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BOARD UPDATE: THE AOG INVESTMENT
PORTFOLIO IN TURBULENT FINANCIAL TIMES

Dec. 23, 2008

This is an interim report from the Board of Directors to
update the membership on how our AOG is doing during these
uncertain, turbulent times of financial stress in our country.
AOG investments have not been immune to the downturn in global
markets; and we want you to know where we stand now and will keep
you informed as we go forward.

Like other organizations that
hold investment funds for their members and have the responsibility
to generate revenues and investment gains from those funds, the AOG
has been significantly impacted by the weakening economy and the
decline in the financial markets. The estimate at this point is that
the total mark to market value of AOG investments has been reduced
by approximately 30% in the first half of FY 2009.

Approximately 1/3 of this reduction is traceable to an investment
of AOG funds in a hedge fund impacted by the Madoff scandal.
The Madoff investment was but one of more than a dozen funds in
which the AOG is invested.  The AOG originally invested $1.2
million, approximately 5% of our investment assets, in the Madoff
fund. Subsequently, as investable assets increased through
appreciation and receipt of new funds, a total of $500,000 was added
for a total investment of $1,691,000.  The value of the
investment on our books at the time of the disclosure of the fraud
was approximately $2.5 million. At this time, we have little hope
that these funds are recoverable; but the AOG will take appropriate
steps to participate in any legal actions that may ultimately
recover some or all of the funds.

The AOG  Financial Management and Investment Policy
(FMIP), which was adopted by the AOG Board in 2003, governs
investment portfolio management and allocations to assure that AOG
investment assets are not concentrated inappropriately.  On
balance, the FMIP has served the AOG well; and its provisions have
been rigorously followed.  The AOG Investment Subcommittee has
worked diligently to minimize losses, and we believe the AOG has
weathered the storm relatively well given current conditions.

Everyone needs to know that the AOG has sufficient resources
to maintain current operations and to accomplish all facets of the
AOG mission.  Prudent management steps are being implemented to
add efficiency to AOG operations by minimizing expenses and
initiating new revenue programs.  We ask all AOG members who
are able, to continue your support for the AOG and the Academy
through your gifts and contributions.

The Board will
update the membership on the state of all AOG investments by the end
of January 2009.   By then, we will have the results for
the quarter ending December 31, 2008.

The Board
extends Seasons Greetings and our thanks to the AOG membership and
the Academy family for your continued support of the AOG.

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Association of Graduates, 3116 Academy Drive, USAF
Academy, CO 80840-4475, Phone: 719.472.0300