Investor Report - Aeifunds.com

Properties from coast-to-coast
Investor Report
Autumn 2005
AEI has purchased
and managed net lease
retail and restaurant
properties from coast-
to-coast for more than
30 years. In this issue
of Investor Report, we
spotlight a few of the properties recently acquired for our Funds and
look at some of the demographic trends that influence the types of
properties we develop and purchase.
Look for our U.S. map icon throughout this issue. It pinpoints the
locations of AEI properties you might consider visiting in your area.
In addition, this issue of Investor Report includes valuable
information of interest to our investors.

AEI by the numbers
(as of September 30, 2005)
Properties developed
or acquired: 253
Investors: 17,000+
Investment capital
subscribed by AEI
investors: $347 million
Consecutive quarters of
public Fund distributions: 85
(That’s more than 21 years
of steady quarterly cash
distributions!)
New at AEI...
...Client statement
...Web site
Thank you for your comments about
our revised account statements. The
statements are now easier-to-read,
incorporate color graphics and include
photos of new investment properties and
of properties we recently sold.
If you have suggestions about how
to make our statements even more
useful, please contact one of our
AEI Client Services representatives at
800-328-3519 or at clientservices@
aeifunds.com.
AEI has launched its remodeled web site. Please visit AEIfunds.com. While online,
learn more about AEI’s current net lease real estate investment offerings and recent
property acquisition activity.

Ask AEI
Question:
I originally invested in an
AEI Fund when there seemed
to be little activity
in the real estate market.
With all that is going on
in some segments of the
real estate market lately,
can I expect AEI to continue
to provide reliable investment
performance in both
up and down markets?
Do you have any questions
you would like to Ask AEI?
If so, please contact our
Client Services department at
800-328-3519 or
clientservices@aeifunds.com.
Historically, the real estate market, like most investments, has had its ups and downs.
The chart below illustrates the dollar weighted average annual composite yield for AEI
Funds over the last 20 years as compared with the yields from direct investments in the
retail, apartment, industrial and office real estate sectors. (The AEI dollar weighted average
yield does not represent specific AEI Fund performance.)
Fluctuations in the real estate market are not new phenomena. Each of the real estate sectors
shows periods of higher and lower performance. Note, however, that AEI has shown
consistent investment performance that has tended to fall between 7 and 9 percent during
the period.
AEI Dollar Weighted Average Annual Composite Yield
and Real Estate Segment Returns, 1984-2004*
Percent Annual Yield/Returns
25%
Apartment Industrial Office Retail
20%
AEI
15%
10%
5%
0%
-5%
-10%
-15%
1984 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97
*Source: National Council of Real Estate Investment Fiduciaries
Note: Past performance does not guarantee future results.
'99 2000 '01
Why has AEI’s performance been relatively consistent over this volatile time?
One reason is because AEI net lease real estate Funds operate more like bond funds with an
upside equity kicker (which is property price appreciation potential) and because AEI Funds
acquire many properties at wholesale prices through the property development process.
Another reason is because AEI focuses its acquisitions on tier one and tier two concepts. Tier
one concepts such as Best Buy and Jared Jewelry stores have hundreds, if not thousands, of
locations, successful track records, strong management infrastructures, and well-designed
stores. They generally have net worths in the hundreds-of-millions of dollars.
Tier two concepts, such as Johnny Carino’s, Mimi’s Cafe and Tractor Supply Company
are strong regional companies retailing out of 20 to 300 stores in their markets. They have
solid management teams and successful track records. Their net worth generally ranges
from $15 to $100 million.
Of the numerous sale-leaseback/acquisition financing proposals that AEI considers each
year, only a small number of potential tenants exhibit the financial strength, management
experience and track record AEI finds attractive and suitable for its Funds.
Autumn 2005 AEI Investor Report Page 3
'98
'02
'03
'04

Did you know...
...AEI Funds produce
passive income
to offset your
passive activity losses
and
AEI Funds are also great
assets for
Charitable
Remainder Trusts?
Learn more...
Investing in an AEI net lease real estate income and growth Fund may be ideal for
anyone seeking:
n Regular cash distributions
n A history of stable performance
n Capital growth potential
n Portfolio diversification
n Income growth potential.
An AEI Fund investment can also be a powerful tax-deferred source of income when
paired with passive activity losses. And it’s a great addition to a Charitable Remainder
Trust portfolio.
Passive Income Source
In general, a passive activity generates income or losses for an investor who is not actually
involved in generating that income as a worker or manager. Passive activities involve money
passively earning money, such as owning income real estate through a fund. A trade or
business activity in which a person does not materially participate is a passive activity.
Special tax rules apply to passive activity earnings or losses.
Taking advantage of those special tax rules by pairing Passive Income Generating investments
(known as PIGs) with Passive Activity Losses (known as PALs) can be a fruitful investment
strategy. An AEI Fund is a great example of a Passive Income Generating investment! And,
you can use passive losses from previous years as well as the current year.
Many people do not realize they have substantial passive losses accumulated from prior
years that are wasting away.
Your financial advisor can help determine whether you have accumulated passive
losses from prior years. If you do, you might like to put those losses to work for you in a
PIG/PAL investment.
Charitable Remainder Trusts
AEI Funds can be sound additions to Charitable Remainder Trusts (CRTs).
A CRT is a tax-exempt irrevocable trust designed to maximize current income for individuals.
This is accomplished by donating assets to a trust which then pays income to the benefactor
for a set period of time. Once this time-frame is past, the remainder of the estate is transferred
to charities deemed as beneficiaries.
Because AEI Funds pay cash for properties, there is no debt and no Unrelated Business
Taxable Income (UBTI), so there are no adverse UBTI tax consequences to the CRT. If an
investment within a CRT generates UBTI, the entire CRT may be subject to taxation, thus
defeating the purpose of setting-up a CRT in the first place.
Once owned by the CRT, an AEI Fund investment can produce a steady income stream that
can fund an Irrevocable Life Insurance Trust or make-up trust insurance premiums.
Please contact your financial advisor if you would like more information about Charitable
Remainder Trusts, or the benefits of including an AEI Fund investment within a CRT.
Autumn 2005 AEI Investor Report Page 4

Recent AEI retail property acquisitions
A new CarMax location
in South Carolina
555 Jamil Road
Columbia, SC
CarMax, a Fortune 500 company,
and one of the Fortune 100 Best Companies to Work For,
is the nation’s largest retailer of pre-owned automobiles.
Headquartered in Richmond, Virginia, CarMax operates 65
superstores in 29 markets. CarMax also operates seven new
car franchises located at pre-owned car superstores.
The first CarMax (NYSE: KMX) opened in Richmond,
Virginia in 1993 and quickly became the nation’s leading
specialty retailer of pre-owned automobiles. For the 12-month
period ended February 2005, the company reported more than
$5 billion in sales, $112 million in net income and a net worth
of $800 million.
Autumn 2005 AEI Investor Report Page 5

AEI’s presence from coast to coast
Since 1975, AEI has developed and acquired more than
250 properties in major markets from coast to coast.
AEI has the contacts and experience to allow us to identify and
close deals quickly on attractive net leased property investment
opportunities across the United States. Our national presence
provides AEI investors with access to a more diverse portfolio
of properties than they would otherwise be able to find or
acquire on their own.
Did you know...
...real estate makes up 13 percent of the investment universe?
Real estate is the third-largest investment segment for the
American public, right next to bonds and stocks. Most of the
client portfolios that we see allocate 10 percent or more to
hard assets such as real estate.
Alternatives, 3%, $1.0 trillion
Stocks
37%
$12.5 trillion
Real Estate
13%
$4.5 trillion
Bonds
47%
$16.0 trillion
Sources: Standard & Poors; PricewaterhouseCoopers;
Bond Market Association; PREI
Data is for U.S. only as of 12/31/2001.
Bonds include municipals but exclude money market instruments.
Alternatives include venture capital, managed funds and
natural resources.
Restaurant Overview
Top 100 Restaurant Report
Nation’s Restaurant News, a major restaurant industry
publication, recently reported that sales in the top 100
American restaurant chains grew by 7.99 percent in
the last year. Latest-year total sales of those top 100
chains were $171.26 billion.
That compares favorably with a 6.11 percent rise in
the preceding year and significantly outpaces the 3.3
percent increase in inflation in the U.S. last year.
Sales increases were the result of improved same-store
sales along with new-store development. Overall, the
Top 100 chains added new locations at a rate of 4.73
percent in 2004 for a total of 192,834 units, compared
with expansion of 4.21 percent the year before.
Restaurant operators have been successfully
improving results in existing locations. Looking at same
store sales for the Top 100 chains shows that just 12
of the chains reported declines, compared with 29 in
the preceding year. The median change in estimated
same store sales in the last year was an improvement
of 3.86 percent, versus a gain of just 1.09 percent a
year earlier. This indicates that, despite a rapid rate of
restaurant development, there is room for additional,
new locations.
2005 Restaurant Sales Projections
Even taking into account dramatic increases in fuel
prices and the effects of hurricanes in the gulf coast,
restaurant sales in 2005 are expected to continue to rise
at the highest rate since 2000, according to Technomic,
a major restaurant industry consulting group.
Technomic projects that total food service sales for all of
2005 will rise at an annual rate of 5.2 percent, to $483.5
billion. (By comparison, 2004 sales increased 4.4 percent.
Technomic bases their studies on all restaurants, not just
the Top 100 chains referred to above.)
Sales for full-service restaurant operations will rise 5.9
percent to $145.5 billion and sales for limited-service
establishments are projected to rise 6.0 percent to
$164.2 billion. Other non-restaurant food service
categories, including education, healthcare and travel
will grow 3.8 percent.

Restaurant Spending
Good economic news
for AEI investors!
How does your family compare?
The National Restaurant Association’s latest Restaurant
Spending report paints a bright picture for the restaurant
industry. Based on an analysis of the federal government’s
most recently published Consumer Expenditure Survey, the
report looks at what Americans spent eating in restaurants in
2003, the most recent year complete data is available. The
report shows that people are eating out more than ever!
You might like to see how your family compares to some of
these statistics:
National spending: The typical American household spent an
average of $2,211 in restaurants in 2003. Per-person spending
on food in restaurants averaged $884.
Spending by region: Of the four census regions, 2003
spending in restaurants was highest in the Northeast, averaging
$1,029 per person and $2,470 per household.
Spending by metro area: Out of 28 metro areas, total
household restaurant spending was highest in New York City,
averaging $3,197 per household.
Per-person spending on dining was highest in Washington,
D.C., averaging $1,196 per person, followed by New York
City ($1,184), Minneapolis/St. Paul ($1,163), San Francisco
($1,124), and Dallas ($1,092).
Spending by income level: Households with a pre-tax income
of $70,000 or more spent an average of $4,323 – $1,441 per
person – on food in restaurants, and allocated the largest share
of their total food dollars to food eaten away from home (49.2
percent). In contrast, households with incomes before taxes
between $15,000 and $19,999 spent an average of $1,242 – or
$591 per person – and allocated 33.4 percent of their total
food dollar on food eaten in restaurants.
Spending by age: Households headed by persons between
the ages of 55 and 64 spent the most per person on food eaten
in restaurants in 2003 – $1,055.
How much do people in your area spend on eating out?
You can find a metropolitan area on the table to the right and
see how your family compares.
Metropolitan
area
Average
annual
household
$ spent in
restaurants
Average
annual
per person
$ spent in
restaurants
Average
weekly
per person
$ spent in
restaurants
Northeast $2,470 $1,029 $19.79
Boston $2,324 $1,010 $19.42
New York $3,197 $1,184 $22.77
Philadelphia $2,232 $858 $16.50
Pittsburgh $2,192 $953 $18.33
Midwest $2,215 $886 $17.04
Chicago $2,583 $923 $17.75
Cincinnati $2,250 $978 $18.81
Cleveland $1,813 $755 $14.52
Detroit $2439 $938 $18.04
Kansas City $2,250 $833 $16.02
Milwaukee $2,352 $941 $18.10
Mpls/St. Paul $2,791 $1,163 $22.37
St. Louis $2,299 $969 $18.63
South $2,051 $820 $15.76
Atlanta $2,274 $875 $16.83
Baltimore $2,263 $905 $17.40
Dallas $2,840 $1,092 $21.00
Houston $2,795 $998 $19.19
Miami $1,947 $721 $13.87
Tampa $1,645 $685 $13.17
Washington $3,109 $1,196 $23.00
West $2,382 $916 $17.62
Anchorage $2,802 $1,001 $19.25
Denver $2,586 $995 $19.13
Honolulu $2,549 $910 $17.50
Los Angeles $2,895 $1,034 $19.88
Phoenix $2,372 $949 $18.25
Portland $2,184 $874 $16.81
San Diego $2,754 $1,020 $19.62
San Francisco $2,923 $1,124 $21.62
Seattle $2,289 $995 $19.13
Autumn 2005 AEI Investor Report Page 7

Changes in lifestyles lead to
expansion of the upscale dining segment
Demographic shifts invite consumers into
more sophisticated restaurant concepts
The empty nester segment of the population has grown
significantly over the past few years, and is expected to
expand further in years to come. This trend has led restaurant
industry experts to explore and anticipate large shifts in dining
and spending habits. These shifts are steering customers from
family-oriented fast-food/sandwich restaurants into more
sophisticated, adult-oriented casual restaurants. AEI Funds
have historically invested in casual dining establishments such
as Applebee’s, Chammps, Johnny Carino’s and TGI Friday’s.
An evening out at a Chammps restaurant
One reason the empty nester segment is growing so rapidly
is that children of aging baby boomers are now moving away
from home. More couples are choosing a double-income, no
U.S. household size, 2003 kids (DINK) lifestyle
Five or
more
Four 10%
persons
13%
One
person
29%
which provides them with
more disposable income.
And, many adults are
deciding to remain single
longer. The pie chart
at left illustrates that,
Three
persons
15%
Two
persons
32%
according to a 2003 U.S.
census report, more than
50 percent of total U.S.
households are made up
of one or two people. Just
13 percent of homes in the
U.S. are the traditional family of four. Experts predict that the
proportion of one and two person households will continue to
grow compared to those with families.
All graph data from the U.S. Census Department.
Why does the restaurant industry (and AEI) find this trend
interesting? Single people and couples without children
usually spend more on dining out than families do. The
following chart illustrates that empty nesters spend twice as
much in restaurants individually as people in large families.
Total amount spent per person in restaurants,
by household size, 2003
$1,500
$1,200
Not only do empty nesters spend more money eating out,
in absolute terms, they also spend a greater percentage of
their food budget on restaurant meals. The following chart
demonstrates that households without children spend the
highest percentage of their food budget dining in restaurants.
Percent of total food budget spent in restaurants,
by household size, 2003
50%
40%
30%
20%
10%
$900
$600
$300
0%
$0
All hholds
All hholds
1 Person
1 Person
2 Persons 3 Persons 4 Persons 5+ Persons
2 Persons 3 Persons 4 Persons 5+ Persons
Empty nesters tend to be more mature and have more time
available to cultivate sophisticated tastes than their familyoriented
counterparts. Therefore, not only are they bigger
spenders, they usually spend their money in higher-end, casual
restaurants, while families with children tend to favor fast
food/sandwich restaurants. In addition, affluent empty nesters
tend to prefer different types of restaurants than lower income
empty nesters. The following table, provided by the NPD group,
Autumn 2005 AEI Investor Report Page 8

Lunch at Johnny Carino’s
a leading restaurant industry research organization, lists the
restaurant preferences of upper and lower income empty
nesters (consumers who have no children at home). It shows
that the people who are spending the most in restaurants prefer
Italian, Casual and Varied Menu concepts.
Good-bye city lights:
Lifestyle farmers
– people whose
lives are tied to
agriculture, but
who do not earn
their living from
it – now number
more than 1.6
million nationwide,
according to Market
Directions, Inc., a demographic research group. More than a
quarter of those people began living agrarian lifestyles in the
last couple of years.
Depending on where you live, these people are called
sundowners, U-turners, hobby farmers, ruralpolitans,
micropolitans, or X-urbanites – people looking for privacy
and solitude from busy city life. These folks tend to be twoincome
households. About half are empty nesters; half have
children at home.
“It’s moved way beyond a fad,” says Jim Wright, chief executive
of Tractor Supply Co., a retailer that caters to customers who
have embraced rural living. The internet and improvements
in long-distance communications have opened the doors to
telecommuters who choose to live in the country.
Some of the more popular Italian, Casual, and Varied Menu
restaurants are Chammps, Applebee’s, Johnny Carino’s,
Marie Callender’s and Mimi’s Cafe – all properties developed
and owned by AEI Funds!
Types of restaurants preferred by empty nesters
Affluent
ENs
Italian
Casual
Varied Menu
Seafood
Number of
restaurant visits
Above
Average
Low-Mid
Income ENs
Seafood
Varied Menu
Retail
Asian Average Sandwich
Italian
Mexican
Retail
Sandwich
Pizza
Source: The NPD Group
Below
Average
Mexican
Asian
Pizza
Casual
City dwellers who move to the country alter their shopping habits
“We believe that people are beginning to reinvest their real
estate gains, and a percentage of baby boomers will choose not
to move to the golf course or to the beach or the mountaintop,”
Wright said. “They will, instead, choose to return to their
parents’ roots.”
AEI recognized this trend more than 10 years ago, and has
added a number of Tractor Supply Company stores to its
portfolios, including locations in Bristol, Virginia; Mt.
Pleasant, Texas; Marion, Indiana; and Maryville, Texas. More
are on line for acquisition during the next six months.
Autumn 2005 AEI Investor Report Page 9

Recent AEI restaurant property acquisitions
Four new Johnny Carino’s
5700 North Elizabeth Street
Pueblo, Colorado
14805 W 119th Street
Olathe, Kansas
5900 South Hulen Street
Fort Worth, Texas
1725 Loop 323 WSW
Tyler, Texas
Johnny Carino’s is a casual, full-service restaurant chain with
an innovative, yet authentic, Italian menu. The Italian dining
experience begins upon entering the restaurant – antique framed
family pictures, Italian ceramics, wood and stone walls, colorful
mismatched wooden chairs and small intimate dining rooms
offer booth and table seating. The restaurant’s open kitchen
design, featuring exhibition cooking, creates a warm, casual
atmosphere to enhance the dining experience.
The Johnny Carino’s concept is owned by Fired Up, Inc. of
Austin, Texas. Fired Up was founded in 1997 and has grown
significantly in just eight years. There are currently 148 Johnny
Carino’s Italian restaurants in 25 states throughout the U.S. AEI
began providing sale/leaseback financing to Johnny Carino’s in
2000 and has purchased more than 20 Carino’s properties.
Autumn 2005 AEI Investor Report Page 10

Introducing...
John Champion
Controller
Beware of mini-tender offers!
John recently joined the AEI accounting
team as Controller. He assists the CFO
with all general accounting, financial
reporting and tax functions for AEI
Funds. John holds a Bachelors degree
in Finance from the University of St.
Thomas and is working to complete an
MBA in Accounting. Previously, John
held several accounting positions, most
recently in the Corporate Tax Department
of Land O’Lakes, Inc.
Kimberly Grundstrom
Administrative Assistant
Client Services/Lease Management
Kimberly is a recent graduate of the
University of Minnesota, receiving
her Bachelor of Science degree in the
Foundations of Education. Kimberly
assists the Client Services and Lease
Management departments. She has
worked as a database assistant at KKE
Architects and a research assistant at
the Center for Early Education and
Development (CEED).
Questions?
Jackie Abbe
Client Services
Manager
Kim Barkley
Client Services
Representative
Kim Grundstrom
Administrative
Assistant
AEI has a friendly and helpful Client Services team to
answer your questions about your AEI Fund account.
While we strive to make an AEI Fund investment as simple
and straightforward as possible, Jackie Abbe, Kim Barkley,
and Kim Grundstrom are available to assist you. They can
answer your questions about:
n Fund distributions
n Fund performance
n statements and financial reports
n tax information
n general communications.
You can reach them by telephone, e-mail or mail.
Telephone:
800-328-3519
E-mail:
clientservices@aeifunds.com
Mail:
AEI Fund Management, Inc.
1300 Wells Fargo Place
30 East Seventh Street
St. Paul, MN 55101
Over the years, AEI has warned its investors of predator groups and individuals who attempt to frighten or otherwise
persuade them to sell their AEI Fund units at prices often far below their real value. We would like to remind you that
predators are still out there, waiting to take advantage of unaware investors.
If you receive a mini-tender offer in the mail, we strongly suggest that you ignore it and, if your AEI shares are held
in an IRA or trust account, advise your investment custodian to do the same.
If you ever have questions about such an offer, or would like information about the value of your AEI Fund units,
please contact AEI Client Services at 800-328-3519 or clientservices@aeifunds.com.
Autumn 2005 AEI Investor Report Page 11

AEI Retail Outlook
AEI Fund Management, Inc.
30 East Seventh Street, Suite 1300
St. Paul, MN 55101
800-328-3519
www.aeifunds.com
Retail (not residential or industrial) is the only core commercial real estate sector to record net income growth
throughout the recent economic downturn. Even without significant job growth, consumers, supported by fiscal stimuli
and low interest rates, have been fueling retail expansion throughout the United States.
According to a major real estate industry research organization, since the onset of the economic downturn beginning in
2001, rent for retail properties climbed nearly 10 percent, while office property rents were down 21 percent, and apartment
rents showed a small increase of 2 percent.
That same organization predicts further growth in the retail real estate area.
Why Real Estate?
Percent returns
20%
NCREIF
15%
10%
5%
0%
-5%
-10%
-15%
-20%
-25%
-30%
S&P 500
1Q82 2Q82 1Q88 2Q88 3Q88 3Q90 4Q00 1Q01 2Q01 3Q01 4Q01 2Q02 3Q02 4Q02 1Q03
Did you know...
Presort Standard
U.S. Postage
PAID
St. Paul, MN
Permit No. 6664
...for more than 20 years, starting in 1982,
every time the S&P 500 dropped more than
five percent in a 12-month period, direct real
estate investments, as represented by the
National Association of Real Estate Investment
Fiduciaries’ (NCREIF) index, yielded at least
five percent?
The correlation between real estate and stocks
and bonds is relatively low. When the market is
down, hard assets are usually up. That’s why real
estate can serve as a buffer against the volatility
of other investments within a portfolio.