For over 25 years, American has consistently followed a strategy for stock selection, seeking to acquire companies that have strong underlying fundamentals, and dominant positions in their industry. Positions are initiated at depressed prices when a company has fallen out of favor with investors on a short-term basis, but the long-term fundamentals are intact.

Our Management is a Disciplined One

To insure that our philosophical stamp is on each account we manage, all portfolios must have an income yield which exceeds the major indexes (S&P 500 or Dow Jones averages) by one to one and a half percent. Our overall goal is to exceed the historical rate of return (presently 10%), over time, by twenty-five percent.

Our disciplined system for determining asset allocation, corporate quality rating, dividend growth rates and portfolio risk has been proven over the past 20 years, and has helped us achieve performance results in excess of the historical rate of return.

Our Investment Strategy

The implementation of an investment philosophy, within a disciplined structure, calls for a strategy which has proven itself over time. Our investment decision process utilizes fundamental tools which provide guidelines for the allocation of assets between common stocks and bonds and assists us in determining growth rates for dividends, earnings and book values.

Equity Discipline

We believe the best approach to optimum total return in the equity market is to invest primarily for capital appreciation through dividend growth. By selecting issues

whose dividend growth prospects will produce greater than average total return, we are able to rely on the increasing income stream to force capital gains as the market recognizes the growing dividend. An example of this is contained on the chart below.

AN EXAMPLE OF DIVIDEND GROWTH

HERE WE ASSUME:
1) THE DIVIDEND GROWTH RATE WILL AVERAGE 10% A YEAR
2) THE STOCK YIELD WILL REMAIN RELATIVELY CONSTANT

The key to our methodology is the accuracy of our projected dividend growth rates. Although no guarantee can ever be given as to future performance, we have found that concentrating on fundamentally sound, high quality issues can produce superior total returns with minimum risk exposure.

The final step, Portfolio Development, involves selecting stocks and structuring them in such a way as to realize the client's goals and objectives. At this juncture, we take into consideration the client's income needs, investment goals, risk tolerance, funding schedule and possible restrictions.

As part of our supervisory process, all securities are monitored daily with each portfolio reviewed weekly. Clients receive detailed statements quarterly. Portfolio statements, appraisals and investment outlook are sent to each client quarterly. Clients will receive periodic notices of our investment outlook or strategy changes during the quarter.

Fixed Income Discipline

Allocations of fixed income investments between short-term and long-term bonds are made using these guidelines:

1. No bond investment will be made at a price exceeding face value.

2. Bond investments are confined to investment grade, as rated by the leading services such as Moody's and Standard & Poor's. Economic conditions are monitored to lessen the interest rate risk factor.

3. AAMG will strive to focus new investment in the highest yield to maturity point on the yield curve.

These disciplines force the managers to shorten their maturity schedule, as interest rates rise, and hold cash flow in short-term maturities during periods of extreme financial pressure. It also allows for quick redeployment of funds into the long-term market as financial conditions warrant.

Asset Allocation

The allocation of the percentage of portfolio assets between stocks and bonds is determined by a strategy based principally upon the relative risk-adjusted returns available in the general market and the constraints imposed by our client. This allocation discipline forces AAMG to increase its allocations towards fixed income investments and/or cash equivalents, when common stocks appreciate to a point where risk-adjusted return declines relative to bond return.

Fee Schedule

The standard fee schedule for American Asset Management Group, Inc. services is 1.5% annually, one-fourth of which is charged quarterly, in arrears. All fees all negotiable.