COMMENTARY

July 8, 2015

Dear Investors,

The markets have seen a notable increase in volatility during the last several weeks due mainly to the drama playing out in Europe regarding Greece's precarious financial position. Although this will likely have a very limited impact on the domestic economy, we will need to see at least some sort of resolution before stocks can regain their footing. In the meantime, we continue to see slightly better economic data here in the United States, especially in the employment numbers, and are still anticipating modest Fed action with interest rates before the end of the year. As for the Funds, while we are still tweaking some positions to help manage risk, our overall strategies remain in place. In the Internet fund, we continue to reduce our larger company exposure in favor of smaller and mid-cap holdings. The other funds have made only minor changes, but have seen some notable benefits in the last quarter from acquisition activity.

Jacob Internet & Small Cap Funds

The Jacob Internet & Small Cap funds added one new name in the quarter: TrueCar. An initial public offering (IPO) from last May, TrueCar is one of the leading online automotive information websites helping consumers to make more informed decisions when buying a car. Taking it a step further than just lead generation, TrueCar has agreements with dealers to offer guaranteed prices for consumers shopping for a car. Dealers only pay TrueCar after an actual purchase, making the service a highly efficient marketing channel. Furthermore, a recent entry into used-car sales and new initiatives into incentives and leasing look promising. With TrueCar accounting for almost 4% of all new car sales, they have already proven themselves to be an effective platform and we believe that they will be able to show significant margin improvement and profits over the next several years.

Jacob Micro Cap Growth Fund

The Jacob Micro Cap fund purchased one new holding in the quarter: Sysorex. This IT consulting firm is in the process of transforming its business from being primarily a low-margin reseller of computer hardware to focus more on offering proprietary security and big data software solutions. While their traditional government customers will remain an important market for Sysorex - the company recently won a couple of notable government-based awards which could lead to significant future sales - the company also hopes to have more success with commercial clients, especially with some of their newer products. Their suite of location-based mobile technologies - sold under the AirPatrol brand - is particularly intriguing.

Jacob Wisdom Fund

The Jacob Wisdom fund also added one new name in the quarter: Methanex. It is the world's largest producer of methanol, its sole product. It controls about 15% of the world market, about twice the size of its nearest competitor. Methanol is an environmentally-friendly fuel substitute and is thus gaining strong market share worldwide. The feedstock for Methanex's production is natural gas, and with the advent of cheap and abundant supplies in North America, the company has recently begun shifting a large portion of its output from Chile to here in the United States. For a producer of a commodity product, Methanex has had surprisingly high returns on its invested capital over the years. These returns should be enhanced by the new production facilities coming on stream this year and next. As we also like to see in our investments, management has a strong record of returning value to shareholders in the form of increasing dividends and share buybacks.

Ryan Jacob
Portfolio Manager
Jacob Internet Fund
Jacob Small Cap Growth Fund

Darren Chervitz
Portfolio Manager
Jacob Micro Cap Growth Fund

Frank Alexander
Portfolio Manager
Jacob Wisdom Fund

www.jacobmutualfunds.com

Mutual fund investing involves risk. Principal loss is possible. There are specific risks inherent in investing in the Internet area, particularly with respect to smaller capitalized companies and the high volatility of internet stocks. All four funds may invest in foreign securities, which involve greater volatility and political, economic and currency risks, and differences in accounting methods. These risks are greater in emerging markets. The Small Cap Fund, Internet Fund and Wisdom Fund will invest in smaller companies, which involve additional risks, such as limited liquidity and greater volatility. The Wisdom Fund may invest in Real Estate Investment Trusts (REITs) which may be affected by economic, legal, cultural, environmental or technological factors that affect property values, rents or occupancies of real estate related to the Fund's holdings. Investments in debt securities typically decrease in value when interest rates rise. This risk is usually greater for longer-term debt securities. The market value of convertible securities tends to decline as interest rates increase and, conversely, to increase as interest rates decline. In addition, convertible securities generally offer lower interest or dividend yields than non-convertible securities of similar quality.

Investments in micro capitalization companies may involve greater risks, as these companies tend to have limited product lines, markets and financial or managerial resources. Micro cap stocks often also have a more limited trading market, such that the Adviser may not be able to sell stocks at an optimal time or price. In addition, less frequently-traded securities may be subject to more abrupt price movements than securities of larger capitalized companies.

Any tax or legal information provided is merely a summary of our understanding and interpretation of some of the current income tax regulations and is not exhaustive. Investors must consult their tax advisor or legal counsel for advice and information concerning their particular situation. Neither the Fund nor any of its representatives may give legal or tax advice.

The information provided herein represents the opinion of Jacob Mutual Funds and is not intended to be a forecast of future events, a guarantee of future results, nor investment advice.

Market Cap is the market price of an entire company, calculated by multiplying the number of shares outstanding by the price per share.

Cash flow measures the cash generating capability of a company by adding non-cash charges (e.g. depreciation) and interest expense to pretax income.

Earnings before interest, taxes, depreciation and amortization (EBITDA) is an approximate measure of a company’s operating cash flow based on data from the company’s income statement. EBITDA is calculated by looking at earnings before the deduction of interest expenses, taxes, depreciation, and amortization.

Please refer to the prospectus located at www.jacobmutualfunds.com/pdfs/Prospectus_All.pdf for more complete information including risks, fees and expenses.

Click here to view the holdings for the Jacob Internet Fund, as of May 31, 2015.
Click here to view the holdings for the Jacob Small Cap Growth Fund, as of May 31, 2015.
Click here to view the holdings for the Jacob Micro Cap Growth Fund, as of May 31, 2015.
Click here to view the holdings for the Jacob Wisdom Fund, as of May 31, 2015.

Please note that these holdings are subject to change and should not be considered a recommendation to buy or sell any security.

Must be preceded or accompanied by a prospectus.

Quasar Distributors, LLC, Distributor 7/15