Fourth Quarter 2013 J.K. Financial, Inc. Performance Report Cover Letter (Clients)

Dear Investor,

Enclosed you will find your Fourth Quarter 2013 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 investment activities and consolidates multiple accounts (if applicable) into one total comprehensive view that focuses on asset allocation and portfolio diversification.

In this annual report you will find 5 years of Historical Account Value quarterly bar chart to go along with our YTD Cash deposit and Withdrawals ledger report, and greater return details than in our normal quarterly reports.

Despite continued slower US economic growth than normal at this point in a recovery, US equity markets ascended dramatically throughout the year, in some cases extending valuations greatly. Over the last quarter, and year for that matter, US markets, in Goldilocks fashion ignored ANY negative news and embraced all events as positive.  It is likely this will not be the case this time next year.

While further US equity appreciation is possible, several years of economic recovery are likely already reflected in current valuations. International, emerging market, commodity, currency, and other global assets likely offer a better risk reward in the future.

Bonds, facing short term headwinds as rates rise, still remain a very important part of a diversified portfolio for stability and safety. As rates rise income from bond portfolios will begin to reflect the new higher rates, finally giving relief from the artificially lowered rates orchestrated by the FOMC asset purchases over the last several years.

Coming soon to your mailbox (still enjoy the novelty of paper) is the Q1 2014 Newsletter which is also extended as we dig deep into our best estimates of what will happen in 2014, and reflect on the good and bad of 2013. We ask you may take a few extra minutes to read this forthcoming newsletter as we have included detailed graphs to help clarify our thoughts.

We will be sending a separate tax report 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.

Sincerely,

John A. Kvale CFA, CFP

Enclosures (Fourth Quarter 2013 Performance Report, Private Policy Statement)

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