		2.77%		1.94%		(1.07%	)
After expense reduction		3.08%	(1)		2.94%	(3)		4.31%		2.82%		1.94%		(1.07%	)
Portfolio turnover rate		19%			10%			2%		18%		20%		27%

	The Paradigm Portfolio
	For the
	Six Months			For the			For the		For the			For the		For the
	Ended			Year Ended			Year Ended		Year Ended			Year Ended		Year Ended
	June 30,			December 31,			December 31,		December 31,			December 31,		December 31,
	2007			2006			2005		2004			2003		2002
	(Unaudited)
Ratio of expenses to average net assets:
Before expense reduction		1.33%	(1)		1.40%			1.45%		1.52%			1.56%		1.64%
After expense reduction		1.32%	(1)		1.32%	(3)		1.40%		1.42%			1.46%		1.64%
Ratio of net investment income (loss) to average net assets:
Before expense reduction		0.83%	(1)		0.85%			0.07%		(0.18%	)		1.28%		(0.27%	)
After expense reduction		0.84%	(1)		0.93%	(3)		0.12%		(0.08%	)		1.38%		(0.27%	)
Portfolio turnover rate		5%			3%			5%		52%			20%		40%

130

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

Notes to Financial Statements — (Continued)

June 30, 2007 (Unaudited)

	The Medical Portfolio
	For the
	Six Months			For the			For the			For the			For the			For the
	Ended			Year Ended			Year Ended			Year Ended			Year Ended			Year Ended
	June 30,			December 31,			December 31,			December 31,			December 31,			December 31,
	2007			2006			2005			2004			2003			2002
	(Unaudited)
Ratio of expenses to average net assets:
Before expense reduction		1.53%	(1)		1.44%			1.50%			1.58%			1.53%			1.53%
After expense reduction		1.41%	(1)		1.34%	(3)		1.49%			1.57%			1.53%			1.53%
Ratio of net investment income (loss) to average net assets:
Before expense reduction		1.15%	(1)		0.33%			(0.17%	)		(0.33%	)		(0.56%	)		(0.47%	)
After expense reduction		1.27%	(1)		0.43%	(3)		(0.16%	)		(0.32%	)		(0.56%	)		(0.47%	)
Portfolio turnover rate		28%			20%			2%			13%			16%			9%

	The Small Cap Opportunities Portfolio
	For the
	Six Months			For the			For the		For the		For the		For the
	Ended			Year Ended			Year Ended		Year Ended		Year Ended		Year Ended
	June 30,			December 31,			December 31,		December 31,		December 31,		December 31,
	2007			2006			2005		2004		2003		2002
	(Unaudited)
Ratio of expenses to average net assets:
Before expense reduction		1.33%	(1)		1.40%			1.48%		1.55%		1.67%		1.66%
After expense reduction		1.29%	(1)		1.27%	(3)		1.37%		1.21%		1.49%		1.66%
Ratio of net investment income (loss) to average net assets:
Before expense reduction		0.53%	(1)		0.30%			0.46%		1.51%		2.88%		(0.29%	)
After expense reduction		0.57%	(1)		0.43%	(3)		0.57%		1.85%		3.06%		(0.29%	)
Portfolio turnover rate		3%			6%			4%		96%		180%		200%

	The Kinetics Government
	Money Market Portfolio
	For the
	Six Months			For the			For the		For the		For the		For the
	Ended			Year Ended			Year Ended		Year Ended		Year Ended		Year Ended
	June 30,			December 31,			December 31,		December 31,		December 31,		December 31,
	2007			2006			2005		2004		2003		2002
	(Unaudited)
Ratio of expenses to average net assets:
Before expense reduction		2.73%	(1)		1.56%			1.37%		0.83%		0.79%		0.75%
After expense reduction		2.73%	(1)		1.17%	(3)		1.37%		0.83%		0.79%		0.75%
Ratio of net investment income to average net assets:
Before expense reduction		2.27%	(1)		3.13%			1.58%		0.18%		0.15%		0.67%
After expense reduction		2.27%	(1)		3.52%	(3)		1.58%		0.18%		0.15%		0.67%
Portfolio turnover rate		N/A			N/A			N/A		N/A		N/A		N/A

131

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

Notes to Financial Statements — (Continued)

June 30, 2007 (Unaudited)

							The Water
	The Market						Infrastructure
	Opportunities Portfolio						Portfolio
	For the Six			January 31,			June 29, 2007(2)
	Months Ended			2006(2) through			through
	June 30, 2007			December 31,			June 30, 2007
	(Unaudited)			2006			(Unaudited)
Ratio of expenses to average net assets:
Before expense reduction		0.84%	(1)		1.81%	(1)		—
After expense reduction		0.84%	(1)		1.61%	(1)(3)		—
Ratio of net investment income to average net assets:
Before expense reduction		0.42%	(1)		0.16%	(1)		—
After expense reduction		0.42%	(1)		0.36%	(1)(3)		—
Portfolio turnover rate		13%			0%			—

(1)	Annualized.
(2)	Commencement of operations.
(3)	See footnote #2 for service provider, waiver discussion.

8.  New Accounting Pronouncements (Unaudited)

In June 2006, the Financial Accounting Standards Board (“FASB”) released FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Trusts’ tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. To the extent that a tax benefit of a position is not deemed to meet the more-likely-than-not threshold, the Trusts would report an income tax expense in the statement of operations. Adoption of FIN 48 is required as of the date of the last Net Asset Value (“NAV”) calculation in the first required financial statement reporting period for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. Management has evaluated the impact of FIN 48 and has determined there is no material impact to the financial statements.

In September 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements.” The Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. The Statement establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (2) the reporting entity’s own

132

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

Notes to Financial Statements — (Continued)

June 30, 2007 (Unaudited)

assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and is to be applied prospectively as of the beginning of the fiscal year in which this Statement is initially applied. At this time, management is evaluating the implications of FAS 157, and the impact, if any, of this standard on the Trusts’ financial statements has not yet been determined.

9.  Information about Proxy Voting (Unaudited)

Information regarding how Kinetics Portfolios Trust votes proxies relating to portfolio securities is available without charge upon request by calling toll-free at 1-800-930-3828 or by accessing the Funds’ website at www.kineticsfund.com and by accessing the SEC’s website at www.sec.gov. Information regarding how the Portfolios voted proxies relating to portfolio securities during the most recent twelve month period ended June 30, is available without charge, upon request, by calling toll-free at 1-800-930-3828 or by accessing the SEC’s website at www.sec.gov.

10.  Information about the Portfolio Holdings (Unaudited)

The Kinetics Portfolios Trust file their complete schedule of portfolio holdings for their first and third fiscal quarters with the SEC on Form N-Q. The Portfolios’ Form N-Q is available without charge, upon request, by calling toll-free at 1-800-930-3828. Furthermore, you can obtain the Form N-Q on the SEC’s website at www.sec.gov. The Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

133

Kinetics Mutual

Funds, Inc.

16 New Broadway

Sleepy Hollow, NY 10591

INVESTMENT ADVISER AND

SHAREHOLDER SERVICING AGENT

Kinetics Asset Management, Inc.

16 New Broadway

Sleepy Hollow, NY 10591

INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

Tait, Weller & Baker LLP

1818 Market Street

Suite 2400

Philadelphia, PA 19103

DISTRIBUTOR

Kinetics Funds Distributor, Inc.

16 New Broadway

Sleepy Hollow, NY 10591

ADMINISTRATOR

FUND ACCOUNTANT AND

TRANSFER AGENT

U.S. Bancorp Fund Services, LLC

615 East Michigan Street

Milwaukee, WI 53202

CUSTODIAN

U.S. Bank, N.A.

Custody Operations

1555 Rivercenter Drive, Suite 302

Milwaukee, WI 53212

THIS MATERIAL MUST BE PRECEDED OR

ACCOMPANIED BY A PROSPECTUS

Item 2. Code of Ethics.

Not applicable for semi-annual reports.

Item 3. Audit Committee Financial Expert.

Not applicable for semi-annual reports.

Item 4. Principal Accountant Fees and Services.

Not applicable for semi-annual reports.

Item 5. Audit Committee of Listed Registrants.

Not applicable to registrants who are not listed issuers (as defined in Rule 10A-3 under the Securities Exchange Act of 1934).

Item 6. Schedule of Investments.

The Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this Form.

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.

Not applicable to open-end investment companies.

Item 8. Portfolio Managers of Closed-End Management Investment Companies.

Not applicable to open-end investment companies.

Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.

Not applicable to open-end investment companies.

Item 10. Submission of Matters to a Vote of Security Holders.

Not applicable.

Item 11. Controls and Procedures.

(a) The Registrant’s President/Chief Executive Officer and Treasurer/Chief Financial Officer have concluded that the Registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”)) are effective as of a date within 90 days of the filing date of this report, that includes the

	disclosure required by this paragraph, based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act and Rule 15d-15(b) under the Securities Exchange Act of 1934, as amended.
(b)	There were no changes in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting.

Item 12. Exhibits.

(a) (1) Not applicable.

     (2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.

     (3) Not applicable to open-end investment companies.

(b) Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed herewith.

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

     (Registrant) Kinetics Mutual Funds, Inc. & Kinetics Portfolios Trust

By (Signature and Title)	/s/ Peter B. Doyle     Peter B. Doyle, President
Date 09/06/07

     Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By (Signature and Title)	/s/ Peter B. Doyle          Peter B. Doyle, President
Date 09/06/07
By (Signature and Title)	/s/ Leonid Polyakov
	Leonid Polyakov, Treasurer
Date 09/06/07