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 EAST 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, 2004
------------------

Date of reporting period: DECEMBER 31, 2004
------------------

ITEM 1. REPORT TO STOCKHOLDERS.

DECEMBER 31, 2004 WWW.KINETICSFUNDS.COM

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

EACH A SERIES OF KINETICS MUTUAL FUNDS, INC.

[KINETICS MUTUAL FUNDS, INC. LOGO]

KINETICS MUTUAL FUNDS, INC.
TABLE OF CONTENTS
December 31, 2004

<Table>
<Caption>
PAGE
----

Shareholders' Letter........................................ 2
Year 2004 Annual Market Commentary.......................... 5
KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS
Expense Example........................................... 15
Statement of Assets & Liabilities......................... 18
Statement of Operations................................... 21
Statements of Changes in Net Assets....................... 24
Notes to Financial Statements............................. 30
Financial Highlights...................................... 40
Report of Independent Registered Public Accounting Firm... 53
KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
Allocation of Portfolio Assets............................ 54
Portfolio of Investments The Internet Portfolio........... 57
Portfolio of Investments The Internet Emerging Growth
Portfolio.............................................. 63
Portfolio of Investments The Paradigm Portfolio........... 67
Portfolio of Investments The Medical Portfolio............ 75
Portfolio of Investments The Small Cap Opportunities
Portfolio.............................................. 79
Portfolio of Investments The Kinetics Government Money
Market Portfolio....................................... 85
Portfolio of Options Written The Internet Portfolio....... 86
Portfolio of Options Written The Internet Emerging Growth
Portfolio.............................................. 87
Portfolio of Options Written The Medical Portfolio........ 88
Statement of Assets & Liabilities......................... 89
Statement of Operations................................... 92
Statements of Changes in Net Assets....................... 95
Notes to Financial Statements............................. 98
Report of Independent Registered Public Accounting Firm... 109
</Table>

KINETICS MUTUAL FUNDS, INC.
SHAREHOLDERS' LETTER

Dear Shareholders,

The year 2004 was financially positive for investors in our funds.
Such an occurrence brings to mind this P.T. Barnum quote: "look around
you with pleasure, look upwards with gratitude." We are appreciative
of the capital entrusted to us, and we will endeavor to make your
future investment experience a pleasant one. Our investor base has
been a constant source of goodwill, and for that we are truly
thankful.

Unlike most things in life, problems in finance occur when most people
are in positive agreement, since agreement in finance changes the rate
at which future cash flows are discounted. To paraphrase Franklin
Roosevelt: The only thing to fear is the lack of fear itself. The
earnings of a company about which there is no disagreement are
discounted at a very low rate. Conversely, the earnings of a company
about which there is much disagreement are discounted at a very high
rate. That is why, as stated in the past letters, we believe the best
opportunities in financial assets occur when one maintains a position
that is out of favor with the general investment community.

Our success or failure in an investment will ultimately be determined
by our assessment of that company's underlying business operations. We
regard ourselves as business analysts, rather than stock analysts. A
concentrated focus on the businesses themselves presents a much
clearer understanding of how a given investment will fare over time.
For example, owners of private enterprises do not need a publicly-
traded stock to know that the companies they own are enriching them. A
quoted stock price should be used to determine whether the outside
investment community is doing something intelligent or foolish, so as
to act accordingly.

OUTLOOK 2005

As bottom-up stock pickers, we have no opinion regarding the direction
of the stock market in 2005. We do, however, have two principal
concerns that could make 2005 an unrewarding experience for the common
investor. First, as of today, the financial services sector accounts
for approximately 30% of the S&P 500's(1) profits, excluding such
companies as General Electric, Ford and General Motors, etc., which
have substantial exposure to financial

products. Historically, the financial services sector has accounted
for approximately 7% of the S&P 500's profits. The reason for this
over fourfold increase has been largely the result of what is
generally known as the "carry trade", where companies borrow short
term and lend longer term. Real interest rates for short-term
borrowers have been negative. Such an environment encourages leverage
and speculation. More recently, as short-term rates have risen, and
the yield curve has flattened, the profitability of this carry trade
has declined. The response by many financial services companies has
been to use additional leverage to maintain earnings growth. Should
this trade reverse itself, which seems inevitable, many companies'
earnings will decline precipitously. The 2005 Price to Earnings Ratio
(P/E)(2) multiple for the S&P 500 Index is considered reasonable
because many financial companies trade at 11 or 12 times earnings.
Excluding financial services companies, the market is trading at very
high valuation levels. Cyclical companies, such as Caterpillar, are
trading at 17 or 18 times peak earnings. More growth-oriented
companies are trading at forward P/E multiples in the 20s.

Our second concern is with the generally optimistic consensus forecast
for 2005 Gross Domestic Product (GDP) growth of 3.5%. Based on readily
available data, such as those found in "Barron's Market Week Section",
it seems difficult to believe that the consensus will be achieved. The
general argument for this growth is as follows: since the Federal
government is not in a position to stimulate, because of the existing
large deficits, and since the Federal Reserve is tightening, GDP
growth will be fueled by job creation. Economists are forecasting the
creation of approximately 4 million new jobs in 2005, or between
330,000 and 340,000 new jobs monthly, which will account for something
on the order of 2.5% to 3% of GDP growth. Productivity gains will
account for the balance, so as to achieve the consensus number of
3.5%.

Facts: the total U.S. labor force is 148.3 million, of which 140
million are employed and 8 million are unemployed; the current
unemployment rate is 5.4%. If the labor force were to grow at the same
rate as the general population (.9%), then

1,332,000 new entrants, or 111,000 entrants per month, would be
available to fill the expected 4 million new jobs that economists are
expecting to be created during 2005, meaning that approximately
220,000 monthly jobs (330,000-111,000) would have to be filled from
the ranks of the unemployed. Should job creation be able to maintain
this pace, in 34 months the U.S. would experience zero unemployment, a
highly unrealistic scenario. More likely, job creation will match
population growth, and productivity gains will result in GDP growth
substantially below consensus estimates. 2% GDP growth is more
compatible with a corporate earnings growth rate of approximately 5%,
which implies a lackluster environment for the typical stock, should
valuations be maintained.

We at Kinetics are cognizant of the environment in which we operate
and continue to strive to find investments that might do well in a
richly-priced investment environment. We believe this focus can
benefit our shareholders and should continue to distinguish us
favorably both from our peers and from commonly used benchmarks, such
as the S&P 500 and the NASDAQ Composite Index(3).

/s/ Peter B. Doyle
Peter B. Doyle
President
Kinetics Mutual Funds, Inc.

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

(1) The S&P 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 Price to Earnings (P/E) Ratio reflects the multiple of earnings at which
a stock sells.
(3) 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.
YEAR 2004 ANNUAL MARKET COMMENTARY

Dear Fellow Shareholders,

We are pleased to present the Kinetics Mutual Funds annual report for
the period ended December 31, 2004. On balance, the Kinetics Family of
Mutual Funds had a prosperous 2004, with gains of 20.84% for the
Paradigm Fund, 16.40% for the Small Cap Opportunities Fund, 10.06% for
the Internet Fund, 7.67% for the Internet Emerging Growth Fund, and
6.96% for the Medical Fund. This compares with the 2004 total returns,
assuming dividends reinvested in the index, of 10.88% for the S&P 500
Index and 8.59% for the NASDAQ Composite Index, assuming no dividends
were reinvested.

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 INTERNET FUND is a sector fund that focuses on companies engaged
in the evolution of Internet-related technology. As a sector fund with
a focus on Internet/technology, 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, investment results.

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 about
the Internet Fund are equally applicable to this Fund.

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 five years in what
may be described as a very difficult period for equity investors. The
Paradigm Fund is Kinetics' most conservative Fund.

THE MEDICAL FUND is a sector fund, offering an investment in
scientific discovery within what we believe is a 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 SMALL CAP OPPORTUNITIES FUND focuses on undervalued and special
situation small capitalization equities that have the potential for
rewarding long-term investment results.

THE KINETICS GOVERNMENT MONEY MARKET FUND is a short-term investment
vehicle that helps to round out our equity product offerings.

/s/ Peter B. Doyle
Peter B. Doyle
Chief Investment Strategist

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 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 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.

(C)JANUARY 1, 2005 -- KINETICS ASSET MANAGEMENT, INC.

HOW A $10,000 INVESTMENT HAS GROWN:

The charts show the growth of a $10,000 investment in the Funds as
compared to the performance of two representative market indices. The
tables below the charts show the average annual total returns on an
investment over various periods. Returns for periods greater than one year
are average annual total returns. The annual returns assume the
reinvestment of all dividends and distributions, however, tax
considerations are not taken into account. Past performance is not
predictive of future performance. Investment return and principal value
will fluctuate, so that your shares, when redeemed, may be worth more or
less than their original costs.

S&P 500 INDEX -- The S&P 500 Index is a capital-weighted index,
representing the aggregate market value of the common equity of 500 stocks
primarily traded on the New York Stock Exchange. The S&P 500 is unmanaged
and includes the reinvestment of dividends and does not reflect the
payments of transaction costs and advisory fees associated with an
investment in the Funds. The securities that comprise the S&P 500 may
differ substantially from the securities in the Funds' portfolios. It is
not possible to directly invest in an index.

NASDAQ COMPOSITE INDEX -- The NASDAQ Composite Index is a broad-based
capitalization-weighted index of all NASDAQ stocks. The NASDAQ Composite
is unmanaged and does not include the reinvestment of dividends and does
not reflect the payment of transaction costs or advisory fees associated
with an investment in the Funds. The securities that comprise the NASDAQ
Composite may differ substantially from the securities in the Funds'
portfolios. It is not possible to directly invest in an index.

THE INTERNET FUND
OCTOBER 21, 1996 -- DECEMBER 31, 2004
[GRAPH]

<Table>
<Caption>
THE INTERNET FUND -- NO
LOAD CLASS S&P 500 NASDAQ COMPOSITE
----------------------- ------- ----------------

10/21/96 10000.00 10000.00 10000.00
12/96 9420.00 10466.00 10396.00
7420.00 10746.00 9842.00
8780.00 12623.00 11636.00
11020.00 13568.00 13614.00
12/97 10620.00 13958.00 12698.00
13700.00 15905.00 14860.00
19000.00 16430.00 15353.00
17140.00 14796.00 13739.00
12/98 31451.00 17947.00 17803.00
60720.00 18841.00 20001.00
67002.00 20169.00 21844.00
59260.00 18910.00 22348.00
12/99 99542.00 21723.00 33137.00
107628.00 22221.00 37250.00
71659.00 21631.00 32321.00
65093.00 21421.00 29944.00
12/00 48280.00 19745.00 20153.00
44837.00 17404.00 15023.00
49300.00 18423.00 17656.00
39873.00 15719.00 12253.00
12/01 43636.00 17398.00 15958.00
41574.00 17446.00 15112.00
35869.00 15109.00 11994.00
30865.00 12489.00 9617.00
12/02 33407.00 13553.00 10970.00
34168.00 13126.00 11035.00
42355.00 15147.00 13365.00
43356.00 15548.00 14731.00
12/03 51516.00 19365.00 17595.00
45242.00 17760.00 16129.00
45563.00 18066.00 16562.00
45362.00 17729.00 15342.00
12/04 51516.00 19365.00 17595.00
</Table>

<Table>
<Caption>
ENDED 12/31/04
---------------------------------------------------------------
ADVISOR ADVISOR
NO LOAD CLASS A CLASS A NASDAQ
CLASS (NO LOAD) (LOAD ADJUSTED)(1) S&P 500 COMPOSITE
- ----------------------------------------------------------------------------------------------

One Year 10.06% 9.95% 3.61% 10.88% 8.59%
- ----------------------------------------------------------------------------------------------
Three Years 5.69% 4.97% 2.93% 3.59% 3.71%
- ----------------------------------------------------------------------------------------------
Five Years -12.34% N/A N/A -2.30% -11.77%
- ----------------------------------------------------------------------------------------------
Since Inception
No Load Class
(10/21/96) 22.12% N/A N/A 8.40% 7.14%
- ----------------------------------------------------------------------------------------------
Since Inception
Advisor Class A
(4/26/01) N/A 1.87% 0.26% 1.17% 1.83%
- ----------------------------------------------------------------------------------------------
</Table>

(1) Reflects front-end sales charge of 5.75%.

THE INTERNET EMERGING GROWTH FUND
DECEMBER 31, 1999 -- DECEMBER 31, 2004
[GRAPH]

<Table>
<Caption>
THE INTERNET EMERGING
GROWTH FUND S&P 500 NASDAQ COMPOSITE
--------------------- ------- ----------------

12/31/99 10000.00 10000.00 10000.00
10770.00 10229.00 11237.00
6/00 7060.00 9958.00 9746.00
5960.00 9861.00 9026.00
12/00 3690.00 9090.00 6071.00
3740.00 8012.00 4522.00
6/01 4030.00 8481.00 5309.00
3700.00 7236.00 3683.00
12/01 4300.00 8009.00 4793.00
4000.00 8031.00 4535.00
6/02 3540.00 6955.00 3596.00
3080.00 5754.00 2880.00
12/02 3240.00 6239.00 3282.00
3190.00 6043.00 3296.00
6/03 3730.00 6973.00 3988.00
4300.00 7157.00 4391.00
12/03 4327.00 8029.00 4923.00
4246.00 8165.00 4901.00
6/04 4327.00 8305.00 5032.00
4125.00 8150.00 4661.00
12/04 4659.00 8902.00 5346.00
</Table>

<Table>
<Caption>
ENDED 12/31/04
-----------------------------
NASDAQ
FUND S&P 500 COMPOSITE
- --------------------------------------------------------------------------------------

One Year 7.67% 10.88% 8.59%
- --------------------------------------------------------------------------------------
Three Years 2.71% 3.59% 3.71%
- --------------------------------------------------------------------------------------
Five Years -14.17% -2.30% -11.77%
- --------------------------------------------------------------------------------------
Since Inception
(12/31/99) -14.14% -2.30% -11.77%
- --------------------------------------------------------------------------------------
</Table>

THE PARADIGM FUND
DECEMBER 31, 1999 -- DECEMBER 31, 2004
[GRAPH]

<Table>
<Caption>
THE PARADIGM FUND-NO
LOAD CLASS S&P 500 NASDAQ COMPOSITE
-------------------- ------- ----------------

12/31/99 10000.00 10000.00 10000.00
10200.00 10229.00 11237.00
6/00 8920.00 9958.00 9746.00
9370.00 9861.00 9026.00
12/00 10400.00 9090.00 6071.00
10200.00 8012.00 4522.00
6/01 10910.00 8481.00 5309.00
10150.00 7236.00 3683.00
12/01 10610.00 8009.00 4793.00
11000.00 8031.00 4535.00
6/02 10670.00 6955.00 3596.00
9730.00 5754.00 2880.00
12/02 10120.00 6239.00 3282.00
10130.00 6043.00 3296.00
6/03 12220.00 6973.00 3988.00
12870.00 7157.00 4391.00
12/03 14964.00 8029.00 4923.00
15215.00 8165.00 4901.00
6/04 15266.00 8305.00 5032.00
15868.00 8150.00 4661.00
12/04 18084.00 8902.00 5346.00
</Table>

<Table>
<Caption>
ENDED 12/31/04
------------------------------------------------------------------------
ADVISOR ADVISOR
NO LOAD CLASS A CLASS A ADVISOR NASDAQ
CLASS (NO LOAD) (LOAD ADJUSTED)(1) CLASS C S&P 500 COMPOSITE
- -----------------------------------------------------------------------------------------------

One Year 20.84% 20.63% 13.73% 20.08% 10.88% 8.59%
- -----------------------------------------------------------------------------------------------
Three Years 19.45% 19.19% 16.89% N/A 3.59% 3.71%
- -----------------------------------------------------------------------------------------------
Five Years 12.58% N/A N/A N/A -2.30% -11.77%
- -----------------------------------------------------------------------------------------------
Since Inception No
Load Class
(12/31/99) 12.56% N/A N/A N/A -2.30% -11.77%
- -----------------------------------------------------------------------------------------------
Since Inception
Advisor Class A
(4/26/01) N/A 15.83% 14.04% N/A 1.17% 1.83%
- -----------------------------------------------------------------------------------------------
Since Inception
Advisor Class C
(06/28/02) N/A N/A N/A 22.43% 10.34% 17.12%
- -----------------------------------------------------------------------------------------------
</Table>

(1) Reflects front-end sales charge of 5.75%.

THE MEDICAL FUND
SEPTEMBER 30, 1999 -- DECEMBER 31, 2004
[GRAPH]

<Table>
<Caption>
THE MEDICAL FUND - NO
LOAD CLASS S&P 500 NASDAQ COMPOSITE
--------------------- ------- ----------------

9/30/99 10000.00 10000.00 10000.00
16910.00 11751.00 16652.00
6/00 19360.00 11439.00 14442.00
21130.00 11328.00 13374.00
12/00 20980.00 10442.00 8996.00
18100.00 9204.00 6701.00
6/01 19140.00 9743.00 7867.00
17520.00 8313.00 5458.00
12/01 18091.00 9201.00 7102.00
16518.00 9226.00 6720.00
6/02 13273.00 7990.00 5328.00
12010.00 6610.00 4268.00
12/02 12819.00 7167.00 4863.00
12960.00 6942.00 4884.00
6/03 15126.00 8010.00 5909.00
15076.00 8222.00 6507.00
12/03 15791.00 9223.00 7295.00
15802.00 9380.00 7262.00
6/04 15912.00 9541.00 7457.00
15721.00 9363.00 6907.00
12/04 16890.00 10227.00 7922.00
</Table>

<Table>
<Caption>
ENDED 12/31/04
--------------------------------------------------------------
ADVISOR ADVISOR
NO LOAD CLASS A CLASS A NASDAQ
CLASS (NO LOAD) (LOAD ADJUSTED)(1) S&P 500 COMPOSITE
- ---------------------------------------------------------------------------------------------

One Year 6.96% 6.59% 0.49% 10.88% 8.59%
- ---------------------------------------------------------------------------------------------
Three Years -2.26% -2.70% -4.58% 3.59% 3.71%
- ---------------------------------------------------------------------------------------------
Five Years 4.82% N/A N/A -2.30% -11.77%
- ---------------------------------------------------------------------------------------------
Since Inception
No Load Class
(9/30/99) 10.48% N/A N/A 0.43% -4.34%
- ---------------------------------------------------------------------------------------------
Since Inception
Advisor Class A
(4/26/01) N/A -2.49% -4.03% 1.17% 1.83%
- ---------------------------------------------------------------------------------------------
</Table>

(1) Reflects front-end sales charge of 5.75%.

THE SMALL CAP OPPORTUNITIES FUND
MARCH 20, 2000 -- DECEMBER 31, 2004
[GRAPH]

<Table>
<Caption>
THE SMALL CAP
OPPORTUNITIES FUND - NO
LOAD CLASS S&P 500 NASDAQ COMPOSITE
----------------------- ------- ----------------

3/20/00 10000.00 10000.00 10000.00
9900.00 10290.00 9919.00
6/00 10210.00 10016.00 8603.00
10970.00 9919.00 7967.00
12/00 11100.00 9143.00 5359.00
12180.00 8059.00 3992.00
6/01 13940.00 8531.00 4687.00
12610.00 7279.00 3251.00
12/01 14500.00 8057.00 4231.00
14610.00 8079.00 4003.00
6/02 13680.00 6996.00 3174.00
10730.00 5788.00 2542.00
12/02 10110.00 6276.00 2897.00
10915.00 6078.00 2909.00
6/03 12738.00 7014.00 3520.00
14581.00 7200.00 3876.00
12/03 16834.00 8076.00 4346.00
16681.00 8213.00 4326.00
6/04 17352.00 8354.00 4442.00
17230.00 8198.00 4115.00
12/04 19594.00 8955.00 4719.00
</Table>

One Year 16.40% 16.17% 9.47% 10.88% 8.59%
- ----------------------------------------------------------------------------------------------
Three Years 10.56% 10.33% 8.25% 3.59% 3.71%
- ----------------------------------------------------------------------------------------------
Since Inception
No Load Class
(3/20/00) 15.08% N/A N/A -2.28% -14.53%
- ----------------------------------------------------------------------------------------------
Since Inception
Advisor Class A
(12/31/01) N/A 10.31% 8.25% 3.59% 3.71%
- ----------------------------------------------------------------------------------------------
</Table>

(1) Reflects front-end sales charge of 5.75%.

KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS
EXPENSE EXAMPLE
December 31, 2004

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 one 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 July 1, 2004 to December 31, 2004.

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
includes Feeder Fund-specific expenses as well as the expenses allocated from
the Master Portfolio.

Although the Feeder Funds charge no transaction fees, a shareholder will be
assessed 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 the redemption or exchange of Fund
shares held for less than one month. These fees will be paid to the Feeder Funds
to help offset transaction costs. The Feeder Funds reserve the right to waive
the redemption fee, subject to their sole discretion,

in instances deemed not to be disadvantageous to the Feeder Funds or
shareholders.

One may use the provided information in the first line, together with the
amounts one has invested, to estimate the expenses that one paid over the
period. Simply divide one's 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 one paid on the 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 one paid for the period. One 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 one's 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 one determine the
relative total costs of owning different funds. In addition, if these
transactional costs were included, one's costs would have been higher.

EXPENSE EXAMPLE

<Table>
<Caption>
ENDING ACCOUNT EXPENSES PAID
BEGINNING ACCOUNT VALUE DURING PERIOD*
VALUE (7/1/04) (12/31/04) (7/1/04 TO 12/31/04)
----------------- -------------- --------------------

THE INTERNET FUND
No Load Class Actual.................. $1,000.00 $1,130.60 $12.51
No Load Class Hypothetical (5% return
before expenses).................... $1,000.00 $1,026.64 $11.90
Advisor Class A Actual................ $1,000.00 $1,129.20 $13.84
Advisor Class A Hypothetical (5%
return before expenses)............. $1,000.00 $1,024.14 $13.16
THE INTERNET EMERGING GROWTH FUND
No Load Class Actual.................. $1,000.00 $1,076.70 $13.70
No Load Class Hypothetical (5% return
before expenses).................... $1,000.00 $1,023.75 $13.35
THE PARADIGM FUND
No Load Class Actual.................. $1,000.00 $1,184.60 $ 7.50
No Load Class Hypothetical (5% return
before expenses).................... $1,000.00 $1,036.35 $ 6.99
Advisor Class A Actual................ $1,000.00 $1,183.20 $ 8.86
Advisor Class A Hypothetical (5%
return before expenses)............. $1,000.00 $1,033.85 $ 8.26
Advisor Class C Actual................ $1,000.00 $1,180.80 $11.59
Advisor Class C Hypothetical (5%
return before expenses)............. $1,000.00 $1,028.85 $10.79
THE MEDICAL FUND
No Load Class Actual.................. $1,000.00 $1,061.40 $11.85
No Load Class Hypothetical (5% return
before expenses).................... $1,000.00 $1,027.13 $11.66
Advisor Class A Actual................ $1,000.00 $1,059.80 $13.14
Advisor Class A Hypothetical (5%
return before expenses)............. $1,000.00 $1,024.63 $12.91
THE SMALL CAP OPPORTUNITIES FUND
No Load Class Actual.................. $1,000.00 $1,129.20 $ 7.45
No Load Class Hypothetical (5% return
before expenses).................... $1,000.00 $1,036.09 $ 7.12
Advisor Class A Actual................ $1,000.00 $1,127.50 $ 8.78
Advisor Class A Hypothetical (5%
return before expenses)............. $1,000.00 $1,033.59 $ 8.39
THE KINETICS GOVERNMENT MONEY MARKET
FUND
No Load Class Actual.................. $1,000.00 $1,000.00 $ 6.90
No Load Class Hypothetical (5% return
before expenses).................... $1,000.00 $1,036.27 $ 7.03
</Table>

- ------------------
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 of 2.34% for The
Internet Fund No Load Class, 2.59% for The Internet Fund Advisor Class A,
2.62% for The Internet Emerging Growth Fund, 1.37% for The Paradigm Fund No
Load Class, 1.62% for The Paradigm Fund Advisor Class A, 2.12% for The
Paradigm Fund Advisor Class C, 2.29% for The Medical Fund No Load Class, 2.54%
for The Medical Fund Advisor Class A, 1.39% for The Small Cap Opportunities
Fund No Load Class, 1.64% for The Small Cap Opportunities Fund Advisor Class A
and 1.37% for The Kinetic Government Money Market Fund, multiplied by the
average account value over the period, multiplied by 184/365.

KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS
STATEMENT OF ASSETS & LIABILITIES
December 31, 2004

<Table>
<Caption>
THE INTERNET
THE INTERNET EMERGING GROWTH
FUND FUND
- ----------------------------------------------------------------------------------

ASSETS:
Investments in the Master Portfolios, at
value*....................................... $ 202,702,639 $ 4,587,346
Receivable from Adviser........................ -- 2,446
Receivable for Master Portfolio interest
sold......................................... 555,740 --
Receivable for Fund shares sold................ 9,691 19,708
Prepaid expenses and other assets.............. 13,057 8,801
------------- ------------
Total assets................................. 203,281,127 4,618,301
------------- ------------
LIABILITIES:
Payable for Master Portfolio interest
purchased.................................... -- 18,394
Payable to Directors and Officers.............. 11,628 341
Payable for Fund shares repurchased............ 565,432 1,313
Payable for service fees....................... 42,755 969
Payable for distribution fees.................. 76 --
Accrued expenses and other liabilities......... 378,844 12,934
------------- ------------
Total liabilities............................ 998,735 33,951
------------- ------------
Net assets................................... $ 202,282,392 $ 4,584,350
============= ============
NET ASSETS CONSIST OF:
Paid in capital................................ $ 371,943,228 $ 15,378,135
Accumulated net investment loss................ (1,845,522) (41,327)
Accumulated net realized loss on investments,
options and written option contracts......... (177,892,521) (11,490,782)
Net unrealized appreciation (depreciation) on:
Investments.................................. 9,776,014 738,883
Written option contracts..................... 301,193 (559)
------------- ------------
Net assets................................... $ 202,282,392 $ 4,584,350
============= ============
CALCULATION OF NET ASSET VALUE PER SHARE -- NO
LOAD CLASS:
Net assets..................................... $ 201,928,687 $ 4,584,350
Shares outstanding............................. 7,986,054 1,018,413
Net asset value per share (offering and
redemption price)............................ $ 25.29 $ 4.50
============= ============
CALCULATION OF NET ASSET VALUE PER SHARE --
ADVISOR CLASS A:
Net assets..................................... $ 353,705
Shares outstanding............................. 14,190
Net asset value per share...................... $ 24.93
=============
Offering price per share ($24.93 divided by
.9425)....................................... $ 26.45
=============
</Table>

- ------------------
* 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.

KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS
STATEMENT OF ASSETS & LIABILITIES
December 31, 2004

<Table>
<Caption>
THE
PARADIGM THE MEDICAL
FUND FUND
- ----------------------------------------------------------------------------------------

ASSETS:
Investments in the Master Portfolios, at value*............ $125,387,144 $120,321,037
Receivable from Adviser.................................... 327 --
Receivable for Master Portfolio interest sold.............. -- 19,636
Receivable for Fund shares sold............................ 1,573,621 4,184
Prepaid expenses and other assets.......................... 23,246 5,805
------------ -----------
Total assets............................................. 126,984,338 20,350,662
------------ -----------
LIABILITIES:
Payable for Master Portfolio interest purchased............ 1,372,871 --
Payable to Directors and Officers.......................... 6,678 2,066
Payable for Fund shares repurchased........................ 200,750 23,820
Payable for service fees................................... 25,055 4,349
Payable for distribution fees.............................. 10,638 143
Accrued expenses and other liabilities..................... 104,132 41,104
------------ -----------
Total liabilities........................................ 1,720,124 71,482
------------ -----------
Net assets............................................... $125,264,214 $20,279,180
============ ===========
NET ASSETS CONSIST OF:
Paid in capital............................................ $ 99,027,503 $21,969,711
Accumulated net investment loss............................ (414,319) --
Accumulated net realized gain (loss) on investments,
options and written option contracts..................... 118,698 (2,022,632)
Net unrealized appreciation on:
Investments.............................................. 26,532,332 252,072
Written option contracts................................. -- 80,029
------------ -----------
Net assets............................................... $125,264,214 $20,279,180
============ ===========
CALCULATION OF NET ASSET VALUE PER SHARE -- NO LOAD CLASS:
Net assets................................................. $ 89,313,244 $19,582,854
Shares outstanding......................................... 5,091,210 1,168,760
Net asset value per share (offering and redemption
price)................................................... $ 17.54 $ 16.76
============ ===========
CALCULATION OF NET ASSET VALUE PER SHARE -- ADVISOR CLASS A:
Net assets................................................. $ 26,524,530 $ 696,326
Shares outstanding......................................... 1,524,537 42,226
Net asset value per share.................................. $ 17.40 $ 16.49
============ ===========
Offering price per share ($17.40 divided by .9425 and
$16.49 divided by .9425, respectively)................... $ 18.46 $ 17.50
============ ===========
CALCULATION OF NET ASSET VALUE PER SHARE -- ADVISOR CLASS C:
Net assets................................................. $ 9,426,440
Shares outstanding......................................... 547,764
Net asset value per share (offering and redemption
price)................................................... $ 17.21
============
</Table>

See Notes to the Financial Statements.

KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS
STATEMENT OF ASSETS & LIABILITIES
December 31, 2004

<Table>
<Caption>
THE SMALL THE KINETICS
CAP GOVERNMENT
OPPORTUNITIES MONEY
FUND MARKET FUND
- ------------------------------------------------------------------------------------------

ASSETS:
Investments in the Master Portfolios, at value*............ $38,655,457 $1,155,562
Receivable from Adviser.................................... 41 79
Receivable for Master Portfolio interest sold.............. -- 8,068
Receivable for Fund shares sold............................ 546,436 16,760
Prepaid expenses and other assets.......................... 17,121 16,036
----------- ----------
Total assets............................................. 39,219,055 1,196,505
----------- ----------
LIABILITIES:
Payable for Master Portfolio interest purchased............ 489,272 --
Payable to Directors and Officers.......................... 2,078 112
Payable for Fund shares repurchased........................ 57,165 24,828
Payable for service fees................................... 7,578 250
Payable for distribution fees.............................. 582 --
Accrued expenses and other liabilities..................... 30,744 5,070
----------- ----------
Total liabilities........................................ 587,419 30,260
----------- ----------
Net assets............................................... $38,631,636 $1,166,245
=========== ==========
NET ASSETS CONSIST OF:
Paid in capital............................................ $29,771,131 $1,166,245
Accumulated net investment income.......................... -- --
Accumulated net realized gain on investments, options and
written option contracts................................. 664,311 --
Net unrealized appreciation on:
Investments.............................................. 8,196,194 --
Written option contracts................................. -- --
----------- ----------
Net assets............................................... $38,631,636 $1,166,245
=========== ==========
CALCULATION OF NET ASSET VALUE PER SHARE -- NO LOAD CLASS:
Net assets................................................. $35,702,410 $1,166,245
Shares outstanding......................................... 1,910,392 1,166,245
Net asset value per share (offering and redemption
price)................................................... $ 18.69 $ 1.00
=========== ==========
CALCULATION OF NET ASSET VALUE PER SHARE -- ADVISOR CLASS A:
Net assets................................................. $ 2,929,226
Shares outstanding......................................... 157,253
Net asset value per share.................................. $ 18.63
===========
Offering price per share ($18.63 divided by .9425)......... $ 19.77
===========
</Table>

See Notes to the Financial Statements.

KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS
STATEMENT OF OPERATIONS
For the Year Ended December 31, 2004

<Table>
<Caption>
THE INTERNET
THE INTERNET EMERGING
FUND GROWTH FUND
- -----------------------------------------------------------------------------------------

INVESTMENT INCOME ALLOCATED FROM MASTER PORTFOLIOS:
Dividends+................................................ $ 2,796,012 $123,825
Interest.................................................. 2,836,489 71,648
Income from securities lending............................ 134,596 1,084
------------ --------
Total investment income............................... 5,767,097 196,557
------------ --------
EXPENSES:
Expenses allocated from Master Portfolios................. 2,962,433 74,719
Distribution fees -- Advisor Class A...................... 1,991 --
Shareholder servicing fees and expenses................... 1,366,063 42,084
Reports to shareholders................................... 208,330 5,051
Administration fees....................................... 147,393 3,077
Professional fees......................................... 85,919 5,628
Directors' and Officers' fees and expenses................ 39,080 976
Registration fees......................................... 24,322 17,648
Fund accounting fees...................................... 10,570 --
Other expenses............................................ 21,111 333
------------ --------
Total expenses........................................ 4,867,212 149,516
Less, expense reimbursement............................... -- (32,794)
------------ --------
Net expenses.......................................... 4,867,212 116,722
------------ --------
Net investment income................................. 899,885 79,835
------------ --------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS ALLOCATED
FROM MASTER PORTFOLIOS:
Net realized gain on:
Investments and foreign currency...................... 33,291,928 128,442
Written option contracts expired or closed............ 19,359 --
Net change in unrealized appreciation (depreciation) of:
Investments and foreign currency...................... (16,648,921) 104,163
Written option contracts.............................. 133,856 (559)
------------ --------
Net gain on investments............................... 16,796,222 232,046
------------ --------
Net increase in net assets resulting from
operations.......................................... $ 17,696,107 $311,881
============ ========
+ Net of Foreign Taxes Withheld of: $ 16,493 $ 358
============ ========
</Table>

See Notes to the Financial Statements.

KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS
STATEMENT OF OPERATIONS
For the Year Ended December 31, 2004

<Table>
<Caption>
THE PARADIGM THE MEDICAL
FUND FUND
- ----------------------------------------------------------------------------------------

INVESTMENT INCOME ALLOCATED FROM MASTER PORTFOLIOS:
Dividends+................................................ $ 851,498 $ 233,471
Interest.................................................. 206,099 41,942
Income from securities lending............................ 3,588 2,401
----------- ----------
Total investment income............................... 1,061,185 277,814
----------- ----------
EXPENSES:
Expenses allocated from Master Portfolios................. 1,131,168 350,117
Distribution fees -- Advisor Class A...................... 46,600 1,751
Distribution fees -- Advisor Class C...................... 36,825 --
Shareholder servicing fees and expenses................... 314,427 140,069
Reports to shareholders................................... 72,920 20,343
Administration fees....................................... 50,407 15,931
Professional fees......................................... 37,839 12,726
Directors' and Officers' fees and expenses................ 18,038 5,047
Registration fees......................................... 42,876 24,000
Fund accounting fees...................................... 8,582 1,143
Other expenses............................................ 2,344 2,371
----------- ----------
Total expenses........................................ 1,762,026 573,498
Less, expense reimbursement............................... (290,017) (33,541)
----------- ----------
Net expenses.......................................... 1,472,009 539,957
----------- ----------
Net investment loss................................... (410,824) (262,143)
----------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS ALLOCATED
FROM MASTER PORTFOLIOS:
Net realized gain on:
Investments and foreign currency...................... 3,960,697 437,562
Written option contracts expired or closed............ 74,512 108,973
Net change in unrealized appreciation (depreciation) of:
Investments and foreign currency...................... 14,057,708 1,116,097
Written option contracts.............................. (69,146) 1,688
----------- ----------
Net gain on investments............................... 18,023,771 1,664,320
----------- ----------
Net increase in net assets resulting from
operations.......................................... $17,612,947 $1,402,177
=========== ==========
+ Net of Foreign Taxes Withheld of: $ 48,359 $ 14,416
=========== ==========
</Table>

See Notes to the Financial Statements.

KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS
STATEMENT OF OPERATIONS
For the Year Ended December 31, 2004

<Table>
<Caption>
THE KINETICS
THE SMALL CAP GOVERNMENT
OPPORTUNITIES MONEY MARKET
FUND FUND
- ------------------------------------------------------------------------------------------

INVESTMENT INCOME ALLOCATED FROM MASTER PORTFOLIOS:
Dividends+................................................ $ 602,296 $ --
Interest.................................................. 93,090 19,981
Income from securities lending............................ 7,345 --
---------- --------
Total investment income............................... 702,731 19,981
---------- --------
EXPENSES:
Expenses allocated from Master Portfolios................. 276,572 16,342
Distribution fees -- Advisor Class A...................... 5,473 --
Shareholder servicing fees and expenses................... 94,028 7,791
Reports to shareholders................................... 16,661 2,438
Administration fees....................................... 14,380 618
Professional fees......................................... 15,250 4,462
Directors' and Officers' fees and expenses................ 5,036 639
Registration fees......................................... 44,069 9,516
Fund accounting fees...................................... 1,908 --
Other expenses............................................ 1,455 1,148
---------- --------
Total expenses........................................ 474,832 42,954
Less, expense reimbursement............................... (67,248) (22,973)
---------- --------
Net expenses.......................................... 407,584 19,981
---------- --------
Net investment income................................. 295,147 --
---------- --------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS ALLOCATED
FROM MASTER PORTFOLIOS:
Net realized gain (loss) on:
Investments and foreign currency...................... 2,050,673 --
Written option contracts expired or closed............ (59,189) --
Net change in unrealized appreciation of:
Investments and foreign currency...................... 2,360,719 --
Written option contracts.............................. 7,445 --
---------- --------
Net gain on investments............................... 4,359,648 --
---------- --------
Net increase in net assets resulting from
operations.......................................... $4,654,795 $ --
========== ========
+ Net of Foreign Taxes Withheld of: $ 2,478 $ --
========== ========
</Table>

See Notes to the Financial Statements.

KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS
STATEMENTS OF CHANGES IN NET ASSETS

<Table>
<Caption>
THE INTERNET EMERGING
THE INTERNET FUND GROWTH FUND
------------------------------ ---------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2004 2003 2004 2003
- ---------------------------------------------------------------------------------------------

OPERATIONS:
Net investment income........ $ 899,885 $ 249,038 $ 79,835 $ 40,760
Net realized gain (loss) on
sale of investments,
foreign currency and
written option contracts
expired or closed.......... 33,311,287 21,223,728 128,442 (885,715)
Net change in unrealized
appreciation (depreciation)
of investments, foreign
currency and written
options.................... (16,515,065) 70,176,722 103,604 1,961,208
------------ --------------- ----------- -----------
Net increase in net
assets resulting from
operations............. 17,696,107 91,649,488 311,881 1,116,253
------------ --------------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS
-- NO LOAD CLASS:
Net investment income........ (2,899,789) (740,840) (107,877) (51,601)
Net realized gains........... -- -- -- --
------------ --------------- ----------- -----------
Total distributions...... (2,899,789) (740,840) (107,877) (51,601)
------------ --------------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS
-- ADVISOR CLASS A:
Net investment income........ (3,218) -- N/A N/A
Net realized gains........... -- -- N/A N/A
------------ --------------- ----------- -----------
Total distributions...... (3,218) -- N/A N/A
------------ --------------- ----------- -----------
CAPITAL SHARE TRANSACTIONS --
NO LOAD CLASS:
Proceeds from shares sold.... 20,187,510 1,846,929,452 1,385,953 4,025,363
Proceeds from shares issued
to holders in reinvestment
of dividends............... 2,758,435 706,523 97,802 50,471
Cost of shares redeemed...... (66,950,463) (1,891,182,828) (1,780,526) (3,801,335)
------------ --------------- ----------- -----------
Net increase (decrease)
in net assets resulting
from capital share
transactions........... (44,004,518) (43,546,853) (296,771) 274,499
------------ --------------- ----------- -----------
</Table>

See Notes to the Financial Statements.

KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)

CAPITAL SHARE TRANSACTIONS --
ADVISOR CLASS A:
Proceeds from shares sold.... $ 21,396,074 $ 942,552,877 $ N/A $ N/A
Proceeds from shares issued
to holders in reinvestment
of dividends............... 3,128 -- N/A N/A
Cost of shares redeemed...... (21,304,122) (948,640,729) N/A N/A
------------ --------------- ----------- -----------
Net increase (decrease)
in net assets resulting
from capital share
transactions........... 95,080 (6,087,852) N/A N/A
------------ --------------- ----------- -----------
TOTAL INCREASE (DECREASE) IN
NET ASSETS................... (29,116,338) 41,273,943 (92,767) 1,339,151
NET ASSETS:
Beginning of year............ 231,398,730 190,124,787 4,677,117 3,337,966
------------ --------------- ----------- -----------
End of year*................. $202,282,392 $ 231,398,730 $ 4,584,350 $ 4,677,117
============ =============== =========== ===========
*Including undistributed net
investment loss of:.......... $ (1,845,522) $ (386,164) $ (41,327) $ (12,842)
------------ --------------- ----------- -----------
CHANGES IN SHARES
OUTSTANDING -- NO LOAD CLASS:
Shares sold.................. 863,154 102,931,421 324,922 963,359
Shares issued in reinvestment
of dividends and
distributions.............. 108,472 30,440 21,685 11,765
Shares redeemed.............. (2,895,291) (104,412,740) (419,861) (913,077)
------------ --------------- ----------- -----------
Net increase (decrease)
in shares
outstanding............ (1,923,665) (1,450,879) (73,254) 62,047
============ =============== =========== ===========
CHANGES IN SHARES OUTSTANDING--
ADVISOR CLASS A:
Shares sold.................. 964,063 50,261,575
Shares issued in
reinvestments of dividends
and distributions.......... 125 --
Shares redeemed.............. (968,696) (50,273,636)
------------ ---------------
Net decrease in shares
outstanding.............. (4,508) (12,061)
============ ===============
</Table>

See Notes to the Financial Statements.

KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS
STATEMENTS OF CHANGES IN NET ASSETS

<Table>
<Caption>
THE PARADIGM FUND THE MEDICAL FUND
----------------------------- ----------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2004 2003 2004 2003
- -------------------------------------------------------------------------------------------------------

OPERATIONS:
Net investment income (loss)............ $ (410,824) $ 278,426 $ (262,143) $ (405,563)
Net realized gain (loss) on sale of
investments, foreign currency and
written option contracts expired or
closed................................ 4,035,209 453,544 546,535 (147,989)
Net change in unrealized appreciation of
investments, foreign currency and
written options....................... 13,988,562 12,195,026 1,117,785 5,625,536
------------ ------------ ----------- ------------
Net increase in net assets resulting
from operations................... 17,612,947 12,926,996 1,402,177 5,071,984
------------ ------------ ----------- ------------
DISTRIBUTIONS TO
SHAREHOLDERS -- NO LOAD CLASS:
Net investment income................... (73,771) (207,871) -- --
Net realized gains...................... (2,290,393) -- -- --
------------ ------------ ----------- ------------
Total distributions................. (2,364,164) (207,871) -- --
------------ ------------ ----------- ------------
DISTRIBUTIONS TO
SHAREHOLDERS -- ADVISOR CLASS A:
Net investment income................... (22,189) (26,269) -- --
Net realized gains...................... (689,040) -- -- --
------------ ------------ ----------- ------------
Total distributions................. (711,229) (26,269) -- --
------------ ------------ ----------- ------------
DISTRIBUTIONS TO
SHAREHOLDERS -- ADVISOR CLASS C:
Net investment income................... (7,531) (1,630) N/A N/A
Net realized gains...................... (233,914) -- N/A N/A
------------ ------------ ----------- ------------
Total distributions................. (241,445) (1,630) N/A N/A
------------ ------------ ----------- ------------
CAPITAL SHARE TRANSACTIONS -- NO LOAD
CLASS:
Proceeds from shares sold............... 57,276,719 68,328,542 3,456,495 69,080,033
Proceeds from shares issued to holders
in reinvestment of dividends.......... 2,324,520 205,494 -- --
Cost of shares redeemed................. (37,924,198) (24,689,332) (8,926,297) (72,786,711)
------------ ------------ ----------- ------------
Net increase (decrease) in net
assets resulting from capital
share transactions................ 21,677,041 43,844,704 (5,469,802) (3,706,678)
------------ ------------ ----------- ------------
CAPITAL SHARE TRANSACTIONS -- ADVISOR
CLASS A:
Proceeds from shares sold............... 13,180,643 34,835,040 142,200 70,038,917
Proceeds from shares issued to holders
in reinvestment of dividends.......... 624,768 23,597 -- --
Cost of shares redeemed................. (3,787,846) (30,227,020) (248,964) (70,349,535)
------------ ------------ ----------- ------------
Net increase (decrease) in net
assets resulting from capital
share transactions................ 10,017,565 4,631,617 (106,764) (310,618)
------------ ------------ ----------- ------------
CAPITAL SHARE TRANSACTIONS -- ADVISOR
CLASS C:
Proceeds from shares sold............... 6,800,263 1,455,581 N/A N/A
Proceeds from shares issued to holders
in reinvestment of dividends.......... 233,753 1,630 N/A N/A
Cost of shares redeemed................. (688,644) (201,775) N/A N/A
------------ ------------ ----------- ------------
Net increase in net assets resulting
from capital share transactions... 6,345,372 1,255,436 N/A N/A
------------ ------------ ----------- ------------
</Table>

See Notes to the Financial Statements.

KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)

TOTAL INCREASE (DECREASE) IN NET
ASSETS.................................. $ 52,336,087 $ 62,422,983 $(4,174,389) $ 1,054,688
NET ASSETS:
Beginning of year....................... 72,928,127 10,505,144 24,453,569 23,398,881
------------ ------------ ----------- ------------
End of year*............................ $125,264,214 $ 72,928,127 $20,279,180 $ 24,453,569
============ ============ =========== ============
*Including undistributed net investment
income (loss) of:....................... $ (414,319) $ 41,514 $ -- $ --
------------ ------------ ----------- ------------
CHANGES IN SHARES OUTSTANDING -- NO LOAD
CLASS:
Shares sold............................. 3,574,328 5,606,562 222,542 5,058,583
Shares issued in reinvestment of
dividends and distributions........... 132,450 13,875 -- --
Shares redeemed......................... (2,483,043) (2,251,480) (565,590) (5,323,297)
------------ ------------ ----------- ------------
Net increase (decrease) in shares
outstanding....................... 1,223,735 3,368,957 (343,048) (264,714)
============ ============ =========== ============
CHANGES IN SHARES OUTSTANDING -- ADVISOR
CLASS A:
Shares sold............................. 845,585 2,875,038 9,081 4,954,616
Shares issued in reinvestment of
dividends and distributions........... 35,886 1,602 -- --
Shares redeemed......................... (244,418) (2,479,771) (15,883) (4,968,579)
------------ ------------ ----------- ------------
Net increase (decrease) in shares
outstanding....................... 637,053 396,869 (6,802) (13,963)
============ ============ =========== ============
CHANGES IN SHARES OUTSTANDING -- ADVISOR
CLASS C:
Shares sold............................. 434,911 111,607
Shares issued on reinvestment of
dividends and distributions........... 13,575 111
Shares redeemed......................... (44,985) (19,082)
------------ ------------
Net increase in shares
outstanding....................... 403,501 92,636
============ ============
</Table>

See Notes to the Financial Statements.

KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS
STATEMENTS OF CHANGES IN NET ASSETS

<Table>
<Caption>
THE SMALL CAP THE KINETICS GOVERNMENT
OPPORTUNITIES FUND MONEY MARKET FUND
---------------------------- ------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2004 2003 2004 2003
- --------------------------------------------------------------------------------------------

OPERATIONS:
Net investment income...... $ 295,147 $ 385,241 $ -- $ --
Net realized gain on sale
of investments, foreign
currency and written
option contracts expired
or closed................ 1,991,484 1,510,246 -- --
Net change in unrealized
appreciation of
investments, foreign
currency and written
options.................. 2,368,164 5,901,833 -- --
------------ ------------- ------------ ---------------
Net increase in net
assets resulting from
operations........... 4,654,795 7,797,320 -- --
------------ ------------- ------------ ---------------
DISTRIBUTIONS TO SHAREHOLDERS
-- NO LOAD CLASS:
Net investment income...... (305,568) (248,072) -- --
Net realized gains......... (746,333) -- -- --
------------ ------------- ------------ ---------------
Total distributions.... (1,051,901) (248,072) -- --
------------ ------------- ------------ ---------------
DISTRIBUTIONS TO SHAREHOLDERS
-- ADVISOR CLASS A:
Net investment income...... (20,162) (18,348) N/A N/A
Net realized gains......... (62,614) -- N/A N/A
------------ ------------- ------------ ---------------
Total distributions.... (82,776) (18,348) N/A N/A
------------ ------------- ------------ ---------------
CAPITAL SHARE TRANSACTIONS --
NO LOAD CLASS:
Proceeds from shares
sold..................... 41,958,086 232,755,111 22,151,984 3,078,985,978
Proceeds from shares issued
to holders in
reinvestment of
dividends................ 1,046,435 243,061 -- --
Cost of shares redeemed.... (34,183,636) (219,683,170) (24,033,453) (3,204,595,312)
------------ ------------- ------------ ---------------
Net increase (decrease)
in net assets
resulting from
capital share
transactions......... 8,820,885 13,315,002 (1,881,469) (125,609,334)
------------ ------------- ------------ ---------------
</Table>

See Notes to the Financial Statements.

KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)

CAPITAL SHARE TRANSACTIONS --
ADVISOR CLASS A:
Proceeds from shares
sold..................... $ 1,527,681 $ 1,940,577 $ N/A $ N/A
Proceeds from shares issued
to holders in
reinvestment of
dividends................ 69,025 17,723 N/A N/A
Cost of shares redeemed.... (1,046,134) (549,149) N/A N/A
------------ ------------- ------------ ---------------
Net increase in net
assets resulting from
capital share
transactions......... 550,572 1,409,151 N/A N/A
------------ ------------- ------------ ---------------
TOTAL INCREASE (DECREASE) IN
NET ASSETS................. 12,891,575 22,255,053 (1,881,469) (125,609,334)
NET ASSETS:
Beginning of year............ 25,740,061 3,485,008 3,047,714 128,657,048
------------ ------------- ------------ ---------------
End of year*................. $ 38,631,636 $ 25,740,061 $ 1,166,245 $ 3,047,714
============ ============= ============ ===============
*Including undistributed net
investment income of:...... $ -- $ 80,247 $ -- $ --
------------ ------------- ------------ ---------------
CHANGES IN SHARES OUTSTANDING
-- NO LOAD CLASS:
Shares sold................ 2,480,060 20,391,400 22,151,984 3,078,985,978
Shares issued in
reinvestment of dividends
and distributions........ 55,869 14,633 -- --
Shares redeemed............ (2,055,870) (19,305,578) (24,033,453) (3,204,595,312)
------------ ------------- ------------ ---------------
Net increase (decrease)
in shares
outstanding.......... 480,059 1,100,455 (1,881,469) (125,609,334)
============ ============= ============ ===============
CHANGES IN SHARES OUTSTANDING
-- ADVISOR CLASS A:
Shares sold................ 89,828 148,435 N/A N/A
Shares issued in
reinvestment of dividends
and distributions........ 3,697 1,070 N/A N/A
Shares redeemed............ (62,012) (40,961) N/A N/A
------------ ------------- ------------ ---------------
Net increase in shares
outstanding.......... 31,513 108,544 N/A N/A
============ ============= ============ ===============
</Table>

See Notes to the Financial Statements.

KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS
NOTES TO FINANCIAL STATEMENTS
December 31, 2004

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") and The Kinetics Government Money
Market Fund ("Government") (each a "Feeder Fund" and collectively, the "Feeder
Funds"). Investment operations of the Funds began on October 21, 1996
(Internet), September 30, 1999 (Medical), December 31, 1999 (Emerging and
Paradigm), February 3, 2000 (Government) and March 20, 2000 (Small Cap). Each
series, unlike many other investment companies which directly acquire and manage
their own portfolios of securities, seeks 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, each Fund in the Company, entered into a master-feeder fund
structure. By entering into this structure, each Feeder Fund 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.

Each Feeder Fund's respective interest in the corresponding Master Portfolio as
of December 31, 2004 is as follows:

<Table>
<Caption>
INTEREST IN
MASTER PORTFOLIO
----------------

Internet Fund......................................... 99.997%
Emerging Fund......................................... 99.863%
Paradigm Fund......................................... 99.984%
Medical Fund.......................................... 99.945%
Small Cap Fund........................................ 99.950%
Government Fund....................................... 97.829%
</Table>

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

KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 2004

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. 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. Advisor Class C shares are subject to an
annual Rule 12b-1 fee of 0.75% of average daily net assets. The No Load 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, 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 will assess a 2.00% redemption fee 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

KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 2004

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 the Master
Portfolios. At December 31, 2004, The Internet Portfolio held one such security
which represented 0.99% of the Portfolio's net assets. The Internet Emerging
Growth Portfolio held a security that was fair valued and it represented 0.00%
of the Portfolio's net assets.

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.

KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 2004

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 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 December 31, 2004, 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.

KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 2004

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 33 1/3% 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 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 intends to qualify as a partnership for federal income tax
purposes. Therefore, the Master Portfolios believe they will not be subject to
any federal income tax on their income and net realized capital gains (if any).
However, each investor in the Master Portfolios will report its allocable share
of the Master Portfolio's income and capital gains for purposes of determining
its federal income tax liability.

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

KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 2004

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 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 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. Income, expenses (other than
expenses attributable to a specific class) and realized and unrealized gains or
losses on investments are allocated to each class of shares based on its
relative net assets.

3. INVESTMENT ADVISER

Effective April 28, 2000, the Trust has an Investment Advisory Agreement (the
"Agreement") 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 Agreement,
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

KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 2004

recapture. For the year ended December 31, 2004, the amounts earned by the
Adviser and the reimbursed expenses for the Feeder Funds are as follows:

<Table>
<Caption>
INTERNET EMERGING
--------- ----------

Annual Advisory Rate.................................. 1.25% 1.25%
Expenses Reimbursed by Adviser........................ $ -- $32,794
</Table>

<Table>
<Caption>
PARADIGM MEDICAL
--------- ----------

Annual Advisory Rate.................................. 1.25% 1.25%
Expenses Reimbursed by Adviser........................ $290,017 $33,541
</Table>

<Table>
<Caption>
SMALL CAP GOVERNMENT
--------- ----------

Annual Advisory Rate.................................. 1.25% 0.50%
Expenses Reimbursed by Adviser........................ $67,248 $22,973
</Table>

The Adviser receives a shareholder servicing fee from 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. 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.

The Feeder Funds paid the Chief Compliance Officer $4,000 for the year ended
December 31, 2004.

The Company, on behalf of the Funds, has adopted two Retail Distribution Plans
pursuant to Rule 12b-1 under the Investment Company Act of 1940 (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 year
ended December 31, 2004, payments under the 12b-1 Plan for the Advisor Class A
shares of the Internet, Paradigm, Medical and Small Cap Funds were limited to
0.25% of the average daily net asset value of such shares of such Funds. During
the year ended December 31, 2004, the Advisor Class A shares of the Internet,
Paradigm, Medical and Small Cap Funds incurred expenses of $1,991, $46,600,
$1,751 and $5,473, 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 year ended December 31, 2004,
Paradigm Advisor Class C shares incurred expenses of $36,825, pursuant to the
12b-1 Plan. Through December 31, 2004, the Funds had not issued any Advisor
Class B shares.

KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 2004

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 year ended December 31, 2004, the Distributor received $376, $52,049,
$709 and $5,861 from sales loads from the Internet, Paradigm, Medical and Small
Cap Funds.

4. INCOME TAXES

At December 31, 2004 the Internet, Emerging, Paradigm and Small Cap Funds had
$230,972, $9,549, $220,218 and $756,419, respectively, of undistributed net
investment income on a tax basis.

At December 31, 2004, the Feeder Funds had accumulated net realized capital loss
carryovers expiring in the following years.

<Table>
<Caption>
FEEDER FUND 2011 2010 2009 2008
----------- -------- ------------ ----------- ----------

Internet.................... $ -- $140,178,775 $34,119,306 $ --
Emerging.................... 887,154 2,635,504 5,481,052 2,488,196
Paradigm.................... -- -- -- --
Medical..................... 284,523 1,600,977 -- --
Small Cap................... -- -- -- --
</Table>

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, 2004, The Internet, Emerging, Paradigm and Medical Funds utilized
$32,231,858, $127,278, $76,651 and $455,601, respectively, of capital loss
carryforwards.

At December 31, 2004, the following Feeder Funds deferred, on a tax basis,
post-October losses and straddle losses of:

<Table>
<Caption>
FEEDER FUND POST-OCTOBER LOSSES STRADDLE LOSSES
----------- ------------------- ---------------

Internet..................................... $1,072,702 $862,341
Paradigm..................................... -- 19,348
Medical...................................... -- 137,132
Small Cap.................................... -- 25,460
</Table>

KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 2004

The tax components of dividends paid during the years ended December 31, 2004
and December 31, 2003, are:

<Table>
<Caption>
INTERNET EMERGING
----------------------------- -----------------------------
ORDINARY LONG-TERM ORDINARY LONG-TERM
INCOME CAPITAL GAINS INCOME CAPITAL GAINS
DISTRIBUTION DISTRIBUTION DISTRIBUTION DISTRIBUTION
------------ ------------- ------------ -------------

2004...................... $2,903,007 $-- $107,877 $--
2003...................... $ 740,840 $-- $ 51,601 $--
</Table>

<Table>
<Caption>
PARADIGM MEDICAL
----------------------------- -----------------------------
ORDINARY LONG-TERM ORDINARY LONG-TERM
INCOME CAPITAL GAINS INCOME CAPITAL GAINS
DISTRIBUTION DISTRIBUTION DISTRIBUTION DISTRIBUTION
------------ ------------- ------------ -------------

2004...................... $2,388,158 $928,680 $-- $--
2003...................... $ 235,770 $ -- $-- $--
</Table>

<Table>
<Caption>
SMALL CAP
-----------------------------
ORDINARY LONG-TERM
INCOME CAPITAL GAINS
DISTRIBUTION DISTRIBUTION
------------ -------------

2004............................................... $1,134,677 $--
2003............................................... $ 266,420 $--
</Table>

The following information is presented on an income tax basis as of December 31,
2004.

<Table>
<Caption>
INTERNET EMERGING PARADIGM MEDICAL SMALL CAP
-------- -------- -------- ------- ---------

Distributable ordinary
income...................... $230,974 $9,549 $220,217 $-- $756,417
Distributable long-term
gains....................... $ -- $ -- $ -- $-- $ --
</Table>

5. TAX INFORMATION (UNAUDITED)

The Internet, Emerging, Paradigm and Small Cap Funds designate 17%, 8%, 31% and
3%, respectively, of dividends declared after December 31, 2004 from net
investment income as qualified dividend income under the Jobs and Growth Tax
Relief Reconciliation Act of 2003.

The Paradigm Fund hereby designates $416,961 as ordinary income distributions
and $130,698 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.

The Small Cap Fund hereby designates $187,381 as ordinary income distributions
and $320,755 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.

KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 2004

For corporate shareholders in the Funds, the percentage of ordinary dividend
income distributed for the year ended December 31, 2004, which is designated as
qualifying for the dividends-received deduction, is as follows: Internet 15.8%,
Emerging 7.3%, Paradigm 19.5% and Small Cap 2.7%.

KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS
FINANCIAL HIGHLIGHTS

<Table>
<Caption>
THE INTERNET FUND
----------------------------------------------------------------------------------
NO LOAD CLASS ADVISOR CLASS A NO LOAD CLASS ADVISOR 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,
2004 2004 2003 2003
------------- --------------- ------------- ---------------

PER SHARE DATA(3)
Net Asset Value,
Beginning of Period............. $ 23.31 $22.88 $ 16.69 $16.47
-------- ------ -------- ------
Income from Investment Operations:
Net investment income (loss).... 0.10(6) 0.05(6) 0.03 (0.82)
Net realized and unrealized gain
(loss) on investments......... 2.25 2.23 6.66 7.23
-------- ------ -------- ------
Total gain (loss) from
investment operations...... 2.35 2.28 6.69 6.41
-------- ------ -------- ------
Less Distributions:
From net investment income...... (0.37) (0.23) (0.07) --
From net realized gains......... -- -- -- --
-------- ------ -------- ------
Total distributions......... (0.37) (0.23) (0.07) --
-------- ------ -------- ------
Net Asset Value, End of Period.... $ 25.29 $24.93 $ 23.31 $22.88
======== ====== ======== ======
Total Return(5)................... 10.06% 9.95% 40.11% 38.92%

SUPPLEMENTAL DATA AND RATIOS
Net assets, end of period
(000's)......................... $201,929 $ 354 $230,971 $ 428
Ratio of expenses to average net
assets:
Before expense
reimbursement............... 2.37% 2.62% 2.39% 2.64%
After expense reimbursement... 2.37% 2.62% 2.39% 2.64%
Ratio of net investment income
(loss) to average net assets:
Before expense
reimbursement............... 0.44% 0.19% 0.11% (0.14)%
After expense reimbursement... 0.44% 0.19% 0.11% (0.14)%
Portfolio turnover rate........... N/A N/A N/A N/A
</Table>

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

(+) Commencement of operations.
(1) Not annualized.
(2) Annualized.
(3) Information presented relates to a share of capital stock outstanding for
each period.
(4) Rate listed represents the portfolio turnover rate from January 1, 2000
through April 28, 2000 (date on which Feeder Fund entered into a
master-feeder fund structure).
(5) The total return calculation does not reflect the 5.75% front end sales
charge on Advisor Class A shares.
(6) Net investment income per share represents net investment income divided by
the average shares outstanding throughout the period.

See Notes to the Financial Statements.

<Table>
<Caption>
THE INTERNET FUND
- -------------------------------------------------------------------------------------------------
ADVISOR CLASS A
NO LOAD CLASS ADVISOR CLASS A NO LOAD CLASS APRIL 26, NO LOAD CLASS
FOR THE FOR THE FOR THE 2001(+) FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED THROUGH YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2002 2002 2001 2001 2000
------------- --------------- ------------- --------------- -------------

$ 21.80 $21.75 $ 24.12 $23.50 $ 49.73
-------- ------ -------- ------ --------
(0.08)(6) (0.12)(6) (0.17) (0.12)(6) (0.76)
(5.03) (5.16) (2.15) (1.63) (24.85)
-------- ------ -------- ------ --------
(5.11) (5.28) (2.32) (1.75) (25.61)
-------- ------ -------- ------ --------
-- -- -- -- --
-- -- -- -- --
-------- ------ -------- ------ --------
-- -- -- -- --
-------- ------ -------- ------ --------
$ 16.69 $16.47 $ 21.80 $21.75 $ 24.12
======== ====== ======== ====== ========
(23.44)% (24.28)% (9.62)% (7.45)%(1) (51.50)%
$189,618 $ 507 $297,793 $ 975 $432,978
2.42% 2.67% 2.37% 2.62%(2) 2.06%
2.42% 2.67% 2.37% 2.62%(2) 2.00%
(0.41)% (0.66)% (0.61)% (0.86)%(2) (1.49)%
(0.41)% (0.66)% (0.61)% (0.86)%(2) (1.43)%
N/A N/A N/A N/A 21%(4)
</Table>

See Notes to the Financial Statements.

KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS
FINANCIAL HIGHLIGHTS

<Table>
<Caption>
THE INTERNET
EMERGING GROWTH FUND
------------------------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2004 2003 2002 2001 2000
------------ ------------ ------------ ------------ ------------

PER SHARE DATA(1)
Net Asset Value,
Beginning of Year............ $ 4.28 $ 3.24 $ 4.30 $ 3.69 $10.00
------ ------ ------ ------ ------
Income from Investment
Operations:
Net investment income
(loss)..................... 0.08 0.04 (0.08) (0.03) (0.03)
Net realized and unrealized
gain (loss) on
investments................ 0.25 1.05 (0.98) 0.64 (6.28)
------ ------ ------ ------ ------
Total gain (loss) from
investment operations... 0.33 1.09 (1.06) 0.61 (6.31)
------ ------ ------ ------ ------
Less Distributions:
From net investment income... (0.11) (0.05) -- -- --
From net realized gains...... -- -- -- -- --
------ ------ ------ ------ ------
Total distributions...... (0.11) (0.05) -- -- --
------ ------ ------ ------ ------
Net Asset Value, End of Year... $ 4.50 $ 4.28 $ 3.24 $ 4.30 $ 3.69
====== ====== ====== ====== ======
Total Return................... 7.67% 33.56% (24.65)% 16.53% (63.10)%
SUPPLEMENTAL DATA AND RATIOS
Net assets, end of year
(000's)...................... $4,584 $4,677 $3,338 $5,277 $4,378
Ratio of expenses to average
net assets:
Before expense
reimbursement............ 3.45% 3.64% 3.78% 4.17% 3.33%
After expense
reimbursement............ 2.67% 2.74% 2.74% 2.74% 2.00%
Ratio of net investment income
(loss) to average net assets:
Before expense
reimbursement............ 1.08% 0.11% (3.03)% (2.09)% (1.76)%
After expense
reimbursement............ 1.84% 1.01% (1.99)% (0.66)% (0.43)%
Portfolio turnover rate........ N/A N/A N/A N/A 17%(2)
</Table>

- ------------------
(1) Information presented relates to a share of capital stock outstanding for
each period.
(2) Rate listed represents the portfolio turnover rate from January 1, 2000
through April 28, 2000 (date on which Feeder Fund entered into a
master-feeder fund structure).

See Notes to the Financial Statements.

(This page intentionally left blank)

KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS
FINANCIAL HIGHLIGHTS

<Table>
<Caption>
THE PARADIGM FUND
---------------------------------------------------
NO LOAD CLASS ADVISOR CLASS A ADVISOR CLASS C
FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
2004 2004 2004
------------- --------------- ---------------

PER SHARE DATA(1)
Net Asset Value,
Beginning of Period.............. $ 14.91 $ 14.82 $14.73
------- ------- ------
Income from Investment Operations:
Net investment income (loss)..... (0.06)(7) (0.10)(7) (0.18)(7)
Net realized and unrealized gain
(loss) on investments.......... 3.17 3.16 3.14
------- ------- ------
Total gain (loss) from
investment operations..... 3.11 3.06 2.96
------- ------- ------
Less Distributions:
From net investment income....... (0.02) (0.02) (0.02)
From net realized gains.......... (0.46) (0.46) (0.46)
------- ------- ------
Total distributions......... (0.48) (0.48) (0.48)
------- ------- ------
Net Asset Value, End of Period..... $ 17.54 $ 17.40 $17.21
======= ======= ======
Total Return(6).................... 20.84% 20.63% 20.08%
SUPPLEMENTAL DATA AND RATIOS
Net assets, end of period
(000's).......................... $89,313 $26,525 $9,426
Ratio of expenses to average net
assets:
Before expense reimbursement... 2.10% 2.35% 2.85%
After expense reimbursement.... 1.74% 1.99% 2.49%
Ratio of net investment income
(loss) to average net assets:
Before expense reimbursement... (0.77)% (1.02)% (1.52)%
After expense reimbursement.... (0.41)% (0.66)% (1.16)%
Portfolio turnover rate............ N/A N/A N/A
</Table>

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

(+) Commencement of operations.
(1) Information presented relates to a share of capital stock outstanding for
each period.
(2) Rate listed represents the portfolio turnover rate from January 1, 2000
through April 28, 2000 (date on which Feeder Fund entered into a
master-feeder fund structure).
(3) The amount is less than $0.005 per share.
(4) Not annualized.
(5) Annualized.
(6) The total return calculation does not reflect the 5.75% front end sales
charge on Advisor Class A shares.
(7) Net investment income per share represents net investment income divided by
the average shares outstanding throughout the period.

See Notes to the Financial Statements.

<Table>
<Caption>
THE PARADIGM FUND
-------------------------------------------------------------------------------------------------------
NO LOAD CLASS ADVISOR CLASS A ADVISOR CLASS C NO LOAD CLASS ADVISOR CLASS A ADVISOR 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)(4)
$57,646 $13,157 $2,125 $5,044 $4,943 $ 519
2.24% 2.49% 2.99% 2.97% 3.22% 3.72%(5)
1.74% 1.99% 2.49% 2.74% 2.99% 3.49%(5)
0.57% 0.32% (0.18)% (1.61)% (1.86)% (2.36)%(5)
1.07% 0.82% 0.32% (1.38)% (1.63)% (2.13)%(5)
N/A N/A N/A N/A N/A N/A
</Table>

See Notes to the Financial Statements.

<Table>
<Caption>
THE PARADIGM FUND
---------------------------------------------------
NO LOAD CLASS ADVISOR CLASS A NO LOAD CLASS
FOR THE APRIL 26, 2001(+) FOR THE
YEAR ENDED THROUGH YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
2001 2001 2000
------------- ----------------- -------------

PER SHARE DATA(1)
Net Asset Value,
Beginning of Period.............. $10.40 $10.42 $10.00
------ ------ ------
Income from Investment Operations:
Net investment income (loss)..... (0.13) (0.10)(7) (0.00)(3)
Net realized and unrealized gain
(loss) on investments.......... 0.34 0.26 0.40
------ ------ ------
Total gain (loss) from
investment operations..... 0.21 0.16 0.40
------ ------ ------
Less Distributions:
From net investment income....... -- -- --
From net realized gains.......... -- -- --
------ ------ ------
Total distributions......... -- -- --
------ ------ ------
Net Asset Value, End of Period..... $10.61 $10.58 $10.40
====== ====== ======
Total Return(6).................... 2.02% 1.54%(4) 4.00%
SUPPLEMENTAL DATA AND RATIOS
Net assets, end of period
(000's).......................... $4,817 $4,091 $3,803
Ratio of expenses to average net
assets:
Before expense reimbursement... 3.47% 3.72%(5) 4.96%
After expense reimbursement.... 2.74% 2.99%(5) 2.00%
Ratio of net investment income
(loss) to average net assets:
Before expense reimbursement... (1.91)% (2.16)%(5) (3.02)%
After expense reimbursement.... (1.18)% (1.43)%(5) (0.06)%
Portfolio turnover rate............ N/A N/A 5%(2)
</Table>

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

See Notes to the Financial Statements.

(This page intentionally left blank)

KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS
FINANCIAL HIGHLIGHTS

<Table>
<Caption>
THE MEDICAL FUND
----------------------------------------------------------------------------------
NO LOAD CLASS ADVISOR CLASS A NO LOAD CLASS ADVISOR 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,
2004 2004 2003 2003
------------- --------------- ------------- ---------------

PER SHARE DATA(3)
Net Asset Value, Beginning of
Period.......................... $ 15.67 $15.47 $ 12.72 $12.61
------- ------ ------- ------
Income from Investment Operations:
Net investment loss............. (0.10)(6) (0.11)(6) (0.25) (0.63)
Net realized and unrealized gain
(loss) on investments......... 1.19 1.13 3.20 3.49
------- ------ ------- ------
Total gain (loss) from
investment operations...... 1.09 1.02 2.95 2.86
------- ------ ------- ------
Less Distributions:
From net investment income...... -- -- -- --
From net realized gains......... -- -- -- --
------- ------ ------- ------
Total distributions......... -- -- -- --
------- ------ ------- ------
Net Asset Value, End of Period.... $ 16.76 $16.49 $ 15.67 $15.47
======= ====== ======= ======
Total Return(5)................... 6.96% 6.59% 23.19% 22.68%

SUPPLEMENTAL DATA AND RATIOS
Net assets, end of period
(000's)......................... $19,583 $ 696 $23,695 $ 758
Ratio of expenses to average net
assets:
Before expense
reimbursement............... 2.54% 2.79% 2.52% 2.77%
After expense reimbursement... 2.39% 2.64% 2.52% 2.77%
Ratio of net investment loss to
average net assets:
Before expense
reimbursement............... (1.31)% (1.56)% (1.55)% (1.80)%
After expense reimbursement... (1.16)% (1.41)% (1.55)% (1.80)%
Portfolio turnover rate........... N/A N/A N/A N/A
</Table>

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

See Notes to the Financial Statements.

<Table>
<Caption>
THE MEDICAL FUND
-----------------------------------------------------------------------------------------------
NO LOAD CLASS ADVISOR CLASS A NO LOAD CLASS ADVISOR CLASS A NO LOAD CLASS
FOR THE FOR THE FOR THE APRIL 26, 2001(+) FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED THROUGH YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2002 2002 2001 2001 2000
------------- --------------- ------------- ----------------- -------------

$ 18.06 $18.01 $ 20.98 $18.24 $ 13.35
------- ------ ------- ------ -------
(0.21) (0.24) (0.25) (0.17)(6) (0.15)
(5.05) (5.08) (2.64) (0.03) 7.78
------- ------ ------- ------ -------
(5.26) (5.32) (2.89) (0.20) 7.63
------- ------ ------- ------ -------
-- -- -- -- --
(0.08) (0.08) (0.03) (0.03) --
------- ------ ------- ------ -------
(0.08) (0.08) (0.03) (0.03) --
------- ------ ------- ------ -------
$ 12.72 $12.61 $ 18.06 $18.01 $ 20.98
======= ====== ======= ====== =======
(29.14)% (29.56)% (13.77)% (1.09)%(1) 57.15%
$22,604 $ 794 $40,416 $1,203 $63,314
2.55% 2.80% 2.28% 2.53%(2) 2.21%
2.55% 2.80% 2.28% 2.53%(2) 2.00%
(1.49)% (1.74)% (1.17)% (1.42)%(2) (1.24)%
(1.49)% (1.74)% (1.17)% (1.42)%(2) (1.03)%
N/A N/A N/A N/A 1%(4)
</Table>

See Notes to the Financial Statements.

KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS
FINANCIAL HIGHLIGHTS

<Table>
<Caption>
THE SMALL CAP
OPPORTUNITIES FUND
----------------------------------------------------------------------------------
NO LOAD CLASS ADVISOR CLASS A NO LOAD CLASS ADVISOR 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,
2004 2004 2003 2003
------------- --------------- ------------- ---------------

PER SHARE DATA(3)
Net Asset Value, Beginning of
Period.......................... $ 16.55 $16.50 $ 10.04 $10.03
------- ------ ------- ------
Income from Investment Operations:
Net investment income (loss).... 0.22(6) 0.18(6) 0.25 0.15
Net realized and unrealized gain
(loss) on investments......... 2.49 2.49 6.43 6.47
------- ------ ------- ------
Total gain (loss) from
investment operations...... 2.71 2.67 6.68 6.62
------- ------ ------- ------
Less Distributions:
From net investment income...... (0.16) (0.13) (0.17) (0.15)
From net realized gains......... (0.41) (0.41) -- --
------- ------ ------- ------
Total distributions......... (0.57) (0.54) (0.17) (0.15)
------- ------ ------- ------
Net Asset Value, End of Period.... $ 18.69 $18.63 $ 16.55 $16.50
======= ====== ======= ======
Total Return(5)................... 16.40% 16.17% 66.51% 65.98%
SUPPLEMENTAL DATA AND RATIOS
Net assets, end of period
(000's)......................... $35,702 $2,929 $23,665 $2,075
Ratio of expenses to average net
assets:
Before expense
reimbursement............... 2.03% 2.28% 2.34% 2.59%
After expense reimbursement... 1.74% 1.99% 2.34% 2.59%
Ratio of net investment income
(loss) to average net assets:
Before expense
reimbursement............... 1.01% 0.76% 2.14% 1.89%
After expense reimbursement... 1.30% 1.05% 2.14% 1.89%
Portfolio turnover rate........... N/A N/A N/A N/A
</Table>

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

See Notes to the Financial Statements.

<Table>
<Caption>
THE SMALL CAP
OPPORTUNITIES FUND
-----------------------------------------------------------------------------------------------
NO LOAD CLASS ADVISOR CLASS A NO LOAD CLASS NO LOAD CLASS
FOR THE FOR THE FOR THE MARCH 20,
YEAR ENDED YEAR ENDED YEAR ENDED ADVISOR CLASS A 2000(+) THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2002 2002 2001 2001(+) 2000
------------- --------------- ------------- --------------- ---------------

$14.50 $14.50 $11.10 $14.50 $10.00
------ ------ ------ ------ ------
(0.18)(6) (0.20)(6) (0.19)(6) -- (0.00)(7)
(4.21) (4.20) 3.59 -- 1.10
------ ------ ------ ------ ------
(4.39) (4.40) 3.40 -- 1.10
------ ------ ------ ------ ------
-- -- -- -- --
(0.07) (0.07) -- -- --
------ ------ ------ ------ ------
(0.07) (0.07) -- -- --
------ ------ ------ ------ ------
$10.04 $10.03 $14.50 $14.50 $11.10
====== ====== ====== ====== ======
(30.28)% (30.35)% 30.63% 0.00%(1) 11.00%(1)
$3,313 $ 172 $9,266 $ 1 $ 517
2.95% 3.20% 3.73% N/A 24.50%(2)
2.74% 2.99% 2.74% N/A 2.00%(2)
(1.59)% (1.84)% (2.37)% N/A (22.59)%(2)
(1.38)% (1.63)% (1.38)% N/A (0.09)%(2)
N/A N/A N/A N/A 8%(4)
</Table>

See Notes to the Financial Statements.

KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS
FINANCIAL HIGHLIGHTS

<Table>
<Caption>
THE KINETICS GOVERNMENT MONEY MARKET FUND
------------------------------------------------------------------------
FEBRUARY 3,
FOR THE FOR THE FOR THE FOR THE 2000(+)
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2004 2003 2002 2001 2000
------------ ------------ ------------ ------------ ------------

PER SHARE DATA(3)
Net Asset Value,
Beginning of Period.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ -------- ------- -------
Income from Investment
Operations:
Net investment income.. -- -- 0.00(4) 0.02 0.04
Net realized and
unrealized gain on
investments.......... -- -- -- -- --
------ ------ -------- ------- -------
Total gain from
investment
operations....... -- -- 0.00(4) 0.02 0.04
------ ------ -------- ------- -------
Less Distributions:
From net investment
income............... -- -- (0.00)(4) (0.02) (0.04)
From net realized
gains................ -- -- -- -- --
------ ------ -------- ------- -------
Total
distributions.... -- -- (0.00)(4) (0.02) (0.04)
------ ------ -------- ------- -------
Net Asset Value, End of
Period................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ======== ======= =======
Total Return............. 0.00% 0.00% 0.22% 2.36% 4.20%(1)
SUPPLEMENTAL DATA AND RATIOS
Net assets, end of period
(000's)................ $1,166 $3,048 $128,657 $94,886 $21,532
Ratio of expenses to
average net assets:
Before expense
reimbursement...... 2.11% 1.32% 1.29% 1.35% 1.43%(2)
After expense
reimbursement...... 0.98% 0.94% 1.23% 1.24% 1.25%(2)
Ratio of net investment
income (loss) to
average net assets:
Before expense
reimbursement...... (1.13)% (0.38)% 0.13% 2.12% 4.61%(2)
After expense
reimbursement...... 0.00% 0.00% 0.19% 2.23% 4.79%(2)
Portfolio turnover
rate................... N/A N/A N/A N/A N/A
</Table>

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

(+) Commencement of operations.
(1) Not annualized.
(2) Annualized.
(3) Information presented relates to a share of capital stock outstanding for
each period.
(4) The amount listed is less than $0.005 per share.

See Notes to the Financial Statements.

KINETICS MUTUAL FUNDS, INC.
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM

To the Shareholders of and Board of Directors
Kinetics Mutual Funds, Inc.
Sleepy Hollow, New York

We have audited the accompanying statements of assets and liabilities
of The Internet Fund, The Internet Emerging Growth Fund, The Paradigm
Fund, The Medical Fund, The Small Cap Opportunities Fund and The
Kinetics Government Money Market Fund, each a series of shares of
Kinetics Mutual Funds, Inc. (the "Funds"), as of December 31, 2004,
and the related statement of operations, statement of changes in net
assets and financial highlights for the year then ended. These
financial statements and financial highlights are the responsibility
of the Fund's management. Our responsibility is to express an opinion
on these financial statements and financial highlights based on our
audit. The statement of changes in net assets for the year ended
December 31, 2003 and the financial highlights for each of the four
years in the period ended December 31, 2003 were audited by other
auditors whose report dated February 20, 2004 expressed an unqualified
opinion on the statement of changes in net assets and the financial
highlights.

We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights
referred to above present fairly in all material respects, the
financial position of the above mentioned Funds as of December 31,
2004, the results of their operations, the changes in their net assets
and the financial highlights for the year then ended, in conformity
with accounting principles generally accepted in the United States of
America.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 11, 2005

KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
ALLOCATION OF PORTFOLIO ASSETS
December 31, 2004

THE INTERNET PORTFOLIO
[GRAPH]

<Table>

Common Stocks 76.33
Short-Term Investments 15.27
Preferred Stocks 2.64
Corporate Bonds 2.55
Rights 1.99
Convertible Bonds 1.35
Put Options 0
Call Options 0
Written Options -0.01
Investments Purchased with Cash Proceeds from Securities 8.67
Lending
Other Assets and Liabilities -8.79
</Table>

THE INTERNET EMERGING GROWTH PORTFOLIO
[GRAPH]

<Table>

Common Stocks 65.6
Short-Term Investments 22.59
Preferred Stocks 0.05
Corporate Bonds 4.31
Rights 4.24
Convertible Bonds 2.96
Put Options 0.24
Call Options 0
Written Options -0.26
Investments Purchased with Cash Proceeds from Securities 5.51
Lending
Other Assets and Liabilities -5.24
</Table>

KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
ALLOCATION OF PORTFOLIO ASSETS
December 31, 2004 -- (Continued)

THE PARADIGM PORTFOLIO
[GRAPH]

<Table>

Common Stocks 92.52
Short-Term Investments 7.02
Preferred Stocks 0.00
Corporate Bonds 0.00
Rights 0.00
Convertible Bonds 0.00
Put Options 0.00
Call Options 0.12
Written Options 0.00
Investments Purchased with Cash Proceeds from Securities 7.12
Lending
Other Assets and Liabilities -6.78
</Table>

THE MEDICAL PORTFOLIO
[GRAPH]

<Table>

Common Stocks 99.5
Short-Term Investments 0.56
Preferred Stocks 0
Corporate Bonds 0
Rights 0.01
Convertible Bonds 0
Put Options 0.09
Call Options 0
Written Options -0.02
Investments Purchased with Cash Proceeds from Securities 3.51
Lending
Other Assets and Liabilities -3.65
</Table>

KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
ALLOCATION OF PORTFOLIO ASSETS
December 31, 2004 -- (Continued)

THE SMALL CAP OPPORTUNITIES PORTFOLIO
[GRAPH]

<Table>

Common Stocks 81.33
Short-Term Investments 14.21
Rights 2.20
Convertible Bonds 1.40
Investments Purchased with Cash Proceeds from Securities 13.61
Lending
Liabilities in Excess of Other Assets -12.68
</Table>

KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE INTERNET PORTFOLIO
Portfolio of Investments -- December 31, 2004

<Table>
<Caption>
COMMON STOCKS -- 76.33%+ SHARES VALUE
- ------------------------------------------------------------------------

ACCESS/BROADBAND -- 7.54%+
PrimaCom AG ADR*......................... 610,000 $ 512,400
UnitedGlobalCom, Inc. -- Class A*(2)..... 1,490,000 14,393,400
XM Satellite Radio Holdings,
Inc. -- Class A*....................... 10,000 376,200
------------
15,282,000
------------
BUSINESS SERVICES -- 1.49%+
eSPEED, Inc. -- Class A*................. 100,000 1,237,000
Ritchie Bros. Auctioneers Incorporated... 54,000 1,785,240
------------
3,022,240
------------
COMPUTER GRAPHICS -- 0.04%+
Pixar*................................... 1,000 85,610
------------
COMPUTER HARDWARE/SOFTWARE -- 2.17%+
Apple Computer, Inc.*.................... 1,000 64,400
Comdisco Holding Company, Inc.*(2)....... 194,400 4,337,064
------------
4,401,464
------------
COMPUTER SERVICES -- 11.92%+
Anteon International Corporation*........ 24,000 1,004,640
CACI International, Inc. -- Class A*..... 248,000 16,896,240
ManTech International Corporation --
Class A*............................... 144,000 3,418,560
SunGard Data Systems Inc.*............... 100,000 2,833,000
------------
24,152,440
------------
CONSULTING SERVICES -- 0.52%+
FTI Consulting, Inc.*.................... 50,000 1,053,500
------------
E-BUSINESS SERVICES -- 5.43%+
FindWhat.com*............................ 10,000 177,300
Harris Interactive, Inc.*................ 1,080,000 8,532,000
NetRatings, Inc.*........................ 120,000 2,300,400
------------
11,009,700
------------
</Table>

See Notes to the Financial Statements.

KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE INTERNET PORTFOLIO
Portfolio of Investments -- December 31, 2004 -- (Continued)

<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------

E-COMMERCE -- 13.17%+
CheckFree Corporation*................... 400,000 $ 15,232,000
eBay, Inc.*(1)........................... 35,000 4,069,800
Getty Images, Inc.*...................... 32,900 2,265,165
MarketWatch.com, Inc.*................... 232,000 4,176,000
Overstock.com, Inc.*(2).................. 1,000 69,000
WebMD Corporation*(1).................... 109,000 889,440
------------
26,701,405
------------
EDUCATION -- 1.19%+
Apollo Group, Inc. -- Class A*........... 30,000 2,421,300
------------
HOLDING COMPANY -- 10.58%+
Groupe Bruxelles Lambert S.A. ........... 50,000 4,070,953
Leucadia National Corporation............ 250,000 17,370,000
------------
21,440,953
------------
INDEX FUND -- 0.02%+
Internet HOLDRs Trust*(1)................ 500 35,635
------------
INFRASTRUCTURE -- 2.92%+
Lynch Interactive Corporation*........... 184,400 5,900,800
Sunshine PCS Corporation -- Class A*..... 149,890 14,989
------------
5,915,789
------------
INTERNET SEARCH ENGINES -- 0.25%+
Netease.com, Inc. ADR*................... 5,000 264,150
SINA Corporation*........................ 5,000 160,300
Sohu.com, Inc.*(2)....................... 5,000 88,550
------------
513,000
------------
MEDIA CONTENT -- 11.87%+
Marvel Enterprises, Inc.*................ 322 6,595
The E.W. Scripps Company................. 1,600 77,248
The Washington Post Company -- Class B... 24,400 23,985,688
------------
24,069,531
------------
MULTIMEDIA -- 2.10%+
Gemstar -- TV Guide International,
Inc.*.................................. 720,000 4,262,400
------------
</Table>

See Notes to the Financial Statements.

KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE INTERNET PORTFOLIO
Portfolio of Investments -- December 31, 2004 -- (Continued)

<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------

xRETAIL -- 0.08%+
Copart, Inc.*............................ 6,000 $ 157,920
------------
TRANSPORT -- SERVICES -- 4.30%+
C.H. Robinson Worldwide, Inc. ........... 36,000 1,998,720
Expeditors International of Washington,
Inc. .................................. 120,000 6,705,600
------------
8,704,320
------------
WIRELESS INFRASTRUCTURE -- 0.74%+
QUALCOMM Inc. ........................... 16,000 678,400
Research In Motion Limited*.............. 10,000 824,200
------------
1,502,600
------------
TOTAL COMMON STOCKS
(cost $145,668,912).................... 154,731,807
------------

PREFERRED STOCKS -- 2.64%+
- ------------------------------------------------------------------------

xCABLE TELEVISION PROVIDER -- 0.05%+
Adelphia Communications Corporation, CLB,
7.500%................................. 190,000 95,000
------------
E-COMMERCE -- 2.59%+
InterActiveCorp, CLB, 1.990%(2).......... 108,104 5,243,044
------------
TOTAL PREFERRED STOCKS
(cost $5,721,979)...................... 5,338,044
------------

PRINCIPAL
CORPORATE BONDS -- 2.55%+ AMOUNT
- ------------------------------------------------------------------------

XACCESS/BROADBAND -- 0.99%+
UnitedGlobalCom, Inc., CLB, 10.750%,
2/15/2008 (Default Effective
10/6/2003)*(+)++....................... $ 2,000,000 2,000,000
------------
INTERNET TECHNOLOGY
INFRASTRUCTURE -- 1.56%+
Level 3 Communications, Inc., CLB,
0.000%, 3/15/2010*(+)(2)............... 3,600,000 3,168,000
------------
TOTAL CORPORATE BONDS
(cost $5,166,207)...................... 5,168,000
------------
</Table>

See Notes to the Financial Statements.

KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE INTERNET PORTFOLIO
Portfolio of Investments -- December 31, 2004 -- (Continued)

<Table>
<Caption>
CORPORATE BONDS -- PRINCIPAL
CONVERTIBLE -- 1.35%+ AMOUNT VALUE
- ------------------------------------------------------------------------

CABLE TELEVISION PROVIDER -- 0.02%+
Adelphia Communications Corporation,
6.000%, 2/15/2006 (Default Effective
8/12/2002)*............................ $ 200,000 $ 43,000
------------
INTERNET TECHNOLOGY INFRASTRUCTURE --
1.33%+
Level 3 Communications, Inc., CLB,
6.000%, 3/15/2010(2)................... 4,600,000 2,696,750
------------
TOTAL CORPORATE BONDS -- CONVERTIBLE
(cost $2,416,834)...................... 2,739,750
------------

RIGHTS -- 1.99%+ SHARES
- ------------------------------------------------------------------------

CONTINGENT VALUE RIGHTS -- 1.99%+
Comdisco Holding Company, Inc.#(2) (cost
$3,161,089)............................ 12,000,699 4,020,234
------------

PUT OPTIONS PURCHASED -- 0.00%+ CONTRACTS
- ------------------------------------------------------------------------
EBAY, INC.
Expiring January 2005 at $20.00........ 100 250
Expiring January 2005 at $35.00........ 50 125
------------
375
------------
Electronic Arts, Inc.
Expiring January 2005 at $25.00........ 100 250
------------
Internet HOLDRs Trust
Expiring January 2006 at $60.00........ 7 2,275
Expiring January 2007 at $70.00........ 7 6,545
------------
8,820
------------
TOTAL PUT OPTIONS PURCHASED
(cost $122,940)........................ 9,445
------------
</Table>

See Notes to the Financial Statements.

KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE INTERNET PORTFOLIO
Portfolio of Investments -- December 31, 2004 -- (Continued)

<Table>
<Caption>
PRINCIPAL
SHORT-TERM INVESTMENTS -- 15.27%+ AMOUNT VALUE
- ------------------------------------------------------------------------

DISCOUNT NOTES -- 15.24%+
Federal Home Loan Bank Discount Note,
2.0000%, 1/3/2005...................... $30,897,000 $ 30,895,541
------------
INVESTMENT COMPANIES -- 0.03%+
First American Prime Obligations Fund --
Class I................................ 63,765 63,765
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $30,959,306)..................... 30,959,306
------------

<Caption>
INVESTMENTS PURCHASED WITH CASH
PROCEEDS FROM SECURITIES
LENDING -- 8.67%+ SHARES
- ------------------------------------------------------------------------

INVESTMENT COMPANIES -- 0.19%+
Merrill Lynch Premier Institutional
Fund................................... 397,019 397,019
------------
</Table>

See Notes to the Financial Statements.

KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE INTERNET PORTFOLIO
Portfolio of Investments -- December 31, 2004 -- (Continued)

<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------

REPURCHASE AGREEMENTS -- 8.48%+
CS First Boston Repurchase Agreement,
2.373%, 1/3/2005(3).................... $ 5,369,932 $ 5,369,932
2.290%, 1/3/2005(3).................... 5,369,932 5,369,932
2.290%, 1/3/2005(3).................... 3,221,960 3,221,960
2.290%, 1/3/2005(3).................... 3,221,959 3,221,959
------------
17,183,783
------------
TOTAL INVESTMENTS PURCHASED WITH CASH
PROCEEDS FROM SECURITIES LENDING
(cost $17,580,802)..................... 17,580,802
------------
TOTAL INVESTMENTS -- 108.80%+
(COST $210,798,069).................... $220,547,388
============
</Table>

- -------------------------
* -- Non-income producing security.
(+) -- Security has a stepped rate. The rate listed is as of December 31, 2004.
+ -- Calculated as a percentage of net assets.
++ -- Fair Valued Security.
# -- Contingent value right (contingent upon profitability of company).
ADR -- American Depository Receipts.
CLB -- Callable Security.
(1) -- All or a portion of the shares have been committed as collateral for
written option contracts.
(2) -- This security or a portion of this security was out on loan at December
31, 2004. Total loaned securities had a market value of $17,266,463 at
December 31, 2004.
(3) -- Collateralized by U.S. Government or U.S. Government Agency securities,
U.S. Government Agency mortgage-backed securities, certificates of
deposit or banker's acceptances.

See Notes to the Financial Statements.

KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE INTERNET EMERGING GROWTH PORTFOLIO
Portfolio of Investments -- December 31, 2004

<Table>
<Caption>
COMMON STOCKS -- 65.60%+ SHARES VALUE
- -------------------------------------------------------------------------

ACCESS/BROADBAND -- 1.34%+
PrimaCom AG ADR*.............................. 4,750 $ 3,990
UTStarcom, Inc.*(2)........................... 2,600 57,590
----------
61,580
----------
BROADCAST SERVICES -- 0.15%+
Liberty Media Corporation -- Class A*......... 504 5,534
Liberty Media International, Inc. -- Class
A*.......................................... 30 1,387
----------
6,921
----------
BUSINESS SERVICES -- 17.75%+
Deluxe Corporation............................ 1,100 41,063
eSPEED, Inc. -- Class A*...................... 10,000 123,700
FactSet Research Systems, Inc. ............... 400 23,376
Interactive Data Corporation*................. 13,000 282,620
John H. Harland Company....................... 1,000 36,100
Valassis Communications, Inc.*................ 2,300 80,523
Websense, Inc.*............................... 4,500 228,240
----------
815,622
----------
COMPUTER HARDWARE/SOFTWARE -- 4.52%+
Comdisco Holding Company, Inc.*............... 9,300 207,483
----------
COMPUTER/MEMORY DEVICES -- 3.01%+
M-Systems Flash Disk Pioneers Ltd.*........... 7,000 138,040
----------
COMPUTER SERVICES -- 5.02%+
SI International, Inc.*....................... 7,500 230,700
----------
DISTRIBUTION/WHOLESALE -- 1.92%+
Navarre Corporation*.......................... 5,000 88,000
----------
E-BUSINESS SERVICES -- 3.70%+
Digital River, Inc.*.......................... 1,000 41,610
NetRatings, Inc.*............................. 6,700 128,439
----------
170,049
----------
HOLDINGS COMPANY -- 4.82%+
Groupe Bruxelles Lambert S.A. ................ 1,200 97,703
Naspers Limited ADR........................... 947 123,584
----------
221,287
----------
INDEX FUND -- 1.74%+
Nasdaq-100 Index Tracking Stock(1)............ 2,000 79,820
----------
</Table>

See Notes to the Financial Statements.

KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE INTERNET EMERGING GROWTH PORTFOLIO
Portfolio of Investments -- December 31, 2004 -- (Continued)

<Table>
<Caption>
SHARES VALUE
- -------------------------------------------------------------------------

INFRASTRUCTURE -- 7.74%+
IDT Corporation*.............................. 5,300 $ 77,804
IDT Corporation -- Class B*................... 5,300 82,044
Lynch Interactive Corporation*................ 6,100 195,200
Sunshine PCS Corporation -- Class A*.......... 6,000 600
----------
355,648
----------
INTERNET SEARCH ENGINES -- 0.74%+
Netease.com, Inc. ADR*........................ 240 12,679
SINA Corp*.................................... 500 16,030
Sohu.com, Inc.*............................... 300 5,313
----------
34,022
----------
INTERNET TECHNOLOGY/SOFTWARE -- 4.80%+
ActivCard Corporation*........................ 7,500 66,750
Imergent, Inc.*............................... 2,500 37,875
Lionbridge Technologies, Inc.*................ 4,000 26,880
ProQuest Company*............................. 3,000 89,100
----------
220,605
----------
MULTIMEDIA -- 0.64%+
Gemstar -- TV Guide International, Inc.*...... 5,000 29,600
----------
TELECOMMUNICATIONS -- 3.56%+
RCN Corporation*.............................. 5,942 136,666
Warwick Valley Telephone Company.............. 1,200 27,036
----------
163,702
----------
TITLE INSURANCE -- 4.15%+
Fidelity National Financial, Inc. ............ 4,173 190,581
----------
TOTAL COMMON STOCKS
(cost $2,245,217)........................... 3,013,660
----------

<Caption>
PREFERRED STOCKS -- 0.05%+
- -------------------------------------------------------------------------

WEB HOSTING/DESIGN -- 0.05%+
PTV, Inc. -- Series A, CLB, 10.000% (cost
$3,774)..................................... 487 2,094
----------
</Table>

See Notes to the Financial Statements.

KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE INTERNET EMERGING GROWTH PORTFOLIO
Portfolio of Investments -- December 31, 2004 -- (Continued)

<Table>
<Caption>
PRINCIPAL
CORPORATE BONDS -- 4.31%+ AMOUNT VALUE
- -------------------------------------------------------------------------

INFRASTRUCTURE -- 4.31%+
RCN Corporation, CLB, 11.125%, 10/15/2007*++
(Default Effective 4/15/2004)............... $200,000 $ --
Level Three Communications, Inc., CLB, 0.000%,
3/15/2010*(+)(2)............................ 225,000 198,000
----------
TOTAL CORPORATE BONDS
(cost $194,748)............................. 198,000
----------

<Caption>
CORPORATE BONDS -- CONVERTIBLE -- 2.96%+
- -------------------------------------------------------------------------

INFRASTRUCTURE -- 2.96%+
Conexant Systems, Inc., CLB, 4.000%, 2/1/2007
(cost $114,679)............................. 150,000 135,750
----------

<Caption>
RIGHTS -- 4.24%+ SHARES
- -------------------------------------------------------------------------

CONTINGENT VALUE RIGHTS -- 4.24%+
Comdisco Holding Company, Inc.# (cost
$245,273)................................... 581,000 194,635
----------

<Caption>
PUT OPTIONS PURCHASED -- 0.24%+ CONTRACTS
- -------------------------------------------------------------------------

Nasdaq-100 Index Tracking Stock
Expiring January 2007 at $39.68 (cost
$11,564).................................... 28 10,920
----------

<Caption>
PRINCIPAL
SHORT-TERM INVESTMENTS -- 22.59%+ AMOUNT
- -------------------------------------------------------------------------

DISCOUNT NOTES -- 17.31%+
Federal Home Loan Bank Discount Note, 2.0000%,
01/03/2005.................................. $795,000 794,962
----------
VARIABLE RATE DEMAND NOTES** -- 5.28%+
American Family, 2.0043%...................... 44,928 44,928
U.S. Bank, N.A., 2.1700%...................... 134,813 134,813
Wisconsin Corporate Central Credit Union,
2.0900%..................................... 63,037 63,037
----------
242,778
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $1,037,740)........................... 1,037,740
----------
</Table>

See Notes to the Financial Statements.

KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE INTERNET EMERGING GROWTH PORTFOLIO
Portfolio of Investments -- December 31, 2004 -- (Continued)

<Table>
<Caption>
INVESTMENTS PURCHASED WITH CASH PRINCIPAL
PROCEEDS FROM SECURITIES LENDING -- AMOUNT OR
5.51%+ SHARES VALUE
- -------------------------------------------------------------------------

INVESTMENT COMPANIES -- 0.12%+
Merrill Lynch Premier Institutional Fund...... 5,720 $ 5,720
----------
REPURCHASE AGREEMENTS -- 5.39%+
CS First Boston Repurchase Agreement,
2.373%, 1/3/2005(3)......................... $ 77,369 77,369
2.290%, 1/3/2005(3)......................... 77,369 77,369
2.290%, 1/3/2005(3)......................... 46,421 46,421
2.290%, 1/3/2005(3)......................... 46,422 46,422
----------
247,581
----------
TOTAL INVESTMENTS PURCHASED WITH CASH PROCEEDS
FROM SECURITIES LENDING
(cost $253,301)............................. 253,301
----------
TOTAL INVESTMENTS -- 105.50%+ (COST
$4,106,296)................................. $4,846,100
==========
</Table>

- -------------------------
* -- Non-income producing security.
** -- Variable rate demand notes are considered short-term obligations and are
payable on demand. Interest rates change periodically on specified dates.
The rates listed are as of December 31, 2004.
(+) -- Security has a stepped rate. The rate is listed as of December 31, 2004.
ADR -- American Depository Receipts.
CLB -- Callable Security.
+ -- Calculated as a percentage of net assets.
++ -- Fair Valued Security.
# -- Contingent value right (contingent upon profitability of company).
(1) -- All or a portion of the shares have been committed as collateral for
written option contracts.
(2) -- This security or a portion of this security was out on loan at December
31, 2004. Total loaned securities had a market value of $264,281 at
December 31, 2004.
(3) -- Collateralized by U.S. Government or U.S. Government Agency securities,
U.S. Government Agency mortgage-backed securities, certificates of
deposit or banker's acceptances.

See Notes to the Financial Statements.

KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE PARADIGM PORTFOLIO
Portfolio of Investments -- December 31, 2004

<Table>
<Caption>
COMMON STOCKS -- 92.52%+ SHARES VALUE
- --------------------------------------------------------------------

AGRICULTURAL CHEMICALS -- 0.01%+
Potash Corporation of Saskatchewan
Inc. .................................. 100 $ 8,306
------------
AGRICULTURAL OPERATIONS -- 2.16%+
Archer-Daniels-Midland Company........... 56,000 1,249,360
Bunge Limited(2)......................... 25,500 1,453,755
------------
2,703,115
------------
AIRLINES -- 0.45%+
China Eastern Airlines Corporation
Limited ADR*(2)........................ 25,000 560,500
------------
AUTO INSURANCE -- 4.05%+
Mercury General Corporation.............. 22,000 1,318,240
The Progressive Corporation.............. 44,400 3,766,896
------------
5,085,136
------------
AUTO MANUFACTURING -- 0.68%+
Brilliance China Automotive Holdings
Limited ADR(2)......................... 40,000 772,000
Great Wall Automobile Holdings Company,
Limited -- Class H*.................... 20,000 9,199
Toyota Industries Corporation............ 3,000 74,949
------------
856,148
------------
BANKS -- 5.01%+
HDFC Bank Ltd. ADR....................... 4,400 199,584
ICICI Bank Limited ADR................... 9,000 181,350
M&T Bank Corporation..................... 40,800 4,399,872
State Bank of India GDR.................. 10,000 365,000
Wells Fargo and Company.................. 18,200 1,131,130
------------
6,276,936
------------
BEVERAGES -- 0.01%+
Taittinger S.A. ......................... 25 7,309
------------
</Table>

See Notes to the Financial Statements.

KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE PARADIGM PORTFOLIO
Portfolio of Investments -- December 31, 2004 -- (Continued)

<Table>
<Caption>
SHARES VALUE
- --------------------------------------------------------------------

BUSINESS SERVICES -- 1.17%+
Deluxe Corporation....................... 10,000 $ 373,300
Iron Mountain Incorporated*.............. 1,500 45,735
Moody's Corporation...................... 12,000 1,042,200
------------
1,461,235
------------
CASINO/HOTELS -- 1.08%+
MGM MIRAGE*.............................. 18,000 1,309,320
Wynn Resorts, Limited*................... 600 40,152
------------
1,349,472
------------
CELLULAR TELECOM SERVICES -- 0.03%+
China Mobile Limited ADR................. 2,000 34,320
------------
COMPUTER SERVICES -- 2.34%+
CACI International, Inc. -- Class A*..... 41,400 2,820,582
SunGard Data Systems Inc.*............... 4,000 113,320
------------
2,933,902
------------
CONSULTING SERVICES -- 0.03%+
FTI Consulting, Inc.*.................... 2,000 42,140
------------
DATA PROCESSING SERVICES -- 0.00%+
Automatic Data Processing, Inc. ......... 100 4,435
------------
ENERGY-EXPLORATION & PRODUCTION -- 7.74%+
Calpine Corporation*(2).................. 190,000 748,600
Canadian Oil Sands Trust................. 1,000 56,430
CNOOC Limited ADR........................ 40,000 2,167,600
EnCana Corporation....................... 12,200 696,132
Nexen Inc. .............................. 6,600 268,290
Suncor Energy, Inc. ..................... 163,000 5,770,200
------------
9,707,252
------------
</Table>

See Notes to the Financial Statements.

KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE PARADIGM PORTFOLIO
Portfolio of Investments -- December 31, 2004 -- (Continued)

<Table>
<Caption>
SHARES VALUE
- --------------------------------------------------------------------

ENERGY-INTEGRATED -- 1.27%+
China Petroleum and Chemical Corporation
ADR.................................... 2,000 $ 81,980
Imperial Oil Ltd. ....................... 6,000 356,400
PetroChina Company Limited ADR........... 12,000 644,280
Shell Canada Limited..................... 7,200 480,681
Statoil ASA ADR.......................... 2,000 31,760
------------
1,595,101
------------
ENERGY-PIPELINE -- 10.16%+
El Paso Corporation...................... 642,000 6,676,800
The Williams Companies, Inc. ............ 372,000 6,059,880
------------
12,736,680
------------
FINANCE -- 0.47%+
Equifax Inc. ............................ 100 2,810
Hong Kong Exchanges & Clearing Limited... 36,000 96,337
Jefferies Group, Inc. ................... 3,000 120,840
The Student Loan Corporation............. 2,000 368,000
------------
587,987
------------
FOOD-MISC/DIVERSIFIED -- 0.13%+
Cadbury Schweppes PLC ADR................ 2,000 75,400
McCormick & Company, Incorporated........ 1,000 38,600
The J. M. Smucker Company................ 1,000 47,070
------------
161,070
------------
HOLDING COMPANIES -- 10.69%+
Berkshire Hathaway Inc. -- Class B*...... 1,500 4,404,000
Brascan Corporation -- Class A........... 1,500 54,015
Groupe Bruxelles Lambert S.A. ........... 18,000 1,465,543
Leucadia National Corporation............ 87,600 6,086,448
Pargesa Holding AG -- Class B............ 240 844,253
Wesco Financial Corporation.............. 1,400 550,200
------------
13,404,459
------------
HOSPITALITY -- 0.01%+
Societe du Lourve........................ 100 12,668
------------
</Table>

See Notes to the Financial Statements.

KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE PARADIGM PORTFOLIO
Portfolio of Investments -- December 31, 2004 -- (Continued)

<Table>
<Caption>
SHARES VALUE
- --------------------------------------------------------------------

INDEPENDENT POWER PRODUCER -- 3.53%+
Reliant Energy Inc.*..................... 324,000 $ 4,422,600
------------
INSURANCE-DIVERSIFIED -- 0.89%+
China Life Insurance Company, Limited
ADR*(2)................................ 3,000 79,320
Power Corporation of Canada.............. 40,000 1,034,929
------------
1,114,249
------------
INVESTMENT MANAGEMENT -- 0.01%+
Eaton Vance Corp. ....................... 100 5,215
Legg Mason, Inc. ........................ 100 7,326
------------
12,541
------------
MEDIA CONTENT -- 6.01%+
Dow Jones & Company, Inc. ............... 100 4,306
Meredith Corporation..................... 2,000 108,400
The E.W. Scripps Company -- Class A...... 7,200 347,616
The New York Times Company -- Class A.... 600 24,480
The Walt Disney Company.................. 6,150 170,970
The Washington Post Company -- Class B... 7,000 6,881,140
------------
7,536,912
------------
METALS -- 0.02%+
Aluminum Corporation of China Limited
ADR.................................... 500 29,275
------------
MINING -- 0.68%+
Anglo American PLC ADR(2)................ 36,000 856,440
------------
NON-FERROUS METALS -- 0.02%+
Cameco Corporation....................... 200 20,972
------------
PROPERTY/CASUALTY INSURANCE-DIVERSIFIED--
6.99%+
Alleghany Corporation*................... 612 174,573
Millea Holdings, Inc. ADR................ 4,000 298,436
White Mountains Insurance Group, Ltd. ... 12,844 8,297,224
------------
8,770,233
------------
</Table>

See Notes to the Financial Statements.

KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE PARADIGM PORTFOLIO
Portfolio of Investments -- December 31, 2004 -- (Continued)

<Table>
<Caption>
SHARES VALUE
- --------------------------------------------------------------------

PUBLIC THOROUGHFARES -- 0.94%+
Anhui Expressway Co.,Ltd. -- Class H..... 660,000 $ 341,773
Shenzhen Expressway Company Limited --
Class H................................ 1,000,000 379,534
Zhejiang Expressway Co., Ltd. -- Class
H...................................... 660,000 454,282
------------
1,175,589
------------
PUBLISHING -- 0.05%+
John Wiley & Sons, Inc. -- Class B....... 2,000 69,200
------------
REAL ESTATE DEVELOPMENT -- 4.04%+
American Real Estate Partners, L.P.*..... 92,000 2,631,200
Forest City Enterprises, Inc. -- Class
A...................................... 8,600 494,930
Pope Resources, L.P. .................... 1,800 45,000
Texas Pacific Land Trust................. 14,000 1,890,700
The St. Joe Company...................... 100 6,420
------------
5,068,250
------------
REAL ESTATE DIVERSIFIED -- 0.07%+
Vornado Realty Trust..................... 1,200 91,356
------------
RE-INSURANCE -- 0.27%+
Montpelier Re Holdings, Ltd. ............ 4,000 153,800
Renaissance Re Holdings, Ltd. ........... 3,600 187,488
------------
341,288
------------
RETAIL-DIVERSIFIED -- 3.35%+
Kmart Holding Corporation*............... 42,400 4,195,480
------------
SECURITIES EXCHANGES -- 1.18%+
Deutsche Boerse AG....................... 400 24,059
Euronext NV.............................. 9,600 292,293
London Stock Exchange PLC................ 6,857 76,619
The Chicago Mercantile Exchange.......... 4,600 1,052,020
TSX Group Inc. .......................... 800 35,849
------------
1,480,840
------------
SPECIALTY INSURANCE -- 1.16%+
Markel Corporation*...................... 4,000 1,456,000
------------
</Table>

See Notes to the Financial Statements.

KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE PARADIGM PORTFOLIO
Portfolio of Investments -- December 31, 2004 -- (Continued)

<Table>
<Caption>
SHARES VALUE
- --------------------------------------------------------------------

TITLE INSURANCE -- 0.06%+
Fidelity National Financial, Inc. ....... 1,600 $ 73,072
------------
TRANSPORT-SERVICES -- 1.05%+
C. H. Robinson Worldwide, Inc. .......... 3,600 199,872
Expeditors International of Washington,
Inc. .................................. 20,000 1,117,600
------------
1,317,472
------------
UTILITIES-DIVERSIFIED -- 3.66%+
CenterPoint Energy, Inc. ................ 406,000 4,587,800
------------
UTILITIES-DOMESTIC -- 6.94%+
Allegheny Energy, Inc.*(2)............... 242,400 4,777,704
PG&E Corporation*........................ 24,000 798,720
TXU Corporation.......................... 48,500 3,131,160
------------
8,707,584
------------
UTILITIES-FOREIGN -- 3.91%+
Huaneng Power International, Inc.
ADR(2)................................. 70,000 2,101,400
Korea Electric Power Corporation ADR..... 212,000 2,806,880
------------
4,908,280
------------
WATER -- 0.20%+
Suez SA ADR.............................. 10,000 267,500
------------
TOTAL COMMON STOCKS
(cost $89,494,810)..................... 116,031,104
------------

<Caption>
CALL OPTIONS PURCHASED -- 0.12%+ CONTRACTS
- --------------------------------------------------------------------

TXU Corporation
Expiring January 2007 at $45.00 (cost
$143,073).............................. 71 148,035
------------

<Caption>
PUT OPTIONS PURCHASED -- 0.00%+
- --------------------------------------------------------------------

The Kroger Co.
Expiring January 2005 at $10.00 (cost
$4,830)................................ 100 250
------------
</Table>

See Notes to the Financial Statements.

KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE PARADIGM PORTFOLIO
Portfolio of Investments -- December 31, 2004 -- (Continued)
<Table>
<Caption>
PRINCIPAL
SHORT-TERM INVESTMENTS -- 7.02%+ AMOUNT VALUE
- --------------------------------------------------------------------

DISCOUNT NOTES -- 5.68%+
Federal Home Loan Bank Discount Note
2.0000%, 01/03/2005.................... $7,118,000 $ 7,117,664
------------
VARIABLE RATE DEMAND NOTES** -- 1.34%+
American Family, 2.0043%................. 254 254
U.S. Bank, N.A., 2.1700%................. 1,685,497 1,685,497
Wisconsin Corporate Central Credit Union,
2.0900%................................ 1,924 1,924
------------
1,687,675
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $8,805,339)...................... 8,805,339
------------

<Caption>
INVESTMENTS PURCHASED WITH
CASH PROCEEDS FROM SECURITIES
LENDING -- 7.12%+
- --------------------------------------------------------------------

INVESTMENT COMPANIES -- 0.16%+
Merrill Lynch Premier Institutional
Fund................................... 201,628 201,628
------------
</Table>

See Notes to the Financial Statements.

KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE PARADIGM PORTFOLIO
Portfolio of Investments -- December 31, 2004 -- (Continued)

<Table>
<Caption>
INVESTMENTS PURCHASED WITH
CASH PROCEEDS FROM SECURITIES PRINCIPAL
LENDING -- 7.12%+ AMOUNT VALUE
- --------------------------------------------------------------------

REPURCHASE AGREEMENTS -- 6.96%+
CS First Boston Repurchase Agreement,
2.373%, 1/3/2005(3).................... $2,727,147 $ 2,727,147
2.290%, 1/3/2005(3).................... 2,727,147 2,727,147
2.290%, 1/3/2005(3).................... 1,636,288 1,636,288
2.290%, 1/3/2005(3).................... 1,636,288 1,636,288
------------
8,726,870
------------
TOTAL INVESTMENTS PURCHASED WITH CASH
PROCEEDS FROM SECURITIES LENDING
(cost $8,928,498)...................... 8,928,498
------------
TOTAL INVESTMENTS -- 106.78%+ (COST
$107,376,550).......................... $133,913,226
============
</Table>

- -------------------------
* -- Non-income producing security.
** -- Variable rate demand notes are considered short-term obligations and are
payable on demand. Interest rates change periodically on specified dates.
The rates listed are as of December 31, 2004.
ADR -- American Depository Receipts.
GDR -- Global Depository Receipts.
+ -- Calculated as a percentage of Net Assets.
(2) -- This security or a portion of this security was out on loan at December
31, 2004. Total loaned securities had a market value of $8,328,400 at
December 31, 2004.
(3) -- Collateralized by U.S. Government or U.S. Government Agency securities,
U.S. Government Agency mortgage-backed securities, certificates of
deposit or banker's acceptances.

See Notes to the Financial Statements.

KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE MEDICAL PORTFOLIO
Portfolio of Investments -- December 31, 2004

<Table>
<Caption>
COMMON STOCKS -- 99.50%+ SHARES VALUE
- ------------------------------------------------------------------------

BIOMEDICAL -- 41.05%+
AEterna Zentaris Inc*(2)................... 12,000 $ 75,120
Amgen, Inc.*............................... 9,800 628,670
Antigenics, Inc.*(2)....................... 892 9,027
Arena Pharmaceuticals, Inc.*............... 14,000 93,660
AVAX Technologies, Inc.*................... 50,000 15,500
Avigen, Inc.*(2)........................... 21,000 68,460
Biogen Idec, Inc.*......................... 23,250 1,548,683
Biomira, Inc.*............................. 37,000 89,170
Cambridge Antibody Technology Group PLC
ADR*..................................... 15,000 212,520
Cell Genesys, Inc.*(2)..................... 11,725 94,972
Chiron Corporation*(1)..................... 33,000 1,099,890
CuraGen Corporation*(2).................... 13,000 93,080
deCODE genetics, Inc.*..................... 11,000 85,910
EntreMed, Inc.*(2)......................... 11,000 35,640
Genencor International, Inc.*.............. 20,000 328,000
Genzyme Corporation*....................... 22,038 1,279,747
Human Genome Sciences, Inc.*............... 17,000 204,340
ImmunoGen, Inc.*........................... 6,000 53,040
Isis Pharmaceuticals, Inc.*................ 5,000 29,500
Isotechnika, Inc. *........................ 15,000 29,420
Maxim Pharmaceuticals, Inc.*(2)............ 10,000 30,200
Medarex, Inc.*(2).......................... 20,000 215,600
MedImmune, Inc.*........................... 29,500 799,745
Millennium Pharmaceuticals, Inc.*.......... 27,296 330,828
NeoRx Corporation*......................... 27,000 56,430
OSI Pharmaceuticals, Inc.*................. 790 59,131
Progenics Pharmaceuticals, Inc.*........... 3,200 54,912
Protein Design Labs, Inc.*................. 12,000 247,920
Savient Pharmaceuticals Inc.*.............. 34,000 92,140
Serono SA ADR(2)........................... 12,000 195,840
</Table>

See Notes to the Financial Statements.

KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE MEDICAL PORTFOLIO
Portfolio of Investments -- December 31, 2004 -- (Continued)

<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------

BIOMEDICAL -- (CONTINUED)
Sirna Therapeutics, Inc.*.................. 3,491 $ 11,031
SuperGen, Inc.*(2)......................... 14,000 98,700
Targeted Genetics Corporation*............. 10,000 15,500
Vical Incorporated*........................ 13,500 63,450
-----------
8,345,776
-----------
CHEMICALS-DIVERSIFIED -- 5.13%+
Akzo Nobel N.V. ADR........................ 10,000 424,900
Lonza Group AG............................. 11,000 619,119
-----------
1,044,019
-----------
DRUG DELIVERY SYSTEMS -- 0.28%+
Hospira, Inc. *............................ 1,700 56,950
-----------
MEDICAL LABS/TESTING SERVICES -- 0.56%+
IMPATH, Inc.*.............................. 26,000 114,140
-----------
PHARMACEUTICALS -- 52.48%+
Abbott Laboratories........................ 17,000 793,050
Atlanta AG ADR............................. 14,000 882,000
Bristol-Meyers Squibb Company.............. 15,000 384,300
China Pharmaceutical Group Limited......... 1,440,000 379,791
Cubist Pharmaceuticals, Inc.*.............. 4,000 47,320
Eli Lilly and Company...................... 11,000 624,250
GlaxoSmithKline PLC ADR.................... 22,673 1,074,473
Johnson & Johnson.......................... 10,000 634,200
MGI Pharma, Inc.*(1)....................... 20,000 560,200
Novartis AG ADR............................ 44,000 2,223,760
Roche Holding AG ADR....................... 4,000 460,470
Schering AG ADR............................ 19,000 1,410,750
Theragenics Corporation*................... 2,000 8,120
Wyeth...................................... 27,900 1,188,261
-----------
10,670,945
-----------
TOTAL COMMON STOCKS
(cost $19,944,832)....................... 20,231,830
-----------
</Table>

See Notes to the Financial Statements.

KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE MEDICAL PORTFOLIO
Portfolio of Investments -- December 31, 2004 -- (Continued)

<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------

RIGHTS -- 0.01%+
- ------------------------------------------------------------------------
CONTINGENT VALUE RIGHTS -- 0.01%+
OSI Pharmaceuticals, Inc.# (cost $0)....... 13,932 $ 1,811
-----------

<Caption>
PUT OPTIONS PURCHASED -- 0.09%+ CONTRACTS
- ------------------------------------------------------------------------

MGI Pharma, Inc.
Expiring January 2005 at $27.50 (cost
$55,300)................................. 200 18,500
-----------

<Caption>
PRINCIPAL
SHORT-TERM INVESTMENTS -- 0.56%+ AMOUNT
- ------------------------------------------------------------------------

VARIABLE RATE DEMAND NOTES** -- 0.56%+
U.S. Bank, N.A., 2.1700%
(cost $113,492).......................... $ 113,492 113,492
-----------
</Table>

See Notes to the Financial Statements.

KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE MEDICAL PORTFOLIO
Portfolio of Investments -- December 31, 2004 -- (Continued)

<Table>
<Caption>
INVESTMENTS PURCHASED WITH PRINCIPAL
CASH PROCEEDS FROM SECURITIES AMOUNT
LENDING -- 3.51%+ OR SHARES VALUE
- ------------------------------------------------------------------------

INVESTMENT COMPANIES -- 0.08%+
Merrill Lynch Premier Institutional Fund... $ 16,116 $ 16,116
-----------
REPURCHASE AGREEMENTS -- 3.43%+
CS First Boston Repurchase Agreement,
2.373%, 1/3/2005(3)...................... 217,975 217,975
2.290%, 1/3/2005(3)...................... 217,975 217,975
2.290%, 1/3/2005(3)...................... 130,785 130,785
2.290%, 1/3/2005(3)...................... 130,785 130,785
-----------
697,520
-----------
TOTAL INVESTMENTS PURCHASED WITH CASH
PROCEEDS FROM SECURITIES LENDING
(cost $713,636).......................... 713,636
-----------
TOTAL INVESTMENTS -- 103.67%+
(COST $20,827,260)....................... $21,079,269
===========
</Table>

- ------------------
* -- Non-income producing security.
** -- Variable rate demand notes are considered short-term obligations and are
payable on demand. Interest rates change periodically on specified dates.
The rates listed are as of December 31, 2004.
ADR -- American Depository Receipts.
# -- Contingent value right (contingent upon profitability of company).
+ -- Calculated as a percentage of net assets.
(1) -- All or a portion of the shares have been committed as collateral for
written option contracts.
(2) -- This security or a portion of this security was out on loan at December
31, 2004. Total loaned securities had a market value of $623,496 at
December 31, 2004.
(3) -- Collateralized by U.S. Government or U.S. Government Agency securities,
U.S. Government Agency mortgage-backed securities, certificates of
deposit or banker's acceptances.

See Notes to the Financial Statements.

KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE SMALL CAP OPPORTUNITIES PORTFOLIO
Portfolio of Investments -- December 31, 2004

<Table>
<Caption>
COMMON STOCKS -- 81.33%+ SHARES VALUE
- ------------------------------------------------------------------------

ACCESS/BROADBAND -- 0.12%+
PrimaCom AG, ADR*.......................... 54,000 $ 45,360
-----------
AIRLINES -- 4.36%+
China Eastern Airlines Corporation Limited
ADR*(2).................................. 40,000 896,800
China Southern Airlines Company Limited
ADR*(2).................................. 40,000 791,232
-----------
1,688,032
-----------
AUTO MANUFACTURING -- 0.38%+
Brilliance China Automotive Holdings
Limited ADR.............................. 4,000 77,200
Oshkosh Truck Corporation.................. 1,000 68,380
-----------
145,580
-----------
BANKS -- 6.99%+
Banque du Liban et d'Outre-Mer S.A.L.
(BLOM) -- Class B GDR.................... 7,200 192,024
Cathay General Bancorp..................... 8,400 315,000
Center Financial Corporation............... 15,800 316,316
East West Bancorp, Inc. ................... 8,400 352,464
Farmers & Merchants Bank of Long Beach..... 12 68,160
Hanmi Financial Corporation................ 10,031 360,514
Nara Bancorp, Inc. ........................ 18,000 382,860
UCBH Holdings, Inc. ....................... 8,400 384,888
Wilshire Bancorp, Inc.*.................... 20,000 330,800
-----------
2,703,026
-----------
BUSINESS SERVICES -- 4.94%+
Loring Ward International, Limited*........ 10,000 --
Quanta Services, Inc.*..................... 200,000 1,600,000
Ritchie Bros. Auctioneers Incorporated..... 9,000 297,540
Sotheby's Holdings, Inc. -- Class A*....... 800 14,528
-----------
1,912,068
-----------
COMPUTER HARDWARE/SOFTWARE -- 0.06%+
Comdisco Holding Company, Inc.*............ 1,000 22,310
-----------
</Table>

See Notes to the Financial Statements.

KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE SMALL CAP OPPORTUNITIES PORTFOLIO
Portfolio of Investments -- December 31, 2004 -- (Continued)

<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------

COMPUTER SERVICES -- 8.48%+
Anteon International Corporation*.......... 3,600 $ 150,696
CACI International Inc. -- Class A*........ 32,000 2,180,160
ManTech International Corporation -- Class
A*....................................... 40,000 949,600
-----------
3,280,456
-----------
CONSULTING SERVICES -- 0.98%+
FTI Consulting, Inc.*...................... 18,000 379,260
-----------
DEFENSE -- 0.34%+
Armor Holdings, Inc.*...................... 800 37,616
United Defense Industries, Inc.*........... 2,000 94,500
-----------
132,116
-----------
ENERGY -- 1.83%+
Calpine Corporation*(2).................... 180,000 709,200
-----------
FINANCE -- 0.32%+
Greenhill & Co., Inc. ..................... 3,000 86,100
Van der Moolen Holding N.V. ADR*........... 5,000 37,950
-----------
124,050
-----------
GAS PIPELINE -- 2.98%+
Southern Union Company..................... 48,000 1,151,040
-----------
HOLDING COMPANY -- 3.39%+
PICO Holdings, Inc.*....................... 18,000 373,860
Triarc Companies, Inc. -- Class A(2)....... 72,000 936,000
-----------
1,309,860
-----------
INDEPENDENT POWER PRODUCER -- 9.11%+
Reliant Energy Inc.*....................... 258,000 3,521,700
-----------
INFRASTRUCTURE -- 0.02%+
Lynch Interactive Corporation*............. 200 6,400
-----------
INVESTMENT MANAGEMENT -- 1.15%+
Gabelli Asset Management Inc. -- Class A... 1,000 48,520
Nuveen Investments -- Class A.............. 10,000 394,700
-----------
443,220
-----------
</Table>

See Notes to the Financial Statements.

KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE SMALL CAP OPPORTUNITIES PORTFOLIO
Portfolio of Investments -- December 31, 2004 -- (Continued)

<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------

LIFE INSURANCE -- 0.34%+
National Western Life Insurance Company --
Class A*................................. 800 $ 133,288
-----------
MANUFACTURING -- 0.52%+
Russell Corporation........................ 10,000 194,800
Steinway Musical Instruments, Inc.*........ 200 5,788
-----------
200,588
-----------
METAL FABRICATION -- 0.26%+
Commercial Metals Company.................. 2,000 101,120
-----------
MINING -- 1.70%+
Aber Diamond Corporation................... 7,200 254,009
Stillwater Mining Company*................. 36,000 405,360
-----------
659,369
-----------
MULTIMEDIA -- 0.55%+
Gemstar -- TV Guide International, Inc.*... 36,000 213,120
-----------
PROPERTY/CASUALTY INSURANCE -- 4.91%+
Alleghany Corporation*..................... 4,004 1,142,141
RLI Corp. ................................. 8,000 332,560
Safety Insurance Group, Inc. .............. 12,000 373,800
Zenith National Insurance Corp. ........... 1,000 49,840
-----------
1,898,341
-----------
PUBLIC THOROUGHFARES -- 0.16%+
Sichuan Expressway Co. Limited............. 480,000 61,137
-----------
PUBLISHING -- 6.31%+
Courier Corporation........................ 11,400 591,888
John Wiley & Sons, Inc. -- Class A......... 14,400 501,696
R.H. Donnelley Corporation*................ 18,000 1,062,900
Value Line, Inc. .......................... 7,200 282,513
-----------
2,438,997
-----------
</Table>

See Notes to the Financial Statements.

KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE SMALL CAP OPPORTUNITIES PORTFOLIO
Portfolio of Investments -- December 31, 2004 -- (Continued)

<Table>
<Caption>
PRINCIPAL
AMOUNT
OR SHARES VALUE
- ------------------------------------------------------------------------

REAL ESTATE DEVELOPMENT -- 0.69%+
Alexander's, Inc.*......................... 300 $ 64,500
Forest City Enterprises, Inc. -- Class A... 3,200 184,160
HomeFed Corporation*....................... 200 10,525
United Capital Corporation*................ 400 9,060
-----------
268,245
-----------
TRANSPORT SERVICES -- 2.77%+
Laidlaw International, Inc.*............... 50,000 1,070,000
-----------
UTILITIES-DOMESTIC -- 17.18%+
Allegheny Energy, Inc.*(2)................. 100,000 1,971,000
Aquila, Inc.*.............................. 500,000 1,845,000
CMS Energy Corporation*.................... 120,000 1,254,000
Sierra Pacific Resources*(2)............... 150,000 1,575,000
-----------
6,645,000
-----------
UTILITIES -- FOREIGN -- 0.47%+
China Resources Power Holdings Company
Limited.................................. 100,000 54,357
Datang International Power Generation
Company Limited -- Class H............... 100,000 75,263
Huadian Power International Corporation
Limited -- Class H....................... 180,000 53,263
-----------
182,883
-----------
WASTE-TO-ENERGY SECTOR -- 0.02%+
Danielson Holding Corporation*............. 1,000 8,450
-----------
TOTAL COMMON STOCKS
(cost $23,459,750)....................... 31,454,216
-----------
<Caption>
CORPORATE BONDS --
CONVERTIBLE -- 1.36%+
- ------------------------------------------------------------------------

PROPERTY/CASUALTY INSURANCE -- 1.36%+
Fairfax Financial Holdings, Limited,
5.000%, 7/15/2023 (cost $497,500)........ $ 500,000 525,000
-----------
</Table>

See Notes to the Financial Statements.

KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE SMALL CAP OPPORTUNITIES PORTFOLIO
Portfolio of Investments -- December 31, 2004 -- (Continued)

<Table>
<Caption>
PRINCIPAL
AMOUNT
RIGHTS -- 2.17%+ OR SHARES VALUE
- ------------------------------------------------------------------------

CONTINGENT VALUE RIGHTS -- 2.17%+
Comdisco Holding Company, Inc.# (cost
$657,587)................................ 2,500,000 $ 837,500
-----------
<Caption>
SHORT-TERM INVESTMENTS -- 14.21%+
- ------------------------------------------------------------------------

DISCOUNT NOTES -- 13.98%+
Federal Home Loan Bank Discount Note,
2.0000%, 1/3/2005........................ $5,408,000 5,407,745
-----------
VARIABLE RATE DEMAND NOTES** -- 0.23%+
American Family, 2.0043%................... 1,055 1,055
U.S. Bank, N.A., 2.1700%................... 88,229 88,229
Wisconsin Corporate Central Credit Union,
2.0900%.................................. 696 696
-----------
89,980
-----------
TOTAL SHORT-TERM INVESTMENTS
(cost $5,497,725)........................ 5,497,725
-----------
</Table>

See Notes to the Financial Statements.

KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE SMALL CAP OPPORTUNITIES PORTFOLIO
Portfolio of Investments -- December 31, 2004 -- (Continued)

<Table>
<Caption>
INVESTMENTS PURCHASED WITH PRINCIPAL
CASH PROCEEDS FROM SECURITIES AMOUNT
LENDING -- 13.61%+ OR SHARES VALUE
- ------------------------------------------------------------------------

INVESTMENT COMPANIES -- 0.31%+
Merrill Lynch Premier Institutional Fund... 118,854 $ 118,854
-----------
REPURCHASE AGREEMENTS -- 13.30%+
CS First Boston Repurchase Agreement,
2.373%, 1/3/2005(3)...................... $1,607,577 1,607,577
2.290%, 1/3/2005(3)...................... 1,607,577 1,607,577
2.290%, 1/3/2005(3)...................... 964,546 964,546
2.290%, 1/3/2005(3)...................... 964,546 964,546
-----------
5,144,246
-----------
TOTAL INVESTMENTS PURCHASED WITH CASH
PROCEEDS FROM SECURITIES LENDING
(cost $5,263,100)........................ 5,263,100
-----------
TOTAL INVESTMENTS -- 112.68%+
(COST $35,375,662)....................... $43,577,541
===========
</Table>

- ------------------
* -- Non-income producing security.
** -- Variable rate demand notes are considered short-term obligations and are
payable on demand. Interest rates change periodically on specified dates.
The rates listed are as of December 31, 2004.
# -- Contingent value right (contingent upon profitability of company).
+ -- Calculated as a percentage of net assets.
ADR -- American Depository Receipts.
GDR -- Global Depository Receipts.
(2) -- This security or a portion of this security was out on loan at December
31, 2004. Total loaned securities had a market value of $4,921,862 at
December 31, 2004.
(3) -- Collateralized by U.S. Government or U.S. Government Agency securities,
U.S. Government Agency mortgage-backed securities, certificates of
deposit or banker's acceptances.

See Notes to the Financial Statements.

KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE KINETICS GOVERNMENT MONEY MARKET PORTFOLIO
Portfolio of Investments -- December 31, 2004

<Table>
<Caption>
PRINCIPAL
SHORT-TERM INVESTMENTS -- 100.99%+ AMOUNT VALUE
- ----------------------------------------------------------------------

DISCOUNT NOTES -- 100.99%+
Federal Home Loan Bank Discount Note
2.0000%, 01/03/2005........................ $1,193,000 $1,192,944
----------
TOTAL INVESTMENTS -- 100.99%+
(COST $1,192,944).......................... $1,192,944
==========
</Table>

- ------------------
+ -- Calculated as a percentage of net assets.

See Notes to the Financial Statements.

KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE INTERNET PORTFOLIO
Portfolio of Options Written -- December 31, 2004

<Table>
<Caption>
CALL OPTIONS WRITTEN CONTRACTS VALUE
- -----------------------------------------------------------------------

WebMD Corporation
Expiring January 2005 at $10.00................. 1,090 $ 8,175
Internet HOLDRs Trust
Expiring January 2007 at $70.00................. 5 7,250
-------
TOTAL CALL OPTIONS WRITTEN........................ 15,425
-------
<Caption>
PUT OPTIONS WRITTEN
- -----------------------------------------------------------------------

eBay, Inc.
Expiring January 2005 at $40.00................. 50 125
-------
TOTAL OPTIONS WRITTEN
(PREMIUMS RECEIVED $316,753).................... $15,550
=======
</Table>

See Notes to the Financial Statements.

KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE INTERNET EMERGING GROWTH PORTFOLIO
Portfolio of Options Written -- December 31, 2004

<Table>
<Caption>
CALL OPTIONS WRITTEN CONTRACTS VALUE
- ---------------------------------------------------------------------

Nasdaq -- 100 Index Tracking Stock
Expiring January 2007 at $39.63............... 20 $12,100
-------
TOTAL OPTIONS WRITTEN
(PREMIUMS RECEIVED $11,540)................... $12,100
=======
</Table>

See Notes to the Financial Statements.

KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE MEDICAL PORTFOLIO
Portfolio of Options Written -- December 31, 2004

<Table>
<Caption>
CALL OPTIONS WRITTEN CONTRACTS VALUE
- -----------------------------------------------------------------------

Chiron Corporation
Expiring January 2005 at $50.00.................. 50 $ 125
MGI Pharma, Inc.
Expiring January 2005 at $30.00.................. 100 3,500
------
TOTAL OPTIONS WRITTEN
(PREMIUMS RECEIVED $83,697)...................... $3,625
======
</Table>

See Notes to the Financial Statements.

KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
STATEMENT OF ASSETS & LIABILITIES
December 31, 2004

<Table>
<Caption>
THE INTERNET
THE INTERNET EMERGING GROWTH
PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------

ASSETS:
Investments, at value(1) (3)......................... $220,547,388 $4,846,100
Cash................................................. 469,124 3,059
Receivable for options written....................... -- 11,540
Receivable for contributed capital................... 9,691 19,707
Dividends and interest receivable.................... 199,076 3,395
Other assets......................................... 22,038 11
------------ ----------
Total assets..................................... 221,247,317 4,883,812
------------ ----------
LIABILITIES:
Written options, at value(2)......................... 15,550 12,100
Payable to Adviser................................... 214,332 4,829
Payable to Trustees and Officers..................... 16,586 450
Payable for securities purchased..................... -- 11,564
Payables for collateral received for securities
loaned............................................. 17,580,802 253,301
Payable for withdrawn capital........................ 565,432 1,313
Accrued expenses and other liabilities............... 145,111 6,607
------------ ----------
Total liabilities................................ 18,537,813 290,164
------------ ----------
Net assets......................................... $202,709,504 $4,593,648
============ ==========
(1) Cost of investments................................ $210,798,069 $4,106,296
============ ==========
(2) Premiums received.................................. $ 316,753 $ 11,540
============ ==========
(3) Includes loaned securities with a market value
of................................................... $ 17,266,463 $ 264,281
============ ==========
</Table>

See Notes to the Financial Statements.

KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
STATEMENT OF ASSETS & LIABILITIES
December 31, 2004

<Table>
<Caption>
THE
PARADIGM THE MEDICAL
PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------

ASSETS:
Investments, at value(1) (3)............................. $133,913,226 $21,079,269
Cash..................................................... 65,286 17,778
Receivable for contributed capital....................... 1,573,622 4,184
Dividends and interest receivable........................ 146,211 13,976
Other assets............................................. 6,782 416
------------ -----------
Total assets......................................... 135,705,127 21,115,623
------------ -----------
LIABILITIES:
Written options, at value(2)............................. -- 3,625
Payable to Adviser....................................... 124,369 21,772
Payable to Trustees and Officers......................... 8,194 2,411
Payables for collateral received for securities loaned... 8,928,498 713,636
Payable for investments purchased........................ 975,978 --
Payable for withdrawn capital............................ 200,750 23,820
Accrued expenses and other liabilities................... 59,907 18,241
------------ -----------
Total liabilities.................................... 10,297,696 783,505
------------ -----------
Net assets............................................. $125,407,431 $20,332,118
============ ===========
(1) Cost of investments.................................... $107,376,550 $20,827,260
============ ===========
(2) Premiums received...................................... $ -- $ 83,697
============ ===========
(3) Includes loaned securities with a market value of...... $ 8,328,400 $ 623,496
============ ===========
</Table>

See Notes to the Financial Statements.

KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
STATEMENT OF ASSETS & LIABILITIES
December 31, 2004

<Table>
<Caption>
THE KINETICS
GOVERNMENT
THE SMALL CAP MONEY
OPPORTUNITIES MARKET
PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------------------

ASSETS:
Investments, at value(1) ( 2)............................. $43,577,541 $1,192,944
Cash...................................................... 77,298 896
Receivable for contributed capital........................ 546,436 16,760
Receivable for investments sold........................... 182,866 --
Dividends and interest receivable......................... 18,360 --
Other assets.............................................. 41,654 290
----------- ----------
Total assets.......................................... 44,444,155 1,210,890
----------- ----------
LIABILITIES:
Payable to Adviser........................................ 37,699 498
Payable to Trustees and Officers.......................... 2,489 148
Payables for collateral received for securities loaned.... 5,263,100 --
Payable for investments purchased......................... 390,246 --
Payable for withdrawn capital............................. 57,165 24,828
Accrued expenses and other liabilities.................... 18,761 4,206
----------- ----------
Total liabilities..................................... 5,769,460 29,680
----------- ----------
Net assets.............................................. $38,674,695 $1,181,210
=========== ==========
(1) Cost of investments..................................... $35,375,662 $1,192,944
=========== ==========
(2) Includes loaned securities with a market value of....... $ 4,921,862 --
=========== ==========
</Table>

See Notes to the Financial Statements.

KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
STATEMENT OF OPERATIONS
For the Year Ended December 31, 2004

<Table>
<Caption>
THE INTERNET
THE INTERNET EMERGING GROWTH
PORTFOLIO PORTFOLIO
- ----------------------------------------------------------------------------------------

INVESTMENT INCOME:
Dividends+............................................ $ 2,796,097 $123,988
Interest.............................................. 2,836,575 71,742
Income from securities lending........................ 134,600 1,085
------------ --------
Total investment income......................... 5,767,272 196,815
------------ --------
EXPENSES:
Investment advisory fees.............................. 2,583,594 54,196
Administration fees................................... 256,190 5,352
Professional fees..................................... 108,598 4,813
Fund accounting fees.................................. 53,141 3,431
Trustees and Officers' fees and expenses.............. 36,869 981
Custodian fees and expenses........................... 20,139 8,008
Other expenses........................................ 21,133 332
------------ --------
Total expenses.................................. 3,079,664 77,113
Expense reduction*.............................. (117,143) (2,295)
------------ --------
Net expenses.................................... 2,962,521 74,818
------------ --------
Net investment income................................... 2,804,751 121,997
------------ --------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on:
Investments and foreign currency.................... 33,292,726 128,613
Written option contracts expired or closed.......... 19,360 --
Net change in unrealized appreciation (depreciation)
of:
Investments and foreign currency.................... (16,649,137) 104,342
Written option contracts............................ 133,866 (560)
------------ --------
Net gain on investments................................. 16,796,815 232,395
------------ --------
Net increase in net assets resulting from operations.... $ 19,601,566 $354,392
============ ========
+ Net of Foreign Taxes Withheld of:..................... $ 16,494 $ 359
============ ========
</Table>

- ------------------
* See "Expense Reduction" in the Notes to the Financial Statements.

See Notes to the Financial Statements.

KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
STATEMENT OF OPERATIONS
For the Year Ended December 31, 2004

<Table>
<Caption>
THE
PARADIGM THE MEDICAL
PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------

INVESTMENT INCOME:
Dividends+................................................ $ 851,681 $ 233,577
Interest.................................................. 206,143 41,961
Income from securities lending............................ 3,589 2,402
----------- ----------
Total investment income............................. 1,061,413 277,940
----------- ----------
EXPENSES:
Investment advisory fees.................................. 995,982 282,481
Administration fees....................................... 88,980 29,244
Professional fees......................................... 42,078 14,151
Fund accounting fees...................................... 25,422 9,586
Trustees' and Officers' fees and expenses................. 19,740 4,760
Custodian fees and expenses............................... 32,543 9,819
Other expenses............................................ 2,309 2,184
----------- ----------
Total expenses...................................... 1,207,054 352,225
Expense reduction*.................................. (75,638) (1,949)
----------- ----------
Net expenses........................................ 1,131,416 350,276
----------- ----------
Net investment loss....................................... (70,003) (72,336)
----------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on:
Investments and foreign currency........................ 3,962,656 438,204
Written option contracts expired or closed.............. 74,536 108,997
Net change in unrealized appreciation (depreciation) of:
Investments and foreign currency........................ 14,059,355 1,116,227
Written option contracts................................ (69,176) 1,727
----------- ----------
Net gain on investments..................................... 18,027,371 1,665,155
----------- ----------
Net increase in net assets resulting from operations........ $17,957,368 $1,592,819
=========== ==========
+ Net of Foreign Taxes Withheld of:......................... $ 48,370 $ 14,422
=========== ==========
</Table>

- ------------------
* See "Expense Reduction" in the Notes to Financial Statements.

See Notes to the Financial Statements.

KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
STATEMENT OF OPERATIONS
For the Year Ended December 31, 2004

<Table>
<Caption>
THE KINETICS
THE SMALL CAP GOVERNMENT
OPPORTUNITIES MONEY
PORTFOLIO MARKET PORTFOLIO
- -----------------------------------------------------------------------------------------

INVESTMENT INCOME:
Dividends+........................................... $ 602,778 $ --
Interest............................................. 93,165 20,268
Income from securities lending....................... 7,351 --
---------- -------
Total investment income........................ 703,294 20,268
---------- -------
EXPENSES:
Investment advisory fees............................. 287,854 10,117
Administration fees.................................. 26,465 759
Professional fees.................................... 13,245 1,297
Fund accounting fees................................. 8,900 464
Trustees and Officers' fees and expenses............. 5,048 548
Custodian fees and expenses.......................... 12,840 2,344
Other expenses....................................... 1,426 1,157
---------- -------
Total expenses................................. 355,778 16,686
Expense reduction*............................. (79,000) --
---------- -------
Net expenses................................... 276,778 16,686
---------- -------
Net investment income.................................. 426,516 3,582
---------- -------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on:
Investments and foreign currency................... 2,052,464 --
Written option contracts expired or closed......... (59,251) --
Net change in unrealized appreciation of:
Investments and foreign currency................... 2,361,466 --
Written option contracts........................... 7,451 --
---------- -------
Net gain on investments................................ 4,362,130 --
---------- -------
Net increase in net assets resulting from operations... $4,788,646 $ 3,582
========== =======
+ Net of Foreign Taxes Withheld of:.................... $ 2,480 $ --
========== =======
</Table>

- ------------------
* See "Expense Reduction" in the Notes to Financial Statements.

See Notes to the Financial Statements.

KINETICS MUTUAL FUNDS, INC. -- MASTER INVESTMENT PORTFOLIOS
STATEMENTS OF CHANGES IN NET ASSETS

<Table>
<Caption>
THE INTERNET
THE INTERNET PORTFOLIO EMERGING GROWTH PORTFOLIO
------------------------------ ---------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2004 2003 2004 2003
- -------------------------------------------------------------------------------------------

OPERATIONS:
Net investment income...... $ 2,804,751 $ 2,497,295 $ 121,997 $ 77,667
Net realized gain (loss) on
sale of investments,
foreign currency and
written options.......... 33,312,086 21,223,940 128,613 (885,675)
Net change in unrealized
appreciation
(depreciation) of
investments, foreign
currency and written
options.................. (16,515,271) 70,176,909 103,782 1,962,563
------------ --------------- ----------- ----------
Net increase in net
assets resulting from
operations........... 19,601,566 93,898,144 354,392 1,154,555
------------ --------------- ----------- ----------
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
BENEFICIAL INTEREST
TRANSACTIONS:
Contributions.............. 26,839,732 2,405,859,200 1,049,978 3,705,810
Withdrawals................ (75,601,294) (2,458,346,799) (1,462,409) (3,554,101)
------------ --------------- ----------- ----------
Net increase (decrease)
in net assets
resulting from
beneficial interest
transactions......... (48,761,562) (52,487,599) (412,431) 151,709
------------ --------------- ----------- ----------
Total increase (decrease)
in net assets............ (29,159,996) 41,410,545 (58,039) 1,306,264
NET ASSETS:
Beginning of year.......... 231,869,500 190,458,955 4,651,687 3,345,423
------------ --------------- ----------- ----------
End of year................ $202,709,504 $ 231,869,500 $ 4,593,648 $4,651,687
============ =============== =========== ==========
</Table>

See Notes to the Financial Statements.

KINETICS MUTUAL FUNDS, INC. -- MASTER INVESTMENT PORTFOLIOS
STATEMENTS OF CHANGES IN NET ASSETS

<Table>
<Caption>
THE PARADIGM PORTFOLIO THE MEDICAL PORTFOLIO
--------------------------- ----------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2004 2003 2004 2003
- --------------------------------------------------------------------------------------------

OPERATIONS:
Net investment income
(loss)...................... $ (70,003) $ 389,497 $ (72,336) $ (144,860)
Net realized gain (loss) on
sale of investments, foreign
currency and written
options..................... 4,037,192 453,812 547,201 (147,770)
Net change in unrealized
appreciation of investments,
foreign currency and written
options..................... 13,990,179 12,200,098 1,117,954 5,627,386
------------ ------------ ------------ -------------
Net increase in net assets
resulting from
operations.............. 17,957,368 13,043,407 1,592,819 5,334,756
------------ ------------ ------------ -------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
BENEFICIAL INTEREST
TRANSACTIONS:
Contributions................. 58,008,906 92,415,880 2,545,683 132,047,719
Withdrawals................... (23,413,796) (43,123,610) (8,320,935) (136,308,781)
------------ ------------ ------------ -------------
Net increase (decrease) in
net assets resulting
from beneficial interest
transactions............ 34,595,110 49,292,270 (5,775,252) (4,261,062)
------------ ------------ ------------ -------------
Total increase (decrease) in
net assets.................. 52,552,478 62,335,677 (4,182,433) 1,073,694
NET ASSETS:
Beginning of year............. 72,854,953 10,519,276 24,514,551 23,440,857
------------ ------------ ------------ -------------
End of year................... $125,407,431 $ 72,854,953 $ 20,332,118 $ 24,514,551
============ ============ ============ =============
</Table>

See Notes to the Financial Statements.

KINETICS MUTUAL FUNDS, INC. -- MASTER INVESTMENT PORTFOLIOS
STATEMENTS OF CHANGES IN NET ASSETS

<Table>
<Caption>
THE SMALL CAP THE KINETICS GOVERNMENT
OPPORTUNITIES PORTFOLIO MONEY MARKET PORTFOLIO
---------------------------- --------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2004 2003 2004 2003
- -------------------------------------------------------------------------------------------

OPERATIONS:
Net investment income.... $ 426,516 $ 546,319 $ 3,582 $ 74,241
Net realized gain on sale
of investments, foreign
currency and written
options................ 1,993,213 1,511,374 -- --
Net change in unrealized
appreciation of
investments, foreign
currency and written
options................ 2,368,917 5,906,903 -- --
------------ ------------- --------------- --------------
Net increase in net
assets resulting
from operations.... 4,788,646 7,964,596 3,582 74,241
------------ ------------- --------------- --------------
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
BENEFICIAL INTEREST
TRANSACTIONS:
Contributions............ 27,678,584 207,817,396 22,191,434 2,678,064,621
Withdrawals.............. (19,582,069) (193,488,428) (23,938,932) (2,803,974,514)
------------ ------------- --------------- --------------
Net increase
(decrease) in net
assets resulting
from beneficial
interest
transactions....... 8,096,515 14,328,968 (1,747,498) (125,909,893)
------------ ------------- --------------- --------------
Total increase (decrease)
in net assets.......... 12,885,161 22,293,564 (1,743,916) (125,835,652)
NET ASSETS:
Beginning of year........ 25,789,534 3,495,970 2,925,126 128,760,778
------------ ------------- --------------- --------------
End of year.............. $38,674,695 $ 25,789,534 $ 1,181,210 $ 2,925,126
============ ============= =============== ==============
</Table>

See Notes to the Financial Statements.

KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS
December 31, 2004

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, and The Kinetics Government Money Market 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. Each of the 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
Opportunities Portfolio invests primarily in the equity securities of U.S. and
foreign small capitalization companies that provide attractive valuation

KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 2004

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 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 securities) will
be valued in good faith at fair value using methods determined by the Board of
Trustees of the Master Portfolios. At December 31, 2004, The Internet Portfolio
held one such security which represented 0.99% of the Portfolio's net assets.
The Internet Emerging Growth Portfolio held a security that was fair valued and
it represented 0.00% of the Portfolio's net assets.

KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 2004

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.

100

KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 2004

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 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.

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.

101

KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 2004

For the year ended December 31, 2004, 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
$117,143, $2,295, $75,638, $1,949 and $79,000, 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.

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.

102

KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 2004

amounts in the financial statements. Actual results could differ from those
estimates.

3. INVESTMENT ADVISER

The Trust has an Investment Advisory Agreement (the "Agreement") 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 Agreement, 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 year ended
December 31, 2004, The Internet Portfolio, The Internet Emerging Growth
Portfolio, The Paradigm Portfolio, The Medical Portfolio, The Small Cap
Opportunities Portfolio, and The Kinetics Government Money Market Portfolio
incurred expenses of $2,583,594, $54,196, $995,982, $282,481, $287,854 and
$10,117, respectively, pursuant to the Investment Advisory Agreement.

KBD Securities, LLC, an affiliate of the Adviser, received $431,162 in brokerage
fee commissions with respect to the Portfolios' portfolio transactions, which
constituted 52% of the Portfolios' brokerage commissions during the period.

<Table>
<Caption>
PORTFOLIO COMMISSIONS
- --------- -----------

The Internet Portfolio...................................... $324,320
The Internet Emerging Growth Portfolio...................... $ 3,850
The Paradigm Portfolio...................................... $ 52,578
The Medical Portfolio....................................... $ 7,372
The Small Cap Opportunities Portfolio....................... $ 43,042
</Table>

The Trust paid the Chief Compliance Officer $4,000 for the year ended December
31, 2004.

103

KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 2004

4. SECURITIES TRANSACTIONS

Purchases and sales of investment securities, other than short-term investments,
for the year ended December 31, 2004 were as follows:

<Table>
<Caption>
PURCHASES SALES
------------------------ -------------------------
U.S. U.S.
GOVERNMENT OTHER GOVERNMENT OTHER
---------- ----------- ---------- ------------

The Internet Portfolio...... $-- $68,493,021 $-- $143,853,969
The Internet Emerging Growth
Portfolio................. -- 596,366 -- 940,063
The Paradigm Portfolio...... -- 71,488,443 -- 37,151,911
The Medical Portfolio....... -- 2,664,026 -- 4,891,861
The Small Cap Opportunities
Portfolio................. -- 24,572,441 -- 19,621,505
</Table>

As of December 31, 2004, unrealized appreciation (depreciation) on investment
securities for federal income tax purposes was as follows:

<Table>
<Caption>
NET
APPRECIATION APPRECIATED DEPRECIATED
(DEPRECIATION) SECURITIES SECURITIES
-------------- ----------- ------------

The Internet Portfolio................. $ 6,013,428 $49,399,491 $(43,386,063)
The Internet Emerging Growth
Portfolio............................ 690,052 1,296,205 (606,153)
The Paradigm Portfolio................. 26,040,186 27,052,591 (1,012,405)
The Medical Portfolio.................. 252,009 5,186,210 (4,934,201)
The Small Cap Opportunities
Portfolio............................ 8,135,413 8,314,863 (179,450)
</Table>

At December 31, 2004, the cost of investments for federal income tax purposes
was $214,533,960, $4,156,048, $107,873,040, $20,827,260 and $35,442,128 for The
Internet Portfolio, The Internet Emerging Growth Portfolio, The Paradigm
Portfolio, The Medical Portfolio, and The Small Cap Opportunities Portfolio,
respectively.

For the year ended December 31, 2004, the Master Portfolios wrote the following
options:

<Table>
<Caption>
NUMBER PREMIUM
OF CONTRACTS AMOUNT
------------ ----------

THE INTERNET PORTFOLIO
- ----------------------------------------------------
Outstanding at the Beginning of Year................ 1,500 $ 336,187
Options Written..................................... 5 6,985
Options Closed...................................... (360) (26,419)
----- ----------
Outstanding at the End of Year...................... 1,145 $ 316,753
===== ==========
</Table>

104

KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 2004

<Table>
<Caption>
NUMBER PREMIUM
OF CONTRACTS AMOUNT
------------ ----------

THE INTERNET EMERGING GROWTH PORTFOLIO
- ----------------------------------------------------
Outstanding at the Beginning of Year................ -- $ --
Options Written..................................... 20 11,540
----- ----------
Outstanding at the End of Year...................... 20 $ 11,540
===== ==========
THE PARADIGM PORTFOLIO
- ----------------------------------------------------
Outstanding at the Beginning of Year................ 420 $ 85,926
Options Expired..................................... (50) (29,944)
Options Closed...................................... (370) (55,982)
----- ----------
Outstanding at the End of Year...................... -- $ --
===== ==========
THE MEDICAL PORTFOLIO
- ----------------------------------------------------
Outstanding at the Beginning of Year................ 200 $ 140,345
Options Written..................................... 100 52,349
Options Expired..................................... (150) (108,997)
----- ----------
Outstanding at the End of Year...................... 150 $ 83,697
===== ==========
THE SMALL CAP OPPORTUNITIES PORTFOLIO
- ----------------------------------------------------
Outstanding at the Beginning of Year................ 150 $ 19,299
Options Closed...................................... (150) (19,299)
----- ----------
Outstanding at the End of Year...................... -- $ --
===== ==========
</Table>

5. PORTFOLIO SECURITIES LOANED

As of December 31, 2004, 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 December 31, 2004, were as
follows:

<Table>
<Caption>
SECURITIES COLLATERAL
----------- -----------

The Internet Portfolio.................... $17,266,463 $17,580,802
The Internet Emerging Growth Portfolio.... 264,281 253,301
The Paradigm Portfolio.................... 8,328,400 8,928,498
The Medical Portfolio..................... 623,496 713,636
The Small Cap Opportunities Portfolio..... 4,921,862 5,263,100
</Table>

105

KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 2004

6. SELECTED FINANCIAL HIGHLIGHTS

Financial highlights for the Master Portfolios were as follows:

<Table>
<Caption>
THE INTERNET PORTFOLIO
------------------------------------------------------------------------
APRIL 28,
FOR THE FOR THE FOR THE FOR THE 2000(+)
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2004 2003 2002 2001 2000
------------ ------------ ------------ ------------ ------------

Ratio of expenses to average net
assets:
Before expense reduction.............. 1.50% 1.51% 1.51% 1.44% 1.43%*
After expense reduction............... 1.44% 1.51% 1.51% 1.44% 1.43%*
Ratio of net investment income (loss)
to average net assets:
Before expense reduction.............. 1.36% 0.99% 0.50% 0.32% (0.69%)*
After expense reduction............... 1.30% 0.99% 0.50% 0.32% (0.69%)*
Portfolio turnover rate................ 42% 69% 41% 44% 16%
</Table>

- ------------------
* Annualized.
(+) Commencement of operations.

<Table>
<Caption>
THE INTERNET EMERGING GROWTH PORTFOLIO
------------------------------------------------------------------------
APRIL 28,
FOR THE FOR THE FOR THE FOR THE 2000(+)
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2004 2003 2002 2001 2000
------------ ------------ ------------ ------------ ------------

Ratio of expenses to average net
assets:
Before expense reduction.............. 1.78% 1.84% 1.83% 2.30% 1.93%*
After expense reduction............... 1.73% 1.84% 1.83% 2.30% 1.84%*
Ratio of net investment income (loss)
to average net assets:
Before expense reduction.............. 2.77% 1.94% (1.07%) (0.22%) (0.35%)*
After expense reduction............... 2.82% 1.94% (1.07%) (0.22%) (0.26%)*
Portfolio turnover rate................ 18% 20% 27% 24% 30%
</Table>

- ------------------
* Annualized.
(+) Commencement of operations.

<Table>
<Caption>
THE PARADIGM PORTFOLIO
------------------------------------------------------------------------
APRIL 28,
FOR THE FOR THE FOR THE FOR THE 2000(+)
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2004 2003 2002 2001 2000
------------ ------------ ------------ ------------ ------------

Ratio of expenses to average net
assets:
Before expense reduction.............. 1.52% 1.56% 1.64% 2.27% 2.85%*
After expense reduction............... 1.42% 1.46% 1.64% 2.27% 2.60%*
Ratio of net investment income (loss)
to average net assets:
Before expense reduction.............. (0.18%) 1.28% (0.27%) (0.69%) (0.66%)*
After expense reduction............... (0.08%) 1.38% (0.27%) (0.69%) (0.41%)*
Portfolio turnover rate................ 52% 20% 40% 41% 89%
</Table>

- ------------------
* Annualized.
(+) Commencement of operations.

106

KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 2004

<Table>
<Caption>
THE MEDICAL PORTFOLIO
-----------------------------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE APRIL 28, 2000(+)
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2004 2003 2002 2001 2000
------------ ------------ ------------ ------------ -----------------

Ratio of expenses to average net
assets:
Before expense reduction............. 1.58% 1.53% 1.53% 1.51% 1.47%*
After expense reduction.............. 1.57% 1.53% 1.53% 1.51% 1.46%*
Ratio of net investment loss to
average net assets:
Before expense reduction............. (0.33%) (0.56%) (0.47%) (0.39%) (0.55%)*
After expense reduction.............. (0.32%) (0.56%) (0.47%) (0.39%) (0.54%)*
Portfolio turnover rate............... 13% 16% 9% 6% 1%
</Table>

- ------------------
* Annualized.
(+) Commencement of operations.

<Table>
<Caption>
THE SMALL CAP OPPORTUNITIES PORTFOLIO
-----------------------------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE APRIL 28, 2000(+)
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2004 2003 2002 2001 2000
------------ ------------ ------------ ------------ -----------------

Ratio of expenses to average net
assets:
Before expense reduction............. 1.55% 1.67% 1.66% 2.35% 13.27%*
After expense reduction.............. 1.21% 1.49% 1.66% 2.35% 10.93%*
Ratio of net investment income (loss)
to average net assets:
Before expense reduction............. 1.51% 2.88% (0.29%) (0.99%) (11.12%)*
After expense reduction.............. 1.85% 3.06% (0.29%) (0.99%) (8.78%)*
Portfolio turnover rate............... 96% 180% 200% 181% 198%
</Table>

- ------------------
* Annualized.
(+) Commencement of operations.

<Table>
<Caption>
THE KINETICS GOVERNMENT
MONEY MARKET PORTFOLIO
-----------------------------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE APRIL 28, 2000(+)
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2004 2003 2002 2001 2000
------------ ------------ ------------ ------------ -----------------

Ratio of expenses to average net
assets:............................. 0.83% 0.79% 0.75% 0.79% 0.78%*
Ratio of net investment income to
average net assets:................. 0.18% 0.15% 0.67% 2.70% 5.36%*
Portfolio turnover rate.............. N/A N/A N/A N/A N/A
</Table>

- ------------------
* Annualized.
(+) Commencement of operations.

7. INFORMATION ABOUT PROXY VOTING (UNAUDITED)

Information regarding how the Kinetics Portfolios Trust vote proxies relating to
portfolio securities is available without charge upon request by calling toll-
free at (800) 930-3828 or by accessing the Funds' website at

107

KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 2004

www.kineticsfunds.com and the SEC's website at www.sec.gov. Information
regarding how the Portfolios voted proxies relating to portfolio securities
during the twelve months ending June 30, 2004 is available by calling toll-free
at (800) 930-3828 or by accessing the SEC's website at www.sec.gov.

8. 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 (800) 930-3828. Furthermore, you can obtain the Form N-Q on the
SEC's website at www.sec.gov.

108

KINETICS PORTFOLIOS TRUST
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM

To the Shareholders of and Board of Trustees
Kinetics Portfolios Trust
Sleepy Hollow, New York

We have audited the accompanying statements of assets and liabilities,
including the schedule of investments, of The Internet Portfolio, The
Internet Emerging Growth Portfolio, The Paradigm Portfolio, The
Medical Portfolio, The Small Cap Opportunities Portfolio and The
Kinetics Government Money Market Portfolio, each a series of shares of
Kinetics Portfolios Trust (the "Trust"), as of December 31, 2004, and
the related statement of operations, statement of changes in net
assets and financial highlights for the year then ended. These
financial statements and financial highlights are the responsibility
of the Trust's management. Our responsibility is to express an opinion
on these financial statements and financial highlights based on our
audit. The statement of changes in net assets for the year ended
December 31, 2003 and the financial highlights for each of the four
years in the period ended December 31, 2003 were audited by other
auditors whose report dated February 20, 2004 expressed an unqualified
opinion on the statement of changes in net assets and the financial
highlights.

We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 2004, by
correspondence with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights
referred to above present fairly in all material respects, the
financial position of the above mentioned Portfolios as of December
31, 2004, the results of their operations, the changes in their net
assets and the financial highlights for the year then ended, in
conformity with accounting principles generally accepted in the United
States of America.

TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 11, 2005

109

KINETICS MUTUAL FUNDS, INC.
MANAGEMENT OF THE FUNDS AND THE PORTFOLIOS
Board of Directors/Board of Trustees

The management and affairs of the Funds and the Portfolios are supervised by the
Board of Directors of the Company and the Board of Trustees of the Trust,
respectively. Each Board consists of the same eight individuals, five of whom
are not "interested persons" of the Company or the Trust as that term is defined
in the Investment Company Act of 1940, as amended (the "1940 Act"). The
Directors are fiduciaries for the Funds' shareholders and are governed by the
laws of the State of Maryland in this regard. The Trustees are fiduciaries for
the Portfolios' shareholders and are governed by the laws of the State of
Delaware in this regard.

<Table>
<Caption>
NUMBER OF PORTFOLIOS
TERM OF OFFICE/ AND FUNDS IN
POSITION(S) WITH THE LENGTH OF COMPLEX OVERSEEN
NAME AND ADDRESS AGE COMPANY AND TRUST TIME SERVED BY TRUSTEE/DIRECTOR
- ----------------------------------------------------------------------------------------------

Murray Stahl .............. 52 Director/Trustee Indefinite/ 12
470 Park Avenue South 5 years
New York, NY 10016
Steven T. Russell ......... 41 Independent Indefinite/ 12
138 Fairview Avenue Director/ 5 years
Bayport, NY 11705 Independent Trustee
Douglas Cohen, C.P.A. ..... 44 Independent Indefinite/ 12
6 Saywood Lane Director/ 5 years
Stonybrook, NY 11790 Independent Trustee
William J. Graham ......... 43 Independent Indefinite/ 12
330 Motor Parkway Director/ 5 years
Hauppauge, NY 11788 Independent Trustee
Peter B. Doyle ............ 43 Director/Trustee Indefinite/ 12
470 Park Avenue South 3 years
New York, NY 10016
Leonid Polyakov ........... 46 Director/Trustee Indefinite/ 12
16 New Broadway 3 years
Sleepy Hollow, NY 10591
Joseph E. Breslin ......... 51 Independent Indefinite/ 12
54 Woodland Drive Director/ 5 years
Rye Brook, NY 10573 Independent Trustee
John J. Sullivan .......... 74 Independent Indefinite/ 12
31 Hemlock Drive Director/ 5 years
Sleepy Hollow, NY 10591 Independent Trustee
</Table>

KINETICS MUTUAL FUNDS, INC.
MANAGEMENT OF THE FUNDS AND THE PORTFOLIOS -- (CONTINUED)

Each Board establishes policies for the operation of the Funds and the
Portfolios and appoints the officers who conduct the daily business of the Funds
and the Portfolios. Directors/Trustees of the Company and the Trust are listed
below with their addresses, present positions with the Company and Trust, length
of time served, principal occupations over at least the last five years, number
of Fund and Portfolios overseen and any other Directorships held. The SAI
includes additional information about the Funds' officers and directors and is
available, without charge, upon request by calling (800) 930-3828.

PRINCIPAL OCCUPATION DURING THE PAST FIVE YEARS OTHER DIRECTORSHIPS HELD BY TRUSTEE/DIRECTOR
- --------------------------------------------------------------------------------------------------

President, Horizon Asset Management, an Chairman of Horizon Asset Management;
investment adviser (1994 to Present). Chairman FRMO Corporation

Attorney and Counselor at Law, Partner Law firm N/A
of Russell and Fig (since September 2002);
Steven Russell Law Firm (1994 to 2002);
Professor of Business Law, Suffolk County
Community College (1997 to Present).

Wagner, Awerma & Strinberg, LLP Certified N/A
Public Accountant (1997 to present); Leon D.
Alpern & Co. (1985 to 1997)

Attorney, William J. Graham, PC (2002 to N/A
present); Bracken & Margolin, LLP (1997 to
2002); Gabor & Gabor (1995 to 1997).

President, Kinetics Asset Management and N/A
Kinetics Fund Distributors, Inc. (2002 to
present); Director and Officer, Horizon Asset
Management, Inc. (1994 to Present) Chief
Investment Strategist, Kinetics Mutual Funds,
Inc. (1998 to Present).

CFO Kinetics Asset Management, Inc. (2000 - N/A
current) Formerly, Vice-President JP Morgan
Asset Management (1997-2000).

Consultant (2003 to present); Senior Vice Director of Andrx Corporation
President, Marketing & Sales, IBJ Whitehall Director of AIP Alternative Strategies Funds
Financial Group, a financial services company
(1999 to 2003); formerly President, J.E.
Breslin & Co., an investment management
consulting firm (1994 to 1999).

Retired; Senior Advisor, Long Term Credit Bank Director of Board of Governors for The Sky
of Japan, Ltd.; Executive Vice President, LTCB Club
Trust Company (1987-1999).
</Table>

KINETICS MUTUAL FUNDS, INC. & KINETICS PORTFOLIOS TRUST
PRIVACY POLICY

We collect the following nonpublic personal information about you:

- Information we receive from you on or in applications or other forms,
correspondence, or conversations, including, but not limited to, your name,
address, phone number, social security number, assets, income and date of
birth; and

- Information about your transactions with us, our affiliates, or others,
including, but not limited to, your account number and balance, payments
history, parties to transactions, cost basis information, and other
financial information.

We do not disclose any nonpublic personal information about our current or
former shareholders to nonaffiliated third parties, except as permitted by law.
For example, we are permitted by law to disclose all of the information we
collect, as described above, to our transfer agent to process your transactions.
Furthermore, we restrict access to your nonpublic personal information to those
persons who require such information to provide products or services to you. We
maintain physical, electronic, and procedural safeguards that comply with
federal standards to guard your nonpublic personal information.

In the event that you hold shares of the fund(s) through a financial
intermediary, including, but not limited to, a broker-dealer, bank, or trust
company, the privacy policy of your financial intermediary would govern how your
nonpublic personal information would be shared with nonaffiliated third parties.

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
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.
615 East Michigan Street
Milwaukee, WI 53202

THIS MATERIAL MUST BE PRECEDED OR
ACCOMPANIED BY A PROSPECTUS

ITEM 2. CODE OF ETHICS.

The registrant has adopted a code of ethics that applies to the registrant's
principal executive officer and principal financial officer. The registrant has
not made any amendments to its code of ethics during the period covered by this
report. The registrant has not granted any waivers from any provisions of the
code of ethics during the period covered by this report. A copy of the
registrant's Code of Ethics is filed herewith.

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.

The registrant's board of trustees/directors has determined that there is at
least one audit committee financial expert serving (as defined in Item 3 on Form
N-CSR) on its audit committee. Mr. Doug Cohen and Mr. Joseph Breslin are the
"audit committee financial experts" and are considered to be "independent" (as
each term is defined in Item 3 of Form N-CSR).

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

(a) Audit Fees. The aggregate fees billed for each of the last two
fiscal years for professional services rendered by the
principal accountant for the audit of the registrant's annual
financial statements or services that are normally provided by
the accountant in connection with statutory and regulatory
filings or engagements for those fiscal years are $53,400 and
$124,600 for Kinetics Mutual Funds, Inc. and Kinetics
Portfolios Trust, respectively, for 2003 and $42,000 and
$42,000 for Kinetics Mutual Funds, Inc. and Kinetics
Portfolios Trust, respectively, for 2004.

(b) Audit-Related Fees. The aggregate fees billed in each of the
last two fiscal years for assurance and related services by
the principal accountant that are reasonably related to the
performance of the audit of the registrant's financial
statements and are not reported under paragraph (a) of this
item are $0 and $0 for Kinetics Mutual Funds, Inc. and
Kinetics Portfolios Trust, respectively, for 2003 and $0 and
$0 for Kinetics Mutual Funds, Inc. and Kinetics Portfolios
Trust, respectively, for 2004.

(c) Tax Fees. The aggregate fees billed in each of the last two
fiscal years for professional services rendered by the
principal accountant for tax compliance are $28,350 and
$30,000 for Kinetics Mutual Funds, Inc. and Kinetics
Portfolios Trust, respectively, for 2003 and $7,500 and $7,500
for Kinetics Mutual Funds, Inc. and Kinetics Portfolios Trust,
respectively, for 2004. Professional services for tax
compliance include review of the Funds' federal and state
income tax returns.

(d) All Other Fees. The aggregate fees billed in each of the last
two fiscal years for products and services provided by the
principal accountant, other than the services reported in
paragraphs (a) through (c) of this Item are $0 and $0 for
Kinetics Mutual Funds, Inc. and Kinetics Portfolios Trust,
respectively, for 2003

and $0 and $0 for Kinetics Mutual Funds, Inc. and Kinetics
Portfolios Trust, respectively, for 2004.

(e)(1) The audit committee does not have pre-approved policies and
procedures. Instead, the audit committee or sub-audit
committee approves on a case-by-case basis each audit or
non-audit service before the accountant is engaged by the
registrant.

(e)(2) There were no services described in each of paragraphs (b)
through (d) of this item that were approved by the audit
committee pursuant to paragraph (c)(7)(i)(C) Rule 2-01 of
Regulation S-X.

(f) The percentage of hours expended on the principal accountant's
engagement to audit the registrant's financial statements for
the most recent fiscal year that were attributed to work
performed by persons other than the principal accountant's
full-time, permanent employees was zero percent (0%).

(g) The aggregate non-audit fees billed by the registrant's
accountant for services rendered to the registrant, and
rendered to the registrant's investment adviser (not including
any sub-adviser whose role is primarily portfolio management
and is subcontracted with or overseen by another investment
adviser), and any entity controlling, controlled by, or under
common control with the adviser that provides ongoing services
to the registrant for each of the last two fiscal years of the
registrant was $0 and $0 for Kinetics Mutual Funds, Inc. and
Kinetics Portfolios Trust, respectively, for 2003 and $0 and
$0 for Kinetics Mutual Funds, Inc. and Kinetics Portfolios
Trust, respectively, for 2004.

(h) Not applicable as the response to (g) of this item is none.

ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.

Not applicable to open-end investment companies.

ITEM 6. SCHEDULE OF INVESTMENTS.

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 PURCHASES.

Not applicable to open-end investment companies.

ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

Not applicable at this time.

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 (the "1940 Act")) are effective as of a date within 90 days of
the filing 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 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) The registrant's Code of Ethics for Chief Executive and Chief Senior
Financial Officers is filed herewith.

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

(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Furnished 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 March 11, 2005
-----------------------------------------------------------------

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 March 11, 2005
-----------------------------------------------------------------

By (Signature and Title)* /s/ Leonid Polyakov
--------------------------------------------
Leonid Polyakov, Treasurer

Date March 11, 2005
-----------------------------------------------------------------

* Print the name and title of each signing officer under his or her signature.