-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OA2iKqXyb1bwfNKOb74ftxomEoKOiyWW1zuf+/rOpt8eJxSyt9AWJPNrxeJ6mnwH 9VLIcNVpKEQbn0LUvypWcw== 0000950117-04-003863.txt : 20041110 0000950117-04-003863.hdr.sgml : 20041110 20041109164338 ACCESSION NUMBER: 0000950117-04-003863 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20040831 FILED AS OF DATE: 20041109 DATE AS OF CHANGE: 20041109 EFFECTIVENESS DATE: 20041109 FILER: COMPANY DATA: COMPANY CONFORMED NAME: JACOB INTERNET FUND INC CENTRAL INDEX KEY: 0001090372 IRS NUMBER: 000000000 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-09447 FILM NUMBER: 041130158 BUSINESS ADDRESS: STREET 1: 19 WEST 34TH STREET STREET 2: SUITE 816A CITY: NEW YORK STATE: NY ZIP: 10001 BUSINESS PHONE: 1-888-522-6239 MAIL ADDRESS: STREET 1: 19 WEST 34TH STREET STREET 2: SUITE 816A CITY: NEW YORK STATE: NY ZIP: 10001 N-CSR 1 a38489.txt JACOB INTERNET FUND INC. As filed with the Securities and Exchange Commission on November 9, 2004 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: 811-09447 Jacob Internet Fund Inc. (Exact name of registrant as specified in charter) C/O Jacob Asset Management of New York LLC 19 West 34th Street, Suite 816A New York, NY 10001 (Address of principal executive offices) (Zip code) Ryan Jacob C/O Jacob Asset Management of New York LLC 19 West 34th Street, Suite 816A New York, NY 10001 (Name and address of agent for service) (212) 868-5969 Registrant's telephone number, including area code Date of fiscal year end: August 31, 2004 Date of reporting period: August 31, 2004 Item 1. Report to Stockholders. Jacob Internet Fund Inc. Annual Report August 31, 2004 The Jacob Internet Fund is a mutual fund with the primary investment objective of long-term growth of capital with current income as a secondary objective. Investment Adviser Jacob Asset Management of New York LLC [JAM LOGO] TABLE OF CONTENTS Letter From the Manager.............. 1 Additional Information on Fund Expenses........................... 4 Schedule of Investments.............. 5 Statement of Assets and Liabilities........................ 8 Statement of Operations.............. 9 Statement of Changes in Net Assets... 10 Financial Highlights................. 11 Notes to the Financial Statements.... 12 Report of Independent Registered Public Accounting Firm............. 17 Additional Information............... 18
Dear Fellow Investors, This past year has been a challenging one for both our economy and the markets. Although the U.S. economy had shown steady improvement early in 2004, recent growth has been more uneven in nature. Conflicting economic data, rising energy prices and the uncertainty regarding the election this fall have all combined to put pressure on the financial markets. We are relatively pleased that the Fund has been able to post small gains during this difficult period. In general, Internet-related companies have fared a bit better compared to other equities as they continue to benefit from secular trends that are not as sensitive to economic uncertainty. The underlying growth in Internet usage among businesses and consumers continues apace and is why we are still optimistic about the opportunities for investment in the Internet sector. Our Fund's portfolio mix still tends to favor small-to-midsize companies, as that is where we are seeing the most favorable risk/reward situations. While we do own small positions in some of the largest Internet players, we are hesitant to increase their weightings due to high valuations and a more pronounced slowdown in growth that is becoming clear due to their larger size. Additionally, we find ourselves less focused on general themes and more concentrated on individual stock selection than at any point since the Fund's inception. This is not surprising given our belief that market averages will likely remain range bound, and that individual names will be critical in driving future outperformance. One area worth highlighting that we do approach on a more thematic basis involves our investments in various Chinese Internet companies. This has been a very controversial segment of investment in 2004, although in 2003 our Chinese holdings had a major positive impact on the Fund's performance. While there are legitimate concerns regarding the sustainability of the rapid growth China is experiencing and how government oversight will impact certain businesses, the long-term thesis for investment remains squarely intact. That is, China has the 2nd largest number of Internet users in the world today and will shortly surpass the U.S. as number one. Also, and even more importantly, an emerging middle class -- the engine of China's growth -- likely has many decades of robust expansion ahead of it. It is likely, however, that the Chinese economy will experience various boom-bust cycles over time, rather than a steady trajectory of growth. This exemplifies a major benefit to the Fund's strategy that we have outlined previously. By actively realizing profits during strong periods, we minimize downside risks, as invariably certain events will produce sharp declines. The Fund has demonstrated the benefits from these shifts in position sizes by the contribution in 2003 from the Chinese Internet names in a strong year, but a much more modest negative impact in 2004 when many of these stocks are down between 20 - 40%. This example of actively managing the Fund's various position weightings has been an important part of our portfolio management strategy for the last three years and has played a key role in our ability to outperform the market averages and our peers. Our broader strategy for selecting companies for the Fund remains the same -- invest in those companies that we believe can succeed through superior business plans and management teams, well-capitalized balance sheets and strong partnerships. Although we believe economic trends could remain uneven in the near future, we are confident in the Fund's positioning, and believe it is balanced in a way to minimize risk and maximize return potential. Longer-term, we continue to believe the Fund represents an excellent investment for those who wish to benefit from the sizable opportunities that should be realized as the Internet becomes a more pervasive influence throughout the global economy. Once again, we would like to thank our shareholders for their continued trust and confidence, and we look forward to a brighter future together. Ryan Jacob Portfolio Manager The opinions expressed above are those of the portfolio manager and are subject to change. Forecasts cannot be guaranteed. Past performance does not guarantee future results. Mutual fund investing involves risk; loss of principal 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. Must be preceded or accompanied by a prospectus. Quasar Distributors, LLC. Distributor (10/04) INDUSTRY BREAKDOWN (AS A % OF COMMON STOCKS) [PIE CHART OMITTED] Internet -- Commerce 35% Internet -- Media Content 29% Internet -- Infrastructure 31% Internet -- Communications 5%
The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q are available on the SEC website at http://www.sec.gov and 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 1-888-SEC-0330. [GRAPH OMITTED] FOR PERIOD ENDED AUGUST 31, 2004 - --------------------------------------------------------------------------------
ANNUALIZED SINCE COMMENCEMENT ONE YEAR OF OPERATIONS -------- ------------- Jacob Internet Fund......................................... 2.03% (33.03)% S&P 500'r'.................................................. 11.46% (3.69)% NASDAQ Composite Index...................................... 1.46% (13.70)%
The Standard & Poor's 500'r' Index (S&P 500'r') 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 NASDAQ Composite Index is a broad-based capitalization-weighted index of all NASDAQ stocks. The returns of the indices are not reduced by any fees or operating expenses. This chart assumes an initial gross investment of $10,000 made on December 14, 1999 (commencement of operations) and reflects the fees charged on an account. Returns shown include the reinvestment of all dividends, but do not include 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. Investment return and principal value will fluctuate, so that your shares, when redeemed, may be worth more or less than the original cost. 3 ADDITIONAL INFORMATION ON FUND EXPENSES FOR THE SIX MONTHS ENDED AUGUST 31, 2004 As a shareholder of a mutual fund, you may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; exchange fees; and (2) ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other fund expenses. The Fund currently charges no sales loads, redemption fees, exchange fees or other transaction fees, however, you will be assessed fees for outgoing wire transfers, returned checks and stop payment orders. In addition, effective January 1, 2005, the Board has approved a redemption fee of 2% on shares sold within 30 days following their purchase date. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (3/1/04 - 8/31/04). ACTUAL EXPENSES The first line of the table below provides information about account values based on actual returns and actual expenses. Although the Fund charges no sales load, redemption fees, or other transaction fees, you will be assessed fees for outgoing wire transfers, returned checks and stop payment orders at prevailing rates charged by U.S. Bancorp Fund Services, LLC, the Fund's transfer agent. If you request that a redemption be made by wire transfer, currently the Fund's transfer agent charges a $15.00 fee. You may use the information in this line, together with the amount 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 based on a hypothetical return and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund 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 your 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 you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
EXPENSES PAID BEGINNING ENDING DURING THE PERIOD VALUE 3/1/04 VALUE 8/31/04 3/1/04 - 8/31/04* ------------ ------------- ----------------- Actual.............................................. $1,000 $ 830 $12.60 Hypothetical (5% annual return before expenses)..... $1,000 $1,011 $13.85
- --------- *Expenses are equal to the Fund's annualized expense ratio of 2.74% multiplied by the average account value over the period multiplied by 184/366 (to reflect the one-half year period). 4 JACOB INTERNET FUND SCHEDULE OF INVESTMENTS AUGUST 31, 2004 - --------------------------------------------------------------------------------
SHARES VALUE ------ ----- COMMON STOCKS 96.8% - ------------------------------------------------------------------------------------------------- INTERNET -- COMMERCE 33.6% 155,773 Autobytel Inc.* $ 1,096,642 65,178 Ctrip.com International Ltd. -- ADR *^(a) 2,056,366 70,191 Digital River, Inc.*(a) 1,689,497 100 eBay Inc.*(a) 8,654 56,000 E*Trade Financial Corporation* 659,680 100 Getty Images, Inc.* 5,545 646,387 HomeStore, Inc.* 1,409,124 21,000 IAC/InterActiveCorp*(a) 479,010 94,720 MatchNet PLC -- Spons Reg S GDR *^ (EUR) 489,231 88,000 Monster Worldwide Inc.* 1,780,240 92,400 Netflix Inc.*(a) 1,288,980 60,000 Orbitz, Inc. -- Class A*(a) 1,111,800 459,400 Roxio, Inc.*(a) 1,598,712 44,053 Shanda Interactive Entertainment Ltd. -- ADR *^ 991,193 240,079 SumTotal Systems, Inc.*(a) 1,157,181 207,165 ValueClick, Inc.* 1,497,803 ----------- 17,319,658 - ------------------------------------------------------------------------------------------------- INTERNET -- COMMUNICATIONS 5.2% 102,309 Conexant Systems, Inc. * 152,440 108,559 Nuance Communications Inc.* 440,749 60,050 Openwave Systems Inc.* 559,666 395,000 Sycamore Networks, Inc.* 1,504,950 ----------- 2,657,805 - ------------------------------------------------------------------------------------------------- INTERNET -- INFRASTRUCTURE 30.2% 100 Adobe Systems Incorporated 4,587 87,788 Agile Software Corporation* 668,944 1,000 Akamai Technologies, Inc.* 13,450 100 Apple Computer, Inc.* 3,449 106,000 Digimarc Corporation* 911,600 130,600 Digital Insight Corporation*(a) 1,953,776 147,822 Internet Security Systems, Inc.*(a) 2,127,158 87,961 MatrixOne, Inc.* 411,657 15,000 McAfee Inc.* 296,700 141,895 Netegrity, Inc.* 861,303 1,000 PalmOne, Inc.*(a) 32,650 72,829 PalmSource, Inc.* 1,639,381 563,500 Plumtree Software, Inc.* 1,893,360 58,576 SafeNet, Inc.*(a) 1,666,487
See notes to the financial statements. 5 JACOB INTERNET FUND SCHEDULE OF INVESTMENTS AUGUST 31, 2004 - --------------------------------------------------------------------------------
SHARES VALUE ------ ----- - ------------------------------------------------------------------------------------------------- COMMON STOCKS -- (CONTINUED) 96.8% INTERNET -- INFRASTRUCTURE -- (CONTINUED) 30.2% 38,000 VeriSign, Inc.*(a) $ 659,680 591,707 webMethods, Inc.* 2,420,082 ----------- 15,564,264 - ------------------------------------------------------------------------------------------------- INTERNET -- MEDIA CONTENT 27.8% 490,094 Alloy, Inc.* 1,989,782 36,600 Ask Jeeves, Inc.* 948,672 10,000 CNET Networks, Inc.* 81,300 100,000 DoubleClick Inc.*(a) 525,000 100 Electronic Arts Inc.* 4,978 41,686 InfoSpace, Inc.*(a) 1,584,068 50,833 iVillage Inc.* 295,340 190,019 MarketWatch Inc.* 1,786,179 68,100 SINA.com*^(a) 1,418,523 121,800 Sohu.com Inc.*^(a) 1,809,948 63,242 Take-Two Interactive Software, Inc.*(a) 2,071,176 18,304 THQ Inc.* 347,593 67,760 UBI Soft Entertainment -- SA *^(EUR) 1,424,633 1,274 Yahoo! Inc.*(a) 36,322 ----------- 14,323,514 ----------- TOTAL COMMON STOCKS (COST $52,969,659) 49,865,241 ----------- PRINCIPAL AMOUNT ------ SHORT-TERM INVESTMENTS 2.2% - ------------------------------------------------------------------------------------------------- U.S. GOVERNMENT AGENCY OBLIGATIONS 2.1% $ 1,060,000 Federal Home Loan Bank, 1.00%, 09/01/04 $ 1,060,000 ----------- Total U.S. Government Agency Obligations 1,060,000 ----------- VARIABLE RATE DEMAND NOTES # 0.1% 58,001 Wisconsin Corporate Central Credit Union, 1.34% 58,001 ----------- Total Variable Rate Demand Notes 58,001 ----------- TOTAL SHORT-TERM INVESTMENTS (COST $1,118,001) 1,118,001 -----------
6 JACOB INTERNET FUND SCHEDULE OF INVESTMENTS AUGUST 31, 2004 - --------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE ------ ----- INVESTMENTS PURCHASED WITH CASH PROCEEDS FROM SECURITIES LENDING 37.0% - ------------------------------------------------------------------------------------------------- COMMERCIAL PAPER 1.9% $ 1,000,000 Lakeside Funding LLC Variable Rate Commercial Paper, 1.618%, Due 9/8/04 $ 1,000,000 ----------- Total Commercial Paper 1,000,000 ----------- CORPORATE NOTES & BONDS 1.9% 1,000,000 Natexis Banq Populair NY Variable Rate Deposit Notes, 1.3778%, Due 7/12/05 1,000,000 ----------- Total Corporate Notes & Bonds 1,000,000 ----------- MONEY MARKET MUTUAL FUNDS 0.1% 46,863 Merrill Lynch Premier Institutional Fund 46,863 ----------- Total Money Market Mutual Funds 46,863 ----------- REPURCHASE AGREEMENTS 33.1% Credit Suisse First Boston Repurchase Agreement: 13,000,000 (Dated 8/31/04), 1.610%, Due 9/1/04 (Repurchase Proceeds $13,000,581) (Collateralized by Ginnie Mae Collateralized Mortgage Obligations) 13,000,000 4,000,000 (Dated 8/31/04), 1.6225%, Due 9/1/04 (Repurchase Proceeds $4,000,180), (Collateralized by Credit Suisse First Boston Collateralized Mortgage Obligations) 4,000,000 ----------- Total Repurchase Agreements 17,000,000 ----------- TOTAL INVESTMENTS PURCHASED WITH CASH PROCEEDS FROM SECURITIES LENDING (COST $19,046,863) 19,046,863 ----------- TOTAL INVESTMENTS (COST $73,134,523) 136.0% 70,030,105 ----------- LIABILITIES LESS OTHER ASSETS (36.0)% (18,544,634) ----------- TOTAL NET ASSETS 100.0% $51,485,471 ----------- -----------
* Non-income producing security. ^ Foreign security. (a) All or a portion of shares are on loan. ADR American Depository Reciept. GDR Global Depository Reciept. EUR European Monetary Unit. # Variable rate demand notes are considered short-term obligations and are payable upon demand. Interest rates change periodically on specified dates. The rates listed are as of August 31, 2004. See notes to the financial statements. 7 JACOB INTERNET FUND STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 2004 - -------------------------------------------------------------------------------- ASSETS: Investments, at value (cost $56,134,523)(1) $ 53,030,105 Repurchase Agreements (cost $17,000,000) 17,000,000 Receivable for investments sold 911,149 Receivable for capital shares sold 16,500 Interest receivable 64 Other assets 44,592 ------------- Total Assets 71,002,410 ------------- LIABILITIES: Payable for collateral received for securities loaned(1) 19,046,863 Payable for capital shares repurchased 162,012 Payable to Adviser 56,332 Accrued expenses and other liabilities 251,732 ------------- Total Liabilities 19,516,939 ------------- NET ASSETS $ 51,485,471 ------------- ------------- NET ASSETS CONSIST OF: Capital Stock $ 219,273,178 Accumulated net realized loss on investments (164,683,289) Net unrealized depreciation on investments (3,104,418) ------------- Total Net Assets $ 51,485,471 ------------- ------------- Shares outstanding (20 billion shares of $0.001 par value authorized) 34,182,965 ------------- Net asset value, redemption price and offering price per share $ 1.51 ------------- -------------
(1) Securities loaned with a market value of $18,007,446 are collateralized by short-term investments with a market value of $19,046,863. See Note 6 for further details. See notes to the financial statements. 8 JACOB INTERNET FUND STATEMENT OF OPERATIONS FOR THE YEAR ENDED AUGUST 31, 2004 - -------------------------------------------------------------------------------- INVESTMENT INCOME Dividend income $ 3,963 Interest income 94,242 Securities lending income 45,172 ----------- Total Investment Income 143,377 ----------- EXPENSES Investment advisory fee 945,048 Distribution expenses 264,613 Administration fee 53,313 Shareholder servicing and accounting costs 314,689 Custody fees 40,860 Federal and state registration 84,092 Professional fees 125,199 Reports to shareholders 57,217 Directors' fees and expenses 70,519 Other 26,176 ----------- Net expenses 1,981,726 ----------- NET INVESTMENT LOSS (1,838,349) ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain on investments 24,681,802 Change in net unrealized appreciation/depreciation on investments (23,906,741) ----------- Net realized and unrealized gain on investments 775,061 ----------- NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(1,063,288) ----------- -----------
See notes to the financial statements. 9 JACOB INTERNET FUND STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED AUGUST 31, 2004 AUGUST 31, 2003 --------------- --------------- OPERATIONS: Net investment loss $ (1,838,349) $ (911,432) Net realized gain on investments 24,681,802 18,959,885 Change in net unrealized appreciation/depreciation on investments (23,906,741) 25,566,197 ------------ ------------- Net increase (decrease) in net assets resulting from operations (1,063,288) 43,614,650 ------------ ------------- CAPITAL SHARE TRANSACTIONS: (NOTE 3) Proceeds from shares sold 155,976,225 179,365,586 Cost of shares redeemed (195,934,518) (142,564,481) ------------ ------------- Net increase (decrease) in net assets resulting from capital share transactions (39,958,293) 36,801,105 ------------ ------------- NET INCREASE (DECREASE) IN NET ASSETS (41,021,581) 80,415,755 NET ASSETS: Beginning of period 92,507,052 12,091,297 ------------ ------------- End of period $ 51,485,471 $ 92,507,052 ------------ ------------- ------------ -------------
See notes to the financial statements. 10 JACOB INTERNET FUND FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
DECEMBER 14, 1999(1) YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED THROUGH AUGUST 31, 2004 AUGUST 31, 2003 AUGUST 31, 2002 AUGUST 31, 2001 AUGUST 31, 2000 --------------- --------------- --------------- --------------- --------------- PER SHARE DATA: Net asset value, beginning of period $ 1.48 $ 0.60 $ 0.83 $ 5.54 $ 10.00 ----------- ----------- ----------- ----------- ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment loss(2) (0.05) (0.01) (0.04) (0.05) (0.09) Net realized and unrealized gains (losses) on investments 0.08 0.89 (0.19) (4.66) (4.37) ----------- ----------- ----------- ----------- ------------ Total from investment operations 0.03 0.88 (0.23) (4.71) (4.46) ----------- ----------- ----------- ----------- ------------ Net asset value, end of period $ 1.51 $ 1.48 $ 0.60 $ 0.83 $ 5.54 ----------- ----------- ----------- ----------- ------------ ----------- ----------- ----------- ----------- ------------ Total return 2.03% 146.67% (27.71%) (85.02%)(4) (44.60%)(3) SUPPLEMENTAL DATA AND RATIOS: Net assets, end of period $51,485,471 $92,507,052 $12,091,297 $17,017,392 $127,779,557 Ratio of gross operating expenses to average net assets 2.63% 2.85%(5) 5.29%(5) 2.99%(6) 2.30%(6)(7) Ratio of net operating expenses to average net assets 2.63% 2.13%(5) 4.60%(5) 2.82%(6) 2.00%(6)(7) Ratio of net investment loss to average net assets reflecting gross operating expenses (2.44%) (2.60%)(5) (5.06%)(5) (2.42%)(6) (1.85%)(6)(7) Ratio of net investment loss to average net assets reflecting net operating expenses (2.44%) (1.88%)(5) (4.37%)(5) (2.25%)(6) (1.55%)(6)(7) Portfolio turnover rate 154.63% 363.27% 1,080.63% 347.84% 195.24%
- --------- (1) Commencement of operations. (2) Net investment loss per share is calculated using ending balances prior to consideration of adjustments for permanent book and tax differences. (3) Not annualized. (4) If certain losses had not been assumed by the affiliate, total return would have been lower by less than 0.01%. (5) The net operating expense ratio and the net investment loss ratio includes expense reductions from fees paid indirectly with brokerage commissions. (6) The net operating expense ratio and the net investment loss ratio includes expense reimbursements made by the Adviser. (7) Annualized. See notes to the financial statements. 11 JACOB INTERNET FUND NOTES TO THE FINANCIAL STATEMENTS AUGUST 31, 2004 - -------------------------------------------------------------------------------- NOTE 1 -- DESCRIPTION OF FUND Jacob Internet Fund Inc. (the 'Corporation'), was organized as a Maryland corporation on July 13, 1999 and is registered under the Investment Company Act of 1940, as amended (the '1940 Act'), as an open-end management investment company issuing its shares in series. The Corporation currently consists of one 'diversified' series, the Jacob Internet Fund (the 'Fund') and the authorized capital stock of the Fund consists of twenty billion shares of stock having a par value of one-tenth of one cent ($0.001) per share. The primary investment objective of the Fund is long-term growth of capital with current income as a secondary objective. The Fund commenced operations on December 14, 1999. NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies consistently followed by the Fund. (a) Investment Valuation -- Investment securities traded on a national securities exchange are valued at their market value determined by their last sales price in the principal market in which these securities are normally traded except those traded on the NASDAQ NMS and Small Cap exchanges, unless there are no transactions on the valuation date, in which case they are valued at the mean between the closing asked and bid prices. Securities traded over-the-counter are valued at the last reported sales price unless there is no reported sales price, in which case the mean between the closing asked and bid prices is used. Securities traded on the NASDAQ NMS and Small Cap exchanges are valued at the NASDAQ Official Closing Price ('NOCP'). Debt securities with maturities of sixty days or less are valued at amortized cost, which approximates market value. Where market quotations are not readily available or are unreliable, securities are valued at fair value using procedures approved by the Board of Directors that are designed to determine a security's fair value. (b) Income Recognition -- Interest income is accrued as earned. Dividend income is recorded on the ex-dividend date. All discounts and premiums are amortized using the effective interest method for tax and financial reporting purposes. (c) Securities Transactions -- Security transactions are accounted for on trade date. Realized gains and losses on securities sold are determined using the high cost method. (d) Distributions to Shareholders -- The Fund records distributions to shareholders on the ex-dividend date. Dividends from net investment income, if any, are declared and paid annually. Distributions of net realized capital gains, if any, will be declared and distributed at least annually. The amounts of distributions from net investment income and net realized capital gains are determined in accordance with federal income tax regulations, which may differ from those amounts determined under U.S. generally accepted accounting principles. These book/tax differences are either temporary or permanent in nature. To the extent these differences are permanent, reclassifications are made in the capital accounts in the period that the difference arises. (e) Federal Income Taxes -- The Fund intends to comply with provisions of the Internal Revenue Code applicable to regulated investment companies, including the distribution of substantially all of 12 JACOB INTERNET FUND NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2004 - -------------------------------------------------------------------------------- the Fund's taxable income. Accordingly, no provision for federal income taxes is considered necessary in the financial statements. (f) Use of Estimates -- The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. (g) Repurchase Agreements -- The fund may enter into repurchase agreements with respect to any of the types of securities in which they are authorized to invest without regard to the maturity of the underlying security. Repurchase agreements will be affected only with banks, savings institutions and broker-dealers. They involve the purchase by the Fund of a debt security with the condition that, after a stated period of time, the original seller will buy back the same security at a predetermined price or yield. Repurchase agreements are used to enhance liquidity and to earn income for periods as short as overnight. To minimize risk, the securities underlying each repurchase agreement will be maintained with the Fund's custodian, or a sub-custodian, in an amount at least equal in value to the repurchase price under the agreement (including accrued interest thereunder), and such agreements will only be affected with parties that meet certain creditworthiness standards. However, in the event the other party to the repurchase agreement fails to repurchase the securities subject to such agreement, a Fund could suffer a loss to the extent it is precluded from selling the securities or, if due to delays, preceeds from the same securities are less than the repurchase price. 13 JACOB INTERNET FUND NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2004 - -------------------------------------------------------------------------------- NOTE 3 -- CAPITAL SHARE TRANSACTIONS At August 31, 2004, there were twenty billion shares, $0.001 par value, authorized. Transactions in shares of the Fund were as follows:
YEAR ENDED AUGUST 31, 2004 ---------------------------- SHARES AMOUNT ------ ------ Sales 91,890,796 $ 155,976,225 Redemptions (120,063,452) (195,934,518) ------------ ------------- Net Decrease (28,172,656) $ (39,958,293) ------------ ------------- ------------- SHARES OUTSTANDING: Beginning of period 62,355,621 ------------ End of period 34,182,965 ------------ ------------
YEAR ENDED AUGUST 31, 2003 ---------------------------- SHARES AMOUNT ------ ------ Sales 181,576,002 $ 179,365,586 Redemptions (139,216,257) (142,564,481) ------------ ------------- Net Increase 42,359,745 $ 36,801,105 ------------ ------------- ------------- SHARES OUTSTANDING: Beginning of period 19,995,876 ------------ End of period 62,355,621 ------------ ------------
NOTE 4 -- INVESTMENT TRANSACTIONS During the year ended August 31, 2004, purchases and sales of investment securities (excluding short-term investments) for the Fund were $103,257,808 and $130,803,151, respectively. The Fund did not purchase U.S. Government securities as a part of its investment strategy during the year ended August 31, 2004. 14 JACOB INTERNET FUND NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2004 - -------------------------------------------------------------------------------- At August 31, 2004, the components of accumulated earnings/(losses) on a tax basis were as follows: Cost of Investments....................................... 74,744,897 -------------- -------------- Gross unrealized appreciation............................. 7,259,191 Gross unrealized depreciation............................. (11,973,983) -------------- Net unrealized appreciation............................... $ (4,714,792) -------------- -------------- Undistributed ordinary income............................. -- Undistributed long-term capital gain...................... -- -------------- Total distributable earnings.............................. $ -- -------------- -------------- Other accumulated losses.................................. $ (163,072,915) -------------- Total accumulated losses.................................. $ (167,787,707) -------------- --------------
At August 31, 2004, the Fund had an accumulated net realized capital loss carryover of $163,072,915, of which $73,196,555 expires in 2009 and $89,876,360 expires in 2010. To the extent the Fund realizes future net capital gains, taxable distributions to its shareholders will be offset by any unused capital loss carryover for the Fund. The Fund made no distributions during the fiscal years ended August 31, 2003 and 2004. NOTE 5 -- INVESTMENT ADVISORY AND OTHER AGREEMENTS The Corporation has an Investment Advisory Agreement (the 'Agreement') with Jacob Asset Management of New York LLC (the 'Adviser'), with whom certain officers and Directors of the Board are affiliated, to furnish investment advisory services to the Fund. Under the terms of the Agreement, the Corporation, on behalf of the Fund, compensates the Adviser for its management services based on an annual rate of 1.25% of the Fund's average daily net assets. U.S. Bancorp Fund Services, LLC serves as transfer agent, administrator and accounting services agent for the Fund. U.S. Bank, N.A. serves as custodian for the Fund. U.S. Bancorp Asset Management serves as the securities lending agent. NOTE 6 -- SECURITIES LENDING The Fund may lend portfolio securities up to 33% of its total assets (including such loans) to borrowers under terms of participation in a securities lending program administered by U.S. Bancorp Asset Management. Securities lending will be fully collateralized at all times with cash and/or short-term debt obligations. 15 JACOB INTERNET FUND NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2004 - -------------------------------------------------------------------------------- The Fund receives compensation in the form of fees and earns interest on the cash collateral. The amount of fees depends on a number of factors including the types of security, length of the loan and credit standing of the borrower. The Fund continues to receive interest or dividends on the securities loaned during the borrowing period. The Fund has the right under the terms of the securities lending agreement to recover the securities from the borrower on demand. U.S. Bancorp Asset Management not receive any compensation from the Fund for its securities lending administrative services during the fiscal year ended August 31, 2004. As of August 31, 2004, the Fund had loaned securities that were collateralized by cash equivalents. The cash collateral is invested by the custodian with the approval of the Adviser. Although risk is mitigated by the collateral, the Fund could experience a delay in recovering its securities and possible loss of income or value if the borrower fails to return them. As of August 31, 2004, the value of the Fund's securities on loan was $18,007,446 and the value of the related collateral was $19,046,863. NOTE 7 -- DISTRIBUTION AND SERVICE PLAN The Corporation, on behalf of the Fund, has adopted a distribution and service plan (the 'Plan'), pursuant to Rule 12b-1 under the 1940 Act. The Plan provides that the Fund will compensate the Adviser up to 0.25% per annum of the Funds' average daily net assets for certain expenses and costs incurred in connection with providing shareholder servicing and maintaining shareholder accounts and to compensate parties with which it has written agreements and whose clients own shares of the Fund for providing servicing to their clients ('Shareholder Servicing'). The Plan also provides for a distribution fee equal to 0.10% of the Fund's average daily net assets on an annual basis. Such a fee is paid in part to Quasar Distributors, LLC, the Fund's distributor, with the balance paid at the direction of the Adviser to broker-dealers, other financial professionals whose clients are Fund shareholders, and for providing distribution assistance and promotional support to the Fund. The Fund incurred $264,613 in expenses pursuant to the 12b-1 Plan for the year ended August 31, 2004. 16 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of the JACOB INTERNET FUND INC. We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Jacob Internet Fund Inc. (the Fund), as of August 31, 2004, the related statements of operations for the year then ended and the statements of changes in net assets and financial highlights for the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on the 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. An audit 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 August 31, 2004, by correspondence with the custodian and brokers or 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 Jacob Internet Fund Inc. at August 31, 2004, and the results of its operations for the year then ended, and changes in its net assets and the financial highlights for the periods indicated therein, in conformity with U.S. generally accepted accounting principles. [Signature: ERNST & YOUNG LLP] Chicago, Illinois October 8, 2004 17 ADDITIONAL INFORMATION INFORMATION ABOUT DIRECTORS The business and affairs of the Fund are managed under the direction of the Corporation's Board of Directors. Information pertaining to the Directors of the Corporation is set forth below. The Statement of Additional Information includes additional information about the Corporation's Directors and Officers and is available, without charge, upon request by calling toll-free 1-888-Jacob-fx (1-888-522-6239).
NUMBER OF TERM OF PORTFOLIOS OFFICE & IN FUND OTHER POSITION(S) LENGTH OF COMPLEX DIRECTORSHIPS HELD WITHIN TIME PRINCIPAL OCCUPATION DURING OVERSEEN HELD BY NAME, ADDRESS AND AGE THE CORPORATION SERVED(1) PAST FIVE YEARS BY DIRECTOR DIRECTOR --------------------- --------------- --------- --------------- ----------- -------- INDEPENDENT DIRECTORS: William B. Fell .............. Director Since Manager, Financial Analysis, 1 None 125 East County Line Road 1999 Food and Support Services Warminster, PA 18974 Division of ARAMARK Age: 35 Corporation since March 2003; Director of Forecasting and Financial Systems, March 2002 - March 2003; Manager, Accounting Services, September 1996 - March 2002; Senior Accountant, March 1995 - September 1996, Maritrans Inc.; Senior Accountant, Ernst & Young LLP, September 1994 - March 1995. Christopher V. Hajinian ...... Director Since Christopher V. Hajinian, P.C.; 1 None 130 Almshouse Rd. 1999 Self- employed attorney; Richboro, PA 18954 Litigation associate, Naulty, Age: 35 Scaricamazza & McDevitt, Ltd., September 1996 - August 1999. Jeffrey I. Schwarzschild ..... Director Since Associate attorney, Law Office 1 None 2001 P. Street, Suite 100 1999 of Mark E. Merin since April Sacramento, CA 95814 2003; Associate attorney, Age: 33 Goldstein, Gellman, Melbostad, Gibson & Harris, LLP ('Goldstein Gellman') June 2001 - March 2003; Consultant, International Venture Associates (high-level strategic consulting and business development firm), February 2000 - June 2001. Associate attorney, Goldstein Gellman from February 1999 through February 2000; worked as a contract attorney for several San Francisco Bay area firms, 1997-1999.
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NUMBER OF TERM OF PORTFOLIOS OFFICE & IN FUND OTHER POSITION(S) LENGTH OF COMPLEX DIRECTORSHIPS HELD WITHIN TIME PRINCIPAL OCCUPATION DURING OVERSEEN HELD BY NAME, ADDRESS AND AGE THE CORPORATION SERVED(1) PAST FIVE YEARS BY DIRECTOR DIRECTOR --------------------- --------------- --------- --------------- ----------- -------- INTERESTED DIRECTORS(3): Ryan I. Jacob(2)(3) .......... Director, Since Chairman and Chief Executive 1 None 19 West 34th Street, Suite President, Chairman 1999 Officer of the Adviser; Chief 816A of the Board and Portfolio Manager of The New York, New York 10001 Chief Executive Internet Fund, Inc. from Age: 35 Officer December 1997 - June 1999; Analyst for Horizon Asset Management from 1994 - August 1998. Leonard S. Jacob, M.D., Ph.D.(2)(4) .................. Director Since Chairman and Chief Executive 1 Macromed Inc., 1787 Sentry Park West, 1999 Officer, InKine Pharmaceutical Carelift Building 18, Suite 440, Company, Inc. since November International Blue Bell, Pennsylvania 19422 1997; President and Chief (a non-profit Age: 55 Executive Officer, Sangen medical relief Pharmaceutical Company since organization), June 1996; Independent Recording for Consultant to various the Blind and biotechnology companies since Dyslexic, June 1996; Co-founder and Saving Face (a Chief Operating Officer, non-profit Genaera Corporation (formerly organization Magainin Pharmaceutical Inc.) for facially 1989 - 1996; Worldwide V.P. disfigured SmithKline Beckman, 1985-1989. children). OFFICERS: Francis J. Alexander ......... Vice President, Since Member of the Adviser and N/A N/A 19 West 34th Street Secretary and 1999 portfolio manager of the Fund Suite 816A Treasurer since inception in 1999, New York, New York 10001 Director of the Fund, 1999 - Age: 59 October 17, 2003; President, Alexander Capital Management, Inc., March 1985 to December 2003; Managing Member, ACMG, LLC (registered investment adviser), October 1999 to present; Director and portfolio manager, 1998 -March 2002, chairman of investment committee, March 1999 - March 2002, Lepereq, de Neuflize & Co. Inc. (financial services company in investment advisory and broker/dealer business).
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NUMBER OF TERM OF PORTFOLIOS OFFICE & IN FUND OTHER POSITION(S) LENGTH OF COMPLEX DIRECTORSHIPS HELD WITHIN TIME PRINCIPAL OCCUPATION DURING OVERSEEN HELD BY NAME, ADDRESS AND AGE THE CORPORATION SERVED(1) PAST FIVE YEARS BY DIRECTOR DIRECTOR --------------------- --------------- --------- --------------- ----------- -------- Shane Morris ................. Chief Compliance Since Operations Manager for the N/A N/A 19 West 34th Street Officer; Anti-Money October Adviser since February 2002; Suite 816A Laundering 2004 previously, producer, writer New York, NY 10001 Compliance Officer and director for Living Room Age: 27 Theatre Productions, May 1999 -- January 2002.
- --------- (1) Each Director holds office during the lifetime of the Fund, until his termination, or until the election and qualification of his successor. (2) Ryan I. Jacob and Leonard S. Jacob are related to each other as nephew and uncle, respectively. (3) Ryan I. Jacob is deemed to be an 'interested person' of the Fund (as defined in the 1940 Act) because of his affiliation with the Adviser. (4) Under the 1940 Act definition of 'interested person,' Leonard S. Jacob qualifies as an independent director. Since the Fund's inception, Dr. Jacob acted and served in the role of independent director. In October 2003, the Board of Directors voted to re-classify Dr. Jacob as an interested Director as a result of a new 'best practice' corporate governance recommendation for mutual funds. PROXY VOTING A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available by calling toll-free 1-888-Jacob-fx (522-6239) or on the SEC website at http://www.sec.gov. PROXY VOTING RECORD Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, 2004 is available without charge by calling 1-888-Jacob-fx (522-6239) or on the SEC website at http://www.sec.gov. 20 Investment Advisor Jacob Asset Management of New York LLC Administrator and Transfer Agent and Dividend Agent U.S. Bancorp Fund Services, LLC Underwriter and Distributor Quasar Distributors, LLC Custodian U.S. Bank, N.A. Independent Registered Pubic Accounting Firm Ernst & Young LLP This report has been prepared for the information of share- holders of the Jacob Internet Fund and is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus that includes information regarding the Fund's objectives, policies, man- agement, records and other information. Jacob Asset Management of New York LLC 19 West 34th Street, Suite 816A, New York, NY, 10001 1-888-Jacob-fx (522-6239) www.JacobInternet.com Jacob Internet Fund Inc. JACOB INTERNET FUND [JAM LOGO] Annual Report --------------- August 31, 2004 Item 2. Code of Ethics. The registrant has adopted a code of ethics that applies to the registrant's principal executive officer and principal financial officer. The registrant has not made any amendments to its code of ethics during the period covered by this report. The registrant has not granted any waivers from any provisions of the code of ethics during the period covered by this report. The registrant has posted its code of ethics on its Internet website: www.jacobinternet.com. Item 3. Audit Committee Financial Expert. The registrant's board of directors has determined that William B. Fell possesses the technical attributes to qualify as an "audit committee financial expert" serving on the registrant's audit committee and designated William B. Fell as the "audit committee financial expert." Mr. Fell is independent under the standards set forth in Item 3 of Form N-CSR. Item 4. Principal Accountant Fees and Services. The registrant has engaged its principal accountant to perform audit services, audit-related services, tax services or other services during the past two fiscal years. "Audit services" refer to performing an audit of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years. "Audit-related services" refer to the assurance and related services by the principal accountant that are reasonably related to the performance of the audit. "Tax services" refer to professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning. There were no "other services" provided by the principal accountant. The following table details the aggregate fees billed for each of the last two fiscal years for audit services (with fees listed under "audit fees"), audit-related services (with fees listed under "audit-related fees"), tax services (with fees listed under "tax fees"), and other services (with fees listed under "all other fees") by the principal accountant.
---------------------------------------------------------- FYE 8/31/04 FYE 8/31/03 ---------------------------------------------------------- Audit Fees $16,000 $14,000 Audit-Related Fees Tax Fees $ 4,000 $ 2,000 All Other Fees ----------------------------------------------------------
The registrant's Audit Committee has adopted an Audit Committee Charter that provides that the Audit Committee shall approve, prior to appointment, the engagement of the auditor to provide audit services to the registrant and non-audit services to the registrant, its investment adviser or any entity controlling, controlled by or under common control with the investment adviser that provides on-going services to the registrant, if the engagement relates directly to the operations and financial reporting of the registrant. All of the principal accountant's hours spent on auditing the registrant's financial statements were attributed to work performed by full-time permanent employees of the principal accountant. The following table indicates that there were no non-audit fees billed by the registrant's accountant for services to the registrant and to the registrant's investment adviser (and any entity controlling, controlled by or under common control with the adviser) for the last two fiscal years.
------------------------------------------------------------------ Non-Audit Related Fees FYE 12/31/2003 FYE 12/31/2002 ------------------------------------------------------------------ Registrant $0 $0 Registrant's Investment Adviser $0 $0 ------------------------------------------------------------------
Item 5. Audit Committee of Listed Registrants. Not applicable to open-end investment companies. Item 6. Schedule of Investments. 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. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchases. Not applicable to open-end investment companies. Item 9. Submission of Matters to a Vote of Security Holders. Not Applicable. Item 10. Controls and Procedures. (a) The registrant's principal executive office/President and principal financial officer/Treasurer have reviewed the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the "Act")) as of a date within 90 days of the filing of this report, as required by Rule 30a-3(b) under the Act and Rule 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934. Based on their review, such officers have concluded that the disclosure controls and procedures are effective in ensuring that information required to be disclosed in this report is appropriately recorded, processed, summarized and reported and made known to them by others within the registrant and by the registrant's service provider. (b) There were no significant changes in the registrant's internal controls over financial reporting that occurred during the registrant's last fiscal half-year that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. 2 Item 11. Exhibits. (a) (1) Any code of ethics or amendment thereto, that is subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy Item 2 requirements through filing an exhibit. Not Applicable. (2) Certifications pursuant to Rule 30a-2(a) under the Act and Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith. (3) Any written solicitation to purchase securities under Rule 23c-1 under the Act sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons. Not applicable to open-end investment companies. (b) Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith. 3 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) Jacob Internet Fund Inc. By (Signature and Title) /s/ Ryan Jacob --------------------------------------- Ryan Jacob, President Date 11-9-04 ---------------------------------------------------------- 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/ Ryan Jacob ----------------------------------- Ryan Jacob, President Date 11-9-04 ------------------------------------------------------- By (Signature and Title)* /s/ Francis Alexander ----------------------------------- Francis Alexander, Treasurer Date 11-9-04 -------------------------------------------------------- 4 EX-99.CERT 2 ex99-cert.txt EXHIBIT 11 (A)(2) Exhibit (a)(2) CERTIFICATIONS I, Ryan Jacob, certify that: 1. I have reviewed this report on Form N-CSR of Jacob Internet Fund Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) [omitted] (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: 11-9-04 /s/ Ryan Jacob -------------------------- --------------------------------- Ryan Jacob President EX-99.906 3 ex99-906cert.txt EXHIBIT 11 (B) Exhibit (a)(2) CERTIFICATIONS I, Francis Alexander, certify that: 1. I have reviewed this report on Form N-CSR of Jacob Internet Fund, Inc. 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) [omitted] (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: 11-9-04 /s/ Francis Alexander ------------------------- ---------------------------------- Francis Alexander Treasurer Exhibit (b) Certification Pursuant to Section 906 of the Sarbanes-Oxley Act Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned officers of Jacob Internet Fund Inc., does hereby certify, to such officer's knowledge, that the report on Form N-CSR of the Jacob Internet Fund Inc. for the year ended August 31, 2004 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as applicable, and that the information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of Jacob Internet Fund Inc. for the stated period. /s/ Ryan Jacob /s/ Francis Alexander - ------------------------------------ ----------------------------------- Ryan Jacob Francis Alexander President, Jacob Internet Fund Inc. Treasurer, Jacob Internet Fund Inc. Dated: 11-9-04 ---------------------- This statement accompanies this report on Form N-CSR pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed as filed by Jacob Internet Fund Inc. for purposes of the Securities Exchange Act of 1934. -----END PRIVACY-ENHANCED MESSAGE-----