January 8, 2015

Dear Investors,

In a fitting end to a turbulent 2014, the equity markets have continued to exhibit extreme volatility, with the latest moves being directly tied to the price of crude oil. Investors are worried about the potential negative ramifications of rapidly falling energy prices, especially in major oil-producing countries like Russia. These concerns shouldn't be minimized, but we believe the broad benefits to countries that are large energy consumers will outweigh these geopolitical risks. We believe the ripple effect of lower energy costs will likely pave the way to accelerating economic growth in 2015. For that reason, our inclination is to be more aggressive with our position weightings, and believe we could see a meaningful shift into the smaller-cap/higher-growth area of the market that we favor.

Jacob Internet Fund

The Internet fund only added one new name in the quarter: Orbitz. As long time holders of Expedia, we have closely followed the online travel space for quite a while and had been skeptical of Orbitz's ability to grow. At the same time, we have experienced a pickup in consolidation activity, and Orbitz has indeed proven itself to be resilient through multiple market cycles. With a new loyalty-based initiative to drive repeat transactions, Orbitz will likely see a pick-up in more profitable hotel bookings and a subsequent increase in cash flow. At only 5x EBITDA, we believe Orbitz could also see multiple expansion and possibly attract a larger suitor.

Jacob Small Cap Fund

Besides also adding Orbitz in the quarter, Small Cap initiated one more position: Theravance Biopharma. After an earlier successful purchase of the original Theravance a few years ago, we watched with great interest as the company announced plans to break up into a royalty-based company and a small biotech with a deep pipeline of respiratory compounds in later-stage trials. Although the spin-off was completed last June, we held off purchasing for a lower valuation before finally stepping in to buy a position. As this management team has an excellent track record in both drug approvals and mergers and acquisitions, we felt this was a great opportunity to potentially benefit once again from their expertise and their successful partnership with GlaxoSmithKline

Jacob Micro Cap Growth Fund

The Micro Cap fund added Orbitz and Theravance Biopharma as well as one more name: pSivida. pSivida is an intriguing drug development company that has specialized in providing miniaturized, sustained-release technologies that allows doctors to deliver medicine directly to the back of the eye. Their most recent drug, Iluvien, for the treatment of diabetic macular edema, is being sold by pSivida's partner, Alimera Sciences, in a number of European countries, and was recently approved for sale in the U.S. by the Food and Drug Administration (FDA). PSivida is working to get the same product approved for another crippling eye disease with limited treatment options, posterior uveitis, and also has a couple of other interesting next-generation drug-delivery technologies in trials.

Jacob Wisdom Fund

The Wisdom fund added one new holding in the quarter: Chevron. Chevron is the third-largest independent energy producer in the world behind Exxon Mobile Corporation and Royal Dutch Shell. Almost two-thirds of its worldwide production is oil while the remainder is primarily natural gas and natural gas liquids such as propane, butane and ethane. The recent decline in energy prices has afforded us the opportunity to purchase shares at a substantial discount to where they had been trading just a few short months ago. With a shareholder-friendly management team that has consistently reduced the number of outstanding shares, and a strong, flexible balance sheet that could help shield the company from the effects of short-term fluctuations in energy prices, we are optimistic about Chevron's return potential.

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

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.

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 for more complete information including risks, fees and expenses.

Click here to view the holdings for the Jacob Internet Fund, as of November 30, 2014.
Click here to view the holdings for the Jacob Small Cap Growth Fund, as of November 30, 2014.
Click here to view the holdings for the Jacob Micro Cap Growth Fund, as of November 30, 2014.
Click here to view the holdings for the Jacob Wisdom Fund, as of November 30, 2014.

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 1/15