ThZeal - The Zeal

N-CSRS 1 c97074n2nvcsrs.txt CERTIFIED SHAREHOLDER REPORT 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

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

------------------ 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)

------------------ * 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)

------------------ * 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)

------------------ * 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)

See Notes to the Financial Statements. 17 KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS STATEMENT OF OPERATIONS Six Months Ended June 30, 2005 (Unaudited)

See Notes to the Financial Statements. 18 KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS STATEMENT OF OPERATIONS Six Months Ended June 30, 2005 (Unaudited)

See Notes to the Financial Statements. 19 KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS STATEMENTS OF CHANGES IN NET ASSETS

See Notes to the Financial Statements. 20 KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)

See Notes to the Financial Statements. 21 KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS STATEMENTS OF CHANGES IN NET ASSETS

See Notes to the Financial Statements. 22 KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)

See Notes to the Financial Statements. 23 KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS STATEMENTS OF CHANGES IN NET ASSETS

See Notes to the Financial Statements. 24 KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)

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:

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:

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.

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:

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

------------------ (+) 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

See Notes to the Financial Statements. 35 KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS FINANCIAL HIGHLIGHTS

------------------ (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

------------------ (+) 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

See Notes to the Financial Statements. 39

------------------ (+) 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

See Notes to the Financial Statements. 43 KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS FINANCIAL HIGHLIGHTS

See Notes to the Financial Statements. 45 KINETICS MUTUAL FUNDS, INC. -- FEEDER FUNDS FINANCIAL HIGHLIGHTS

------------------ (+) 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 %] 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

THE INTERNET EMERGING GROWTH PORTFOLIO [GRAPH IN %] 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

47 KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS ALLOCATION OF PORTFOLIO ASSETS June 30, 2005 (Unaudited) -- (Continued) THE PARADIGM PORTFOLIO [GRAPH IN %] 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

THE MEDICAL PORTFOLIO [GRAPH IN %] 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

48 KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS ALLOCATION OF PORTFOLIO ASSETS June 30, 2005 (Unaudited) -- (Continued) THE SMALL CAP OPPORTUNITIES PORTFOLIO [GRAPH IN %] 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

49 KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS THE INTERNET PORTFOLIO Portfolio of Investments -- June 30, 2005 (Unaudited)
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 ------------
See Notes to the Financial Statements. 50 KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS THE INTERNET PORTFOLIO Portfolio of Investments -- June 30, 2005 (Unaudited) -- (Continued)
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 ------------
See Notes to the Financial Statements. 51 KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS THE INTERNET PORTFOLIO Portfolio of Investments -- June 30, 2005 (Unaudited) -- (Continued)
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 ------------ 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 ------------ 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 ------------
See Notes to the Financial Statements. 52 KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS THE INTERNET PORTFOLIO Portfolio of Investments -- June 30, 2005 (Unaudited) -- (Continued)
Principal Amount ---------------------------------------------------------------------------- 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 ------------ 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 ------------ 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 ------------
PRINCIPAL AMOUNT SHORT-TERM INVESTMENTS -- 11.64%+ OR SHARES ------------------------------------------------------------------------
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 ------------
See Notes to the Financial Statements. 53 KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS THE INTERNET PORTFOLIO Portfolio of Investments -- June 30, 2005 (Unaudited) -- (Continued)
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 ------------
------------------ * -- 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)
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 ----------
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)
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 ----------
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)
PREFERRED STOCKS -- 0.04%+ SHARES VALUE ------------------------------------------------------------------------ DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.04%+ PTV, Inc. -- Series A, CLB, 10.000% (cost $3,774)..................................... 487 $ 1,400 ---------- 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 ---------- 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 ---------- 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 ---------- 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 ----------
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)
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 ----------
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)
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 ----------
------------------ * -- 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)
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 ------------
See Notes to the Financial Statements. 60 KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS THE PARADIGM PORTFOLIO Portfolio of Investments -- June 30, 2005 (Unaudited) -- (Continued)
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 ------------
See Notes to the Financial Statements. 61 KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS THE PARADIGM PORTFOLIO Portfolio of Investments -- June 30, 2005 (Unaudited) -- (Continued)
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 ------------
See Notes to the Financial Statements. 62 KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS THE PARADIGM PORTFOLIO Portfolio of Investments -- June 30, 2005 (Unaudited) -- (Continued)
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 ------------
See Notes to the Financial Statements. 63 KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS THE PARADIGM PORTFOLIO Portfolio of Investments -- June 30, 2005 (Unaudited) -- (Continued)
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 ------------ CALL PUT PURCHASED -- 0.11%+ CONTRACTS --------------------------------------------------------------------- ~~TXU Corporation Expiring January 2007 at $45.00 (cost $143,073)................. 71 273,705~~ 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 ------------
See Notes to the Financial Statements. 64 KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS THE PARADIGM PORTFOLIO Portfolio of Investments -- June 30, 2005 (Unaudited) -- (Continued)
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 ------------

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 ------------
------------------ * -- 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)
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
See Notes to the Financial Statements. 67 KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS THE MEDICAL PORTFOLIO Portfolio of Investments -- June 30, 2005 (Unaudited) -- (Continued)
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 -----------
See Notes to the Financial Statements. 68 KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS THE MEDICAL PORTFOLIO Portfolio of Investments -- June 30, 2005 (Unaudited) -- (Continued)
SHARES VALUE ------------------------------------------------------------------------ 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 -----------
------------------ * -- 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)
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 -----------
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)
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 -----------
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)
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 -----------
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)
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 -----------
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)
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 ----------- 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 ----------- 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 ----------- 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 -----------
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)
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 ----------- 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 -----------
------------------ * -- 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)
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 ==========
------------------ + -- 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)
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 ======
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)
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 =======
See Notes to the Financial Statements. 79 KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS STATEMENT OF ASSETS & LIABILITIES June 30, 2005 (Unaudited)
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 ============ ==========
See Notes to the Financial Statements. 80 KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS STATEMENT OF ASSETS & LIABILITIES June 30, 2005 (Unaudited)
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 ============ ===========
See Notes to the Financial Statements. 81 KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS STATEMENT OF ASSETS & LIABILITIES June 30, 2005 (Unaudited)
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 $ -- =========== ==========
See Notes to the Financial Statements. 82 KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS STATEMENT OF OPERATIONS Six Months Ended June 30, 2005 (Unaudited)
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 ============ =========
------------------ * 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)
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 =========== ===========
------------------ * 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)
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 $ -- ========== =======
------------------ * 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
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 ============ ============ ========== ===========
See Notes to the Financial Statements. 86 KINETICS MUTUAL FUNDS, INC. -- MASTER INVESTMENT PORTFOLIOS STATEMENTS OF CHANGES IN NET ASSETS
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 ============ ============ =========== ===========
See Notes to the Financial Statements. 87 KINETICS MUTUAL FUNDS, INC. -- MASTER INVESTMENT PORTFOLIOS STATEMENTS OF CHANGES IN NET ASSETS
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 =========== ============ ========== ============
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:
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 ===========
91 KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) June 30, 2005 (Unaudited) LEHMAN BROTHERS REPURCHASE AGREEMENT Collateralized by:
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 ===========
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.
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
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:
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
As of June 30, 2005, unrealized appreciation (depreciation) on investment securities was as follows:
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)
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:
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........................ -- $ -- ====== =========
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:
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
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:
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%
------------------ * Annualized. (+) Commencement of operations.
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%
------------------ * Annualized. (+) Commencement of operations. 99 KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) June 30, 2005 (Unaudited)
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%
------------------ * Annualized. (+) Commencement of operations.
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%
------------------ * Annualized. (+) Commencement of operations.
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%
------------------ * Annualized. (+) Commencement of operations. 100 KINETICS PORTFOLIOS TRUST -- MASTER INVESTMENT PORTFOLIOS NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) June 30, 2005 (Unaudited)
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
------------------ * 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.