Investment Philosophy:

1. Dividend paying stocks are believed to be generally less risky than non-dividend paying stocks
2. Impressive capital gains can be achieved in dividend paying stocks.
3. Stock investment ideas from multiple sources used to form a consolidated opinion are preferred to ideas derived from single sources.
4. Layered screening is used to produce a small universe of income stocks with criteria indicating superior price performance.
5. Fundamental and technical analyses considerations are used to reduce reliance on numeric data and reduce risk.
6. Risk weighting is used to further reduce risk.
7. Modest diversification is preferred to very broad diversification to increase the prospects for superior performance.
8. A stock investment system increases the likelihood of success in equity investing.

1. Initial Screen: Stocks are screened to produce stocks with current dividend yields of 2% or higher.
2. Middle Screen: The stocks resulting from the Initial Screen are further screened to produce stocks that offer total return potential of 10% - 100%, based on the difference in consensus target prices from multiple sources and the current price of the stock, plus dividend yield.
3. Final Screen: The resulting stocks from the Middle Screen are further analyzed based on dividend yield and coverage, fundamental and technical analyses, risk/reward analysis, and diversification of the overall portfolio to produce the income stocks selected for addition to the Caldwell Dividend Strategy portfolio.
4. Risk weighting: Stocks are designated as low, medium or high risk. Stocks designated as low risk, generally are given a full to 1 ½ position weighting in the portfolio, or 5% to 7.5% of the portfolio. Stocks designated as medium risk are generally given a full position weighting, or 5% of the portfolio. Stocks designated as high risk are generally given a ½ to full position weighting, or 2.5% to 5% of the portfolio. Thus, low risk stocks generally receive higher weightings than high risk stocks. In addition, any one stock comprises no more than 7.5% of the portfolio upon addition.
5. Number of stocks in the portfolio: Targeted at 15 to 20, but may be more or less at any given time.
6. Deletion: Once added to the portfolio, a stock is deleted from the portfolio when other stocks offer more compelling value after the middle and final screens are conducted, or deletion is supported by the fundamental and technical analyses consideration overlay process.

1. Screens are conducted monthly to determine additions and deletions, and electronic reports are sent to subscribers as soon as data is assembled, generally in the first week of each month.
2. Additional Interim Reports are sent if deletions or additions are merited between Monthly Reports.
3. Turnover in the portfolio is expected to be moderate with typically 0-3 monthly additions/deletions.
4. The portfolio may at times be less than fully invested.
5. No margin is used.
6. No derivative products such as options or futures are used.

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