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, 2005
-----------------
Date of reporting period: JUNE 30, 2005
-------------
ITEM 1. REPORT TO STOCKHOLDERS.
JUNE 30, 2005 www.kineticsfunds.com
SEMI-ANNUAL REPORT
The INTERNET Fund
The Internet EMERGING GROWTH Fund
The PARADIGM Fund
The MEDICAL Fund
The SMALL CAP OPPORTUNITIES Fund
The KINETICS GOVERNMENT MONEY MARKET Fund
EACH A SERIES OF KINETICS MUTUAL FUNDS, INC.
[KINETICS MUTUAL FUNDS, INC. LOGO]
INFORMATION ABOUT THE PORTFOLIO HOLDINGS (UNAUDITED)
The Funds file their complete schedule of portfolio holdings for their first and
third fiscal quarters with the SEC on Form N-Q. The Funds' Form N-Q is available
without charge, upon request, by calling toll-free at 1-(800) 930-3828.
Furthermore, you can obtain the Form N-Q on the SEC's website at www.sec.gov.
Finally, the Form N-Q may be reviewed and copied at the SEC's Public Reference
Room in Washington, D.C. Information on the operation of the Public Reference
Room may be obtained by calling 1-(800)-SEC-0330.
KINETICS MUTUAL FUNDS, INC.
TABLE OF CONTENTS
June 30, 2005
<Table>
<Caption>
PAGE
----
Shareholders' Letter........................................ 2
Investment Commentary....................................... 4
KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS
Expense Example........................................... 9
Statement of Assets & Liabilities......................... 14
Statement of Operations................................... 17
Statements of Changes in Net Assets....................... 20
Notes to Financial Statements............................. 26
Financial Highlights...................................... 34
KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
Allocation of Portfolio Assets............................ 47
Portfolio of Investments The Internet Portfolio........... 50
Portfolio of Investments The Internet Emerging Growth
Portfolio.............................................. 55
Portfolio of Investments The Paradigm Portfolio........... 60
Portfolio of Investments The Medical Portfolio............ 67
Portfolio of Investments The Small Cap Opportunities
Portfolio.............................................. 70
Portfolio of Investments The Kinetics Government Money
Market Portfolio....................................... 77
Portfolio of Options Written The Internet Portfolio....... 78
Portfolio of Options Written The Internet Emerging Growth
Portfolio.............................................. 79
Statement of Assets & Liabilities......................... 80
Statement of Operations................................... 83
Statements of Changes in Net Assets....................... 86
Notes to Financial Statements............................. 89
</Table>
1
KINETICS MUTUAL FUNDS, INC.
SHAREHOLDERS' LETTER
Dear Fellow Shareholders,
For the six months ended June 30, 2005, our five equity mutual funds
had wildly varying degrees of investment performance. As regular
readers of our commentary are aware, we would not draw any inferences,
either good or bad, from six months of results. As investors, we
ultimately hope to capture the average weighted returns on equity of
the businesses we own in each of our funds. Stock prices can move
drastically in short periods of time, often having little or no
correlation to the underlying business returns, which the adviser
believes ultimately determine, together with the valuation at the time
of purchase, the success or failure of your investment. The Paradigm
Fund and the Small Cap Opportunities Fund, our two mutual funds having
the most investment latitude, generated respective returns of 7.58%
and 3.26%. This placed them within the 1st quartile of their peer
groups, as ranked by Lipper Mutual Funds. Our more sector specific
funds, the Internet Fund, the Internet Emerging Growth Fund and the
Medical Fund, generated returns of -7.07%, -4.44% and -7.57%,
respectively. This placed the two Internet related funds in the fourth
and second quartiles, respectively, versus their peers, and the
Medical Fund in the fourth quartile versus its peers. The longer-term
relative track records of our funds, with the exception of the Medical
Fund, compare favorably with their peers, as measured by Lipper. Our
Medical Fund has a unique profile and invests almost exclusively in
pharmaceutical/biotechnology companies. Many of its peers invest in
medical device companies, HMOs, etc. In point of fact, we believe our
Medical Fund does not have a true peer group.
The total return for the S&P 500 Index(1), assuming dividends
reinvested in the Index, was -0.81% for the first six months of 2005,
while the NASDAQ Composite Index(2) had a total return of -5.12%
during the same period.
We continue to inform our shareholders through our website,
www.kineticsfunds.com. This website provides an array of information,
including recent portfolio holdings, quarterly investment
commentaries, newsflashes, recent performance data, and online access
to account information.
Kinetics offers the following funds to investors:
THE PARADIGM FUND focuses on companies that currently have, or which
the adviser expects to soon have, sustainable high returns on equity.
The Fund has produced attractive returns since its inception
2
in what may be described as a very difficult period for equity
investors. The Paradigm Fund is Kinetics' most conservative Fund.
THE SMALL CAP OPPORTUNITIES FUND focuses on undervalued and special
situation small capitalization equities that are perceived by the
adviser to have the potential for rewarding long-term investment
results.
THE INTERNET FUND is a sector fund that focuses on companies engaged
in the evolution of Internet-related technology. As such, this Fund
has been, and is likely to continue to be, quite volatile. The
Internet Fund is not designed to be a major component of one's equity
exposure. We view this Fund's holdings as publicly traded venture
capital and are quite aware that many of these investments will not
fulfill their early promise. However, the adviser is hopeful that over
time some small percentage will develop into excellent investments,
allowing the fund to produce overall satisfactory, albeit lumpy,
investment results.
THE MEDICAL FUND is a sector fund, offering an investment in
scientific discovery within the promising field of medical research,
particularly in the development of cancer treatments and therapies. As
a sector fund, The Medical Fund is likely to have heightened
volatility.
THE INTERNET EMERGING GROWTH FUND focuses upon early life cycle
companies that the adviser believes are positioned on the edge of the
curve in the evolution of Internet-related technology. Thus, the
statements made above regarding the Internet Fund are equally
applicable to this fund.
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
President
Kinetics Mutual Funds, Inc.
- ------------------
(1) The S & P 500 Index is a broad based unmanaged index of 500 stocks, which is
widely recognized as representative of the equity market in general. You
cannot invest directly in an index.
(2) The NASDAQ Composite Index is a market capitalization-weighted index that is
designed to represent the performance of the National Market System which
includes over 5,000 stocks traded only over-the-counter and not on an
exchange. You cannot invest directly in an index.
3
INVESTMENT COMMENTARY
Dear Fellow Shareholders,
Regular readers of our investment commentary know that we do not have
an overall view of the stock market. In fact, we believe investors who
invest with a top-down outlook are inviting trouble. The number of
economic variables that must be entertained and properly analyzed is
infinite. This makes the capital allocation process, which is
difficult enough, impossibly complicated. In the words of Warren
Buffett: "The key to investing is not assessing how much an industry
is going to affect society, or how much it will grow, but rather
determining the competitive advantage of any given company, and, above
all, the durability of that advantage." Understanding the positioning
of a single company and its competitive advantage, although not
simple, is far easier than trying to determine the direction of
interest rates or the future price of a barrel of oil. Our primary
analytical focus is to unearth companies that have long product
lifecycles and sustainable competitive advantages. A perusal of the
holdings in all of our funds would reveal many niche or uniquely
situated companies that provide goods and services that we believe are
likely to be in great demand for many years.
We believe that our investment strategy differs from those of the vast
majority of other professional investors in two material ways. First,
we have a very long-term investment horizon. Thus, the turnover in all
of our funds is considerably lower than that of the typical mutual
fund. We invest in companies, and are content to achieve the returns
of the businesses we own, which requires patience. We are seeking to
capture the investment returns from that "durable competitive
advantage" we believe our companies possess, and the only way we
believe to do this is by waiting a reasonable amount of time.
4
Most investment professionals are compensated based on yearly results
relative to a certain benchmark or peer group. This causes the typical
investment professional to behave as if the world ends on December
31st of each year. Companies that do not have a perceived near-term
catalyst (one likely to be apparent before year-end by other
investors) are frequently discounted at higher rates, resulting in
investment opportunities for those with patience. We at Kinetics are
interested in producing superior long-term investment results, and to
accomplish this we believe we have to remain indifferent to the
pattern of our returns. If we think that we have an opportunity to
double our money in an investment over the next three years, we place
no consideration as to whether we will get a return from that
investment in the current year. We believe the pattern of investment
return is critical to those that have a misaligned financial
incentive. This compensation structure can also induce investment
professionals to buy companies at inflated prices if there is a belief
that a given stock has momentum or that such stock is owned by a
relevant peer group.
Second, we diversify based on what we call non-codependence. That is,
we wish to own a collection of companies that do not conduct
significant business transactions with one another. This type of
diversification strategy can only be accomplished through bottoms-up
fundamental analysis. Stock categories, security industry codes, and
historical correlation studies have considerable limitations and are
used primarily for convenience by investment professionals. We believe
these diversification methods often understate or misstate the risk
being taken within a portfolio. For example, Enron's relationship with
Arthur Andersen put both companies out of business despite their
having been in very different industries. We believe that an
investment in Nestle would not provide one with any material exposure
to Switzerland; yet, the holding would be reported on a typical
statement as indicating that x-percent was invested in Switzerland as
result of such holding. We believe that the real risks of owning
Nestle have nothing to do with either the Swiss economy or
Switzerland. We are of the belief that you can be properly diversified
with a limited number of names within a single industry, provided that
these companies have totally independent risk/return characteristics;
however, you can be totally un-diversified and, thus,
5
unprotected, while being invested in a hundred names across many
different industries. The cornerstone of our investment philosophy is
proper diversification, as determined by our assessment of the risks
being assumed and not by some misconceived categorization.
We thank you for your confidence and stress that we will endeavor to
do sensible things with your money, especially given that a growing
amount of our money is invested in tandem with yours.
/s/ Peter B. Doyle
Peter B. Doyle
Chief Investment Strategist,
Kinetics Asset Management, Inc.
6
DISCLOSURE
THIS MATERIAL IS INTENDED TO BE REVIEWED IN CONJUNCTION WITH A CURRENT
PROSPECTUS, WHICH INCLUDES ALL FEES AND EXPENSES THAT APPLY TO A
CONTINUED INVESTMENT PROGRAM, AS WELL AS INFORMATION REGARDING THE
RISK FACTORS, POLICIES AND OBJECTIVES OF THE FUNDS. READ IT CAREFULLY
BEFORE INVESTING.
MUTUAL FUND INVESTING INVOLVES RISK. PRINCIPAL LOSS IS POSSIBLE.
BECAUSE THE FUNDS [OTHER THAN THE PARADIGM FUND, THE SMALL CAP
OPPORTUNITIES FUND 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
7
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.
8
KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS
EXPENSE EXAMPLE
June 30, 2005 (Unaudited)
Shareholders incur two type of costs: (1) transaction costs, including sales
charges (loads) on purchase payments, reinvestments of dividends or other
distributions made by the Fund, redemption fees, and exchange fees, and (2),
ongoing costs, including management fees, distribution and/or service (12b-1)
fees, and other Fund expenses. This example is intended to help 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 January 1, 2005 to June 30, 2005.
ACTUAL EXPENSES
The first line of the table below provides information about actual account
values and actual expenses. Unlike other mutual funds that directly acquire and
manage their own portfolio securities, each Feeder Fund invests all of its
investable assets in a corresponding Master Portfolio, a separately registered
investment company. The Master Portfolio, in turn, invests in securities. With
this type of organization, expenses can accrue specifically to the Master
Portfolio or the Feeder Fund or both. The Adviser for the Master Portfolios has
directed a certain amount of the Master Portfolio's trades to brokers believed
to provide the best execution and, as a result, the Master Portfolios have
generated direct brokerage credits to reduce certain service provider fees. Each
Feeder Fund records its proportionate share of the Master Portfolio's expenses,
including directed brokerage credits, on a daily basis. Any expense reductions
include Feeder Fund-specific expenses as well as the expenses allocated from the
Master Portfolio.
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 certain 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
9
reserve the right to waive the redemption fee, subject to their sole discretion,
in certain instances.
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.
10
EXPENSE EXAMPLE
<Table>
<Caption>
ENDING ACCOUNT EXPENSES PAID
BEGINNING ACCOUNT VALUE DURING PERIOD*
VALUE (1/1/05) (6/30/05) (1/1/05 TO 6/30/05)
----------------- -------------- --------------------
THE INTERNET FUND
No Load Class Actual -- before expense
reimbursement....................... $1,000.00 $ 929.20 $11.24
No Load Class Actual -- after expense
reimbursement....................... $1,000.00 $ 929.20 $11.24
No Load Class Hypothetical (5% return
before expenses) -- before expense
reimbursement....................... $1,000.00 $1,013.14 $11.73
No Load Class Hypothetical (5% return
before expenses) -- after expense
reimbursement....................... $1,000.00 $1,013.14 $11.73
Advisor Class A Actual -- before
expense reimbursement............... $1,000.00 $ 928.20 $12.43
Advisor Class A Actual -- after
expense reimbursement............... $1,000.00 $ 928.20 $12.43
Advisor Class A Hypothetical (5%
return before expenses) -- before
expense reimbursement............... $1,000.00 $1,011.90 $12.97
Advisor Class A Hypothetical (5%
return before expenses) -- after
expense reimbursement............... $1,000.00 $1,011.90 $12.97
THE INTERNET EMERGING GROWTH FUND
No Load Class Actual -- before expense
reimbursement....................... $1,000.00 $ 955.60 $16.10
No Load Class Actual -- after expense
reimbursement....................... $1,000.00 $ 955.60 $13.09
No Load Class Hypothetical (5% return
before expenses) -- before expense
reimbursement....................... $1,000.00 $1,008.33 $16.53
No Load Class Hypothetical (5% return
before expenses) -- after expense
reimbursement....................... $1,000.00 $1,011.41 $13.47
THE PARADIGM FUND
No Load Class Actual -- before expense
reimbursement....................... $1,000.00 $1,075.80 $10.40
No Load Class Actual -- after expense
reimbursement....................... $1,000.00 $1,075.80 $ 8.70
No Load Class Hypothetical (5% return
before expenses) -- before expense
reimbursement....................... $1,000.00 $1,014.78 $10.09
No Load Class Hypothetical (5% return
before expenses) -- after expense
reimbursement....................... $1,000.00 $1,016.41 $ 8.45
Advisor Class A Actual -- before
expense reimbursement............... $1,000.00 $1,071.30 $11.66
Advisor Class A Actual -- after
expense reimbursement............... $1,000.00 $1,071.30 $ 9.96
Advisor Class A Hypothetical (5%
return before expenses) -- before
expense reimbursement............... $1,000.00 $1,013.54 $11.33
Advisor Class A Hypothetical (5%
return before expenses) -- after
expense reimbursement............... $1,000.00 $1,015.17 $ 9.69
</Table>
11
<Table>
<Caption>
ENDING ACCOUNT EXPENSES PAID
BEGINNING ACCOUNT VALUE DURING PERIOD*
VALUE (1/1/05) (6/30/05) (1/1/05 TO 6/30/05)
----------------- -------------- --------------------
Advisor Class C Actual -- before
expense reimbursement............... $1,000.00 $1,069.20 $14.21
Advisor Class C Actual -- after
expense reimbursement............... $1,000.00 $1,069.20 $12.52
Advisor Class C Hypothetical (5%
return before expenses) -- before
expense reimbursement............... $1,000.00 $1,011.06 $13.81
Advisor Class C Hypothetical (5%
return before expenses) -- after
expense reimbursement............... $1,000.00 $1,012.69 $12.18
Institutional Class Actual -- before
expense reimbursement**............. $1,000.00 $1,040.80 $ 1.87
Institutional Class Actual -- after
expense reimbursement**............. $1,000.00 $1,040.80 $ 1.42
Institutional Class Hypothetical (5%
return before expenses) -- before
expense reimbursement**............. $1,000.00 $1,002.82 $ 1.84
Institutional Class Hypothetical (5%
return before expenses) -- after
expense reimbursement**............. $1,000.00 $1,003.27 $ 1.39
THE MEDICAL FUND
No Load Class Actual -- before expense
reimbursement....................... $1,000.00 $ 923.60 $12.40
No Load Class Actual -- after expense
reimbursement....................... $1,000.00 $ 923.60 $11.88
No Load Class Hypothetical (5% return
before expenses) -- before expense
reimbursement....................... $1,000.00 $1,011.90 $12.97
No Load Class Hypothetical (5% return
before expenses) -- after expense
reimbursement....................... $1,000.00 $1,012.45 $12.42
Advisor Class A Actual -- before
expense reimbursement............... $1,000.00 $ 922.40 $13.58
Advisor Class A Actual -- after
expense reimbursement............... $1,000.00 $ 922.40 $13.06
Advisor Class A Hypothetical (5%
return before expenses) -- before
expense reimbursement............... $1,000.00 $1,010.66 $14.21
Advisor Class A Hypothetical (5%
return before expenses) -- after
expense reimbursement............... $1,000.00 $1,011.21 $13.66
THE SMALL CAP OPPORTUNITIES FUND
No Load Class Actual -- before expense
reimbursement....................... $1,000.00 $1,032.60 $10.53
No Load Class Actual -- after expense
reimbursement....................... $1,000.00 $1,032.60 $ 7.91
No Load Class Hypothetical (5% return
before expenses) -- before expense
reimbursement....................... $1,000.00 $1,014.43 $10.44
No Load Class Hypothetical (5% return
before expenses) -- after expense
reimbursement....................... $1,000.00 $1,017.01 $ 7.85
Advisor Class A Actual -- before
expense reimbursement............... $1,000.00 $1,031.70 $11.79
</Table>
12
<Table>
<Caption>
ENDING ACCOUNT EXPENSES PAID
BEGINNING ACCOUNT VALUE DURING PERIOD*
VALUE (1/1/05) (6/30/05) (1/1/05 TO 6/30/05)
----------------- -------------- --------------------
Advisor Class A Actual -- after
expense reimbursement............... $1,000.00 $1,031.70 $ 9.17
Advisor Class A Hypothetical (5%
return before expenses) -- before
expense reimbursement............... $1,000.00 $1,013.19 $11.68
Advisor Class A Hypothetical (5%
return before expenses) -- after
expense reimbursement............... $1,000.00 $1,015.77 $ 9.10
THE KINETICS GOVERNMENT MONEY MARKET FUND
No Load Class Actual -- before expense
reimbursement....................... $1,000.00 $1,005.80 $31.43
No Load Class Actual -- after expense
reimbursement....................... $1,000.00 $1,005.80 $ 5.72
No Load Class Hypothetical (5% return
before expenses) -- before expense
reimbursement....................... $1,000.00 $ 993.45 $31.24
No Load Class Hypothetical (5% return
before expenses) -- after expense
reimbursement....................... $1,000.00 $1,019.09 $ 5.76
</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 before expense
reimbursement and after expense reimbursement respectively of 2.35% and 2.35%
for The Internet Fund No Load Class, 2.60% and 2.60% for The Internet Fund
Advisor Class A, 3.32% and 2.70% for The Internet Emerging Growth Fund, 2.02%
and 1.69% for The Paradigm Fund No Load Class, 2.27% and 1.94% for The
Paradigm Fund Advisor Class A, 2.77% and 2.44% for The Paradigm Fund Advisor
Class C, 2.60% and 2.49% for The Medical Fund No Load Class, 2.85% and 2.74%
for The Medical Fund Advisor Class A, 2.09% and 1.57% for The Small Cap
Opportunities Fund No Load Class, 2.34% and 1.82% for The Small Cap
Opportunities Fund Advisor Class A, and 6.32% and 1.15% for The Kinetics
Government Money Market Fund, multiplied by the average account value over
the period, multiplied by 181/365.
** Expenses paid during period 5/27/05 -- 6/30/05 and are equal to the Fund's
annualized expense ratio before expense reimbursement and after expense
reimbursement of 1.97% and 1.49% respectively for The Paradigm Fund
Institutional Class, multiplied by the average account value over the period,
multiplied by 34/365 (to reflect the inception date to the end of the
semi-annual period).
13
KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS
STATEMENT OF ASSETS & LIABILITIES
June 30, 2005 (Unaudited)
<Table>
<Caption>
THE INTERNET
THE INTERNET EMERGING GROWTH
FUND FUND
- ----------------------------------------------------------------------------------
ASSETS:
Investments in the Master Portfolios, at
value*....................................... $ 164,598,712 $ 3,681,280
Receivable from Adviser........................ -- 12,664
Receivable for Master Portfolio interest
sold......................................... 76,324 5,105
Receivable for Fund shares sold................ 3,185 100
Prepaid expenses and other assets.............. 26,871 9,326
------------- ------------
Total assets................................. 164,705,092 3,708,475
------------- ------------
LIABILITIES:
Payable to Directors and Officers.............. 7,190 138
Payable for Fund shares repurchased............ 79,508 5,205
Payable for service fees....................... 34,186 767
Payable for distribution fees.................. 64 --
Accrued expenses and other liabilities......... 159,287 8,136
------------- ------------
Total liabilities............................ 280,235 14,246
------------- ------------
Net assets................................... $ 164,424,857 $ 3,694,229
============= ============
NET ASSETS CONSIST OF:
Paid in capital................................ $ 347,525,886 $ 14,693,478
Accumulated net investment income.............. -- 82,453
Accumulated net realized loss on investments,
options and written option contracts......... (184,260,514) (11,496,725)
Net unrealized appreciation on:
Investments.................................. 1,153,800 405,210
Written option contracts..................... 5,685 9,813
------------- ------------
Net assets................................... $ 164,424,857 $ 3,694,229
============= ============
CALCULATION OF NET ASSET VALUE PER SHARE -- NO
LOAD CLASS:
Net assets..................................... $ 164,121,024 $ 3,694,229
Shares outstanding............................. 6,982,987 859,832
Net asset value per share (offering and
redemption price)............................ $ 23.50 $ 4.30
============= ============
CALCULATION OF NET ASSET VALUE PER SHARE --
ADVISOR CLASS A:
Net assets..................................... $ 303,833
Shares outstanding............................. 13,130
Net asset value per share...................... $ 23.14
=============
Offering price per share ($23.14 divided by
.9425)....................................... $ 24.55
=============
</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.
14
KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS
STATEMENT OF ASSETS & LIABILITIES
June 30, 2005 (Unaudited)
<Table>
<Caption>
THE
PARADIGM THE MEDICAL
FUND FUND
- ----------------------------------------------------------------------------------------
ASSETS:
Investments in the Master Portfolios, at value*............ $241,116,089 $15,954,899
Receivable from Adviser.................................... 262,327 8,987
Receivable for Master Portfolio interest sold.............. -- 24,514
Receivable for Fund shares sold............................ 3,250,187 100
Prepaid expenses and other assets.......................... 37,855 15,369
------------ -----------
Total assets............................................. 244,666,458 16,003,869
------------ -----------
LIABILITIES:
Payable for Master Portfolio interest purchased............ 2,835,462 --
Payable to Directors and Officers.......................... 6,476 747
Payable for Fund shares repurchased........................ 414,725 24,614
Payable for service fees................................... 43,716 3,355
Payable for distribution fees.............................. 17,464 122
Accrued expenses and other liabilities..................... 82,286 27,863
------------ -----------
Total liabilities........................................ 3,400,129 56,701
------------ -----------
Net assets............................................... $241,266,329 $15,947,168
============ ===========
NET ASSETS CONSIST OF:
Paid in capital............................................ $201,401,019 $19,060,988
Accumulated net realized gain (loss) on investments,
options and written option contracts..................... 658,435 (1,140,764)
Net unrealized appreciation (depreciation) on:
Investments.............................................. 39,206,875 (1,973,056)
------------ -----------
Net assets............................................... $241,266,329 $15,947,168
============ ===========
CALCULATION OF NET ASSET VALUE PER SHARE -- NO LOAD CLASS:
Net assets................................................. $181,061,329 $15,367,624
Shares outstanding......................................... 9,597,222 992,902
Net asset value per share (offering and redemption
price)................................................... $ 18.87 $ 15.48
============ ===========
CALCULATION OF NET ASSET VALUE PER SHARE -- ADVISOR CLASS A:
Net assets................................................. $ 36,883,660 $ 579,544
Shares outstanding......................................... 1,978,669 38,092
Net asset value per share.................................. $ 18.64 $ 15.21
============ ===========
Offering price per share ($18.64 divided by .9425 and
$15.21 divided by .9425, respectively)................... $ 19.78 $ 16.14
============ ===========
CALCULATION OF NET ASSET VALUE PER SHARE -- ADVISOR CLASS C:
Net assets................................................. $ 18,352,562
Shares outstanding......................................... 997,551
Net asset value per share (offering and redemption
price)................................................... $ 18.40
============
CALCULATION OF NET ASSET VALUE PER SHARE -- INSTITUTIONAL
CLASS:
Net assets................................................. $ 4,968,778
Shares outstanding......................................... 263,332
Net asset value per share (offering and redemption
price)................................................... $ 18.87
============
</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.
15
KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS
STATEMENT OF ASSETS & LIABILITIES
June 30, 2005 (Unaudited)
<Table>
<Caption>
THE SMALL THE KINETICS
CAP GOVERNMENT
OPPORTUNITIES MONEY
FUND MARKET FUND
- ------------------------------------------------------------------------------------------
ASSETS:
Investments in the Master Portfolios, at value*............ $68,304,019 $1,110,686
Receivable from Adviser.................................... 131,972 30,136
Receivable for Fund shares sold............................ 719,146 1,371
Prepaid expenses and other assets.......................... 24,768 9,355
----------- ----------
Total assets............................................. 69,179,905 1,151,548
----------- ----------
LIABILITIES:
Payable for Master Portfolio interest purchased............ 681,379 1,371
Payable for Dividend to Shareholders....................... -- 1,910
Payable to Directors and Officers.......................... 1,926 95
Payable for Fund shares repurchased........................ 37,767 --
Payable for service fees................................... 13,346 235
Payable for distribution fees.............................. 638 --
Accrued expenses and other liabilities..................... 28,932 7,907
----------- ----------
Total liabilities........................................ 763,988 11,518
----------- ----------
Net assets............................................... $68,415,917 $1,140,030
=========== ==========
NET ASSETS CONSIST OF:
Paid in capital............................................ $56,876,783 $1,140,030
Accumulated net investment income.......................... 359,966 --
Accumulated net realized gain on investments, options and
written option contracts................................. 557,478 --
Net unrealized appreciation (depreciation) on:
Investments.............................................. 10,621,690 --
----------- ----------
Net assets............................................... $68,415,917 $1,140,030
=========== ==========
CALCULATION OF NET ASSET VALUE PER SHARE -- NO LOAD CLASS:
Net assets................................................. $65,109,754 $1,140,030
Shares outstanding......................................... 3,373,563 1,140,030
Net asset value per share (offering and redemption
price)................................................... $ 19.30 $ 1.00
=========== ==========
CALCULATION OF NET ASSET VALUE PER SHARE -- ADVISOR CLASS A:
Net assets................................................. $ 3,306,163
Shares outstanding......................................... 172,031
Net asset value per share.................................. $ 19.22
===========
Offering price per share ($19.22 divided by .9425)......... $ 20.39
===========
</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.
16
KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS
STATEMENT OF OPERATIONS
Six Months Ended June 30, 2005 (Unaudited)
<Table>
<Caption>
THE INTERNET
THE INTERNET EMERGING
FUND GROWTH FUND
- -----------------------------------------------------------------------------------------
INVESTMENT INCOME ALLOCATED FROM MASTER PORTFOLIOS:
Dividends+................................................ $ 2,042,597 $ 142,579
Interest.................................................. 1,056,752 36,588
Income from securities lending............................ 55,949 213
Expenses only from Master Portfolio....................... (1,291,329) (35,554)
------------ ---------
Total investment income............................... 1,863,969 143,826
------------ ---------
EXPENSES:
Distribution fees -- Advisor Class A...................... 394 --
Shareholder servicing fees and expenses................... 472,319 16,424
Reports to shareholders................................... 138,563 5,491
Administration fees....................................... 46,219 986
Professional fees......................................... 54,370 729
Directors' and Officers' fees and expenses................ 17,760 310
Registration fees......................................... 15,319 8,584
Fund accounting fees...................................... 4,049 --
Other expenses............................................ 10,241 181
------------ ---------
Total expenses........................................ 759,234 32,705
Less, expense reimbursement............................... -- (12,659)
------------ ---------
Net expenses.......................................... 759,234 20,046
------------ ---------
Net investment income................................. 1,104,735 123,780
------------ ---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS ALLOCATED
FROM MASTER PORTFOLIOS:
Net realized gain (loss) on:
Investments and foreign currency...................... (6,677,747) (5,943)
Written option contracts expired or closed............ 309,754 --
Net change in unrealized appreciation (depreciation) of:
Investments and foreign currency...................... (8,622,214) (333,674)
Written option contracts.............................. (295,508) 10,373
------------ ---------
Net loss on investments............................... (15,285,715) (329,244)
------------ ---------
Net decrease in net assets resulting from
operations.......................................... $(14,180,980) $(205,464)
============ =========
+ Net of Foreign Taxes Withheld of: $ 17,169 $ 369
============ =========
</Table>
See Notes to the Financial Statements.
17
KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS
STATEMENT OF OPERATIONS
Six Months Ended June 30, 2005 (Unaudited)
<Table>
<Caption>
THE PARADIGM THE MEDICAL
FUND FUND
- ----------------------------------------------------------------------------------------
INVESTMENT INCOME ALLOCATED FROM MASTER PORTFOLIOS:
Dividends+................................................ $ 1,119,480 $ 157,169
Interest.................................................. 172,750 1,458
Income from securities lending............................ 2,471 1,407
Expenses only from Master Portfolio....................... (1,160,707) (134,112)
----------- -----------
Total investment income............................... 133,994 25,922
----------- -----------
EXPENSES:
Distribution fees -- Advisor Class A...................... 37,025 762
Distribution fees -- Advisor Class C...................... 47,032 --
Shareholder servicing fees and expenses................... 274,683 51,322
Shareholder servicing fees -- Institutional Class......... 801 --
Reports to shareholders................................... 45,595 18,879
Administration fees....................................... 36,891 4,173
Professional fees......................................... 41,662 5,254
Directors' and Officers' fees and expenses................ 14,291 991
Registration fees......................................... 26,417 12,284
Fund accounting fees...................................... 11,320 443
Other expenses............................................ 3,067 1,086
----------- -----------
Total expenses........................................ 538,784 95,194
Less, expense waiver for Institutional Class service
fees.................................................... (601) --
Less, expense reimbursement............................... (262,000) (8,987)
----------- -----------
Net expenses.......................................... 276,183 86,207
----------- -----------
Net investment loss................................... (142,189) (60,285)
----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS ALLOCATED
FROM MASTER PORTFOLIOS:
Net realized gain on:
Investments and foreign currency...................... 539,737 798,217
Written option contracts expired or closed............ -- 83,651
Net change in unrealized appreciation (depreciation) of:
Investments and foreign currency...................... 12,674,543 (2,225,128)
Written option contracts.............................. -- (80,029)
----------- -----------
Net gain (loss) on investments........................ 13,214,280 (1,423,289)
----------- -----------
Net increase (decrease) in net assets resulting from
operations.......................................... $13,072,091 $(1,483,574)
=========== ===========
+ Net of Foreign Taxes Withheld of: $ 32,437 $ 19,555
=========== ===========
</Table>
See Notes to the Financial Statements.
18
KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS
STATEMENT OF OPERATIONS
Six Months Ended June 30, 2005 (Unaudited)
<Table>
<Caption>
THE KINETICS
THE SMALL CAP GOVERNMENT
OPPORTUNITIES MONEY MARKET
FUND FUND
- ------------------------------------------------------------------------------------------
INVESTMENT INCOME ALLOCATED FROM MASTER PORTFOLIOS:
Dividends+................................................ $ 636,921 $ --
Interest.................................................. 115,970 13,980
Income from securities lending............................ 10,156 --
Expenses only from Master Portfolio....................... (370,318) (9,220)
---------- --------
Total investment income............................... 392,729 4,760
---------- --------
EXPENSES:
Distribution fees -- Advisor Class A...................... 3,537 --
Shareholder servicing fees and expenses................... 81,248 4,665
Reports to shareholders................................... 28,898 4,672
Administration fees....................................... 11,897 296
Professional fees......................................... 11,635 186
Directors' and Officers' fees and expenses................ 4,502 126
Registration fees......................................... 19,510 16,813
Fund accounting fees...................................... 2,443 --
Other expenses............................................ 1,024 772
---------- --------
Total expenses........................................ 164,694 27,530
Less, expense reimbursement............................... (131,931) (30,057)
---------- --------
Net expenses.......................................... 32,763 (2,527)
---------- --------
Net investment income................................. 359,966 7,287
---------- --------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS ALLOCATED
FROM MASTER PORTFOLIOS:
Net realized loss on:
Investments and foreign currency...................... (106,833) --
Net change in unrealized appreciation (depreciation) of:
Investments and foreign currency...................... 2,425,496 --
---------- --------
Net gain on investments............................... 2,318,663 --
---------- --------
Net increase in net assets resulting from
operations.......................................... $2,678,629 $ 7,287
========== ========
+ Net of Foreign Taxes Withheld of: $ 3,433 $ --
========== ========
</Table>
See Notes to the Financial Statements.
19
KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
THE INTERNET EMERGING
THE INTERNET FUND GROWTH FUND
---------------------------- ----------------------------
SIX MONTHS FOR THE SIX MONTHS FOR THE
ENDED YEAR ENDED ENDED YEAR ENDED
JUNE 30, 2005 DECEMBER 31, JUNE 30, 2005 DECEMBER 31,
(UNAUDITED) 2004 (UNAUDITED) 2004
- --------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income........ $ 1,104,735 $ 899,885 $ 123,780 $ 79,835
Net realized gain (loss) on
sale of investments,
foreign currency and
written option contracts
expired or closed.......... (6,367,993) 33,311,287 (5,943) 128,442
Net change in unrealized
appreciation (depreciation)
of investments, foreign
currency and written
options.................... (8,917,722) (16,515,065) (323,301) 103,604
------------ ------------ ----------- -----------
Net increase (decrease)
in net assets resulting
from operations........ (14,180,980) 17,696,107 (205,464) 311,881
------------ ------------ ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS
-- NO LOAD CLASS:
Net investment income........ -- (2,899,789) -- (107,877)
------------ ------------ ----------- -----------
Total distributions...... -- (2,899,789) -- (107,877)
------------ ------------ ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS
-- ADVISOR CLASS A:
Net investment income........ -- (3,218) N/A N/A
------------ ------------ ----------- -----------
Total distributions...... -- (3,218) N/A N/A
------------ ------------ ----------- -----------
CAPITAL SHARE TRANSACTIONS --
NO LOAD CLASS:
Proceeds from shares sold.... 1,162,777 20,187,510 365,596 1,385,953
Proceeds from shares issued
to holders in reinvestment
of dividends............... -- 2,758,435 -- 97,802
Cost of shares redeemed...... (24,815,071) (66,950,463) (1,050,253) (1,780,526)
------------ ------------ ----------- -----------
Net decrease in net
assets resulting from
capital share
transactions........... (23,652,294) (44,004,518) (684,657) (296,771)
------------ ------------ ----------- -----------
</Table>
See Notes to the Financial Statements.
20
KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
<Table>
<Caption>
THE INTERNET EMERGING
THE INTERNET FUND GROWTH FUND
---------------------------- ----------------------------
SIX MONTHS FOR THE SIX MONTHS FOR THE
ENDED YEAR ENDED ENDED YEAR ENDED
JUNE 30, 2005 DECEMBER 31, JUNE 30, 2005 DECEMBER 31,
(UNAUDITED) 2004 (UNAUDITED) 2004
- --------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS --
ADVISOR CLASS A:
Proceeds from shares sold.... $ -- $ 21,396,074 N/A N/A
Proceeds from shares issued
to holders in reinvestment
of dividends............... -- 3,128 N/A N/A
Cost of shares redeemed...... (24,261) (21,304,122) N/A N/A
------------ ------------ ----------- -----------
Net increase (decrease)
in net assets resulting
from capital share
transactions........... (24,261) 95,080 N/A N/A
------------ ------------ ----------- -----------
TOTAL DECREASE IN NET ASSETS... (37,857,535) (29,116,338) (890,121) (92,767)
NET ASSETS:
Beginning of year............ 202,282,392 231,398,730 4,584,350 4,677,117
------------ ------------ ----------- -----------
End of period*............... $164,424,857 $202,282,392 $ 3,694,229 $ 4,584,350
============ ============ =========== ===========
*Including undistributed net
investment income of:........ $ -- $ (1,845,522) $ 82,453 $ (41,327)
------------ ------------ ----------- -----------
CHANGES IN SHARES
OUTSTANDING -- NO LOAD CLASS:
Shares sold.................. 49,214 863,154 83,683 324,922
Shares issued in reinvestment
of dividends and
distributions.............. -- 108,472 -- 21,685
Shares redeemed.............. (1,052,281) (2,895,291) (242,264) (419,861)
------------ ------------ ----------- -----------
Net decrease in shares
out-standing........... (1,003,067) (1,923,665) (158,581) (73,254)
============ ============ =========== ===========
CHANGES IN SHARES OUTSTANDING--
ADVISOR CLASS A:
Shares sold.................. -- 964,063
Shares issued in
reinvestments of dividends
and distributions.......... -- 125
Shares redeemed.............. (1,060) (968,696)
------------ ------------
Net decrease in shares
outstanding.............. (1,060) (4,508)
============ ============
</Table>
See Notes to the Financial Statements.
21
KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
THE PARADIGM FUND THE MEDICAL FUND
----------------------------- ----------------------------
SIX MONTHS FOR THE SIX MONTHS FOR THE
ENDED YEAR ENDED ENDED YEAR ENDED
JUNE 30, 2005 DECEMBER 31, JUNE 30, 2005 DECEMBER 31,
(UNAUDITED) 2004 (UNAUDITED) 2004
- --------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment loss...................... $ (142,189) $ (410,824) $ (60,285) $ (262,143)
Net realized gain (loss) on sale of
investments, foreign currency and
written option contracts expired or
closed................................. 539,737 4,035,209 881,868 546,535
Net change in unrealized appreciation
(depreciation) of investments, foreign
currency and written options........... 12,674,543 13,988,562 (2,305,157) 1,117,785
------------ ------------ ----------- -----------
Net increase in net assets resulting
from operations.................... 13,072,091 17,612,947 (1,483,574) 1,402,177
------------ ------------ ----------- -----------
DISTRIBUTIONS TO
SHAREHOLDERS -- NO LOAD CLASS:
Net investment income.................... -- (73,771) -- --
Net realized gains....................... -- (2,290,393) -- --
------------ ------------ ----------- -----------
Total distributions.................. -- (2,364,164) -- --
------------ ------------ ----------- -----------
DISTRIBUTIONS TO
SHAREHOLDERS -- ADVISOR CLASS A:
Net investment income.................... -- (22,189) -- --
Net realized gains....................... -- (689,040) -- --
------------ ------------ ----------- -----------
Total distributions.................. -- (711,229) -- --
------------ ------------ ----------- -----------
DISTRIBUTIONS TO
SHAREHOLDERS -- ADVISOR CLASS C:
Net investment income.................... -- (7,531) N/A N/A
Net realized gains....................... -- (233,914) N/A N/A
------------ ------------ ----------- -----------
Total distributions.................. -- (241,445) N/A N/A
------------ ------------ ----------- -----------
CAPITAL SHARE TRANSACTIONS -- NO LOAD
CLASS:
Proceeds from shares sold................ 118,281,311 57,276,719 242,658 3,456,495
Proceeds from shares issued to holders in
reinvestment of dividends.............. -- 2,324,520 -- --
Cost of shares redeemed.................. (36,152,728) (37,924,198) (3,027,140) (8,926,297)
------------ ------------ ----------- -----------
Net increase (decrease) in net assets
resulting from capital share
transactions....................... 82,128,583 21,677,041 (2,784,482) (5,469,802)
------------ ------------ ----------- -----------
CAPITAL SHARE TRANSACTIONS -- ADVISOR
CLASS A:
Proceeds from shares sold................ 12,236,211 13,180,643 31,597 142,200
Proceeds from shares issued to holders in
reinvestment of dividends.............. -- 624,768 -- --
Cost of shares redeemed.................. (4,129,722) (3,787,846) (95,553) (248,964)
------------ ------------ ----------- -----------
Net increase (decrease) in net assets
resulting from capital share
transactions....................... 8,106,489 10,017,565 (63,956) (106,764)
------------ ------------ ----------- -----------
CAPITAL SHARE TRANSACTIONS -- ADVISOR
CLASS C:
Proceeds from shares sold................ 8,390,892 6,800,263 N/A N/A
Proceeds from shares issued to holders in
reinvestment of dividends.............. -- 233,753 N/A N/A
Cost of shares redeemed.................. (471,186) (688,644) N/A N/A
------------ ------------ ----------- -----------
Net increase in net assets resulting
from capital share transactions.... 7,919,706 6,345,372 N/A N/A
------------ ------------ ----------- -----------
</Table>
See Notes to the Financial Statements.
22
KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
<Table>
<Caption>
THE PARADIGM FUND THE MEDICAL FUND
----------------------------- ----------------------------
SIX MONTHS FOR THE SIX MONTHS FOR THE
ENDED YEAR ENDED ENDED YEAR ENDED
JUNE 30, 2005 DECEMBER 31, JUNE 30, 2005 DECEMBER 31,
(UNAUDITED) 2004 (UNAUDITED) 2004
- --------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS --
INSTITUTIONAL CLASS:
Proceeds from shares sold................ 4,775,246 N/A
Proceeds from shares issued to holders in
reinvestment of dividends.............. -- N/A
Cost of shares redeemed.................. -- N/A
------------ ------------
Net increase (decrease) in net assets
resulting from capital share
transactions....................... 4,775,246 N/A
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS... $116,002,115 $ 52,336,087 $(4,332,012) $(4,174,389)
NET ASSETS:
Beginning of year........................ 125,264,214 72,928,127 20,279,180 24,453,569
------------ ------------ ----------- -----------
End of period*........................... $241,266,329 $125,264,214 $15,947,168 $20,279,180
============ ============ =========== ===========
*Including undistributed net investment
loss of:................................. $ -- $ (414,319) $ -- $ --
------------ ------------ ----------- -----------
CHANGES IN SHARES OUTSTANDING -- NO LOAD
CLASS:
Shares sold.............................. 6,574,978 3,574,328 15,299 222,542
Shares issued in reinvestment of
dividends and distributions............ -- 132,450 -- --
Shares redeemed.......................... (2,068,967) (2,483,043) (191,157) (565,590)
------------ ------------ ----------- -----------
Net increase (decrease) in shares
outstanding........................ 4,506,011 1,223,735 (175,858) (343,048)
============ ============ =========== ===========
CHANGES IN SHARES OUTSTANDING -- ADVISOR
CLASS A:
Shares sold.............................. 688,450 845,585 2,045 9,081
Shares issued in reinvestment of
dividends and distributions............ -- 35,886 -- --
Shares redeemed.......................... (234,317) (244,418) (6,179) (15,883)
------------ ------------ ----------- -----------
Net increase (decrease) in shares
outstanding........................ 454,133 637,053 (4,134) (6,802)
============ ============ =========== ===========
CHANGES IN SHARES OUTSTANDING -- ADVISOR
CLASS C:
Shares sold.............................. 476,515 434,911
Shares issued on reinvestment of
dividends and distributions............ -- 13,575
Shares redeemed.......................... (26,728) (44,985)
------------ ------------
Net increase in shares outstanding... 449,787 403,501
============ ============
CHANGES IN SHARES OUTSTANDING --
INSTITUTIONAL CLASS:
Shares sold.............................. 263,332 N/A
Shares issued in investments of dividends
and distributions...................... -- N/A
Shares redeemed.......................... -- N/A
------------ ------------
Net increase in shares outstanding... 263,332 N/A
============ ============
</Table>
See Notes to the Financial Statements.
23
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
---------------------------- --------------------------------
SIX MONTHS FOR THE SIX MONTHS FOR THE
ENDED YEAR ENDED ENDED YEAR ENDED
JUNE 30, 2005 DECEMBER 31, JUNE 30, 2005 DECEMBER 31,
(UNAUDITED) 2004 (UNAUDITED) 2004
- -----------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income....... $ 359,966 $ 295,147 $ 7,287 $ --
Net realized gain (loss) on
sale of investments,
foreign currency and
written
option contracts expired
or closed................. (106,833) 1,991,484 -- --
Net change in unrealized
appreciation of
investments, foreign
currency and written
options................... 2,425,496 2,368,164 -- --
----------- ------------ ---------- ----------------
Net increase in net
assets resulting from
operations............ 2,678,629 4,654,795 7,287 --
----------- ------------ ---------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS
-- NO LOAD CLASS:
Net investment income....... -- (305,568) (7,287) --
Net realized gains.......... -- (746,333) -- --
----------- ------------ ---------- ----------------
Total distributions..... -- (1,051,901) (7,287) --
----------- ------------ ---------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS
-- ADVISOR CLASS A:
Net investment income....... -- (20,162) N/A N/A
Net realized gains.......... -- (62,614) N/A N/A
----------- ------------ ---------- ----------------
Total distributions..... -- (82,776) N/A N/A
----------- ------------ ---------- ----------------
CAPITAL SHARE TRANSACTIONS --
NO LOAD CLASS:
Proceeds from shares sold... 30,543,246 41,958,086 152,002 22,151,984
Proceeds from shares issued
to holders in reinvestment
of dividends.............. -- 1,046,435 5,198 --
Cost of shares redeemed..... (3,725,360) (34,183,636) (183,415) (24,033,453)
----------- ------------ ---------- ----------------
Net increase (decrease)
in net assets
resulting from capital
share transactions.... 26,817,886 8,820,885 (26,215) (1,881,469)
----------- ------------ ---------- ----------------
</Table>
See Notes to the Financial Statements.
24
KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
<Table>
<Caption>
THE SMALL CAP THE KINETICS GOVERNMENT
OPPORTUNITIES FUND MONEY MARKET FUND
---------------------------- --------------------------------
SIX MONTHS FOR THE SIX MONTHS FOR THE
ENDED YEAR ENDED ENDED YEAR ENDED
JUNE 30, 2005 DECEMBER 31, JUNE 30, 2005 DECEMBER 31,
(UNAUDITED) 2004 (UNAUDITED) 2004
- -----------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS --
ADVISOR CLASS A:
Proceeds from shares sold... $ 1,098,729 $ 1,527,681 $ N/A $ N/A
Proceeds from shares issued
to holders in reinvestment
of dividends.............. -- 69,025 N/A N/A
Cost of shares redeemed..... (810,963) (1,046,134) N/A N/A
----------- ------------ ---------- ----------------
Net increase in net
assets resulting from
capital share
transactions.......... 287,766 550,572 N/A N/A
----------- ------------ ---------- ----------------
TOTAL INCREASE (DECREASE) IN
NET ASSETS.................. 29,784,281 12,891,575 (26,215) (1,881,469)
NET ASSETS:
Beginning of year............. 38,631,636 25,740,061 1,166,245 3,047,714
----------- ------------ ---------- ----------------
End of period*................ $68,415,917 $ 38,631,636 $1,140,030 $ 1,166,245
=========== ============ ========== ================
*Including undistributed net
investment income of:....... $ 359,966 $ -- $ -- $ --
----------- ------------ ---------- ----------------
CHANGES IN SHARES OUTSTANDING
-- NO LOAD CLASS:
Shares sold................. 1,667,022 2,480,060 152,002 22,151,984
Shares issued in
reinvestment of dividends
and distributions......... -- 55,869 5,198 --
Shares redeemed............. (203,851) (2,055,870) (183,415) (24,033,453)
----------- ------------ ---------- ----------------
Net increase (decrease)
in shares
outstanding........... 1,463,171 480,059 (26,215) (1,881,469)
=========== ============ ========== ================
CHANGES IN SHARES OUTSTANDING
-- ADVISOR CLASS A:
Shares sold................. 59,588 89,828 N/A N/A
Shares issued in
reinvestment of dividends
and distributions......... -- 3,697 N/A N/A
Shares redeemed............. (44,810) (62,012) N/A N/A
----------- ------------ ---------- ----------------
Net increase in shares
outstanding........... 14,778 31,513 N/A N/A
=========== ============ ========== ================
</Table>
See Notes to the Financial Statements.
25
KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS
NOTES TO FINANCIAL STATEMENTS
June 30, 2005 (Unaudited)
1. ORGANIZATION
Kinetics Mutual Funds, Inc. (the "Company") is registered under the Investment
Company Act of 1940, as amended (the "1940 Act") and is incorporated in the
State of Maryland. The Company is an open-end management investment company
issuing its shares in series. One billion shares are authorized for the Company
with a par value of $0.001 per share. The series of the Company presently
authorized are The Internet Fund ("Internet"), The Internet Emerging Growth Fund
("Emerging"),The Paradigm Fund ("Paradigm"), The Medical Fund ("Medical"), The
Small Cap Opportunities Fund ("Small Cap") and The Kinetics Government Money
Market Fund ("Government") (each a "Feeder Fund" and collectively, the "Feeder
Funds"). Investment operations of the Feeder 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 Feeder 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 June 30, 2005 is as follows:
<Table>
<Caption>
INTEREST IN
MASTER PORTFOLIO
----------------
Internet Fund......................................... 99.996%
Emerging Fund......................................... 99.836%
Paradigm Fund......................................... 99.991%
Medical Fund.......................................... 99.936%
Small Cap Fund........................................ 99.971%
Government Fund....................................... 97.734%
</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.
26
KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
June 30, 2005 (Unaudited)
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. Effective May 27,
2005, the Paradigm Fund issued an additional class of shares -- the
Institutional Class. The Institutional Class shares are subject to a service fee
of 0.20% of average daily net assets. All other classes are subject to a service
fee of 0.25% of average daily net assets. The No Load Class and the
Institutional Class shares do not pay a 12b-1 fee or have a sales charge. Each
class of shares for each Fund has identical rights and privileges except with
respect to the Rule 12b-1 fees paid by the Advisor Class A and Class C shares,
the sales charge on the Advisor Class A and Class C shares, the service fees
paid by the No Load Class, Advisor Class A and Advisor Class C versus those paid
by the Institutional Class, voting rights on matters pertaining to a single
class of shares and the exchange privileges of each class of shares. Shares of
each Feeder Fund will assess a 2.00% redemption fee (with exceptions) on shares
redeemed or exchanged within 30 days of purchase.
Refer to the Master Portfolio's financial statements to obtain information about
the investment objective of the corresponding Feeder Fund. The financial
statements of the Master Portfolios, including the portfolio of investments in
securities, are contained elsewhere in this report and should be read in
conjunction with the Feeder Funds' financial statements.
2. SIGNIFICANT ACCOUNTING POLICIES
SECURITY VALUATION
Master Portfolio securities (other than Government) that are listed on a U.S.
securities exchange for which market quotations are readily available are valued
at the last quoted sale price on the day the valuation is made. Price
information on listed securities is taken from the exchange where the security
is primarily traded. All equity securities that are traded using the National
Association of Securities Dealers' Automated Quotation System ("NASDAQ") are
valued using the NASDAQ Official Closing Price ("NOCP"). In the event market
quotations are not readily available or if events occur that may materially
affect the value of a particular security between the time trading
27
KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
June 30, 2005 (Unaudited)
ends on a particular security and the close of regular trading on the New York
Stock Exchange ("NYSE"), "fair value" will be determined. Purchased options,
futures, unlisted U.S. securities and listed U.S. securities not traded on the
valuation date for which market quotations are readily available are valued at
the mean of the most recent bid and asked prices. Fixed-income securities (other
than obligations having a maturity of 60 days or less) are normally valued on
the basis of quotes obtained from pricing services, which take into account
appropriate factors such as institutional sized trading in similar groups of
securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics and other market data.
Investments in The Kinetics Government Money Market Portfolio and instruments
with remaining maturities of 60 days or less are valued at amortized cost, which
approximates fair value. Other assets and securities for which no quotations are
readily available (including restricted securities) are valued in good faith at
fair value using methods determined by the Board of Trustees of the Master
Portfolios. At June 30, 2005, none of the Master Portfolios held securities
which were fair valued.
REPURCHASE AGREEMENTS
Each Master Portfolio may enter into repurchase agreements with banks that are
members of the Federal Reserve System or securities dealers who are members of a
national securities exchange or are primary dealers in U.S. Government
Securities. In connection with transactions in repurchase agreements, it is the
Trust's policy that the Master Portfolio receive, as collateral, securities
whose market value, including accrued interest, at all times will be at least
equal to 100% of the amount invested by the Master Portfolio in each repurchase
agreement. If the seller defaults, and the value of the collateral declines,
realization of the collateral by the Master Portfolio may be delayed or limited.
WRITTEN OPTION ACCOUNTING
The Master Portfolios may write (sell) call or put options for trading or
hedging purposes. When a Master Portfolio writes an option, an amount equal to
the premium received by the Master Portfolio is included in the Statement of
Assets and Liabilities as an asset and an equivalent liability. The amount of
the liability is subsequently marked-to-market to reflect the current value of
the option written. By writing the option, the Master Portfolio may become
obligated during the term of the option to deliver or purchase the securities
underlying the option at the exercise price if the option is exercised. Option
contracts are valued at the average of the current bid and asked price reported
on the day of the valuation. When an option expires on
28
KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
June 30, 2005 (Unaudited)
its stipulated expiration date or the Master Portfolio enters into a closing
purchase transaction, the Master Portfolio realizes a gain or loss if the cost
of the closing transaction differs from the premium received when the option was
sold, without regard to any unrealized gain or loss on the underlying security,
and the liability related to such option is eliminated. When an option is
exercised, the premium originally received decreases the cost basis of the
underlying security (or increases the proceeds on the security sold short) and
the Master Portfolio realizes a gain or loss from the sale of the security (or
closing of the short sale). As collateral for uncovered written options, the
Master Portfolio is required under the 1940 Act to maintain assets consisting of
cash, cash equivalents or liquid securities. This collateral is required to be
adjusted daily to reflect the market value of the purchase obligation for put
options or the market value of the instrument underlying the contract for call
options.
FOREIGN CURRENCY TRANSLATIONS
The books and records of the Master Portfolios are maintained in U.S. dollars.
For the Master Portfolios, foreign currency transactions are translated into
U.S. dollars on the following basis: (i) market values of investment securities
and other assets and liabilities are translated at the exchange rate of such
currencies against the U.S. dollar, as provided by an approved pricing service,
and (ii) purchases and sales of investment securities, dividend and interest
income and certain expenses at the rates of exchange prevailing on the
respective dates of such transactions. The Master Portfolios do not isolate and
treat as ordinary income that portion of the results of operations arising as a
result of changes in the exchange rate from the fluctuations arising from
changes in the market prices of securities held during the period. However, for
federal income tax purposes, the Master Portfolios do isolate and treat as
ordinary income the effect of changes in foreign exchange rates arising from
actual foreign currency transactions and the effect of changes in foreign
exchange rates arising between trade date and settlement date.
RESTRICTED SECURITIES
The Master Portfolios may invest in restricted securities. These securities are
valued by the Master Portfolios after giving due consideration to pertinent
factors including recent private sales, market conditions and the issuer's
financial performance. The Master Portfolios have no right to require
registration of unregistered securities. At June 30, 2005, 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.
29
KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
June 30, 2005 (Unaudited)
WHEN-ISSUED SECURITIES
The Master Portfolios may purchase securities on a when-issued or delayed
delivery basis. Although the purchase amounts of these securities are
established at the time the purchaser enters into the agreement, these
securities may be delivered and paid for at a future date. The Master Portfolios
record purchases of when-issued securities and reflect the values of such
securities in determining net asset value in the same manner as other portfolio
securities. The Master Portfolios maintain at all times cash or other liquid
assets in an amount at least equal to the amount of outstanding commitments for
when-issued securities.
SECURITIES LENDING
Each Master Portfolio may lend its portfolio securities to broker-dealers by
entering directly into lending arrangements with such broker-dealers or
indirectly through repurchase agreements with respect to no more than 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.
30
KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
June 30, 2005 (Unaudited)
It is the Feeder Funds' policy to meet the requirements of the Internal Revenue
Code applicable to regulated investment companies and the Feeder Funds intend to
distribute investment company net taxable income and net capital gains to
shareholders. Therefore, no federal income tax provision is recorded. Dividends
from net investment income and distributions of net realized capital gains, if
any, will be declared and paid at least annually. The character of distributions
made during the year from net investment income or net realized gains may differ
from the characterization for federal income tax purposes due to differences in
the recognition of income, expenses and gain items for financial statement and
tax purposes. Additionally, the 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
The Trust has Investment Advisory Agreements (the "Agreements") with Kinetics
Asset Management, Inc. (the "Adviser"), with whom certain officers and trustees
of the Trust are affiliated, to furnish investment advisory services to the
Master Portfolios. Under the terms of the Agreements, the Master Portfolios
compensate the Adviser for its management services at the annual rate of 1.25%
of each Master Portfolio's average daily net assets, except for The Kinetics
Government Money Market Portfolio, which compensates the Adviser at an annual
rate of 0.50% of the Master Portfolio's average daily net assets.
31
KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
June 30, 2005 (Unaudited)
The Adviser has voluntarily agreed to continue to pay certain operating expenses
as deemed appropriate. The Adviser may discontinue the voluntary reimbursement
at any time, these reimbursements are not subject to recapture. For the six
months ended June 30, 2005, 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........................ $ -- $12,659
</Table>
<Table>
<Caption>
PARADIGM MEDICAL
--------- ----------
Annual Advisory Rate.................................. 1.25% 1.25%
Expenses Reimbursed by Adviser........................ $262,000 $ 8,987
</Table>
<Table>
<Caption>
SMALL CAP GOVERNMENT
--------- ----------
Annual Advisory Rate.................................. 1.25% 0.50%
Expenses Reimbursed by Adviser........................ $131,931 $30,057
</Table>
The Adviser receives a shareholder servicing fee from the No Load, Class A and
Class C shares of the Feeder Funds pursuant to a Shareholder Servicing Agreement
in the amount equal to 0.25% of the Feeder Fund's average daily net assets. For
the Institutional Class the Adviser receives a shareholder servicing fee in the
amount equal to 0.20% of the Institutional Class average daily net assets. At
this time the Investment Adviser has contractually agreed to waive and/or
reimburse the portion of the Institutional Class shareholder servicing fee in
excess of 0.05% of its average daily net assets until at least May 1, 2006. For
the period May 27, 2005 through June 30, 2005 the adviser waived $601 in
shareholder servicing fees for the Institutional Class. The Adviser is
responsible for paying a portion of these shareholder servicing fees to various
agents that have a written shareholder servicing agreement with the Adviser and
that perform shareholder servicing functions and maintenance of shareholder
accounts on behalf of their clients who own shares of the Feeder Funds.
For the six months ended June 30, 2005, the Feeder Funds incurred expenses of
$12,000 to be paid to the Chief Compliance Officer.
The Company, on behalf of the Funds, has adopted two Retail Distribution Plans
pursuant to Rule 12b-1 under the 1940 Act (the "12b-1 Plans"). One Plan is for
Advisor Class A shares, while the other Plan is for Advisor Classes B and C
shares. Under the first Plan, Advisor Class A shares may pay up to an annual
rate of 0.50% of the average daily net asset value of shares to the Distributor
or other qualified recipients under the Plan. During the six
32
KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
June 30, 2005 (Unaudited)
months ended June 30, 2005, 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 six months ended June 30, 2005, the Advisor Class A shares of the Internet,
Paradigm, Medical and Small Cap Funds incurred expenses of $394, $37,025, $762
and $3,537, respectively, pursuant to the 12b-1 Plan. Under the second Plan,
Advisor Classes B and C shares pay an annual rate of 0.75% of the average daily
net asset value of such shares. During the six months ended June 30, 2005,
Paradigm Advisor Class C shares incurred expenses of $47,032, pursuant to the
12b-1 Plan. Through June 30, 2005, the Funds had not issued any Advisor Class B
shares.
Kinetics Funds Distributor, Inc. (the "Distributor") acts as the Fund's
principal underwriter in a continuous public offering of the Fund's shares. The
Distributor is an affiliate of the Adviser.
For the six months ended June 30, 2005, the Distributor received $0, $42,879,
$165 and $4,510 from sales loads from the Internet, Paradigm, Medical and Small
Cap Funds.
4. INCOME TAXES
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.
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>
33
KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS
FINANCIAL HIGHLIGHTS
<Table>
<Caption>
THE INTERNET FUND
-------------------------------------------------------------------------------
NO LOAD ADVISOR
CLASS CLASS A NO LOAD ADVISOR
SIX MONTHS SIX MONTHS CLASS CLASS A
ENDED ENDED FOR THE YEAR FOR THE YEAR
JUNE 30, JUNE 30, ENDED ENDED
2005 2005 DECEMBER 31, DECEMBER 31,
(UNAUDITED) (UNAUDITED) 2004 2004
----------- ----------- ------------ ------------
PER SHARE DATA(3)
Net Asset Value, Beginning of
Period......................... $ 25.29 $24.93 $ 23.31 $22.88
-------- ------ -------- ------
Income from Investment Operations:
Net investment income (loss)... 0.15(6) 0.12(6) 0.10(6) 0.05(6)
Net realized and unrealized
gain (loss) on investments... (1.94) (1.91) 2.25 2.23
-------- ------ -------- ------
Total gain (loss) from
investment operations..... (1.79) (1.79) 2.35 2.28
-------- ------ -------- ------
Less Distributions:
From net investment income..... -- -- (0.37) (0.23)
From net realized gains........ -- -- -- --
-------- ------ -------- ------
Total distributions......... -- -- (0.37) (0.23)
-------- ------ -------- ------
Net Asset Value, End of Period... $ 23.50 $23.14 $ 25.29 $24.93
======== ====== ======== ======
Total Return(5).................. (7.08)%(1) (7.18)%(1) 10.06% 9.95%
SUPPLEMENTAL DATA AND RATIOS
Net assets, end of period
(000's)........................ $164,121 $ 304 $201,929 $ 354
Ratio of expenses to average net
assets:
Before expense
reimbursement............... 2.35%(2) 2.60%(2) 2.37% 2.62%
After expense
reimbursement............... 2.35%(2) 2.60%(2) 2.37% 2.62%
Ratio of net investment income
(loss) to average net assets:
Before expense
reimbursement............... 1.27%(2) 1.02%(2) 0.44% 0.19%
After expense
reimbursement............... 1.27%(2) 1.02%(2) 0.44% 0.19%
Portfolio turnover rate.......... N/A N/A N/A N/A
<Caption>
THE INTERNET FUND
--------------------------------
NO LOAD ADVISOR
CLASS CLASS A
FOR THE YEAR FOR THE YEAR
ENDED ENDED
DECEMBER 31, DECEMBER 31,
2003 2003
------------ ------------
PER SHARE DATA(3)
Net Asset Value, Beginning of
Period......................... $ 16.69 $16.47
-------- ------
Income from Investment Operations
Net investment income (loss)... 0.03 (0.82)
Net realized and unrealized
gain (loss) on investments... 6.66 7.23
-------- ------
Total gain (loss) from
investment operations..... 6.69 6.41
-------- ------
Less Distributions:
From net investment income..... (0.07) --
From net realized gains........ -- --
-------- ------
Total distributions......... (0.07) --
-------- ------
Net Asset Value, End of Period... $ 23.31 $22.88
======== ======
Total Return(5).................. 40.11% 38.92%
SUPPLEMENTAL DATA AND RATIOS
Net assets, end of period
(000's)........................ $230,971 $ 428
Ratio of expenses to average net
assets:
Before expense
reimbursement............... 2.39% 2.64%
After expense
reimbursement............... 2.39% 2.64%
Ratio of net investment income
(loss) to average net assets:
Before expense
reimbursement............... 0.11% (0.14)%
After expense
reimbursement............... 0.11% (0.14)%
Portfolio turnover rate.......... 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.
34
<Table>
<Caption>
THE INTERNET FUND
- ----------------------------------------------------------------------------------------
ADVISOR
NO LOAD ADVISOR NO LOAD CLASS A NO LOAD
CLASS CLASS A CLASS APRIL 26, CLASS
FOR THE YEAR FOR THE YEAR FOR THE YEAR 2001(+) FOR THE
ENDED ENDED 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.
35
KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS
FINANCIAL HIGHLIGHTS
<Table>
<Caption>
THE INTERNET
EMERGING GROWTH FUND
--------------------------------------------------------------------------------------
SIX MONTHS
ENDED FOR THE FOR THE FOR THE FOR THE FOR THE
JUNE 30, YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
2005 DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
(UNAUDITED) 2004 2003 2002 2001 2000
----------- ------------ ------------ ------------ ------------ ------------
PER SHARE DATA(1)
Net Asset Value,
Beginning of Year........... $ 4.50 $ 4.28 $ 3.24 $ 4.30 $ 3.69 $10.00
------ ------ ------ ------ ------ ------
Income from Investment
Operations:
Net investment income
(loss).................... 0.14 0.08 0.04 (0.08) (0.03) (0.03)
Net realized and unrealized
gain (loss) on
investments............... (0.34) 0.25 1.05 (0.98) 0.64 (6.28)
------ ------ ------ ------ ------ ------
Total gain (loss) from
investment
operations............. (0.20) 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........................ $ 4.30 $ 4.50 $ 4.28 $ 3.24 $ 4.30 $ 3.69
====== ====== ====== ====== ====== ======
Total Return.................. $(4.44)%(3) 7.67% 33.56% (24.65)% 16.53% (63.10)%
SUPPLEMENTAL DATA AND RATIOS
Net assets, end of year
(000's)..................... $3,694 $4,584 $4,677 $3,338 $5,277 $4,378
Ratio of expenses to average
net assets:
Before expense
reimbursement........... 3.32%(4) 3.45% 3.64% 3.78% 4.17% 3.33%
After expense
reimbursement........... 2.70%(4) 2.67% 2.74% 2.74% 2.74% 2.00%
Ratio of net investment income
(loss) to average net
assets:
Before expense
reimbursement........... 5.40%(4) 1.08% 0.11% (3.03)% (2.09)% (1.76)%
After expense
reimbursement........... 6.02%(4) 1.84% 1.01% (1.99)% (0.66)% (0.43)%
Portfolio turnover rate....... N/A 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).
(3) Not annualized.
(4) Annualized.
See Notes to the Financial Statements.
36
(This page intentionally left blank)
37
KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS
FINANCIAL HIGHLIGHTS
<Table>
<Caption>
THE PARADIGM FUND
----------------------------------------------------------------------------
NO LOAD ADVISOR ADVISOR
CLASS CLASS A CLASS C INSTITUTIONAL CLASS NO LOAD
SIX MONTHS SIX MONTHS SIX MONTHS FOR THE PERIOD CLASS
ENDED ENDED ENDED MAY 27, 2005 FOR THE YEAR
JUNE 30, JUNE 30, JUNE 30, THROUGH ENDED
2005 2005 2005 JUNE 30, 2005 DECEMBER 31,
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) 2004
----------- ----------- ----------- ------------------- ------------
PER SHARE DATA(1)
Net Asset Value,
Beginning of Period.......... $ 17.54 $ 17.40 $ 17.21 $18.13 $ 14.91
-------- ------- ------- ------ -------
Income from Investment
Operations:
Net investment income
(loss)...................... (0.01)(7) (0.03)(7) (0.06)(7) 0.01(7) (0.06)(7)
Net realized and unrealized
gain (loss) on
investments................. 1.34 1.27 1.25 0.73 3.17
-------- ------- ------- ------ -------
Total gain (loss) from
investment operations.... 1.33 1.24 1.19 0.74 3.11
-------- ------- ------- ------ -------
Less Distributions:
From net investment income... -- -- -- -- (0.02)
From net realized gains...... -- -- -- -- (0.46)
-------- ------- ------- ------ -------
Total distributions....... -- -- -- -- (0.48)
-------- ------- ------- ------ -------
Net Asset Value, End of
Period....................... $ 18.87 $ 18.64 $ 18.40 $18.87 $ 17.54
======== ======= ======= ====== =======
Total Return(6)................ 7.58%(4) 7.13%(4) 6.92%(4) 4.08%(4) 20.84%
SUPPLEMENTAL DATA AND RATIOS
Net assets, end of period
(000's)...................... $181,061 $36,884 $18,353 $4,969 $89,313
Ratio of expenses to average
net assets:
Before expense reimbursement
and waivers(8)............ 2.02%(5) 2.27%(5) 2.77%(5) 1.97%(5) 2.10%
After expense
reimbursement............. 1.69%(5) 1.94%(5) 2.44%(5) 1.49%(5) 1.74%
Ratio of net investment income
(loss) to average net assets:
Before expense
reimbursement............. (0.40)%(5) (0.65)%(5) (1.15)%(5) (0.35)%(5) (0.77)%
After expense
reimbursement............. (0.07)%(5) (0.32)%(5) (0.82)%(5) 0.13%(5) (0.41)%
Portfolio turnover rate........ N/A N/A N/A N/A N/A
<Caption>
THE PARADIGM FUND
---------------------------
ADVISOR ADVISOR
CLASS A CLASS C
FOR THE YEAR FOR THE YEAR
ENDED ENDED
DECEMBER 31, DECEMBER 31,
2004 2004
------------ ------------
PER SHARE DATA(1)
Net Asset Value,
Beginning of Period.......... $ 14.82 $14.73
------- ------
Income from Investment
Operations:
Net investment income
(loss)...................... (0.10)(7) (0.18)(7)
Net realized and unrealized
gain (loss) on
investments................. 3.16 3.14
------- ------
Total gain (loss) from
investment operations.... 3.06 2.96
------- ------
Less Distributions:
From net investment income... (0.02) (0.02)
From net realized gains...... (0.46) (0.46)
------- ------
Total distributions....... (0.48) (0.48)
------- ------
Net Asset Value, End of
Period....................... $ 17.40 $17.21
======= ======
Total Return(6)................ 20.63% 20.08%
SUPPLEMENTAL DATA AND RATIOS
Net assets, end of period
(000's)...................... $26,525 $9,426
Ratio of expenses to average
net assets:
Before expense reimbursement
and waivers(8)............ 2.35% 2.85%
After expense
reimbursement............. 1.99% 2.49%
Ratio of net investment income
(loss) to average net assets:
Before expense
reimbursement............. (1.02)% (1.52)%
After expense
reimbursement............. (0.66)% (1.16)%
Portfolio turnover rate........ 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.
(8) See footnote #3 for the Investment Adviser, waiver discussion.
See Notes to the Financial Statements.
38
<Table>
<Caption>
THE PARADIGM FUND
--------------------------------------------------------------------------------------------
NO LOAD ADVISOR ADVISOR NO LOAD ADVISOR ADVISOR
CLASS CLASS A CLASS C CLASS CLASS A CLASS C
FOR THE FOR THE FOR THE FOR THE FOR THE JUNE 28, 2002 (+)
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2003 2003 2003 2002 2002 2002
------------ ------------ ------------ ------------ ------------ -----------------
$ 10.12 $ 10.07 $10.05 $10.61 $10.58 $10.64
------- ------- ------ ------ ------ ------
0.05 0.08 0.02 (0.14) (0.17) (0.11)
4.79 4.70 4.67 (0.35) (0.34) (0.48)
------- ------- ------ ------ ------ ------
4.84 4.78 4.69 (0.49) (0.51) (0.59)
------- ------- ------ ------ ------ ------
(0.05) (0.03) (0.01) -- -- --
-- -- -- -- -- --
------- ------- ------ ------ ------ ------
(0.05) (0.03) (0.01) -- -- --
------- ------- ------ ------ ------ ------
$ 14.91 $ 14.82 $14.73 $10.12 $10.07 $10.05
======= ======= ====== ====== ====== ======
47.87% 47.47% 46.68% (4.62)% (4.82)% (5.55)(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.
39
<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>
- ------------------
(+) 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.
40
(This page intentionally left blank)
41
KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS
FINANCIAL HIGHLIGHTS
<Table>
<Caption>
THE MEDICAL FUND
-------------------------------------------------------------------------------------
NO LOAD ADVISOR
CLASS CLASS A NO LOAD ADVISOR
SIX MONTHS SIX MONTHS CLASS CLASS A
ENDED ENDED FOR THE FOR THE
JUNE 30, JUNE 30, YEAR ENDED YEAR ENDED
2005 2005 DECEMBER 31, DECEMBER 31,
(UNAUDITED) (UNAUDITED) 2004 2004
----------- ----------- ------------ ------------
PER SHARE DATA(3)
Net Asset Value, Beginning
of Period................. $ 16.76 $16.49 $ 15.67 $15.47
------- ------ ------- ------
Income from Investment
Operations:
Net investment loss....... (0.05)(6) (0.07)(6) (0.10)(6) (0.11)(6)
Net realized and
unrealized gain (loss)
on investments.......... (1.23) (1.21) 1.19 1.13
------- ------ ------- ------
Total gain (loss) from
investment
operations........... (1.28) (1.28) 1.09 1.02
------- ------ ------- ------
Less Distributions:
From net investment
income.................. -- -- -- --
From net
realized gains.......... -- -- -- --
------- ------ ------- ------
Total distributions... -- -- -- --
------- ------ ------- ------
Net Asset Value, End of
Period.................... $ 15.48 $15.21 $ 16.76 $16.49
======= ====== ======= ======
Total Return(5)............. (7.64)%(1) (7.76)%(1) 6.96% 6.59%
SUPPLEMENTAL DATA AND RATIOS
Net assets, end of period
(000's)................... $15,368 $ 580 $19,583 $ 696
Ratio of expenses to average
net assets:
Before expense
reimbursement......... 2.60%(2) 2.85%(2) 2.54% 2.79%
After expense
reimbursement......... 2.49%(2) 2.74%(2) 2.39% 2.64%
Ratio of net investment loss
to average net assets:
Before expense
reimbursement......... (0.79)%(2) (1.04)%(2) (1.31)% (1.56)%
After expense
reimbursement......... (0.68)%(2) (0.93)%(2) (1.16)% (1.41)%
Portfolio turnover rate..... N/A N/A N/A N/A
<Caption>
THE MEDICAL FUND
--------------------------------
NO LOAD ADVISOR
CLASS CLASS A
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
2003 2003
------------ ------------
PER SHARE DATA(3)
Net Asset Value, Beginning
of Period................. $ 12.72 $12.61
------- ------
Income from Investment
Operations:
Net investment loss....... (0.25) (0.63)
Net realized and
unrealized gain (loss)
on investments.......... 3.20 3.49
------- ------
Total gain (loss) from
investment
operations........... 2.95 2.86
------- ------
Less Distributions:
From net investment
income.................. -- --
From net
realized gains.......... -- --
------- ------
Total distributions... -- --
------- ------
Net Asset Value, End of
Period.................... $ 15.67 $15.47
======= ======
Total Return(5)............. 23.19% 22.68%
SUPPLEMENTAL DATA AND RATIOS
Net assets, end of period
(000's)................... $23,695 $ 758
Ratio of expenses to average
net assets:
Before expense
reimbursement......... 2.52% 2.77%
After expense
reimbursement......... 2.52% 2.77%
Ratio of net investment loss
to average net assets:
Before expense
reimbursement......... (1.55)% (1.80)%
After expense
reimbursement......... (1.55)% (1.80)%
Portfolio turnover rate..... 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.
42
<Table>
<Caption>
THE MEDICAL FUND
---------------------------------------------------------------------------------------
ADVISOR
NO LOAD NO LOAD CLASS A NO LOAD
CLASS ADVISOR CLASS A CLASS APRIL 26, 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
------------ --------------- ------------ ------------ ------------
$ 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.
43
KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS
FINANCIAL HIGHLIGHTS
<Table>
<Caption>
THE SMALL CAP
OPPORTUNITIES FUND
---------------------------------------------------------------------------------------
NO LOAD CLASS ADVISOR CLASS NO LOAD CLASS ADVISOR CLASS A
SIX MONTHS SIX MONTHS FOR THE FOR THE
ENDED ENDED YEAR ENDED YEAR ENDED
JUNE 30, 2005 JUNE 30, 2005 DECEMBER 31, DECEMBER 31,
(UNAUDITED) (UNAUDITED) 2004 2004
------------- ------------- ------------- ---------------
PER SHARE DATA(3)
Net Asset Value, Beginning
of Period............... $ 18.69 $18.63 $ 16.55 $16.50
------- ------ ------- ------
Income from Investment
Operations:
Net investment income
(loss)................ 0.13(6) 0.11(6) 0.22(6) 0.18(6)
Net realized and
unrealized gain (loss)
on investments........ 0.48 0.48 2.49 2.49
------- ------ ------- ------
Total gain (loss)
from investment
operations......... 0.61 0.59 2.71 2.67
------- ------ ------- ------
Less Distributions:
From net investment
income................ -- -- (0.16) (0.13)
From net realized
gains................. -- -- (0.41) (0.41)
------- ------ ------- ------
Total
distributions...... -- -- (0.57) (0.54)
------- ------ ------- ------
Net Asset Value, End of
Period.................. $ 19.30 $19.22 $ 18.69 $18.63
======= ====== ======= ======
Total Return(5)........... 3.26%(1) 3.17%(1) 16.40% 16.17%
SUPPLEMENTAL DATA AND
RATIOS
Net assets, end of period
(000's)................. $65,110 $3,306 $35,702 $2,929
Ratio of expenses to
average net assets:
Before expense
reimbursement....... 2.09%(2) 2.34%(2) 2.03% 2.28%
After expense
reimbursement....... 1.57%(2) 1.82%(2) 1.74% 1.99%
Ratio of net investment
income (loss) to average
net assets:
Before expense
reimbursement....... 0.91%(2) 0.66%(2) 1.01% 0.76%
After expense
reimbursement....... 1.43%(2) 1.18%(2) 1.30% 1.05%
Portfolio turnover rate... N/A N/A N/A N/A
<Caption>
THE SMALL CAP
OPPORTUNITIES FUND
------------------------------------
NO LOAD CLASS ADVISOR CLASS A
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
2003 2003
------------- ---------------
PER SHARE DATA(3)
Net Asset Value, Beginning
of Period............... $ 10.04 $10.03
------- ------
Income from Investment
Operations:
Net investment income
(loss)................ 0.25 0.15
Net realized and
unrealized gain (loss)
on investments........ 6.43 6.47
------- ------
Total gain (loss)
from investment
operations......... 6.68 6.62
------- ------
Less Distributions:
From net investment
income................ (0.17) (0.15)
From net realized
gains................. -- --
------- ------
Total
distributions...... (0.17) (0.15)
------- ------
Net Asset Value, End of
Period.................. $ 16.55 $16.50
======= ======
Total Return(5)........... 66.51% 65.98%
SUPPLEMENTAL DATA AND
RATIOS
Net assets, end of period
(000's)................. $23,665 $2,075
Ratio of expenses to
average net assets:
Before expense
reimbursement....... 2.34% 2.59%
After expense
reimbursement....... 2.34% 2.59%
Ratio of net investment
income (loss) to average
net assets:
Before expense
reimbursement....... 2.14% 1.89%
After expense
reimbursement....... 2.14% 1.89%
Portfolio turnover rate... 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.
(7) The amount listed is less than $0.005 per share.
See Notes to the Financial Statements.
44
<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
------ ------ ------ ------ ------
)(6)
(0.18 (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.
45
KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS
FINANCIAL HIGHLIGHTS
<Table>
<Caption>
THE KINETICS GOVERNMENT MONEY MARKET FUND
----------------------------------------------------------------------------------------
FEBRUARY 3,
SIX MONTHS FOR THE FOR THE FOR THE FOR THE 2000(+)
ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
JUNE 30, 2005 DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
(UNAUDITED) 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 $ 1.00
------ ------ ------ -------- ------- -------
Income from Investment
Operations:
Net investment income.... 0.01 -- -- 0.00(4) 0.02 0.04
Net realized and
unrealized gain on
investments............ -- -- -- -- -- --
------ ------ ------ -------- ------- -------
Total gain from
investment
operations.......... 0.01 -- -- 0.00(4) 0.02 0.04
------ ------ ------ -------- ------- -------
Less Distributions:
From net investment
income................. (0.01) -- -- (0.00)(4) (0.02) (0.04)
From net realized
gains.................. -- -- -- -- -- --
------ ------ ------ -------- ------- -------
Total
distributions....... (0.01) -- -- (0.00)(4) (0.02) (0.04)
------ ------ ------ -------- ------- -------
Net Asset Value, End of
Period................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ======== ======= =======
Total Return............... 0.58%(1) 0.00% 0.00% 0.22% 2.36% 4.20%(1)
SUPPLEMENTAL DATA AND RATIOS
Net assets, end of period
(000's).................. $1,140 $1,166 $3,048 $128,657 $94,886 $21,532
Ratio of expenses to
average net assets:
Before expense
reimbursement........ 6.32%(2) 2.11% 1.32% 1.29% 1.35% 1.43%(2)
After expense
reimbursement........ 1.15%(2) 0.98% 0.94% 1.23% 1.24% 1.25%(2)
Ratio of net investment
income (loss) to average
net assets:
Before expense
reimbursement........ (3.92)%(2) (1.13)% (0.38)% 0.13% 2.12% 4.61%(2)
After expense
reimbursement........ 1.25%(2) 0.00% 0.00% 0.19% 2.23% 4.79%(2)
Portfolio turnover rate.... N/A 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.
46
KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
ALLOCATION OF PORTFOLIO ASSETS
June 30, 2005 (Unaudited)
THE INTERNET PORTFOLIO
[GRAPH IN %]
<Table>
Common Stocks 79.72
Short-Term Investments 11.64
Preferred Stocks 3.16
Corporate Bonds 1.80
Rights 2.01
Convertible Bonds 1.50
Put Options 0.01
Written Options 0.00
Investments Purchased with Cash Proceeds from Securities 3.08
Lending
Liabilities in Excess of Other Assets -2.88
</Table>
THE INTERNET EMERGING GROWTH PORTFOLIO
[GRAPH IN %]
<Table>
Common Stocks 76.94
Short-Term Investments 9.42
Preferred Stocks 0.04
Corporate Bonds 5.02
Rights 4.25
Convertible Bonds 3.73
Put Options 0.60
Written Options -0.34
Investments Purchased with Cash Proceeds from Securities 7.31
Lending
Liabilities in Excess of Other Assets -6.97
</Table>
47
KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
ALLOCATION OF PORTFOLIO ASSETS
June 30, 2005 (Unaudited) -- (Continued)
THE PARADIGM PORTFOLIO
[GRAPH IN %]
<Table>
Common Stocks 91.37
Short-Term Investments 9.09
Call Options 0.11
Investments Purchased with Cash Proceeds from Securities 4.19
Lending
Liabilities in Excess of Other Assets -4.76
</Table>
THE MEDICAL PORTFOLIO
[GRAPH IN %]
<Table>
Common Stocks 99.67
Rights 0.00
Investments Purchased with Cash Proceeds from Securities 5.88
Lending
Liabilities in Excess of Other Assets -5.55
</Table>
48
KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
ALLOCATION OF PORTFOLIO ASSETS
June 30, 2005 (Unaudited) -- (Continued)
THE SMALL CAP OPPORTUNITIES PORTFOLIO
[GRAPH IN %]
<Table>
Common Stocks 85.10
Short-Term Investments 12.79
Rights 1.78
Convertible Bonds 0.73
Investments Purchased with Cash Proceeds from Securities 15.55
Lending
Liabilities in Excess of Other Assets -15.95
</Table>
49
KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE INTERNET PORTFOLIO
Portfolio of Investments -- June 30, 2005 (Unaudited)
<Table>
<Caption>
COMMON STOCKS -- 79.72%+ SHARES VALUE
- ------------------------------------------------------------------------
AIR FREIGHT & LOGISTICS -- 3.63%+
Expeditors International of Washington,
Inc. .................................. 120,000 $ 5,977,200
------------
CAPITAL MARKETS -- 0.15%+
Internet HOLDRs Trust*(1)................ 500 27,085
LaBranche & Co Inc.*(2).................. 36,000 226,800
------------
253,885
------------
COMMERCIAL SERVICES & SUPPLIES -- 5.42%+
Apollo Group, Inc. -- Class A*........... 30,000 2,346,600
Comdisco Holding Company, Inc.*.......... 194,400 3,309,660
Copart, Inc.*............................ 6,000 142,800
FTI Consulting, Inc.*.................... 50,000 1,045,000
Ritchie Bros. Auctioneers Incorporated... 54,000 2,081,700
------------
8,925,760
------------
COMMUNICATIONS EQUIPMENT -- 0.10%+
QUALCOMM, Inc. .......................... 5,000 165,050
------------
COMPUTERS & PERIPHERALS -- 0.05%+
Apple Computer, Inc.*.................... 2,000 73,620
------------
DIVERSIFIED FINANCIAL SERVICES -- 1.02%+
eSPEED, Inc. -- Class A*................. 100,000 891,000
Hong Kong Exchanges & Clearing Limited... 100,000 258,664
International Securities Exchange,
Inc.*(2)............................... 10,000 251,100
Nasdaq Stock Market Inc.*................ 14,400 271,584
------------
1,672,348
------------
DIVERSIFIED TELECOMMUNICATION SERVICES --
11.01%+
Leucadia National Corporation............ 360,000 13,906,800
Lynch Interactive Corporation*........... 184,000 4,130,800
XO Communications, Inc.*(2).............. 30,000 79,800
------------
18,117,400
------------
HEALTH CARE PROVIDERS & SERVICES --0.68%+
WebMD Corporation*....................... 109,000 1,119,430
------------
</Table>
See Notes to the Financial Statements.
50
KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE INTERNET PORTFOLIO
Portfolio of Investments -- June 30, 2005 (Unaudited) -- (Continued)
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------
INTERNET & CATALOG RETAIL -- 0.17%+
eBay, Inc.*.............................. 6,000 $ 198,060
IAC/InterActiveCorp*..................... 2,000 48,100
Overstock.com, Inc.*(2).................. 1,000 35,600
------------
281,760
------------
INTERNET SOFTWARE & SERVICES -- 1.34%+
MIVA, Inc.*.............................. 10,000 46,400
Netease.com, Inc. ADR*(2)................ 5,000 285,550
NetRatings, Inc.*........................ 120,000 1,632,000
SINA Corp*............................... 5,000 139,500
Sohu.com, Inc.*(2)....................... 5,000 109,600
------------
2,213,050
------------
IT SERVICES -- 23.26%+
Anteon International Corporation*........ 24,000 1,094,880
CACI International, Inc. -- Class A*..... 250,000 15,790,000
CheckFree Corporation*................... 400,000 13,624,000
ManTech International Corporation --
Class A*............................... 144,000 4,469,760
SunGard Data Systems Inc.*............... 94,000 3,305,980
------------
38,284,620
------------
LEISURE EQUIPMENT & PRODUCTS -- 0.00%+
Marvel Enterprises, Inc.*................ 322 6,350
------------
MEDIA -- 31.93%+
DreamWorks Animation SKG, Inc.*.......... 3,000 78,600
The E.W. Scripps Company -- Class A...... 2,400 117,120
Gemstar-TV Guide International, Inc.*.... 720,000 2,584,800
Getty Images, Inc.*...................... 36,600 2,717,916
Groupe Bruxelles Lambert S.A. ........... 50,000 4,332,829
Harris Interactive, Inc.*................ 1,080,000 5,259,600
Liberty Global, Inc. -- Class A*......... 315,707 14,734,046
Pixar*................................... 3,600 180,180
PrimaCom AG ADR*......................... 610,000 1,647,000
ProQuest Company*........................ 6,000 196,740
The Washington Post Company -- Class B... 24,400 20,374,732
XM Satellite Radio Holdings,
Inc. -- Class A*....................... 10,000 336,600
------------
52,560,163
------------
</Table>
See Notes to the Financial Statements.
51
KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE INTERNET PORTFOLIO
Portfolio of Investments -- June 30, 2005 (Unaudited) -- (Continued)
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------
SECURITY AND COMMODITY EXCHANGES --
0.95%+
Archipelago Holdings Inc.*(2)............ 40,000 $ 1,559,600
------------
WIRELESS TELECOMMUNICATION SERVICES --
0.01%+
Sunshine PCS Corporation -- Class A*..... 149,890 15,738
------------
TOTAL COMMON STOCKS
(cost $128,762,588).................... 131,225,974
------------
<Caption>
CONVERTIBLE PREFERRED STOCKS --
3.16%+
- ------------------------------------------------------------------------
INTERNET & CATALOG RETAIL -- 3.15%+
InterActiveCorp, CLB, 1.990%*(2)......... 108,104 5,188,992
------------
MEDIA -- 0.01%+
Adelphia Communications Corporation,
7.500%*................................ 190,000 9,500
------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(cost $5,721,979)...................... 5,198,492
------------
<Caption>
CORPORATE BONDS -- PRINCIPAL
CONVERTIBLE -- 1.46%+ AMOUNT
- ------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES --
1.45%+
Level 3 Communications, Inc., CLB,
6.000%, 3/15/2010(2)................... $ 4,600,000 2,392,000
------------
MEDIA -- 0.01%+
Adelphia Communications Corporation,
6.000%, 2/15/2006, Acquired on
2/10/2004 at $123,000 (Default
Effective 8/12/2002)*.................. 200,000 10,000
------------
TOTAL CORPORATE BONDS -- CONVERTIBLE
(cost $2,561,921)...................... 2,402,000
------------
</Table>
See Notes to the Financial Statements.
52
KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE INTERNET PORTFOLIO
Portfolio of Investments -- June 30, 2005 (Unaudited) -- (Continued)
<Table>
<Caption>
Principal Amount
- ----------------------------------------------------------------------------
<Caption>
PRINCIPAL
CORPORATE BONDS -- 1.80%+ AMOUNT VALUE
- ----------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES --
1.80%+
Level 3 Communications, Inc., CLB,
12.875%, 3/15/2010(+)(2)
(Cost $3,652,933)...................... $ 3,600,000 $ 2,961,000
------------
<Caption>
RIGHTS -- 2.01%+ SHARES
- ----------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES -- 2.01%+
Comdisco Holding Company, Inc.,
Expiration Date 12/31/2050,
Strike Price $1.00#
(cost $3,253,775)...................... 12,240,699 3,304,989
------------
<Caption>
PUT OPTIONS PURCHASED -- 0.01%+ CONTRACTS
- ----------------------------------------------------------------------------
Internet HOLDRs Trust
Expiring January 2006 at $60.00........ 7 4,900
Expiring January 2007 at $70.00........ 7 11,235
------------
TOTAL PUT OPTIONS PURCHASED
(cost $15,715)......................... 16,135
------------
</Table>
<Table>
PRINCIPAL
AMOUNT
SHORT-TERM INVESTMENTS -- 11.64%+ OR SHARES
- ------------------------------------------------------------------------
<Caption>
INVESTMENT COMPANIES -- 0.15%+
First American Prime Obligations Fund --
Class I................................ 252,670 252,670
------------
US GOVERNMENT AGENCY ISSUES -- 11.49%+
Federal Home Loan Bank Discount Note,
2.975%, 7/01/2005...................... $18,910,000 18,910,000
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $19,162,670)..................... 19,162,670
------------
</Table>
See Notes to the Financial Statements.
53
KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE INTERNET PORTFOLIO
Portfolio of Investments -- June 30, 2005 (Unaudited) -- (Continued)
<Table>
<Caption>
INVESTMENTS PURCHASED
WITH CASH PROCEEDS PRINCIPAL
FROM SECURITIES AMOUNT
LENDING -- 3.08%+ OR SHARES VALUE
- ------------------------------------------------------------------------
INVESTMENT COMPANIES -- 0.00%+
Merrill Lynch Premier Institutional
Fund................................... 37 $ 37
------------
REPURCHASE AGREEMENTS -- 3.08%+
CS First Boston Repurchase Agreement,
3.497%, 7/1/2005(3)
Repurchase price $1,881,714............ $ 1,881,531 1,881,531
------------
Lehman Brothers Repurchase Agreement,
3.560%, 7/1/2005(3)
Repurchase price $3,198,919............ 3,198,603 3,198,603
------------
5,080,134
------------
TOTAL INVESTMENTS PURCHASED WITH CASH
PROCEEDS FROM SECURITIES LENDING
(cost $5,080,171)...................... 5,080,171
------------
TOTAL INVESTMENTS -- 102.88%+
(cost $168,211,752).................... $169,351,431
============
CASH RECEIVED AS PROCEEDS FROM SECURITIES
LENDING................................ 766,930
------------
</Table>
- ------------------
* -- Non-income producing security.
(+) -- Security has a stepped rate. The rate listed is as of June 30, 2005.
+ -- Calculated as a percentage of net assets.
# -- 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 June 30,
2005. Total loaned securities had a market value of $5,656,308 at June
30, 2005.
(3) -- See Repurchase Agreements disclosure in the Notes to Financial Statements
for the Kinetics Portfolios Trust.
See Notes to the Financial Statements.
54
KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE INTERNET EMERGING GROWTH PORTFOLIO
Portfolio of Investments -- June 30, 2005 (Unaudited)
<Table>
<Caption>
COMMON STOCKS -- 76.94%+ SHARES VALUE
- ------------------------------------------------------------------------
AEROSPACE & DEFENSE -- 6.09%+
SI International, Inc.*....................... 7,500 $ 224,700
----------
CAPITAL MARKETS -- 3.99%+
Nasdaq-100 Index Tracking Stock(1)............ 4,000 147,160
----------
COMMERCIAL SERVICES & SUPPLIES -- 6.54%+
Comdisco Holding Company, Inc.*............... 9,300 158,333
Deluxe Corporation............................ 1,100 44,660
John H. Harland Company....................... 1,000 38,000
----------
240,993
----------
COMPUTERS & PERIPHERALS -- 5.61%+
ActivCard Corporation*........................ 7,500 34,275
M-Systems Flash Disk Pioneers Ltd.*........... 9,000 172,530
----------
206,805
----------
DIVERSIFIED FINANCIAL SERVICES -- 3.56%+
Chicago Mercantile Exchange Holdings Inc...... 100 29,550
eSPEED, Inc. -- Class A*...................... 10,000 89,100
International Securities Exchange, Inc.*(2)... 500 12,555
----------
131,205
----------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 9.39%+
IDT Corporation*.............................. 5,300 70,172
IDT Corporation -- Class B*................... 5,300 69,748
Lynch Interactive Corporation*................ 6,100 136,945
Warwick Valley Telephone Company.............. 1,200 29,520
XO Communications, Inc.*(2)................... 15,000 39,900
----------
346,285
----------
INSURANCE -- 4.04%+
Fidelity National Financial, Inc.............. 4,173 148,934
----------
</Table>
See Notes to the Financial Statements.
55
KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE INTERNET EMERGING GROWTH PORTFOLIO
Portfolio of Investments -- June 30, 2005 (Unaudited) -- (Continued)
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES -- 10.89%+
Digital River, Inc.*.......................... 1,000 $ 31,750
Gravity Co. Ltd. ADR*......................... 3,000 25,800
Imergent, Inc.*............................... 2,500 26,500
Netease.com, Inc. ADR*........................ 240 13,706
NetRatings, Inc.*............................. 6,700 91,120
SINA Corp*.................................... 500 13,950
Sohu.com, Inc.*(2)............................ 300 6,576
Websense, Inc.*............................... 4,000 192,200
----------
401,602
----------
IT SERVICES -- 0.73%+
Lionbridge Technologies, Inc.*................ 4,000 27,120
----------
MEDIA -- 25.50%+
Gemstar-TV Guide International, Inc.*......... 5,000 17,950
Groupe Bruxelles Lambert S.A.................. 1,600 138,651
Interactive Data Corporation*................. 13,000 270,140
Liberty Global, Inc. -- Class A*.............. 30 1,400
Liberty Media Corporation -- Class A*......... 504 5,136
Naspers Limited ADR........................... 947 119,312
Navarre Corporation*(2)....................... 5,000 39,975
PrimaCom AG ADR*.............................. 4,750 12,825
ProQuest Company*............................. 3,000 98,370
RCN Corporation*.............................. 6,545 151,124
Valassis Communications, Inc.*................ 2,300 85,215
----------
940,098
----------
SOFTWARE -- 0.58%+
FactSet Research Systems, Inc................. 600 21,504
----------
WIRELESS TELECOMMUNICATION SERVICES -- 0.02%+
Sunshine PCS Corporation -- Class A*.......... 6,000 630
----------
TOTAL COMMON STOCKS
(cost $2,336,958)........................... 2,837,036
----------
</Table>
See Notes to the Financial Statements.
56
KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE INTERNET EMERGING GROWTH PORTFOLIO
Portfolio of Investments -- June 30, 2005 (Unaudited) -- (Continued)
<Table>
<Caption>
PREFERRED STOCKS -- 0.04%+ SHARES VALUE
- ------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.04%+
PTV, Inc. -- Series A, CLB, 10.000% (cost
$3,774)..................................... 487 $ 1,400
----------
<Caption>
CORPORATE
BONDS -- CONVERTIBLE -- 3.73%+ AMOUNT
- -------------------------------------------------------------------------
SEMICONDUCTOR EQUIPMENT & PRODUCTS -- 3.73%+
Conexant Systems, Inc., CLB,
4.000%, 2/1/2007 (cost $123,080)............ $150,000 137,625
----------
<Caption>
CORPORATE BONDS -- 5.02%+
- -------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 5.02%+
Level 3 Communications, Inc., CLB,
12.875%, 3/15/2010(+)(2) (cost $202,599).... 225,000 185,063
----------
<Caption>
RIGHTS -- 4.25%+ SHARES
- -------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES -- 4.25%+
Comdisco Holding Company, Inc.,
Expiration Date 12/31/2050,
Strike Price $1.00#
(cost $245,273)............................. 581,000 156,870
----------
<Caption>
PUT OPTIONS PURCHASED -- 0.60%+ CONTRACTS
- -------------------------------------------------------------------------
Nasdaq -- 100 Index Tracking Stock
Expiring January 2007 at $38.625............ 28 10,220
Expiring January 2007 at $39.625............ 28 11,760
----------
TOTAL PUT OPTIONS PURCHASED (cost $22,568).... 21,980
----------
</Table>
See Notes to the Financial Statements.
57
KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE INTERNET EMERGING GROWTH PORTFOLIO
Portfolio of Investments -- June 30, 2005 (Unaudited) -- (Continued)
<Table>
<Caption>
PRINCIPAL
SHORT TERM INVESTMENTS -- 9.42%+ AMOUNT VALUE
- -------------------------------------------------------------------------
US GOVERNMENT AGENCY ISSUES -- 4.69%+
Federal Home Loan Bank Discount Note,
2.975%, 7/1/2005............................ $173,000 $ 173,000
----------
VARIABLE RATE DEMAND NOTES** -- 4.73%+
American Family, 2.949%....................... 45,643 45,643
U.S. Bank, N.A., 3.080%....................... 64,894 64,894
Wisconsin Corporate Central Credit Union,
3.000%...................................... 63,931 63,931
----------
174,468
----------
TOTAL SHORT TERM INVESTMENTS
(cost $347,468)............................. 347,468
----------
</Table>
See Notes to the Financial Statements.
58
KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE INTERNET EMERGING GROWTH PORTFOLIO
Portfolio of Investments -- June 30, 2005 (Unaudited) -- (Continued)
<Table>
<Caption>
INVESTMENTS PURCHASED WITH CASH PRINCIPAL
PROCEEDS FROM SECURITIES AMOUNT
LENDING -- 7.31%+ OR SHARES VALUE
- -------------------------------------------------------------------------
INVESTMENT COMPANIES -- 0.00%+
Merrill Lynch Premier Institutional Fund...... 2 $ 2
REPURCHASE AGREEMENTS -- 7.31%+
CS First Boston Repurchase Agreement,
3.497%, 7/1/2005(3)
Repurchase price $99,813................. $ 99,803 99,803
Lehman Brothers Repurchase Agreement,
3.560%, 7/1/2005(3)
Repurchase price $169,681................ 169,664 169,664
----------
269,467
----------
TOTAL INVESTMENTS PURCHASED WITH CASH PROCEEDS
FROM SECURITIES LENDING
(cost $269,469)............................. 269,469
----------
TOTAL INVESTMENTS -- 107.31%+
(cost $3,551,189)........................... $3,956,911
==========
CASH RECEIVED AS PROCEEDS FROM SECURITIES
LENDING..................................... 40,680
----------
</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 June 30, 2005.
(+) -- Security has a stepped rate. The rate listed is as of June 30, 2005.
+ -- Calculated as a percentage of net assets.
# -- 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 June 30,
2005. Total loaned securities had a market value of $292,604 at June 30,
2005.
(3) -- See Repurchase Agreements disclosure in the Notes to Financial Statements
for the Kinetics Portfolios Trust.
See Notes to the Financial Statements.
59
KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE PARADIGM PORTFOLIO
Portfolio of Investments -- June 30, 2005 (Unaudited)
<Table>
<Caption>
COMMON STOCKS -- 91.37%+ SHARES VALUE
- ---------------------------------------------------------------------
AEROSPACE & DEFENSE -- 0.01%+
General Dynamics Corporation............. 200 $ 21,908
------------
AIRLINES -- 0.18%+
China Eastern Airlines Corporation
Limited ADR............................ 25,000 440,000
------------
AUTO COMPONENTS -- 1.02%+
Toyota Industries Corporation............ 90,000 2,458,861
------------
AUTOMOBILES -- 0.00%+
Great Wall Automobile Holdings Company,
Limited -- Class H..................... 20,000 7,142
------------
BEVERAGES -- 0.25%+
Anheuser-Busch Companies, Inc. .......... 1,400 64,050
Brown-Forman Corporation -- Class B...... 1,400 84,644
Constellation Brands, Inc. -- Class A*... 600 17,700
Diageo plc ADR........................... 2,000 118,600
Pernod Ricard SA......................... 1,200 191,710
Remy Cointreau SA........................ 2,400 109,274
Taittinger SA............................ 25 10,136
------------
596,114
------------
CAPITAL MARKETS -- 0.51%+
The Bear Stearns Companies Inc. ......... 1,000 103,940
Eaton Vance Corp. ....................... 3,000 71,730
LaBranche & Co Inc.*(2).................. 124,000 781,200
Legg Mason, Inc. ........................ 1,000 104,110
London Stock Exchange PLC................ 18,857 166,053
------------
1,227,033
------------
CHEMICALS -- 0.02%+
Novozymes A/S -- Class B................. 200 9,907
Potash Corporation of Saskatchewan
Inc. .................................. 400 38,232
------------
48,139
------------
COMMERCIAL BANKS -- 4.97%+
Fifth Third Bancorp...................... 4,000 164,840
HDFC Bank Ltd. ADR....................... 4,400 204,644
ICICI Bank Limited ADR................... 9,000 196,650
M&T Bank Corporation..................... 76,600 8,055,256
State Bk Of India GDR*................... 14,000 559,160
Wells Fargo and Company.................. 45,400 2,795,732
------------
11,976,282
------------
</Table>
See Notes to the Financial Statements.
60
KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE PARADIGM PORTFOLIO
Portfolio of Investments -- June 30, 2005 (Unaudited) -- (Continued)
<Table>
<Caption>
SHARES VALUE
- ---------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES -- 0.66%+
Deluxe Corporation....................... 2,000 $ 81,200
Equifax Inc. ............................ 100 3,571
FTI Consulting, Inc.*.................... 2,000 41,800
H&R Block, Inc. ......................... 25,000 1,458,750
------------
1,585,321
------------
CONSUMER FINANCE -- 0.86%+
The Student Loan Corporation............. 9,400 2,066,120
------------
DIVERSIFIED FINANCIAL SERVICES -- 4.82%+
Archipelago Holdings Inc.*(2)............ 60,000 2,339,400
Brascan Corporation -- Class A........... 1,500 57,240
Chicago Mercantile Exchange Holdings
Inc. .................................. 6,000 1,773,000
Deutsche Boerse AG....................... 1,400 109,458
Euronext NV.............................. 10,200 345,535
Hong Kong Exchanges & Clearing Limited... 800,000 2,069,312
Moody's Corporation...................... 24,600 1,106,016
Pargesa Holding AG -- Class B............ 240 878,430
Power Corporation of Canada.............. 80,600 2,020,838
Singapore Exchange Limited............... 144,000 180,230
TSX Group Inc. .......................... 24,800 738,990
------------
11,618,449
------------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 3.32%+
Leucadia National Corporation............ 207,500 8,015,725
------------
ELECTRIC UTILITIES -- 14.72%+
Allegheny Energy, Inc.*(2)............... 430,400 10,854,688
CenterPoint Energy, Inc. ................ 622,000 8,216,620
Huaneng Power International, Inc.
ADR(2)................................. 106,400 3,138,800
Korea Electric Power Corporation ADR..... 403,700 6,325,979
Sierra Pacific Resources*(2)............. 220,000 2,739,000
TXU Corporation.......................... 50,700 4,212,663
------------
35,487,750
------------
</Table>
See Notes to the Financial Statements.
61
KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE PARADIGM PORTFOLIO
Portfolio of Investments -- June 30, 2005 (Unaudited) -- (Continued)
<Table>
<Caption>
SHARES VALUE
- ---------------------------------------------------------------------
FOOD PRODUCTS -- 1.69%+
Archer-Daniels-Midland Company........... 72,000 $ 1,539,360
Bunge Limited............................ 25,200 1,597,680
Cadbury Schweppes PLC ADR................ 2,000 76,660
Dean Foods Company*...................... 19,000 669,560
The J.M. Smucker Company................. 1,000 46,940
McCormick & Company, Incorporated........ 1,000 32,680
TreeHouse Foods, Inc.*................... 3,600 102,636
------------
4,065,516
------------
HOTELS RESTAURANTS & LEISURE -- 0.50%+
Carnival Corporation..................... 2,000 109,100
Harrah's Entertainment, Inc. ............ 3,000 216,210
Hilton Group plc ADR..................... 6,000 61,570
MGM MIRAGE*.............................. 19,500 771,810
Societe du Louvre........................ 100 17,913
Wynn Resorts, Limited*................... 600 28,362
------------
1,204,965
------------
HOUSEHOLD DURABLES -- 0.09%+
Fortune Brands, Inc. .................... 2,400 213,120
------------
INDUSTRIAL CONGLOMERATES -- 0.00%+
Alleghany Corporation*................... 24 7,128
------------
INSURANCE -- 14.73%+
Berkshire Hathaway Inc. -- Class B*...... 3,362 9,358,127
Fairfax Financial Holdings Limited....... 8,800 1,460,800
Fidelity National Financial, Inc. ....... 7,200 256,968
Markel Corporation*...................... 6,400 2,169,600
Mercury General Corporation.............. 2,000 109,040
Millea Holdings, Inc. ADR................ 4,000 269,240
Montpelier Re Holdings, Ltd. ............ 4,800 165,984
The Progressive Corporation.............. 81,500 8,053,015
Wesco Financial Corporation.............. 1,700 612,000
White Mountains Insurance Group, Ltd. ... 20,700 13,059,630
------------
35,514,404
------------
IT SERVICES -- 1.67%+
Automatic Data Processing, Inc. ......... 100 4,197
CACI International, Inc. -- Class A*..... 62,900 3,972,764
Iron Mountain Incorporated*.............. 1,800 55,836
------------
4,032,797
------------
</Table>
See Notes to the Financial Statements.
62
KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE PARADIGM PORTFOLIO
Portfolio of Investments -- June 30, 2005 (Unaudited) -- (Continued)
<Table>
<Caption>
SHARES VALUE
- ---------------------------------------------------------------------
MEDIA -- 7.70%+
Dow Jones & Company, Inc. ............... 100 $ 3,545
DreamWorks Animation SKG, Inc.*.......... 1,000 26,200
Groupe Bruxelles Lambert S.A. ........... 78,000 6,759,213
The E.W. Scripps Company -- Class A...... 29,200 1,424,960
John Wiley & Sons, Inc. -- Class B....... 2,000 79,800
Meredith Corporation..................... 2,000 98,120
The New York Times Company -- Class A.... 600 18,690
The Walt Disney Company.................. 7,650 192,627
The Washington Post Company -- Class B... 11,936 9,966,918
------------
18,570,073
------------
METALS & MINING -- 0.43%+
Anglo American PLC ADR................... 40,000 940,000
Cameco Corporation....................... 2,400 107,400
------------
1,047,400
------------
MULTILINE RETAIL -- 4.97%+
Sears Holdings Corporation*.............. 80,000 11,989,600
------------
MULTI-UTILITIES & UNREGULATED POWER --
2.32%+
Calpine Corporation*(2).................. 40,000 136,000
Reliant Energy Inc.*..................... 442,000 5,471,960
------------
5,607,960
------------
OIL & GAS -- 20.62%+
Canadian Natural Resources Ltd. ......... 2,400 87,312
Canadian Oil Sands Trust................. 80,400 5,914,224
CNOOC Limited ADR........................ 49,300 2,924,476
El Paso Corporation...................... 758,700 8,740,224
EnCana Corporation....................... 65,600 2,597,104
Imperial Oil Ltd. ....................... 21,000 1,749,510
Nexen Inc. .............................. 43,500 1,320,660
Petro-Canada............................. 23,400 1,524,276
PetroChina Company Limited ADR........... 31,000 2,276,950
Petroleo Brasileiro S.A. ADR............. 4,000 208,520
Shell Canada Limited..................... 102,000 2,738,037
Statoil ASA ADR.......................... 10,000 203,000
Suncor Energy, Inc. ..................... 250,400 11,848,928
The Williams Companies, Inc. ............ 400,000 7,600,000
------------
49,733,221
------------
</Table>
See Notes to the Financial Statements.
63
KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE PARADIGM PORTFOLIO
Portfolio of Investments -- June 30, 2005 (Unaudited) -- (Continued)
<Table>
<Caption>
SHARES VALUE
- ---------------------------------------------------------------------
PAPER & FOREST PRODUCTS -- 0.03%+
Pope Resources, L.P. .................... 1,800 $ 64,665
------------
PHARMACEUTICALS -- 0.04%+
Novo-Nordisk A/S ADR..................... 1,800 91,746
------------
REAL ESTATE -- 4.31%+
American Real Estate Partners, L.P.*..... 143,500 4,168,675
Forest City Enterprises, Inc. -- Class
A...................................... 39,400 2,797,400
The St. Joe Company...................... 3,600 293,544
Texas Pacific Land Trust................. 14,400 2,548,800
Vornado Realty Trust..................... 7,300 586,920
------------
10,395,339
------------
ROAD & RAIL -- 0.62%+
Anhui Expressway Co., Ltd. -- Class H.... 660,000 450,152
Beijing Capital International Airport
Company Limited -- Class H............. 100,000 39,893
Jiangsu Expressway Company Ltd. -- Class
H...................................... 200,000 104,238
Shenzhen Expressway Company Limited --
Class H................................ 1,200,000 451,697
Zhejiang Expressway Co., Ltd. -- Class
H...................................... 660,000 450,153
------------
1,496,133
------------
SPECIALTY RETAIL -- 0.01%+
Tiffany & Co. ........................... 1,000 32,760
------------
TOBACCO -- 0.30%+
Altria Group, Inc. ...................... 10,600 685,396
British American Tobacco p.l.c. ADR...... 1,000 38,820
------------
724,216
------------
TOTAL COMMON STOCKS
(cost $181,255,714).................... 220,339,887
------------
<Caption>
CALL PUT PURCHASED -- 0.11%+ CONTRACTS
- ---------------------------------------------------------------------
TXU Corporation Expiring January 2007 at
$45.00 (cost $143,073)................. 71 273,705
<Caption>
PRINCIPAL
SHORT-TERM INVESTMENTS -- 9.09%+ AMOUNT
- ---------------------------------------------------------------------
US GOVERNMENT AGENCY ISSUES -- 8.36%+
Federal Home Loan Bank Discount Note
2.975%, 7/1/2005....................... $20,143,000 20,143,000
------------
</Table>
See Notes to the Financial Statements.
64
KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE PARADIGM PORTFOLIO
Portfolio of Investments -- June 30, 2005 (Unaudited) -- (Continued)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES** -- 0.73%+
American Family, 2.949%.................. $ 578 $ 578
U.S. Bank, N.A., 3.080%.................. 1,762,943 1,762,943
Wisconsin Corporate Central Credit Union,
3.000%................................. 2,707 2,707
------------
1,766,228
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $21,909,228)..................... 21,909,228
------------
</Table>
<Table>
<Caption>
INVESTMENTS PURCHASED WITH PRINCIPAL
CASH PROCEEDS AMOUNT
FROM SECURITIES LENDING -- 4.19%+ OR SHARES
- ---------------------------------------------------------------------
INVESTMENT COMPANIES 0.00%+
Merrill Lynch Premier Institutional
Fund................................... 72 72
------------
REPURCHASE AGREEMENTS -- 4.19%+
CS First Boston Repurchase Agreement,
3.497%, 7/1/2005(3)
Repurchase price $3,736,685............ $ 3,736,322 3,736,322
Lehman Brothers Repurchase Agreement,
3.560%, 7/1/2005(3)
Repurchase price $6,352,375............ 6,351,747 6,351,747
------------
10,088,069
------------
TOTAL INVESTMENTS PURCHASED WITH CASH
PROCEEDS FROM SECURITIES LENDING
(cost $10,088,141)..................... 10,088,141
------------
TOTAL INVESTMENTS -- 104.76%+
(cost $213,396,156).................... $252,610,961
============
CASH RECEIVED AS PROCEEDS FROM SECURITIES
LENDING................................ 1,522,959
------------
</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 June 30, 2005.
+ -- Calculated as a percentage of net assets.
GDR -- Global Depository Receipts.
See Notes to the Financial Statements.
65
KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE PARADIGM PORTFOLIO
Portfolio of Investments -- June 30, 2005 (Unaudited) -- (Continued)
ADR -- American Depository Receipts.
(2) -- This security or a portion of this security was out on loan at June 30,
2005. Total loaned securities had a market value of $11,041,540 at June 30,
2005.
(3) -- See Repurchase Agreements disclosure in the Notes to Financial Statements
for the Kinetics Portfolios Trust.
See Notes to the Financial Statements.
66
KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE MEDICAL PORTFOLIO
Portfolio of Investments -- June 30, 2005 (Unaudited)
<Table>
<Caption>
COMMON STOCKS -- 99.67%+ SHARES VALUE
- ------------------------------------------------------------------------
BIOTECHNOLOGY -- 36.58%+
AEterna Zentaris Inc.*(2).................. 20,500 $ 94,300
Amgen, Inc.*............................... 9,800 592,508
Arena Pharmaceuticals, Inc.*............... 14,000 95,480
AVAX Technologies, Inc.*................... 50,000 14,250
Avigen, Inc.*.............................. 21,000 65,100
Biogen Idec, Inc.*......................... 12,250 422,013
Biomira, Inc.*............................. 37,000 63,640
Cambridge Antibody Technology Group PLC
ADR*..................................... 15,000 174,000
Cell Genesys, Inc.*(2)..................... 14,725 78,779
Chiron Corporation*........................ 33,000 1,151,370
Cubist Pharmaceuticals, Inc.*.............. 4,000 52,680
CuraGen Corporation*....................... 13,000 66,820
deCODE genetics, Inc.*(2).................. 11,000 103,290
Dendreon Corporation*...................... 7,000 36,610
EntreMed, Inc.*(2)......................... 11,000 25,410
Favrille Inc.*............................. 10,000 42,500
Genzyme Corporation*....................... 8,038 483,003
Human Genome Sciences, Inc.*............... 17,000 196,860
ImmunoGen, Inc.*........................... 6,000 34,740
Isis Pharmaceuticals, Inc.*(2)............. 5,000 19,550
Isotechnika, Inc.*......................... 15,000 27,790
Maxim Pharmaceuticals, Inc.*............... 10,000 13,100
Medarex, Inc.*............................. 20,000 166,600
MedImmune, Inc.*........................... 29,500 788,240
Millennium Pharmaceuticals, Inc.*.......... 30,296 280,844
NeoRx Corporation*(2)...................... 27,000 16,200
Progenics Pharmaceuticals, Inc.*........... 3,200 66,752
Protein Design Labs, Inc.*................. 7,000 141,470
QLT Inc.*.................................. 10,000 104,200
Savient Pharmaceuticals Inc.*.............. 34,000 149,940
Serono SA ADR.............................. 12,000 191,880
Sirna Therapeutics, Inc.*.................. 3,491 6,109
</Table>
See Notes to the Financial Statements.
67
KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE MEDICAL PORTFOLIO
Portfolio of Investments -- June 30, 2005 (Unaudited) -- (Continued)
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------
BIOTECHNOLOGY -- (CONTINUED)
xTargeted Genetics Corporation*............ 10,000 $ 8,000
Vical Incorporated*........................ 13,500 65,880
-----------
5,839,908
-----------
CHEMICALS -- 6.28%+
Akzo Nobel N.V. ADR........................ 10,000 392,900
Lonza Group AG............................. 11,000 608,942
-----------
1,001,842
-----------
HEALTH CARE EQUIPMENT & SUPPLIES -- 0.04%+
Theragenics Corporation*................... 2,000 6,440
-----------
HEALTH CARE PROVIDERS & SERVICES -- 0.71%+
IMPATH, Inc.*.............................. 26,000 113,360
-----------
PHARMACEUTICALS -- 56.06%+
Abbott Laboratories........................ 17,000 833,170
Altana AG ADR(2)........................... 14,000 803,180
Antigenics, Inc.*(2)....................... 892 4,826
Bristol-Meyers Squibb Company.............. 15,000 374,700
China Pharmaceutical Group Limited*........ 1,440,000 294,645
Eli Lilly and Company...................... 11,000 612,810
GlaxoSmithKline PLC ADR.................... 22,673 1,099,867
Johnson & Johnson.......................... 10,000 650,000
MGI Pharma, Inc.*.......................... 4,000 87,040
Novartis AG ADR............................ 36,000 1,707,840
Schering AG ADR............................ 19,000 1,172,110
SuperGen, Inc.*............................ 14,000 69,160
Wyeth...................................... 27,900 1,241,550
-----------
8,950,898
-----------
TOTAL COMMON STOCKS
(cost $17,887,107)....................... 15,912,448
-----------
</Table>
See Notes to the Financial Statements.
68
KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE MEDICAL PORTFOLIO
Portfolio of Investments -- June 30, 2005 (Unaudited) -- (Continued)
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------
<Caption>
RIGHTS -- 0.00%+ SHARES VALUE
- ------------------------------------------------------------------------
X
BIOTECHNOLOGY -- 0.00%+
OSI Pharmaceuticals, Inc.
Expiration Date 6/12/2008,
Strike Price $1.00# (cost $0)............ 13,932 $ 557
-----------
PRINCIPAL
INVESTMENTS PURCHASED WITH CASH PROCEEDS AMOUNT OR
FROM SECURITIES LENDING -- 5.88% SHARES VALUE
- ------------------------------------------------------------------------
xINVESTMENT COMPANIES -- 0.00%+
Merrill Lynch Premier Institutional Fund... 7 7
-----------
REPURCHASE AGREEMENTS -- 5.88%+
CS First Boston Repurchase Agreement,
3.497%, 7/1/2005(3)
Repurchase price $347,453................ $ 347,419 347,419
Lehman Brothers Repurchase Agreement,
3.560%, 7/1/2005(3)
Repurchase price $590,672................ 590,614 590,614
-----------
938,033
-----------
TOTAL INVESTMENTS PURCHASED WITH CASH
PROCEEDS FROM SECURITIES LENDING (cost
$938,040)................................ 938,040
-----------
TOTAL INVESTMENTS -- 105.55%+
(cost $18,825,147)....................... $16,851,045
===========
CASH RECEIVED AS PROCEEDS FROM SECURITIES
LENDING.................................. 141,612
-----------
</Table>
- ------------------
* -- Non-income producing security.
+ -- Calculated as a percentage of net assets.
# -- Contingent value right (contingent upon profitability of company).
ADR -- American Depository Receipts.
(2) -- This security or a portion of this security was out on loan at June 30,
2005. Total loaned securities had a market value of $1,016,080 at June
30, 2005.
(3) -- See Repurchase Agreements disclosure in the Notes to Financial Statements
for the Kinetics Portfolios Trust.
See Notes to the Financial Statements.
69
KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE SMALL CAP OPPORTUNITIES PORTFOLIO
Portfolio of Investments -- June 30, 2005 (Unaudited)
<Table>
<Caption>
COMMON STOCKS -- 85.10%+ SHARES VALUE
- ------------------------------------------------------------------------
AEROSPACE & DEFENSE -- 1.26%+
Armor Holdings, Inc.*...................... 800 $ 31,688
Bombardier Inc............................. 300,000 639,053
GenCorp Inc.*.............................. 10,000 192,600
-----------
863,341
-----------
AIRLINES -- 2.74%+
China Eastern Airlines Corporation Limited
ADR...................................... 55,000 968,000
China Southern Airlines Company Limited
ADR*(2).................................. 55,000 902,127
-----------
1,870,127
-----------
AUTOMOBILES -- 0.10%+
Brilliance China Automotive Holdings
Limited ADR.............................. 4,000 69,640
-----------
CAPITAL MARKETS -- 4.35%+
Calamos Asset Management, Inc. -- Class
A........................................ 20,000 544,800
Gabelli Asset Management, Inc. -- Class
A........................................ 1,000 44,190
Greenhill & Co., Inc....................... 3,000 121,530
LaBranche & Co Inc.*(2).................... 216,000 1,360,800
Nuveen Investments -- Class A.............. 12,000 451,440
Van der Moolen Holding N.V. ADR............ 95,217 448,472
-----------
2,971,232
-----------
COMMERCIAL BANKS -- 4.08%+
Banque du Liban et d'Outre-Mer S.A.L.
(BLOM) -- Class B GDR.................... 15,400 631,400
Cathay General Bancorp..................... 8,600 289,906
Center Financial Corporation............... 18,000 446,940
East West Bancorp, Inc..................... 8,600 288,874
Farmers & Merchants Bank of Long Beach..... 12 67,500
Hanmi Financial Corporation................ 20,062 335,035
Nara Bancorp, Inc.......................... 20,000 293,600
UCBH Holdings, Inc......................... 18,000 292,320
Wilshire Bancorp, Inc...................... 10,000 143,300
-----------
2,788,875
-----------
</Table>
See Notes to the Financial Statements.
70
KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE SMALL CAP OPPORTUNITIES PORTFOLIO
Portfolio of Investments -- June 30, 2005 (Unaudited) -- (Continued)
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES -- 3.15%+
Comdisco Holding Company, Inc.*............ 1,000 $ 17,025
Deluxe Corporation......................... 10,000 406,000
FTI Consulting, Inc.*...................... 40,000 836,000
Loring Ward International, Limited*........ 10,000 --
PICO Holdings, Inc.*....................... 18,000 535,680
Ritchie Bros. Auctioneers Incorporated..... 9,000 346,950
Sotheby's Holdings, Inc. -- Class A*....... 800 10,960
-----------
2,152,615
-----------
CONSTRUCTION & ENGINEERING -- 2.83%+
Quanta Services, Inc.*..................... 220,000 1,936,000
-----------
DIVERSIFIED FINANCIAL SERVICES -- 5.49%+
Archipelago Holdings Inc.*(2).............. 27,000 1,052,730
Hong Kong Exchanges & Clearing Limited..... 300,000 775,992
International Securities Exchange,
Inc.*(2)................................. 18,000 451,980
Nasdaq Stock Market Inc.*.................. 36,000 678,960
Siem Industries Inc.*...................... 32,000 788,000
-----------
3,747,662
-----------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.66%+
Lynch Interactive Corporation*............. 1,800 40,410
NeuStar, Inc. -- Class A*.................. 1,000 25,600
XO Communications, Inc.*(2)................ 144,000 383,040
-----------
449,050
-----------
ELECTRIC UTILITIES -- 11.41%+
Allegheny Energy, Inc.*.................... 156,700 3,951,974
China Resources Power Holdings Company
Limited.................................. 100,000 55,658
Datang International Power Generation
Company Limited -- Class H............... 100,000 75,926
Huadian Power International Corporation
Limited -- Class H....................... 180,000 50,961
Sierra Pacific Resources*(2)............... 294,200 3,662,790
-----------
7,797,309
-----------
</Table>
See Notes to the Financial Statements.
71
KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE SMALL CAP OPPORTUNITIES PORTFOLIO
Portfolio of Investments -- June 30, 2005 (Unaudited) -- (Continued)
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------
GAS UTILITIES -- 2.88%+
Southern Union Company*.................... 80,250 $ 1,970,138
-----------
HOTELS RESTAURANTS & LEISURE -- 1.89%+
Triarc Companies, Inc. -- Class A(2)....... 80,400 1,294,440
-----------
INDUSTRIAL CONGLOMERATES -- 1.78%+
Alleghany Corporation*..................... 4,084 1,212,948
-----------
INSURANCE -- 2.39%+
Danielson Holding Corporation*............. 3,800 46,246
Fairfax Financial Holdings Limited......... 1,000 166,000
National Western Life Insurance Company --
Class A*................................. 1,200 232,668
RLI Corp................................... 8,000 356,800
Safety Insurance Group, Inc................ 12,000 405,120
Wesco Financial Corporation................ 1,000 360,000
Zenith National Insurance Corp. ........... 1,000 67,860
-----------
1,634,694
-----------
IT SERVICES -- 5.81%+
Anteon International Corporation*.......... 3,600 164,232
CACI International, Inc. -- Class A*....... 40,600 2,564,296
ManTech International Corporation -- Class
A*....................................... 40,000 1,241,600
-----------
3,970,128
-----------
LEISURE EQUIPMENT & PRODUCTS -- 0.01%+
Steinway Musical Instruments, Inc.*........ 200 5,872
-----------
MACHINERY -- 0.12%+
Oshkosh Truck Corporation.................. 1,000 78,280
-----------
MEDIA -- 4.46%+
Courier Corporation........................ 17,100 656,811
Gemstar-TV Guide International, Inc.*...... 36,000 129,240
John Wiley & Sons, Inc. -- Class A......... 18,000 715,140
PrimaCom AG ADR*........................... 54,000 145,800
R.H. Donnelley Corporation*................ 18,000 1,115,640
Value Line, Inc............................ 7,200 282,600
-----------
3,045,231
-----------
</Table>
See Notes to the Financial Statements.
72
KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE SMALL CAP OPPORTUNITIES PORTFOLIO
Portfolio of Investments -- June 30, 2005 (Unaudited) -- (Continued)
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------
METALS & MINING -- 0.92%+
Aber Diamond Corporation................... 8,000 $ 246,240
Commercial Metals Company.................. 4,800 114,336
Stillwater Mining Company*................. 36,000 267,120
-----------
627,696
-----------
MULTILINE RETAIL -- 1.85%+
Dillard's, Inc. -- Class A................. 54,000 1,264,680
-----------
MULTI-UTILITIES & UNREGULATED POWER -- 16.32%+
Aquila, Inc.*(2)........................... 583,000 2,104,630
Calpine Corporation*(2).................... 360,000 1,224,000
CMS Energy Corporation*.................... 152,000 2,289,120
Dynegy Inc. -- Class A*.................... 120,000 583,200
Reliant Energy Inc.*....................... 400,000 4,952,000
-----------
11,152,950
-----------
OIL & GAS -- 0.67%+
Shell Canada Limited....................... 3,000 80,530
UTS Energy Corporation*.................... 180,000 377,556
-----------
458,086
-----------
PAPER & FOREST PRODUCTS -- 0.01%+
Pope Resources, L.P. ...................... 200 7,185
-----------
REAL ESTATE -- 6.92%+
Alexander's, Inc.*......................... 300 74,625
American Real Estate Partners, L.P.*....... 108,000 3,137,400
Forest City Enterprises, Inc. -- Class A... 4,000 284,000
HomeFed Corporation*....................... 200 12,600
New Valley Corporation*.................... 6,600 47,190
SOLIDERE GDR*.............................. 800 11,200
Tejon Ranch Co.*........................... 400 20,588
Texas Pacific Land Trust................... 6,400 1,132,800
United Capital Corporation*................ 400 10,380
-----------
4,730,783
-----------
</Table>
See Notes to the Financial Statements.
73
KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE SMALL CAP OPPORTUNITIES PORTFOLIO
Portfolio of Investments -- June 30, 2005 (Unaudited) -- (Continued)
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------
ROAD & RAIL -- 1.87%+
Laidlaw International, Inc.*............... 50,000 $ 1,205,000
Sichuan Expressway Co. Limited -- Class
H........................................ 480,000 72,271
-----------
1,277,271
-----------
SOFTWARE -- 0.80%+
Midway Games Inc.*(2)...................... 50,000 548,000
-----------
TOBACCO -- 0.33%+
Vector Group Ltd........................... 12,000 222,840
-----------
TOTAL COMMON STOCKS
(cost $47,404,095)....................... 58,147,073
-----------
<Caption>
PRINCIPAL
CONVERTIBLE BONDS -- 0.73%+ AMOUNT
- ------------------------------------------------------------------------
INSURANCE -- 0.73%+
Fairfax Financial Holdings Limited 5.000%,
7/15/2023
(cost $497,500).......................... $ 500,000 496,250
-----------
<Caption>
RIGHTS -- 1.78%+ SHARES
- ------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES -- 1.78%+
Comdisco Holding Company, Inc.
Expiration Date 12/31/2050,
Strike Price $1.00#
(cost $1,328,840)........................ 4,500,000 1,215,000
-----------
<Caption>
PRINCIPAL
SHORT-TERM INVESTMENTS -- 12.79%+ AMOUNT
- ------------------------------------------------------------------------
US GOVERNMENT AGENCY ISSUES -- 12.52%+
Federal Home Loan Bank Discount Note
2.975%, 7/1/2005 $8,554,000 8,554,000
-----------
</Table>
See Notes to the Financial Statements.
74
KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE SMALL CAP OPPORTUNITIES PORTFOLIO
Portfolio of Investments -- June 30, 2005 (Unaudited) -- (Continued)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES** -- 0.27%+
American Family, 2.949%.................... $ 2,575 $ 2,575
U.S. Bank, N.A., 3.080%.................... 179,531 179,532
Wisconsin Corporate Central Credit Union,
3.000%................................... 1,249 1,249
-----------
183,356
-----------
TOTAL SHORT-TERM INVESTMENTS
(cost $8,737,356)........................ 8,737,356
-----------
<Caption>
INVESTMENTS PURCHASED WITH CASH PRINCIPAL
PROCEEDS FROM SECURITIES AMOUNT
LENDING -- 15.55%+ OR SHARES
- ------------------------------------------------------------------------
INVESTMENT COMPANIES -- 0.00%+
Merrill Lynch Premier Institutional Fund... 76 76
-----------
REPURCHASE AGREEMENTS -- 15.55%+
CS First Boston Repurchase Agreement,
3.497%, 7/1/2005(3)
Repurchase price $3,935,307.............. $3,934,925 3,934,925
Lehman Brothers Repurchase Agreement,
3.560%, 7/1/2005(3)
Repurchase price $6,690,034.............. 6,689,372 6,689,372
-----------
10,624,297
-----------
TOTAL INVESTMENTS PURCHASED WITH CASH
PROCEEDS FROM SECURITIES LENDING
(cost $10,624,373)....................... 10,624,373
-----------
TOTAL INVESTMENTS -- 115.95%+
(cost $68,592,164)....................... $79,220,052
===========
CASH RECEIVED AS PROCEEDS FROM SECURITIES
LENDING.................................. 1,603,912
-----------
</Table>
- ------------------
* -- Non-income producing security.
See Notes to the Financial Statements.
75
KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE SMALL CAP OPPORTUNITIES PORTFOLIO
Portfolio of Investments -- June 30, 2005 (Unaudited) -- (Continued)
** -- 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 June 30, 2005.
+ -- Calculated as a percentage of net assets.
# -- Contingent value right (contingent upon profitability of company).
GDR -- Global Depository Receipts.
ADR -- American Depository Receipts.
(2) -- This security or a portion of this security was out on loan at June 30,
2005. Total loaned securities had a market value of $11,314,142 at June
30, 2005.
(3) -- See Repurchase Agreements disclosure in the Notes to Financial Statements
for the Kinetics Portfolios Trust.
See Notes to the Financial Statements.
76
KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE KINETICS GOVERNMENT MONEY MARKET PORTFOLIO
Portfolio of Investments -- June 30, 2005 (Unaudited)
<Table>
<Caption>
PRINCIPAL
SHORT TERM INVESTMENTS -- 100.23%+ AMOUNT VALUE
- ----------------------------------------------------------------------
US GOVERNMENT AGENCY ISSUES -- 100.23%+
Federal Home Loan Bank Discount Note,
2.975%, 7/1/2005........................... $1,139,000 $1,139,000
----------
TOTAL INVESTMENTS -- 100.23%
(COST $1,139,000).......................... $1,139,000
==========
</Table>
- ------------------
+ -- Calculated as a percentage of net assets.
See Notes to the Financial Statements.
77
KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE INTERNET PORTFOLIO
Portfolio of Options Written -- June 30, 2005 (Unaudited)
<Table>
<Caption>
CALL OPTIONS WRITTEN CONTRACTS VALUE
- --------------------------------------------------------------------------
Internet HOLDRs Trust
Expiring January 2007 at $70.00.................. 5 $1,300
------
TOTAL OPTIONS WRITTEN
(PREMIUMS RECEIVED $6,985)....................... $1,300
======
</Table>
See Notes to the Financial Statements.
78
KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
THE INTERNET EMERGING GROWTH PORTFOLIO
Portfolio of Options Written -- June 30, 2005 (Unaudited)
<Table>
<Caption>
CALL OPTIONS WRITTEN CONTRACTS VALUE
- -----------------------------------------------------------------------
Nasdaq -- 100 Index Tracking Stock
Expiring January 2007 at $38.625................ 20 $ 6,800
Expiring January 2007 at $39.625................ 20 5,850
-------
TOTAL OPTIONS WRITTEN
(PREMIUMS RECEIVED $22,479)..................... $12,650
=======
</Table>
See Notes to the Financial Statements.
79
KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
STATEMENT OF ASSETS & LIABILITIES
June 30, 2005 (Unaudited)
<Table>
<Caption>
THE INTERNET
THE INTERNET EMERGING GROWTH
PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------
ASSETS:
Investments, at value(1) (3)......................... $169,351,431 $3,956,911
Cash received as proceeds from securities lending.... 766,930 40,680
Cash................................................. 547,782 4,901
Receivable for options written....................... -- --
Receivable for contributed capital................... 3,185 100
Receivable for investments sold...................... 210,471 --
Dividends and interest receivable.................... 326,859 22,868
Other assets......................................... 7,400 174
------------ ----------
Total assets..................................... 171,214,058 4,025,634
------------ ----------
LIABILITIES:
Written options, at value(2)......................... 1,300 12,650
Payable to Adviser................................... 171,241 3,822
Payable to Trustees and Officers..................... 14,103 541
Payable for securities purchased..................... 393,476 --
Payables for collateral received for securities
loaned............................................. 5,847,101 310,149
Payable for withdrawn capital........................ 79,508 5,205
Accrued expenses and other liabilities............... 102,205 5,944
------------ ----------
Total liabilities................................ 6,608,934 338,311
------------ ----------
Net assets......................................... $164,605,124 $3,687,323
============ ==========
(1) Cost of investments................................ $168,211,752 $3,551,189
============ ==========
(2) Premiums received.................................. $ 6,985 $ 22,479
============ ==========
(3) Includes loaned securities with a market value
of................................................... $ 5,656,308 $ 292,604
============ ==========
</Table>
See Notes to the Financial Statements.
80
KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
STATEMENT OF ASSETS & LIABILITIES
June 30, 2005 (Unaudited)
<Table>
<Caption>
THE
PARADIGM THE MEDICAL
PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------
ASSETS:
Investments, at value(1) ( 2)............................ $252,610,961 $16,851,045
Cash received as proceeds from securities lending........ 1,522,959 141,612
Cash..................................................... 354,799 --
Receivable for contributed capital....................... 3,250,187 100
Receivable for investments sold.......................... -- 97,761
Dividends and interest receivable........................ 231,640 16,579
Other assets............................................. 7,040 860
------------ -----------
Total assets......................................... 257,977,586 17,107,957
------------ -----------
LIABILITIES:
Payable to Adviser....................................... 220,160 16,814
Payable for Custodian.................................... -- 7,923
Payable to Trustees and Officers......................... 15,887 2,270
Payable for securities purchased......................... 4,498,712 --
Payables for collateral received for securities loaned... 11,611,100 1,079,652
Payable for withdrawn capital............................ 414,724 24,614
Accrued expenses and other liabilities................... 79,110 11,498
------------ -----------
Total liabilities.................................... 16,839,693 1,142,771
------------ -----------
Net assets............................................. $241,137,893 $15,965,186
============ ===========
(1) Cost of investments.................................... $213,396,156 $18,825,147
============ ===========
(2) Includes loaned securities with a market value of...... $ 11,041,540 $ 1,016,080
============ ===========
</Table>
See Notes to the Financial Statements.
81
KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
STATEMENT OF ASSETS & LIABILITIES
June 30, 2005 (Unaudited)
<Table>
<Caption>
THE KINETICS
GOVERNMENT
THE SMALL CAP MONEY
OPPORTUNITIES MARKET
PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------------------
ASSETS:
Investments, at value(1)(2)............................... $79,220,052 $1,139,000
Cash received as proceeds from securities lending......... 1,603,912 --
Cash...................................................... 108,316 669
Receivable for contributed capital........................ 719,146 1,371
Dividends and interest receivable......................... 37,116 --
Other assets.............................................. 37,008 --
----------- ----------
Total assets.......................................... 81,725,550 1,141,040
----------- ----------
LIABILITIES:
Payable to Adviser........................................ 66,461 467
Payable to Trustees and Officers.......................... 4,990 206
Payables for collateral received for securities loaned.... 12,228,285 --
Payable for investments purchased......................... 1,015,213 --
Payable for withdrawn capital............................. 37,767 --
Accrued expenses and other liabilities.................... 48,929 3,924
----------- ----------
Total liabilities..................................... 13,401,645 4,597
----------- ----------
Net assets.............................................. $68,323,905 $1,136,443
=========== ==========
(1) Cost of investments..................................... $68,592,164 $1,139,000
=========== ==========
(2) Includes loaned securities with a market value of....... $11,314,142 $ --
=========== ==========
</Table>
See Notes to the Financial Statements.
82
KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
STATEMENT OF OPERATIONS
Six Months Ended June 30, 2005 (Unaudited)
<Table>
<Caption>
THE INTERNET
THE INTERNET EMERGING GROWTH
PORTFOLIO PORTFOLIO
- ----------------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends+............................................ $ 2,042,787 $ 142,790
Interest.............................................. 1,056,850 36,642
Income from securities lending........................ 55,954 214
------------ ---------
Total investment income......................... 3,155,591 179,646
------------ ---------
EXPENSES:
Investment advisory fees.............................. 1,092,291 25,693
Administration fees................................... 94,910 2,453
Professional fees..................................... 30,074 693
Fund accounting fees.................................. 24,345 1,786
Trustees and Officers' fees and expenses.............. 23,460 690
Custodian fees and expenses........................... 16,572 4,568
Other expenses........................................ 14,741 281
------------ ---------
Total expenses.................................. 1,296,393 36,164
Expense reduction*.............................. (5,019) (558)
------------ ---------
Net expenses.................................... 1,291,374 35,606
------------ ---------
Net investment income................................... 1,864,217 144,040
------------ ---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on:
Investments and foreign currency.................... (6,678,140) (5,961)
Written option contracts expired or closed.......... 309,768 --
Net change in unrealized appreciation (depreciation)
of:
Investments and foreign currency.................... (8,622,529) (334,148)
Written option contracts............................ (295,518) 10,390
------------ ---------
Net loss on investments................................. (15,286,419) (329,719)
------------ ---------
Net decrease in net assets resulting from operations.... $(13,422,202) $(185,679)
============ =========
+ Net of Foreign Taxes Withheld of:..................... $ 17,171 $ 369
============ =========
</Table>
- ------------------
* See "Expense Reduction" in the Notes to the Financial Statements.
See Notes to the Financial Statements.
83
KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
STATEMENT OF OPERATIONS
Six Months Ended June 30, 2005 (Unaudited)
<Table>
<Caption>
THE
PARADIGM THE MEDICAL
PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends+................................................ $ 1,120,141 $ 157,249
Interest.................................................. 172,852 1,458
Income from securities lending............................ 2,472 1,408
----------- -----------
Total investment income............................. 1,295,465 160,115
----------- -----------
EXPENSES:
Investment advisory fees.................................. 991,067 110,326
Administration fees....................................... 83,449 9,489
Professional fees......................................... 36,571 3,293
Fund accounting fees...................................... 25,032 4,625
Trustees' and Officers' fees and expenses................. 24,640 2,555
Custodian fees and expenses............................... 32,742 5,111
Other expenses............................................ 267 1,686
----------- -----------
Total expenses...................................... 1,193,768 137,085
Expense reduction*.................................. (32,916) (2,895)
----------- -----------
Net expenses........................................ 1,160,852 134,190
----------- -----------
Net investment income..................................... 134,613 25,925
----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on:
Investments and foreign currency........................ 539,386 798,720
Written option contracts expired or closed.............. -- 83,697
Net change in unrealized appreciation (depreciation) of:
Investments and foreign currency........................ 12,675,792 (2,226,431)
Written option contracts................................ -- (80,072)
----------- -----------
Net gain (loss) on investments.............................. 13,215,178 (1,424,086)
----------- -----------
Net increase (decrease) in net assets resulting from
operations................................................ $13,349,791 $(1,398,161)
=========== ===========
+ Net of Foreign Taxes Withheld of:......................... $ 32,456 $ 19,565
=========== ===========
</Table>
- ------------------
* See "Expense Reduction" in the Notes to Financial Statements.
See Notes to the Financial Statements.
84
KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
STATEMENT OF OPERATIONS
Six Months Ended June 30, 2005 (Unaudited)
<Table>
<Caption>
THE KINETICS
THE SMALL CAP GOVERNMENT
OPPORTUNITIES MONEY
PORTFOLIO MARKET PORTFOLIO
- -----------------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends+........................................... $ 636,894 $ --
Interest............................................. 115,965 14,293
Income from securities lending....................... 10,156 --
---------- -------
Total investment income........................ 763,015 14,293
---------- -------
EXPENSES:
Investment advisory fees............................. 317,056 2,912
Administration fees.................................. 39,475 624
Professional fees.................................... 11,164 124
Fund accounting fees................................. 15,863 243
Trustees and Officers' fees and expenses............. 7,959 224
Custodian fees and expenses.......................... 21,097 4,525
Other expenses....................................... 24 772
---------- -------
Total expenses................................. 412,638 9,424
Expense reduction*............................. (42,187) --
---------- -------
Net expenses................................... 370,451 9,424
---------- -------
Net investment income.................................. 392,564 4,869
---------- -------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on:
Investments and foreign currency................... (106,538) --
Written option contracts expired or closed......... -- --
Net change in unrealized appreciation (depreciation)
of:
Investments and foreign currency................... 2,426,014 --
Written option contracts........................... -- --
---------- -------
Net gain on investments................................ 2,319,476 --
---------- -------
Net increase in net assets resulting from operations... $2,712,040 $ 4,869
========== =======
+ Net of Foreign Taxes Withheld of:.................... $ 3,432 $ --
========== =======
</Table>
- ------------------
* See "Expense Reduction" in the Notes to Financial Statements.
See Notes to the Financial Statements.
85
KINETICS MUTUAL FUNDS, INC. -- MASTER INVESTMENT PORTFOLIOS
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
THE INTERNET
THE INTERNET PORTFOLIO EMERGING GROWTH PORTFOLIO
---------------------------- ----------------------------
SIX MONTHS FOR THE SIX MONTHS FOR THE
ENDED YEAR ENDED ENDED YEAR ENDED
JUNE 30, 2005 DECEMBER 31, JUNE 30, 2005 DECEMBER 31,
(UNAUDITED) 2004 (UNAUDITED) 2004
- ---------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income......... $ 1,864,217 $ 2,804,751 $ 144,040 $ 121,997
Net realized gain (loss) on
sale of investments, foreign
currency and written
options..................... (6,368,372) 33,312,086 (5,961) 128,613
Net change in unrealized
appreciation (depreciation)
of investments, foreign
currency and written
options..................... (8,918,047) (16,515,271) (323,758) 103,782
------------ ------------ ---------- -----------
Net increase (decrease) in
net assets resulting
from operations......... (13,422,202) 19,601,566 (185,679) 354,392
------------ ------------ ---------- -----------
NET DECREASE IN NET ASSETS
RESULTING FROM BENEFICIAL
INTEREST TRANSACTIONS:
Contributions................. 181,451 26,839,732 198,595 1,049,978
Withdrawals................... (24,863,629) (75,601,294) (919,241) (1,462,409)
------------ ------------ ---------- -----------
Net decrease in net assets
resulting from
beneficial interest
transactions............ (24,682,178) (48,761,562) (720,646) (412,431)
------------ ------------ ---------- -----------
Total decrease in net
assets...................... (38,104,380) (29,159,996) (906,325) (58,039)
NET ASSETS:
Beginning of year............. 202,709,504 231,869,500 4,593,648 4,651,687
------------ ------------ ---------- -----------
End of year................... $164,605,124 $202,709,504 $3,687,323 $ 4,593,648
============ ============ ========== ===========
</Table>
See Notes to the Financial Statements.
86
KINETICS MUTUAL FUNDS, INC. -- MASTER INVESTMENT PORTFOLIOS
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
THE PARADIGM PORTFOLIO THE MEDICAL PORTFOLIO
---------------------------- -----------------------------
SIX MONTHS FOR THE SIX MONTHS FOR THE
ENDED YEAR ENDED ENDED YEAR ENDED
JUNE 30, 2005 DECEMBER 31, JUNE 30, 2005 DECEMBER 31,
(UNAUDITED) 2004 (UNAUDITED) 2004
- ------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss).... $ 134,613 $ (70,003) $ 25,925 $ (72,336)
Net realized gain on sale of
investments, foreign currency
and written options........... 539,386 4,037,192 882,417 547,201
Net change in unrealized
appreciation (depreciation) of
investments, foreign currency
and written options........... 12,675,792 13,990,179 (2,306,503) 1,117,954
------------ ------------ ----------- -----------
Net increase (decrease) in
net assets resulting from
operations................ 13,349,791 17,957,368 (1,398,161) 1,592,819
------------ ------------ ----------- -----------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM BENEFICIAL
INTEREST TRANSACTIONS:
Contributions................... 121,620,110 58,008,906 38,282 2,545,683
Withdrawals..................... (19,239,439) (23,413,796) (3,007,053) (8,320,935)
------------ ------------ ----------- -----------
Net increase (decrease) in
net assets resulting from
beneficial interest
transactions.............. 102,380,671 34,595,110 (2,968,771) (5,775,252)
------------ ------------ ----------- -----------
Total increase (decrease) in net
assets........................ 115,730,462 52,552,478 (4,366,932) (4,182,433)
NET ASSETS:
Beginning of year............... 125,407,431 72,854,953 20,332,118 24,514,551
------------ ------------ ----------- -----------
End of year..................... $241,137,893 $125,407,431 $15,965,186 $20,332,118
============ ============ =========== ===========
</Table>
See Notes to the Financial Statements.
87
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
---------------------------- ----------------------------
SIX MONTHS FOR THE SIX MONTHS FOR THE
ENDED YEAR ENDED ENDED YEAR ENDED
JUNE 30, 2005 DECEMBER 31, JUNE 30, 2005 DECEMBER 31,
(UNAUDITED) 2004 (UNAUDITED) 2004
- ---------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income.......... $ 392,564 $ 426,516 $ 4,869 $ 3,582
Net realized gain (loss) on
sale of investments, foreign
currency and written
options...................... (106,538) 1,993,213 -- --
Net change in unrealized
appreciation (depreciation)
of investments, foreign
currency and written
options...................... 2,426,014 2,368,917 -- --
----------- ------------ ---------- ------------
Net increase in net assets
resulting from
operations............... 2,712,040 4,788,646 4,869 3,582
----------- ------------ ---------- ------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
BENEFICIAL INTEREST
TRANSACTIONS:
Contributions.................. 26,917,773 27,678,584 117,768 22,191,434
Withdrawals.................... 19,397 (19,582,069) (167,404) (23,938,932)
----------- ------------ ---------- ------------
Net increase (decrease) in
net assets resulting from
beneficial interest
transactions............. 26,937,170 8,096,515 (49,636) (1,747,498)
----------- ------------ ---------- ------------
Total increase (decrease) in
net assets................... 29,649,210 12,885,161 (44,767) (1,743,916)
NET ASSETS:
Beginning of year.............. 38,674,695 25,789,534 1,181,210 2,925,126
----------- ------------ ---------- ------------
End of year.................... $68,323,905 $38,674,695 $1,136,443 $ 1,181,210
=========== ============ ========== ============
</Table>
See Notes to the Financial Statements.
88
KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS
June 30, 2005 (Unaudited)
1. ORGANIZATION
The Kinetics Portfolios Trust (the "Trust") was organized as a Delaware
Statutory Trust on March 14, 2000 and is registered under the Investment Company
Act of 1940, as amended (the "1940 Act"), as an open-end management investment
company issuing its beneficial interests in series, each series representing a
distinct portfolio with its own investment objectives and policies. The series
currently authorized are The Internet Portfolio, The Internet Emerging Growth
Portfolio, The Paradigm Portfolio, The Medical Portfolio, The Small Cap
Opportunities Portfolio, 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
89
KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
June 30, 2005 (Unaudited)
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 or guaranteed, as to principal and interest, 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 June 30, 2005, there were no fair valued
securities held by the funds.
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
90
KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
June 30, 2005 (Unaudited)
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.
At June 30, 2005 the Master Portfolios, with the exception of the Kinetics
Government Money Market Portfolio, received, as collateral, securities with a
total market value of $29,206,893. The detailed list of the securities received
as collateral is listed below.
CS FIRST BOSTON REPURCHASE AGREEMENT
Collateralized by:
<Table>
<Caption>
DESCRIPTION FAIR VALUE
- ----------- -----------
Crusade Global Trust, Series 2003-2, Class A, 3.620%,
9/18/2034................................................. $ 7,303,123
DSLA Mortgage Loan Trust, Series 2005-AR4, Class 2A2,
4.571%, 8/19/2045......................................... 3,199,108
-----------
Total....................................................... $10,502,231
===========
</Table>
91
KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
June 30, 2005 (Unaudited)
LEHMAN BROTHERS REPURCHASE AGREEMENT
Collateralized by:
<Table>
<Caption>
DESCRIPTION FAIR VALUE
- ----------- -----------
Aztar Corporation, 7,875%, 6/15/2014........................ $ 377,129
Caesars Entertainment, Inc., 8.125%, 5/15/2011.............. 85,666
CSC Holdings Inc., 7.250%, 7/15/2008........................ 561,400
Dole Food Company, Inc., 8.625%, 5/1/2009................... 131,380
Fairfax Financial Holdings Limited, 7.750%, 4/26/2012....... 225,333
HCA, Inc., 5.750%, 3/15/2014................................ 477,744
HCA, Inc., 6.750%, 7/15/2013................................ 215,544
Kerzner International Limited, 8.875%, 8/15/2011............ 283,550
L-3 Communications Corporation, 6.125%, 7/15/2013........... 200,000
Omnicare Inc., 8.125%, 3/15/2011............................ 328,551
Owens & Minor, Inc., 8.500%, 7/15/2011...................... 454,750
PanAmSat Holding Corp., 10.375%, 11/1/2014.................. 171,875
Pogo Producing Company, 6.625%, 3/15/2015................... 419,067
Republic of Venezuela, 13.625%, 8/15/2018................... 536,000
Sears Roebuck Acceptance Corp., 6.750%, 8/15/2011........... 892,570
TECO Energy, Inc., 7.200%, 5/1/2011......................... 195,656
TECO Energy, Inc., 7.500%, 6/15/2010........................ 1,403,920
Universal Compression, Inc., 7,250%, 5/15/2010.............. 198,550
Westar Energy, Inc., 5.875%, 7/15/2036...................... 11,545,977
-----------
Total....................................................... $18,704,662
===========
</Table>
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
92
KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
June 30, 2005 (Unaudited)
security, and the liability related to such option is eliminated. When an option
is exercised, the premium originally received decreases the cost basis of the
underlying security (or increases the proceeds on the security sold short) and
the Master Portfolio realizes a gain or loss from the sale of the security (or
closing of the short sale). As collateral for uncovered written options, the
Master Portfolio is required under the 1940 Act to maintain assets consisting of
cash, cash equivalents or liquid securities. This collateral is required to be
adjusted daily to reflect the market value of the purchase obligation for put
options or the market value of the instrument underlying the contract for call
options.
FOREIGN CURRENCY TRANSLATIONS
The books and records of the Master Portfolios are maintained in U.S. dollars.
For the Master Portfolios, foreign currency transactions are translated into
U.S. dollars on the following basis: (i) market value of investment securities
and other assets and liabilities are translated at the exchange rate of such
currencies against the U.S. dollar, as provided by an approved pricing service,
and (ii) purchases and sales of investment securities, dividend and interest
income and certain expenses at the rates of exchange prevailing on the
respective dates of such transactions. The Master Portfolios do not isolate and
treat as ordinary income that portion of the results of operations arising as a
result of changes in the exchange rate from the fluctuations arising from
changes in the market prices of securities held during the period. However, for
federal income tax purposes, the Master Portfolios do isolate and treat as
ordinary income the effect of changes in foreign exchange rates arising from
actual foreign currency transactions and the effect of changes in foreign
exchange rates arising between trade date and settlement date.
RESTRICTED SECURITIES
The Master Portfolios may invest in restricted securities. These securities are
valued by the Master Portfolios after giving due consideration to pertinent
factors including recent private sales, market conditions and the issuer's
financial performance. The Master Portfolios have no right to require
registration of unregistered securities. At June 30, 2005, the Master Portfolios
did not hold any investment securities which were determined to be illiquid
pursuant to the guidelines adopted by the Board of Trustees.
WHEN-ISSUED SECURITIES
The Master Portfolios may purchase securities on a when-issued or delayed
delivery basis. Although the purchase amounts of these securities are
established at the time the purchaser enters into the agreement, these
93
KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
June 30, 2005 (Unaudited)
securities may be delivered and paid for at a future date. The Master Portfolios
record purchases of when-issued securities and reflect the values of such
securities in determining net asset value in the same manner as other portfolio
securities. The Master Portfolios maintain at all times cash or other liquid
assets in an amount at least equal to the amount of outstanding commitments for
when-issued securities.
EXPENSE REDUCTION
The Adviser has directed a certain amount of the Master Portfolios' trades to
brokers believed to provide the best execution and, as a result, it has
generated directed brokerage credits to reduce certain service provider fees.
For the six months ended June 30, 2005, 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
$5,019, $558, $32,916, $2,895 and $42,187, 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.
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 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.
94
KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
June 30, 2005 (Unaudited)
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.
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.
3. INVESTMENT ADVISER
The Trust has Investment Advisory Agreements (the "Agreements") with Kinetics
Asset Management, Inc. (the "Adviser"), with whom certain officers and trustees
of the Trust are affiliated, to furnish investment advisory services to the
Master Portfolios. Under the terms of the Agreements, the Master Portfolios
compensate the Adviser for its management services at the annual rate of 1.25%
of each Master Portfolio's average daily net assets, except for The Kinetics
Government Money Market Portfolio, which compensates the Adviser at a rate of
0.50% of the Master Portfolio's average daily net assets. For the six months
ended June 30, 2005, 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 $1,092,291, $25,693, $991,067, $110,326, $317,056 and
$2,912, respectively, pursuant to the Investment Advisory Agreements.
95
KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
June 30, 2005 (Unaudited)
KBD Securities, LLC, an affiliate of the Adviser, received $43,828 in brokerage
fee commissions with respect to the Portfolios' portfolio transactions, which
constituted 14% of the Portfolios' brokerage commissions during the period.
<Table>
<Caption>
PORTFOLIO COMMISSIONS
--------- -----------
The Internet Portfolio...................................... $ 3,862
The Internet Emerging Growth Portfolio...................... $ 580
The Paradigm Portfolio...................................... $15,225
The Medical Portfolio....................................... $ 1,141
The Small Cap Opportunities Portfolio....................... $23,020
</Table>
For the six months ended June 30, 2005, the Trust incurred expenses of $12,000
to be paid to the Chief Compliance Officer.
4. APPROVAL OF INVESTMENT ADVISORY CONTRACTS BY DIRECTORS OF INVESTMENT
COMPANIES
At a meeting of the Board of Trustees held on March 7, 2005, the Board,
including all of the Independent Trustees, approved the Agreements with respect
to the Master Portfolios. In reaching a decision to renew the Agreements, the
Board, including all of the Trustees who are not interested persons under the
1940 Act (the "Independent Trustees"), considered, among others (1) the nature,
extent and quality of the services provided by the Adviser; (2) the performance
of the Portfolios over 6 and 9 months and three and five year periods ended
December 31, 2004 compared to the median of its relevant Lipper, Inc. ("Lipper")
peer group, additional peer group information for the Medical Portfolio provided
by the Advisor for the period from September 30, 1999 to December 31, 2004, and
the methodology used to arrive at the Master Portfolios included in the peer
groups; (3) the contractual and actual compensation to be paid under the
Agreements as compared to the compensation paid to relevant Lipper peer groups;
(4) the expense ratios of the Master Portfolios, with expense waivers, as
compared to expense ratios for relevant peer groups of Lipper portfolios; (5)
the qualifications of the Adviser's personnel, portfolio management capabilities
and investment methodologies; (6) the Adviser's operations, compliance program
and policies with respect to Code of Ethics; (7) the financial condition of the
Adviser; (8) the cost of services to be provided by the Adviser and the
Adviser's profitability from each Master Portfolio for the years ended December
31, 2004; (9) "fall-out" benefits to the Adviser and its affiliates from the
relationship with the Master Portfolios; (10) the extent to which economies of
scale are relevant given the Master Portfolios' current
96
KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
June 30, 2005 (Unaudited)
asset size and current asset growth potential; and (11) that each Master
Portfolio other than the Government Money Market Portfolio is designed for
long-term investors. The Lipper peer group information was provided by U.S.
Bancorp Fund Services, LLC, the Company's administrator.
Based on the factors considered, the disinterested Trustees concluded that it
was appropriate to renew the Agreements.
5. SECURITIES TRANSACTIONS
Purchases and sales of investment securities, other than short-term investments,
for the six months ended June 30, 2005 were as follows:
<Table>
<Caption>
PURCHASES SALES
------------------------ ------------------------
U.S. U.S.
GOVERNMENT OTHER GOVERNMENT OTHER
---------- ----------- ---------- -----------
The Internet Portfolio....... $-- $ 3,652,927 $-- $12,902,863
The Internet Emerging Growth
Portfolio.................. -- 266,981 -- 48,383
The Paradigm Portfolio....... -- 99,927,451 -- 8,146,748
The Medical Portfolio........ -- 306,441 -- 3,159,175
The Small Cap Opportunities
Portfolio.................. -- 25,970,869 -- 1,135,089
</Table>
As of June 30, 2005, unrealized appreciation (depreciation) on investment
securities was as follows:
<Table>
<Caption>
NET
APPRECIATION APPRECIATED DEPRECIATED
(DEPRECIATION) SECURITIES SECURITIES
-------------- ----------- ------------
The Internet Portfolio................. $ 1,139,679 $36,744,681 $(35,605,002)
The Internet Emerging Growth
Portfolio............................ 405,722 1,070,923 (665,201)
The Paradigm Portfolio................. 39,214,805 41,048,886 (1,834,081)
The Medical Portfolio.................. (1,974,102) 2,879,627 (4,853,729)
The Small Cap Opportunities
Portfolio............................ 10,627,888 11,992,776 (1,364,888)
</Table>
At June 30, 2005, the cost of investments was $168,211,752, $3,551,189,
$213,396,156, $18,825,147 and $68,592,164 for The Internet Portfolio, The
Internet Emerging Growth Portfolio, The Paradigm Portfolio, The Medical
Portfolio, and The Small Cap Opportunities Portfolio, respectively.
97
KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
June 30, 2005 (Unaudited)
For the six months ended June 30, 2005, the Master Portfolios wrote the
following options:
<Table>
<Caption>
NUMBER PREMIUM
OF CONTRACTS AMOUNT
------------ ---------
THE INTERNET PORTFOLIO
- ------------------------------------------------------
Outstanding at the Beginning of Year.................. 1,145 $ 316,753
Options Expired....................................... (1,140) (309,768)
------ ---------
Outstanding at the End of Year........................ 5 $ 6,985
====== =========
THE INTERNET EMERGING GROWTH PORTFOLIO
- ------------------------------------------------------
Outstanding at the Beginning of Year.................. 20 $ 11,540
Options Written....................................... 20 10,939
------ ---------
Outstanding at the End of Year........................ 40 $ 22,479
====== =========
THE MEDICAL PORTFOLIO
- ------------------------------------------------------
Outstanding at the Beginning of Year.................. 150 $ 83,697
Options Expired....................................... (150) (83,697)
------ ---------
Outstanding at the End of Year........................ -- $ --
====== =========
</Table>
6. PORTFOLIO SECURITIES LOANED
As of June 30, 2005, the Master Portfolios had loaned securities that were
collateralized by cash. The cash collateral is invested by the custodian in a
money market pooled account approved by the Adviser. Although risk is mitigated
by the collateral, the Master Portfolio could experience a delay in recovering
its securities and possible loss of income or value if the borrower fails to
return them. The Master Portfolio receives interest on the collateral received
as well as a fee for the securities loaned. The Master Portfolios will continue
to receive dividends and interest on all securities loaned. Gain or loss in the
fair value of the securities loaned that may occur during the term of the loan
will be accounted for by the Master Portfolios. The value of the securities on
loan and the value of the related collateral at June 30, 2005, were as follows:
<Table>
<Caption>
SECURITIES COLLATERAL
----------- -----------
The Internet Portfolio.................... $ 5,656,308 $ 5,847,101
The Internet Emerging Growth Portfolio.... 292,604 310,149
The Paradigm Portfolio.................... 11,041,540 11,611,100
The Medical Portfolio..................... 1,016,080 1,079,652
The Small Cap Opportunities Portfolio..... 11,314,142 12,228,285
</Table>
98
KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
June 30, 2005 (Unaudited)
7. SELECTED FINANCIAL HIGHLIGHTS
Financial highlights for the Master Portfolios were as follows:
<Table>
<Caption>
THE INTERNET PORTFOLIO
--------------------------------------------------------------------------------------
FOR THE APRIL 28,
SIX MONTHS FOR THE FOR THE FOR THE FOR THE 2000(+)
ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
JUNE 30, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2005 2004 2003 2002 2001 2000
----------- ------------ ------------ ------------ ------------ ------------
Ratio of expenses to
average net assets:
Before expense
reduction............... 1.48%* 1.50% 1.51% 1.51% 1.44% 1.43%*
After expense reduction... 1.48%* 1.44% 1.51% 1.51% 1.44% 1.43%*
Ratio of net investment
income (loss) to average
net assets:
Before expense
reduction............... 2.13%* 1.30% 0.99% 0.50% 0.32% (0.69%)*
After expense reduction... 2.13%* 1.36% 0.99% 0.50% 0.32% (0.69%)*
Portfolio turnover rate.... 2% 42% 69% 41% 44% 16%
</Table>
- ------------------
* Annualized.
(+) Commencement of operations.
<Table>
<Caption>
THE INTERNET EMERGING GROWTH PORTFOLIO
--------------------------------------------------------------------------------------
FOR THE APRIL 28,
SIX MONTHS FOR THE FOR THE FOR THE FOR THE 2000(+)
ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
JUNE 30, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2005 2004 2003 2002 2001 2000
----------- ------------ ------------ ------------ ------------ ------------
Ratio of expenses to
average net assets:
Before expense
reduction............... 1.76%* 1.78% 1.84% 1.83% 2.30% 1.93%*
After expense reduction... 1.73%* 1.73% 1.84% 1.83% 2.30% 1.84%*
Ratio of net investment
income (loss) to average
net assets:
Before expense
reduction............... 7.00%* 2.77% 1.94% (1.07%) (0.22%) (0.35%)*
After expense reduction... 7.03%* 2.82% 1.94% (1.07%) (0.22%) (0.26%)*
Portfolio turnover rate.... 1% 18% 20% 27% 24% 30%
</Table>
- ------------------
* Annualized.
(+) Commencement of operations.
99
KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
June 30, 2005 (Unaudited)
<Table>
<Caption>
THE PARADIGM PORTFOLIO
--------------------------------------------------------------------------------------
FOR THE APRIL 28,
SIX MONTHS FOR THE FOR THE FOR THE FOR THE 2000(+)
ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
JUNE 30, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2005 2004 2003 2002 2001 2000
----------- ------------ ------------ ------------ ------------ ------------
Ratio of expenses to
average net assets:
Before expense
reduction............... 1.51%* 1.52% 1.56% 1.64% 2.27% 2.85%*
After expense reduction... 1.46%* 1.42% 1.46% 1.64% 2.27% 2.60%*
Ratio of net investment
income (loss) to average
net assets:
Before expense
reduction............... 0.12%* (0.18%) 1.28% (0.27%) (0.69%) (0.66%)*
After expense reduction... 0.17%* (0.08%) 1.38% (0.27%) (0.69%) (0.41%)*
Portfolio turnover rate.... 5% 52% 20% 40% 41% 89%
</Table>
- ------------------
* Annualized.
(+) Commencement of operations.
<Table>
<Caption>
THE MEDICAL PORTFOLIO
------------------------------------------------------------------------------------------
FOR THE
SIX MONTHS FOR THE FOR THE FOR THE FOR THE APRIL 28, 2000(+)
ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
JUNE 30, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2005 2004 2003 2002 2001 2000
---------- ------------ ------------ ------------ ------------ -----------------
Ratio of expenses to
average net assets:
Before expense
reduction.............. 1.55%* 1.58% 1.53% 1.53% 1.51% 1.47%*
After expense
reduction.............. 1.52%* 1.57% 1.53% 1.53% 1.51% 1.46%*
Ratio of net investment
loss to average net
assets:
Before expense
reduction.............. 0.26%* (0.33%) (0.56%) (0.47%) (0.39%) (0.55%)*
After expense
reduction.............. 0.29%* (0.32%) (0.56%) (0.47%) (0.39%) (0.54%)*
Portfolio turnover rate... 2% 13% 16% 9% 6% 1%
</Table>
- ------------------
* Annualized.
(+) Commencement of operations.
<Table>
<Caption>
THE SMALL CAP OPPORTUNITIES PORTFOLIO
------------------------------------------------------------------------------------------
FOR THE
SIX MONTHS FOR THE FOR THE FOR THE FOR THE APRIL 28, 2000(+)
ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
JUNE 30, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2005 2004 2003 2002 2001 2000
---------- ------------ ------------ ------------ ------------ -----------------
Ratio of expenses to
average net assets:
Before expense
reduction.............. 1.63%* 1.55% 1.67% 1.66% 2.35% 13.27%*
After expense
reduction.............. 1.46%* 1.21% 1.49% 1.66% 2.35% 10.93%*
Ratio of net investment
income (loss) to average
net assets:
Before expense
reduction.............. 1.38%* 1.51% 2.88% (0.29%) (0.99%) (11.12%)*
After expense
reduction.............. 1.55%* 1.85% 3.06% (0.29%) (0.99%) (8.78%)*
Portfolio turnover rate... 3% 96% 180% 200% 181% 198%
</Table>
- ------------------
* Annualized.
(+) Commencement of operations.
100
KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
June 30, 2005 (Unaudited)
<Table>
<Caption>
THE KINETICS GOVERNMENT
MONEY MARKET PORTFOLIO
------------------------------------------------------------------------------------------
FOR THE
SIX MONTHS FOR THE FOR THE FOR THE FOR THE APRIL 28, 2000(+)
ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
JUNE 30, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2005 2004 2003 2002 2001 2000
---------- ------------ ------------ ------------ ------------ -----------------
Ratio of expenses to
average net assets:..... 1.62%* 0.83% 0.79% 0.75% 0.79% 0.78%*
Ratio of net investment
income to average net
assets:................. 0.84%* 0.18% 0.15% 0.67% 2.70% 5.36%*
Portfolio turnover
rate.................... N/A N/A N/A N/A N/A N/A
</Table>
- ------------------
* Annualized.
(+) Commencement of operations.
8. 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
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, 2005 is available without charge, upon
request, by calling toll-free at (800) 930-3828 or by accessing the SEC's
website at www.sec.gov.
9. 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. Finally, the Form N-Q may be reviewed and copied
at the SEC's Public Reference Room in Washington, D.C. Information on the
operation of the Public Reference Room may be obtained by calling
1-800-SEC-0330.
101
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
THE FUNDS' PROXY VOTING POLICIES AND PROCEDURES ARE AVAILABLE WITHOUT CHARGE
UPON REQUEST BY CALLING TOLL-FREE AT 1-800-930-3828 OR BY ACCESSING THE SEC'S
WEBSITE AT www.sec.gov. INFORMATION REGARDING HOW THE FUNDS VOTED PROXIES
RELATING TO PORTFOLIO SECURITIES DURING THE TWELVE MONTHS ENDED JUNE 30, 2005
WILL BE AVAILABLE AFTER AUGUST 31, 2005 WITHOUT CHARGE, UPON REQUEST, BY CALLING
TOLL-FREE AT 1-800-930-3828 OR BY ACCESSING THE SEC'S WEBSITE AT www.sec.gov.
ITEM 2. CODE OF ETHICS.
Not applicable for semi-annual reports.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable for semi-annual reports.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable for semi-annual reports.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable to open-end investment companies.
ITEM 6. SCHEDULE OF INVESTMENTS.
The Schedule of Investments is included as part of the report to shareholders
filed under Item 1 of this Form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable to open-end investment companies.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable to open-end investment companies.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable to open-end investment companies.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The Registrant's President/Chief Executive Officer and Treasurer/Chief
Financial Officer have concluded that the Registrant's disclosure controls
and procedures (as defined in Rule 30a-3(c) under the Investment Company
Act of 1940, as amended (the "1940 Act"))
are effective as of a date within 90 days of the filing date of this
report, that includes the disclosure required by this paragraph, based on
the evaluation of these controls and procedures required by Rule 30a-3(b)
under the 1940 Act and Rule 15d-15(b) under the Securities Exchange Act of
1934, as amended.
(b) There were no changes in the Registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred
during the second fiscal quarter of the period covered by this report that
has materially affected, or is reasonably likely to materially affect, the
Registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a) (1) Not applicable.
(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. Filed herewith.
(3) Not applicable to open-end investment companies.
(b) 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 September 07, 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 September 07, 2005
--------------------------------------------------------------
By (Signature and Title)* /s/ Leonid Polyakov
-----------------------------------------
Leonid Polyakov, Treasurer
Date September 07, 2005
--------------------------------------------------------------
* Print the name and title of each signing officer under his or her signature.