Fourth Quarter 2011 J.K. Financial, Inc. Performance Report Cover Letter (Clients)

Dear Investor,

Enclosed you will find your Fourth Quarter 2011 Performance Report. As a reminder this report is a summary of your monthly statements and transactions you receive directly from our outside custodian along with the IRS tax basis for each of your investments.  This report summarizes the last 90 days activities and consolidates multiple accounts into one report for a total comprehensive view.

We have added a new easy to read 5 years of Historical Account Value quarterly bar chart to go along with our newly added YTD Cash deposit and Withdrawals ledger report, larger Account Summary Graph Pie chart, Cover Page Investment Allocation Summary, and greater return details.

As mentioned in our recent street-cents article, we have embraced green, cutting paper consumption by 50% and saving your storage space. Your report is printed on the front and back of pages now.

This from our Q 3 2011 report:

“If history holds true, the final quarter of the year is the best for capital market returns, and we do feel there is ample possibility for a nice finish to the year.”

Capital markets returned to their senses in the most recent quarter and gained just over 11% to finish at 1257.46 on the S&P 500. Interestingly, the index started the year at 1257.64. While the domestic capital markets made very little headway this year, companies within the index had earnings over 15% greater than the prior year. This fact makes the current domestic capital markets, all other things equal, 15% cheaper than last year and well below historical averages.

World markets, small companies, and just about every other equity oriented asset class faired much worse. According to Bloomberg, globally, equity markets dropped an average of over 12%, with emerging markets fairing much worse.

While our election cycle year research would predict 2012 not to be as good as 2011, we believe it is possible to have a payback year from 2011 provided some clarity is garnered on the EU situation. It is worth noting by the time ALL, clarity and confidence return, capital markets will have already taken this into consideration, and will most likely already be much higher than we are today.

We will be sending a separate tax report by mid February that will summarize taxable items and help in your government tax filing requirements should you have a taxable account. IT IS VERY IMPORTANT YOU WATCH FOR THIS REPORT AS IRS RULES HAVE MANDATED CUSTODIAL REPORTING, WHICH WILL NOT BE 100% ACCURATE DURING THE TRANSITION PHASE. OUR REPORT WILL BE THE MOST ACCURATE. We have included our latest private policy statement for your review. Also, we want to take this opportunity to offer our latest ADV filings; Requests for review will be accepted via phone, mail or email, and mailed immediately upon request.

Enclosures (Fourth Quarter 2011 Performance Report, Private Policy Statement)

John A. Kvale CFA, CFP

214-706-4300

www.jkfinancialinc.com

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