FORM N-CSR

As filed with the Securities and Exchange Commission on March 9, 2009

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)

555 Taxter Road, Suite 175
Elmsford, NY 10523

(Address of principal executive offices) (Zip code)

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

(Name and address of agent for service)

(800) 930-3828

Registrant’s telephone number, including area code

Date of fiscal year end: December 31, 2008

Date of reporting period: December 31, 2008

KINETICS MUTUAL FUNDS, INC.

Table of Contents

December 31, 2008


	Page

Shareholders’ Letter		2
Year 2008 Annual Investment Commentary		5
KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS
Expense Example		19
Statement of Assets & Liabilities		28
Statement of Operations		33
Statements of Changes in Net Assets		38
Notes to Financial Statements		48
Financial Highlights		64
Report of Independent Registered Public Accounting Firm		83
KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS
Allocation of Portfolio Assets		84
Portfolio of Investments The Internet Portfolio		89
Portfolio of Investments The Global Portfolio		95
Portfolio of Investments The Paradigm Portfolio		100
Portfolio of Investments The Medical Portfolio		114
Portfolio of Investments The Small Cap Opportunities Portfolio		117
Portfolio of Investments The Kinetics Government Money Market Portfolio		125
Portfolio of Investments The Market Opportunities Portfolio		126
Portfolio of Investments The Water Infrastructure Portfolio		132
Portfolio of Investments The Multi-Disciplinary Portfolio		136
Portfolio of Options Written The Internet Portfolio		137
Portfolio of Options Written The Medical Portfolio		138
Portfolio of Options Written The Small Cap Opportunities Portfolio		139
Portfolio of Options Written The Market Opportunities Portfolio		140
Portfolio of Options Written The Multi-Disciplinary Portfolio		141
Statement of Assets & Liabilities		146
Statement of Operations		151
Statements of Changes in Net Assets		156
Notes to Financial Statements		161
Report of Independent Registered Public Accounting Firm		178

KINETICS MUTUAL FUNDS, INC.

Shareholders’ Letter

Dear Fellow Shareholders:

We are pleased to present the Kinetics Mutual Funds’ Annual Report for the period ended December 31, 2008. On balance, the Kinetics Family of Mutual Funds had disappointing results for 2008, with declines in the no-load classes of 53.17% for the Paradigm Fund, 57.88% for the Small-Cap Opportunities Fund, 54.82% for the Market Opportunities Fund, 42.24% for the Internet Fund, and 50.72% for the Global Fund. Our Medical Fund had a modest decline of 20.42%, the Water Infrastructure Fund declined by 25.17%, and the Multi-Disciplinary Fund declined by 17.76%. This compares with declines of 37.00% and 40.54% for the S&P 500 Index⁽¹⁾ and the NASDAQ Composite Index⁽²⁾, respectively.

There are two ways to judge our performance in 2008. The unflattering, and not inaccurate view, is that we did not foresee a near meltdown in the global financial system and remained unhedged and very net long. The only justification we can give for our action is that the operational aspects of our holdings, to a very large degree, did not suffer in a material way. Thus, selling or hedging because everyone else was selling did not seem rational to us. We did, in fact, sell a significant amount of our holdings, but only in order to meet redemption obligations.

The second way to view us is by reference to what has transpired at our companies during 2008. From this standpoint, we believe we have engaged in intelligent inactivity. In our view, there was and remains very little financial risk in our portfolio and a very large percentage of our companies performed quite well operationally. When investment fundamentals are looked at again, and we believe they will once there is equilibrium in the supply/demand for negotiable instruments, our portfolio should rebound. We are very hopeful that the actions of the Federal Reserve will take hold and allow investors to assess risk on a more logical basis. It seems inconceivable to us that the Federal Reserve’s actions will not ultimately bring about a more benign investment climate. We believe the infusion of sufficient funds should eventually create asset inflation. Further, Governments have announced fiscal stimulus plans amounting to over $1.5 trillion, and these should help stimulate economic activities. Thus, while we believe the

economic numbers will certainly get worse in the coming months, we also believe the capital markets should eventually respond to these positive developments.

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

Kinetics offers the following Funds to investors:

The Paradigm Fund focuses on companies that currently have, or which should soon have, sustainable high returns on equity.

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

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

The Internet Fund is a sector fund that focuses on companies engaged in the evolution of Internet-related developments. As such, this Fund has been, and is likely to continue to be, quite volatile.

The Global Fund’s mandate was changed in March 2008 to focus on U.S. and foreign investments, currently with particular emphasis on China and other Asian markets.

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

The Water Infrastructure Fund is a sector fund that invests in global companies engaged in water infrastructure and water-specific natural resources, as well as related activities.

KINETICS MUTUAL FUNDS, INC.

Investment Commentary

Dear Fellow Shareholders,

If I were an investor in a fund whose performance was down substantially more than the market, which was the case for most of our funds (notable exceptions, the Medical Fund, the Water Infrastructure Fund and the Multi-Disciplinary Funds) I would like at least two questions answered. First, has the investment adviser lost its way? That is, does the adviser see the world in a way that has been eclipsed by events, such that the fund(s) will not make a comeback? Second, did the adviser fail to recognize an overvalued situation and fail to take action?

The majority of the underperformance in our funds can be traced to our higher level of exposure to financial stocks and emerging markets. In the case of our financial positions, we did not, for the most part, own those investments that used excessive leverage or that had their operations experience significant duress during 2008. Furthermore, the vast majority of our companies did not and do not need to access capital for their future operations. This, however, did not seem to matter, as we believe it was a case of investors throwing the baby out with the bath water. The general attitude was that if it was connected to the financial industry, the stock should be sold.

Moreover, the whole notion of geographic diversification and non-codependent businesses did not provide protection in 2008, as the market was not driven by fundamentals. The year 2008 was quite different than the 2000 to 2002 decline, which was driven by fundamentals. Many emerging markets sold off earlier and more aggressively than the United States, even though the origination of the crisis was domestic. Our exposure to China, which we believe is in far better fiscal shape to weather this economic storm than is the United States, negatively impacted portfolios as valuations there collapsed to levels that are, in our opinion, irrational given that nation’s long-term economic prospects.

Long before the end of 2007, we reviewed the investment landscape and were well aware of problems in the housing sector. At the end 2007, we were comfortable with the valuations of our companies in comparison to their business prospects. It has been, and remains, our philosophy that we will only act based upon the value we receive or

hold versus the prices then available. Selling a great business because its price might decline or shorting it because the market might decline in the next month is not, in our opinion, a successful approach and, thus, is not a feasible modus operandi for us.

For much of 2008, the economic weakness in the United States could be directly linked to the housing market and its related supply/demand imbalances. For many years the nation’s housing inventory had been expanding well in excess of its natural demand. We believe that while the decline in housing (as credit dried up) was having its effect on the capital markets, it was not an economic catastrophe. During the middle part of September, however, with the allowed demise of Lehman Brothers, the near demise of American International Group, and the breaking of the buck by the Reserve Primary Fund, a money market fund, we believe the global financial system experienced a near meltdown and from that point forward, the economic fallout has been extremely traumatic.

In such a financial crisis, there is an overwhelming demand for liquidity or risk-free assets, such as cash and United States Treasuries. This demand for cash and safety overwhelms the usually higher demand for potentially more profitable securities, such as stocks and corporate bonds. In fact, cash is frequently raised through the sale of these negotiable instruments. If Goldman Sachs and Morgan Stanley, for example, have to de-lever their balances sheets in order to remain viable institutions, they will be forced to sell whatever they can, almost without regard to valuation or expected return. While this process is not illogical in and of itself, it does create anomalies in the pricing of assets, which we perceive to be an incredible opportunity.

The recent response by the U.S. Government, particularly the Federal Reserve Bank, has been to purchase negotiable instruments. Since September 30, 2008, the Federal Reserve has expanded its balance sheet from $937 billion to over $2.2 trillion. It has in place additional programs to bring the spending to over $3 trillion in short order. The actions of the government are without precedent. Since this massive buying spree began in earnest, non-Treasury fixed income markets have rallied, and the equity markets have somewhat stabilized. In our opinion, the changes can be explained by basic economics.

Negotiable instruments have behaved more favorably recently because the supply/demand imbalance is being corrected. It appears to us that the government will not stop its purchases until a more normalized environment ensues.

However, stocks still compete against other assets, and we believe the high yields on convertible bonds, municipal bonds and corporate bonds will make a sustained rally in equities unlikely until the credit spreads between Treasuries and non-Treasury fixed income tighten. Fortunately, this process can happen relatively quickly, and we believe the stock market is likely to discount an economic recovery long before it is reported in the underlying statistics, which are likely to get worse before they get better.

There are two ways to describe our 2008 investment performance. The first and more painful method (which is ultimately less useful) is to look at the absolute numbers, and for our funds the picture was not sanguine. This, however, only describes the price behavior, which in the shorter term is determined by emotions and liquidity needs. The second and more appropriate view, in our opinion, is to focus on the business returns of the companies whose shares we own on your behalf. By and large, we believe our companies have performed, within the context of the economic environment in which they operate, quite well. In fact, we believe the dislocation between equity prices and the fundamentals of the companies we own has created tremendous opportunity. Consequently, we have not engineered a large-scale reshuffling of our holdings, as we believe the price behavior of the companies in our portfolios was primarily the result of a quest for liquidity. While the stock prices of many of our holdings suggest that they are going out of business, we firmly believe that those companies that have held up well operationally are likely to be bid up the most aggressively.

We thank you for your continued support and appreciate your patience in these trying times.

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 Global Fund, The Paradigm Fund, The Small Cap Opportunities Fund, The Market Opportunities Fund, The Kinetics Government Money Market Fund and The Multi-Disciplinary 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. International investing [for The Global Fund, The Water Infrastructure Fund, The Paradigm Fund, The Market Opportunities Fund, The Small Cap Opportunities Fund and The Internet Fund] presents special risks including currency exchange fluctuation, government regulations, and the potential for political and economic instability. Accordingly, the share price for these Funds is expected to be more volatile than that of a U.S.-only fund. Past performance is no guarantee of future performance.

As of March 14, 2008, The Global Fund, formerly known as the Internet Emerging Growth Fund, changed its name and investment mandate.

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

Non-investment grade debt securities [for all Funds], i.e., junk bonds, are subject to greater credit risk, price volatility and risk of loss than investment grade securities. Further, options contain special risks including the imperfect correlation between the value of the option and the value of the underlying asset. Investments [for the Multi-Disciplinary Fund] in futures, swaps and other derivative instruments may result in loss as derivative instruments may be illiquid, difficult to price and leveraged so that small changes may produce disproportionate losses to the Fund. To the extent the Funds segregate

assets to cover derivative positions, they may impair their ability to meet current obligations, to honor requests for redemption and to manage the Funds in a manner consistent with their respective investment objectives. Purchasing and writing put and call options and, in particular, writing “uncovered” options are highly specialized activities that entail greater than ordinary investment risk.

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

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

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

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

The Nasdaq Composite (NASDAQ) and the Standard & Poor’s 500 Index (S&P 500) each represent an unmanaged, broad-basket of stocks. They are typically used as a proxy for overall market performance.

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.

For more information, log onto www.kineticsfunds.com.

January 1, 2009 — Kinetics Asset Management, Inc.

How a $10,000 Investment Has Grown:

The charts show the growth of a $10,000 investment in the Feeder Funds as compared to the performance of two representative market indices. The tables below the charts show the average annual total returns on an investment over various periods. Returns for periods greater than one year are average annual total returns. The annual returns assume the reinvestment of all dividends and distributions, however, the graph and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Past performance is not predictive of future performance. Current performance may be lower or higher than the returns quoted below. The performance data reflects voluntary fee waivers and expense reimbursements made by the Adviser and the returns would have been lower if these waivers and expense reimbursements were not in effect. Investment return and principal value will fluctuate, so that your shares, when redeemed, may be worth more or less than their original costs.

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

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

MSCI EAFE Index — The MSCI EAFE Index (Europe, Australasia, Far East) is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the US and Canada. The MSCI EAFE is unmanaged and includes the reinvestment of dividends and does not reflect the payment of transaction costs or advisory fees associated with an investment in the Funds. The securities that comprise the MSCI EAFE may differ substantially from the securities in the Funds’ portfolios. It is not possible to directly invest in an index.

The Internet Fund

December 31, 1998 — December 31, 2008

Ended 12/31/2008

Advisor

No Load

Class A

Advisor

NASDAQ

Class

(No Load)

(Load Adjusted)⁽¹⁾

Class C

S&P 500

Composite

One Year

−42.24

−42.37

−45.69

−42.67

−37.00

−40.54

Five Years

−1.58

−1.59

−2.76

N/A

−2.19

−4.67

Ten Years

3.23

N/A

−1.38

−3.24

Since Inception No Load Class (10/21/96)

12.75

N/A

3.73

2.02

Since Inception Advisor Class A (4/26/01)

N/A

−1.38

−2.14

N/A

−2.20

−3.26

Since Inception Advisor Class C (2/16/07)

N/A

−16.59

−20.82

−21.76


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

Returns for periods greater than one year are average annual total returns.

The Global Fund

December 31, 1999 — December 31, 2008*

Ended 12/31/2008

Advisor

No Load

Class A

Advisor

NASDAQ

Class

(No Load)

(Load Adjusted)⁽¹⁾

Class C

S&P 500

Composite

MSCI EAFE

One Year

−50.72

N/A

−37.00

−40.54

−45.09

Five Years

−7.87

N/A

−2.19

−4.67

−0.81

Since Inception No Load Class (12/31/99)

−12.94

N/A

−3.60

−10.00

−3.84

Since Inception Advisor Class A (5/19/08)

N/A

−47.12

%⁽²⁾

−50.18

%⁽²⁾

N/A

−35.67

%⁽²⁾

−37.32

%⁽²⁾

−43.92

%⁽²⁾

Since Inception Advisor Class C (5/19/08)

N/A

−47.14

%⁽²⁾

−35.67

%⁽²⁾

−37.32

%⁽²⁾

−43.92

%⁽²⁾


*		On March 14, 2008, the Internet Emerging Growth Fund changed its investment mandate and name to the Global Fund. Performance of the Internet Emerging Growth Fund is included for the period prior to March 14, 2008.

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

⁽²⁾		Not annualized.

Returns for periods greater than one year are average annual total returns.

The Paradigm Fund

December 31, 1999 — December 31, 2008

Ended 12/31/2008

Advisor

No Load

Class A

Advisor

Institutional

NASDAQ

Class

(No Load)

(Load Adjusted)⁽¹⁾

Class C

Class

S&P 500

Composite

One Year

−53.17

−53.30

−55.99

−53.54

53.11

−37.00

−40.54

Five Years

0.36

0.05

−1.12

−0.44

N/A

−2.19

−4.67

Since Inception
No Load Class
(12/31/99)

4.78

N/A

−3.60

−10.00

Since Inception
Advisor Class A
(4/26/01)

N/A

4.75

3.94

N/A

−2.20

−3.26

Since Inception
Advisor Class C
(6/28/02)

N/A

4.77

N/A

0.51

1.16

Since Inception Institutional Class (5/27/05)

N/A

−5.43

−5.68

−7.35


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

Returns for periods greater than one year are average annual total returns.

The Medical Fund

September 30, 1999 — December 31, 2008

Ended 12/31/2008

Advisor

No Load

Class A

Advisor

NASDAQ

Class

(No Load)

(Load Adjusted)⁽¹⁾

Class C

S&P 500

Composite

One Year

−20.42

−20.49

−25.05

−20.97

37.00

−40.54

Five Years

2.30

2.06

0.86

N/A

−2.19

−4.67

Since Inception
No Load Class
(9/30/99)

6.36

N/A

−2.05

−5.82

Since Inception
Advisor Class A
(4/26/01)

N/A

−0.71

−1.48

N/A

−2.20

−3.26

Since Inception
Advisor Class C
(2/16/07)

N/A

−7.41

−20.82

−21.76


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

Returns for periods greater than one year are average annual total returns.

The Small Cap Opportunities Fund

March 20, 2000 — December 31, 2008

Ended 12/31/2008

Advisor

No Load

Class A

Advisor

Institutional

NASDAQ

Class

(No Load)

(Load Adjusted)⁽¹⁾

Class C

Class

S&P 500

Composite

One Year

−57.88

−58.00

−60.41

−58.20

57.82

−37.00

−40.54

Five Years

−3.15

−3.41

−4.55

N/A

−2.19

−4.67

Since Inception
No Load Class
(3/20/00)

4.19

N/A

−3.62

−11.50

Since Inception
Advisor Class A
(12/31/01)

N/A

−0.40

−1.23

N/A

−1.53

−2.99

Since Inception
Advisor Class C (2/16/07)

N/A

−33.68

N/A

−20.82

−21.76

Since Inception Institutional Class (8/12/05)

N/A

−11.11

−6.85

−8.83


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

Returns for periods greater than one year are average annual total returns.

The Market Opportunities Fund

January 31, 2006 — December 31, 2008

Ended 12/31/2008

Advisor

No Load

Class A

Advisor

Institutional

NASDAQ

Class

(No Load)

(Load Adjusted)⁽¹⁾

Class C

Class

S&P 500

Composite

One Year

−54.82

−54.91

−57.51

−55.13

N/A

−37.00

−40.54

Since Inception
No Load Class
(1/31/06)

−10.16

N/A

−9.41

−12.22

Since Inception
Advisor Class A
(1/31/06)

N/A

−10.38

−12.18

N/A

−9.41

−12.22

Since Inception
Advisor Class C
(2/16/07)

N/A

−27.14

N/A

−20.82

−21.76

Since Inception
Institutional Class
(5/19/08)

N/A

−46.77

%⁽²⁾

−35.67

%⁽²⁾

37.32

%⁽²⁾


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


⁽²⁾	Not annualized.

Returns for periods greater than one year are average annual total returns.

The Water Infrastructure Fund

June 29, 2007 — December 31, 2008

Ended 12/31/2008

Advisor

No Load

Class A

Advisor

Institutional

NASDAQ

Class

(No Load)

(Load Adjusted)⁽¹⁾

Class C

Class

S&P 500

Composite

One Year

−25.17

−25.37

−29.66

−25.79

−25.05

−37.00

−40.54

Since Inception
No Load Class
(6/29/07)

−16.07

N/A

−27.08

−28.30

Since Inception
Advisor Class A
(6/29/07)

N/A

−16.26

−19.49

N/A

27.08

−28.30

Since Inception
Advisor Class C
(6/29/07)

N/A

−16.69

N/A

−27.08

−28.30

Since Inception
Institutional Class
(6/29/07)

N/A

−15.91

−27.08

−28.30


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

Returns for periods greater than one year are average annual total returns.

The Multi-Disciplinary Fund

February 11, 2008 — December 31, 2008

Ended 12/31/2008

Advisor

No Load

Class A

Advisor

Institutional

NASDAQ

Class

(No Load)

(Load Adjusted)⁽¹⁾

Class C

Class

S&P 500

Composite

Since Inception
No Load Class
(2/11/08)

−17.76

%⁽²⁾

N/A

31.06

%⁽²⁾

−32.03

%⁽²⁾

Since Inception
Advisor Class A
(2/11/08)

N/A

−17.97

%⁽²⁾

−22.69

%⁽²⁾

N/A

−31.06

%⁽²⁾

−32.03

%⁽²⁾

Since Inception
Advisor Class C
(2/11/08)

N/A

−18.30

%⁽²⁾

N/A⁽²

⁾

−31.06

%⁽²⁾

−32.03

%⁽²⁾

Since Inception
Institutional Class
(2/11/08)

N/A

−17.65

%⁽²⁾

31.06

%⁽²⁾

−32.03

%⁽²⁾


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

⁽²⁾		Not annualized.

Returns for periods greater than one year are average annual total returns.

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Expense Example

December 31, 2008

Shareholders incur two type of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvestments of dividends or other distributions made by the Fund, redemption fees, and exchange fees, and (2), ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses. This example is intended to help investors understand the ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested on July 1, 2008 and held for the entire period from July 1, 2008 to December 31, 2008.

Actual Expenses

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

The Feeder Funds will charge shareholder fees for outgoing wire transfers, returned checks, and exchanges executed by telephone between the Feeder Fund and any other series of Kinetics Mutual Funds, Inc. The Feeder Fund’s transfer agent charges a $5.00 transaction fee to shareholder accounts for telephone exchanges between any two series of Kinetics Mutual Funds, Inc. The Feeder Fund’s transfer agent does not charge a transaction fee for written exchange requests. IRA accounts are assessed a $15.00 annual fee. Finally, as a disincentive to market-timing transactions, the Feeder Funds will assess a 2.00% fee on the redemption or exchange of Fund shares held for less than 30 days. These fees will be paid to the Feeder Funds to help offset transaction costs. The Feeder Funds reserve the right to waive the redemption fee, subject to their sole discretion, in instances deemed not to be disadvantageous to the Feeder Funds or shareholders.

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

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Feeder Funds’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which are not the Feeder Funds’ actual returns. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses one paid for the period. You may use this information to compare the ongoing costs of investing in the Feeder Funds and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight 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 if these transactional costs were included, one’s costs would have been higher.

Expense Example


	Beginning		Ending
	Account		Account					Expenses Paid
	Value		Value		Annualized			During Period*
	(7/1/08)		(12/31/08)		Expense Ratio			(7/1/08 to 12/31/08)

The Internet Fund
No Load Class Actual — before expense reimbursement	$	1,000.00	$	721.86		2.11	%	$	9.13
No Load Class Actual — after expense reimbursement	$	1,000.00	$	721.86		1.90	%	$	8.22
No Load Class Hypothetical (5% return before expenses) — before expense reimbursement	$	1,000.00	$	1,014.53		2.11	%	$	10.68
No Load Class Hypothetical (5% return before expenses) — after expense reimbursement	$	1,000.00	$	1,015.58		1.90	%	$	9.63
Advisor Class A Actual — before expense reimbursement	$	1,000.00	$	721.28		2.36	%	$	10.21
Advisor Class A Actual — after expense reimbursement	$	1,000.00	$	721.28		2.15	%	$	9.30
Advisor Class A Hypothetical (5% return before expenses) — before expense reimbursement	$	1,000.00	$	1,013.27		2.36	%	$	11.94
Advisor Class A Hypothetical (5% return before expenses) — after expense reimbursement	$	1,000.00	$	1,014.33		2.15	%	$	10.89
Advisor Class C Actual — before expense reimbursement	$	1,000.00	$	719.18		2.86	%	$	12.36
Advisor Class C Actual — after expense reimbursement	$	1,000.00	$	719.18		2.65	%	$	11.45
Advisor Class C Hypothetical (5% return before expenses) — before expense reimbursement	$	1,000.00	$	1,010.76		2.86	%	$	14.46
Advisor Class C Hypothetical (5% return before expenses) — after expense reimbursement	$	1,000.00	$	1,011.81		2.65	%	$	13.40
The Global Fund
No Load Class Actual — before expense reimbursement	$	1,000.00	$	643.97		6.65	%	$	27.48
No Load Class Actual — after expense reimbursement	$	1,000.00	$	643.97		1.40	%	$	5.79
No Load Class Hypothetical (5% return before expenses) — before expense reimbursement	$	1,000.00	$	991.70		6.65	%	$	33.29
No Load Class Hypothetical (5% return before expenses) — after expense reimbursement	$	1,000.00	$	1,018.10		1.40	%	$	7.10
Advisor Class A Actual — before expense reimbursement	$	1,000.00	$	643.01		8.16	%	$	33.70
Advisor Class A Actual — after expense reimbursement	$	1,000.00	$	643.01		1.65	%	$	6.81
Advisor Class A Hypothetical (5% return before expenses) — before expense reimbursement	$	1,000.00	$	984.11		8.16	%	$	40.70


	Beginning		Ending
	Account		Account					Expenses Paid
	Value		Value		Annualized			During Period*
	(7/1/08)		(12/31/08)		Expense Ratio			(7/1/08 to 12/31/08)

Advisor Class A Hypothetical (5% return before expenses) — after expense reimbursement	$	1,000.00	$	1,016.84		1.65	%	$	8.36
Advisor Class C Actual — before expense reimbursement	$	1,000.00	$	642.74		7.39	%	$	30.52
Advisor Class C Actual — after expense reimbursement	$	1,000.00	$	642.74		2.15	%	$	8.88
Advisor Class C Hypothetical (5% return before expenses) — before expense reimbursement	$	1,000.00	$	987.98		7.39	%	$	36.93
Advisor Class C Hypothetical (5% return before expenses) — after expense reimbursement	$	1,000.00	$	1,014.33		2.15	%	$	10.89
The Paradigm Fund
No Load Class Actual — before expense reimbursement	$	1,000.00	$	577.00		1.77	%	$	7.02
No Load Class Actual — after expense reimbursement	$	1,000.00	$	577.00		1.65	%	$	6.54
No Load Class Hypothetical (5% return before expenses) — before expense reimbursement	$	1,000.00	$	1,016.24		1.77	%	$	8.97
No Load Class Hypothetical (5% return before expenses) — after expense reimbursement	$	1,000.00	$	1,016.84		1.65	%	$	8.36
Advisor Class A Actual — before expense reimbursement	$	1,000.00	$	576.05		2.02	%	$	8.00
Advisor Class A Actual — after expense reimbursement	$	1,000.00	$	576.05		1.90	%	$	7.53
Advisor Class A Hypothetical (5% return before expenses) — before expense reimbursement	$	1,000.00	$	1,014.98		2.02	%	$	10.23
Advisor Class A Hypothetical (5% return before expenses) — after expense reimbursement	$	1,000.00	$	1,015.58		1.90	%	$	9.63
Advisor Class C Actual — before expense reimbursement	$	1,000.00	$	574.50		2.51	%	$	9.93
Advisor Class C Actual — after expense reimbursement	$	1,000.00	$	574.50		2.40	%	$	9.50
Advisor Class C Hypothetical (5% return before expenses) — before expense reimbursement	$	1,000.00	$	1,012.52		2.51	%	$	12.70
Advisor Class C Hypothetical (5% return before expenses) — after expense reimbursement	$	1,000.00	$	1,013.07		2.40	%	$	12.14
Institutional Class Actual — before expense reimbursement	$	1,000.00	$	577.56		1.72	%	$	6.82
Institutional Class Actual — after expense reimbursement	$	1,000.00	$	577.56		1.45	%	$	5.75
Institutional Class Hypothetical (5% return before expenses) — before expense reimbursement	$	1,000.00	$	1,016.49		1.72	%	$	8.72


	Beginning		Ending
	Account		Account					Expenses Paid
	Value		Value		Annualized			During Period*
	(7/1/08)		(12/31/08)		Expense Ratio			(7/1/08 to 12/31/08)

Institutional Class Hypothetical (5% return before expenses) — after expense reimbursement	$	1,000.00	$	1,017.85		1.45	%	$	7.35
The Medical Fund
No Load Class Actual — before expense reimbursement	$	1,000.00	$	819.40		2.22	%	$	10.15
No Load Class Actual — after expense reimbursement	$	1,000.00	$	819.40		1.39	%	$	6.36
No Load Class Hypothetical (5% return before expenses) — before expense reimbursement	$	1,000.00	$	1,013.98		2.22	%	$	11.24
No Load Class Hypothetical (5% return before expenses) — after expense reimbursement	$	1,000.00	$	1,018.15		1.39	%	$	7.05
Advisor Class A Actual — before expense reimbursement	$	1,000.00	$	819.59		2.47	%	$	11.30
Advisor Class A Actual — after expense reimbursement	$	1,000.00	$	819.59		1.64	%	$	7.50
Advisor Class A Hypothetical (5% return before expenses) — before expense reimbursement	$	1,000.00	$	1,012.72		2.47	%	$	12.50
Advisor Class A Hypothetical (5% return before expenses) — after expense reimbursement	$	1,000.00	$	1,016.89		1.64	%	$	8.31
Advisor Class C Actual — before expense reimbursement	$	1,000.00	$	816.45		2.97	%	$	13.56
Advisor Class C Actual — after expense reimbursement	$	1,000.00	$	816.45		2.14	%	$	9.77
Advisor Class C Hypothetical (5% return before expenses) — before expense reimbursement	$	1,000.00	$	1,010.21		2.97	%	$	15.01
Advisor Class C Hypothetical (5% return before expenses) — after expense reimbursement	$	1,000.00	$	1,014.38		2.14	%	$	10.84
The Small Cap Opportunities Fund
No Load Class Actual — before expense reimbursement	$	1,000.00	$	556.96		1.84	%	$	7.20
No Load Class Actual — after expense reimbursement	$	1,000.00	$	556.96		1.65	%	$	6.46
No Load Class Hypothetical (5% return before expenses) — before expense reimbursement	$	1,000.00	$	1,015.89		1.84	%	$	9.32
No Load Class Hypothetical (5% return before expenses) — after expense reimbursement	$	1,000.00	$	1,016.84		1.65	%	$	8.36
Advisor Class A Actual — before expense reimbursement	$	1,000.00	$	556.09		2.09	%	$	8.18
Advisor Class A Actual — after expense reimbursement	$	1,000.00	$	556.09		1.90	%	$	7.43
Advisor Class A Hypothetical (5% return before expenses) — before expense reimbursement	$	1,000.00	$	1,014.63		2.09	%	$	10.58


	Beginning		Ending
	Account		Account					Expenses Paid
	Value		Value		Annualized			During Period*
	(7/1/08)		(12/31/08)		Expense Ratio			(7/1/08 to 12/31/08)

Advisor Class A Hypothetical (5% return before expenses) — after expense reimbursement	$	1,000.00	$	1,015.58		1.90	%	$	9.63
Advisor Class C Actual — before expense reimbursement	$	1,000.00	$	554.88		2.59	%	$	10.12
Advisor Class C Actual — after expense reimbursement	$	1,000.00	$	554.88		2.40	%	$	9.38
Advisor Class C Hypothetical (5% return before expenses) — before expense reimbursement	$	1,000.00	$	1,012.12		2.59	%	$	13.10
Advisor Class C Hypothetical (5% return before expenses) — after expense reimbursement	$	1,000.00	$	1,013.07		2.40	%	$	12.14
Institutional Class Actual — before expense reimbursement	$	1,000.00	$	557.33		1.79	%	$	7.01
Institutional Class Actual — after expense reimbursement	$	1,000.00	$	557.33		1.45	%	$	5.68
Institutional Class Hypothetical (5% return before expenses) — before expense reimbursement	$	1,000.00	$	1,016.14		1.79	%	$	9.07
Institutional Class Hypothetical (5% return before expenses) — after expense reimbursement	$	1,000.00	$	1,017.85		1.45	%	$	7.35
The Kinetics Government Money Market Fund
No Load Class Actual — before expense reimbursement	$	1,000.00	$	1,002.57		3.41	%	$	17.17
No Load Class Actual — after expense reimbursement	$	1,000.00	$	1,002.57		0.65	%	$	3.27
No Load Class Hypothetical (5% return before expenses) — before expense reimbursement	$	1,000.00	$	1,007.99		3.41	%	$	17.21
No Load Class Hypothetical (5% return before expenses) — after expense reimbursement	$	1,000.00	$	1,021.87		0.65	%	$	3.30
The Market Opportunities Fund
No Load Class Actual — before expense reimbursement	$	1,000.00	$	623.11		1.87	%	$	7.63
No Load Class Actual — after expense reimbursement	$	1,000.00	$	623.11		1.64	%	$	6.69
No Load Class Hypothetical (5% return before expenses) — before expense reimbursement	$	1,000.00	$	1,015.74		1.87	%	$	9.48
No Load Class Hypothetical (5% return before expenses) — after expense reimbursement	$	1,000.00	$	1,016.89		1.64	%	$	8.31
Advisor Class A Actual — before expense reimbursement	$	1,000.00	$	622.61		2.12	%	$	8.65
Advisor Class A Actual — after expense reimbursement	$	1,000.00	$	622.61		1.89	%	$	7.71
Advisor Class A Hypothetical (5% return before expenses) — before expense reimbursement	$	1,000.00	$	1,014.48		2.12	%	$	10.74


	Beginning		Ending
	Account		Account					Expenses Paid
	Value		Value		Annualized			During Period*
	(7/1/08)		(12/31/08)		Expense Ratio			(7/1/08 to 12/31/08)

Advisor Class A Hypothetical (5% return before expenses) — after expense reimbursement	$	1,000.00	$	1,015.63		1.89	%	$	9.58
Advisor Class C Actual — before expense reimbursement	$	1,000.00	$	621.06		2.62	%	$	10.68
Advisor Class C Actual — after expense reimbursement	$	1,000.00	$	621.06		2.39	%	$	9.74
Advisor Class C Hypothetical (5% return before expenses) — before expense reimbursement	$	1,000.00	$	1,011.97		2.62	%	$	13.25
Advisor Class C Hypothetical (5% return before expenses) — after expense reimbursement	$	1,000.00	$	1,013.12		2.39	%	$	12.09
Institutional Class Actual — before expense reimbursement	$	1,000.00	$	623.91		1.83	%	$	7.47
Institutional Class Actual — after expense reimbursement	$	1,000.00	$	623.91		1.44	%	$	5.88
Institutional Class Hypothetical (5% return before expenses) — before expense reimbursement	$	1,000.00	$	1,015.94		1.83	%	$	9.27
Institutional Class Hypothetical (5% return before expenses) — after expense reimbursement	$	1,000.00	$	1,017.90		1.44	%	$	7.30
The Water Infrastructure Fund
No Load Class Actual — before expense reimbursement	$	1,000.00	$	765.59		2.19	%	$	9.72
No Load Class Actual — after expense reimbursement	$	1,000.00	$	765.59		1.64	%	$	7.28
No Load Class Hypothetical (5% return before expenses) — before expense reimbursement	$	1,000.00	$	1,014.13		2.19	%	$	11.09
No Load Class Hypothetical (5% return before expenses) — after expense reimbursement	$	1,000.00	$	1,016.89		1.64	%	$	8.31
Advisor Class A Actual — before expense reimbursement	$	1,000.00	$	765.12		2.44	%	$	10.83
Advisor Class A Actual — after expense reimbursement	$	1,000.00	$	765.12		1.89	%	$	8.39
Advisor Class A Hypothetical (5% return before expenses) — before expense reimbursement	$	1,000.00	$	1,012.87		2.44	%	$	12.35
Advisor Class A Hypothetical (5% return before expenses) — after expense reimbursement	$	1,000.00	$	1,015.63		1.89	%	$	9.58
Advisor Class C Actual — before expense reimbursement	$	1,000.00	$	762.39		2.94	%	$	13.02
Advisor Class C Actual — after expense reimbursement	$	1,000.00	$	762.39		2.39	%	$	10.59
Advisor Class C Hypothetical (5% return before expenses) — before expense reimbursement	$	1,000.00	$	1,010.36		2.94	%	$	14.86


	Beginning		Ending
	Account		Account					Expenses Paid
	Value		Value		Annualized			During Period*
	(7/1/08)		(12/31/08)		Expense Ratio			(7/1/08 to 12/31/08)

Advisor Class C Hypothetical (5% return before expenses) — after expense reimbursement	$	1,000.00	$	1,013.12		2.39	%	$	12.09
Institutional Class Actual — before expense reimbursement	$	1,000.00	$	766.06		2.14	%	$	9.50
Institutional Class Actual — after expense reimbursement	$	1,000.00	$	766.06		1.44	%	$	6.39
Institutional Class Hypothetical (5% return before expenses) — before expense reimbursement	$	1,000.00	$	1,014.38		2.14	%	$	10.84
Institutional Class Hypothetical (5% return before expenses) — after expense reimbursement	$	1,000.00	$	1,017.90		1.44	%	$	7.30
The Multi-Disciplinary Fund
No Load Class Actual — before expense reimbursement	$	1,000.00	$	846.97		17.52	%	$	81.34
No Load Class Actual — after expense reimbursement	$	1,000.00	$	846.97		1.49	%	$	6.92
No Load Class Hypothetical (5% return before expenses) — before expense reimbursement	$	1,000.00	$	937.06		17.52	%	$	85.31
No Load Class Hypothetical (5% return before expenses) — after expense reimbursement	$	1,000.00	$	1,017.65		1.49	%	$	7.56
Advisor Class A Actual — before expense reimbursement	$	1,000.00	$	845.63		17.77	%	$	82.44
Advisor Class A Actual — after expense reimbursement	$	1,000.00	$	845.63		1.74	%	$	8.07
Advisor Class A Hypothetical (5% return before expenses) — before expense reimbursement	$	1,000.00	$	935.80		17.77	%	$	86.47
Advisor Class A Hypothetical (5% return before expenses) — after expense reimbursement	$	1,000.00	$	1,016.39		1.74	%	$	8.82
Advisor Class C Actual — before expense reimbursement	$	1,000.00	$	844.06		18.27	%	$	84.69
Advisor Class C Actual — after expense reimbursement	$	1,000.00	$	844.06		2.24	%	$	10.38
Advisor Class C Hypothetical (5% return before expenses) — before expense reimbursement	$	1,000.00	$	933.29		18.27	%	$	88.79
Advisor Class C Hypothetical (5% return before expenses) — after expense reimbursement	$	1,000.00	$	1,013.88		2.24	%	$	11.34
Institutional Class Actual — before expense reimbursement	$	1,000.00	$	847.20		17.32	%	$	80.42
Institutional Class Actual — after expense reimbursement	$	1,000.00	$	847.20		1.29	%	$	5.99
Institutional Class Hypothetical (5% return before expenses) — before expense reimbursement	$	1,000.00	$	938.06		17.32	%	$	84.38

Beginning

Ending

Account

Expenses Paid

Value

Annualized

During Period*

(7/1/08)

(12/31/08)

Expense Ratio

(7/1/08 to 12/31/08)

Institutional Class Hypothetical (5% return before expenses) — after expense reimbursement

1,000.00

1,018.65

1.29

6.55


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 multiplied by the average account value over the period, multiplied by 184/366.

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Statement of Assets & Liabilities

December 31, 2008


	The Internet			The Global
	Fund			Fund


ASSETS:
Investments in the Master Portfolios, at value*	$	75,633,699		$	1,958,744
Receivable from Adviser		19,389			9,180
Receivable for Master Portfolio interest sold		65,942			4,940
Receivable for Fund shares sold		9,520			2,709
Prepaid expenses and other assets		17,950			19,710

Total assets		75,746,500			1,995,283

LIABILITIES:
Payable to Directors and Officers		614			6
Payable for Fund shares repurchased		75,462			7,648
Payable for service fees		15,627			414
Payable for distribution fees		166			22
Accrued expenses and other liabilities		111,118			13,357

Total liabilities		202,987			21,447

Net assets	$	75,543,513		$	1,973,836

NET ASSETS CONSIST OF:
Paid in capital	$	260,915,148		$	12,560,641
Accumulated net investment loss		(494,997	)		(8	)
Accumulated net realized loss on investments, foreign currency and written option contracts		(181,256,468	)		(9,008,595	)
Net unrealized depreciation on:
Investments and foreign currency		(3,166,284	)		(1,578,202	)
Written option contracts		(453,886	)		—

Net Assets	$	75,543,513		$	1,973,836

CALCULATION OF NET ASSET VALUE PER SHARE — NO LOAD CLASS:
Net assets	$	75,112,054		$	1,862,871
Shares outstanding		3,626,425			788,778
Net asset value per share (offering and redemption price)	$	20.71		$	2.36

CALCULATION OF NET ASSET VALUE PER SHARE — ADVISOR CLASS A:
Net assets	$	318,350		$	105,690
Shares outstanding		15,531			44,772
Net asset value per share (redemption price)	$	20.50		$	2.36

Offering price per share ($20.50 divided by .9425 and $2.36 divided by .9425)	$	21.75		$	2.50

CALCULATION OF NET ASSET VALUE PER SHARE — ADVISOR CLASS C:
Net assets	$	113,109		$	5,275
Shares outstanding		5,599			2,230
Net asset value per share (offering and redemption price)	$	20.20		$	2.37


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

See Notes to the Financial Statements.

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Statement of Assets & Liabilities

December 31, 2008


	The Paradigm			The Medical
	Fund			Fund


ASSETS:
Investments in the Master Portfolios, at value*	$	1,267,501,494		$	18,980,926
Receivable from Adviser		211,283			14,161
Receivable for Master Portfolio interest sold		1,616,186			28,588
Receivable for Fund shares sold		5,596,095			22,196
Prepaid expenses and other assets		57,274			13,273

Total assets		1,274,982,332			19,059,144

LIABILITIES:
Payable to Directors and Officers		20,230			75
Payable for Fund shares repurchased		7,212,281			50,784
Payable for service fees		250,219			3,763
Payable for distribution fees		165,638			748
Accrued expenses and other liabilities		883,456			21,830

Total liabilities		8,531,824			77,200

Net assets	$	1,266,450,508		$	18,981,944

NET ASSETS CONSIST OF:
Paid in capital	$	2,578,747,795		$	24,180,338
Accumulated net investment income		1,990,250			62
Accumulated net realized loss on investments, foreign currency and written option contracts		(632,693,545	)		(278,976	)
Net unrealized appreciation (depreciation) on:
Investments and foreign currency		(681,593,992	)		(4,937,898	)
Written option contracts		—			18,418

Net Assets	$	1,266,450,508		$	18,981,944

CALCULATION OF NET ASSET VALUE PER SHARE — NO LOAD CLASS:
Net assets	$	740,982,604		$	15,727,188
Shares outstanding		51,386,691			1,032,784
Net asset value per share (offering and redemption price)	$	14.42		$	15.23

CALCULATION OF NET ASSET VALUE PER SHARE — ADVISOR CLASS A:
Net assets	$	249,423,534		$	2,940,814
Shares outstanding		17,613,552			197,333
Net asset value per share (redemption price)	$	14.16		$	14.90

Offering price per share ($14.16 divided by .9425 and $14.90 divided by .9425)	$	15.02		$	15.81

CALCULATION OF NET ASSET VALUE PER SHARE — ADVISOR CLASS C:
Net assets	$	147,915,433		$	313,942
Shares outstanding		10,716,702			21,168
Net asset value per share (offering and redemption price)	$	13.80		$	14.83

CALCULATION OF NET ASSET VALUE PER SHARE — INSTITUTIONAL CLASS:
Net assets	$	128,128,937
Shares outstanding		8,876,243
Net asset value per share (offering and redemption price)	$	14.44


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

See Notes to the Financial Statements.

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Statement of Assets & Liabilities

December 31, 2008


				The Kinetics
	The Small Cap			Government
	Opportunities			Money Market
	Fund			Fund


ASSETS:
Investments in the Master Portfolios, at value*	$	210,511,281		$	2,678,458
Receivable from Adviser		63,567			6,791
Receivable for Master Portfolio interest sold		385,431			—
Receivable for Fund shares sold		484,240			—
Prepaid expenses and other assets		27,656			12,144

Total assets		211,472,175			2,697,393

LIABILITIES:
Payable to Directors and Officers		3,990			3
Payable for Fund shares repurchased		869,671			—
Payable for service fees		33,794			570
Payable for distribution fees		4,473			—
Accrued expenses and other liabilities		220,037			8,879

Total liabilities		1,131,965			9,452

Net assets	$	210,340,210		$	2,687,941

NET ASSETS CONSIST OF:
Paid in capital	$	486,006,372		$	2,687,941
Accumulated net investment income (loss)		(387,918	)		83
Accumulated net realized loss on investments, foreign currency and written option contracts		(141,529,646	)		(83	)
Net unrealized depreciation on:
Investments and foreign currency		(133,747,288	)		—
Written option contracts		(1,310	)		—

Net Assets	$	210,340,210		$	2,687,941

CALCULATION OF NET ASSET VALUE PER SHARE — NO LOAD CLASS:
Net assets	$	126,971,209		$	2,687,941
Shares outstanding		9,642,047			2,687,941
Net asset value per share (offering and redemption price)	$	13.17		$	1.00

CALCULATION OF NET ASSET VALUE PER SHARE — ADVISOR CLASS A:
Net assets	$	12,089,904
Shares outstanding		929,194
Net asset value per share (redemption price)	$	13.01

Offering price per share ($13.01 divided by .9425)	$	13.80

CALCULATION OF NET ASSET VALUE PER SHARE — ADVISOR CLASS C:
Net assets	$	2,871,124
Shares outstanding		222,267
Net asset value per share (offering and redemption price)	$	12.92

CALCULATION OF NET ASSET VALUE PER SHARE — INSTITUTIONAL CLASS:
Net assets	$	68,407,973
Shares outstanding		5,186,532
Net asset value per share (offering and redemption price)	$	13.19


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

See Notes to the Financial Statements.

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Statement of Assets & Liabilities

December 31, 2008


	The Market			The Water
	Opportunities			Infrastructure
	Fund			Fund


ASSETS:
Investments in the Master Portfolios, at value*	$	57,543,242		$	16,075,707
Receivable from Adviser		14,130			10,571
Receivable for Master Portfolio interest sold		167,653			—
Receivable for Fund shares sold		67,114			1,159,991
Prepaid expenses and other assets		28,774			17,193

Total assets		57,820,913			17,263,462

LIABILITIES:
Payable for Master Portfolio interest purchased		—			1,116,728
Payable to Directors and Officers		764			40
Payable for Fund shares repurchased		234,767			43,263
Payable for service fees		11,641			3,009
Payable for distribution fees		6,224			1,829
Accrued expenses and other liabilities		31,145			17,456

Total liabilities		284,541			1,182,325

Net assets	$	57,536,372		$	16,081,137

NET ASSETS CONSIST OF:
Paid in capital	$	113,170,544		$	24,998,792
Accumulated net investment income (loss)		73,246			(27,093	)
Accumulated net realized loss on investments, foreign currency, options and written option contracts		(26,695,430	)		(5,585,536	)
Net unrealized depreciation on:
Investments and foreign currency		(28,785,049	)		(3,305,026	)
Written option contracts		(226,939	)		—

Net Assets	$	57,536,372		$	16,081,137

CALCULATION OF NET ASSET VALUE PER SHARE — NO LOAD CLASS:
Net assets	$	34,245,440		$	6,597,915
Shares outstanding		4,740,050			866,706
Net asset value per share (offering and redemption price)	$	7.22		$	7.61

CALCULATION OF NET ASSET VALUE PER SHARE — ADVISOR CLASS A:
Net assets	$	18,514,348		$	7,660,950
Shares outstanding		2,563,939			1,008,792
Net asset value per share (redemption price)	$	7.22		$	7.59

Offering price per share ($7.22 divided by .9425 and $7.59 divided by .9425)	$	7.66		$	8.05

CALCULATION OF NET ASSET VALUE PER SHARE — ADVISOR CLASS C:
Net assets	$	4,771,262		$	1,571,481
Shares outstanding		665,714			208,374
Net asset value per share (offering and redemption price)	$	7.17		$	7.54

CALCULATION OF NET ASSET VALUE PER SHARE — INSTITUTIONAL CLASS:
Net assets	$	5,322		$	250,791
Shares outstanding		738			32,860
Net asset value per share (offering and redemption price)	$	7.21		$	7.63


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

See Notes to the Financial Statements.

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Statement of Assets & Liabilities

December 31, 2008


	The Multi-
	Disciplinary
	Fund


ASSETS:
Investments in the Master Portfolios, at value*	$	338,529
Receivable from Adviser		4,494
Prepaid expenses and other assets		24,339

Total assets		367,362

LIABILITIES:
Payable to Directors and Officers		4
Payable for service fees		60
Payable for distribution fees		70
Accrued expenses and other liabilities		13,117

Total liabilities		13,251

Net assets	$	354,111

NET ASSETS CONSIST OF:
Paid in capital	$	429,519
Accumulated net investment income		—
Accumulated net realized loss on investments and written option contracts		(60,467	)
Net unrealized depreciation on:
Investments		(818	)
Written option contracts		(14,123	)

Net Assets	$	354,111

CALCULATION OF NET ASSET VALUE PER SHARE — NO LOAD CLASS:
Net assets	$	99,390
Shares outstanding		12,096
Net asset value per share (offering and redemption price)	$	8.22

CALCULATION OF NET ASSET VALUE PER SHARE — ADVISOR CLASS A:
Net assets	$	83,923
Shares outstanding		10,234
Net asset value per share (redemption price)	$	8.20

Offering price per share ($8.20 divided by .9425)	$	8.70

CALCULATION OF NET ASSET VALUE PER SHARE — ADVISOR CLASS C:
Net assets	$	88,439
Shares outstanding		10,829
Net asset value per share (offering and redemption price)	$	8.17

CALCULATION OF NET ASSET VALUE PER SHARE — INSTITUTIONAL CLASS:
Net assets	$	82,359
Shares outstanding		10,006
Net asset value per share (offering and redemption price)	$	8.23


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

See Notes to the Financial Statements.

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Statement of Operations

For the Year Ended December 31, 2008


	The Internet			The Global
	Fund			Fund


INVESTMENT INCOME ALLOCATED FROM MASTER PORTFOLIOS:
Dividends†	$	1,143,300		$	84,861
Interest		597,549			4,572
Income from securities lending		610,484			3,233
Other income		959,922			—
Expenses only from Master Portfolio		(1,513,094	)		(69,261	)

Net investment income from Master Portfolio		1,798,161			23,405

EXPENSES:
Distribution fees — Advisor Class A⁽¹⁾		1,092			154
Distribution fees — Advisor Class C⁽¹⁾		1,003			32
Shareholder servicing fees — Advisor Class A⁽¹⁾		1,092			154
Shareholder servicing fees — Advisor Class C⁽¹⁾		335			11
Shareholder servicing fees — No Load Class		280,524			6,930
Transfer Agent fees and expenses		322,874			24,928
Reports to shareholders		64,300			25,520
Administration fees		28,797			726
Professional fees		13,866			7,786
Directors’ and Officers’ fees and expenses		2,972			70
Registration fees		43,940			35,327
Fund accounting fees		10,915			140
Other expenses		3,020			218

Total expenses		774,730			101,996
Less, expense reimbursement		(138,654	)		(130,950	)

Net expenses		636,076			(28,954	)

Net investment income		1,162,085			52,359

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS ALLOCATED FROM MASTER PORTFOLIOS:
Net realized gain on:
Investments and foreign currency		1,853,798			188,701
Net change in unrealized depreciation of:
Investments and foreign currency		(64,929,858	)		(2,272,129	)
Written option contracts		(453,886	)		—

Net loss on investments		(63,529,946	)		(2,083,428	)

Net decrease in net assets resulting from operations	$	(62,367,861	)	$	(2,031,069	)

† Net of Foreign Taxes Withheld of:	$	134,438		$	1,623


⁽¹⁾	Advisor Class A and Advisor Class C shares of the Global Fund commenced operations on May 19, 2008.

See Notes to the Financial Statements.

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Statement of Operations

For the Year Ended December 31, 2008


	The Paradigm			The Medical
	Fund			Fund


INVESTMENT INCOME ALLOCATED FROM MASTER PORTFOLIOS:
Dividends†	$	48,892,351		$	377,799
Interest		13,246,035			29,312
Income from securities lending		7,550,702			52,963
Expenses only from Master Portfolio		(42,353,989	)		(267,681	)

Net investment income from Master Portfolio		27,335,099			192,393

EXPENSES:
Distribution fees — Advisor Class A		1,140,388			5,017
Distribution fees — Advisor Class C		2,085,388			1,802
Shareholder servicing fees — Advisor Class A		1,140,388			5,017
Shareholder servicing fees — Advisor Class C		695,129			601
Shareholder servicing fees — No Load Class		4,731,200			41,686
Shareholder servicing fees — Institutional Class		1,142,243			—
Transfer Agent fees and expenses		2,153,508			46,724
Reports to shareholders		705,332			7,080
Administration fees		813,757			5,509
Professional fees		207,606			8,442
Directors’ and Officers’ fees and expenses		93,308			436
Registration fees		288,108			43,568
Fund accounting fees		156,673			1,046
Other expenses		77,704			234

Total expenses		15,430,732			167,162
Less, expense waiver for Institutional Class service fees		(856,682	)		—
Less, expense reimbursement		(1,703,490	)		(162,123	)

Net expenses		12,870,560			5,039

Net investment income		14,464,539			187,354

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS ALLOCATED FROM MASTER PORTFOLIOS:
Net realized gain (loss) on:
Investments and foreign currency		(629,790,657	)		369,226
Written option contracts expired or closed		(666,313	)		—
Net increase from payments by affiliates on the disposal of investments in violation of restrictionsˆ		409,048			—
Net change in unrealized appreciation (depreciation) of:
Investments and foreign currency		(1,574,315,582	)		(5,674,431	)
Written option contracts		(102,907	)		18,418

Net loss on investments		(2,204,466,411	)		(5,286,787	)

Net decrease in net assets resulting from operations	$	(2,190,001,872	)	$	(5,099,433	)

† Net of Foreign Taxes Withheld of:	$	2,799,955		$	19,665

ˆSee Note 3, “Investment Adviser” in the Notes to the Financial Statements.

See Notes to the Financial Statements.

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Statement of Operations

For the Year Ended December 31, 2008


				The Kinetics
	The Small Cap			Government
	Opportunities			Money Market
	Fund			Fund


INVESTMENT INCOME ALLOCATED FROM MASTER PORTFOLIOS:
Dividends†	$	7,463,567		$	—
Interest		1,189,219			34,288
Income from securities lending		2,264,373			—
Expenses only from Master Portfolio		(7,934,393	)		(27,080	)

Net investment income from Master Portfolio		2,982,766			7,208

EXPENSES:
Distribution fees — Advisor Class A		62,125			—
Distribution fees — Advisor Class C		31,716			—
Shareholder servicing fees — Advisor Class A		62,125			—
Shareholder servicing fees — Advisor Class C		10,572			—
Shareholder servicing fees — No Load Class		867,135			5,481
Shareholder servicing fees — Institutional Class		413,735			—
Transfer Agent fees and expenses		449,432			5,194
Reports to shareholders		253,826			7,842
Administration fees		148,033			586
Professional fees		45,816			7,776
Directors’ and Officers’ fees and expenses		17,572			50
Registration fees		100,844			23,238
Fund accounting fees		27,652			108
Other expenses		18,248			400

Total expenses		2,508,831			50,675
Less, expense waiver for Institutional Class service fees		(310,302	)		—
Less, expense reimbursement		(746,353	)		(61,137	)

Net expenses		1,452,176			(10,462	)

Net investment income		1,530,590			17,670

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS ALLOCATED FROM MASTER PORTFOLIOS:
Net realized loss on:
Investments and foreign currency		(139,881,284	)		(83	)
Net increase from payments by affiliates on the disposal of investments in violation of restrictionsˆ		66,778			—
Net change in unrealized depreciation of:
Investments and foreign currency		(332,378,364	)		—
Written option contracts		(1,310	)		—

Net loss on investments		(472,194,180	)		(83	)

Net increase (decrease) in net assets resulting from operations	$	(470,663,590	)	$	17,587

† Net of Foreign Taxes Withheld of:	$	141,151		$	—

ˆSee Note 3, “Investment Adviser” in the Notes to the Financial Statements.

See Notes to the Financial Statements.

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Statement of Operations

For the Year Ended December 31, 2008


	The Market			The Water
	Opportunities			Infrastructure
	Fund			Fund


INVESTMENT INCOME ALLOCATED FROM MASTER PORTFOLIOS:
Dividends†	$	1,763,460		$	404,675
Interest		203,776			92,014
Income from securities lending		396,425			27,517
Expenses only from Master Portfolio		(1,235,519	)		(282,564	)

Net investment income from Master Portfolio		1,128,142			241,642

EXPENSES:
Distribution fees — Advisor Class A		81,024			10,717
Distribution fees — Advisor Class C		48,155			11,869
Shareholder servicing fees — Advisor Class A		81,024			10,717
Shareholder servicing fees — Advisor Class C		16,052			3,956
Shareholder servicing fees — No Load Class		129,989			32,596
Shareholder servicing fees — Institutional Class⁽¹⁾		9			427
Transfer Agent fees and expenses		75,893			32,379
Reports to shareholders		17,200			3,433
Administration fees		23,570			5,350
Professional fees		13,202			10,517
Directors’ and Officers’ fees and expenses		2,871			422
Registration fees		52,525			37,375
Fund accounting fees		4,535			1,034
Other expenses		1,778			198

Total expenses		547,827			160,990
Less, expense waiver for Institutional Class service fees⁽¹⁾		(7	)		(321	)
Less, expense reimbursement		(146,058	)		(106,299	)

Net expenses		401,762			54,370

Net investment income		726,380			187,272

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS ALLOCATED FROM MASTER PORTFOLIOS:
Net realized gain (loss) on:
Investments and foreign currency		(27,256,427	)		(5,803,423	)
Written option contracts expired or closed		—			637
Net increase for receivable from affiliate on the disposal of investments in violation of restrictionsˆ.		484,604
Net change in unrealized depreciation of:
Investments and foreign currency		(46,083,451	)		(3,337,404	)
Written option contracts		(226,939	)		—

Net loss on investments		(73,082,213	)		(9,140,190	)

Net decrease in net assets resulting from operations	$	(72,355,833	)	$	(8,952,918	)

† Net of Foreign Taxes Withheld of:	$	86,109		$	32,505


⁽¹⁾	Institutional Class shares of the Market Opportunities Fund commenced operations on May 19, 2008.


ˆ	See Note 3, “Investment Adviser” in the Notes to the Financial Statements.

See Notes to the Financial Statements.

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Statement of Operations

For the Period February 11, 2008ˆ through December 31, 2008


	The Multi-
	Disciplinary
	Fund


INVESTMENT INCOME ALLOCATED FROM MASTER PORTFOLIOS:
Interest	$	5,467
Expenses only from Master Portfolio		(17,446	)

Net investment loss from Master Portfolio		(11,979	)

EXPENSES:
Distribution fees — Advisor Class A		211
Distribution fees — Advisor Class C		647
Shareholder servicing fees — Advisor Class A		211
Shareholder servicing fees — Advisor Class C		216
Shareholder servicing fees — No Load Class		227
Shareholder servicing fees — Institutional Class		167
Transfer Agent fees and expenses		25,375
Reports to shareholders		236
Administration fees		90
Professional fees		9,338
Directors’ and Officers’ fees and expenses		10
Registration fees		7,212
Fund accounting fees		15

Total expenses		43,955
Less, expense waiver for Institutional Class service fees		(125	)
Less, expense reimbursement		(55,451	)

Net expenses		(11,621	)

Net investment loss		(358	)

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS ALLOCATED FROM MASTER PORTFOLIOS:
Net realized gain (loss) on:
Investments		(70,873	)
Written option contracts expired or closed		10,406
Net change in unrealized depreciation of:
Investments		(818	)
Written option contracts		(14,123	)

Net loss on investments		(75,408	)

Net decrease in net assets resulting from operations	$	(75,766	)

ˆCommencement of operations.

See Notes to the Financial Statements.

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Statements of Changes in Net Assets


	The Internet Fund						The Global Fund
	For the			For the			For the			For the
	Year Ended			Year Ended			Year Ended			Year Ended
	December 31, 2008			December 31, 2007			December 31, 2008			December 31, 2007


OPERATIONS:
Net investment income	$	1,162,085		$	1,352,765		$	52,359		$	159,497
Net realized gain on sale of investments, foreign currency and written option contracts expired or closed		1,853,798			15,698,724			188,701			294,670
Net change in unrealized appreciation (depreciation) of investments, foreign currency and written options		(65,383,744	)		16,150,780			(2,272,129	)		(303,988	)

Net increase (decrease) in net assets resulting from operations		(62,367,861	)		33,202,269			(2,031,069	)		150,179

DISTRIBUTIONS TO SHAREHOLDERS — NO LOAD CLASS:
Net investment income		(180,775	)		(1,629,950	)		(42,183	)		(188,230	)

Total distributions		(180,775	)		(1,629,950	)		(42,183	)		(188,230	)

DISTRIBUTIONS TO SHAREHOLDERS — ADVISOR CLASS A:⁽¹⁾
Net investment income		(751	)		(5,354	)		(2,180	)		N/A

Total distributions		(751	)		(5,354	)		(2,180	)		N/A

DISTRIBUTIONS TO SHAREHOLDERS — ADVISOR CLASS C:⁽¹⁾⁽²⁾
Net investment income		(235	)		(2,405	)		(88	)		N/A

Total distributions		(235	)		(2,405	)		(88	)		N/A

CAPITAL SHARE TRANSACTIONS — NO LOAD CLASS:
Proceeds from shares sold		6,464,409			30,688,190			1,558,631			904,772
Redemption fees		4,900			4,080			772			879
Proceeds from shares issued to holders in reinvestment of dividends		173,127			1,493,327			41,443			186,476
Cost of shares redeemed		(36,080,016	)		(33,892,666	)		(862,547	)		(1,906,635	)

Net increase (decrease) in net assets resulting from capital share transactions		(29,437,580	)		(1,707,069	)		738,299			(814,508	)

CAPITAL SHARE TRANSACTIONS — ADVISOR CLASS A:⁽¹⁾
Proceeds from shares sold		156,223			342,660			182,086			N/A
Redemption fees		20			—			—			N/A
Proceeds from shares issued to holders in reinvestment of dividends		615			4,405			2,065			N/A
Cost of shares redeemed		(241,742	)		(24,946	)		(21,680	)		N/A

Net increase (decrease) in net assets resulting from capital share transactions		(84,884	)		322,119			162,471			N/A

CAPITAL SHARE TRANSACTIONS — ADVISOR CLASS C:⁽¹⁾⁽²⁾
Proceeds from shares sold		44,894			299,960			10,000			N/A
Redemption fees		—			204			—			N/A
Proceeds from shares issued to holders in reinvestment of dividends		105			1,392			88			N/A
Cost of shares redeemed		(147,129	)		(10,217	)		—			N/A

Net increase (decrease) in net assets resulting from capital share transactions		(102,130	)		291,339			10,088			N/A


TOTAL INCREASE (DECREASE) IN NET ASSETS:		(92,174,216	)		30,470,949			(1,164,662	)		(852,559	)
NET ASSETS:
Beginning of year		167,717,729			137,246,780			3,138,498			3,991,057

End of year*	$	75,543,513		$	167,717,729		$	1,973,836		$	3,138,498

*Including undistributed net investment loss of:	$	(494,997	)	$	(1,567,144	)	$	(8	)	$	(126,482	)


⁽¹⁾	Advisor Class A and Advisor Class C shares of the Global Fund commenced operations on May 19, 2008.
⁽²⁾	Advisor Class C shares of the Internet Fund commenced operations on February 16, 2007.

See Notes to the Financial Statements.

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Statements of Changes in Net Assets — (Continued)


	The Internet Fund						The Global Fund
	For the			For the			For the			For the
	Year Ended			Year Ended			Year Ended			Year Ended
	December 31, 2008			December 31, 2007			December 31, 2008			December 31, 2007


CHANGES IN SHARES OUTSTANDING — NO LOAD CLASS:
Shares sold		208,819			877,610			372,985			178,439
Shares issued in reinvestments of dividends and distributions		8,491			41,574			17,711			38,212
Shares redeemed		(1,231,700	)		(1,065,901	)		(243,058	)		(373,212	)

Net increase (decrease) in shares outstanding		(1,014,390	)		(146,717	)		147,638			(156,561	)

CHANGES IN SHARES OUTSTANDING — ADVISOR CLASS A:⁽¹⁾
Shares sold		6,346			10,246			52,744			N/A
Shares issued in reinvestments of dividends and distributions		30			124			882			N/A
Shares redeemed		(8,709	)		(819	)		(8,854	)		N/A

Net increase (decrease) in shares outstanding		(2,333	)		9,551			44,772			N/A

CHANGES IN SHARES OUTSTANDING — ADVISOR CLASS C:⁽¹⁾⁽²⁾
Shares sold		2,063			8,559			2,193			N/A
Shares issued in reinvestments of dividends and distributions		5			39			37			N/A
Shares redeemed		(4,784	)		(283	)		—			N/A

Net increase (decrease) in shares outstanding		(2,716	)		8,315			2,230			N/A


⁽¹⁾	Advisor Class A and Advisor Class C shares of the Global Fund commenced operations on May 19, 2008.

⁽²⁾	Advisor Class C shares of the Internet Fund commenced operations on February 16, 2007.

See Notes to the Financial Statements.

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Statements of Changes in Net Assets


	The Paradigm Fund						The Medical Fund
	For the			For the			For the			For the
	Year Ended			Year Ended			Year Ended			Year Ended
	December 31, 2008			December 31, 2007			December 31, 2008			December 31, 2007


OPERATIONS:
Net investment income	$	14,464,539		$	11,645,301		$	187,354		$	87,456
Net realized gain (loss) on sale of investments, foreign currency and written option contracts expired or closed		(630,047,922	)		24,069,411			369,226			1,257,766
Net change in unrealized appreciation (depreciation) of investments, foreign currency and written options		(1,574,418,489	)		529,799,808			(5,656,013	)		936,268

Net increase (decrease) in net assets resulting from operations		(2,190,001,872	)		565,514,520			(5,099,433	)		2,281,490

DISTRIBUTIONS TO SHAREHOLDERS — NO LOAD CLASS:
Net investment income		—			(11,699,941	)		(160,902	)		(83,580	)
Net realized gains		(4,119,453	)		(11,505,288	)		(379,210	)		(582,488	)

Total distributions		(4,119,453	)		(23,205,229	)		(540,112	)		(666,068	)

DISTRIBUTIONS TO SHAREHOLDERS — ADVISOR CLASS A:
Net investment income		—			(1,577,182	)		(25,786	)		(4,104	)
Net realized gains		(1,395,788	)		(2,187,982	)		(72,741	)		(48,899	)

Total distributions		(1,395,788	)		(3,765,164	)		(98,527	)		(53,003	)

DISTRIBUTIONS TO SHAREHOLDERS — ADVISOR CLASS C:⁽¹⁾
Net investment income		—			(177	)		(1,481	)		(110	)
Net realized gains		(850,989	)		(1,318,999	)		(7,780	)		(5,043	)

Total distributions		(850,989	)		(1,319,176	)		(9,261	)		(5,153	)

DISTRIBUTIONS TO SHAREHOLDERS — INSTITUTIONAL CLASS:
Net investment income		—			(4,342,775	)		N/A			N/A
Net realized gains		(706,833	)		(3,204,711	)		N/A			N/A

Total distributions		(706,833	)		(7,547,486	)		N/A			N/A

CAPITAL SHARE TRANSACTIONS — NO LOAD CLASS:
Proceeds from shares sold		777,766,342			1,849,873,606			12,391,571			9,939,816
Redemption fees		414,514			208,321			5,119			8,816
Proceeds from shares issued to holders in reinvestment of dividends		3,983,262			22,401,473			534,949			655,064
Cost of shares redeemed		(1,675,903,934	)		(629,292,842	)		(6,247,291	)		(13,683,124	)

Net increase (decrease) in net assets resulting from capital share transactions		(893,739,816	)		1,243,190,558			6,684,348			(3,079,428	)

CAPITAL SHARE TRANSACTIONS — ADVISOR CLASS A:
Proceeds from shares sold		237,905,995			350,897,357			3,411,318			838,301
Redemption fees		85,557			47,579			5,045			9
Proceeds from shares issued to holders in reinvestment of dividends		1,172,121			3,255,755			67,566			44,818
Cost of shares redeemed		(207,346,143	)		(44,065,954	)		(1,198,061	)		(255,909	)

Net increase (decrease) in net assets resulting from capital share transactions		31,817,530			310,134,737			2,285,868			627,219


⁽¹⁾	Advisor Class C shares of the Medical Fund commenced operations on February 16, 2007.

See Notes to the Financial Statements.

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Statements of Changes in Net Assets — (Continued)


	The Paradigm Fund						The Medical Fund
	For the			For the			For the			For the
	Year Ended			Year Ended			Year Ended			Year Ended
	December 31, 2008			December 31, 2007			December 31, 2008			December 31, 2007


CAPITAL SHARE TRANSACTIONS — ADVISOR CLASS C:⁽¹⁾
Proceeds from shares sold		112,960,292			194,027,867			501,414			144,802
Redemption fees		14,030			16,484			336			1
Proceeds from shares issued to holders in reinvestment of dividends		763,533			1,154,254			5,511			5,153
Cost of shares redeemed		(86,079,004	)		(21,852,493	)		(240,952	)		(41	)

Net increase in net assets resulting from capital share transactions		27,658,851			173,346,112			266,309			149,915

CAPITAL SHARE TRANSACTIONS — INSTITUTIONAL CLASS:
Proceeds from shares sold		234,720,520			300,690,200			N/A			N/A
Redemption fees		27,867			8,309			N/A			N/A
Proceeds from shares issued to holders in reinvestment of dividends		624,496			7,311,557			N/A			N/A
Cost of shares redeemed		(517,865,576	)		(128,408,385	)		N/A			N/A

Net increase (decrease) in net assets resulting from capital share transactions		(282,492,693	)		179,601,681			N/A			N/A

TOTAL INCREASE (DECREASE) IN NET ASSETS:		(3,313,831,063	)		2,435,950,553			3,489,192			(745,028	)
NET ASSETS:
Beginning of year		4,580,281,571			2,144,331,018			15,492,752			16,237,780

End of year*	$	1,266,450,508		$	4,580,281,571		$	18,981,944		$	15,492,752

*Including undistributed net investment income (loss) of:	$	1,990,250		$	(10,109,243	)	$	62		$	7,298

CHANGES IN SHARES OUTSTANDING — NO LOAD CLASS:
Shares sold		30,563,817			63,730,279			644,585			490,051
Shares issued in reinvestments of dividends and distributions		282,239			724,732			35,404			32,884
Shares redeemed		(73,373,736	)		(22,412,502	)		(349,528	)		(691,314	)

Net increase (decrease) in shares outstanding		(42,527,680	)		42,042,509			330,461			(168,379	)

CHANGES IN SHARES OUTSTANDING — ADVISOR CLASS A:
Shares sold		9,802,715			12,078,256			199,403			43,860
Shares issued in reinvestments of dividends and distributions		84,490			106,956			4,568			2,300
Shares redeemed		(10,100,248	)		(1,555,850	)		(80,265	)		(13,237	)

Net increase (decrease) in shares outstanding		(213,043	)		10,629,362			123,706			32,923

CHANGES IN SHARES OUTSTANDING — ADVISOR CLASS C:⁽¹⁾
Shares sold		4,474,742			6,821,284			27,549			7,397
Shares issued in reinvestments of dividends and distributions		56,496			38,695			374			265
Shares redeemed		(4,547,903	)		(780,249	)		(14,415	)		(2	)

Net increase (decrease) in shares outstanding		(16,665	)		6,079,730			13,508			7,660

CHANGES IN SHARES OUTSTANDING — INSTITUTIONAL CLASS:
Shares sold		9,395,948			10,562,832			N/A			N/A
Shares issued in reinvestments of dividends and distributions		44,196			236,696			N/A			N/A
Shares redeemed		(26,545,295	)		(4,510,587	)		N/A			N/A

Net increase (decrease) in shares outstanding		(17,105,151	)		6,288,941			N/A			N/A


⁽¹⁾	Advisor Class C shares of the Medical Fund commenced operations on February 16, 2007.

See Notes to the Financial Statements.

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Statements of Changes in Net Assets


							The Kinetics Government
	The Small Cap Opportunities Fund						Money Market Fund
	For the			For the			For the			For the
	Year Ended			Year Ended			Year Ended			Year Ended
	December 31, 2008			December 31, 2007			December 31, 2008			December 31, 2007


OPERATIONS:
Net investment income	$	1,530,590		$	652,285		$	17,670		$	43,527
Net realized gain (loss) on sale of investments, foreign currency and written option contracts expired or closed		(139,814,506	)		10,940,512			(83	)		—
Net change in unrealized appreciation (depreciation) of investments, foreign currency and written options		(332,379,674	)		110,489,283			—			—

Net increase (decrease) in net assets resulting from operations		(470,663,590	)		122,082,080			17,587			43,527

DISTRIBUTIONS TO SHAREHOLDERS — NO LOAD CLASS:
Net investment income		—			(5,211,975	)		(17,587	)		(43,527	)
Net realized gains		(2,580,104	)		(1,576,555	)		—			—

Total distributions		(2,580,104	)		(6,788,530	)		(17,587	)		(43,527	)

DISTRIBUTIONS TO SHAREHOLDERS — ADVISOR CLASS A:
Net investment income		—			(216,845	)		N/A			N/A
Net realized gains		(242,741	)		(79,429	)		N/A			N/A

Total distributions		(242,741	)		(296,274	)		N/A			N/A

DISTRIBUTIONS TO SHAREHOLDERS — ADVISOR CLASS C:⁽¹⁾
Net investment income		—			(29,881	)		N/A			N/A
Net realized gains		(57,484	)		(10,599	)		N/A			N/A

Total distributions		(57,484	)		(40,480	)		N/A			N/A

DISTRIBUTIONS TO SHAREHOLDERS — INSTITUTIONAL CLASS:
Net investment income		—			(2,707,668	)		N/A			N/A
Net realized gains		(1,390,250	)		(682,422	)		N/A			N/A

Total distributions		(1,390,250	)		(3,390,090	)		N/A			N/A

CAPITAL SHARE TRANSACTIONS — NO LOAD CLASS:
Proceeds from shares sold		124,972,348			609,987,689			4,422,225			1,478,721
Redemption fees		67,878			81,392			—			—
Proceeds from shares issued to holders in reinvestment of dividends		2,547,716			6,566,511			15,599			39,561
Cost of shares redeemed		(447,983,662	)		(222,811,396	)		(2,939,399	)		(1,754,222	)

Net increase (decrease) in net assets resulting from capital share transactions		(320,395,720	)		393,824,196			1,498,425			(235,940	)

CAPITAL SHARE TRANSACTIONS — ADVISOR CLASS A:
Proceeds from shares sold		12,727,793			25,460,990			N/A			N/A
Redemption fees		4,012			2,571			N/A			N/A
Proceeds from shares issued to holders in reinvestment of dividends		216,516			241,765			N/A			N/A
Cost of shares redeemed		(16,402,510	)		(4,433,515	)		N/A			N/A

Net increase (decrease) in net assets resulting from capital share transactions		(3,454,189	)		21,271,811			N/A			N/A


⁽¹⁾	Advisor Class C shares of the Small Cap Opportunities Fund commenced operations on February 16, 2007.

See Notes to the Financial Statements.

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Statements of Changes in Net Assets — (Continued)


							The Kinetics Government
	The Small Cap Opportunities Fund						Money Market Fund
	For the			For the			For the			For the
	Year Ended			Year Ended			Year Ended			Year Ended
	December 31, 2008			December 31, 2007			December 31, 2008			December 31, 2007


CAPITAL SHARE TRANSACTIONS — ADVISOR CLASS C:⁽¹⁾
Proceeds from shares sold		3,622,686			5,051,725			N/A			N/A
Redemption fees		59			1,076			N/A			N/A
Proceeds from shares issued to holders in reinvestment of dividends		28,520			25,478			N/A			N/A
Cost of shares redeemed		(2,146,275	)		(114,627	)		N/A			N/A

Net increase in net assets resulting from capital share transactions		1,504,990			4,963,652			N/A			N/A

CAPITAL SHARE TRANSACTIONS — INSTITUTIONAL CLASS:
Proceeds from shares sold		33,049,688			103,687,085			N/A			N/A
Redemption fees		1,510			3,028			N/A			N/A
Proceeds from shares issued to holders in reinvestment of dividends		1,357,045			3,374,500			N/A			N/A
Cost of shares redeemed		(114,107,993	)		(42,283,259	)		N/A			N/A

Net increase (decrease) in net assets resulting from capital share transactions		(79,699,750	)		64,781,354			N/A			N/A

TOTAL INCREASE (DECREASE) IN NET ASSETS:		(876,978,838	)		596,407,719			1,498,425			(235,940	)
NET ASSETS:
Beginning of year		1,087,319,048			490,911,329			1,189,516			1,425,456

End of year*	$	210,340,210		$	1,087,319,048		$	2,687,941		$	1,189,516

*Including undistributed net investment income (loss) of:	$	(387,918	)	$	(2,649,098	)	$	83		$	—

CHANGES IN SHARES OUTSTANDING — NO LOAD CLASS:
Shares sold		4,796,386			19,955,450			4,422,225			1,478,721
Shares issued in reinvestments of dividends and distributions		196,884			206,429			15,599			39,561
Shares redeemed		(18,197,054	)		(7,302,163	)		(2,939,399	)		(1,754,222	)

Net increase (decrease) in shares outstanding		(13,203,784	)		12,859,716			1,498,425			(235,940	)

CHANGES IN SHARES OUTSTANDING — ADVISOR CLASS A:
Shares sold		530,590			821,149			N/A			N/A
Shares issued in reinvestments of dividends and distributions		16,941			7,673			N/A			N/A
Shares redeemed		(768,900	)		(144,091	)		N/A			N/A

Net increase (decrease) in shares outstanding		(221,369	)		684,731			N/A			N/A

CHANGES IN SHARES OUTSTANDING — ADVISOR CLASS C:⁽¹⁾
Shares sold		162,488			159,451			N/A			N/A
Shares issued in reinvestments of dividends and distributions		2,247			810			N/A			N/A
Shares redeemed		(99,012	)		(3,717	)		N/A			N/A

Net increase in shares outstanding		65,723			156,544			N/A			N/A

CHANGES IN SHARES OUTSTANDING — INSTITUTIONAL CLASS:
Shares sold		1,421,164			3,434,722			N/A			N/A
Shares issued in reinvestments of dividends and distributions		104,710			106,116			N/A			N/A
Shares redeemed		(6,261,434	)		(1,406,770	)		N/A			N/A

Net increase (decrease) in shares outstanding		(4,735,560	)		2,134,068			N/A			N/A


⁽¹⁾	Advisor Class C shares of the Small Cap Opportunities Fund commenced operations on February 16, 2007.

See Notes to the Financial Statements.

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Statements of Changes in Net Assets


	The Market Opportunities Fund						The Water Infrastructure Fund
	For the			For the			For the			From June 29,
	Year Ended			Year Ended			Year Ended			2007ˆ through
	December 31, 2008			December 31, 2007			December 31, 2008			December 31, 2007


OPERATIONS:
Net investment income	$	726,380		$	84,658		$	187,272		$	16,318
Net realized gain (loss) on sale of investments, foreign currency and written option contracts expired or closed		(26,771,823	)		(139,847	)		(5,802,786	)		31,249
Net change in unrealized appreciation (depreciation) of investments, foreign currency and written options		(46,310,390	)		15,573,705			(3,337,404	)		32,378

Net increase (decrease) in net assets resulting from operations		(72,355,833	)		15,518,516			(8,952,918	)		79,945

DISTRIBUTIONS TO SHAREHOLDERS — NO LOAD CLASS:
Net investment income		(285,733	)		(118,628	)		—			(9,413	)
Net realized gains		—			—			—			(11,976	)

Total distributions		(285,733	)		(118,628	)		—			(21,389	)

DISTRIBUTIONS TO SHAREHOLDERS — ADVISOR CLASS A:
Net investment income		(62,736	)		(22,695	)		—			(7,700	)
Net realized gains		—			—			—			(12,600	)

Total distributions		(62,736	)		(22,695	)		—			(20,300	)

DISTRIBUTIONS TO SHAREHOLDERS — ADVISOR CLASS C:⁽¹⁾
Net investment income		(8,853	)		—			—			(2,363	)
Net realized gains		—			—			—			(6,144	)

Total distributions		(8,853	)		—			—			(8,507	)

DISTRIBUTIONS TO SHAREHOLDERS — INSTITUTIONAL CLASS:⁽²⁾
Net investment income		(62	)		N/A			—			(435	)
Net realized gains		—			N/A			—			(525	)

Total distributions		(62	)		N/A			—			(960	)

CAPITAL SHARE TRANSACTIONS — NO LOAD CLASS:
Proceeds from shares sold		44,566,651			55,769,867			27,335,651			2,828,533
Redemption fees		27,450			14,947			489			—
Proceeds from shares issued to holders in reinvestment of dividends		283,718			117,154			—			19,762
Cost of shares redeemed		(32,158,187	)		(9,030,247	)		(16,642,255	)		(465,719	)

Net increase in net assets resulting from capital share transactions		12,719,632			46,871,721			10,693,885			2,382,576

CAPITAL SHARE TRANSACTIONS — ADVISOR CLASS A:
Proceeds from shares sold		19,183,719			33,158,535			7,936,561			2,521,529
Redemption fees		7,471			949			2,093			126
Proceeds from shares issued to holders in reinvestment of dividends		51,974			19,057			—			19,597
Cost of shares redeemed		(18,476,958	)		(5,377,672	)		(869,788	)		(102,213	)

Net increase in net assets resulting from capital share transactions		766,206			27,800,869			7,068,866			2,439,039


ˆ	Commencement of operations.

⁽¹⁾Advisor Class C shares of the Market Opportunities Fund commenced operations on February 16, 2007.

⁽²⁾Institutional Class shares of the Market Opportunities Fund commenced operations on May 19, 2008.

See Notes to the Financial Statements.

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Statements of Changes in Net Assets — (Continued)


	The Market Opportunities Fund						The Water Infrastructure Fund
	For the			For the			For the			From June 29,
	Year Ended			Year Ended			Year Ended			2007ˆ through
	December 31, 2008			December 31, 2007			December 31, 2008			December 31, 2007


CAPITAL SHARE TRANSACTIONS — ADVISOR CLASS C:⁽¹⁾
Proceeds from shares sold		4,664,077			8,211,008			1,298,685			1,194,129
Redemption fees		186			612			—			109
Proceeds from shares issued to holders in reinvestment of dividends		7,291			—			—			7,586
Cost of shares redeemed		(3,618,752	)		(145,356	)		(388,456	)		(5,465	)

Net increase in net assets resulting from capital share transactions		1,052,802			8,066,264			910,229			1,196,359

CAPITAL SHARE TRANSACTIONS — INSTITUTIONAL CLASS:⁽²⁾
Proceeds from shares sold		10,000			N/A			329,302			100,000
Redemption fees		—			N/A			69			—
Proceeds from shares issued to holders in reinvestment of dividends		62			N/A			—			960
Cost of shares redeemed		—			N/A			(116,019	)		—

Net increase in net assets resulting from capital share transactions		10,062			N/A			213,352			100,960

TOTAL INCREASE (DECREASE) IN NET ASSETS:		(58,164,515	)		98,116,047			9,933,414			6,147,723
NET ASSETS:
Beginning of year		115,700,887			17,584,840			6,147,723			—

End of year*	$	57,536,372		$	115,700,887		$	16,081,137		$	6,147,723

*Including undistributed net investment income (loss) of:	$	73,246		$	(77,886	)	$	(27,093	)	$	—

CHANGES IN SHARES OUTSTANDING — NO LOAD CLASS:
Shares sold		3,752,788			3,879,691			2,786,011			277,724
Shares issued in reinvestments of dividends and distributions		40,416			7,325			—			1,945
Shares redeemed		(2,962,139	)		(641,269	)		(2,153,711	)		(45,263	)

Net increase in shares outstanding		831,065			3,245,747			632,300			234,406

CHANGES IN SHARES OUTSTANDING — ADVISOR CLASS A:
Shares sold		1,638,020			2,313,386			875,948			249,966
Shares issued in reinvestments of dividends and distributions		7,414			1,195			—			1,929
Shares redeemed		(1,813,295	)		(379,689	)		(108,948	)		(10,103	)

Net increase (decrease) in shares outstanding		(167,861	)		1,934,892			767,000			241,792

CHANGES IN SHARES OUTSTANDING — ADVISOR CLASS C:⁽¹⁾
Shares sold		445,382			559,532			141,741			117,981
Shares issued in reinvestments of dividends and distributions		1,047			—			—			747
Shares redeemed		(329,688	)		(10,559	)		(51,559	)		(536	)

Net increase in shares outstanding		116,741			548,973			90,182			118,192

CHANGES IN SHARES OUTSTANDING — INSTITUTIONAL CLASS:⁽²⁾
Shares sold		729			N/A			36,839			10,000
Shares issued in reinvestments of dividends and distributions		9			N/A			—			94
Shares redeemed		—			N/A			(14,073	)		—

Net increase in shares outstanding		738			N/A			22,766			10,094


ˆ	Commencement of operations.
⁽¹⁾	Advisor Class C shares of the Market Opportunities Fund commenced operations on February 16, 2007.
⁽²⁾	Institutional Class shares of the Market Opportunities Fund commenced operations on May 19, 2008.

See Notes to the Financial Statements.

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Statements of Changes in Net Assets


	The Multi-Disciplinary Fund
	From February 11, 2008ˆ
	through December 31, 2008


OPERATIONS:
Net investment loss	$	(358	)
Net realized loss on sale of investments and written option contracts expired or closed		(60,467	)
Net change in unrealized depreciation of investments and written options		(14,941	)

Net decrease in net assets resulting from operations		(75,766	)

DISTRIBUTIONS TO SHAREHOLDERS — NO LOAD CLASS:
Net investment income		(48	)
Net realized gains		—

Total distributions		(48	)

DISTRIBUTIONS TO SHAREHOLDERS — ADVISOR CLASS A:
Net investment income		(27	)
Net realized gains		—

Total distributions		(27	)

DISTRIBUTIONS TO SHAREHOLDERS — ADVISOR CLASS C:
Net investment income		(5	)
Net realized gains		—

Total distributions		(5	)

DISTRIBUTIONS TO SHAREHOLDERS — INSTITUTIONAL CLASS:
Net investment income		(48	)
Net realized gains		—

Total distributions		(48	)

CAPITAL SHARE TRANSACTIONS — NO LOAD CLASS:
Proceeds from shares sold		119,689
Redemption fees		—
Proceeds from shares issued to holders in reinvestment of dividends		44
Cost of shares redeemed		(4	)

Net increase in net assets resulting from capital share transactions		119,729

CAPITAL SHARE TRANSACTIONS — ADVISOR CLASS A:
Proceeds from shares sold		102,357
Redemption fees		—
Proceeds from shares issued to holders in reinvestment of dividends		27
Cost of shares redeemed		—

Net increase in net assets resulting from capital share transactions		102,384




ˆ Commencement of operations.

See Notes to the Financial Statements.

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Statements of Changes in Net Assets — (Continued)


	The Multi-Disciplinary Fund
	From February 11, 2008ˆ
	through December 31, 2008


CAPITAL SHARE TRANSACTIONS — ADVISOR CLASS C:
Proceeds from shares sold		107,839
Redemption fees		—
Proceeds from shares issued to holders in reinvestment of dividends		5
Cost of shares redeemed		—

Net increase in net assets resulting from capital share transactions		107,844

CAPITAL SHARE TRANSACTIONS — INSTITUTIONAL CLASS:
Proceeds from shares sold		100,000
Redemption fees		—
Proceeds from shares issued to holders in reinvestment of dividends		48
Cost of shares redeemed		—

Net increase in net assets resulting from capital share transactions		100,048

TOTAL INCREASE IN NET ASSETS:		354,111
NET ASSETS:
Beginning of year		—

End of year*	$	354,111

*Including undistributed net investment income of:	$	—

CHANGES IN SHARES OUTSTANDING — NO LOAD CLASS:
Shares sold		12,091
Shares issued in reinvestments of dividends and distributions		5
Shares redeemed		—

Net increase in shares outstanding		12,096

CHANGES IN SHARES OUTSTANDING — ADVISOR CLASS A:
Shares sold		10,231
Shares issued in reinvestments of dividends and distributions		3
Shares redeemed		—

Net increase in shares outstanding		10,234

CHANGES IN SHARES OUTSTANDING — ADVISOR CLASS C:
Shares sold		10,828
Shares issued in reinvestments of dividends and distributions		1
Shares redeemed		—

Net increase in shares outstanding		10,829

CHANGES IN SHARES OUTSTANDING — INSTITUTIONAL CLASS:
Shares sold		10,000
Shares issued in reinvestments of dividends and distributions		6
Shares redeemed		—

Net increase in shares outstanding		10,006


ˆ	Commencement of operations.

See Notes to the Financial Statements.

KINETICS MUTUAL FUNDS, INC.—FEEDER FUNDS

Notes to Financial Statements

December 31, 2008

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 Global Fund (“Global,” formerly The Internet Emerging Growth Fund), The Paradigm Fund (“Paradigm”), The Medical Fund (“Medical”), The Small Cap Opportunities Fund (“Small Cap”), The Kinetics Government Money Market Fund (“Government”), The Market Opportunities Fund (“Market Opportunities”), The Water Infrastructure Fund (“Water Infrastructure”) and The Multi-Disciplinary Fund (“Multi-Disciplinary”). Investment operations of the Company began on October 21, 1996 (Internet), September 30, 1999 (Medical), December 31, 1999 (Global and Paradigm), February 3, 2000 (Government), March 20, 2000 (Small Cap), January 31, 2006 (Market Opportunities), June 29, 2007 (Water Infrastructure) and February 11, 2008 (Multi-Disciplinary). Each series, unlike many other investment companies which directly acquire and manage their own portfolios of securities, seeks to achieve its investment objective by investing all of its investable assets in a corresponding portfolio series (each a “Master Portfolio” and collectively the “Master Portfolios”) of Kinetics Portfolios Trust (the “Trust”).

On April 28, 2000 (January 31, 2006 with respect to Market Opportunities, June 29, 2007 with respect to Water Infrastructure and February 11, 2008 with respect to Multi-Disciplinary), each series in the Company entered into a master-feeder fund structure. By entering into this structure, each series (each a “Feeder Fund” and collectively, the “Feeder Funds”) invested all of its assets in a corresponding Master Portfolio which had the same investment objective as the Feeder Fund. Each Master Portfolio has multiple feeder funds. Each Feeder Fund receives a proportionate amount of interest in the Master Portfolio equal to its relative contribution of capital. Thus, each Feeder Fund is allocated its portion of income, gains (losses) and expenses from the Master Portfolio.

KINETICS MUTUAL FUNDS, INC.—FEEDER FUNDS

Notes to Financial Statements — (Continued)

December 31, 2008

Each Feeder Fund’s respective interest in the corresponding Master Portfolio as of December 31, 2008 is as follows:


	Interest in
	Master Portfolio

Internet Fund		99.992	%
Global Fund		99.847	%
Paradigm Fund		98.068	%
Medical Fund		99.938	%
Small Cap Fund		99.993	%
Government Fund		98.973	%
Market Opportunities Fund		99.990	%
Water Infrastructure Fund		99.529	%
Multi-Disciplinary Fund		80.932	%

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

As of December 31, 2008, each of the Feeder Funds, except the Government Fund, offer Advisor Class A shares. Advisor Class A shares are subject to an annual Rule 12b-1 fee of 0.25% of average daily net assets and a service 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%.

As of December 31, 2008 each of the Feeder Funds, except the Government Fund, offer Advisor Class C shares. Advisor Class C shares are subject to an annual Rule 12b-1 fee of 0.75% of average daily net assets and a service fee of 0.25% of average daily net assets. Advisor Class C shares do not have a sales charge.

As of December 31, 2008 each of the Feeder Funds offer No Load Class shares. No Load Class shares are subject to a service fee of 0.25% of average daily net assets but do not have 12b-1 fees or a sales charge.

As of December 31, 2008 the Paradigm, Small Cap, Market Opportunities, Water Infrastructure and Multi-Disciplinary Funds offer Institutional Class shares. Institutional Class shares are subject to a service fee of 0.20% of average daily net assets but do not have 12b-1 fees or 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 Advisor Class C shares, the sales charge on the Advisor Class A and Advisor Class C shares, the service fees paid by the Advisor Class A, Advisor Class C, No Load Class and Institutional Class Shares, voting rights on matters pertaining to a

KINETICS MUTUAL FUNDS, INC.—FEEDER FUNDS

Notes to Financial Statements — (Continued)

December 31, 2008

single class of shares and the exchange privileges of each class of shares. Shares of each Feeder Fund, except the Government Fund, will assess a 2.00% redemption fee (with exceptions) on shares redeemed or exchanged within 30 days of purchase. Income, expenses (other than expenses attributable to a specific class), and realized and unrealized gains or losses on investments are allocated to each class based on its relative net assets.

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 portfolios of investments 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 securities held by the Kinetics Government Money Market Portfolio) that are listed on a U.S. securities exchange for which market quotations are readily available are valued at the last quoted sale price on the day the valuation is made. Price information on listed securities is taken from the exchange where the security is primarily traded. All equity securities that are traded using the National Association of Securities Dealers’ Automated Quotation System (“NASDAQ”) are valued using the NASDAQ Official Closing Price (“NOCP”). In the event market quotations are not readily available or if events occur that may materially affect the value of a particular security between the time trading ends on a particular security and the close of regular trading on the New York Stock Exchange (“NYSE”), “fair value” will be determined. Purchased non-exchange traded 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. Exchange traded options are valued at the last reported sale price on an exchange on which the option is traded. If no sales are reported on a particular day, the mean between the highest bid and lowest asked quotations at the close of the exchanges will be used. 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.

KINETICS MUTUAL FUNDS, INC.—FEEDER FUNDS

Notes to Financial Statements — (Continued)

December 31, 2008

Investment securities in The Kinetics Government Money Market Portfolio and instruments with remaining maturities of 60 days or less are valued at amortized cost, which approximates fair value. Other assets and securities for which no quotations are readily available (including restricted securities) are valued in good faith at fair value using methods determined by the Board of Trustees of the Master Portfolios. At December 31, 2008 0.00%, 2.76%, 1.00% and 0.00% fair valued securities were held by the Internet Portfolio, Global Portfolio, Paradigm Portfolio, and Small Cap Opportunities Portfolio, respectively.

In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements.” The Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. The Statement establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (2) the reporting entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The Master Portfolios adopted the Statement effective January 1, 2008. See the Notes to Financial Statements for the Master Portfolios for a discussion of the Statement.

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

KINETICS MUTUAL FUNDS, INC.—FEEDER FUNDS

Notes to Financial Statements — (Continued)

December 31, 2008

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. When an option expires on its stipulated expiration date or the Master Portfolio enters into a closing purchase transaction, the Master Portfolio realizes a gain or loss if the cost of the closing transaction differs from the premium received when the option was sold, without regard to any unrealized gain or loss on the underlying security, and the liability related to such option is eliminated. When an option is exercised, the premium originally received decreases the cost basis of the underlying security (or increases the proceeds on the security sold short) and the Master Portfolio realizes a gain or loss from the sale of the security (or closing of the short sale). As collateral for uncovered written options, the Master Portfolio is required under the 1940 Act to maintain assets consisting of cash, cash equivalents or liquid securities. This collateral is required to be adjusted daily to reflect the exercise price 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 and Illiquid 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

KINETICS MUTUAL FUNDS, INC.—FEEDER FUNDS

Notes to Financial Statements — (Continued)

December 31, 2008

financial performance. The Master Portfolios have no right to require registration of unregistered securities. At December 31, 2008 the Global Portfolio had restricted securities with an aggregate value of $30,821 representing 1.6% of its net assets. An illiquid asset is any asset which may not be sold or disposed of in the ordinary course of business within seven days at approximately the value at which the Master Portfolio has valued the investment. At December 31, 2008, the following Master Portfolios held illiquid securities:


	Market		Percentage of
	Value		Net Assets

The Internet Portfolio	$	634		0.00	%
The Global Portfolio		17,850		0.91
The Paradigm Portfolio		12,901,309		1.00
The Small Cap Opportunities Portfolio		6,301		0.00

When-Issued Securities

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

Securities Lending

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

KINETICS MUTUAL FUNDS, INC.—FEEDER FUNDS

Notes to Financial Statements — (Continued)

December 31, 2008

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

Federal Income Taxes

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

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

Effective June 29, 2007, the Feeder Funds adopted FASB Interpretation No. 48 (FIN 48), “Accounting for Uncertainty in Income Taxes”. FIN 48 requires the evaluation of tax positions taken on previously filed tax returns or expected to be taken on future returns. These positions must meet a “more likely than not” standard that, based on the technical merits, have a more than fifty percent likelihood of being sustained upon examination. In evaluating whether a tax position has met the recognition threshold, the Funds must presume that the position will be examined by the appropriate taxing authority that has full knowledge of all relevant information. Tax positions not deemed to meet the “more-likely-than-not” threshold are recorded as a tax expense in the current year.

FIN 48 requires the Feeder Funds to analyze all open tax years, as defined by the relevant statute of limitations, for all major jurisdictions. Open tax years

KINETICS MUTUAL FUNDS, INC.—FEEDER FUNDS

Notes to Financial Statements — (Continued)

December 31, 2008

are those that are open for examination by taxing authorities. As of December 31, 2008, open tax years include the tax years ended December 31, 2005 through 2008. The Funds have no examination in progress.

The Feeder Funds have reviewed all open tax years and major jurisdictions and concluded that the adoption of FIN 48 resulted in no effect to the Funds’ financial position or results of operations. There is no tax liability resulting from unrecognized tax benefits relating to uncertain income tax positions taken or expected to be taken in future tax returns. The Funds are also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.

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. Other noncash dividends are recognized as investment income at the fair value of the property received. Withholding taxes on foreign dividends have been provided for in accordance with the Company’s understanding of the applicable country’s tax rules and rates.

3. Investment Adviser

KINETICS MUTUAL FUNDS, INC.—FEEDER FUNDS

Notes to Financial Statements — (Continued)

December 31, 2008

assets of the Water Infrastructure Portfolio. This sub-advisory agreement was terminated on October 27, 2008.

The Adviser has voluntarily agreed to waive a portion of its advisory fee and/or reimburse certain operating expenses as deemed appropriate. The Adviser may discontinue the voluntary waiver/reimbursement at any time; these waivers/reimbursements are not subject to recapture. For the year ended December 31, 2008, the rate earned by the Adviser from the Master Portfolios and the waived fees/reimbursed expenses for the Feeder Funds are as follows:


	Internet		Global

Annual Advisory Rate		1.25%		1.25%
Expenses Reimbursed by Adviser through voluntary waiver	$	138,654	$	130,950
Expenses Reimbursed by Adviser through Institutional class shareholder servicing fee waiver	$	—	$	—


	Paradigm		Medical

Annual Advisory Rate		1.25%		1.25%
Expenses Reimbursed by Adviser through voluntary waiver	$	1,703,490	$	162,123
Expenses Reimbursed by Adviser through Institutional class shareholder servicing fee waiver	$	856,682	$	—


	Small Cap		Government

Annual Advisory Rate		1.25%		0.50%
Expenses Reimbursed by Adviser through voluntary waiver	$	746,353	$	61,137
Expenses Reimbursed by Adviser through Institutional class shareholder servicing fee waiver	$	310,302	$	—


	Market		Water
	Opportunities		Infrastructure

Annual Advisory Rate		1.25%		1.25%
Expenses Reimbursed by Adviser through voluntary waiver	$	146,058	$	106,299
Expenses Reimbursed by Adviser through Institutional class shareholder servicing fee waiver	$	7	$	321


	Multi-
	Disciplinary

Annual Advisory Rate		1.25%
Expenses Reimbursed by Adviser through voluntary waiver	$	55,451
Expenses Reimbursed by Adviser through Institutional class shareholder servicing fee waiver	$	125

KINETICS MUTUAL FUNDS, INC.—FEEDER FUNDS

Notes to Financial Statements — (Continued)

December 31, 2008

The Adviser receives a shareholder servicing fee from the No Load Class, Class A and Class C shares of a Feeder Fund pursuant to a Shareholder Servicing Agreement in the amount equal to 0.25% of the Feeder Fund’s average daily net assets attributable to No Load Class, Class A and Class C shares, respectively. For the Institutional Class, the Adviser receives a shareholder servicing fee pursuant to a shareholder servicing agreement in the amount equal to 0.20% of a Feeder Fund’s average daily net assets attributable to Institutional Class shares. 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 a Feeder Fund’s average daily net assets attributable to Institutional Class shares until at least May 1, 2009. For the year ended December 31, 2008, the Adviser waived amounts depicted in the above table in shareholder servicing fees for the Institutional Class of the Paradigm Fund, the Small Cap Fund, the Market Opportunities Fund, the Water Infrastructure Fund and the Multi-Disciplinary Fund. 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 year ended December 31, 2008, the Feeder Funds were allocated $24,000 for the services of the Chief Compliance Officer employed by the Adviser.

The Company, on behalf of the Feeder 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 Class 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 Advisor Class A shares to the Distributor or other qualified recipients under the Plan. During the year ended December 31, 2008, payments under the 12b-1 Plan for the Advisor Class A shares of the Internet, Global, Paradigm, Medical, Small Cap, Market Opportunities, Water and Multi-Disciplinary Funds were limited to 0.25% of the average daily net asset value of such shares of such Funds. During the year ended December 31, 2008, the Advisor Class A shares of the Internet, Global, Paradigm, Medical, Small Cap, Market Opportunities, Water Infrastructure and Multi-Disciplinary Funds incurred expenses of $1,092, $154, $1,140,388, $5,017, $62,125, $81,024, $10,717 and $211 respectively, pursuant to the 12b-1 Plan. Under the second Plan, Advisor Class C shares

KINETICS MUTUAL FUNDS, INC.—FEEDER FUNDS

Notes to Financial Statements — (Continued)

December 31, 2008

pay an annual rate of 0.75% of the average daily net asset value of such shares. During the year ended December 31, 2008, Internet, Global, Paradigm, Medical, Small Cap, Market Opportunities, Water Infrastructure and Multi-Disciplinary Funds Advisor Class C Shares incurred expenses of $1,003, $32, $2,085,388, $1,802, $31,716, $48,155, $11,869, and $647 respectively, pursuant to the 12b-1 Plan.

Kinetics Funds Distributor, Inc. (the “Distributor”) acts as the Feeder Funds’ principal underwriter in a continuous public offering of the Feeder Funds’ shares. The Distributor is an affiliate of the Adviser. For the year ended December 31, 2008, the Distributor received $344, $754, $290,509, $6,265, $15,644, $40,099, $12,702, and $12 in sales loads from the Advisor Class A shares of the Internet, Global, Paradigm, Medical, Small Cap, Market Opportunities, Water Infrastructure, and Multi-Disciplinary Funds.

During the fiscal year ended December 31, 2008, investments were made by the Adviser that caused the Paradigm Portfolio, the Small Cap Opportunities Portfolio and the Market Opportunities Portfolio to violate Rule 12(d)(3)-1 of the Investment Company Act of 1940. In general, Rule 12(d)(3)-1 provides that a fund may not acquire more than 5% of the outstanding shares of a class of an issuer’s equity securities or invest more than 5% of the fund’s total assets in that issuer’s equity securities if that issuer is engaged in securities related businesses. As a result, as determined by the Board of Trustees, the Adviser paid $415,007 and $66,781 to the Paradigm Portfolio and the Small Cap Opportunities Portfolio, respectively. Of these amounts, $409,048 was allocated to the Paradigm Fund and $66,778 was allocated to the Small Cap Opportunities Fund. These payments comprised $0.003 of each class of the Paradigm Fund and the Small Cap Opportunities Fund at the time of the reimbursement. This contributed 0.03% to the return of the Institutional Class of the Paradigm Fund and 0.03% to the return of Class C of the Small Cap Opportunities Fund for the year ended December 31, 2008, and had no impact on the returns of the other classes. Additionally, a receivable from the Adviser of $484,652 was recorded at December 31, 2008 in the Market Opportunities Portfolio. Of this amount $484,604 was allocated to the Market Opportunities Fund, which amounted to $0.06 of each class. This contributed 0.38%, 0.37%, 0.38% and 0.44% to the returns of the No Load Class, the Advisor Class A, the Advisor Class C and the Institutional Class, respectively, for the year ended December 31, 2008.

KINETICS MUTUAL FUNDS, INC.—FEEDER FUNDS

Notes to Financial Statements — (Continued)

December 31, 2008

4. Reclassification of Capital Accounts

Accounting principles generally accepted in the United States of America require that certain components of net assets relating to permanent differences be reclassified between financial and tax reporting. These reclassifications have no effect on net assets or net asset value per share. For the year ended December 31, 2008, each Fund recorded the following reclassifications to the accounts listed below:


	INCREASE (DECREASE)
				Accumulated
				Net			Accumulated
				Investment			Net Realized
	Paid-in-Capital			Income(Loss)			Gain(Loss)

The Internet Fund	$	—		$	91,823		$	(91,823	)
The Global Fund		(1,976,185	)		118,566			1,857,619
The Paradigm Fund		3,142			(2,365,046	)		2,361,904
The Medical Fund		—			(6,421	)		6,421
The Small Cap Opportunities Fund		(1,696,975	)		730,590			966,385
The Kinetics Government Money Market Fund		—			—			—
The Market Opportunities Fund		(772	)		(217,864	)		218,636
The Water Infrastructure Fund		(2,885	)		(214,365	)		217,250
The Multi-Disciplinary Fund		(358	)		358			—

5. Income Taxes

At December 31, 2008 the Internet, Global, Paradigm, Medical, Small Cap, Government, Market Opportunities, Water Infrastructure, and Multi-Disciplinary Funds had $169,733, $0, $4,066,980, $28,128, $0, $83, $0, $0 and $0, respectively, of undistributed net investment income on a tax basis.

At December 31, 2008 none of the funds had accumulated gains on a tax basis.

At December 31, 2008, the Feeder Funds had accumulated net realized capital loss carryforwards expiring in the following years.


Feeder Fund	2016		2015		2014		2013		2011		2010		2009

Internet	$	—	$	—	$	16,077,777	$	6,777,871	$	—	$	140,178,775	$	17,319,359
Global		—		—		—		4,885		887,154		2,635,504		5,481,052
Paradigm		417,659,386		—		—		—		—		—		—
Medical		—		—		—		—		—		—		—
Small Cap		78,193,634		—		—		—		—		—		—
Government		16		—		—		—		—		—		—
Market Opportunities		25,711,245		40,803		21		—		—		—		—
Water Infrastructure		2,008,692		—		—		—		—		—		—
Multi-Disciplinary		43,829		—		—		—		—		—		—

KINETICS MUTUAL FUNDS, INC.—FEEDER FUNDS

Notes to Financial Statements — (Continued)

December 31, 2008

To the extent that the Feeder Funds realize future net capital gains, those gains will be offset by any unused capital loss carryforwards. For the year ended December 31, 2008, Internet and Global Funds utilized $1,763,096 and $70,682, respectively, of capital loss carryforwards.

At December 31, 2008, the following Feeder Funds deferred, on a tax basis, post-October losses and straddle losses of:


			Post-October
Feeder Fund	Post-October Losses		Currency Losses		Straddle Losses

Internet	$	1,121	$	—	$	—
Global		—		8		—
Paradigm		183,653,239		237,760		—
Medical		78,010		—		88,724
Small Cap		52,575,883		51,746		—
Government		67		—		—
Market Opportunities		—		1,805		—
Water Infrastructure		3,455,944		27,093		—
Multi-Disciplinary		15,711		—		—

The tax components of dividends paid during the years ended December 31, 2008 and December 31, 2007, are:


	Internet				Global
	Ordinary		Long-Term		Ordinary		Long-Term
	Income		Capital Gains		Income		Capital Gains
	Distribution		Distribution		Distribution		Distribution

2008	$	181,761	$	—	$	44,451	$	—
2007	$	1,637,709	$	—	$	188,230	$	—


	Paradigm				Medical
	Ordinary		Long-Term		Ordinary		Long-Term
	Income		Capital Gains		Income		Capital Gains
	Distribution		Distribution		Distribution		Distribution

2008	$	—	$	7,073,063	$	463,919	$	183,981
2007	$	21,702,378	$	14,493,388	$	219,441	$	631,855


	Small Cap				Government
	Ordinary		Long-Term		Ordinary		Long-Term
	Income		Capital Gains		Income		Capital Gains
	Distribution		Distribution		Distribution		Distribution

2008	$	—	$	4,270,579	$	17,587	$	—
2007	$	5,786,962	$	5,224,746	$	43,527	$	—


	Market Opportunities				Water Infrastructure
	Ordinary		Long-Term		Ordinary		Long-Term
	Income		Capital Gains		Income		Capital Gains
	Distribution		Distribution		Distribution		Distribution

2008	$	357,384	$	—	$	—	$	—
2007	$	141,323	$	—	$	51,156	$	—

KINETICS MUTUAL FUNDS, INC.—FEEDER FUNDS

Notes to Financial Statements — (Continued)

December 31, 2008


	Multi-Disciplinary
	Ordinary		Long-Term
	Income		Capital Gains
	Distribution		Distribution

2008	$	128	$	—
2007		N/A		N/A

6. Tax Information (Unaudited)

The Internet, Global, Medical, and Market Opportunities Funds designate 36%, 100%, 79%, and 100%, respectively, of dividends declared after December 31, 2008 from net investment income as qualified dividend income under the Jobs and Growth Tax Relief Reconciliation Act of 2003.

The Medical Fund hereby designates 72% as ordinary income distributions and 28% as long-term capital gain distributions for the purposes of the dividends paid deduction, which include earnings and profits distributed to shareholders on redemptions of Fund shares.

For corporate shareholders in the Funds, the percentage of ordinary dividend income distributed for the year ended December 31, 2008, which is designated as qualifying for the dividends-received deduction, is as follows: Internet 30%, Global 24%, Medical 55%, and Market Opportunities 100%.

The Internet, Global, Medical, and Market Opportunities Funds designate 17%, 5%, 3%, and 13%, respectively, of their ordinary income distributions for the fiscal year as interest-related dividends under Internal Revenue Code Section 871(k)(1)(C).

The Internet, Global, Paradigm, Medical, Small Cap, Government, Market Opportunities, Water Infrastructure, and Multi-Disciplinary Funds designate 0%, 0%, 0%, 59%, 0%, 0%, 0%, 0% and 0%, respectively, of their ordinary income distributions as short-term capital gain distributions under Internal Revenue Code Section 871(k)(2)(C).

7. New Accounting Pronouncements

In March 2008, FASB issued Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities” (“SFAS 161”). SFAS 161 is effective for fiscal years beginning after November 15, 2008. SFAS 161 is intended to improve financial reporting for derivative instruments by requiring enhanced disclosure that enables investors to understand how and why an entity uses derivatives, how derivative

KINETICS MUTUAL FUNDS, INC.—FEEDER FUNDS

Notes to Financial Statements — (Continued)

December 31, 2008

instruments and hedging activities are accounted for, and how derivative instruments and related hedging activities affect an entity’s financial performance and financial position. Management is currently evaluating the implications of SFAS 161. The impact on the Funds’ financial statement disclosures, if any, is currently being assessed.

8. Temporary Guarantee Program for Money Market Funds (Unaudited)

The Board of Directors (the “Board”) of Kinetics Mutual Funds, Inc. approved the participation of The Kinetics Government Money Market Fund (the “Fund”) in the U.S. Department of the Treasury’s (the “Treasury”) Temporary Guarantee Program for Money Market Funds (the “Program”) for the three-month period ended December 18, 2008. On November 24, 2008, the Treasury announced the extension of the Program until April 30, 2009 and the Board approved the Fund’s continued participation in the Program on December 5, 2008. The Program seeks to protect the net asset value of shares held by a shareholder of record in a participating fund at the close of business on September 19, 2008. Any shares held by shareholders in a participating fund as of that date are insured against loss under the Program if the fund liquidates its holdings and market-based net asset value of the shares at the time of the liquidation is less than $0.995 per share. Shares acquired by a shareholder of record after the close of business on September 19, 2008 that exceed the number of shares the shareholder owned in the Fund on September 19, 2008 are not eligible for protection under the Program.

Participation in the Program for the three-month period ending December 18, 2008, required a payment to the Treasury in the amount of 0.01% of the net asset value of the Fund as of September 19, 2008. Continued participation in the Program for the period December 19, 2008 through April 30, 2009, required a payment to the Treasury in the amount of 0.015% of the net asset value of the Fund as of September 19, 2008. The Fund will bear the expense of its participation in the Program without regard to any fee waivers or expense limitations currently in effect for the Fund. The Secretary of the Treasury may extend the Program beyond April 30, 2009 through the close of business on September 18, 2009. Participation in any extension of the Program will require payment of an additional fee and approval by the Board.

KINETICS MUTUAL FUNDS, INC.—FEEDER FUNDS

Notes to Financial Statements — (Continued)

December 31, 2008

9. Information about Proxy Voting (Unaudited)

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

10. Information about the Portfolio Holdings (Unaudited)

The 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. — FEEDER FUNDS

Financial Highlights


	The Internet Fund
	No Load Class			Advisor Class A			Advisor Class C			No Load Class			Advisor Class A
	For the			For the			For the			For the			For the
	Year Ended			Year Ended			Year Ended			Year Ended			Year Ended
	December 31,			December 31,			December 31,			December 31,			December 31,
	2008			2008			2008			2007			2007


PER SHARE DATA:⁽¹⁾
Net Asset Value,
Beginning of Year	$	35.94		$	35.66		$	35.31		$	28.62		$	28.24

Income from Investment Operations:
Net investment income (loss)⁽²⁾		0.29			0.22			0.08			0.30			0.23
Net realized and unrealized gain (loss) on investments		(15.47	)		(15.33	)		(15.15	)		7.37			7.49

Total from investment operations		(15.18	)		(15.11	)		(15.07	)		7.67			7.72

Redemption Fees		0.00	⁽³⁾		0.00	⁽³⁾		—			0.00	⁽³⁾		—
Less Distributions:
From net investment income		(0.05	)		(0.05	)		(0.04	)		(0.35	)		(0.30	)
From net realized gains		—			—			—			—			—

Total distributions		(0.05	)		(0.05	)		(0.04	)		(0.35	)		(0.30	)

Net Asset Value, End of Year	$	20.71		$	20.50		$	20.20		$	35.94		$	35.66

Total Return⁽⁴⁾		(42.24	)%		(42.37	)%		(42.67	)%		26.81	%		27.35	%



SUPPLEMENTAL DATA AND RATIOS
Net assets, end of year (000’s)	$	75,112		$	318		$	113		$	166,787		$	637
Ratio of operating expenses to average net assets:
Before expense reimbursement		2.03	%		2.28	%		2.78	%		1.99	%		2.24	%
After expense reimbursement⁽⁷⁾		1.90	%		2.15	%		2.65	%		1.98	%		2.23	%
Ratio of net investment income (loss) to average net assets:
Before expense reimbursement		0.90	%		0.65	%		0.15	%		0.94	%		0.70	%
After expense reimbursement⁽⁷⁾		1.03	%		0.78	%		0.28	%		0.95	%		0.71	%
Portfolio turnover rate		N/A			N/A			N/A			N/A			N/A


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

See Notes to the Financial Statements.


The Internet Fund
	Advisor Class C			No Load Class			Advisor Class A			No Load Class			Advisor Class A			No Load Class			Advisor Class A
	February 16, 2007ˆ			For the			For the			For the			For the			For the			For the
	through			Year Ended			Year Ended			Year Ended			Year Ended			Year Ended			Year Ended
	December 31,			December 31,			December 31,			December 31,			December 31,			December 31,			December 31,
	2007			2006			2006			2005			2005			2004			2004




	$	28.66		$	24.66		$	24.40		$	25.29		$	24.93		$	23.31		$	22.88


		0.07			(0.08	)		(0.14	)		0.11			0.05			0.10			0.05

		6.87			4.15			4.09			(0.54	)		(0.44	)		2.25			2.23


		6.94			4.07			3.95			(0.43	)		(0.39	)		2.35			2.28

		0.00	⁽³⁾		0.00	⁽³⁾		—			0.00	⁽³⁾		0.00	⁽³⁾		—			—

		(0.29	)		(0.11	)		(0.11	)		(0.20	)		(0.14	)		(0.37	)		(0.23	)
		—			—			—			—			—			—			—

		(0.29	)		(0.11	)		(0.11	)		(0.20	)		(0.14	)		(0.37	)		(0.23	)

	$	35.31		$	28.62		$	28.24		$	24.66		$	24.40		$	25.29		$	24.93

		24.22	%⁽⁵⁾		16.50	%		16.18	%		(1.69	)%		(1.55	)%		10.06	%		9.95	%


	$	294		$	137,012		$	235		$	148,260		$	300		$	201,929		$	354



		2.73	%⁽⁶⁾		1.98	%		2.23	%		2.35	%		2.60	%		2.37	%		2.62	%

		2.72	%⁽⁶⁾		1.85	%		2.10	%		2.35	%		2.60	%		2.37	%		2.62	%


		0.22	%⁽⁶⁾		(0.42	)%		(0.67	)%		0.46	%		0.21	%		0.44	%		0.19	%

		0.23	%⁽⁶⁾		(0.29	)%		(0.54	)%		0.46	%		0.21	%		0.44	%		0.19	%
		N/A			N/A			N/A			N/A			N/A			N/A			N/A

See Notes to the Financial Statements.

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Financial Highlights


	The Global Fund
	No Load			Advisor			Advisor
	Class			Class A			Class C
	For the			May 19, 2008ˆ			May 19, 2008ˆ
	Year Ended			through			through
	December 31,			December 31,			December 31,
	2008			2008			2008


PER SHARE DATA:⁽¹⁾
Net Asset Value,
Beginning of Year	$	4.90		$	4.56		$	4.56

Income from Investment Operations:
Net investment income		0.07	⁽²⁾		0.03	⁽²⁾		0.02	⁽²⁾
Net realized and unrealized gain (loss) on investments		(2.56)			(2.18)			(2.17)

Total from investment operations		(2.49)			(2.15)			(2.15)

Redemption Fees		0.00	⁽³⁾		—			—
Less Distributions:
From net investment income		(0.05)			(0.05)			(0.04)
From net realized gains		—			—			—

Total distributions		(0.05)			(0.05)			(0.04)

Net Asset Value, End of Year	$	2.36		$	2.36		$	2.37

Total Return⁽⁴⁾		(50.72)	%		(47.12)	%⁽⁵⁾		(47.14)	%⁽⁵⁾



SUPPLEMENTAL DATA AND RATIOS
Net assets, end of year (000’s)	$	1,863		$	106		$	5
Ratio of operating expenses to average net assets:
Before expense reimbursement		5.98	%		8.28	%⁽⁶⁾		8.78	%⁽⁶⁾
After expense reimbursement⁽⁷⁾		1.41	%		1.65	%⁽⁶⁾		2.15	%⁽⁶⁾
Ratio of net investment income (loss) to average net assets:
Before expense reimbursement		(2.72)	%		(5.16)	%⁽⁶⁾		(5.66)	%⁽⁶⁾
After expense reimbursement⁽⁷⁾		1.85	%		1.47	%⁽⁶⁾		0.97	%⁽⁶⁾
Portfolio turnover rate		N/A			N/A			N/A


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

See Notes to the Financial Statements.


The Global Fund
	No Load			No Load			No Load			No Load
	Class			Class			Class			Class
	For the			For the			For the			For the
	Year Ended			Year Ended			Year Ended			Year Ended
	December 31,			December 31,			December 31,			December 31,
	2007			2006			2005			2004




	$	5.00		$	4.43		$	4.50		$	4.28


		0.22			0.13			0.15			0.08
		(0.01	)		0.62			(0.03	)		0.25

		0.21			0.75			0.12			0.33

		0.00	⁽³⁾		0.00	⁽³⁾		0.00	⁽³⁾		—

		(0.31	)		(0.18	)		(0.19	)		(0.11	)
		—			—			—			—

		(0.31	)		(0.18	)		(0.19	)		(0.11	)

	$	4.90		$	5.00		$	4.43		$	4.50

		4.27	%		16.90	%		2.65	%		7.67	%


	$	3,138		$	3,991		$	3,896		$	4,584

		3.84	%		3.09	%		3.22	%		3.45	%
		1.48	%		1.39	%		2.69	%		2.67	%

		1.87	%		1.30	%		2.80	%		1.08	%
		4.23	%		3.00	%		3.33	%		1.84	%
		N/A			N/A			N/A			N/A

See Notes to the Financial Statements.

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Financial Highlights


	The Paradigm Fund
	No Load Class			Advisor Class A			Advisor Class C			Institutional Class
	For the			For the			For the			For the
	Year Ended			Year Ended			Year Ended			Year Ended
	December 31,			December 31,			December 31,			December 31,
	2008			2008			2008			2008


PER SHARE DATA:⁽¹⁾
Net Asset Value,
Beginning of Year	$	30.99		$	30.52		$	29.90		$	30.97

Income from Investment Operations:
Net investment income (loss)		0.12	⁽²⁾		0.06	⁽²⁾		(0.05	)⁽²⁾		0.18	⁽²⁾
Net realized and unrealized gain (loss) on investments		(16.62	)⁽⁸⁾		(16.34	)⁽⁸⁾		(15.97	)⁽⁸⁾		(16.63	)⁽⁸⁾

Total from investment operations		(16.50	)		(16.28	)		(16.02	)		(16.45	)

Redemption Fees		0.01			0.00	⁽³⁾		0.00	⁽³⁾		0.00	⁽³⁾
Less Distributions:
From net investment income		—			—			—			—
From net realized gains		(0.08	)		(0.08	)		(0.08	)		(0.08	)

Total distributions		(0.08	)		(0.08	)		(0.08	)		(0.08	)

Net Asset Value, End of Year	$	14.42		$	14.16		$	13.80		$	14.44

Total Return⁽⁴⁾		(53.17	)%⁽⁸⁾		(53.30	)%⁽⁸⁾		(53.54	)%⁽⁸⁾		(53.11	)%⁽⁸⁾



SUPPLEMENTAL DATA AND RATIOS
Net assets, end of year (000’s)	$	740,983		$	249,424		$	147,915		$	128,129
Ratio of operating expenses to average net assets:
Before expense reimbursement		1.72	%		1.97	%		2.47	%		1.67	%
After expense reimbursement⁽⁷⁾		1.66	%		1.91	%		2.41	%		1.46	%
Ratio of net investment income (loss) to average net assets:
Before expense reimbursement		0.46	%		0.21	%		(0.29	)%		0.51	%
After expense reimbursement⁽⁷⁾		0.52	%		0.27	%		(0.23	)%		0.72	%
Portfolio turnover rate		N/A			N/A			N/A			N/A


ˆ	Commencement of operations.
(1)	Information presented relates to a share of capital stock outstanding for each period.
(2)	Net investment income per share represents net investment income divided by the average shares outstanding throughout the period.
(3)	Amount calculated is less than $0.005.
(4)	The total return calculation does not reflect the 5.75% front end sales charge on Advisor Class A shares.
(5)	Not annualized.
(6)	Annualized.
(7)	See Note #3, Investment Adviser, for the waiver and expense reimbursement discussion.
(8)	Includes adviser reimbursement from net realized losses on the disposal of investments in violation of restrictions and trading errors. This reimbursement comprises less than $0.005 of the NAVs for each class at the time of the reimbursement and 0.03% of the total return for the Institutional Class for the fiscal year ended December 31, 2008. There was no impact on the other classes.

See Notes to the Financial Statements.


The Paradigm Fund
	No Load Class			Advisor Class A			Advisor Class C			Institutional Class			No Load Class			Advisor Class A
	For the			For the			For the			For the			For the			For the
	Year Ended			Year Ended			Year Ended			through			Year Ended			Year Ended
	December 31,			December 31,			December 31,			December 31,			December 31,			December 31,
	2007			2007			2007			2007			2006			2006




	$	25.79		$	25.43		$	24.98		$	25.76		$	20.33		$	20.08


		0.11	⁽²⁾		0.04	⁽²⁾		(0.10	)⁽²⁾		0.17	⁽²⁾		0.14	⁽²⁾		0.08	⁽²⁾
		5.35			5.27			5.15			5.34			5.52			5.43

		5.46			5.31			5.05			5.51			5.66			5.51

		0.00	⁽³⁾		0.00	⁽³⁾		0.00	⁽³⁾		0.00	⁽³⁾		0.00	⁽³⁾		0.00	⁽³⁾

		(0.13	)		(0.09	)		(0.00	)		(0.17	)		(0.16	)		(0.12	)
		(0.13	)		(0.13	)		(0.13	)		(0.13	)		(0.04	)		(0.04	)

		(0.26	)		(0.22	)		(0.13	)		(0.30	)		(0.20	)		(0.16	)

	$	30.99		$	30.52		$	29.90		$	30.97		$	25.79		$	25.43

		21.15	%		20.87	%		20.20	%		21.37	%		27.81	%		27.42	%


	$	2,910,518		$	544,046		$	320,962		$	804,755		$	1,337,761		$	183,031

		1.68	%		1.93	%		2.43	%		1.63	%		1.79	%		2.04	%
		1.68	%		1.93	%		2.43	%		1.48	%		1.63	%		1.88	%

		0.39	%		0.14	%		(0.36	)%		0.44	%		0.44	%		0.19	%
		0.39	%		0.14	%		(0.36	)%		0.59	%		0.60	%		0.35	%
		N/A			N/A			N/A			N/A			N/A			N/A

See Notes to the Financial Statements.

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Financial Highlights


	The Paradigm Fund
	Advisor Class C			Institutional Class			No Load Class			Advisor Class A			Advisor Class C
	For the			For the			For the			For the			For the
	Year Ended			through			Year Ended			Year Ended			Year Ended
	December 31,			December 31,			December 31,			December 31,			December 31,
	2006			2006			2005			2005			2005


PER SHARE DATA:⁽¹⁾
Net Asset Value,
Beginning of Year	$	19.76		$	20.31		$	17.54		$	17.40		$	17.21

Income from Investment Operations:
Net investment income (loss)		(0.03	)⁽²⁾		0.19	⁽²⁾		(0.03	)⁽²⁾		(0.07	)⁽²⁾		(0.17	)⁽²⁾
Net realized and unrealized gain (loss) on investments		5.33			5.49			2.82			2.77			2.74

Total from investment operations		5.30			5.68			2.79			2.70			2.57

Redemption Fees		0.00	⁽³⁾		—			0.03			0.00	⁽³⁾		0.00	⁽³⁾
Less Distributions:
From net investment income		(0.04	)		(0.19	)		(0.01	)		—			—
From net realized gains		(0.04	)		(0.04	)		(0.02	)		(0.02	)		(0.02	)

Total distributions		(0.08	)		(0.23	)		(0.03	)		(0.02	)		(0.02	)

Net Asset Value, End of Year	$	24.98		$	25.76		$	20.33		$	20.08		$	19.76

Total Return⁽⁴⁾		26.82	%		27.96	%		16.11	%		15.54	%		14.96	%



SUPPLEMENTAL DATA AND RATIOS
Net assets, end of year (000’s)	$	116,226		$	507,314		$	418,914		$	60,421		$	38,740
Ratio of operating expenses to average net assets:
Before expense reimbursement		2.54	%		1.74	%		1.93	%		2.18	%		2.68	%
After expense reimbursement⁽⁷⁾		2.38	%		1.43	%		1.69	%		1.94	%		2.44	%
Ratio of net investment income (loss) to average net assets:
Before expense reimbursement		(0.31	)%		0.48	%		(0.41	)%		(0.66	)%		(1.16	)%
After expense reimbursement⁽⁷⁾		(0.15	)%		0.79	%		(0.17	)%		(0.42	)%		(0.92	)%
Portfolio turnover rate		N/A			N/A			N/A			N/A			N/A


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


(7)	See Note #3, Investment Adviser, for the waiver and expense reimbursement discussion.

See Notes to the Financial Statements.


The Paradigm Fund
Institutional Class			No Load Class			Advisor Class A			Advisor Class C
May 27, 2005ˆ			For the			For the			For the
through			Year Ended			Year Ended			Year Ended
December 31,			December 31,			December 31,			December 31,
2005			2004			2004			2004




$	18.13		$	14.91		$	14.82		$	14.73



	0.01	⁽²⁾		(0.06	)⁽²⁾		(0.10	)		(0.18	)


	2.23			3.17			3.16			3.14


	2.24			3.11			3.06			2.96

	—			—			—			—


	(0.04	)		(0.02	)		(0.02	)		(0.02	)
	(0.02	)		(0.46	)		(0.46	)		(0.46	)

	(0.06	)		(0.48	)		(0.48	)		(0.48	)

$	20.31		$	17.54		$	17.40		$	17.21

	12.35	%⁽⁵⁾		20.84	%		20.63	%		20.08	%




$	10,895		$	89,313		$	26,525		$	9,426


	1.88	%⁽⁶⁾		2.10	%		2.35	%		2.85	%

	1.49	%⁽⁶⁾		1.74	%		1.99	%		2.49	%


	(0.37	)%⁽⁶⁾		(0.77	)%		(1.02	)%		(1.52	)%

	0.02	%⁽⁶⁾		(0.41	)%		(0.66	)%		(1.16	)%
	N/A			N/A			N/A			N/A

See Notes to the Financial Statements.

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Financial Highlights


	The Medical Fund
	No Load Class			Advisor Class A			Advisor Class C			No Load Class			Advisor Class A
	For the			For the			For the			For the			For the
	Year Ended			Year Ended			Year Ended			Year Ended			Year Ended
	December 31,			December 31,			December 31,			December 31,			December 31,
	2008			2008			2008			2007			2007


PER SHARE DATA:⁽¹⁾
Net Asset Value,
Beginning of Year	$	19.82		$	19.39		$	19.34		$	17.83		$	17.47

Income from Investment Operations:
Net investment income (loss)⁽²⁾		0.19			0.13			0.05			0.10			0.05
Net realized and unrealized gain (loss) on investments		(4.25	)		(4.15	)		(4.13	)		2.67			2.62

Total from investment operations		(4.06	)		(4.02	)		(4.08	)		2.77			2.67

Redemption Fees		0.01			0.04			0.02			0.01			0.00	⁽³⁾
Less Distributions:
From net investment income		(0.16	)		(0.13	)		(0.07	)		(0.10	)		(0.06	)
From net realized gains		(0.38	)		(0.38	)		(0.38	)		(0.69	)		(0.69	)

Total distributions		(0.54	)		(0.51	)		(0.45	)		(0.79	)		(0.75	)

Net Asset Value, End of Year	$	15.23		$	14.90		$	14.83		$	19.82		$	19.39

Total Return⁽⁴⁾		(20.42	)%		(20.49	)%		(20.97	)%		15.47	%		15.16	%



SUPPLEMENTAL DATA AND RATIOS
Net assets, end of year (000’s)	$	15,727		$	2,941		$	314		$	13,917		$	1,427
Ratio of operating expenses to average net assets:
Before expense reimbursement		2.26	%		2.51	%		3.01	%		2.41	%		2.66	%
After expense reimbursement⁽⁷⁾		1.41	%		1.66	%		2.16	%		1.40	%		1.65	%
Ratio of net investment income (loss) to average net assets:
Before expense reimbursement		0.18	%		(0.07	)%		(0.57	)%		(0.51	)%		(0.76	)%
After expense reimbursement⁽⁷⁾		1.03	%		0.78	%		0.28	%		0.50	%		0.25	%
Portfolio turnover rate		N/A			N/A			N/A			N/A			N/A


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

See Notes to the Financial Statements.


The Medical Fund
	Advisor Class C			No Load Class			Advisor Class A			No Load Class			Advisor Class A			No Load Class			Advisor Class A
	February 16, 2007ˆ			For the			For the			For the			For the			For the			For the
	through			Year Ended			Year Ended			Year Ended			Year Ended			Year Ended			Year Ended
	December 31,			December 31,			December 31,			December 31,			December 31,			December 31,			December 31,
	2007			2006			2006			2005			2005			2004			2004




	$	18.29		$	16.64		$	16.34		$	16.76		$	16.49		$	15.67		$	15.47


		(0.04	)		0.06			0.01			(0.18	)		(0.22	)		(0.10	)		(0.11	)

		1.79			2.40			2.35			0.06			0.07			1.19			1.13

		1.75			2.46			2.36			(0.12	)		(0.15	)		1.09			1.02

		0.00	⁽³⁾		0.00	⁽³⁾		—			0.00	⁽³⁾		—			—			—

		(0.01	)		(0.04	)		—			—			—			—			—
		(0.69	)		(1.23	)		(1.23	)		—			—			—			—

		(0.70	)		(1.27	)		(1.23	)		—			—			—			—

	$	19.34		$	17.83		$	17.47		$	16.64		$	16.34		$	16.76		$	16.49

		9.55	%⁽⁵⁾		14.81	%		14.49	%		(0.72	)%		(0.91	)%		6.96	%		6.59	%


	$	148		$	15,527		$	711		$	13,943		$	559		$	19,583		$	696

		3.19	%⁽⁶⁾		2.28	%		2.53	%		2.48	%		2.73	%		2.54	%		2.79	%
		2.15	%⁽⁶⁾		1.44	%		1.69	%		2.44	%		2.69	%		2.39	%		2.64	%


		(1.30	)%⁽⁶⁾		(0.51	)%		(0.76	)%		(1.14	)%		(1.39	)%		(1.31	)%		(1.56	)%
		(0.26	)%⁽⁶⁾		0.33	%		0.08	%		(1.10	)%		(1.35	)%		(1.16	)%		(1.41	)%
		N/A			N/A			N/A			N/A			N/A			N/A			N/A

See Notes to the Financial Statements.

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Financial Highlights


	The Small Cap Opportunities Fund
	No Load Class			Advisor Class A			Advisor Class C			Institutional Class			No Load Class
	For the			For the			For the			For the			For the
	Year Ended			Year Ended			Year Ended			Year Ended			Year Ended
	December 31,			December 31,			December 31,			December 31,			December 31,
	2008			2008			2008			2008			2007


PER SHARE DATA:⁽¹⁾
Net Asset Value, Beginning of Year	$	31.92		$	31.63		$	31.57		$	31.92		$	26.92

Income from Investment Operations:
Net investment income (loss)⁽²⁾		0.05			(0.01	)		(0.12	)		0.10			0.01
Net realized and unrealized gain (loss) on investments		(18.53	)⁽⁸⁾		(18.34	)⁽⁸⁾		(18.26	)⁽⁸⁾		(18.56	)⁽⁸⁾		5.29

Total from investment operations		(18.48	)		(18.35	)		(18.38	)		(18.46	)		5.30

Redemption Fees		0.00	⁽³⁾		0.00	⁽³⁾		0.00	⁽³⁾		0.00	⁽³⁾		0.00	⁽³⁾
Less Distributions:
From net investment income		—			—			—			—			(0.23	)
From net realized gains		(0.27	)		(0.27	)		(0.27	)		(0.27	)		(0.07	)

Total distributions		(0.27	)		(0.27	)		(0.27	)		(0.27	)		(0.30	)

Net Asset Value, End of Year	$	13.17		$	13.01		$	12.92		$	13.19		$	31.92

Total Return⁽⁴⁾		(57.88	)%⁽⁸⁾		(58.00	)%⁽⁸⁾		(58.20	)%⁽⁸⁾		(57.82	)%⁽⁸⁾		19.65	%




SUPPLEMENTAL DATA AND RATIOS
Net assets, end of year (000’s)	$	126,971		$	12,090		$	2,871		$	68,408		$	729,278
Ratio of operating expenses to average net assets:
Before expense reimbursement		1.79	%		2.04	%		2.54	%		1.74	%		1.71	%
After expense reimbursement⁽⁷⁾		1.67	%		1.92	%		2.42	%		1.47	%		1.69	%
Ratio of net investment income (loss) to average net assets:
Before expense reimbursement		0.09	%		(0.16	)%		(0.66	)%		0.14	%		0.00	%
After expense reimbursement⁽⁷⁾		0.21	%		(0.04	)%		(0.54	)%		0.41	%		0.02	%
Portfolio turnover rate		N/A			N/A			N/A			N/A			N/A


ˆ	Commencement of operations.
(1)	Information presented relates to a share of capital stock outstanding for each period.
(2)	Net investment income per share represents net investment income divided by the average shares outstanding throughout the period.
(3)	Amount calculated is less than $0.005.
(4)	The total return calculation does not reflect the 5.75% front end sales charge on Advisor Class A shares.
(5)	Not annualized.
(6)	Annualized.
(7)	See Note #3, Investment Adviser, for the waiver and expense reimbursement discussion.
(8)	Includes adviser reimbursement from the net realized loss on the disposal of investments in violation of restrictions. This reimbursement comprises less than $0.005 of the NAVs for each class at the time of the reimbursement and 0.03% of the total return for Adviser Class C for the fiscal year ended December 31, 2008. There was no impact on the other classes.

See Notes to the Financial Statements.


The Small Cap Opportunities Fund
	Advisor Class A			Advisor Class C			Institutional Class			No Load Class			Advisor Class A			Institutional Class
	For the			February 16, 2007ˆ			For the			For the			For the			For the
	Year Ended			through			Year Ended			Year Ended			Year Ended			Year Ended
	December 31,			December 31,			December 31,			December 31,			December 31,			December 31,
	2007			2007			2007			2006			2006			2006



	$	26.71		$	28.70		$	26.91		$	21.02		$	20.89		$	21.00


		(0.07	)		(0.21	)		0.07			0.03			(0.03	)		0.08

		5.25			3.33			5.29			5.92			5.88			5.91

		5.18			3.12			5.36			5.95			5.85			5.99

		0.00	⁽³⁾		0.02			0.00	⁽³⁾		0.00	⁽³⁾		0.00	⁽³⁾		0.00	⁽³⁾

		(0.19	)		(0.20	)		(0.28	)		(0.05	)		(0.03	)		(0.08	)
		(0.07	)		(0.07	)		(0.07	)		—			—			—

		(0.26	)		(0.27	)		(0.35	)		(0.05	)		(0.03	)		(0.08	)

	$	31.63		$	31.57		$	31.92		$	26.92		$	26.71		$	26.91

		19.36	%		10.94	%⁽⁵⁾		19.91	%		28.37	%		28.03	%		28.52	%





	$	36,390		$	4,942		$	316,709		$	268,875		$	12,144		$	209,592

		1.96	%		2.47	%⁽⁶⁾		1.66	%		1.83	%		2.08	%		1.78	%
		1.94	%		2.45	%⁽⁶⁾		1.49	%		1.58	%		1.83	%		1.38	%


		(0.25	)%		(0.76	)%⁽⁶⁾		0.05	%		(0.14	)%		(0.39	)%		(0.09	)%
		(0.23	)%		(0.75	)%⁽⁶⁾		0.22	%		0.11	%		(0.14	)%		0.31	%
		N/A			N/A			N/A			N/A			N/A			N/A

See Notes to the Financial Statements.

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Financial Highlights


	The Small Cap Opportunities Fund
	No Load Class			Advisor Class A			Institutional Class			No Load Class			Advisor Class A
	For the			For the			August 12, 2005ˆ			For the			For the
	Year Ended			Year Ended			through			Year Ended			Year Ended
	December 31,			December 31,			December 31,			December 31,			December 31,
	2005			2005			2005			2004			2004


PER SHARE DATA:⁽¹⁾
Net Asset Value, Beginning of Year	$	18.69		$	18.63		$	20.48		$	16.55		$	16.50

Income from Investment Operations:
Net investment income⁽²⁾		0.12			0.02			0.00⁽³	⁾		0.22			0.18
Net realized and unrealized gain on investments		2.35			2.38			0.67			2.49			2.49

Total from investment operations		2.47			2.40			0.67			2.71			2.67

Redemption Fees		0.00	⁽³⁾		0.00	⁽³⁾		—			—			—
Less Distributions:
From net investment income		(0.01	)		(0.01	)		(0.02	)		(0.16	)		(0.13	)
From net realized gains		(0.13	)		(0.13	)		(0.13	)		(0.41	)		(0.41	)

Total distributions		(0.14	)		(0.14	)		(0.15	)		(0.57	)		(0.54	)

Net Asset Value, End of Year	$	21.02		$	20.89		$	21.00		$	18.69		$	18.63

Total Return⁽⁴⁾		13.17	%		12.83	%		3.23	%⁽⁵⁾		16.40	%		16.17	%



SUPPLEMENTAL DATA AND RATIOS
Net assets, end of year (000’s)	$	55,979		$	5,205		$	67,586		$	35,702		$	2,929
Ratio of operating expenses to average net assets:
Before expense reimbursement		1.93	%		2.16	%		1.77	%⁽⁶⁾		2.03	%		2.28	%
After expense reimbursement⁽⁷⁾		1.66	%		1.94	%		1.59	%⁽⁶⁾		1.74	%		1.99	%
Ratio of net investment income (loss) to average net assets:
Before expense reimbursement		0.18	%		(0.17	)%		(0.21	)%⁽⁶⁾		1.01	%		0.76	%
After expense reimbursement⁽⁷⁾		0.45	%		0.06	%		(0.03	)%⁽⁶⁾		1.30	%		1.05	%
Portfolio turnover rate		N/A			N/A			N/A			N/A			N/A


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

See Notes to the Financial Statements.

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Financial Highlights


	The Kinetics Government Money Market Fund
	For The			For the			For the			For the			For the
	Year Ended			Year Ended			Year Ended			Year Ended			Year Ended
	December 31,			December 31,			December 31,			December 31,			December 31,
	2008			2007			2006			2005			2004


PER SHARE DATA:⁽¹⁾
Net Asset Value, Beginning of Year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00

Income from Investment Operations:
Net investment income		0.01			0.04			0.04			0.02			—
Net realized and unrealized gain on investments		—			—			—			—			—

Total from investment operations		0.01			0.04			0.04			0.02			—

Less Distributions:
From net investment income		(0.01	)		(0.04	)		(0.04	)		(0.02	)		—

Total distributions		(0.01	)		(0.04	)		(0.04	)		(0.02	)		—

Net Asset Value, End of Year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00

Total Return		0.91	%		3.77	%		4.45	%		1.88	%		0.00	%



SUPPLEMENTAL DATA AND RATIOS
Net assets, end of year (000’s)	$	2,688		$	1,190		$	1,425		$	1,052		$	1,166
Ratio of operating expenses to average net assets:
Before expense reimbursement		3.55	%		6.42	%		3.94	%		5.08	%		2.11	%
After expense reimbursement⁽²⁾		0.76	%		0.98	%		0.22	%		1.06	%		0.98	%
Ratio of net investment income (loss) to average net assets:
Before expense reimbursement		(1.98	)%		(1.74	)%		0.73	%		(2.17	)%		(1.13	)%
After expense reimbursement⁽²⁾		0.81	%		3.70	%		4.45	%		1.85	%		0.00	%
Portfolio turnover rate		N/A			N/A			N/A			N/A			N/A


(1)	Information presented relates to a share of capital stock outstanding for each period.
(2)	See Note #3, Investment Adviser, for the waiver and expense reimbursement discussion.

See Notes to the Financial Statements.

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Financial Highlights


	The Market Opportunities Fund
	No Load Class			Advisor Class A			Advisor Class C			Institutional Class
	For the			For the			For the			May 19, 2008ˆ
	Year Ended			Year Ended			Year Ended			through
	December 31,			December 31,			December 31,			December 31,
	2008			2008			2008			2008


PER SHARE DATA:⁽¹⁾
Net Asset Value, Beginning of Year	$	16.12		$	16.07		$	16.01		$	13.71

Income from Investment Operations:
Net investment income (loss)		0.11	⁽²⁾		0.08	⁽²⁾		0.02	⁽²⁾		0.08	⁽²⁾
Net realized and unrealized gain (loss) on investments		(9.02	)		(8.97	)		(8.91	)		(6.55	)
Payment by adviser⁽⁷⁾		0.06			0.06			0.06			0.06

Total from investment operations		(8.85	)		(8.83	)		(8.83	)		(6.41	)

Redemption Fees		0.01			0.00	⁽³⁾		0.00	⁽³⁾		—
Less Distributions:
From net investment income		(0.06	)		(0.02	)		(0.01	)		(0.09	)
From net realized gains		—			—			—			—

Total distributions		(0.06	)		(0.02	)		(0.01	)		(0.09	)

Net Asset Value, End of Year	$	7.22		$	7.22		$	7.17		$	7.21

Total Return⁽⁴⁾		(54.82	)%		(54.91	)%		(55.13	)%		(46.77	)%⁽⁵⁾



SUPPLEMENTAL DATA AND RATIOS
Net assets, end of year (000’s)	$	34,246		$	18,514		$	4,771		$	5
Ratio of operating expenses to average net assets:
Before expense reimbursement		1.82	%		2.07	%		2.57	%		1.82	%⁽⁶⁾
After expense reimbursement⁽⁷⁾		1.66	%		1.91	%		2.41	%		1.44	%⁽⁶⁾
Ratio of net investment income (loss) to average net assets:
Before expense reimbursement		0.78	%		0.53	%		0.03	%		0.94	%⁽⁶⁾
After expense reimbursement⁽⁷⁾		0.94	%		0.69	%		0.19	%		1.32	%⁽⁶⁾
Portfolio turnover rate		N/A			N/A			N/A			N/A


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

See Notes to the Financial Statements.


The Market Opportunities Fund
	No Load Class			Advisor Class A			Advisor Class C			No Load Class			Advisor Class A
	For the			For the			February 16, 2007ˆ			January 31, 2006ˆ			January 31, 2006ˆ
	Year Ended			Year Ended			through			through			through
	December 31,			December 31,			December 31,			December 31,			December 31,
	2007			2007			2007			2006			2006



	$	12.05		$	12.04		$	12.99		$	10.00		$	10.00


		0.04	⁽²⁾		0.00	⁽²⁾		(0.05	)⁽²⁾		0.04			0.02

		4.05			4.04			3.07			2.05			2.05
		—			—			—			—			—

		4.09			4.04			3.02			2.09			2.07

		0.01			0.00	⁽³⁾		0.00	⁽³⁾		0.00	⁽³⁾		—

		(0.03	)		(0.01	)		—			(0.04	)		(0.03	)
		—			—			—			—			—

		(0.03	)		(0.01	)		—			(0.04	)		(0.03	)

	$	16.12		$	16.07		$	16.01		$	12.05		$	12.04

		34.03	%		33.54	%		23.25	%⁽⁵⁾		20.85	%⁽⁵⁾		20.68	%⁽⁵⁾



	$	63,004		$	43,907		$	8,790		$	7,994		$	9,591

		1.91	%		2.16	%		2.66	%⁽⁶⁾		2.68	%⁽⁶⁾		2.93	%⁽⁶⁾
		1.74	%		1.99	%		2.49	%⁽⁶⁾		1.46	%⁽⁶⁾		1.71	%⁽⁶⁾


		0.12	%		(0.14	)%		(0.60	)%⁽⁶⁾		(0.76	)%⁽⁶⁾		(1.01	)%⁽⁶⁾
		0.29	%		0.03	%		(0.43	)%⁽⁶⁾		0.46	%⁽⁶⁾		(0.21	)%⁽⁶⁾
		N/A			N/A			N/A			N/A			N/A

See Notes to the Financial Statements.

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Financial Highlights


	The Water Infrastructure Fund
	No Load Class			Advisor Class A			Advisor Class C			Institutional Class
	For the			For the			For the			For the
	Year Ended			Year Ended			Year Ended			Year Ended
	December 31,			December 31,			December 31,			December 31,
	2008			2008			2008			2008


PER SHARE DATA:⁽¹⁾
Net Asset Value, Beginning of Year	$	10.17		$	10.17		$	10.16		$	10.18

Income from Investment Operations:
Net investment income⁽²⁾		0.10			0.07			0.03			0.12
Net realized and unrealized gain (loss) on investments		(2.66	)		(2.65	)		(2.65	)		(2.67	)

Total from investment operations		(2.56	)		(2.58	)		(2.62	)		(2.55	)

Redemption Fees		0.00	⁽³⁾		0.00	⁽³⁾		—			0.00	⁽³⁾
Less Distributions:
From net investment income⁽²⁾		—			—			—			—
From net realized gains		—			—			—			—

Total distributions		—			—			—			—

Net Asset Value, End of Year	$	7.61		$	7.59		$	7.54		$	7.63

Total Return⁽⁴⁾		(25.17	)%		(25.37	)%		(25.79	)%		(25.05	)%



SUPPLEMENTAL DATA AND RATIOS
Net assets, end of year (000’s)	$	6,598		$	7,661		$	1,571		$	251
Ratio of operating expenses to average net assets:
Before expense reimbursement		2.20	%		2.45	%		2.95	%		2.15	%
After expense reimbursement⁽⁷⁾		1.65	%		1.90	%		2.40	%		1.45	%
Ratio of net investment income (loss) to average net assets:
Before expense reimbursement		0.55	%		0.30	%		(0.20	)%		0.60	%
After expense reimbursement⁽⁷⁾		1.10	%		0.85	%		0.35	%		1.30	%
Portfolio turnover rate		N/A			N/A			N/A			N/A


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

See Notes to the Financial Statements.


The Water Infrastructure Fund
	No Load Class			Advisor Class A			Advisor Class C			Institutional Class
	June 29, 2007ˆ			June 29, 2007ˆ			June 29, 2007ˆ			June 29, 2007ˆ
	through			through			through			through
	December 31,			December 31,			December 31,			December 31,
	2007			2007			2007			2007



	$	10.00		$	10.00		$	10.00		$	10.00


		0.06			0.05			0.02			0.06
		0.20			0.20			0.21			0.21

		0.26			0.25			0.23			0.27

		—			0.00	⁽³⁾		0.00	⁽³⁾		—

		(0.04	)		(0.03	)		(0.02	)		(0.04	)
		(0.05	)		(0.05	)		(0.05	)		(0.05	)

		(0.09	)		(0.08	)		(0.07	)		(0.09	)

	$	10.17		$	10.17		$	10.16		$	10.18

		2.64	%⁽⁵⁾		2.55	%⁽⁵⁾		2.33	%⁽⁵⁾		2.76	%⁽⁵⁾




	$	2,385		$	2,459		$	1,201		$	103

		3.62	%⁽⁶⁾		3.87	%⁽⁶⁾		4.37	%⁽⁶⁾		3.58	%⁽⁶⁾
		1.74	%⁽⁶⁾		1.99	%⁽⁶⁾		2.49	%⁽⁶⁾		1.54	%⁽⁶⁾

		(0.73	)%⁽⁶⁾		(0.98	)%⁽⁶⁾		(1.48	)%⁽⁶⁾		(0.69	)%⁽⁶⁾
		1.15	%⁽⁶⁾		0.90	%⁽⁶⁾		0.40	%⁽⁶⁾		1.35	%⁽⁶⁾
		N/A			N/A			N/A			N/A

See Notes to the Financial Statements.

KINETICS MUTUAL FUNDS, INC. — FEEDER FUNDS

Financial Highlights


	The Multi-Disciplinary Fund
	No Load Class			Advisor Class A			Advisor Class C			Institutional Class
	February 11, 2008ˆ			February 11, 2008ˆ			February 11, 2008ˆ			February 11, 2008ˆ
	through			through			through			through
	December 31,			December 31,			December 31,			December 31,
	2008			2008			2008			2008


PER SHARE DATA:⁽¹⁾
Net Asset Value, Beginning of Period	$	10.00		$	10.00		$	10.00		$	10.00

Income from Investment Operations:
Net investment income (loss)⁽²⁾		0.01			(0.01	)		(0.05	)		0.02
Net realized and unrealized gain (loss) on investments		(1.79	)		(1.79	)		(1.78	)		(1.79	)

Total from investment operations		(1.78	)		(1.80	)		(1.83	)		(1.77	)

Redemption Fees		—			—			—			—
Less Distributions:
From net investment income		(0.00	)⁽³⁾		(0.00	)⁽³⁾		(0.00	)⁽³⁾		(0.00	)⁽³⁾
From net realized gains		—			—			—			—
Total distributions		(0.00	)		(0.00	)		(0.00	)		(0.00	)

Net Asset Value, End of Period	$	8.22		$	8.20		$	8.17		$	8.23

Total Return⁽⁴⁾		(17.76	)%⁽⁵⁾		(17.97	)%⁽⁵⁾		(18.30	)%⁽⁵⁾		(17.65	)%⁽⁵⁾



SUPPLEMENTAL DATA AND RATIOS
Net assets, end of year (000’s)	$	99		$	84		$	88		$	82
Ratio of operating expenses to average net assets:
Before expense reimbursement		17.58	%⁽⁶⁾		17.83	%⁽⁶⁾		18.33	%⁽⁶⁾		17.53	%⁽⁶⁾
After expense reimbursement⁽⁷⁾		1.49	%⁽⁶⁾		1.74	%⁽⁶⁾		2.24	%⁽⁶⁾		1.29	%⁽⁶⁾
Ratio of net investment income (loss) to average net assets:
Before expense reimbursement		(15.99	)%⁽⁶⁾		(16.24	)%⁽⁶⁾		(16.74	)%⁽⁶⁾		(15.94	)%⁽⁶⁾
After expense reimbursement⁽⁷⁾		0.10	%⁽⁶⁾		(0.15	)% ⁽⁶⁾		(0.65	)%⁽⁶⁾		0.30	%⁽⁶⁾
Portfolio turnover rate		N/A			N/A			N/A			N/A


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

See Notes to the Financial Statements.

KINETICS MUTUAL FUNDS, INC.

Report of Independent Registered
Public Accounting Firm

To the Shareholders of and Board of Directors

Kinetics Mutual Funds, Inc.

Elmsford, New York

We have audited the accompanying statements of assets and liabilities of The Internet Fund, The Global Fund, The Paradigm Fund, The Medical Fund, The Small Cap Opportunities Fund, The Kinetics Government Money Market Fund, The Market Opportunities Fund, The Water Infrastructure Fund, and The Multi-Disciplinary Fund, each a series of shares of Kinetics Mutual Funds, Inc. (the “Funds”), as of December 31, 2008, and the related statements of operations, the statements of changes in net assets and financial highlights for the periods indicated thereon. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform, nor were the Funds required to have, an audit of their internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly in all material respects, the financial position of the above mentioned Funds as of December 31, 2008, the results of their operations, the changes in their net assets and financial highlights for the periods indicated thereon, in conformity with accounting principles generally accepted in the United States of America.

TAIT, WELLER & BAKER LLP

Philadelphia, Pennsylvania

February 27, 2009

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Internet Portfolio

Portfolio of Investments — December 31, 2008


Identifier	COMMON STOCKS — 66.85%	Shares		Value


	*Aerospace & Defense — 4.77%*
CAI	CACI International, Inc. — Class A*		80,000	$	3,607,200

	*Asian Exchanges — 4.98%*
388 HK	Hong Kong Exchanges & Clearing Limited		100,000		949,653
8697 JP	Osaka Securities Exchange Co., Ltd.		144		629,057
SGX SP	Singapore Exchange Limited		620,000		2,186,083

					3,764,793

	*Asset Management — 0.67%*
URB/A CN	Urbana Corp. — Class A*		240,000		262,454
GROW	US Global Investors, Inc. — Class A⁽¹⁾		48,000		234,720
WSDT	WisdomTree Investments, Inc.*⁽¹⁾		12,000		8,400

					505,574

	*Capital Markets — 1.59%*
CLST LN	Collins Stewart plc		4,000		3,379
LAB	LaBranche & Co. Inc.*		210,000		1,005,900
NTRS	Northern Trust Corp.		2,000		104,280
STT	State Street Corporation		2,000		78,660
TLPR LN	Tullett Prebon plc		4,000		7,850

					1,200,069

	*Commercial Services & Supplies — 6.68%*
CDCO	Comdisco Holding Company, Inc.*⁽¹⁾		194,400		1,516,320
CSGP	CoStar Group, Inc.*⁽¹⁾		2,000		65,880
RBA	Ritchie Bros. Auctioneers, Incorporated⁽¹⁾		162,000		3,470,040

					5,052,240

	*Computers & Peripherals — 0.56%*
AAPL	Apple, Inc.*		5,000		426,750

	*Diversified Consumer Services — 0.37%*
APOL	Apollo Group, Inc. — Class A*⁽¹⁾		2,000		153,240
BID	Sotheby’s⁽¹⁾		14,400		128,016

					281,256

See Notes to the Financial Statements.

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Internet Portfolio

Portfolio of Investments — December 31, 2008 — (Continued)


Identifier		Shares		Value


	*Diversified Financial Services — 1.63%*
CLE LN	Climate Exchange PLC*		40,000	$	506,089
CME	CME Group, Inc.		2,476		515,280
ICE	IntercontinentalExchange Inc.*		2,000		164,880
MKTX	MarketAxess Holdings, Inc.*⁽¹⁾		6,000		48,960

					1,235,209

	*European Exchanges — 1.17%*
DB1 GR	Deutsche Boerse AG		4,000		282,458
OMX SS	OMX AB*		18,000		603,190

					885,648

	*Holding Company — 10.36%*
GBLB BB	Groupe Bruxelles Lambert S.A.		18,000		1,422,686
GBLS BB	Groupe Bruxelles Lambert S.A. Strip VVPR*		2,000		25
LUK	Leucadia National Corporation*		324,000		6,415,200

					7,837,911

	*Hotels, Restaurants & Leisure — 0.00%*
IILG	Interval Leisure Group, Inc.*		200		1,078

	*Household Durables — 0.63%*
IEP	Icahn Enterprises LP		18,000		476,100

	*Internet & Catalog Retail — 0.45%*
EBAY	eBay, Inc.*		24,000		335,040
HSNI	HSN, Inc.*		200		1,454
TKTM	Ticketmaster*⁽¹⁾		200		1,284

					337,778

	*Internet Software & Services — 0.91%*
BIDU	Baidu.com, Inc. — ADR*		1,000		130,570
GOOG	Google Inc. — Class A*⁽¹⁾		1,800		553,770
IACI	IAC/InterActiveCorp*		500		7,865

					692,205

See Notes to the Financial Statements.

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Internet Portfolio

Portfolio of Investments — December 31, 2008 — (Continued)


Identifier		Shares		Value


	*IT Services — 12.04%*
BR	Broadridge Financial Solutions, Inc.		78,000	$	978,120
IRM	Iron Mountain Incorporated*⁽¹⁾		6,000		148,380
MANT	ManTech International Corporation — Class A*		140,000		7,586,600
MA	Mastercard, Inc. — Class A⁽¹⁾		2,000		285,860
V	Visa, Inc. — Class A⁽¹⁾		2,000		104,900

					9,103,860

	*Leisure Equipment & Products — 0.01%*
MVL	Marvel Entertainment, Inc.*⁽¹⁾		322		9,902

	*Media — 13.11%*
DWA	DreamWorks Animation SKG, Inc. — Class A*		146,000		3,687,960
SSP	The E.W. Scripps Company — Class A		1,333		2,946
IAR	Idearc Inc.*⁽¹⁾		364,000		30,940
LBTYK	Liberty Global, Inc. — Series C*		100,707		1,528,732
SNI	Scripps Networks Interactive — Class A⁽¹⁾		4,000		88,000
SIRI	Sirius XM Radio, Inc.*⁽¹⁾		46,000		5,520
TWX	Time Warner, Inc.⁽¹⁾		240,000		2,414,400
DIS	The Walt Disney Co.⁽¹⁾		1,380		31,312
WMG	Warner Music Group Corp.⁽¹⁾		240,000		724,800
WPO	The Washington Post Company — Class B		3,600		1,404,900

					9,919,510

	*Other Exchanges — 0.92%*
ASX AU	ASX Ltd.		18,000		417,901
JSE SJ	JSE Limited		60,000		237,534
NZX NZ	NZX Ltd.		12,000		38,080

					693,515

	*Publishing — 0.34%*
MCO	Moody’s Corporation⁽¹⁾		4,000		80,360
RHD	R.H. Donnelley Corporation*⁽¹⁾		484,000		179,080

					259,440

See Notes to the Financial Statements.

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Internet Portfolio

Portfolio of Investments — December 31, 2008 — (Continued)


Identifier		Shares		Value


	*Software — 3.07%*
FTIS LI	Financial Technologies (India) Ltd. — GDR		144,000	$	288,000
MVSN	Macrovision Solutions Corporation*⁽¹⁾		152,880		1,933,932
MSFT	Microsoft Corp.⁽¹⁾		5,000		97,200

					2,319,132

	*Special Purpose Entity — 0.00%*
ADPAO	Adelphia Contingent Value Vehicle CVV Services ACC-4 Int*+		250,827		—
ADPAL	Adelphia Recovery Trust Ser ACC-6 E/F Int*+		4,878,645		634

					634

	*Thrifts & Mortgage Finance — 0.00%*
TREE	Tree.com, Inc.*		33		86

	*U.S. Equity Exchanges — 1.71%*
NDAQ	The Nasdaq OMX Group*⁽¹⁾		48,000		1,186,080
NYX	NYSE Euronext		4,000		109,520

					1,295,600

	*Wireless Telecommunication Services — 0.88%*
CHU	China Unicom (Hong Kong) Limited — ADR⁽¹⁾		54,288		662,314
SNSHA	Sunshine PCS Corp. — Class A*		149,890		599

					662,913

	TOTAL COMMON STOCKS (cost $51,272,003)				50,568,403



	ESCROW NOTES — 0.00%


006ESCBG1	Adelphia Communications Corp.*+		200,000		—
006ESC958	Adelphia Communications Corp. Preferred*+		190,000		—

	TOTAL ESCROW NOTES (cost $0)				—

See Notes to the Financial Statements.

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Internet Portfolio

Portfolio of Investments — December 31, 2008 — (Continued)


		Principal
Identifier	CONVERTIBLE BONDS — 1.85%	Amount		Value


	*Diversified Telecommunication Services — 1.85%*
52729NAS9	Level 3 Communications, Inc., CLB 6.000%, 03/15/2010	$	2,000,000	$	1,400,000

	TOTAL CONVERTIBLE BONDS (cost $1,653,960)				1,400,000



	RIGHTS — 1.38%	Shares


	*Commercial Services & Supplies — 1.38%*
CDCOR	Comdisco Holding Company, Inc.		12,240,699		1,040,460

	Expiration Date: 12/31/2050 Strike Price $1.00#
	TOTAL RIGHTS (cost $3,253,775)				1,040,460



		Principal
	SHORT-TERM INVESTMENTS — 29.30%	Amount


	*US Government Agency Issues — 12.96%*
313385AQ9	Federal Home Loan Bank Discount Note^ˆ*0.005%, 01/15/2009*	$	9,800,000		9,799,981



		Shares

	Money Market Funds — 16.34%
FGVXX	First American Government Obligations Fund — Class Y		3,016,182		3,016,182
FIUXX	First American Prime Obligations Fund — Class I		3,230,327		3,230,327
FAIXX	First American Prime Obligations Fund — Class Y		3,167,777		3,167,777
FFCXX	First American Tax Free Obligations Fund — Class Y		92,438		92,438
FOCXX	First American Treasury Obligations Fund — Class Y		2,853,305		2,853,305

					12,360,029

	TOTAL SHORT-TERM INVESTMENTS (cost $22,160,010)				22,160,010

See Notes to the Financial Statements.

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Internet Portfolio

Portfolio of Investments — December 31, 2008 — (Continued)


	INVESTMENTS PURCHASED WITH THE
	CASH PROCEEDS FROM SECURITIES
Identifier	LENDING — 13.85%	Shares		Value


	*Investment Companies — 13.85%*
	Mount Vernon Securities Lending Trust — Prime Portfolio		10,478,464	$	10,478,464

	TOTAL INVESTMENTS PURCHASED WITH THE CASH PROCEEDS FROM SECURITIES LENDING (cost $10,478,464)				10,478,464

	TOTAL INVESTMENTS — 113.23% (cost $88,818,212)			$	85,647,337

Percentages are stated as a percent of net assets.


* —	Non-income producing security.
# —	Contingent value right (contingent upon profitability of company).

ˆ — All or a portion of the shares have been committed as collateral for written option contracts.


+ —	Security is considered illiquid. The aggregate value of such securities is $634 or 0.00% of net assets.


ADR —	American Depository Receipt.


CLB —	Callable Security.


GDR —	Global Depository Receipt.


(1) —	This security or a portion of this security was out on loan at December 31, 2008. Total loaned securities had a market value of $9,471,644 at December 31, 2008.

See Notes to the Financial Statements.

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Global Portfolio

Portfolio of Investments — December 31, 2008


Identifier	COMMON STOCKS — 96.38%	Shares		Value


	*Airlines — 2.37%*
753 HK	Air China Limited — Class H		50,000	$	15,484
670 HK	China Eastern Airlines Corporation Limited — Class H*		100,000		15,096
1055 HK	China Southern Airlines Company Limited — Class H*		96,000		15,979

					46,559

	*Asian Exchanges — 9.09%*
388 HK	Hong Kong Exchanges & Clearing Limited		6,500		61,728
PSE PM	Philippine Stock Exchange, Inc.		3,200		9,085
SGX SP	Singapore Exchange Limited		30,500		107,541

					178,354

	*Asset Management — 6.50%*
CML SJ	Coronation Fund Managers Ltd.		30,000		15,041
DC/A CN	Dundee Corporation — Class A*		1,600		7,841
URB/A CN	Urbana Corp. — Class A*		31,800		34,775
GROW	US Global Investors, Inc. — Class A		7,000		34,230
806 HK	Value Partners Group Limited		111,000		35,519

					127,406

	*Automobiles — 0.79%*
TTM	Tata Motors Limited — ADR⁽¹⁾		3,500		15,575

	*Beverages — 2.98%*
168 HK	Tsingtao Brewery Co. Limited — Class H		28,000		58,455

	*Commercial Banks — 12.25%*
3988 HK	Bank of China Ltd. — Class H		136,000		37,202
939 HK	China Construction Bank Corp. — Class H		70,000		38,386
HDB	HDFC Bank Ltd. — ADR⁽¹⁾		620		44,255
IBN	ICICI Bank Ltd. — ADR		1,500		28,875
1398 HK	Industrial & Commercial Bank of China — Class H		80,000		42,115
SBKFF	State Bank of India — GDR		900		49,500

					240,333

See Notes to the Financial Statements.

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Global Portfolio

Portfolio of Investments — December 31, 2008 — (Continued)


Identifier		Shares		Value


	*Construction & Engineering — 4.41%*
1186 HK	China Railway Construction Corp. — Class H*		26,000	$	38,714
390 HK	China Railway Group Ltd. — Class H*		24,000		16,629
BOKA NA	Koninklijke Boskalis Westminster NV		400		9,230
NTBC LN	Noida Toll Bridge Company Ltd. — GDR*		4,000		21,896

					86,469

	*Diversified Financial Services — 0.27%*
IFSS LI	Indiabulls Financial Services Ltd. — GDR		1,000		5,270

	*Diversified Telecommunication Services — 2.00%*
2267781Z	CIBL Inc.*+		51		17,850
TCL	Tata Communications Limited — ADR		1,000		21,370

					39,220

	*Electric Utilities — 5.68%*
991 HK	Datang International Power Generation Company Limited — Class H		96,000		50,786
HNP	Huaneng Power International, Inc. — ADR		1,200		35,016
RIFS LI	Reliance Infrastructure Ltd. — GDR		500		25,700

					111,502

	*Food — 0.15%*
PJP IX	X5 Retail Group N.V. — GDR*		350		3,010

	*Gaming — 1.02%*
200 HK	Melco International Development Limited		60,000		19,896

	*Holding Company — 0.00%*
GBLS BB	Groupe Bruxelles Lambert S.A. Strip VVPR*		160		2

	*Hotels, Restaurants & Leisure — 0.80%*
IHTD LI	Indian Hotels Company Limited — GDR		5,000		3,000
MPEL	Melco Crown Entertainment Ltd. — ADR*⁽¹⁾		4,000		12,680

					15,680

See Notes to the Financial Statements.

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Global Portfolio

Portfolio of Investments — December 31, 2008 — (Continued)


Identifier		Shares		Value


	*Insurance — 5.51%*
LFC	China Life Insurance Co., Limited — ADR		500	$	23,200
2628 HK	China Life Insurance Co., Limited — Class H		16,000		48,618
2318 HK	Ping An Insurance Group Company of China Limited — Class H		7,500		36,289

					108,107

	*Metals & Mining — 2.66%*
HNDNF	Hindalco Industries Limited — GDR (Acquired 08/06/08-10/01/08 at $43,060)ˆ		14,285		15,071
358 HK	Jiangxi Copper Company Ltd. — Class H		14,000		10,260
SLT	Sterlite Industries India Ltd. — ADR⁽¹⁾		4,000		22,080
VED LN	Vedanta Resources Plc		550		4,836

					52,247

	*Oil, Gas & Consumable Fuels — 10.10%*
SNP	China Petroleum & Chemical Corp. — ADR		250		15,448
386 HK	China Petroleum & Chemical Corp. — Class H		64,000		38,729
1088 HK	China Shenhua Energy Company Limited — Class H		14,000		29,625
CEO	CNOOC Limited — ADR		300		28,572
GAID LI	Gail India Limited — GDR		1,500		38,850
PTR	PetroChina Company Limited — ADR		350		31,143
RIGD LI	Reliance Industries Limited — GDR (Acquired 04/03/08-04/07/08 at $40,737)ˆ		450		15,750

					198,117

	*Other Exchanges — 0.45%*
JSE SJ	JSE Limited		2,225		8,808

	*Real Estate — 2.27%*
12 HK	Henderson Land Development Company Limited		12,000		44,438

	*Real Estate Investment Trusts (REITs) — 2.61%*
823 HK	The Link REIT		31,000		51,199

	*Real Estate Management & Development — 2.24%*
1 HK	Cheung Kong (Holdings) Limited		4,000		37,831
XIN	Xinyuan Real Estate Co. Ltd. — ADR*		2,500		6,100

					43,931

See Notes to the Financial Statements.

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Global Portfolio

Portfolio of Investments — December 31, 2008 — (Continued)


Identifier		Shares		Value


	*Software — 2.12%*
FTIS LI	Financial Technologies (India) Ltd. — GDR		20,800	$	41,600

	*Tobacco — 3.20%*
ITC IX	ITC Limited — GDR		7,000		28,000
PM	Philip Morris International, Inc.		800		34,808

					62,808

	*Transportation Infrastructure — 16.91%*
995 HK	Anhui Expressway Co., Ltd. — Class H		66,000		23,845
694 HK	Beijing Capital International Airport Company Limited — Class H		125,000		62,740
357 HK	Hainan Meilan International Airport Company Limited — Class H		65,000		24,825
737 HK	Hopewell Highway Infrastructure Limited		34,000		18,908
54 HK	Hopewell Holdings Limited		16,000		52,644
177 HK	Jiangsu Expressway Company Ltd. — Class H		54,000		39,715
NCSP LI	Novorossiysk Sea Trade Port — GDR		800		5,400
548 HK	Shenzhen Expressway Company Limited — Class H		54,000		18,882
107 HK	Sichuan Expressway Co. Limited — Class H*		114,000		21,623
3382 HK	Tianjin Port Development Holdings Ltd.		148,000		34,946
576 HK	Zhejiang Expressway Co., Limited — Class H		48,000		28,180

					331,708

	*Wireless Telecommunication Services — 0.00%*
SNSHA	Sunshine PCS Corp. — Class A*		6,000		24

	TOTAL COMMON STOCKS (cost $3,469,883)				1,890,718



	PREFERRED STOCKS — 0.02%


	*Diversified Telecommunication Services — 0.02%*
PTVI	PTV, Inc. — Series A, CLB*		487		438

	TOTAL PREFERRED STOCKS (cost $3,774)				438

See Notes to the Financial Statements.

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Global Portfolio

Portfolio of Investments — December 31, 2008 — (Continued)


Identifier	SHORT-TERM INVESTMENTS — 2.41%	Shares		Value


	*Money Market Funds — 2.41%*
FIUXX	First American Prime Obligations Fund — Class I		47,327	$	47,327

	TOTAL SHORT-TERM INVESTMENTS (cost $47,327)				47,327



	INVESTMENTS PURCHASED WITH THE CASH
	PROCEEDS FROM SECURITIES LENDING — 5.00%


	*Investment Companies — 5.00%*
	Mount Vernon Securities Lending Trust — Prime Portfolio		98,047		98,047

	TOTAL INVESTMENTS PURCHASED WITH THE CASH PROCEEDS FROM SECURITIES LENDING (cost $98,047)				98,047

	TOTAL INVESTMENTS — 103.81% (cost $3,619,031)			$	2,036,530

Percentages are stated as a percent of net assets.


* —	Non-income producing security.

ˆ — Restricted Security.


+ —	Security is considered illiquid. The aggregate value of such securities is $17,850 or 0.91% of net assets.


ADR —	American Depository Receipt.
GDR —	Global Depository Receipt.


CLB —	Callable Security.


(1) —	This security or a portion of this security was out on loan at December 31, 2008. Total loaned securities had a market value of $90,227 at December 31, 2008.

See Notes to the Financial Statements.

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Paradigm Portfolio

Portfolio of Investments — December 31, 2008


Identifier	COMMON STOCKS — 97.57%	Shares		Value


	*Aerospace & Defense — 1.07%*
CAI	CACI International, Inc. — Class A*⁽¹⁾		306,000	$	13,797,540

	*Airlines — 0.38%*
753 HK	Air China Limited — Class H		1,540,000		476,891
670 HK	China Eastern Airlines Corporation Limited — Class H*		10,460,000		1,579,082
1055 HK	China Southern Airlines Company Limited — Class H*		17,505,000		2,913,660

					4,969,633

	*Asian Exchanges — 8.08%*
388 HK	Hong Kong Exchanges & Clearing Limited		6,400,000		60,777,786
8697 JP	Osaka Securities Exchange Co., Ltd.		4,370		19,090,127
SGX SP	Singapore Exchange Limited		6,977,000		24,600,493

					104,468,406

	*Asset Management — 5.77%*
BLK	BlackRock, Inc.⁽¹⁾		48,500		6,506,275
BX	The Blackstone Group LP		252,000		1,645,560
BAM	Brookfield Asset Management Inc. — Class A⁽¹⁾		2,396,000		36,586,920
CNS	Cohen & Steers, Inc.⁽¹⁾		216,000		2,373,840
EV	Eaton Vance Corp.⁽¹⁾		361,000		7,584,610
LM	Legg Mason, Inc.⁽¹⁾		130,000		2,848,300
POW CN	Power Corporation of Canada		815,000		14,801,377
PZN	Pzena Investment Management, Inc. — Class A⁽¹⁾		246,000		1,038,120
URB/A CN	Urbana Corp. — Class A*		424,000		463,670
GROW	US Global Investors, Inc. — Class A⁽¹⁾		93,000		454,770
806 HK	Value Partners Group Limited		722,000		231,034
WSDT	WisdomTree Investments, Inc.*⁽¹⁾		12,000		8,400

					74,542,876

	*Auto Components — 0.42%*
6201 JP	Toyota Industries Corporation		261,000		5,487,766

See Notes to the Financial Statements.

100

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Paradigm Portfolio

Portfolio of Investments — December 31, 2008 — (Continued)


Identifier		Shares		Value


	*Automobiles — 0.00%*
2333 HK	Great Wall Motor Company Limited — Class H		20,000	$	6,968

	*Beverages — 1.20%*
DPS	Dr. Pepper Snapple Group, Inc.*⁽¹⁾		1,920		31,200
RI FP	Pernod-Ricard SA		39,000		2,871,601
RCO FP	Remy Cointreau SA		3,490		143,743
168 HK	Tsingtao Brewery Co. Limited — Class H		6,000,000		12,526,129

					15,572,673

	*Biotechnology — 0.19%*
CRL	Charles River Laboratories International, Inc.*⁽¹⁾		93,000		2,436,600

	*Brokerage & Investment Banking — 0.26%*
GHL	Greenhill & Co., Inc.⁽¹⁾		48,500		3,383,845

	*Capital Markets — 2.43%*
BK	The Bank of New York Mellon Corp.		621,000		17,592,930
CLST LN	Collins Stewart plc		38,000		32,098
DFR	Deerfield Capital Corporation⁽¹⁾		3,604		12,830
JEF	Jefferies Group, Inc.⁽¹⁾		10,000		140,600
LAB	LaBranche & Co. Inc.*		1,268,000		6,073,720
NTRS	Northern Trust Corp.⁽¹⁾		49,500		2,580,930
STT	State Street Corporation⁽¹⁾		122,000		4,798,260
TLPR LN	Tullett Prebon plc		66,000		129,527

					31,360,895

	*Chemicals — 2.04%*
NZYMB DC	Novozymes A/S — Class B		200		15,613
POT	Potash Corporation of Saskatchewan Inc.⁽¹⁾		1,200		87,864
SIAL	Sigma-Aldrich Corp.⁽¹⁾		623,000		26,315,520

					26,418,997

See Notes to the Financial Statements.

101

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Paradigm Portfolio

Portfolio of Investments — December 31, 2008 — (Continued)


Identifier		Shares		Value


	*Commercial Banks — 1.96%*
3988 HK	Bank of China Ltd. — Class H		9,200,000	$	2,516,580
CATY	Cathay General Bancorp⁽¹⁾		104,000		2,470,000
CLFC	Center Financial Corporation		167,000		1,030,390
939 HK	China Construction Bank Corp. — Class H		6,770,000		3,712,485
EWBC	East West Bancorp, Inc.⁽¹⁾		90,000		1,437,300
HAFC	Hanmi Financial Corporation⁽¹⁾		178,500		367,710
1398 HK	Industrial & Commercial Bank of China — Class H		7,000,000		3,685,066
MTB	M&T Bank Corporation⁽¹⁾		21,000		1,205,610
NARA	Nara Bancorp, Inc.⁽¹⁾		162,000		1,592,460
SBID LI	State Bank of India — GDR⁽¹⁾		70,000		3,850,000
UCBH	UCBH Holdings, Inc.⁽¹⁾		130,000		894,400
WFC	Wells Fargo & Company⁽¹⁾		37,000		1,090,760
WIBC	Wilshire Bancorp, Inc.⁽¹⁾		162,000		1,470,960

					25,323,721

	*Construction & Engineering — 0.02%*
390 HK	China Railway Group Ltd. — Class H*		360,000		249,439

	*Consumer Finance — 0.06%*
STU	The Student Loan Corporation		18,500		758,500

	*Diversified Consumer Services — 0.30%*
BID	Sotheby’s⁽¹⁾		440,000		3,911,600

	*Diversified Financial Services — 3.28%*
AGO	Assured Guaranty Ltd.⁽¹⁾		1,552,000		17,692,800
CLE LN	Climate Exchange PLC*		76,000		961,569
CME	CME Group, Inc.⁽¹⁾		22,800		4,744,908
53 HK	Guoco Group Limited		60,000		351,862
ICE	IntercontinentalExchange Inc.*		11,400		939,816
LSE LN	London Stock Exchange Group plc		1,260,000		9,238,997
PARG SW	Pargesa Holding SA		74,000		4,866,820
TPL	Texas Pacific Land Trust⁽¹⁾		153,260		3,540,306

					42,337,078

	*Diversified Food — 0.01%*
CBY	Cadbury PLC — ADR		2,000		71,340

See Notes to the Financial Statements.

102

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Paradigm Portfolio

Portfolio of Investments — December 31, 2008 — (Continued)


Identifier		Shares		Value


	*Electric Utilities — 3.06%*
AYE	Allegheny Energy, Inc.⁽¹⁾		208,000	$	7,042,880
BIP	Brookfield Infrastructure Partners LP		96,000		1,075,200
991 HK	Datang International Power Generation Company Limited — Class H		15,353,000		8,122,023
1071 HK	Huadian Power International Corporation — Class H		968,000		231,065
KEP	Korea Electric Power Corporation — ADR*⁽¹⁾		279,000		3,239,190
NVE	NV Energy, Inc.		1,474,000		14,577,860
USERY	RAO Unified Energy System of Russia — ADR*+		52,000		5,304,000

					39,592,218

	*Energy Equipment & Services — 0.02%*
2883 HK	China Oilfield Services Limited — Class H		278,000		224,188

	*European Exchanges — 0.91%*
BME SM	Bolsas y Mercados Espanoles		38,800		991,843
DB1 GR	Deutsche Boerse AG		110,000		7,767,584
OMX SS	OMX AB*		88,000		2,948,931

					11,708,358

	*Food Products — 0.58%*
KFT	Kraft Foods Inc. — Class A⁽¹⁾		281,000		7,544,850

	*Funds, Trusts, and Other Financial Vehicles — 0.08%*
GDX	Market Vectors Gold Miners ETF		32,000		1,084,160

	*Gaming — 2.30%*
LVS	Las Vegas Sands Corp.*		177,000		1,049,610
200 HK	Melco International Development Limited		2,600,000		862,171
MGM	MGM Mirage*⁽¹⁾		307,000		4,224,320
WYNN	Wynn Resorts Limited*⁽¹⁾		557,000		23,538,820

					29,674,921

	*Health Care Equipment & Supplies — 0.02%*
SYK	Stryker Corp.⁽¹⁾		5,850		233,707

See Notes to the Financial Statements.

103

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Paradigm Portfolio

Portfolio of Investments — December 31, 2008 — (Continued)


Identifier		Shares		Value


	*Holding Company — 9.41%*
BRK/A	Berkshire Hathaway Inc. — Class A*⁽¹⁾		388	$	37,480,800
BRK/B	Berkshire Hathaway Inc. — Class B*		8,250		26,515,500
GBLB BB	Groupe Bruxelles Lambert S.A.		207,000		16,360,884
GBLS BB	Groupe Bruxelles Lambert S.A. Strip VVPR*		24,000		300
LUK	Leucadia National Corporation*⁽¹⁾		2,085,000		41,283,000
PAOR FP	Paris Orleans et Cie SA		200		4,726

					121,645,210

	*Hotels, Restaurants & Leisure — 0.14%*
LTO IM	Lottomatica S.p.A.		2,000		48,930
BAIN FP	Societe des Bains de Mer et du Cercle des Estrangers a Monaco		2		1,515
WEN	Wendy’s/Arby’s Group, Inc. — Class A		368,000		1,817,920

					1,868,365

	*Household Durables — 1.39%*
FO	Fortune Brands, Inc.⁽¹⁾		3,700		152,736
IEP	Icahn Enterprises LP		470,060		12,433,087
JAH	Jarden Corporation*⁽¹⁾		465,000		5,347,500

					17,933,323

	*Independent Power Producers & Energy Traders — 1.48%*
CPN	Calpine Corporation*⁽¹⁾		2,071,000		15,076,880
DYN	Dynegy, Inc. — Class A*⁽¹⁾		2,056,000		4,112,000

					19,188,880

See Notes to the Financial Statements.

104

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Paradigm Portfolio

Portfolio of Investments — December 31, 2008 — (Continued)


Identifier		Shares		Value


	*Insurance — 5.26%*
ABK	Ambac Financial Group, Inc.⁽¹⁾		1,406,000	$	1,827,800
LFC	China Life Insurance Co., Limited — ADR⁽¹⁾		291,000		13,502,400
2628 HK	China Life Insurance Co., Limited — Class H		670,000		2,035,883
GWO CN	Great-West Lifeco, Inc.		115,000		1,928,311
L	Loews Corporation		87,000		2,457,750
MKL	Markel Corporation*⁽¹⁾		67,000		20,033,000
MBI	MBIA Inc.*⁽¹⁾		1,503,000		6,117,210
2328 HK	PICC Property & Casualty Co. Ltd. — Class H*		3,726,000		2,009,584
2318 HK	Ping An Insurance Group Company of China Limited — Class H		1,950,000		9,435,241
WSC	Wesco Financial Corporation		1,600		460,640
WTM	White Mountains Insurance Group Ltd.		30,500		8,146,855

					67,954,674

	*Internet & Catalog Retail — 0.18%*
EBAY	eBay, Inc.*		162,000		2,261,520

	*Internet Software & Services — 0.16%*
GOOG	Google Inc. — Class A*⁽¹⁾		6,500		1,999,725

	*IT Services — 1.15%*
BR	Broadridge Financial Solutions, Inc.		74,000		927,960
MA	Mastercard, Inc. — Class A⁽¹⁾		79,500		11,362,935
V	Visa, Inc. — Class A⁽¹⁾		4,900		257,005
WU	The Western Union Company⁽¹⁾		162,000		2,323,080

					14,870,980

See Notes to the Financial Statements.

105

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Paradigm Portfolio

Portfolio of Investments — December 31, 2008 — (Continued)


Identifier		Shares		Value


	*Media — 2.75%*
DWA	DreamWorks Animation SKG, Inc. — Class A*⁽¹⁾		418,000	$	10,558,680
SSP	The E.W. Scripps Company — Class A		52,666		116,392
SNI	Scripps Networks Interactive — Class A⁽¹⁾		109,000		2,398,000
TWX	Time Warner, Inc.⁽¹⁾		1,018,000		10,241,080
DIS	The Walt Disney Co.⁽¹⁾		17,000		385,730
WMG	Warner Music Group Corp.⁽¹⁾		1,473,000		4,448,460
WPO	The Washington Post Company — Class B		19,000		7,414,750
9399 JP	Xinhua Finance Ltd.*		100		2,675

					35,565,767

	*Metals & Mining — 2.98%*
AAUK	Anglo American PLC — ADR⁽¹⁾		2,047,000		23,786,140
FNV CN	Franco-Nevada Corporation		641,100		11,051,120
FCX	Freeport-McMoRan Copper & Gold Inc.⁽¹⁾		2,680		65,499
RTP	Rio Tinto Plc — ADR⁽¹⁾		32,300		2,871,793
1171 HK	Yanzhou Coal Mining Company Limited — Class H		950,000		697,466

					38,472,018

	*Multiline Retail — 0.83%*
SHLD	Sears Holdings Corporation*⁽¹⁾		276,000		10,728,120

	*Multi-Utilities — 1.78%*
CNP	Centerpoint Energy, Inc.		456,000		5,754,720
CMS	CMS Energy Corporation⁽¹⁾		223,000		2,254,530
NRG	NRG Energy, Inc.*		190,000		4,432,700
RRI	Reliant Energy Inc.*		1,823,000		10,536,940

					22,978,890

	*Oil & Gas — 0.03%*
135 HK	CNPC Hong Kong Limited		1,100,000		342,056

See Notes to the Financial Statements.

106

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Paradigm Portfolio

Portfolio of Investments — December 31, 2008 — (Continued)


Identifier		Shares		Value


	*Oil, Gas & Consumable Fuels — 11.88%*
CCJ	Cameco Corporation⁽¹⁾		180,000	$	3,105,000
CNQ	Canadian Natural Resources Ltd.⁽¹⁾		592,000		23,668,160
COSWF	Canadian Oil Sands Trust⁽¹⁾		1,521,000		25,996,843
1898 HK	China Coal Energy Company — Class H		2,800,000		2,229,104
1088 HK	China Shenhua Energy Company Limited — Class H		260,000		550,179
CEO	CNOOC Limited — ADR⁽¹⁾		52,400		4,990,576
EP	El Paso Corporation		844,000		6,608,520
ECA	EnCana Corporation⁽¹⁾		391,000		18,173,680
OGZPY	Gazprom OAO — ADR⁽¹⁾		427,000		6,084,750
IMO	Imperial Oil Ltd.⁽¹⁾		514,000		17,332,080
MRO	Marathon Oil Corp.⁽¹⁾		162,000		4,432,320
NEGI	National Energy Group, Inc.*		49,000		159,250
NXY	Nexen Inc.⁽¹⁾		541,000		9,510,780
NHYDY	Norsk Hydro ASA — ADR		28,000		111,166
PWE	Penn West Energy Trust⁽¹⁾		424,000		4,714,880
PCZ	Petro-Canada⁽¹⁾		144,000		3,152,160
PBR	Petroleo Brasileiro S.A. — ADR⁽¹⁾		44,000		1,077,560
SD	SandRidge Energy, Inc.*⁽¹⁾		143,000		879,450
STO	StatoilHydro ASA — ADR⁽¹⁾		130,000		2,165,800
SU	Suncor Energy, Inc.⁽¹⁾		947,000		18,466,500
WZR CN	WesternZagros Resources Ltd.*		343,000		166,707

					153,575,465

	*Other Exchanges — 1.57%*
ASX AU	ASX Ltd.		672,000		15,601,648
JSE SJ	JSE Limited		670,000		2,652,461
NZX NZ	NZX Ltd.		23,579		74,823
X CN	TMX Group Inc.		98,000		1,999,692

					20,328,624

See Notes to the Financial Statements.

107

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Paradigm Portfolio

Portfolio of Investments — December 31, 2008 — (Continued)


Identifier		Shares		Value


	*Pharmaceuticals — 2.29%*
1093 HK	China Pharmaceutical Group Limited		1,100,000	$	386,054
FRX	Forest Laboratories, Inc.*		139,000		3,540,330
GSK	GlaxoSmithKline plc — ADR⁽¹⁾		32,000		1,192,640
MYL	Mylan, Inc.*⁽¹⁾		44,000		435,160
NVS	Novartis AG — ADR		22,500		1,119,600
NVO	Novo-Nordisk A/S — ADR⁽¹⁾		75,500		3,879,945
PFE	Pfizer, Inc.⁽¹⁾		863,000		15,283,730
SNY	Sanofi-Aventis — ADR		118,000		3,794,880

					29,632,339

	*Publishing — 0.03%*
JW/A	John Wiley & Sons, Inc. — Class A		7,600		270,408
JW/B	John Wiley & Sons, Inc. — Class B		1,940		69,355
RHD	R.H. Donnelley Corporation*⁽¹⁾		50,000		18,500

					358,263

	*Real Estate — 1.10%*
12 HK	Henderson Land Development Company Limited		3,838,000		14,212,614
242 HK	Shun Tak Holdings Limited		68,000		18,688

					14,231,302

	*Real Estate Investment Trusts (REITs) — 1.15%*
ALX	Alexander’s, Inc.⁽¹⁾		7,400		1,886,260
823 HK	The Link REIT		6,580,000		10,867,332
VNO	Vornado Realty Trust⁽¹⁾		36,000		2,172,600

					14,926,192

	*Real Estate Management & Development — 2.57%*
1 HK	Cheung Kong (Holdings) Limited		1,570,000		14,848,778
FCE/A	Forest City Enterprises, Inc. — Class A⁽¹⁾		1,189,000		7,966,300
10 HK	Hang Lung Group Limited		280,000		847,204
JOE	The St. Joe Company*⁽¹⁾		204,000		4,961,280
4 HK	Wharf Holdings Ltd.		1,456,000		3,992,155
20 HK	Wheelock and Company Limited		245,000		537,406

					33,153,123

See Notes to the Financial Statements.

108

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The Paradigm Portfolio

Portfolio of Investments — December 31, 2008 — (Continued)


Identifier		Shares		Value


	*Road & Rail — 5.13%*
BNI	Burlington Northern Santa Fe Corp.⁽¹⁾		318,000	$	24,075,780
CSX	CSX Corp.		361,000		11,721,670
525 HK	Guangshen Railway Company Limited — Class H		170,000		62,734
NSC	Norfolk Southern Corp.⁽¹⁾		334,000		15,714,700
UNP	Union Pacific Corp.⁽¹⁾		307,000		14,674,600

					66,249,484

	*Software — 0.04%*
FTIS LI	Financial Technologies (India) Ltd. — GDR		283,000		566,000

	*State Commercial Banks — 0.01%*
PFBC	Preferred Bank Los Angeles⁽¹⁾		16,000		96,000

	*Thrifts & Mortgage Finance — 0.88%*
FRE	Federal Home Loan Mortgage Corporation⁽¹⁾		8,040,000		5,869,200
FNM	Federal National Mortgage Association⁽¹⁾		7,225,000		5,491,000

					11,360,200

	*Tobacco — 0.72%*
PM	Philip Morris International, Inc.		214,000		9,311,140

See Notes to the Financial Statements.

109

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The Paradigm Portfolio

Portfolio of Investments — December 31, 2008 — (Continued)


Identifier		Shares		Value


	*Transportation Infrastructure — 2.62%*
995 HK	Anhui Expressway Co., Ltd. — Class H		4,823,500	$	1,742,639
694 HK	Beijing Capital International Airport Company Limited — Class H		32,200,000		16,161,905
357 HK	Hainan Meilan International Airport Company Limited — Class H		3,800,000		1,451,317
54 HK	Hopewell Holdings Limited		12,000		39,483
177 HK	Jiangsu Expressway Company Ltd. — Class H		5,490,000		4,037,702
548 HK	Shenzhen Expressway Company Limited — Class H		8,200,000		2,867,281
107 HK	Sichuan Expressway Co. Limited — Class H*		16,764,000		3,179,670
3382 HK	Tianjin Port Development Holdings Ltd.		1,860,000		439,189
576 HK	Zhejiang Expressway Co., Limited — Class H		6,710,000		3,939,318

					33,858,504

	*U.S. Equity Exchanges — 4.36%*
NDAQ	The Nasdaq OMX Group*⁽¹⁾		1,522,000		37,608,620
NYX	NYSE Euronext		685,000		18,755,300

					56,363,920

	*Wireless Telecommunication Services — 1.24%*
CHL	China Mobile Limited — ADR⁽¹⁾		155,000		7,881,750
CHU	China Unicom (Hong Kong) Limited — ADR⁽¹⁾		612,000		7,466,400
762 HK	China Unicom Limited		595,000		713,982

					16,062,132

	TOTAL COMMON STOCKS (cost $1,945,151,265)				1,261,042,495

See Notes to the Financial Statements.

110

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The Paradigm Portfolio

Portfolio of Investments — December 31, 2008 — (Continued)


		Principal
Identifier	ESCROW NOTES — 0.00%	Amount		Value


	Calpine Corporation (converted from Calpine Corp., 8.500%, 02/15/2011)*+	$	1,000,000	$	0
	Calpine Corporation (converted from Calpine Corp., 10.500%, 05/15/2015)*+		300,000		0
	Calpine Corporation (converted from Calpine Corp., 8.750%, 07/15/2008)*+		200,000		0
	Calpine Corporation (converted from Calpine Corp., 7.875%, 04/01/2008)*+		200,000		0
	Calpine Corporation (converted from Calpine Corp., 7.625%, 04/15/2050)*+		100,000		0
	Calpine Corporation (converted from Calpine Corp., 4.750%, 11/15/2023)*+		42,200,000		5

	TOTAL ESCROW NOTES (cost $0)				5



	CORPORATE BONDS — 0.06%


	*Diversified Financial Services — 0.06%*
317928AA7	FINOVA Group, Inc. 7.500%, 11/15/2009, Acquired 10/19/2006-3/29/2007 at $2,775,288 (Default Effective 4/29/2005)		9,503,880		700,911

	TOTAL CORPORATE BONDS (cost $7,390,483)				700,911

See Notes to the Financial Statements.

111

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The Paradigm Portfolio

Portfolio of Investments — December 31, 2008 — (Continued)


Identifier	CALL OPTIONS PURCHASED — 0.01%	Contracts		Value


	*Diversified Financial Services — 0.00%*
LUK.AD	Leucadia National Corporation Expiration: January 2009, Exercise Price: $20.00		72	$	7,560
	*Insurance — 0.01%*
L.AE	Loews Corporation Expiration: January 2009, Exercise Price: $25.00		500		185,000

	TOTAL CALL OPTIONS PURCHASED (cost $1,557,476)				192,560



		Principal
	SHORT-TERM INVESTMENTS — 0.00%	Amount


	*US Government Agency Issues — 0.00%*
313385AP4	Federal Home Loan Bank Discount Note 0.020%, 01/14/2009	$	46,000		46,000

	TOTAL SHORT-TERM INVESTMENTS (cost $46,000)				46,000



	INVESTMENTS PURCHASED WITH
	THE CASH PROCEEDS FROM
	SECURITIES LENDING — 32.33%	Shares


	*Investment Companies — 21.16%*
	DWS Money Market Series Institutional Shares		15,754,213		15,754,213
	Goldman Sachs Financial SQ Money Market		20,150,380		20,150,380
	Mount Vernon Securities Lending Trust — Prime Portfolio		230,000,000		230,000,000
	Reserve Primary Fund+		8,221,304		7,597,304

					273,501,897

See Notes to the Financial Statements.

112

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The Paradigm Portfolio

Portfolio of Investments — December 31, 2008 — (Continued)


Identifier		Shares		Value


	*Repurchase Agreements — 11.17%*
	ING Financial Repurchase Agreement 0.040%, dated 12/31/2008, due 01/02/2009 Repurchase price $144,373,321⁽²⁾		144,373,000	$	144,373,000

	TOTAL INVESTMENTS PURCHASED WITH THE CASH PROCEEDS FROM SECURITIES LENDING (cost $418,498,897)				417,874,897

	TOTAL INVESTMENTS — 129.97% (cost $2,372,644,121)			$	1,679,856,868

Percentages are stated as a percent of net assets.


* —	Non-income producing security.


+ —	Security is considered illiquid. The aggregate value of such securities is $12,901,309 or 1.00% of net assets.


ADR —	American Depository Receipt.
GDR —	Global Depository Receipt.


(1) —	This security or a portion of this security was out on loan at December 31, 2008. Cash collateral for loaned securities consisted of $417,874,897 in cash and $624,000 in cash receivable. Of the total collateral, $8,221,304 was illiquid. Total loaned securities had a market value of $407,863,511 at December 31, 2008.
(2) —	See Repurchase Agreements disclosure in the Notes to Financial Statements for the Kinetics Portfolios Trust.

See Notes to the Financial Statements.

113

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The Medical Portfolio

Portfolio of Investments — December 31, 2008


Identifier	COMMON STOCKS — 96.18%	Shares		Value


	*Biotechnology — 20.82%*
AEZS	AEterna Zentaris Inc.*		102,500	$	50,225
AFFX	Affymetrix, Inc.*⁽¹⁾		90,000		269,100
AMRI	Albany Molecular Research, Inc.*⁽¹⁾		42,000		409,080
ARNA	Arena Pharmaceuticals, Inc.*⁽¹⁾		40,000		166,800
AVXT	AVAX Technologies, Inc.*		50,000		750
AVGN	Avigen, Inc.*		51,000		38,760
BIIB	Biogen Idec, Inc.*		28,250		1,345,547
CEGE	Cell Genesys, Inc.*⁽¹⁾		73,725		16,219
CBST	Cubist Pharmaceuticals, Inc.*⁽¹⁾		20,000		483,200
CRGN	CuraGen Corporation*		96,000		44,160
DCGN	deCODE genetics, Inc.*⁽¹⁾		11,000		2,035
DNDN	Dendreon Corporation*⁽¹⁾		29,000		132,820
FVRL	Favrille Inc.*⁽¹⁾		43,000		2,150
HGSI	Human Genome Sciences, Inc.*		21,000		44,520
IMGN	ImmunoGen, Inc.*⁽¹⁾		14,000		60,060
ISA CN	Isotechnika, Inc.*		40,000		3,240
MEDX	Medarex, Inc.*		31,000		172,980
MBRX	Metabasis Therapeutics, Inc.*		44,000		14,080
COX FP	NicOx SA*		15,000		161,802
ONTY	Oncothyreon, Inc.*		15,333		11,500
PGNX	Progenics Pharmaceuticals, Inc.*		23,200		239,192
SVNT	Savient Pharmaceuticals Inc.*⁽¹⁾		25,000		144,750
TGEN	Targeted Genetics Corp.*		1,000		175
TELK	Telik, Inc.*⁽¹⁾		111,000		42,180
VICL	Vical Incorporated*		69,500		97,995

					3,953,320

	*Chemicals — 1.86%*
ATB CN	Atrium Innovations Inc.*		4,884		51,115
DOW	The Dow Chemical Co.		20,000		301,800

					352,915

	*Health Care Equipment & Supplies — 0.01%*
TGX	Theragenics Corporation*		2,000		2,340

See Notes to the Financial Statements.

114

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The Medical Portfolio

Portfolio of Investments — December 31, 2008 — (Continued)


Identifier		Shares		Value


	*Health Care Providers & Services — 0.03%*
IBLTZ	IMPATH Bankruptcy Liquidating Trust — Class A		26,000	$	5,980

	*Life Sciences Tools & Services — 9.35%*
LIFE	Life Technologies Corporation*		29,000		675,990
LONN VX	Lonza Group AG		12,000		1,099,826

					1,775,816

	*Pharmaceuticals — 64.11%*
ABT	Abbott Laboratories		18,000		960,660
AGEN	Antigenics, Inc.*		892		428
BMY	Bristol-Myers Squibb Company⁽¹⁾		35,000		813,750
1093 HK	China Pharmaceutical Group Limited		1,640,000		575,572
LLY	Eli Lilly & Company		28,000		1,127,560
EPCT	EpiCept Corporation*⁽¹⁾		2,039		1,305
GENZ	Genzyme Corporation*⁽¹⁾		18,538		1,230,367
GSK	GlaxoSmithKline plc — ADR		28,673		1,068,643
JNJ	Johnson & Johnson		22,000		1,316,260
4508 JP	Mitsubishi Tanabe Pharma Corporation		19,000		282,328
NVS	Novartis AG — ADR		29,000		1,443,040
PTIE	Pain Therapeutics, Inc.*⁽¹⁾		30,000		177,600
PFE	Pfizer, Inc.⁽¹⁾		46,000		814,660
SNY	Sanofi-Aventis — ADR		24,000		771,840
SGP	Schering-Plough Corporation		26,000		442,780
SCR	Simcere Pharmaceutical Group — ADR*		51,000		365,670
WYE	Wyeth		20,900		783,959

					12,176,422

	TOTAL COMMON STOCKS (cost $23,207,480)				18,266,793

See Notes to the Financial Statements.

115

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The Medical Portfolio

Portfolio of Investments — December 31, 2008 — (Continued)


Identifier	SHORT-TERM INVESTMENTS — 3.71%	Shares		Value


	*Money Market Funds — 3.71%*
FIUXX	First American Prime Obligations Fund — Class Iˆ		705,093	$	705,093

	TOTAL SHORT-TERM INVESTMENTS (cost $705,093)				705,093



	INVESTMENTS PURCHASED WITH THE
	CASH PROCEEDS FROM SECURITIES
	LENDING — 25.18%


	*Investment Companies — 25.18%*
	Mount Vernon Securities Lending Trust — Prime Portfolio		4,783,206		4,783,206

	TOTAL INVESTMENTS PURCHASED WITH THE CASH PROCEEDS FROM SECURITIES LENDING (cost $4,783,206)				4,783,206

	TOTAL INVESTMENTS — 125.07% (cost $28,695,779)			$	23,755,092

Percentages are stated as a percent of net assets.


* —	Non-income producing security.

ˆ — All or a portion of the shares have been committed as collateral for written option contracts.


ADR —	American Depository Receipt.


(1) —	This security or a portion of this security was out on loan at December 31, 2008. Total loaned securities had a market value of $4,413,275 at December 31, 2008.

See Notes to the Financial Statements.

116

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The Small Cap Opportunities Portfolio

Portfolio of Investments — December 31, 2008


Identifier	COMMON STOCKS — 98.67%	Shares		Value


	*Aerospace & Defense — 1.04%*
BBD/B CN	Bombardier Inc. — Class B⁽¹⁾		196,000	$	706,521
CAI	CACI International, Inc. — Class A*⁽¹⁾		33,000		1,487,970

					2,194,491

	*Airlines — 2.62%*
CEA	China Eastern Airlines Corporation Limited — ADR*⁽¹⁾		51,000		769,916
670 HK	China Eastern Airlines Corporation Limited — Class H*		5,768,000		870,759
ZNH	China Southern Airlines Company Limited — ADR*⁽¹⁾		120,000		1,018,800
1055 HK	China Southern Airlines Company Limited — Class H*		17,110,000		2,847,914

					5,507,389

	*Asian Exchanges — 7.63%*
8697 JP	Osaka Securities Exchange Co., Ltd.		1,548		6,762,361
SGX SP	Singapore Exchange Limited		2,635,000		9,290,855

					16,053,216

	*Asset Management — 3.07%*
CNS	Cohen & Steers, Inc.⁽¹⁾		145,000		1,593,550
EV	Eaton Vance Corp.⁽¹⁾		110,000		2,311,100
PZN	Pzena Investment Management, Inc. — Class A⁽¹⁾		178,000		751,160
URB/A CN	Urbana Corp. — Class A*		652,680		713,745
GROW	US Global Investors, Inc. — Class A⁽¹⁾		169,000		826,410
806 HK	Value Partners Group Limited		782,000		250,233
WSDT	WisdomTree Investments, Inc.*⁽¹⁾		14,000		9,800

					6,455,998

	*Beverages — 6.04%*
168 HK	Tsingtao Brewery Co. Limited — Class H		6,087,000		12,707,757

See Notes to the Financial Statements.

117

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The Small Cap Opportunities Portfolio

Portfolio of Investments — December 31, 2008 — (Continued)


Identifier		Shares		Value


	*Capital Markets — 6.45%*
CSWC	Capital Southwest Corp.⁽¹⁾		6,000	$	648,960
DFR	Deerfield Capital Corporation⁽¹⁾		9,664		34,404
IAAC	International Assets Holding Corporation*⁽¹⁾		27,928		239,622
JEF	Jefferies Group, Inc.⁽¹⁾		864,000		12,147,840
LAB	LaBranche & Co. Inc.*		106,000		507,740

					13,578,566

	*Commercial Banks — 5.42%*
BMBZF	BLOM Bank SAL — GDR		30,000		2,160,000
CATY	Cathay General Bancorp⁽¹⁾		90,000		2,137,500
CLFC	Center Financial Corporation		146,800		905,756
EWBC	East West Bancorp, Inc.⁽¹⁾		54,800		875,156
FMBL	Farmers & Merchants Bank of Long Beach CA		29		111,723
FBOD	First Bank of Delaware*		248,000		364,560
HAFC	Hanmi Financial Corporation⁽¹⁾		184,000		379,040
NARA	Nara Bancorp, Inc.		148,000		1,454,840
UCBH	UCBH Holdings, Inc.⁽¹⁾		249,000		1,713,120
WIBC	Wilshire Bancorp, Inc.⁽¹⁾		145,000		1,316,600

					11,418,295

	*Commercial Services & Supplies — 1.39%*
CDCO	Comdisco Holding Company, Inc.*⁽¹⁾		9,000		70,200
CRRC	Courier Corporation		44,000		787,600
LW CN	Loring Ward International Ltd.		1,000		10,092
PICO	PICO Holdings, Inc.*⁽¹⁾		56,500		1,501,770
RBA	Ritchie Bros. Auctioneers, Incorporated⁽¹⁾		26,000		556,920

					2,926,582

	*Construction & Engineering — 0.41%*
PWR	Quanta Services, Inc.*		44,000		871,200

	*Consumer Finance — 0.02%*
STU	The Student Loan Corporation		1,175		48,175

	*Diversified Consumer Services — 0.66%*
BID	Sotheby’s⁽¹⁾		157,000		1,395,730

See Notes to the Financial Statements.

118

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The Small Cap Opportunities Portfolio

Portfolio of Investments — December 31, 2008 — (Continued)


Identifier		Shares		Value


	*Diversified Financial Services — 3.37%*
CLE LN	Climate Exchange PLC*		78,400	$	991,934
OCX CN	Onex Corporation		39,000		574,654
RHJI BB	RHJ International*		800		3,870
TPL	Texas Pacific Land Trust		239,120		5,523,672

					7,094,130

	*Diversified Telecommunication Services — 0.02%*
2267781Z	CIBL Inc.*+		18		6,300
LICT	Lynch Interactive Corporation*		18		45,468

					51,768

	*Electric Utilities — 3.87%*
991 HK	Datang International Power Generation Company Limited — Class H		11,048,000		5,844,598
1071 HK	Huadian Power International Corporation — Class H		1,369,000		326,785
NVE	NV Energy, Inc.		200,000		1,978,000

					8,149,383

	*Energy — 0.62%*
SEMUF	Siem Industries Inc.		48,000		1,296,000

	*Energy Equipment & Services — 0.14%*
2883 HK	China Oilfield Services Limited — Class H		360,000		290,315

	*European Exchanges — 2.99%*
OMX SS	OMX AB*		188,000		6,299,989

	*Gaming — 0.54%*
200 HK	Melco International Development Limited		3,411,000		1,131,102

	*Gas Utilities — 0.46%*
SUG	Southern Union Company		73,500		958,433

	*Holding Company — 0.73%*
BNB CN	BAM Investments Ltd.*		187,000		1,531,446

See Notes to the Financial Statements.

119

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The Small Cap Opportunities Portfolio

Portfolio of Investments — December 31, 2008 — (Continued)


Identifier		Shares		Value


	*Hotels, Restaurants & Leisure — 2.15%*
BAIN FP	Societe des Bains de Mer et du Cercle des Estrangers a Monaco		20	$	15,152
WEN	Wendy’s/Arby’s Group, Inc. — Class A^ˆ		915,000		4,520,100

					4,535,252

	*Household Durables — 8.21%*
IEP	Icahn Enterprises LP		436,000		11,532,200
JAH	Jarden Corporation*⁽¹⁾		500,000		5,750,000

					17,282,200

	*Independent Power Producers & Energy Traders — 1.77%*
CPN	Calpine Corporation*⁽¹⁾		479,000		3,487,120
DYN	Dynegy, Inc. — Class A*		125,000		250,000

					3,737,120

	*Industrial Conglomerates — 0.43%*
Y	Alleghany Corporation*		3,200		902,400

	*Insurance — 4.37%*
ABK	Ambac Financial Group, Inc.⁽¹⁾		430,000		559,000
CVA	Covanta Holding Corporation*⁽¹⁾		252,000		5,533,920
GLRE	Greenlight Capital Re, Ltd. — Class A*		5,600		72,744
MBI	MBIA Inc.*⁽¹⁾		615,000		2,503,050
NWLIA	National Western Life Insurance Company — Class A*⁽¹⁾		1,000		169,170
WSC	Wesco Financial Corporation		1,274		366,785

					9,204,669

	*IT Services — 1.06%*
MANT	ManTech International Corporation — Class A*		41,000		2,221,790

	*Media — 5.71%*
DWA	DreamWorks Animation SKG, Inc. — Class A*		280,000		7,072,800
IAR	Idearc Inc.*⁽¹⁾		1,344,000		114,240
WMG	Warner Music Group Corp.⁽¹⁾		1,600,000		4,832,000

					12,019,040

See Notes to the Financial Statements.

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Portfolio of Investments — December 31, 2008 — (Continued)


Identifier		Shares		Value


	*Metals & Mining — 4.53%*
FMG AU	Fortescue Metals Group Ltd.*		1,291,000	$	1,737,163
FNV CN	Franco-Nevada Corporation		299,800		5,167,877
IMN CN	Inmet Mining Corporation		138,000		2,188,772
1171 HK	Yanzhou Coal Mining Company Limited — Class H		618,000		453,720

					9,547,532

	*Multi-Utilities — 3.22%*
CMS	CMS Energy Corporation⁽¹⁾		134,000		1,354,740
RRI	Reliant Energy Inc.*⁽¹⁾		940,000		5,433,200

					6,787,940

	*Oil, Gas & Consumable Fuels — 2.06%*
BLMC	Biloxi Marsh Lands Corporation		100		845
1898 HK	China Coal Energy Company — Class H		988,000		786,555
1088 HK	China Shenhua Energy Company Limited — Class H		94,000		198,911
135 HK	CNPC Hong Kong Limited		3,003,000		933,812
KEWL	Keweenaw Land Association Ltd.		290		52,200
NEGI	National Energy Group, Inc.*		351,000		1,140,750
PVG	Penn Virginia GP Holdings LP⁽¹⁾		70,000		695,100
UTS CN	UTS Energy Corporation*⁽¹⁾		800,000		518,429

					4,326,602

	*Other Exchanges — 1.57%*
JSE SJ	JSE Limited		677,000		2,680,173
NZX NZ	NZX Ltd.		194,000		615,618

					3,295,791

	*Pharmaceuticals — 0.32%*
1093 HK	China Pharmaceutical Group Limited		1,893,000		664,365

	*Publishing — 0.48%*
RHD	R.H. Donnelley Corporation*⁽¹⁾		1,520,000		562,400
VALU	Value Line, Inc.⁽¹⁾		13,000		448,760

					1,011,160

See Notes to the Financial Statements.

121

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The Small Cap Opportunities Portfolio

Portfolio of Investments — December 31, 2008 — (Continued)


Identifier		Shares		Value


	*Real Estate — 0.01%*
SLED LI	Solidere — GDR		800	$	13,200

	*Real Estate Investment Trusts REITs — 4.77%*
ALX	Alexander’s, Inc.⁽¹⁾		12,000		3,058,800
NLY	Annaly Capital Management, Inc.		49,000		777,630
823 HK	The Link REIT		3,755,000		6,201,646

					10,038,076

	*Road & Rail — 0.01%*
525 HK	Guangshen Railway Company Limited — Class H		70,000		25,832

	*Software — 0.88%*
FTIS LI	Financial Technologies (India) Ltd. — GDR		298,000		596,000
MVSN	Macrovision Solutions Corporation*⁽¹⁾		100,000		1,265,000

					1,861,000

	*State Commercial Banks — 0.22%*
PFBC	Preferred Bank Los Angeles⁽¹⁾		78,000		468,000

	*Transportation Infrastructure — 7.86%*
694 HK	Beijing Capital International Airport Company Limited — Class H		16,146,000		8,104,041
357 HK	Hainan Meilan International Airport Company Limited — Class H		5,569,000		2,126,944
548 HK	Shenzhen Expressway Company Limited — Class H		922,000		322,394
107 HK	Sichuan Expressway Co. Limited — Class H*		28,320,000		5,371,526
3382 HK	Tianjin Port Development Holdings Ltd.		737,000		174,023
576 HK	Zhejiang Expressway Co., Limited — Class H		772,000		453,227

					16,552,155

	*U.S. Equity Exchanges — 1.55%*
NDAQ	The Nasdaq OMX Group*⁽¹⁾		132,000		3,261,720

	TOTAL COMMON STOCKS (cost $338,261,992)				207,715,809

See Notes to the Financial Statements.

122

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The Small Cap Opportunities Portfolio

Portfolio of Investments — December 31, 2008 — (Continued)


		Principal
Identifier	ESCROW NOTES — 0.00%	Amount		Value


	Calpine Corporation (converted from Calpine Corp., 4.750%, 11/15/2023)*+	$	14,400,000	$	1

	TOTAL ESCROW NOTES (cost $0)				1



	CORPORATE BONDS — 0.10%


	*Diversified Financial Services — 0.10%*
317928AA7	FINOVA Group, Inc. 7.500%, 11/15/2009, Acquired on 10/19/2006-5/17/2007 at $741,082 (Default Effective 4/29/2005)		2,783,965		205,317

	TOTAL CORPORATE BONDS (cost $1,390,853)				205,317



	RIGHTS — 0.35%	Shares


	*Commercial Services & Supplies — 0.35%*
CDCOR	Comdisco Holding Company, Inc. Expiration Date 12/31/2050, Strike Price $1.00#		8,690,000		738,650

	TOTAL RIGHTS (cost $2,692,904)				738,650



	CALL OPTIONS PURCHASED — 0.00%	Contracts


	*Insurance — 0.00%*
L.AF	Loews Corporation Expiration: January 2009,
	Exercise Price: $30.00		36		2,160

	TOTAL CALL OPTIONS PURCHASED (cost $90,828)				2,160

See Notes to the Financial Statements.

123

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Small Cap Opportunities Portfolio

Portfolio of Investments — December 31, 2008 — (Continued)


	INVESTMENTS PURCHASED WITH
	THE CASH PROCEEDS FROM
Identifier	SECURITIES LENDING — 24.20%	Shares		Value


	*Investment Companies — 24.20%*
	Mount Vernon Securities Lending Trust — Prime Portfolio		50,956,896	$	50,956,896

	TOTAL INVESTMENTS PURCHASED WITH THE CASH PROCEEDS FROM SECURITIES LENDING (cost $50,956,896)				50,956,896

	TOTAL INVESTMENTS — 123.32% (cost $393,393,473)			$	259,618,833

Percentages are stated as a percent of net assets.


* —	Non-income producing security.
# —	Contingent value right (contingent upon profitability of company).

ˆ — All or a portion of the shares have been committed as collateral for written option contracts.


+ —	Security is considered illiquid. The aggregate value of such securities is $6,301 or 0.00% of net assets.


ADR —	American Depository Receipt.
GDR —	Global Depository Receipt.


(1) —	This security or a portion of this security was out on loan at December 31, 2008. Total loaned securities had a market value of $46,239,400 at December 31, 2008.

See Notes to the Financial Statements.

124

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Kinetics Government Money Market Portfolio

Portfolio of Investments — December 31, 2008


		Principal
Identifier	SHORT-TERM INVESTMENTS — 97.29%	Amount		Value


	*US Government Agency Issues — 97.29%*
313385AP4	Federal Home Loan Bank Discount Note 0.020%, 01/14/2009	$	54,000	$	54,000
313385AQ9	Federal Home Loan Bank Discount Note 0.002%, 01/15/2009		2,579,000		2,578,995

	TOTAL SHORT-TERM INVESTMENTS (cost $2,632,995)				2,632,995

	TOTAL INVESTMENTS — 97.29% (cost $2,632,995)			$	2,632,995

Percentages are stated as a percent of net assets.

See Notes to the Financial Statements.

125

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The Market Opportunities Portfolio

Portfolio of Investments — December 31, 2008


Identifier	COMMON STOCKS — 92.08%	Shares		Value


	*Asian Exchanges — 5.70%*
388 HK	Hong Kong Exchanges & Clearing Limited		144,000	$	1,367,500
8697 JP	Osaka Securities Exchange Co., Ltd.		180		786,321
SGX SP	Singapore Exchange Limited		320,000		1,128,302

					3,282,123

	*Asset Management — 15.54%*
AB	AllianceBernstein Holding LP		18,000		374,220
BLK	BlackRock, Inc.⁽¹⁾		7,200		965,880
BX	The Blackstone Group LP		80,000		522,400
BAM	Brookfield Asset Management Inc. — Class A⁽¹⁾		72,000		1,099,440
CNS	Cohen & Steers, Inc.⁽¹⁾		54,000		593,460
EV	Eaton Vance Corp.⁽¹⁾		36,000		756,360
BEN	Franklin Resources, Inc.		2,000		127,560
IVZ	Invesco Limited		4,000		57,760
JNS	Janus Capital Group, Inc.		42,200		338,866
LM	Legg Mason, Inc.		48,000		1,051,680
POW CN	Power Corporation of Canada		48,000		871,738
PZN	Pzena Investment Management, Inc. — Class A⁽¹⁾		222,000		936,840
SII CN	Sprott, Inc.		48,000		167,193
TROW	T. Rowe Price Group, Inc.⁽¹⁾		7,000		248,080
URB/A CN	Urbana Corp. — Class A*		400,000		437,424
GROW	US Global Investors, Inc. — Class A⁽¹⁾		42,000		205,380
806 HK	Value Partners Group Limited		560,000		179,195
WSDT	WisdomTree Investments, Inc.*		12,000		8,400

					8,941,876

	*Brokerage & Investment Banking — 2.80%*
GHL	Greenhill & Co., Inc.⁽¹⁾		18,000		1,255,860
LAZ	Lazard Ltd. — Class A		12,000		356,880

					1,612,740

See Notes to the Financial Statements.

126

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Market Opportunities Portfolio

Portfolio of Investments — December 31, 2008 — (Continued)


Identifier		Shares		Value


	*Capital Markets — 13.64%*
BK	The Bank of New York Mellon Corp.		36,856	$	1,044,131
CLST LN	Collins Stewart plc		6,000		5,068
GFIG	GFI Group, Inc.		2,000		7,080
JEF	Jefferies Group, Inc.⁽¹⁾		314,000		4,414,840
LAB	LaBranche & Co. Inc.*		150,000		718,500
NTRS	Northern Trust Corp.		18,000		938,520
STT	State Street Corporation		18,018		708,648
TLPR LN	Tullett Prebon plc		6,000		11,775

					7,848,562

	*Commercial Banks — 6.42%*
3988 HK	Bank of China Ltd. — Class H		2,912,000		796,552
CATY	Cathay General Bancorp⁽¹⁾		3,600		85,500
CLFC	Center Financial Corporation		6,000		37,020
939 HK	China Construction Bank Corp. — Class H		2,192,000		1,202,033
EWBC	East West Bancorp, Inc.⁽¹⁾		3,600		57,492
HAFC	Hanmi Financial Corporation		6,800		14,008
1398 HK	Industrial & Commercial Bank of China — Class H		2,508,000		1,320,307
NARA	Nara Bancorp, Inc.		7,000		68,810
UCBH	UCBH Holdings, Inc.⁽¹⁾		7,200		49,536
WIBC	Wilshire Bancorp, Inc.⁽¹⁾		7,200		65,376

					3,696,634

	*Diversified Consumer Services — 0.74%*
BID	Sotheby’s⁽¹⁾		48,000		426,720

See Notes to the Financial Statements.

127

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Market Opportunities Portfolio

Portfolio of Investments — December 31, 2008 — (Continued)


Identifier		Shares		Value


	*Diversified Financial Services — 6.74%*
CLE LN	Climate Exchange PLC*		36,000	$	455,480
CME	CME Group, Inc.		3,800		790,818
IBKR	Interactive Brokers Group, Inc. — Class A*⁽¹⁾		4,000		71,560
ICE	IntercontinentalExchange Inc.*		20,000		1,648,800
JPM	JPMorgan Chase & Co.		1,305		41,147
LSE LN	London Stock Exchange Group plc		24,000		175,981
MXB	MSCI Inc. — Class A*		12,000		213,120
OCX CN	Onex Corporation		30,000		442,041

					3,838,947

	*Electric Utilities — 0.06%*
BIP	Brookfield Infrastructure Partners LP		3,200		35,840

	*European Exchanges — 3.53%*
DB1 GR	Deutsche Boerse AG		6,000		423,686
OMX SS	OMX AB*		48,000		1,608,508

					2,032,194

	Finance/Banks — 0.03%
GHQ	GHL Acquisition Corporation*⁽¹⁾		2,000		18,000

	*Funds, Trusts, and Other Financial Vehicles — 0.45%*
GLD	SPDR Gold Trust*		3,000		259,650

	*Holding Company — 3.16%*
BNB CN	BAM Investments Ltd.*		33,000		270,255
BRK/A	Berkshire Hathaway Inc. — Class A*		16		1,545,600

					1,815,855

	*Household Durables — 1.10%*
IEP	Icahn Enterprises LP		24,000		634,800

See Notes to the Financial Statements.

128

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Market Opportunities Portfolio

Portfolio of Investments — December 31, 2008 — (Continued)


Identifier		Shares		Value


	*Insurance — 12.16%*
ABK	Ambac Financial Group, Inc.⁽¹⁾		20,000	$	26,000
LFC	China Life Insurance Co., Limited — ADR⁽¹⁾		36,000		1,670,400
2628 HK	China Life Insurance Co., Limited — Class H		156,000		474,027
L	Loews Corporation		32,000		904,000
MKL	Markel Corporation*		1,200		358,800
MBI	MBIA Inc.*⁽¹⁾		450,000		1,831,500
2318 HK	Ping An Insurance Group Company of China Limited — Class H		358,000		1,732,213

					6,996,940

	*IT Services — 3.29%*
BR	Broadridge Financial Solutions, Inc.		72,000		902,880
MA	Mastercard, Inc. — Class A⁽¹⁾		4,000		571,720
V	Visa, Inc. — Class A⁽¹⁾		8,000		419,600

					1,894,200

	*Metals & Mining — 6.35%*
FNV CN	Franco-Nevada Corporation		212,000		3,654,403

	*Other Exchanges — 4.44%*
ASX AU	ASX Ltd.		72,000		1,671,605
IMAREX NO	IMAREX ASA*		2,000		16,638
JSE SJ	JSE Limited		180,000		712,601
NZX NZ	NZX Ltd.		48,526		153,987

					2,554,831

	*Software — 0.50%*
FTIS LI	Financial Technologies (India) Ltd. — GDR		144,675		289,350

	*State Commercial Banks — 0.03%*
PFBC	Preferred Bank Los Angeles⁽¹⁾		2,700		16,200

	*Thrifts & Mortgage Finance — 1.30%*
FRE	Federal Home Loan Mortgage Corporation⁽¹⁾		500,000		365,000
FNM	Federal National Mortgage Association⁽¹⁾		500,000		380,000

					745,000

See Notes to the Financial Statements.

129

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Market Opportunities Portfolio

Portfolio of Investments — December 31, 2008 — (Continued)


Identifier		Shares		Value


	*U.S. Equity Exchanges — 4.17%*
NDAQ	The Nasdaq OMX Group*⁽¹⁾		25,000	$	617,750
NYX	NYSE Euronext		65,000		1,779,700

					2,397,450

	TOTAL COMMON STOCKS (cost $81,708,683)				52,992,315



	CALL OPTIONS PURCHASED — 0.01%	Contracts


	*Capital Markets — 0.01%*
STT.AH	State Street Corporation Expiration: January 2009, Exercise Price: $40.00		18		4,320

	TOTAL CALL OPTIONS PURCHASED (cost $56,394)				4,320



	SHORT-TERM INVESTMENTS — 5.96%	Shares


	*Money Market Funds — 5.96%*
FIUXX	First American Prime Obligations Fund — Class Iˆ		1,738,163		1,738,163
FAIXX	First American Prime Obligations Fund — Class Y		1,690,611		1,690,611
	TOTAL SHORT-TERM INVESTMENTS (cost $3,428,774)				3,428,774



	INVESTMENTS PURCHASED WITH THE
	CASH PROCEEDS FROM SECURITIES
	LENDING — 26.98%


	*Investment Companies — 26.98%*
	Mount Vernon Securities Lending Trust — Prime Portfolio		15,528,761		15,528,761

	TOTAL INVESTMENTS PURCHASED WITH THE CASH PROCEEDS FROM SECURITIES LENDING (cost $15,528,761)				15,528,761

	TOTAL INVESTMENTS — 125.03% (cost $100,722,612)			$	71,954,170

See Notes to the Financial Statements.

130

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Market Opportunities Portfolio

Portfolio of Investments — December 31, 2008 — (Continued)

Percentages are stated as a percent of net assets.


* —	Non-income producing security.

ˆ — All or a portion of the shares have been committed as collateral for written option contracts.


ADR —	American Depository Receipt.
GDR —	Global Depository Receipt.


(1) —	This security or a portion of this security was out on loan at December 31, 2008. Total loaned securities had a market value of $14,428,361 at December 31, 2008.

See Notes to the Financial Statements.

131

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Water Infrastructure Portfolio

Portfolio of Investments — December 31, 2008


Identifier	COMMON STOCKS — 89.12%	Shares		Value


	*Building Materials — 0.90%*
SPIP SP	Sinopipe Holdings Limited		2,000,000	$	145,757

	*Building Products — 8.46%*
AMN	Ameron International Corp.		11,400		717,288
GEBN VX	Geberit AG		6,108		649,049

					1,366,337

	*Building Supplies — 3.24%*
SOLK GA	Corinth Pipeworks SA*		100,000		122,324
NWPX	Northwest Pipe Company*		8,000		340,880
PAP TB	Pacific Pipe Public Company Limited		2,286,500		59,825

					523,029

	*Chemicals — 0.47%*
HWKN	Hawkins, Inc.		1,600		24,464
YARIY	Yara International ASA — ADR		2,400		50,985

					75,449

	*Commercial Services & Supplies — 1.77%*
AENV SP	Asia Environment Holdings Limited		310,000		22,592
LAYN	Layne Christensen Company*⁽¹⁾		7,750		186,078
SINO SP	Sinomem Technology Limited*		850,000		76,696

					285,366

	*Construction & Engineering — 5.05%*
URS	URS Corp.*⁽¹⁾		20,000		815,400

	*Electric Utilities — 1.63%*
EDE	The Empire District Electric Co.⁽¹⁾		15,000		264,000

	*Electrical Equipment — 3.33%*
FELE	Franklin Electric Co., Inc.		11,400		320,454
ROP	Roper Industries, Inc.⁽¹⁾		5,000		217,050

					537,504

	*Food Products — 1.99%*
HQS	HQ Sustainable Maritime Industries, Inc.*		41,100		321,813

	*Gas Utilities — 1.89%*
GSZ FP	GDF Suez		6,205		304,664

See Notes to the Financial Statements.

132

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Water Infrastructure Portfolio

Portfolio of Investments — December 31, 2008 — (Continued)


Identifier		Shares		Value


	*Health Care Equipment & Supplies — 2.27%*
CMN	Cantel Medical Corp.*		25,000	$	366,750

	*Household Durables — 0.44%*
6485 JP	Maezawa Kyuso Industries Co. Ltd.		4,500		71,931

	*Independent Power Producers & Energy Traders — 0.64%*
GLH-U CN	Great Lakes Hydro Income Fund		8,000		103,297

	*Industrial Conglomerates — 2.01%*
TYC	Tyco International Ltd.		15,000		324,000

	*Machinery — 17.17%*
ARF-U CN	Armtec Infrastructure Income Fund		20,000		278,493
DHR	Danaher Corp.⁽¹⁾		8,000		452,880
IR	Ingersoll-Rand Company Ltd. — Class A		15,000		260,250
ITT	ITT Corporation⁽¹⁾		11,000		505,890
LNN	Lindsay Corporation		10,000		317,900
MPR	Met-Pro Corporation⁽¹⁾		34,800		463,536
MWA/B	Mueller Water Products, Inc. — Class B		45,000		379,800
840 HK	Xinjiang Tianye Water Saving Irrigation System Co. Ltd. — Class H		1,430,000		114,397

					2,773,146

	*Multi-Utilities — 2.49%*
ACE IM	ACEA S.P.A		30,000		401,793

See Notes to the Financial Statements.

133

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Water Infrastructure Portfolio

Portfolio of Investments — December 31, 2008 — (Continued)


Identifier		Shares		Value


	*Water Utilities — 35.37%*
AWR	American States Water Company		16,200	$	534,276
AWK	American Water Works Co., Inc.⁽¹⁾		5,000		104,400
WTR	Aqua America, Inc.⁽¹⁾		33,400		687,706
ARTNA	Artesian Resources Corp. — Class A		20,610		326,050
CWT	California Water Service Group		20,000		928,600
CTWS	Connecticut Water Service, Inc.		18,494		436,643
270 HK	Guangdong Investment Limited		1,000,000		401,280
MWC PM	Manila Water Company		1,050,000		292,587
MSEX	Middlesex Water Co.		20,000		344,600
NWG LN	Northumbrian Water Group Plc		90,200		306,382
SVT LN	Severn Trent plc		13,000		223,916
SJW	SJW Corp.⁽¹⁾		25,000		748,500
SWWC	Southwest Water Company		20,000		64,400
EYAPS GA	Thessaloniki Water Supply & Sewage Co. SA		10,000		59,772
YORW	York Water Company		20,953		254,369

					5,713,481

	TOTAL COMMON STOCKS (cost $17,662,669)				14,393,717



	SHORT-TERM INVESTMENTS — 2.68%


	*Money Market Funds — 2.68%*
FIUXX	First American Prime Obligations Fund — Class I		433,476		433,476

	TOTAL SHORT-TERM INVESTMENTS (cost $433,476)				433,476

See Notes to the Financial Statements.

134

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Water Infrastructure Portfolio

Portfolio of Investments — December 31, 2008 — (Continued)


	INVESTMENTS PURCHASED WITH THE
	CASH PROCEEDS FROM SECURITIES
Identifier	LENDING — 16.88%	Shares		Value


	*Investment Companies — 16.88%*
	Mount Vernon Securities Lending Trust — Prime Portfolio		2,726,704	$	2,726,704

	TOTAL INVESTMENTS PURCHASED WITH THE CASH PROCEEDS FROM SECURITIES LENDING (cost $2,726,704)				2,726,704

	TOTAL INVESTMENTS — 108.68% (cost $20,822,849)			$	17,553,897

Percentages are stated as a percent of net assets.


* —	Non-income producing security.


ADR —	American Depository Receipt.

(1) —

This security or a portion of this security was out on loan at December 31, 2008. Total loaned securities had a market value of $2,744,778 at December 31, 2008. Market fluctuations may cause the value of the securities on loan to exceed the value of the collateral. When this occurs, collateral is adjusted on the next business day based on the prior day’s market fluctuations and the current day’s lending activity.

See Notes to the Financial Statements.

135

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Multi-Disciplinary Portfolio

Portfolio of Investments — December 31, 2008


Identifier	COMMON STOCKS — 0.02%	Shares		Value


	*Asset Management — 0.02%*
FIG	Fortress Investment Group LLC — Class A		100	$	100

	TOTAL COMMON STOCKS (cost $1,002)				100



		Principal
	SHORT-TERM INVESTMENTS — 82.30%	Amount


	*US Government Agency Issues — 72.68%*
313385AQ9	Federal Home Loan Bank Discount Note^ˆ*0.005%, 01/15/2009*	$	304,000		303,999



		Shares

	*Money Market Funds — 9.62%*
FGVXX	First American Government Obligations Fund — Class Y		10,634		10,634
FIUXX	First American Prime Obligations Fund — Class I		13,872		13,872
FAIXX	First American Prime Obligations Fund — Class Y		15,744		15,744

					40,250

	TOTAL SHORT-TERM INVESTMENTS (cost $344,249)				344,249

	TOTAL INVESTMENTS — 82.32% (cost $345,251)			$	344,349

Percentages are stated as a percent of net assets.

ˆ — All or a portion of the shares have been committed as collateral for written option contracts.

See Notes to the Financial Statements.

136

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Multi-Disciplinary Portfolio

Portfolio of Options Written — December 31, 2008


Identifier	PUT OPTIONS WRITTEN	Contracts		Value


	Aerospace & Defense
BA.MM	Boeing Co.
	Expiration: January 2009, Exercise Price: $65.00		1	$	2,235
NOC.NI	Northrop Grumman Corp.
	Expiration: February 2009, Exercise Price: $45.00		1		260

					2,495

	Airlines
HDZ.OC	China Southern Airlines Company Limited — ADR
	Expiration: March 2009, Exercise Price: $15.00		2		730

	Auto Components
TEN.PB	Tenneco Inc.
	Expiration: April 2009, Exercise Price: $10.00		2		1,410

	Beverages
STZ.MC	Constellation Brands, Inc. — Class A
	Expiration: January 2009, Exercise Price: $15.00		2		85

	*Capital Markets*
BK.RE	The Bank of New York Mellon Corp.
	Expiration: June 2009, Exercise Price: $25.00		1		410
SHQ.OC	The Charles Schwab Corporation
	Expiration: March 2009, Exercise Price: $15.00		1		143
FIG.MV	Fortress Investment Group LLC — Class A
	Expiration: January 2009, Exercise Price: $12.50		1		1,145
GQG.MI	GFI Group, Inc.
	Expiration: January 2009, Exercise Price: $7.50		4		1,580
GS.PC	The Goldman Sachs Group, Inc.
	Expiration: April 2009, Exercise Price: $115.00		1		3,285
LM.NC	Legg Mason, Inc.
	Expiration: February 2009, Exercise Price: $15.00		1		90
NRQ.PK	Northern Trust Corp.
	Expiration: April 2009, Exercise Price: $55.00		2		1,890
RQW.PH	T. Rowe Price Group, Inc.
	Expiration: April 2009, Exercise Price: $40.00		1		760
QGW.RA	U.S. Global Investors, Inc. — Class A
	Expiration: June 2009, Exercise Price: $5.00		3		833

					10,136

See Notes to the Financial Statements.

141

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Multi-Disciplinary Portfolio

Portfolio of Options Written — December 31, 2008 — (Continued)


Identifier		Contracts		Value


	*Chemicals*
IAQ.MI	Sigma-Aldrich Corp.
	Expiration: January 2009, Exercise Price: $45.00		1	$	343

	*Commercial Banks*
HDB.PM	HDFC Bank Ltd. — ADR
	Expiration: April 2009, Exercise Price: $65.00		1		945
IBN.MF	ICIC Bank Ltd. — ADR
	Expiration: January 2009, Exercise Price: $30.00		1		1,080
MTB.PO	M&T Bank Corporation
	Expiration: April 2009, Exercise Price: $75.00		2		4,140

					6,165

	*Commercial Services & Supplies*
IRM.MD	Iron Mountain Incorporated
	Expiration: January 2009, Exercise Price: $20.00		2		70

	*Consumer Finance*
DFS.MB	Discover Financial Services
	Expiration: January 2009, Exercise Price: $10.00		2		190

	*Diversified Consumer Services*
BID.PB	Sotheby’s
	Expiration: April 2009, Exercise Price: $10.00		1		248

	*Diversified Financial Services*
LUK.MH	Leucadia National Corporation
	Expiration: January 2009, Exercise Price: $40.00		1		2,015
MCO.QD	Moody’s Corporation
	Expiration: May 2009, Exercise Price: $20.00		1		400

					2,415

	*Electric Utilities*
AYE.MF	Allegheny Energy, Inc.
	Expiration: January 2009, Exercise Price: $30.00		1		22

	*Hotels, Restaurants & Leisure*
IGT.PD	International Game Technology
	Expiration: April 2009, Exercise Price: $20.00		1		840
MGM.ME	MGM Mirage
	Expiration: January 2009, Exercise Price: $25.00		1		1,140
UWY.MR	Wynn Resorts Limited
	Expiration: January 2009, Exercise Price: $90.00		1		4,765

					6,745

See Notes to the Financial Statements.

142

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Multi-Disciplinary Portfolio

Portfolio of Options Written — December 31, 2008 — (Continued)


Identifier		Contracts		Value


	*Independent Power Producers & Energy Traders*
CPN.OV	Calpine Corp.
	Expiration: March 2009, Exercise Price: $12.50		3	$	1,590
HNP.MF	Huaneng Power International, Inc. — ADR
	Expiration: January 2009, Exercise Price: $30.00		2		435
ULA.NE	Reliant Energy Inc.
	Expiration: February 2009, Exercise Price: $5.00		2		140

					2,165

	*Insurance*
GIY.MA	AMBAC Financial Group Inc.
	Expiration: January 2009, Exercise Price: $5.00		10		3,900
LFC.MX	China Life Insurance Co., Limited — ADR
	Expiration: January 2009, Exercise Price: $57.50		1		1,105
MBI.QZ	MBIA Inc.
	Expiration: May 2009, Exercise Price: $4.00		4		520

					5,525

	*Internet Software & Services*
QXB.PC	eBay, Inc.
	Expiration: April 2009, Exercise Price: $15.00		2		438
GOU.RL	Google Inc. — Class A
	Expiration: June 2009, Exercise Price: $260.00		1		2,315

					2,753

	*IT Services*
WU.NB	The Western Union Company
	Expiration: February 2009, Exercise Price: $10.00		4		70

	*Machinery*
UKU.OC	American Railcar Industries, Inc.
	Expiration: March 2009, Exercise Price: $15.00		2		960

	*Media*
MHP.QX	The McGraw-Hill Companies, Inc.
	Expiration: May 2009, Exercise Price: $22.50		1		355
DIS.MX	The Walt Disney Co.
	Expiration: January 2009, Exercise Price: $22.50		1		70

					425

See Notes to the Financial Statements.

143

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Multi-Disciplinary Portfolio

Portfolio of Options Written — December 31, 2008 — (Continued)


Identifier		Contracts		Value


	*Metals & Mining*
CMC.MD	Commercial Metals Company
	Expiration: January 2009, Exercise Price: $20.00		2	$	1,680
NUE.SH	Nucor Corp.
	Expiration: July 2009, Exercise Price: $40.00		1		635
RJT.SU	Rio Tinto Plc — ADR
	Expiration: July 2009, Exercise Price: $70.00		1		1,455

					3,770

	*Oil, Gas & Consumable Fuels*
CCJ.ME	Cameco Corporation
	Expiration: January 2009, Exercise Price: $25.00		2		1,550
CCD.RF	Canadian Natural Resources Ltd.
	Expiration: June 2009, Exercise Price: $30.00		1		375
SNP.MO	China Petroleum & Chemical Corporation — ADR
	Expiration: January 2009, Exercise Price: $75.00		1		1,345
CEO.MP	CNOOC Limited — ADR
	Expiration: January 2009, Exercise Price: $80.00		1		112
ECA.PH	EnCana Corporation
	Expiration: April 2009, Exercise Price: $40.00		1		355
IMO.NI	Imperial Oil Ltd.
	Expiration: February 2009, Exercise Price: $45.00		1		1,155
KJA.MC	Nexen Inc.
	Expiration: January 2010, Exercise Price: $15.00		2		780
PWE.OB	Penn West Energy Trust
	Expiration: March 2009, Exercise Price: $10.00		1		83
PWK.OO	PetroChina Company Limited — ADR
	Expiration: March 2009, Exercise Price: $75.00		1		490
STO.ME	StatoilHydro ASA — ADR
	Expiration: January 2009, Exercise Price: $25.00		2		1,670
SXH.OD	Suncor Energy, Inc.
	Expiration: March 2009, Exercise Price: $20.00		1		320

					8,235

	*Real Estate Investment Trusts (REITs)*
BAM.RC	Brookfield Asset Management, Inc. — Class A
	Expiration: June 2009, Exercise Price: $15.00		1		267

See Notes to the Financial Statements.

144

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

The Multi-Disciplinary Portfolio

Portfolio of Options Written — December 31, 2008 — (Continued)


Identifier		Contracts		Value


	*Road & Rail*
BNI.MP	Burlington Northern Santa Fe Corporation
	Expiration: January 2009, Exercise Price: $80.00		1	$	500
CSX.ML	CSX Corp.
	Expiration: January 2009, Exercise Price: $60.00		1		2,760

					3,260

	*Specialty Retail*
TIF.QD	Tiffany & Co.
	Expiration: May 2009, Exercise Price: $20.00		1		275

	*Textiles, Apparel & Luxury Goods*
COH.QA	Coach, Inc.
	Expiration: May 2009, Exercise Price: $17.50		1		217

	*Transportation Infrastructure*
PAC.MW	Grupo Aeroportuario del Pacifico S.A.B. de C.V. — ADR
	Expiration: January 2009, Exercise Price: $17.50		1		17

	*Transportation Services*
UPS.ML	United Parcel Service — Class B
	Expiration: January 2009, Exercise Price: $60.00		1		490

	*Wireless Telecommunication Services*
CWA.MH	China Unicom (Hong Kong) Limited — ADR
	Expiration: January 2009, Exercise Price: $40.00		1		405
CHU.PV	China Unicom (Hong Kong) Limited — ADR
	Expiration: April 2009, Exercise Price: $12.50		4		810

					1,215

	TOTAL PUT OPTIONS WRITTEN (premiums received $43,279)			$	60,698


ADR —	American Depository Receipt.

See Notes to the Financial Statements.

145

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

Statement of Assets & Liabilities

December 31, 2008


	The Internet		The Global
	Portfolio		Portfolio


ASSETS:
Investments, at value⁽¹⁾⁽²⁾	$	85,647,337	$	2,036,530
Foreign currencies, at value⁽³⁾		200,984		38,227
Cash		1,156,201		25
Receivable for contributed capital		9,520		2,709
Dividends and interest receivable		54,745		2,374
Other assets		37,440		319

Total assets		87,106,227		2,080,184

LIABILITIES:
Written options, at value⁽⁴⁾		815,000		—
Payable to Adviser		78,257		2,060
Payable to Trustees and Officers		862		7
Payable for collateral received for securities loaned		10,478,464		98,047
Payable for withdrawn capital		75,462		7,648
Accrued expenses and other liabilities		18,358		10,679

Total liabilities		11,466,403		118,441

Net assets	$	75,639,824	$	1,961,743

⁽¹⁾Cost of investments	$	88,818,212	$	3,619,031

⁽²⁾Includes loaned securities with a market value of	$	9,471,644	$	90,227

⁽³⁾Cost of foreign currencies	$	199,253	$	37,693

⁽⁴⁾Premiums received	$	361,078	$	—

See Notes to the Financial Statements.

146

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

Statement of Assets & Liabilities

December 31, 2008


	The		The
	Paradigm		Medical
	Portfolio		Portfolio


ASSETS:
Investments, at value⁽¹⁾⁽²⁾	$	1,535,483,868	$	23,755,092
Repurchase agreements, at value⁽⁵⁾		144,373,000		—
Foreign currencies, at value⁽³⁾		7,533,273		—
Cash		—		41,077
Receivable for collateral for securities loaned		624,000		—
Receivable for contributed capital		5,596,095		22,196
Receivable for investments sold		28,532,707		—
Dividends and interest receivable		1,586,345		33,254
Other assets		601,405		7,221

Total assets		1,724,330,693		23,858,840

LIABILITIES:
Written options, at value⁽⁴⁾		—		1,040
Payable to Adviser		1,392,128		18,852
Payable to Custodian		3,184,350		—
Payable to Trustees and Officers		26,887		99
Payable for securities purchased		1,307,701		—
Payable for collateral received for securities loaned		418,498,897		4,783,206
Payable for withdrawn capital		7,212,281		50,784
Accrued expenses and other liabilities		233,459		12,166

Total liabilities		431,855,703		4,866,147

Net assets	$	1,292,474,990	$	18,992,693

⁽¹⁾Cost of investments	$	2,372,644,121	$	28,695,779

⁽²⁾Includes loaned securities with a market value of	$	407,863,511	$	4,413,275

⁽³⁾Cost of foreign currencies	$	7,548,375	$	—

⁽⁴⁾Premiums received	$	—	$	19,470

⁽⁵⁾Cost of repurchase agreements	$	144,373,000	$	—

See Notes to the Financial Statements.

147

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

Statement of Assets & Liabilities

December 31, 2008


			The Kinetics
	The Small Cap		Government
	Opportunities		Money Market
	Portfolio		Portfolio


ASSETS:
Investments, at value⁽¹⁾⁽²⁾	$	259,618,833	$	2,632,995
Foreign currencies, at value⁽³⁾		1,472,402		—
Cash		—		83,276
Receivable for contributed capital		484,240		—
Receivable for investments sold		713,957		—
Dividends and interest receivable		302,090		—
Other assets		170,519		44

Total assets		262,762,041		2,716,315

LIABILITIES:
Written options, at value⁽⁴⁾		5,250		—
Payable to Adviser		232,866		1,146
Payable to Custodian		104,918		—
Payable to Trustees and Officers		5,156		2
Payable for collateral received for securities loaned		50,956,896		—
Payable for withdrawn capital		869,671		—
Accrued expenses and other liabilities		61,372		8,919

Total liabilities		52,236,129		10,067

Net assets	$	210,525,912	$	2,706,248

⁽¹⁾Cost of investments	$	393,393,473	$	2,632,995

⁽²⁾Includes loaned securities with a market value of	$	46,239,400	$	—

⁽³⁾Cost of foreign currencies	$	1,451,867	$	—

⁽⁴⁾Premiums received	$	3,940	$	—

See Notes to the Financial Statements.

148

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

Statement of Assets & Liabilities

December 31, 2008


	The Market		The Water
	Opportunities		Infrastructure
	Portfolio		Portfolio


ASSETS:
Investments, at value⁽¹⁾⁽²⁾	$	71,954,170	$	17,553,897
Foreign currencies, at value⁽³⁾		598,088		194,762
Cash		579,551		40,017
Receivable for contributed capital		67,114		1,159,991
Receivable for payment by affiliate		484,652		—
Dividends and interest receivable		47,579		53,269
Other assets		67,836		5,601

Total assets		73,798,990		19,007,537

LIABILITIES:
Written options, at value⁽⁴⁾		407,500		—
Payable to Adviser		58,372		15,291
Payable to Trustees and Officers		645		63
Payable for securities purchased		—		56,148
Payable for collateral received for securities loaned		15,528,761		2,726,704
Payable for withdrawn capital		234,767		43,263
Accrued expenses and other liabilities		19,799		14,348

Total liabilities		16,249,844		2,855,817

Net assets	$	57,549,146	$	16,151,720

⁽¹⁾Cost of investments	$	100,722,612	$	20,822,849

⁽²⁾Includes loaned securities with a market value of	$	14,428,361	$	2,744,778

⁽³⁾Cost of foreign currencies	$	617,644	$	238,320

⁽⁴⁾Premiums received	$	180,539	$	—

See Notes to the Financial Statements.

149

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

Statement of Assets & Liabilities

December 31, 2008


	The Multi-
	Disciplinary
	Portfolio


ASSETS:
Investments, at value⁽¹⁾	$	344,349
Deposit at brokers for written options		63,955
Cash		78,210
Receivable for investments sold		3,194
Dividends and interest receivable		48
Other assets		7

Total assets		489,763

LIABILITIES:
Written options, at value⁽²⁾		60,698
Payable to Adviser		444
Payable to Trustees and Officers		2
Payable for securities purchased		1,275
Accrued expenses and other liabilities		9,058

Total liabilities		71,477

Net assets	$	418,286

⁽¹⁾Cost of investments	$	345,251

⁽²⁾Premiums received	$	43,279

See Notes to the Financial Statements.

150

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

Statement of Operations

For the Year Ended December 31, 2008


	The Internet			The Global
	Portfolio			Portfolio


INVESTMENT INCOME:
Dividends†	$	1,143,384		$	85,022
Interest		597,592			4,581
Income from securities lending		610,522			3,239
Other income		959,999			—

Total investment income		3,311,497			92,842

EXPENSES:
Investment advisory fees		1,411,000			35,211
Administration fees		42,835			1,077
Professional fees		12,468			7,440
Fund accounting fees		15,538			5,590
Trustee and Officers’ fees and expenses		3,246			70
Custodian fees and expenses		25,094			19,788
Other expenses		3,022			218

Total expenses		1,513,203			69,394

Net expenses		1,513,203			69,394

Net investment income		1,798,294			23,448

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on:
Investments and foreign currency		1,853,794			188,690
Net change in unrealized depreciation of:
Investments and foreign currency		(64,934,366	)		(2,277,088	)
Written option contracts		(453,922	)		—

Net loss on investments		(63,534,494	)		(2,088,398	)

Net decrease in net assets resulting from operations	$	(61,736,200	)	$	(2,064,950	)

† Net of Foreign Taxes Withheld of:	$	134,448		$	1,627

See Notes to the Financial Statements.

151

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

Statement of Operations

For the Year Ended December 31, 2008


	The			The
	Paradigm			Medical
	Portfolio			Portfolio


INVESTMENT INCOME:
Dividends†	$	49,560,384		$	378,082
Interest		13,422,851			29,333
Income from securities lending		7,657,783			53,004

Total investment income		70,641,018			460,419

EXPENSES:
Investment advisory fees		40,463,719			236,014
Administration fees		1,230,567			6,412
Professional fees		179,842			7,978
Fund accounting fees		313,637			3,994
Trustee and Officers’ fees and expenses		103,430			466
Custodian fees and expenses		558,764			12,776
Other expenses		77,714			234

Total expenses		42,927,673			267,874

Net expenses		42,927,673			267,874

Net investment income		27,713,345			192,545

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on:
Investments and foreign currency		(640,156,444	)		369,558
Written option contracts expired or closed		(676,900	)		—
Net increase from payments by affiliates on the disposal of investments in violation of restrictionsˆ		415,007			—
Net realized capital gains tax		(320,435	)		—
Net change in unrealized appreciation (depreciation) of:
Investments and foreign currency		(1,594,707,316	)		(5,677,938	)
Written option contracts		(103,358	)		18,430

Net loss on investments		(2,235,549,446	)		(5,289,950	)

Net decrease in net assets resulting from operations	$	(2,207,836,101	)	$	(5,097,405	)

† Net of Foreign Taxes Withheld of:	$	2,839,376		$	19,679

^See Note 3, “Investment Adviser” in the Notes to the Financial Statements.

See Notes to the Financial Statements.

152

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

Statement of Operations

For the Year Ended December 31, 2008


				The Kinetics
	The Small Cap			Government
	Opportunities			Money Market
	Portfolio			Portfolio


INVESTMENT INCOME:
Dividends†	$	7,463,896		$	—
Interest		1,189,269			34,763
Income from securities lending		2,264,469			—

Total investment income		10,917,634			34,763

EXPENSES:
Investment advisory fees		7,282,270			11,053
Administration fees		298,868			881
Professional fees		38,978			7,450
Fund accounting fees		75,391			252
Trustee and Officers’ fees and expenses		18,838			50
Custodian fees and expenses		202,144			7,584
Other expenses		18,238			159

Total expenses		7,934,727			27,429

Net expenses		7,934,727			27,429

Net investment income		2,982,907			7,334

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on:
Investments and foreign currency		(139,875,739	)		(84	)
Net increase from payments by affiliates on the disposal of investments in violation of restrictionsˆ		66,781			—
Net change in unrealized depreciation of:
Investments and foreign currency		(332,404,165	)		—
Written option contracts		(1,310	)		—

Net loss on investments		(472,214,433	)		(84	)

Net increase (decrease) in net assets resulting from operations	$	(469,231,526	)	$	7,250

† Net of Foreign Taxes Withheld of:	$	141,157		$	—

^See Note 3, “Investment Adviser” in the Notes to the Financial Statements.

See Notes to the Financial Statements.

153

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

Statement of Operations

For the Year Ended December 31, 2008


	The Market			The Water
	Opportunities			Infrastructure
	Portfolio			Portfolio


INVESTMENT INCOME:
Dividends†	$	1,763,638		$	406,691
Interest		203,796			92,464
Income from securities lending		396,466			27,651

Total investment income		2,363,900			526,806

EXPENSES:
Investment advisory fees		1,132,541			238,093
Administration fees		34,611			7,850
Professional fees		11,886			9,789
Fund accounting fees		14,563			7,771
Trustee and Officers’ fees and expenses		2,887			470
Custodian fees and expenses		37,376			19,800
Other expenses		1,778			198

Total expenses		1,235,642			283,971

Net expenses		1,235,642			283,971

Net investment income		1,128,258			242,835

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on:
Investments and foreign currency		(27,257,951	)		(5,822,315	)
Written option contracts expired or closed		—			640
Net increase from receivable from affiliates on the disposal of investments in violation of restrictionsˆ		484,652			—
Net change in unrealized depreciation of:
Investments and foreign currency		(46,089,250	)		(3,345,871	)
Written option contracts		(226,961	)		—

Net loss on investments		(73,089,510	)		(9,167,546	)

Net decrease in net assets resulting from operations	$	(71,961,252	)	$	(8,924,711	)

† Net of Foreign Taxes Withheld of:	$	86,117		$	32,679

^See Note 3, “Investment Adviser” in the Notes to the Financial Statements.

See Notes to the Financial Statements.

154

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

Statement of Operations

For the Period February 11, 2008ˆ through December 31, 2008


	The Multi-
	Disciplinary
	Portfolio


INVESTMENT INCOME:
Interest	$	6,789

Total investment income		6,789

EXPENSES:
Investment advisory fees		5,304
Administration fees		171
Professional fees		7,384
Fund accounting fees		1,824
Trustee and Officers’ fees and expenses		10
Custodian fees and expenses		6,921

Total expenses		21,614

Net expenses		21,614

Net investment loss		(14,825	)

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on:
Investments		(87,378	)
Written option contracts expired or closed		12,895
Net change in unrealized depreciation of:
Investments		(902	)
Written option contracts		(17,419	)

Net loss on investments		(92,804	)

Net decrease in net assets resulting from operations	$	(107,629	)


ˆ	Commencement of operations.

See Notes to the Financial Statements.

155

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

Statements of Changes in Net Assets


	The Internet Portfolio						The Global Portfolio
	For the			For the			For the			For the
	Year Ended			Year Ended			Year Ended			Year Ended
	December 31,			December 31,			December 31,			December 31,
	2008			2007			2008			2007


OPERATIONS:
Net investment income	$	1,798,294		$	2,283,029		$	23,448		$	140,984
Net realized gain on sale of investments, foreign currency and written options		1,853,794			15,699,622			188,690			295,159
Net change in unrealized appreciation (depreciation) of investments, foreign currency and written options		(65,388,288	)		16,152,318			(2,277,088	)		(304,486	)

Net increase (decrease) in net assets resulting from operations		(61,736,200	)		34,134,969			(2,064,950	)		131,657

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM BENEFICIAL INTEREST TRANSACTIONS:
Contributions		1,732,265			21,788,282			1,685,706			641,520
Withdrawals		(32,194,574	)		(25,387,972	)		(801,892	)		(1,617,402	)

Net increase (decrease) in net assets resulting from beneficial interest transactions		(30,462,309	)		(3,599,690	)		883,814			(975,882	)

Total increase (decrease) in net assets		(92,198,509	)		30,535,279			(1,181,136	)		(844,225	)
NET ASSETS:
Beginning of year		167,838,333			137,303,054			3,142,879			3,987,104

End of year	$	75,639,824		$	167,838,333		$	1,961,743		$	3,142,879

See Notes to the Financial Statements.

156

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

Statements of Changes in Net Assets


	The Paradigm Portfolio						The Medical Portfolio
	For the			For the			For the			For the
	Year Ended			Year Ended			Year Ended			Year Ended
	December 31,			December 31,			December 31,			December 31,
	2008			2007			2008			2007


OPERATIONS:
Net investment income	$	27,713,345		$	24,576,262		$	192,545		$	91,619
Net realized gain (loss) on sale of investments, foreign currency and written options		(640,738,772	)		24,227,223			369,558			1,258,860
Net change in unrealized appreciation (depreciation) of investments, foreign currency and written options		(1,594,810,674	)		537,525,297			(5,659,508	)		937,125

Net increase (decrease) in net assets resulting from operations		(2,207,836,101	)		586,328,782			(5,097,405	)		2,287,604

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM BENEFICIAL INTEREST TRANSACTIONS:
Contributions		283,118,993			2,022,528,529			13,013,167			8,466,891
Withdrawals		(1,422,768,329	)		(130,658,050	)		(4,427,289	)		(11,493,025	)

Net increase (decrease) in net assets resulting from beneficial interest transactions		(1,139,649,336	)		1,891,870,479			8,585,878			(3,026,134	)

Total increase (decrease) in net assets		(3,347,485,437	)		2,478,199,261			3,488,473			(738,530	)
NET ASSETS:
Beginning of year		4,639,960,427			2,161,761,166			15,504,220			16,242,750

End of year	$	1,292,474,990		$	4,639,960,427		$	18,992,693		$	15,504,220

See Notes to the Financial Statements.

157

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

Statements of Changes in Net Assets


	The Small Cap
	Opportunities Portfolio						The Kinetics Government Money Market Portfolio
	For the			For the			For the			For the
	Year Ended			Year Ended			Year Ended			Year Ended
	December 31,			December 31,			December 31,			December 31,
	2008			2007			2008			2007


OPERATIONS:
Net investment income	$	2,982,907		$	3,464,783		$	7,334		$	29,647
Net realized gain (loss) on sale of investments, foreign currency and written options		(139,808,958	)		10,942,305			(84	)		—
Net change in unrealized appreciation (depreciation) of investments, foreign currency and written options		(332,405,475	)		110,493,933			—			—

Net increase (decrease) in net assets resulting from operations		(469,231,526	)		124,901,021			7,250			29,647

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM BENEFICIAL INTEREST TRANSACTIONS:
Contributions		9,623,613			545,055,337			3,553,538			1,384,198
Withdrawals		(417,583,047	)		(73,301,302	)		(2,067,115	)		(1,639,629	)

Net increase (decrease) in net assets resulting from beneficial interest transactions		(407,959,434	)		471,754,035			1,486,423			(255,431	)

Total increase (decrease) in net assets		(877,190,960	)		596,655,056			1,493,673			(225,784	)
NET ASSETS:
Beginning of year		1,087,716,872			491,061,816			1,212,575			1,438,359

End of year	$	210,525,912		$	1,087,716,872		$	2,706,248		$	1,212,575

See Notes to the Financial Statements.

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Statements of Changes in Net Assets


	The Market Opportunities Portfolio						The Water Infrastructure Portfolio
	For the			For the			For the			From June 29,
	Year Ended			Year Ended			Year Ended			2007ˆ through
	December 31,			December 31,			December 31,			December 31,
	2008			2007			2008			2007


OPERATIONS:
Net investment income	$	1,128,258		$	351,788		$	242,835		$	17,366
Net realized gain (loss) on sale of investments, foreign currency and written options		(26,773,299	)		(139,936	)		(5,821,675	)		32,043
Net change in unrealized appreciation (depreciation) of investments, foreign currency and written options		(46,316,211	)		15,574,685			(3,345,871	)		33,213

Net increase (decrease) in net assets resulting from operations		(71,961,252	)		15,786,537			(8,924,711	)		82,622

NET INCREASE IN NET ASSETS RESULTING FROM BENEFICIAL INTEREST TRANSACTIONS:
Contributions		41,907,272			87,609,598			33,631,279			6,511,597
Withdrawals		(28,148,309	)		(5,225,769	)		(14,812,293	)		(336,774	)

Net increase in net assets resulting from beneficial interest transactions		13,758,963			82,383,829			18,818,986			6,174,823

Total increase (decrease) in net assets		(58,202,289	)		98,170,366			9,894,275			6,257,445
NET ASSETS:
Beginning of year		115,751,435			17,581,069			6,257,445			—

End of year	$	57,549,146		$	115,751,435		$	16,151,720		$	6,257,445

^Commencement of operations.

See Notes to the Financial Statements.

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KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

Statements of Changes in Net Assets


	The Multi-Disciplinary
	Portfolio
	From February 11, 2008ˆ
	through December 31, 2008


OPERATIONS:
Net investment loss	$	(14,825	)
Net realized loss on sale of investments and written options		(74,483	)
Net change in unrealized depreciation of investments and written options		(18,321	)

Net decrease in net assets resulting from operations		(107,629	)

NET INCREASE IN NET ASSETS RESULTING FROM BENEFICIAL INTEREST TRANSACTIONS:
Contributions		605,549
Withdrawals		(79,634	)

Net increase in net assets resulting from beneficial interest transactions		525,915

Total increase in net assets		418,286
NET ASSETS:
Beginning of year		—

End of year	$	418,286


ˆ	Commencement of operations.

See Notes to the Financial Statements.

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Notes to Financial Statements

December 31, 2008

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 objective and policies. The series currently authorized are: The Internet Portfolio, The Global Portfolio (formerly The Internet Emerging Growth Portfolio), The Paradigm Portfolio, The Medical Portfolio, The Small Cap Opportunities Portfolio, The Kinetics Government Money Market Portfolio, The Market Opportunities Portfolio, The Water Infrastructure Portfolio and The Multi-Disciplinary Portfolio (collectively, the “Master Portfolios”). Pursuant to the 1940 Act, the Master Portfolios, with the exception of The Kinetics Government Money Market Portfolio, are “non-diversified” series of the Trust. The Market Opportunities Portfolio commenced operations on January 31, 2006, The Water Infrastructure Portfolio commenced operations on June 29, 2007 and The Multi-Disciplinary Portfolio commenced operations on February 11, 2008. Each of the remaining Master Portfolios commenced operations on April 28, 2000.

Each Master Portfolio is a Master Investment Portfolio in a master-feeder fund structure. Each Master Portfolio has multiple feeder funds invested in the Master Portfolio. By contributing assets to the Master Portfolio, the feeder funds receive a beneficial interest in the Master Portfolio. The Master Portfolio then invests the contributed assets in portfolio securities and allocates income, gains (losses) and expenses to the feeder funds based on the feeder funds’ proportionate interests 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 Global Portfolio invests primarily in the equity securities of foreign companies that have the ability to facilitate an increase in the growth of their traditional business lines and secondarily in U.S. companies benefiting from international economic growth. 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

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Notes to Financial Statements — (Continued)

December 31, 2008

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

2. Significant Accounting Policies

Security Valuation

Master Portfolio securities (other than securities held by the Kinetics Government Money Market Portfolio) 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 non-exchange traded 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. Exchange traded options are valued at the last reported sale price on an exchange on which the option is traded. If no sales are reported on a particular day, the mean between the highest bid and lowest asked quotations at the close of the exchanges will be used. Fixed-income securities (other than obligations having a maturity of 60 days or less) are normally

162

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Notes to Financial Statements — (Continued)

December 31, 2008

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. Investment securities in The Kinetics Government Money Market Portfolio and instruments purchased with remaining maturities of 60 days or less are valued at amortized cost, which approximates fair value. Other assets and securities for which no quotations are readily available (including restricted securities) will be valued in good faith at fair value using methods determined by the Board of Trustees of the Master Portfolios. At December 31, 2008 0.00%, 2.76%, 1.00% and 0.00% fair valued securities were held by the Internet Portfolio, Global Portfolio, Paradigm Portfolio, and Small Cap Opportunities Portfolio, respectively.

Repurchase Agreements

At December 31, 2008 the Paradigm Portfolio received as collateral securities with a total market value of $147,263,663. The detailed list of the securities received as collateral is listed below.

ING Financial Repurchase Agreement, 0.040%, due 01/02/2009, par value $144,373,000 Collateralized by:


Description	Fair Value

U.S. Treasury Bill, 0.330%, 10/22/2009	$	140,548,619
FGLMC, Pool # G04588, 5.500%, 08/01/2038		6,715,044

Total	$	147,263,663

Written Option Accounting

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Notes to Financial Statements — (Continued)

December 31, 2008

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 and Illiquid Securities

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Notes to Financial Statements — (Continued)

December 31, 2008

registration of unregistered securities. At December 31, 2008 the Global Portfolio had restricted securities with an aggregate value of $30,821 representing 1.57% of its net assets. An illiquid asset is any asset which may not be sold or disposed of in the ordinary course of business within seven days at approximately the value at which the Portfolio has valued the investment. At December 31, 2008, the following Portfolios held illiquid securities:


			Percentage
	Market Value		of Net Assets

The Internet Portfolio	$	634		0.00	%
The Global Portfolio		17,850		0.91
The Paradigm Portfolio		12,901,309		1.00
The Small Cap Opportunities Portfolio		6,301		0.00

When-Issued Securities

Securities Lending

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 interests in the respective Master Portfolios.

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Notes to Financial Statements — (Continued)

December 31, 2008

Federal Income Taxes

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

Effective June 29, 2007, the Master Portfolios adopted Financial Accounting Standards Board (FASB) Interpretation No. 48 (FIN 48), “Accounting for Uncertainty in Income Taxes”. FIN 48 requires the evaluation of tax positions taken on previously filed tax returns or expected to be taken on future returns. These positions must meet a “more likely than not” standard that, based on the technical merits, have a more than fifty percent likelihood of being sustained upon examination. In evaluating whether a tax position has met the recognition threshold, the Portfolios must presume that the position will be examined by the appropriate taxing authority that has full knowledge of all relevant information. Tax positions not deemed to meet the “more-likely-than-not” threshold are recorded as a tax expense in the current year.

FIN 48 requires the Master Portfolios to analyze all open tax years, as defined by the relevant statute of limitations, for all major jurisdictions. Open tax years are those that are open for exam by taxing authorities. As of December 31, 2008, open tax years include the tax years ended December 31, 2005 through 2008. The Portfolios have no examination in progress.

The Master Portfolios have reviewed all open tax years and major jurisdictions and concluded that the adoption of FIN 48 resulted in no effect to the Portfolios’ financial position or results of operations. There is no tax liability resulting from unrecognized tax benefits relating to uncertain income tax positions taken or expected to be taken in future tax returns. The Portfolios are also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.

Use of 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

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Notes to Financial Statements — (Continued)

December 31, 2008

and interest income is recognized on the accrual basis. Other noncash dividends are recognized as investment income at the fair value of the property received. Withholding taxes on foreign dividends have been provided for in accordance with the Trust’s understanding of the applicable country’s tax rules and rates.

3. Investment Adviser

The Trust has entered into Investment Advisory Agreements (the “Agreements”) with Kinetics Asset Management, Inc. (the “Adviser”), with whom certain officers and trustees of the Trust are affiliated, to furnish investment advisory services to the Master Portfolios. Under the terms of the Agreements, the Master Portfolios compensate the Adviser for its management services at the annual rate of 1.25% of each Master Portfolio’s average daily net assets, except for The Kinetics Government Money Market Portfolio, which compensates the Adviser at a rate of 0.50% of the Master Portfolio’s average daily net assets. Pursuant to a sub-advisory agreement, the sub-adviser to the Water Infrastructure Portfolio, Aqua Terra Asset Management LLC, received compensation from the Adviser at the annual rate of 0.35% of daily net assets of the Water Infrastructure Portfolio. This sub-advisory agreement was terminated October 27, 2008. For the year ended December 31, 2008, The Internet Portfolio, The Global Portfolio, The Paradigm Portfolio, The Medical Portfolio, The Small Cap Opportunities Portfolio, The Kinetics Government Money Market Portfolio, The Market Opportunities Portfolio, The Water Infrastructure Portfolio and The Multi-Disciplinary Portfolio incurred expenses of $1,411,000, $35,211, $40,463,719, $236,014, $7,282,270, $11,053, $1,132,541, $238,093 and $5,304, respectively, pursuant to the Investment Advisory Agreements.

For the year ended December 31, 2008, the Trust was allocated $24,000 for the services of the Chief Compliance Officer employed by the Adviser.

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Notes to Financial Statements — (Continued)

December 31, 2008

4. Securities Transactions

Purchases and sales of investment securities, other than short-term investments, for the year ended December 31, 2008 were as follows:


	Purchases				Sales
	U.S.				U.S.
	Government		Other		Government		Other

The Internet Portfolio	$	—	$	18,946,657	$	—	$	49,320,496
The Global Portfolio		—		3,499,689		—		2,590,022
The Paradigm Portfolio		—		956,066,777		—		1,321,030,407
The Medical Portfolio		—		11,532,895		—		5,060,950
The Small Cap Opportunities Portfolio		—		90,518,327		—		359,464,502
The Market Opportunities Portfolio		—		81,099,681		—		62,755,075
The Water Infrastructure Portfolio		—		27,646,246		—		9,444,524
The Multi-Disciplinary Portfolio^ˆ		—		—		—		—

^ˆCommenced operations on February 11, 2008.

As of December 31, 2008, the cost of investments and unrealized appreciation (depreciation) on investment securities for federal income tax purposes was as follows:


	Net
	Appreciation			Appreciated		Depreciated			Cost of
	(Depreciation)			Securities		Securities			Investments

The Internet Portfolio	$	(4,728,350	)	$	17,105,172	$	(21,833,522	)	$	90,375,687
The Global Portfolio		(1,582,501	)		106,183		(1,688,684	)		3,619,031
The Paradigm Portfolio		(726,005,644	)		264,492,612		(990,498,256	)		2,405,862,512
The Medical Portfolio		(5,080,995	)		2,239,772		(7,320,767	)		28,836,087
The Small Cap Opportunities Portfolio		(144,414,279	)		12,469,251		(156,883,530	)		404,033,112
The Kinetics Government Money Market Portfolio		—			—		—			2,632,995
The Market Opportunities Portfolio		(29,817,903	)		3,200,781		(33,018,684	)		101,772,073
The Water Infrastructure Portfolio		(3,389,852	)		903,572		(4,293,424	)		20,943,749
The Multi-Disciplinary Portfolio^ˆ		(902	)		—		(902	)		345,251

The difference between book basis and tax basis unrealized appreciation/depreciation is attributable primarily to wash loss deferrals, PFIC adjustments and partnership adjustments.

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Notes to Financial Statements — (Continued)

December 31, 2008

For the year ended December 31, 2008, the Master Portfolios wrote the following options:


	Number			Premium
	of Contracts			Amount

*The Internet Portfolio*
Outstanding at the Beginning of Year		—		$	—
Options Written		40			361,078

Outstanding at the End of Year		40		$	361,078

*The Paradigm Portfolio*
Outstanding at the Beginning of Year		80		$	109,758
Options Written		1,900			650,046
Options Closed		(1,980	)		(759,804	)

Outstanding at the End of Year		—		$	—

*The Medical Portfolio*
Outstanding at the Beginning of Year		—		$	—
Options Written		40			19,470

Outstanding at the End of Year		40		$	19,470

*The Small Cap Opportunities Portfolio*
Outstanding at the Beginning of Year		—		$	—
Options Written		20			3,940

Outstanding at the End of Year		20		$	3,940

*The Market Opportunities Portfolio*
Outstanding at the Beginning of Year		—		$	—
Options Written		20			180,539

Outstanding at the End of Year		20		$	180,539

*The Water Infrastructure Portfolio*
Outstanding at the Beginning of Year		—		$	—
Options Written		80			28,000
Options Closed		(80	)		(28,000	)

Outstanding at the End of Year		—		$	—

*The Multi-Disciplinary Portfolio*
Outstanding at February 11, 2008^ˆ		—		$	—
Options Written		248			94,121
Options Exercised		(110	)		(37,597	)
Options Expired		(35	)		(10,225	)
Options Closed		(1	)		(3,020	)

Outstanding at the End of Year		102		$	43,279

^ˆ Commencement of operations.

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Notes to Financial Statements — (Continued)

December 31, 2008


5.	Portfolio Securities Loaned

As of December 31, 2008, 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, a Master Portfolio could experience a delay in recovering its securities and possible loss of income or value if the borrower fails to return them. The Master Portfolio receives interest on the collateral received as well as a fee for the securities loaned. The Master Portfolios will continue to receive dividends and interest on all securities loaned. Gain or loss in the fair value of the securities loaned that may occur during the term of the loan will be accounted for by the Master Portfolios. The value of the securities on loan and the value of the related collateral at December 31, 2008, were as follows:


	Securities		Collateral

The Internet Portfolio	$	9,471,644	$	10,478,464
The Global Portfolio		90,227		98,047
The Paradigm Portfolio		407,863,511		418,498,897
The Medical Portfolio		4,413,275		4,783,206
The Small Cap Opportunities Portfolio		46,239,400		50,956,896
The Market Opportunities Portfolio		14,428,361		15,528,761
The Water Infrastructure Portfolio		2,744,778		2,726,704
The Multi-Disciplinary Portfolio		—		—

6. Selected Financial Highlights

Financial highlights for the Master Portfolios were as follows:


	The Internet Portfolio
	For the		For the		For the		For the		For the
	Year Ended		Year Ended		Year Ended		Year Ended		Year Ended
	December 31,		December 31,		December 31,		December 31,		December 31,
	2008		2007		2006		2005		2004

Ratio of expenses to average net assets:
Before expense reduction		1.34%		1.34%		1.39%		1.45%		1.50%
After expense reduction		1.34%		1.33%		1.33%		1.44%		1.44%
Ratio of net investment income to average net assets:
Before expense reduction		1.59%		1.58%		0.17%		1.35%		1.30%
After expense reduction		1.59%		1.59%		0.23%		1.36%		1.36%
Portfolio turnover rate		19%		15%		11%		12%		42%

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Notes to Financial Statements — (Continued)

December 31, 2008


	The Global Portfolio
	For the		For the		For the		For the		For the
	Year Ended		Year Ended		Year Ended		Year Ended		Year Ended
	December 31,		December 31,		December 31,		December 31,		December 31,
	2008		2007		2006		2005		2004

Ratio of expenses to average net assets:
Before expense reduction		2.46%		1.99%		1.62%		1.73%		1.78%
After expense reduction		2.46%		1.98%		1.46%		1.72%		1.73%
Ratio of net investment income to average net assets:
Before expense reduction		0.83%		3.73%		2.78%		4.30%		2.77%
After expense reduction		0.83%		3.74%		2.94%		4.31%		2.82%
Portfolio turnover rate		98%		22%		10%		2%		18%


	The Paradigm Portfolio
	For the		For the		For the		For the		For the
	Year Ended		Year Ended		Year Ended		Year Ended		Year Ended
	December 31,		December 31,		December 31,		December 31,		December 31,
	2008		2007		2006		2005		2004

Ratio of expenses to average net assets:
Before expense reduction		1.33%		1.33%		1.40%		1.45%		1.52%
After expense reduction		1.33%		1.33%		1.32%		1.40%		1.42%
Ratio of net investment income (loss) to average net assets:
Before expense reduction		0.86%		0.75%		0.85%		0.07%		(0.18%	)
After expense reduction		0.86%		0.75%		0.93%		0.12%		(0.08%	)
Portfolio turnover rate		34%		8%		3%		5%		52%


	The Medical Portfolio
	For the		For the		For the		For the			For the
	Year Ended		Year Ended		Year Ended		Year Ended			Year Ended
	December 31,		December 31,		December 31,		December 31,			December 31,
	2008		2007		2006		2005			2004

Ratio of expenses to average net assets:
Before expense reduction		1.42%		1.49%		1.44%		1.50%			1.58%
After expense reduction		1.42%		1.40%		1.34%		1.49%			1.57%
Ratio of net investment income (loss) to average net assets:
Before expense reduction		1.02%		0.42%		0.33%		(0.17%	)		(0.33%	)
After expense reduction		1.02%		0.51%		0.43%		(0.16%	)		(0.32%	)
Portfolio turnover rate		28%		38%		20%		2%			13%


	The Small Cap Opportunities Portfolio
	For the		For the		For the		For the		For the
	Year Ended		Year Ended		Year Ended		Year Ended		Year Ended
	December 31,		December 31,		December 31,		December 31,		December 31,
	2008		2007		2006		2005		2004

Ratio of expenses to average net assets:
Before expense reduction		1.36%		1.34%		1.40%		1.48%		1.55%
After expense reduction		1.36%		1.31%		1.27%		1.37%		1.21%
Ratio of net investment income to average net assets:
Before expense reduction		0.51%		0.38%		0.30%		0.46%		1.51%
After expense reduction		0.51%		0.41%		0.43%		0.57%		1.85%
Portfolio turnover rate		16%		17%		6%		4%		96%

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Notes to Financial Statements — (Continued)

December 31, 2008

The Kinetics Government

Money Market Portfolio

For the

Year Ended

December 31,

2008

2007

2006

2005

2004

Ratio of expenses to average net assets:

Before expense reduction

1.24%

2.22%

1.56%

1.37%

0.83%

After expense reduction

1.24%

2.22%

1.17%

1.37%

0.83%

Ratio of net investment income to average net assets:

Before expense reduction

0.33%

2.47%

3.13%

1.58%

0.18%

After expense reduction

0.33%

2.47%

3.52%

1.58%

0.18%

Portfolio turnover rate

N/A

The Market

Opportunities Portfolio

For the

January 31,

Year Ended

2006^ˆthrough

December 31,

2008

2007

2006

Ratio of expenses to average net assets:

Before expense reduction

1.36%

1.44%

1.81%

⁽¹⁾

After expense reduction

1.36%

1.44%

1.61%

⁽¹⁾

Ratio of net investment income to average net assets:

Before expense reduction

1.25%

0.61%

0.16%

⁽¹⁾

After expense reduction

1.25%

0.61%

0.36%

⁽¹⁾

Portfolio turnover rate

77%

14%


	The Water
	Infrastructure Portfolio
	For the		June 29,
	Year Ended		2007^ˆthrough
	December 31,		December 31,
	2008		2007

Ratio of expenses to average net assets:
Before expense reduction		1.49%		2.01%	⁽¹⁾
After expense reduction		1.49%		2.01%	⁽¹⁾
Ratio of net investment income to average net assets
Before expense reduction		1.27%		0.96%	⁽¹⁾
After expense reduction		1.27%		0.96%	⁽¹⁾
Portfolio turnover rate		66%		7%

172

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

Notes to Financial Statements — (Continued)

December 31, 2008


	The Multi-
	Disciplinary Portfolio
	February 11, 2008ˆ
	through
	December 31, 2008

Ratio of expenses to average net assets:
Before expense reduction		5.09	%⁽¹⁾
After expense reduction		5.09	%⁽¹⁾
Ratio of net investment income (loss) to average net assets
Before expense reduction		(3.49	)%⁽¹⁾
After expense reduction		(3.49	)%⁽¹⁾
Portfolio turnover rate		N/A	⁽²⁾


ˆ	Commencement of operations.
(1)	Annualized.
(2)	This Portfolio did not hold any long term securities during the period, therefore the portfolio turnover is not applicable.

7. FAS 157 — Summary of Fair Value Exposure

In September 2006, FASB issued Standard No. 157, “Fair Value Measurements” (“FAS 157”) effective for fiscal years beginning after November 15, 2007. FAS 157 clarifies the definition of fair value for financial reporting, establishes a framework for measuring fair value and requires additional disclosure about the use of fair value measurements in an effort to make the measurement of fair value more consistent and comparable. The Portfolios have adopted FAS 157 effective January 1, 2008. A summary of the fair value hierarchy under FAS 157 is described below:

Various inputs are used in determining the value of the Portfolios’ investments. These inputs are summarized in the three broad levels listed below:

Level 1 — Quoted prices in active markets for identical securities.

Level 2 — Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).

Level 3 — Significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments).

173

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

Notes to Financial Statements — (Continued)

December 31, 2008

The Internet Portfolio

The following is a summary of the inputs used to value the Portfolio’s net assets as of December 31, 2008:


			Written
	Investments in		Options
Description	Securities		Contracts

Level 1 — Quoted prices	$	83,354,913	$	815,000
Level 2 — Other significant observable inputs		2,291,790		—
Level 3 — Significant unobservable inputs		634		—

Total	$	85,647,337	$	815,000

The Global Portfolio

The following is a summary of the inputs used to value the Portfolio’s net assets as of December 31, 2008:


			Written
	Investments in		Options
Description	Securities		Contracts

Level 1 — Quoted prices	$	1,910,480	$	—
Level 2 — Other significant observable inputs		71,930		—
Level 3 — Significant unobservable inputs		54,120		—

Total	$	2,036,530	$	—

The Paradigm Portfolio

The following is a summary of the inputs used to value the Portfolio’s net assets as of December 31, 2008:


			Written
	Investments in		Options
Description	Securities		Contracts

Level 1 — Quoted prices	$	1,518,366,717	$	—
Level 2 — Other significant observable inputs		148,588,842		—
Level 3 — Significant unobservable inputs		12,901,309		—

Total	$	1,679,856,868	$	—

The Medical Portfolio

The following is a summary of the inputs used to value the Portfolio’s net assets as of December 31, 2008:


			Written
	Investments in		Options
Description	Securities		Contracts

Level 1 — Quoted prices	$	23,755,092	$	1,040
Level 2 — Other significant observable inputs		—		—
Level 3 — Significant unobservable inputs		—		—

Total	$	23,755,092	$	1,040

174

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

Notes to Financial Statements — (Continued)

December 31, 2008

The Small Cap Opportunities Portfolio

The following is a summary of the inputs used to value the Portfolio’s net assets as of December 31, 2008:


			Written
	Investments in		Options
Description	Securities		Contracts

Level 1 — Quoted prices	$	250,288,933	$	5,250
Level 2 — Other significant observable inputs		9,323,599		—
Level 3 — Significant unobservable inputs		6,301		—

Total	$	259,618,833	$	5,250

The Government Money Market Portfolio

The following is a summary of the inputs used to value the Portfolio’s net assets as of December 31, 2008:


			Written
	Investments in		Options
Description	Securities		Contracts

Level 1 — Quoted prices	$	—	$	—
Level 2 — Other significant observable inputs		2,632,995		—
Level 3 — Significant unobservable inputs		—		—

Total	$	2,632,995	$	—

The Market Opportunities Portfolio

The following is a summary of the inputs used to value the Portfolio’s net assets as of December 31, 2008:


			Written
	Investments in		Options
Description	Securities		Contracts

Level 1 — Quoted prices	$	70,039,674	$	407,500
Level 2 — Other significant observable inputs		1,914,496		—
Level 3 — Significant unobservable inputs		—		—

Total	$	71,954,170	$	407,500

The Water Infrastructure Portfolio

The following is a summary of the inputs used to value the Portfolio’s net assets as of December 31, 2008:


			Written
	Investments in		Options
Description	Securities		Contracts

Level 1 — Quoted prices	$	17,408,140	$	—
Level 2 — Other significant observable inputs		145,757		—
Level 3 — Significant unobservable inputs		—		—

Total	$	17,553,897	$	—

175

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

Notes to Financial Statements — (Continued)

December 31, 2008

The Multi-Disciplinary Portfolio

The following is a summary of the inputs used to value the Portfolio’s net assets as of December 31, 2008:


			Written
	Investments in		Options
Description	Securities		Contracts

Level 1 — Quoted prices	$	40,350	$	60,698
Level 2 — Other significant observable inputs		303,999		—
Level 3 — Significant unobservable inputs		—		—

Total	$	344,349	$	60,698

Following is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value:


	The Internet Portfolio				The Global Portfolio
	Investments		Written Options		Investments		Written Options
Description	in Securities		Contracts		in Securities		Contracts

Balance as of December 31, 2007	$	—	$	—	$	—	$	—
Accrued discounts/premiums		—		—		—		—
Realized gain (loss)*		—		—		—		—
Change in unrealized appreciation		—		—		—		—
(depreciation)		—		—		—		—
Net purchases (sales)		—		—		—		—
Transfer in and/or out of Level 3		634		—		54,120		—

Balance as of December 31, 2008	$	634	$	—	$	54,120	$	—


	The Paradigm Portfolio				The Small Cap Opportunities Portfolio
	Investments		Written Options		Investments		Written Options
Description	in Securities		Contracts		in Securities		Contracts

Balance as of December 31, 2007	$	—	$	—	$	—	$	—
Accrued discounts/premiums		—		—		—		—
Realized gain (loss)*		—		—		—		—
Change in unrealized appreciation		—		—		—		—
(depreciation)		—		—		—		—
Net purchases (sales)		—		—		—		—
Transfer in and/or out of Level 3		12,901,309		—		6,301		—

Balance as of December 31, 2008	$	12,901,309	$	—	$	6,301	$	—

8. New Accounting Pronouncements

176

KINETICS PORTFOLIOS TRUST — MASTER INVESTMENT PORTFOLIOS

Notes to Financial Statements — (Continued)

December 31, 2008

instruments and hedging activities are accounted for, and how derivative instruments and related hedging activities affect an entity’s financial performance and financial position. Management is currently evaluating the implications of SFAS 161. The impact on the Portfolios’ financial statement disclosures, if any, is currently being assessed.

9. Information about Proxy Voting (Unaudited)

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

10. Information about the Portfolio Holdings (Unaudited)

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

177

KINETICS PORTFOLIOS TRUST

Report of Independent Registered
Public Accounting Firm

To the Shareholders of and Board of Trustees

Kinetics Portfolios Trust

Elmsford, New York

We have audited the accompanying statements of assets and liabilities, including the schedule of investments, of The Internet Portfolio, The Global Portfolio, The Paradigm Portfolio, The Medical Portfolio, The Small Cap Opportunities Portfolio, The Kinetics Government Money Market Portfolio, The Market Opportunities Portfolio, The Water Infrastructure Portfolio, and The Multi-Disciplinary Portfolio, each a series of shares of Kinetics Portfolios Trust (the “Trust”), as of December 31, 2008, and the related statements of operations, the statements of changes in net assets and financial highlights for the periods indicated thereon. These financial statements and financial highlights are the responsibility of the Trust’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform, nor were the Portfolios required to have, an audit of the Trust’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2008, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly in all material respects, the financial position of the above mentioned Portfolios as of December 31, 2008, the results of their operations,

178

KINETICS PORTFOLIOS TRUST

Management of the Funds and the Portfolios

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

Each Board establishes policies for the operation of the Funds and the Portfolios and appoints the officers who conduct the daily business of the Funds and the Portfolios. Directors/Trustees of the Company and the Trust are listed below with their addresses, present positions with the Company and Trust, length of time served, principal occupations over at least the last five years, number of Funds and Portfolios overseen and any other Directorships held. The SAI includes additional information about the Funds’ officers and directors and is available, without charge, upon request by calling 1-800-930-3828.

181

KINETICS PORTFOLIOS TRUST

Management of the Funds and the Portfolios — (Continued)

Board of Directors/Board of Trustees

Independent Directors/Trustees


			Number of
			Portfolios/Funds in
		Term of Office/	Fund Complex**
	Position(s) with the	Length of	Overseen by
Name and Address	Company and Trust	Time Served	Trustee/Director

John J. Sullivan Year Born: 1931 c/o Kinetics Asset Management, Inc. 555 Taxter Road Suite 175 Elmsford, New York, 10523	Independent Director/Trustee	Indefinite/ Since 2000		18
Steven T. Russell Year Born: 1964 c/o Kinetics Asset Management, Inc. 555 Taxter Road Suite 175 Elmsford, New York, 10523	Independent Director/Trustee	Indefinite/ Since 2000		18
Douglas Cohen, C.P.A Year Born: 1961 c/o Kinetics Asset Management, Inc. 555 Taxter Road Suite 175 Elmsford, New York, 10523	Independent Director/Trustee	Indefinite/ Since 2000		18
William J. Graham Year Born: 1962 c/o Kinetics Asset Management, Inc. 555 Taxter Road Suite 175 Elmsford, New York, 10523	Independent Director/Trustee	Indefinite/ Since 2000		18
Joseph E. Breslin Year Born: 1953 c/o Kinetics Asset Management, Inc. 555 Taxter Road Suite 175 Elmsford, New York, 10523	Independent Director/Trustee	Indefinite/ Since 2000		18
James M. Breen Year Born: 1959 c/o Kinetics Asset Management, Inc. 555 Taxter Road Suite 175 Elmsford, New York, 10523	Independent Director/Trustee	Indefinite/ Since 2008		18

182


Principal Occupation During the Past Five Years		Other Directorships Held by Trustee/Director

Retired; Senior Advisor, Long Term Credit Bank of Japan, Ltd.; Executive Vice President, Long Term Credit Bank Trust Company (1987-1999)		Director, The Kinetics Funds (a private investment company) (2003 to Present)
Attorney and Counselor at Law, Partner, Law Firm of Russell and Fig (since September 2002); Steven Russell Law Firm (1994 to 2002); Professor of Business Law, Suffolk County Community College (1997 to Present)		N/A
Sunrise Credit Services, Inc. (2005 to Present); Wagner & Zwerman, LLP Certified Public Accountant (1997 to 2005); Leon D. Alpern & Co. (1985 to 1997)		Director, The Kinetics Funds (a private investment company) (1996 to Present)
Attorney, William J. Graham, PC (2001 to Present); Bracken & Margolin, LLP (1997 to 2001)		N/A
Chief Operating Officer, Central Park Credit Holdings, (2007-Present) Chief Operating Officer, Aladdin Capital Management (2005-2007); Independent Consultant Whitehall Asset Management (May 2003 to 2004); Consultant, Independence Community Bank (2003-2005); Senior Managing Director, Marketing & Sales, Whitehall Asset Management, a financial services company (1999 to May 2003)		Director, AIP Alternative Strategies Fund
Assistant Attache, Immigration & Customs Enforcement (ICE)		N/A

183

KINETICS PORTFOLIOS TRUST

Management of the Funds and the Portfolios — (Continued)

Board of Directors/Board of Trustees (Continued)

Interested Directors/Trustees and Officers


			Number of
			Portfolios/Funds in
		Term of Office/	Fund Complex**
	Position(s) with the	Length of	Overseen by
Name and Address	Company and Trust	Time Served	Trustee/Director

Murray Stahl* Year Born: 1953 c/o Kinetics Asset Management, Inc. 555 Taxter Road Suite 175 Elmsford, New York, 10523	Director/Trustee and Secretary	Indefinite/ Since 2000		18
Peter B. Doyle* Year Born: 1962 c/o Kinetics Asset Management, Inc. 555 Taxter Road Suite 175 Elmsford, New York, 10523	Director/Trustee, President and Chairman of the Board	Indefinite/ Since 2002		18
Leonid Polyakov* Year Born: 1959 c/o Kinetics Asset Management, Inc. 555 Taxter Road Suite 175 Elmsford, New York, 10523	Director/Trustee and Treasurer	Indefinite/ Since 2002		18


*	Directors/Trustees who are considered “interested persons” as defined in Section 2(a)(19) of the 1940 Act because of their association with the Adviser.

184


		Principal Occupation During the Past Five Years		Other Directorships Held by Trustee/Director

		Chairman, The FRMO Corp. (2001 to Present) (provides consulting services to private investment funds and research services with respect to marketable securities); Chairman, Horizon Asset Management, an investment adviser (1994 to Present); Director of Research, Kinetics Asset Management and Kinetics Mutual Funds, Inc.		Chairman of Horizon Asset Management; Chairman of FRMO Corporation
		President, Kinetics Asset Management and Kinetics Fund Distributors, Inc. (2002 to Present); Director, Kinetics Advisers, LLC (2000 to Present); Director and Officer, Horizon Asset Management, Inc. (1994 to Present); Chief Investment Strategist, Kinetics Asset Management and Kinetics Mutual Funds, Inc. (1998 to Present)		Director, The Kinetics Funds (a private investment company) (2001 to Present); Director and Officer of FRMO Corporation
		CFO, Kinetics Asset Management, Inc. (2000 to Present); President, Kinetics Funds Distributor, Inc. (2002 to Present); Director, Kinetics Advisers, LLC (2000 to Present); CFO, KBD Securities, LLC (2000 to Present); Vice-President, JP Morgan (1997 to 2000)		Director, The Kinetics Funds (a private investment company) (2001 to Present)


**	The term “fund complex” refers to the Company and the Trust, which hold themselves out as related for investment purposes.

185

KINETICS MUTUAL FUNDS, INC. & KINETICS PORTFOLIOS TRUST

Privacy Policy

We collect the following nonpublic personal information about you:


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

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

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

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

Kinetics Mutual

Funds, Inc.

615 East Michigan Street

Milwaukee, WI 53202

INVESTMENT ADVISER AND

SHAREHOLDER SERVICING AGENT

Kinetics Asset Management, Inc.

555 Taxter Road

Suite 175

Elmsford, NY 10523

INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

Tait, Weller & Baker LLP

1818 Market Street

Suite 2400

Philadelphia, PA 19103

DISTRIBUTOR

Kinetics Funds Distributor, Inc.

555 Taxter Road

Suite 175

Elmsford, NY 10523

ADMINISTRATOR

FUND ACCOUNTANT AND

TRANSFER AGENT

U.S. Bancorp Fund Services, LLC

615 East Michigan Street

Milwaukee, WI 53202

CUSTODIAN

U.S. Bank, N.A.

Custody Operations

1555 River Center Drive, Suite 302

Milwaukee, WI 53212

THIS MATERIAL MUST BE PRECEDED OR

ACCOMPANIED BY A PROSPECTUS

Item 2. Code of Ethics.

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

Item 3. Audit Committee Financial Expert.

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

Item 4. Principal Accountant Fees and Services.

Items 4(a) to 4(d).

The registrant has engaged its principal accountant to perform audit services, audit-related services, tax services and other services during the past two fiscal years. “Audit services” refers to performing an audit of the registrant’s annual financial statements or services that are normally provided by the principal accountant in connection with statutory and regulatory filings or engagements for those fiscal years. “Audit-related services” refers to the assurance and related services by the principal accountant that are reasonably related to the performance of the audit. “Tax services” refers to services rendered by the principal accountant for tax compliance, tax advice, and tax planning. “Other services” refers to products and services provided by the principal accountant other than audit services, audit-related services and tax services. The following table details the aggregate fees billed for each of the last two fiscal years for audit services, audit-related services, tax fees and other services by the principal accountant.


	FYE 12/31/2008		FYE 12/31/2007		FYE 12/31/2008		FYE 12/31/2007
	Kinetics Portfolios		Kinetics Portfolios		Kinetics Mutual		Kinetics Mutual
	Trust		Trust		Funds		Funds

Audit Fees		76,000		67,200		76,000		67,200
Audit-Related Fees		0		0		0		0
Tax Fees		21,500		18,800		21,500		20,300
All Other Fees		0		0		0		0

Items 4(e) to 4(h).

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

(e)(2) There were no services approved by the audit committee pursuant to paragraph (c)(7)(i)(C) Rule 2-01 of Regulation S-X.

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

(g) The aggregate non-audit fees billed by the registrant’s principal accountant for services rendered to the registrant, and rendered to the registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for each of the last two fiscal years of the registrant was $0 and $0 for Kinetics Mutual Funds, Inc. and Kinetics Portfolios Trust, respectively, for the fiscal year ended December 31, 2007 and $0 and $0 for Kinetics Mutual Funds, Inc. and Kinetics Portfolios Trust, respectively, for the fiscal year ended December 31, 2008.

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

Item 5. Audit Committee of Listed Registrants.

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

Item 6. Schedule of Investments.

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

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

Not applicable to open-end investment companies.

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

Not applicable to open-end investment companies.

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

Not applicable to open-end investment companies.

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

Not Applicable.

Item 11. Controls and Procedures.

(a)

The Registrant’s President/Chief Executive Officer and Treasurer/Chief Financial Officer have concluded that the Registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”)) are effective as of a date within 90 days of the filing date of this report, that includes the disclosure required by this paragraph, based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act and Rule 15d-15(b) under the Securities Exchange Act of 1934, as amended.

(b)

There were no changes in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 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) Code of Ethics is filed herewith.

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

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

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

SIGNATURES

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


(Registrant) Kinetics Mutual Funds, Inc. & Kinetics Portfolios Trust
By (Signature and Title)*	/s/ Peter B. Doyle
	Peter B. Doyle, President

Date March 6, 2009

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


By (Signature and Title)*	/s/ Peter B. Doyle
	Peter B. Doyle, President

Date March 6, 2009


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

Date March 6, 2009


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



		December 31, 2008 www.kineticsfunds.com

		Annual Report

		The Internet Fund The Global Fund The Paradigm Fund The Medical Fund The Small Cap Opportunities Fund The Kinetics Government Money Market Fund The Market Opportunities Fund The Water Infrastructure Fund The Multi-Disciplinary Fund

		LOGO Each a series of Kinetics Mutual Funds, Inc.


	Item 1. Reports to Stockholders.
	Item 2. Code of Ethics.
	Item 3. Audit Committee Financial Expert.
	Item 4. Principal Accountant Fees and Services.
	Item 5. Audit Committee of Listed Registrants.
	Item 6. Schedule of Investments.
	Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
	Item 8. Portfolio Managers of Closed-End Management Investment Companies.
	Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
	Item 10. Submission of Matters to a Vote of Security Holders.
	Item 11. Controls and Procedures.
	Item 12. Exhibits.
	SIGNATURES
EX-99.CODE
EX-99.CERT
EX-99.906 CERT


	(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.