Vann Investments, LLC - I have been very pleased with the overall performance of all portfolios given the difficult, trendless market we witnessed this past year. All accounts opened for over one year are generating income well in excess of what one could achieve in savings accounts or 30 year U.S. Treasury bonds. During the dramatic drops we witnessed our portfolios barely budged. (that was due in large part to the stream of income being deposited to the accounts on a continuing basis from our investments). During the month of December we received good news on our Ford (F) common stock. After a 5 year suspension the dividend is being reinstated at $.20 per year. That works out to a 1.98% yield based on our purchase price of $10.08. It's not a lot, but it is a start and I expect regular increases in the future. Looking back over the year we lost a lot of good Preferreds that were either called in for redemption or conversion to common. In every case we made a substantial profit on our original purchase. Not everyone experienced a good year however. The following are excerpts from an article that appeared in USA Today on December 19, 2011: "The average diversified U.S. stock mutual fund has fallen 5.9% this year, vs. a 1.4% loss for the Standard & Poor's 500-stock index, says Lipper, which tracks the funds. Out of 8,036 funds, 7,399, or 92%, are showing a loss — and some are doozies.•Perennially snakebit Apex Small Cap has fallen 41% this year.•Rochdale Mid/Small Growth fund tumbled 36.1%.•Legg Mason Capital Management Opportunity Trust, managed by former star manager Bill Miller, is down 35%.... stock funds tend to invest in midsize and small companies, which have lagged behind the S&P 500. The Russell 2000 small-cap index, for example, has fallen 8.4% this year.Another reason is technical: Lipper's average U.S. stock fund figure includes many new funds that use futures and options to amplify gains and losses. Without those funds, the average loss for U.S. stock funds would have been 4.1%.Thanks to the European crisis, international funds have been smacked even harder: The average large-company international fund has plunged 15.5%.Some specialized funds have tanked even more. Direxion Daily Real Estate Bear 3X, which uses futures and options to amplify performance up and down, plunged 57.7%" One item all these poor performers have in common is the high risk they assume. The worst performers made outsized bets on risky companies, and regions of the world that offer great potential for huge gains and large losses. In my opinion this is not investing; this is trading at best and gambling at worst. As has now been demonstrated for the last three years. A portfolio that is built with high quality, dividend paying stocks, issued by companies that have a track record of sound management and increasing cash flow, out performs a risky portfolio the majority of the time. There are periods of time when the reverse is true. Those periods are short lived and tend to be a sign that we are in a "bubble" market that is headed for a crash (The Junk Bond bubble of the 80's, the tech bubble of the 90's, and housing bubble of the 2000's come to mind). Throughout these periods a high quality portfolio while underperforming during the runup, survive the crash better and recover faster. Additionally the income they generate helps cushion the blow. While it is an imperfect method the only roadmap to the future is found by studying the past. I have written before how this period is very reminiscent of the stagnate period of the Carter years. What followed that long painful period was a twenty year expansion that saw the markets as measured by the DJIA (Dow Jones Industrial Average) explode with a 1000% gain. During this period of remarkable growth the leaders were names like Ford, GM, Exxon, Boeing, Merck, Bank of America etc. Literally, at the beginning of the last great bull market Business Week had on its cover "The Death of Equities" The story dealt with how we would never see the DJIA break above 1,000 and stocks would remain a horrible investment. Within one year of that article the DJIA was up 70% to 1,700 and never looked back. The American people, U.S. Economy, U.S. Large Cap companies and the U.S. Stock Market are the greatest engines for growth and economic advancement the world has ever seen. I believe we are on the cusp of seeing that demonstrated once again. Based on my analysis, once we break out of the trading range we have been locked into since 1999. I believe we will see the market make an initial move as measured by the DJIA to 37,000 before we get a significant correction. After that "crash" we will then begin the march to 100,000. The only thing that could stop this from happening is if the United States abandons the free markets, private property rights, and economic mobility (Everything advocated by the Occupy Wall Street crowd) in exchange for the false security of Euro-style Socialism and the shared misery that a Statist Government brings. As always, please call me with any questions or concerns you may have at (303) 688-6853. I want to wish everyone a Happy, Healthy, and Prosperous New Year. Tom Vann

3160 N Industrial Way
Castle Rock, CO 80109
ph: (303) 688-6853
fax: (303) 660-6193
alt: (866) 273-3852
tdvann@vanninvestmentsllc.com

I have been very pleased with the overall performance of all portfolios given the difficult, trendless market we witnessed this past year. All accounts opened for over one year are generating income well in excess of what one could achieve in savings accounts or 30 year U.S. Treasury bonds. During the dramatic drops we witnessed our portfolios barely budged. (that was due in large part to the stream of income being deposited to the accounts on a continuing basis from our investments). During the month of December we received good news on our Ford (F) common stock. After a 5 year suspension the dividend is being reinstated at $.20 per year. That works out to a 1.98% yield based on our purchase price of $10.08. It's not a lot, but it is a start and I expect regular increases in the future. Looking back over the year we lost a lot of good Preferreds that were either called in for redemption or conversion to common. In every case we made a substantial profit on our original purchase. Not everyone experienced a good year however.

The following are excerpts from an article that appeared in USA Today on December 19, 2011:

"The average diversified U.S. stock mutual fund has fallen 5.9% this year, vs. a 1.4% loss for the Standard & Poor's 500-stock index, says Lipper, which tracks the funds. Out of 8,036 funds, 7,399, or 92%, are showing a loss — and some are doozies.

•Perennially snakebit Apex Small Cap has fallen 41% this year.

•Rochdale Mid/Small Growth fund tumbled 36.1%.

•Legg Mason Capital Management Opportunity Trust, managed by former star manager Bill Miller, is down 35%.

... stock funds tend to invest in midsize and small companies, which have lagged behind the S&P 500. The Russell 2000 small-cap index, for example, has fallen 8.4% this year.

Another reason is technical: Lipper's average U.S. stock fund figure includes many new funds that use futures and options to amplify gains and losses. Without those funds, the average loss for U.S. stock funds would have been 4.1%.

Thanks to the European crisis, international funds have been smacked even harder: The average large-company international fund has plunged 15.5%.

Some specialized funds have tanked even more. Direxion Daily Real Estate Bear 3X, which uses futures and options to amplify performance up and down, plunged 57.7%"

One item all these poor performers have in common is the high risk they assume. The worst performers made outsized bets on risky companies, and regions of the world that offer great potential for huge gains and large losses. In my opinion this is not investing; this is trading at best and gambling at worst. As has now been demonstrated for the last three years. A portfolio that is built with high quality, dividend paying stocks, issued by companies that have a track record of sound management and increasing cash flow, out performs a risky portfolio the majority of the time. There are periods of time when the reverse is true. Those periods are short lived and tend to be a sign that we are in a "bubble" market that is headed for a crash (The Junk Bond bubble of the 80's, the tech bubble of the 90's, and housing bubble of the 2000's come to mind).

Throughout these periods a high quality portfolio while underperforming during the runup, survive the crash better and recover faster. Additionally the income they generate helps cushion the blow.

While it is an imperfect method the only roadmap to the future is found by studying the past. I have written before how this period is very reminiscent of the stagnate period of the Carter years. What followed that long painful period was a twenty year expansion that saw the markets as measured by the DJIA (Dow Jones Industrial Average) explode with a 1000% gain. During this period of remarkable growth the leaders were names like Ford, GM, Exxon, Boeing, Merck, Bank of America etc. Literally, at the beginning of the last great bull market Business Week had on its cover "The Death of Equities" The story dealt with how we would never see the DJIA break above 1,000 and stocks would remain a horrible investment. Within one year of that article the DJIA was up 70% to 1,700 and never looked back.

The American people, U.S. Economy, U.S. Large Cap companies and the U.S. Stock Market are the greatest engines for growth and economic advancement the world has ever seen. I believe we are on the cusp of seeing that demonstrated once again. Based on my analysis, once we break out of the trading range we have been locked into since 1999. I believe we will see the market make an initial move as measured by the DJIA to 37,000 before we get a significant correction. After that "crash" we will then begin the march to 100,000. The only thing that could stop this from happening is if the United States abandons the free markets, private property rights, and economic mobility (Everything advocated by the Occupy Wall Street crowd) in exchange for the false security of Euro-style Socialism and the shared misery that a Statist Government brings.

As always, please call me with any questions or concerns you may have at (303) 688-6853. I want to wish everyone a Happy, Healthy, and Prosperous New Year.

Tom Vann

About Vann Investments, LLC

Vann Investments, LLC was founded by Thomas D. Vann in July 1991. Thomas Vann graduated from the University of Colorado in 1976 with a B.A. in Economics. He immediately went to work for the firm of E.F. Hutton & Co. After 15 years working for Wall Street Wire Houses he set up his fee only practice. It is the belief of Vann Investments, LLC that paying commissions creates a conflict of interest between the Advisor and the Client. Vann Investments, LLC is only compensated based on the size of the assets under management. If the client’s assets decline in value, we are still paid, but we are paid less. The only way we can increase our revenues is through our clients increasing their wealth.

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3160 N Industrial Way
Castle Rock, CO 80109
ph: (303) 688-6853
fax: (303) 660-6193
alt: (866) 273-3852
tdvann@vanninvestmentsllc.com

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